AuMake Limited
Annual Report 2020

Plain-text annual report

&annual report accounts 2020 AUKETT SWANKE GROUP PLC 1 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020COVER / INSIDE COVER: EQ, BRISTOL Aukett Swanke provides design services, focusing on architecture, master planning, and interior design with specialisms in executive architecture and associated engineering services. The practice designs and delivers commercial projects throughout the United Kingdom, Continental Europe and the Middle East. 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 300 staff in 11 locations 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. 2 1 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020our studio locations london abu dhabi al ain berlin dubai frankfurt istanbul moscow prague tunbridge wells Aukett Swanke Ltd / Veretec Ltd 10 Bonhill Street LONDON EC2A 4PE United Kingdom T +44 (0)20 7843 3000 / 3199 london@aukettswanke.com london@veretec.co.uk Shankland Cox Ltd Al Saman Tower, Office No 1407 Hamdan Street PO Box 44396 ABU DHABI United Arab Emirates T +971 (0)2 671 5411 abudhabi@shanklandcox.com Shankland Cox Ltd ADNIC Building, Office No M03 Zayed Bin Sultan Street PO Box 80670 AL AIN United Arab Emirates T +971 (0)3 766 9334 info@shanklandcox.com Aukett Swanke Architectural Design Ltd Sidra Tower, Office No 1405 Sheikh Zayed Road PO Box 616 DUBAI United Arab Emirates T +971 (0)4 369 7197 dubai@aukettswanke.com 2 key international people LUKE SCHUBERTH Managing Director - UK SUZETTE VELA BURKETT Managing Director - UK NICK PELL Interior Design Director - International TOM ALEXANDER Director Aukett Swanke K U KEITH MORGAN Managing Director Veretec JAMES ATHA Director Veretec GORDON MCQUADE Director Veretec STEPHEN EMBLEY Managing Director - Middle East PAULA MCKEON Finance Director Middle East SUBRAYA KALKURA Director John R Harris & Partners YOUSSEF FAKACH Director Shankland Cox OMID ROUHANI Director Aukett Swanke Architectural Design Y E K R U T LARISA LIGAY General Director Moscow MAXIM NERETIN Director - Aurora Moscow TOM NUGENT Director Moscow BURCU SENPARLAK General Manager Istanbul ZEYNEP ORBERK Director Istanbul H C E Z C C I L B U P E R 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 E L D D M I T S A E E P O R U E L A T N E N I T N O C 3 Aukett sro Janáčkovo nábřeží 471/49 150 00 PRAGUE 5 Czech Republic T +420 224 220 025 aukett@aukett.cz Aukett Swanke OOO 3 Malaya Polyanka Street MOSCOW 119180 Russia T +7 (499) 238 37 29 moscow@aukettswanke.ru Aukett Swanke Group Plc 1 Lonsdale Gardens TUNBRIDGE WELLS Kent TN1 1NU T +44 (0)20 7843 3000 plcenquiries@aukettswanke.com John R Harris & Partners Sidra Tower, Office No 1308 & 1309 Sheik Zayed Road PO Box 31043 DUBAI United Arab Emirates T +971 (0)4 286 2831 dubai@johnrharris.com Swanke Hayden Connell Mimarlik AS Esentepe Mahallesi Kore Şehitleri Caddesi 34/6 Deniz İş Hanı 34394 Zincirlikuyu ISTANBUL Turkey T +90 212 318 0400 istanbul@aukettswanke.com Aukett + Heese GmbH Budapester Strasse 43 10787 BERLIN Germany T +49 (0)30 230994 0 mail@aukett-heese.de Aukett + Heese Frankfurt GmbH Gutleutstrasse 163 60327 FRANKFURT AM MAIN Germany T +49 (0)69 2475277 0 mail@aukett-heese-frankfurt.de A I S S U R Y N A M R E G AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 NICHOLAS THOMPSON Chief Executive Officer ANTONY BARKWITH Group Finance Director & Company Secretary ROBERT FRY Executive Director & Managing Director - International BEVERLEY WRIGHT Director of Corporate Finance & Strategy E V I T U C E X E T N E M E G A N A M 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 • ANGLO AMERICAN DE BEERS • ARLINGTON • ARUP • ASCOT UNDERWRITING • AVGUR ESTATE • AVIVA • AXA • AZZEDINE ALAIA BAKER MCKENZIE • BANK OF AMERICA MERRILL LYNCH • BANK OF MOSCOW • BAT-RUSSIA C+T GROUP • BATIKENT 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 • CEG / 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 our clients include . . . • DB SCHENKER • DECATHLON • DELOITTE • DEUTSCHE BANK • DIMENSION DATA • DGV CONSULTING • DOĞUŞ GYO • DONSTROY • DU • DUNHILL EASTMAN GROUP • EDE & RAVENSCROFT • EMAAR HOSPITALITY GROUP LLC • EMLAK KONUT • ENDURANCE ESTATES • EO ENGINEERS OFFICE (DUBAI) • EQUA BANK • ERNST & YOUNG • ER YATIRIM • 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 LONDON • INCE GORDON DADDS • 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’SVMOLSON 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 YATIRIM • ROVNER INVESTMENT GROUP • ROYAL BANK OF SCOTLAND • ROYAL EXCHANGE • ROYAL LONDON • RUBLEVO-ARKHANGELSKOYE • RUSHYDRO • RWE NPOWER SAB MILLER • SAFESTORE • SANOFI • 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 KATILIM 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 Directors’ biographies Five year summary Corporate information Chief Executive’s Statement Financial Review 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 4 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 11 12 - 13 14 14 15 - 17 18 - 21 22 - 24 25 - 29 29 30 - 34 35 36 37 38 39 40 41 42 43 - 87 88 5 contentsnews &comment New website for Aukett Swanke Group Plc In December 2020 we were proud to announce the launch of a new website for Aukett Swanke Group Plc at www.aukettswankeplc.com New banking relocation to Istanbul This year we are placed at 54th in the Building Design 2021 World Architecture 100 League Table, up nine places from 2020. WA100 is Building Design’s annual survey of the world’s largest practices ranked by the number of fee-earning architects they employ. This also places us as the fifth largest UK registered practice on the table and one of only 14 UK practices to appear in these rankings. Appointment of new Associate Director We welcome Dominic Mayer who has recently joined the Veretec team as Associate Director. He is an architect with over 20 years of experience and has worked on a wide range of building typologies, specialising in large-scale residential and workplace schemes as well as recreation and leisure facilities. EQ breaks ground in Bristol Aukett Swanke’s 200,000sqft EQ development for CEG in the heart of Bristol City Centre broke ground on the main construction phase in December 2020, becoming the largest speculative office development currently underway in the south of England. Raising the bar in terms of quality, occupant wellbeing and sustainability - targeting a BREEAM ‘Outstanding’ rating - EQ will provide occupier amenities such as a rooftop bar, restaurant and business lounge with communal terrace, ground floor café kitchen, 50 seat auditorium, fitness suite, break out space and more than 260 cycle spaces, in excess of industry standard. Luke Schuberth, Aukett Swanke Managing Director - UK is pictured (right) at the event with the Mayor of Bristol Marvin Rees. Swanke Hayden Connell Mimarlik, our Turkish studio, continues to play an important role in facilitating financial and banking sector relocations from Ankara, led by the Central Bank of Turkey. Vakifbank is the 3rd largest bank in Turkey with over 400bn TL of assets. The recent appointment to design Vakifbank’s HQ interiors in the Istanbul Financial Centre is our second relocation project for this client and builds on a long tradition of serving the financial community that began in the 1990s with major architectural high-rise projects for both Isbank and Sabanci Bank. The project comprises 60,000sqm of accommodation including offices, executive areas, meeting rooms, lounge areas, training facilities, cafeteria and other social support functions. Award for Veretec project 40 Beak Street in London’s West End has been announced winner of the Workplace Exterior category at the 2021 Surface Design Awards. Veretec collaborated with Stiff + Trevillion during the detailed design and construction stages of this new flagship studio and private art complex for Damien Hirst. This beautiful façade displays intricate artwork by Lee Simmons along the cornice and around the chamfered corner together with high quality glazed bricks with over 100 bespoke specials manufactured in Holland. These materials were used to reference the art-deco style of the surrounding buildings, whilst the full height windows and decorative balustrades have a contrasting powder coated metal finish. We are delighted that 40 Beak Street has bagged yet another deserving award. 6 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 7 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 news &comment German Resilience ROBERT FRY During a decade when most developed European economies have struggled to achieve any significant growth the German economy has proven remarkably resilient in an era of global turbulence. Led by Chancellor Angela Merkel through four terms of office since 2005 in coalition governments of varying composition, Germany has negotiated a course through the aftermath of the global financial crisis, a European migration crisis and now the ongoing Covid pandemic to lead the beginning of what is hoped will become a more general economic recovery in Europe. The construction sector has remained very robust over the last few years and has held up well during the pandemic and is expected to remain strong throughout 2021. Confidence therefore remains in the construction sector boosted by a rebound in manufacturing at the end of 2020 against a broader background of virus restrictions and falling unemployment in sharp contrast to the contracting economies of France and Spain. This economic backdrop is borne out by the performance of our joint venture studios in Berlin and Frankfurt, which have been consistently profitable over the last three years with their revenues and profits increasing year on year and mirroring the German economy as a whole. Their order books for 2020/21 are at the same level as they were pre- Covid seemingly shrugging off any pandemic impact. From a project perspective the quality and profile of work being undertaken by these studios remains of the highest quality and significance. The Berlin studio has completed the Haus an der Dahme apartment building, started the design of the Bahn Tower @ Sony Centre refurbishment and the site stages of the Edge East Side tower, set to be the tallest building in Berlin, pre-let to Amazon. EDGE EAST SIDE TOWER, BERLIN (image ©EDGE) MESSETURM, FRANKFURT Frankfurt completed the Sparda Bank façade renovation and fit outs for Allergan and a leading international technology company, the latter alongside base building upgrades in the iconic Messeturm building. Ongoing projects include office fit outs for Commerzbank on their Cielo Campus in collaboration with the Berlin studio. In overall terms, amid the prevailing turbulence globally, the German story remains one of continued success, stability and resilience, factors which we hope will emerge positively across the other studios and economies served by the Group. 8 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 9 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 Financial highlights United Kingdom and Middle East results down but Continental Europe up significantly Revenues - surge in coronavirus cases led to sharp decline in revenues in second half (April to September) down 42% (H2 2020: £4.79m, H2 2019: £8.19m) Profit before tax – focus on costs contained loss before tax to a creditable £46k (2019: profit £292k) Cash – cash preserved through cost focus above and restructuring of loan payments, with net funds of £837k at 30 September 2020 (2019: £820k) Structural reorganisation through remote working and reduced number of Middle East licences and office “ The past year has confronted us with a succession of constantly changing problems as Governments around the world have moved the goal posts according to fluctuating circumstances, and responses of clients have similarly varied. We have continued our efforts to contain costs whenever and wherever possible whilst maintaining the quality of service our clients expect. The net result is considerably better than one might have expected. The current year started with revenues below our expectations due to further project delays and below average enquiries, accordingly we expect to make a loss in H1. However, increased levels of enquiries and notable project wins since December have improved our order book and the potential for recovery in H2. Nicholas Thompson Chief Executive Officer Raúl Curiel - Chairman 17 February 2021 Chairman’s Statement This is my second year as Non-Executive Chairman, and there is no escaping the fact that it has been dominated by the worldwide impact of the pandemic that evidently has affected every family, every economy and every business in the world. I would like to express my personal gratitude to all of our management and staff for the considerable efforts that they have made to minimise the impact of this pandemic and to explore more creative and imaginative ways to maintain and, where possible, expand our range of services. As a global business, we are well accustomed to dealing with circumstances that vary from country to country and region to region; governments have reacted to this global crisis very differently, with policies often changing from day to day. Our Directors and staff have worked tirelessly to manage all of these factors and they have swiftly adapted to working remotely without losing their invaluable team spirit. Given these multiple challenges, I am delighted that the outcome this year is genuinely creditable and better than anyone could reasonably have expected: a loss before tax of only £46k (2019: profit £292k). Looking forward to a recovery from this pandemic governments everywhere will be striving to see their economies prosper once again. With our projects continuing and new commissions being added we remain focused on maintaining our quality of service by adapting to changing circumstances and until a more sustained market is evident. I fully expect the Group to continue to build on the progress made in the last financial year as the impact of pandemic starts to recede and that continued improvement to be reflected in the Group’s valuation. John Bullough, who has been an active non-executive director for 6 years, has decided to retire from the board at the conclusion of the Annual General Meeting. I would like to take this opportunity to thank John for his many years of hard work and commitment and wise counsel. Therefore, in spite of the current market conditions, I look forward to the remainder of 2021 and beyond with great confidence. 10 10 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 11 Board of Directors Raúl Curiel Non Executive Chairman *+ # BA(Hons) MArch Aged 74 Raúl’s extensive career as a professional architect spanned some 40 years before his retirement 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, European Managing Director of its successor Aukett Fitzroy Robinson, and subsequently a non-executive director of the Group until 2010. He was appointed Non-executive Group Chairman in 2019. Nicholas Thompson Chief Executive Officer # BSc(Hons) MBA Aged 66 Nicholas became Group CEO in 2005 and has over 35 years of experience in property and consulting organisations; twenty-six 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. Nicholas is responsible for implementing the Group’s strategy. Antony Barkwith Group Finance Director & Company Secretary ^ FCA MPhys(Hons) Aged 40 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 Controller for Advanced Power, an international power generation developer, owner and asset manager, working there from 2010 until 2018. 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 John Bullough Non-executive Director *+ # FRICS Aged 70 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. Robert Fry Executive Director & Managing Director - International ^ BA(Hons) DipArch MA RIBA Int’l AIA Aged 64 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 and master’s degree 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. He now plays a key role in evaluating ASG’s businesses and senior management teams, mergers and acquisitions and corporate governance initiatives across all geographic locations and works closely with the CEO and GFD in the development of the Group’s operational strategy. Clive Carver Non-executive director +*#^ FCA FCT Aged 60 Clive joined the board in May 2019. He is the Chairman of AIM listed Caspian Sunrise PLC and executive chairman and CFO of soon to be relisted 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. 12 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 13  Five year summary Years ending 30 September 2020 £’000 2019 £’000 2018 £’000 2017 £’000 2016 £’000 Total revenues under management1 28,534 31,505 31,950 34,583 30,379 Revenue 12,166 15,492 14,380 18,395 20,841 Revenue less sub consultant costs1 11,336 13,711 13,094 16,070 18,410 (Loss) / profit before tax Basic earnings per share (p) Dividends per share (p) Net assets Cash and cash equivalents2 Secured bank loans Net funds3 (46) 0.00 - 4,374 992 (155) 837 292 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) 184 790 1 Alternative performance measures, refer to page 21 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 02155571 Share registrars Equiniti www.equiniti.com 0121 415 7047 Auditors BDO LLP www.bdo.co.uk Registered office 10 Bonhill Street London EC2A 4PE Website www.aukettswankeplc.com Nominated adviser and broker Arden Partners Plc www.arden-partners.com Bankers Coutts & Co www.coutts.com Investor / Media enquiries Chris Steele 07979 604687 Solicitors Payne Hicks Beach www.phb.co.uk Fox Williams www.foxwilliams.com Chief Executive’s Statement Navigating our way through a pandemic is not a common occurrence in the commercial world and so we, like every other business, had to quickly adapt our organisation and services provision to a set of unknown factors with uncertain consequences. It has been no mean feat to stem the potential losses that we faced in the second half and the outcome of a loss just below breakeven at £46k for the year is a quite remarkable result under these circumstances. Both I and my co-Directors are grateful to all those in the Group who have contributed to this outcome. At the interim stage we had achieved a small but important continuation to our profit recovery. This recovery was left very much in doubt as the impact of the COVID-19 worldwide pandemic took hold. We said at that time that COVID-19 created an uncertain future and that we would adapt our operations as best we could. This has largely been achieved through remote working and reduced office occupancy levels where appropriate but, with the increasing number of project delays through specific gateways (planning to technical drawings and onto construction) and the unpredictable nature of localised lockdowns and new regulations, some disruption has, predictably, occurred to the decision-making process required to transition across these gateways. Because of this we were unable to match the full reduction in the revenue loss arising from such delays in the second half with equivalent cost reductions. This final result achieved is even more satisfying given this unprecedented background. n Group Performance This year is a tale of two halves. The first half saw a growing revenue line and a return to profitability. This follows on from 2019 where the Group returned a profit in the second half. However, having initially contained the impact of the COVID-19 pandemic in the first half of our year, successive months in H2 2020 saw a steady deterioration in top line revenues with a consequent impact on profit. Revenues for the year as a whole fell by £3.32m (21%) to £12.17m (2019: £15.49m) which was entirely in the second half. Our short-term cost controls and expense avoidance managed to mitigate this to a marginal loss for the year at £46k (2019: profit £292k). The UK operation continued to produce a profit before the allocation of central costs, and the Middle East incurred a small loss, whereas our Continental Europe operations went from strength to strength. Both the UK and Middle East were impacted by delays through decision gateways whereas the Continental European operations did not see such immediate impasses to the progress in their projects. On a brighter note we managed our cash balances well with group wide cash balances at the year-end standing at £992k (2019: £1,145k) After deducting the final balance due on the Group’s long term loan, net funds stood at £837k (2019: £820k). This provides us with some comfort in the months ahead given the apparent longevity of the COVID-19 pandemic, at least until the current vaccination programme successfully takes hold. n United Kingdom Second half revenues stalled as client gateways became more difficult to cross, resulting in the small increase in revenues seen in H1 being reversed in H2. Revenue ended the year at £7.11m (2019: £7.45m) and loss before tax (including management charges) at £282k (2019: £89k), whilst profit before group management charge fell to a respectable £214k (2019: £451k) given the impact of wider events. Although the pandemic had a negative effect on the transition through project gateways there were many projects where considerable progress was made and we are able to report no cancellations due to COVID-19. Particular project highlights during the year have been: Birmingham City University’s STEAMhouse at Eastside Locks and our £60m EQ headquarter building in Bristol, both of which are now on site; site progress with the Asticus Building in London’s West End; a new office planning application comprising 290,000sqft in Wimbledon for M&G and Bell Hammer, following a competition win earlier in the year; and a number of hybrid scheme rollouts including the formal position of Hybrid Architect at Highams Park in London for 400 residential units and 85,000sqft of industrial space. We have also seen an increase in the number of Life Sciences buildings. STEAMhouse, EQ and Asticus also include our workplace consultancy services. In addition, we won our first overseas hybrid scheme for a major oil and gas company in Moscow’s Skolkovo development area. STEAMHOUSE, EASTSIDE LOCKS, BIRMINGHAM EQ. BRISTOL 14 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 15 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020THE FEATHERSTONE BUILDING, LONDON EC1 DU TELECOM, AL QUDRA ETISALAT RETAIL STORE In our specialised delivery group, Veretec,  it is pleasing to report that there were no project cancellations. However, there were a number of temporary suspensions, together with construction delays for projects on site to establish new COVID-19 social distancing and hygiene solutions following the lockdown in March 2020.  We only saw new onsite instructions starting to come through towards the end of the financial year when the lockdown restrictions were lifted, which will benefit 2021 but, obviously, not the current result. Two larger commissions have been contracted during H1. Key projects around London include Featherstone Building, Old Street; Nova East, Victoria; 1 Museum Street, Holborn; Hawley Wharf, Camden and Carey Street Spitalfields where we were the executive delivery architect, together with ongoing technical design audits. Although we did not experience any major losses in operational efficiency it became clear, after a few months of remote working, that some project team work would benefit from personal contact (such as design reviews and the detailed review of drawings) and as a result the office was re-opened, on a voluntary attendance basis, in July as restrictions were lifted. However, new restrictions have been introduced since the year end that essentially retain the remote working requirement for the time being. n United Arab Emirates Whilst the statistics on COVID-19 were less in the UAE than in say, Europe, the restrictions imposed were much harsher. Initially this had a negative effect on the design side of the business with virtually all jobs stalling or being terminated and no news ones being evident in our marketplace. Construction sites remained open but any positive COVID-19 test on site staff resulted in immediate closure and a discontinuous service profile. As a result, revenue fell sharply in H2 to end the year on at £4.82m (2019: £7.52m) a year on year fall of 36%. Whilst management implemented a combination of short-term cost reductions primarily through payroll and permanent operational savings which are further described in the financial review, this effectively eliminated any possibility of a profit, hence a final loss of just £23k (2019: profit £525k) at pre management charge level is a good result. The team in the UAE retain a strong local market position with a number of clients where their services are regularly sought. This has led to the current commissions from T&T (as project manager) Du telecom; Etisalat with their retail and stores and business centres; WSP on a number of detailed design and site based projects; DCT in Al Ain with the historic building stock such as Al Ain Museum and Sheikh Khalifa House. On a more individual project basis we have continued to receive additional instructions on the landmark Atlantis, The Palm hotel refurbishment, the Expo 2020 site and Imkan and Miral in Abu Dhabi, as well as from high net worth individuals in the region. We started to see new enquiries coming through in the latter months of the year, with some larger projects being evident. However, until the vaccine is widely available with more positive sentiment being evident we see the market as generally flat. n Continental Europe This hub comprises one wholly owned subsidiary, two joint ventures and an associate plus a former wholly owned subsidiary in Russia operating under a licensee arrangement. 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. The hub has been by far the best performing hub this year with profits of £657k (2019: £495k). The main contributor was again Berlin which seemingly shrugged off the pandemic as did its sister company in Frankfurt. The smaller operations in Istanbul and Prague both had positive years with Prague having its best year for over ten years. Projects this year by the Berlin office included the completion of the Haus an der Dahme apartment building, the design start for the refurbishment of the Bahn Tower at the Sony Centre and the start on site of the Edge East Side tower, set to be the tallest building in Berlin, pre-let to Amazon. In Frankfurt completions include the Sparda Bank façade renovation and fit-outs for Allergan and a leading international technology company, the latter in the iconic Messeturm building. Projects soon to complete include office fit-outs for Commerzbank on their Cielo Campus in collaboration with the Berlin office. Prague project completions include the fit-out of Swarco’s offices, the design stages for the WPP Bubenska and Exxon Mobil HQ fit-out projects and the ongoing site stages for the refurbishment of the Trikaya OC Repy shopping centre and DB Schenker Logistics building extension. Turkey had a positive year and the resilience of the corporate sector precipitated new fit-out projects for LC Waikiki and Google, and the completion of an architectural refurbishment project for the Turkish Chamber of Commerce TUSIAD Enka in Istanbul. Several follow-on projects to create COVID-19 safe working environments were also completed for Google and Allianz in Istanbul and VM Ware in Bulgaria. Architectural designs were completed for new housing and villa types in Erbil, Iraq, due to start on site in 2021. The Moscow office completed several concept designs for mixed use projects in Moscow, Tumen and the Krasnodar region, and collaborated with the London studio on a significant education centre and a private residence project in the Moscow region. The Moscow operation’s first year as a licensee business has made a positive contribution to Group revenues. n Group Costs Central expenditure continued to be kept under tight control during the second half and reduced through salary savings, travel avoidance and minimising overhead spending. This was aided by the reversal of a significant accrual that had been provided for a significant one-off event but having been evaluated as at the year end, is no longer considered sufficiently probable to warrant retention in the books. This reduced net Group Costs by 24% or £285k against the prior period spend of £1.18m. n Going Concern As noted at the beginning of this statement, COVID-19 has created a level of uncertainty for the future. With project delays and disruption continuing after the year end and into 2021, we expect increased challenges on our working capital position over the next 12 months. We begin each financial year needing to win new work and this next year is no different. We typically bid for a large number of projects and have an enviable and consistent track record of winning more than our fair share. The position is no different in the current financial year except that the impact of COVID-19 makes it more difficult to predict the number of projects sent out to tender and more importantly the timings on the projects we win. To date we have managed this risk by controlling costs and remaining close to our clients. The board has a reasonable expectation that the Group will have adequate resources to operate for the foreseeable future, however we face the usual uncertainties that occur in our market regarding the future levels and timing of work that are made by client decisions which are beyond our control. The going concern statement in the Directors report and corresponding section in note 1 provide a summary of the assessments made by the directors to establish the financial risk to the Group over the next 12 months. This is further supplemented by the principal risks and uncertainties section in the strategic report. SWARCO, PRAGUE VMWARE, SOFIA MIXED USE DEVELOPMENT, TUMEN, RUSSIA n Summary and Outlook 2020 could have been so much better. We had every expectation of a return to profit from prior year losses, over the full year, but only managed this for the first six months. The loss in the second half is a direct result of COVID-19 issues. The 2020-21 financial year has started with revenues below our expectations due to further project delays through client gateway decisions and below average enquiries, accordingly we expect to make a loss in the first half. However, increased levels of enquiries and notable project wins since December have improved our order book and the potential for recovery in the second half. On behalf of the Board Nicholas Thompson Chief Executive Officer 17 February 2021 16 HAUS AN DER DAHME, BERLIN 17 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Financial review The headline financial results of the Group were: Total revenues under management1 Revenue Revenue less sub consultant costs1 Net operating expenses Other operating income Net finance costs Gain on disposal of subsidiary Share of results of associate and joint ventures (Loss) / profit before tax Tax credit (Loss) / profit for the year 455 (112) 52 442 (46) 26 (20) 371 (42) - 382 292 40 332 1 Alternative performance measures, refer to page 21 for definition Revenues for the year were £12.17m, a decrease of 21.5% on the previous year (2019: £15.49m). Similarly, revenues less sub consultants decreased to £11.34m (2019: £13.71m), a 17.3% decrease. Subconsultant costs decreased from £1.78m last year to £0.83m. Each of the Group’s hubs experienced a fall in revenue. While the UK limited its decrease to 4.7%, and the Continental Europe decrease was anticipated (following the sale of the Russian subsidiary in October 2019 generating a profit on disposal of £52k in the process), the Middle East felt the greatest impact of economic slowdown with revenues falling by 35.9% (revenue less subconsultant costs down by 30.1%). Operating expenses in the year were reduced by £1.91m, of which £1.36m related to technical staff costs, 84% of which was from a combination of permanent reductions in headcount and temporary salary reductions agreed with staff within the UAE reflecting the reduction in technical workload and revenue. Indirect personnel expenses reduced £0.34m, of which £0.19m was in the UAE and £0.15m saved in Group central costs from temporary salary savings, reduced travel and entertaining, and professional services. Further savings were made in the UAE on property costs as the UAE (£0.09m) continued to consolidate its office location, and across the business as operations downsized through the COVID-19 pandemic in the second half of the year. Other operating income included £158k of government grants claimed on the UK furlough scheme, of which £133k had been received in cash by the year end. The cash position through the second half of the year and at year end was further protected through a £227k UK VAT deferral which is due to be repaid in instalments between March 2021 and February 2022, and a UK rent deferral of £139k to be paid monthly over the period January to December 2021. The Group adopted IFRS16 this year with no material net impact on the profit and loss account felt from the transition. The adjustments recognised on adoption are detailed in note 34. The result before tax was a loss of £46k (2019: £292k profit). The adverse performance compared to the prior year recognised the challenges in rescaling fixed operating costs, and intermittent trading in the 2nd half of the year in the UAE and UK, as well as wider challenges to the UAE operation in levels of construction investment in the region. Taking account of a £26k tax credit, and loss attributable to non-controlling interests of £25k our profit after tax at £5k gives an EPS profit of 0.00 pence per share (2019: 0.21 pence per share (profit)). 2020 £’000 28,534 12,166 11,336 2019 £’000 31,505 15,492 13,711 n United Kingdom Revenue Revenue less sub consultant costs1 FTE technical staff1 Net revenue per FTE technical staff1 Profit before tax (excluding Group management charges)1 Loss before tax (including Group management charges) 2020 £’000 7,106 6,990 69 101 214 (282) 2019 £’000 7,454 7,379 73 101 451 (89) (12,219) (14,130) 1 Alternative performance measures, refer to page 21 for definition The UK’s revenue decreased 4.7% year on year. The year started strongly with earnings exceeding £4.09m in the first half of the year, driven by continued growth in the Veretec executive architecture offering which generate revenue of £2.5m in the 6 months to March 2020. However the impact of economic slowdown hit Veretec earnings significantly harder than Aukett Swanke Limited in the second half of the year as earnings reduced 41.5% to £1.5m. Earnings also reduced in the second half of the year in Aukett Swanke Limited however this was limited to a reduction of 10.5%. Staff numbers (FTE technical staff) grew to 80 by March 2020 before then dipping to a low of 54 in July 2020 and ending the year at 60. Staff numbers were adjusted primarily through the release of agency and freelance staff on short notice periods, with some temporary utilisation of the UK government furlough scheme for payroll employees. This agile response enabled the UK hub to maintain revenue at £100k per FTE for the full year, comparable with the prior year result. Whilst management took steps to limit the impact of lower earnings, much of the operating cost base is fixed in the costs of the London office, IT infrastructure and insurances. Modest savings were achieved in day to day running costs, travel and discretionary spend and as a result the hub recorded a result (excluding Group management charges) £237k down on the prior year (on revenues £348k lower). n Middle East Revenue Revenue less sub consultant costs1 FTE technical staff1 Net revenue per FTE technical staff1 (Loss)/profit before tax (excluding Group management charges)1 Loss before tax (including Group management charges) 1 Alternative performance measures, refer to page 21 for definition 2020 £’000 4,823 4,122 52 79 (23) (472) 2019 £’000 7,522 5,900 70 84 525 (69) Revenues decreased 35.9% from £7.52m to £4.82m in the year, due to the effect of a general slowdown in construction investment in the region combined with further economic contraction following the onset of the COVID-19 pandemic mid-way through the year. Some of the large projects which had restarted in the prior year stalled or stopped completely, which included projects providing fees into all of the region’s subsidiaries. With new opportunities more scarce, competitiveness on fees and onerous clauses being proposed on potential new contracts, management undertook significant cost cutting measures both in direct technical staff costs by implementing permanent headcount reductions, temporary reduced working hours and temporary salary reductions, and in the ongoing administrative, property and operational costs, with measures to simplify the organisational structure and further consolidate and co-locate the entities’ operations into common buildings. Average technical staff FTE numbers reduced to 52 (2019: 70) and net revenue per FTE technical staff dropped from £84k to £79k. The reduction in revenue less subconsultant costs of £1.79m, meant that the hub registered a small loss before management charges, being £0.55m down on the prior year. 18 19 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020n Continental Europe Revenue Revenue less sub consultant costs1 FTE technical staff1 Net revenue per FTE technical staff1 Profit before tax (excluding Group management charges)1 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 21 for definition 2020 £’000 237 224 7 33 657 511 16,605 11,646 129 90 2019 £’000 516 432 13 33 495 351 16,529 10,140 116 87 Reported revenues, comprise the Turkey subsidiary (prior year Turkey and Russia). Turkey reported revenues for the year of £237k (2019: £261k), however this decrease was attributable to the devaluation of the Turkish Lira across the period. In local currency revenue less sub consultant costs actually increased by 13.4% to TRY 1.87m. With international clients and contracts denominated in USD and EUR, the subsidiary recorded further foreign exchange gains and recorded a local profit (including Group management charges) of £25k. The result before tax (including Group management charges), also including the joint venture and associate in Germany and the joint venture in the Czech Republic, was a profit of £511k (2019: £351k). Continental Europe’s result is materially dominated by the associate Berlin and joint venture in Frankfurt, which remained strong and profitable throughout the year. They together contributed £418k (2019: £382k) profit (including Group management charges) to the Continental Europe result. The Czech Republic also enjoyed a much stronger year with increased revenue and a Group share of profit at £25k. While total revenues under management increased 0.5%, revenue less sub consultant costs increased 14.9%, as the mix of projects undertaken required a lower share of third party technical support. Revenue less sub consultant costs increased in both operations in Germany and the Czech Republic with each relatively unaffected by the economic impact of COVID-19. Staff numbers increased to 129 from 116 due to growth across the entities, with steady income streams enabling improved efficiency and profitability. As a result, earnings per FTE technical staff were improved at £90k (2019: £87k). n Financing Taking account of the year’s result, total equity is now £4.37m (2019: £4.51m). Net funds (see note 21) at year end were marginally improved, being £837k (2019: £820k), comprising cash of £992k (2019: 1,145k), and the loan taken out in respect of the acquisition of Shankland Cox Limited (“SCL”), which now stands at just £155k (2019: £325k). 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 was being repaid in equal quarterly instalments of USD 80k over five years. During the year it was agreed with Coutts & Co to reschedule the final USD 240k balance into monthly instalment payments of USD 20k from Aug-20 to July-21. 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 2021, with a review in May 2021. The Group has four finance leases taken out by Aukett Swanke Limited to fund the purchase of fit-out costs of the London office in June & November 2018 which were capitalised as a tangible fixed assets (reclassified as right of use assets in the current year following adoption of IFRS16) and finance lease liabilities. The lease liability as at 30 September 2020 was £207k (2019: £278k). On adoption of IFRS16 the Group recognised a right of use asset and lease liability on the London office which was taken out on a 10 year lease to May 2028. The impact on this change in accounting policy is disclosed in notes 14 and 34. The lease liability as at 30 September 2020 was £3,137k. The office leases in the UAE and Turkey are all short term, and other leases in the Group are low value, therefore no IFRS16 capitalisation of these leases has been made. 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 utilisation of the facility is expected to continue to be required throughout the going concern period. 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. n 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 two businesses: Veretec Limited and Aukett Swanke Limited. Veretec had been growing over the past few years, continuing that trend through the first half of the 2019/20 financial year until the impact of a slowdown during the COVID-19 pandemic from April 2020. We consider that to be a temporary slowdown and the company to rebound into the 2020/21 year growing back up to the levels of revenue and staff numbers previously attained. Aukett Swanke Limited maintained a core stable team through much of the year with a smaller impact from COVID-19 as most of its live projects continued through preconstruction phases. • The Middle East adapted its strategy during the year. Previously Aukett Swanke Architectural Design Limited targeted 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. In the year 2019/20 these larger, long term projects largely stalled or stopped due to the economic challenges in the region, and the hub focussed on winning smaller projects to maintain its core staff and capability. However the long term strategy remains the focus of the business going forwards with the mix of larger, longer term projects giving a combination of more predictable revenue streams on which to grow the business, balancing with the smaller projects so as not to be over reliant on a small number of key clients. • 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. n 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 18-20. 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 20. 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 18-20; • 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 19 and 20; • Result before taxation (excluding Group management charges), and result before taxation (including Group management charges), which are further assessed on pages 18-20; Cash at bank and in hand and net funds / (debt), which is assessed further on page 14. The numbers of full time equivalent technical members of staff differ 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 19 and 20. On behalf of the Board Antony Barkwith Group Finance Director 17 February 2021 20 21 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Strategic report The Directors present their Strategic Report on the Group for the year ended 30 September 2020. n 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 and at the same time provides a pleasant and rewarding working environment for our staff. In addition, we undertake to deliver projects throughout the technical drawing stages and, onto site and up to practical completion and handover. Our markets are subject to cyclical and other economic and political influences in the markets in which we operate, which gives rise to peaks and troughs in our financial performance. Management is cognisant that our business model needs to reflect these variable factors in both our decision making and expectation of future performance. The recent pandemic, which affected all our operations, is an event that has required specific responses and creates an uncertain outlook in terms of both continuity of project instructions and new business activity. However, the business and the component parts have been through many sustained crises before and whilst losses have been incurred the business has been able to respond positively by adopting new business models along with re-structuring the operational costs. n Business Model We operate through a ‘three hub’ structure covering: the United Kingdom with our office in London; the Middle East with offices in Abu Dhabi, Al Ain, and Dubai; and Continental Europe with four offices in Berlin, Frankfurt, Istanbul, and Prague; along with a Licensee operation in Moscow. This model has remained unchanged for several years. The presentation of the results of our operations is at local, underlying, trading level and before the allocation of central costs in order to provide a level playing field in terms of comparable performance across the hubs as many only incur a small management charge. The United Kingdom hub comprises three principal service offers: comprehensive architectural design including master planning, interior design and fit-out capability and an executive architectural delivery service operating under the ‘Veretec’ brand. Our Middle East business in the United Arab Emirates (“UAE”) comprises several 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 better placed to offer such a ‘one-stop shop’ service. Our Continental European operations provide services offered that are consistent with the other two hubs. Entities within this hub can provide additional drawing services to the larger operations in order to optimise both local and group wide resources. Management of the operations is delegated to locally based Directors who are, in most instances, indigenous to the country with oversight on a regular basis by the Group’s executive management. As a Group we now have a total average full time equivalent (“FTE”) staff contingent of 291 (2019: 305) throughout our organisation which includes both wholly owned and joint venture operations. We are ranked by professional staff in the 2021 World Architecture 100 at number 54= (2019: 2020 WA100 number 63=). As stated above the pandemic created by COVID-19 has required us to adopt a series of measures to maintain our business envelope which we have achieved through: remote and home working; voluntary attendance in the office; communication through a series of media tools; investing in Office 365, all of which has been achieved in each hub. n 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. With regards to Brexit, now that the UK has left the EU with a trade and cooperation agreement in place, the UK has improved clarity on the future trading arrangements. In the short term this improves business confidence to make operational and investment decisions, however there still remains some uncertainty in predicting and quantifying the long term impact for the UK business. 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. The effect of COVID-19 has driven political decisions on the grounds of public health and safety, which impacts the ability for both the Group and its clients to operate, and for staff to travel; and economic grounds to reduce the long-term impact on the viability of companies and sustain jobs. Further, this impacts clients’ decision making thereby influencing levels of property development activity. Whilst the lock-down measures imposed by the UK government in 2020 and into 2021 demonstrated an ability to manage case levels, the easing of these measures highlighted how quickly case levels can increase and stretch the UK health service’s ability to cope. Whilst the recent approvals of a number of vaccines is welcomed, it is too early to tell how effective their roll out will be which makes the effect of the pandemic in the coming 12 months impractical to quantify. 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 office lease rent free period which expired in May 2020 includes the option to further extend the rent free period for a further 4 months subject to landlord approved installation of specific property improvements. The decision whether to undertake this work has been paused while management undertake a thorough review of how the UK operation anticipates utilising the office space in the future. The UAE continued further property rationalisation and simplification of local licenses to reduce ongoing fixed costs. The UK continues to maintain a balance in the mix of permanent vs. contract and agency staff to give flexibility to respond to falls in revenue as was experienced during the year. 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 contracts assets (and consequentially higher levels of contract liabilities); 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 contract assets. Payment also tends to take longer in the Middle East. The decline in revenue in the UK and the Middle East in the second half of the year tightened the free cash available to be remitted to the Plc by the year end, which was partially offset by dividends received from the German joint Ventures. Further pressure on cash resources is anticipated through the first half of 2021. 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 2020 renewed the Group’s overdraft facility until November 2021, 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 17 February 2021 of which is USD 120k. 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. 22 23 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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 indemnity insurance in respect of professional negligence claims but is exposed to the cost of excess deductibles on any successful claims. Contract pricing All mature markets are subject to downward pricing pressures as a result of the wide spectrum of available suppliers to each project. This pressure is increased if activity levels are low such as in the economic downturns and global recession. Additionally, architects may be under pressure to work without fees (for a time) in order to win a project or retain sufficient qualified staff to complete the project if won. The Group mitigates this risk by focusing on markets where it has clear skills that are well above average, or avoids it by not lowering prices, thus risking the loss of such work. 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 17 February 2021 and signed on its behalf by Antony Barkwith Group Finance Director 24 Directors’ report The Directors present their report for the year ended 30 September 2020. n 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. n 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. n 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. n Remuneration Committee The Remuneration Committee convenes not less than twice a year, ordinarily on a six monthly basis, and during the year it met on three occasions. The Committee comprises 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. n 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. 25 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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 reviewed the effectiveness of the Board and the matrix of its skill sets. It met on one occasion. n Substantial shareholdings At 17 February 2021 the Company had been informed of the following notifiable interests of three per cent or more in its share capital: n 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. n Directors Antony Barkwith, John Bullough, Clive Carver, Raúl Curiel, Robert Fry and Nicholas Thompson all served as Directors of the Company throughout the year ended 30 September 2020. Biographical details of the current Directors are set out on pages 12 and 13. 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 Robert Fry Antony Barkwith Non-executive Directors John Bullough Raúl Curiel Clive Carver 13 13 13 13 13 13 13 13 13 13 13 12 n Directors’ interests Directors’ interests in the shares of the Company were as follows: Number of ordinary shares Nicholas Thompson John Bullough Raúl Curiel Clive Carver Antony Barkwith Robert Fry 30 September 2020 30 September 2019 16,802,411 500,000 9,240,018 - - 16,802,411 500,000 9,240,018 - - 2,150,000 2,150,000 n 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. Shareholder Notes Number of ordinary shares Nicholas Thompson Director of the Company Jeremy Blake Andrew Murdoch Begonia 365 SL Raúl Curiel Former employee of the Group Former director of the Company Controlled by a former director of the Company Non-Executive Director of the Company Stephen Atkinson Former employee of the Group John Vincent Former director of the Company 16,802,411 13,030,638 12,478,486 9,515,192 9,240,018 7,634,922 5,791,394 Percentage of ordinary shares 10.17% 7.89% 7.56% 5.76% 5.59% 4.62% 3.51% n Share price The mid-market closing price of the shares of the Company at 30 September 2020 was 1.60 pence and the range of mid-market closing prices of the shares during the year was between 1.40 pence and 2.90 pence. n 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. n 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. 26 27 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020          n 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. n 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. 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. n 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. n Future developments An indication of likely future developments in the business of the Group is contained in the Strategic Report. n Financial instruments Information concerning the use of financial instruments by the Group is given in notes 27 to 31 of the financial statements. n Dividends With the continuing pandemic and the uncertainty that this has on near-term trading along with the requirement to conserve cash flow, the Board does not intend to pay a dividend in the forthcoming year. n Going Concern The impact of measures taken around the world to restrict the spread of the COVID-19 virus have had a significant impact to which the business has to date stood up well. Actions taken in the Spring and Summer of 2020, resulted in new working practices to allow existing projects to continue and to for the Group to continue to bid for new work. The cost cutting actions taken also mitigated the financial impact of the above on the Group and the Group continues to operate within its banking limits, with an anticipated breach of the debt servicing covenant having been waived prior to this occurring for the year ended 30 September 2020. More details of the actions taken, and the results of forecasting performed by the Group in response to the COVID-19 pandemic are summarised in the Going Concern section of note 1. In addressing any going concern issues the Directors are required to consider likely cashflows over at least a 12 month period following the date of the approval of the Financial Statements. While the business is currently operating within its banking limits, should there be any material delays in projects under way or should the Group stop winning its share of new projects there may be a need for further action. At year end, the Group had net assets of approximately £4.4 million, and total current assets less current liabilities of approximately £0.5 million. Based on forecasts prepared and reviewed for the period to 30 September 2022 the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. However there remains a risk that in the current COVID-19 environment, the Group may find itself as the result of unexpected levels of delays on project work beyond its control or depending on the outcome of overdraft facility renewals scheduled for November 2021, requiring additional financing. For this reason, the Board considers it appropriate to prepare the financial statements on a going concern basis however given the lack of certainty involved in preparing these cash flow forecasts, there is a material uncertainty which may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group or the Parent Company was unable to continue as a going concern. n 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 17 February 2021 and signed on its behalf by Antony Barkwith Company Secretary Aukett Swanke Group Plc Registered number 02155571 Statement of directors’ responsibilities n 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 accounting standards in conformity with the requirements of the Companies Act 2006. 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 international accounting standards in conformity with the requirements of the Companies Act 2006, 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. n 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. 28 29 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Independent auditor’s report to the members of Aukett Swanke Group Plc n 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 2020 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 changes in cash flows, the consolidated and company statements of changes in equity and the 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 accounting standards in conformity with the requirements of the Companies Act 2006 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 2020 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; • the Parent Company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 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. n 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. n Material uncertainty related to going concern We draw attention to note 1 to the financial statements which indicates the Directors’ assessment of going concern. In the current COVID-19 environment, the Group may find itself as a result of unexpected levels of delays on project work beyond its control requiring additional financing. As stated in note 1, these events or conditions along with other matters as set out in note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. We have highlighted going concern as a key audit matter based on our assessment of the significance of the risk and the effect on our audit strategy. Our audit procedures in response to this key audit matter included: • We agreed the forecasts to the plans agreed by the Board of Directors for approval, ensuring that the cash flow forecast and net funds represent an accurate extraction of the future plans; • Reconciled the opening cash position to the 30 September 2020 audited consolidated cash balance; • Understood the relative contribution of the business segments to the Group’s going concern analysis and challenged the focus of the analysis on the UK segment; • Corroborated the secured and potential work pipelines to work performed on the value in use models and audit of contracts, challenging Management as to any material post-year end variances in revenues and enquiring about the impact of any project delays in secured and potential continuation work; • Challenged the future revenue pipeline and enquired about the status of outstanding bids, agreeing to submitted proposal documents and newly won contracts where appropriate; • Checked the calculations used by Management in sensitising the base case cash flow model to the downside scenarios highlighted in note 1 to confirm their mechanical accuracy; • Considering the availability of the facility by challenging Management on conversations held with the Group’s bankers from the latest facility update, in addition to auditing the assessment by Management of covenant sensitivity to the future forecasts and the impact therefore on retention of the facility during the going concern period; and • Challenged the cost savings and cash deferral initiatives planned by Management throughout the going concern period, including corroborating to supporting evidence of the cash availability from these measures. n Key audit matters Key audit matters are those matters that, in our professional judgement, 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. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Valuation of contract assets and completeness of contract liabilities for long-term architectural services contracts Matter How we addressed the matter in our audit The accounting policies for the recognition of revenue on contracts with customers in accordance with IFRS 15 are documented on page 48. The measurement of revenue earned on architectural services contracts with customers is determined by reference to the stage of completion of those contracts at the statement of financial position date, which is a function of the costs (fee earners and subcontractors) incurred on the contract compared to the total costs expected at the culmination of the contract, less any bills raised to date. We considered the design and implementation of controls around the recognition and measurement of revenue in the year to the statement of financial position date, including controls around contract and sales invoice approval, timecard entries and total cost estimation by directors. We tested the operating effectiveness of controls around the approval of invoices by Management and the reconciliation of the billing system to the accounting system. Since the above measurement requires Directors to assess the final costs expected on a contract to determine the stage of completion, there is inherent estimation uncertainty and therefore significant judgment arising in the formulation of these estimates, which could vary materially over time and dependent on customer activity. We selected a sample of contracts for testing from the statement of financial position balances of contract assets and contract liabilities and performed the following procedures: • We agreed the revenue from the revenue recognition model to the underlying contract and where relevant, contract variations agreed between the Group and its clients. • Chargeable time costs incurred to date for the selected projects were agreed to reports generated from the timekeeping system. A sample of individuals costs from the reports were agreed through to their supporting timecard and their charge rate agreed to firm wide charge rates to test the accuracy of the recorded time. • Reviewed work done by the component auditor to agree a sample of revenue entries recorded in the accounting system to the supporting contract, a copy of the physical sales invoice raised and cash received (see below for work performed around revenue recognition work performed on the year-end balances). • For the sample of recorded projects (both in the UK and by the UAE component auditor), the relevant calculation of revenue at the statement of financial position date was recomputed to test the accuracy of the calculation of contract asset or contract liability. • In both the UK and in the UAE (component auditor), we assessed and challenged the key stage of completion judgments made by the directors. This involved reviewing the basis of future costs expected to be incurred on the project, and obtaining a detailed understanding of the project from management and the project Director. Where relevant, key judgments (costs to completion, project recovery rates) and objectives achieved (submission of key deliverables indicating closure of costs allocable to certain project stages) were corroborated to supporting documentation and post- year end time chargeability to test the accuracy of judgments made at the statement of financial position date. Key observation Based on the procedures performed, we consider that assumptions made by management in recognising revenue on part-completed contracts with customers at the statement of financial position date to be appropriate. 30 31 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Annual impairment review of the UK, Shankland Cox Limited (‘SCL’) and John R Harris & Partners (‘JRHP’) Cash Generating Units Matter How we addressed the matter in our audit The accounting policies for the impairment reviews performed annually under applicable accounting standards are described on page 46. The total statement of financial position goodwill arising from past acquisitions of £2.4m, exists predominantly within the UK (£1.7m), with another £0.6m being in relation to the JRHP cash generating unit (located within the UAE operating segment). The residual £0.1m, which is immaterial, is allocable to the Turkey CGU. While no goodwill is allocable to the SCL CGU (also in the UAE operating segment), £0.3m of other intangible assets are situated within the CGU. There is a risk that these are impaired in the context of the results of the Group and the UK and UAE economic operating environments. The impairment review includes a number of significant judgments around future cash flows (primarily revenue less sub consultant costs), discount rates and long term growth rates, to which the CGUs are sensitive to variations in. In the light of the COVID-19 pandemic there is even heightened uncertainty around future revenue less sub consultant cost pipelines and the consequent profitability of the CGUs. There is significant management judgment and uncertainty involved in the preparation of the value in use models under applicable accounting standards for the Group and as a result this was considered to be a key audit matter. Our audit procedures included: • We assessed the value in use models for each CGU to test compliance with the requirements of applicable accounting standards and mathematical accuracy of each model. • The Weighted Average Cost of Capital (‘WACC’) of the models was recomputed with reference to external data to test its accuracy of computation. • The cash flows within the model were challenged to check that these were accurately stated, reasonable and achievable in the light of the economic environment and future pipeline of work. The pipeline of work was specifically challenged and samples of underlying revenue pipeline corroborated to the supporting contracts from where the revenue has been derived. • The sensitivity analysis performed by Management was assessed to determine the susceptibility of future cash flows to variance in the input assumptions along with the headroom in the model. Key observation Based on the procedures performed, we consider that the assumptions and the methodology used in preparing the value in use calculations are appropriate. n Our application of materiality We apply the concept of materiality both in the planning and performing of our audit, and in evaluating the impact 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 was set at £191,000 (2019: £205,000) which represents approximately 1.5% (2019: 1.5%) of the three yearly average revenue less sub consultant costs for the year. This benchmark is considered to be appropriate as this fairly reflects the activity of the Group in a lossmaking environment, where we would generally base the materiality for a listed Group on its profits. 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 £133,000 (2019: £143,000), being 70% (2019:70%) of the materiality level. The audit of the company-only financial statements of Aukett Swanke Group Plc was performed at a level of £91,000 (2019: £141,000) which represents 3% of net assets at the year-end (2019: 3%). 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 £63,700 (2019: £98,700) being 70% (2019: 70%) of the company-only materiality level. Component materiality ranged from £6,000 to £50,000, 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. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £6,600 (2019: £7,000) in addition to other misstatements that warranted reporting on qualitative grounds. n 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 a non-BDO component audit firm in Dubai. The UAE component auditor’s work resulted in them auditing the following percentages of the Group (the balance being audited by BDO LLP): • Revenue less sub-consultant costs: 36% • Gross assets: 12% In addition to the above, the UAE segment for which the component auditor was responsible, contributed a loss of £472k to the overall group loss before tax of £46k. 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 LLP 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 LLP to establish understanding of terms and instructions, conducted by video conference; • Detailed remote review of audit files produced by UAE component auditor by the Group Engagement team (performed over video conference); • Attendance at the clearance meeting between UAE local management and UAE component auditor by video conference; and • Direction and supervision of clearance of core audit areas relevant to the Group with involvement in steering and concluding on any remaining audit adjustments and judgements. The above elements of the review and involvement in the component auditor’s activities in our role as group auditor under ISA 600 were largely conducted by video conference (where noted) in view of the travel restrictions in place due to the SARs-Cov19 pandemic. As group auditor we were able to obtain sufficient assurance over the audit work performed on the significant components through use of this approach. 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. n 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. n 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. n 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. 32 33 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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. n Responsibilities of directors As explained more fully in the statement of Directors’ responsibilities set out on page 29 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. n 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. n 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. Nicholas Carter-Pegg (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK Date: 18 February 2021 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). ATRIUM STUDY, LONDON Consolidated income statement For the year ended 30 September 2020 Note 3 3 4 5 9 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 Gain on disposal of subsidiary Share of results of associate and joint ventures (Loss) / profit before tax Tax credit (Loss) / profit for the year (Loss) / profit attributable to: Owners of Aukett Swanke Group Plc Non-controlling interests Basic and diluted earnings per share for profit attributable to the ordinary equity holders of the Company: From continuing operations Total profit per share 10 2020 £’000 12,166 (830) 11,336 (9,600) (1,295) (1,324) 455 (428) (112) (540) 52 442 (46) 26 (20) 5 (25) (20) 0.00p 0.00p 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 34 35 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Consolidated statement of comprehensive income For the year ended 30 September 2020 Consolidated statement of financial position At 30 Sepember 2020 (Loss) / profit for the year Currency translation differences Other comprehensive (loss)/profit for the year Total comprehensive (loss)/profit for the year Total comprehensive (loss)/profit for the year is attributable to: Owners of Aukett Swanke Group Plc Non-controlling interests 2020 £’000 (20) (38) (38) (58) (33) (25) (58) 2019 £’000 332 46 46 378 392 (14) 378 ST GEORGE’S HOUSE EAST, WIMBLEDON Note 11 12 13 14 16 17 22 18 3 19 3 20 14 20 14 22 23 24 Non current assets Goodwill Other intangible assets Property, plant and equipment Right-of-use assets Investment in associate Investments in joint ventures Deferred tax Total non current assets Current assets Trade and other receivables Contract assets Cash at bank and in hand Total current assets Total assets Current liabilities Trade and other payables Contract liabilities Borrowings Lease liabilities Total current liabilities Non current liabilities Borrowings Lease liabilities 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 2020 £’000 2,392 653 272 2,929 927 317 214 7,704 3,527 628 992 5,147 12,851 (3,333) (606) (155) (539) (4,633) - (2,805) (47) (992) (3,844) (8,477) 4,374 1,652 1,176 (16) 41 1,494 4,347 27 4,374 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 36 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 37 The financial statements on pages 35 to 87 were approved and authorised for issue by the Board of Directors on 17 February 2021 and were signed on its behalf by: Nicholas Thompson Chief Executive Officer Antony Barkwith Group Financial Director AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Company statement of financial position At 30 September 2020 Consolidated statement of cash flows For the year ended 30 September 2020 Note 13 15 18 18 19 20 20 24 Non current assets Property, plant and equipment 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 Deferred tax 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 2020 £’000 15 3,348 26 3,389 1,928 164 2,092 5,481 (2,430) (155) (2,585) (3) - (3) (2,588) 2,893 1,652 (1,429) 1,176 1,494 2,893 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 The result for the year contained within the parent company’s income statement is a loss of £1,815k (2019: profit £335k). The financial statements on pages 35 to 87 were approved and authorised for issue by the Board of Directors on 17 February 2021 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 received/(paid) Net cash inflow from operating activities Cash flows from investing activities Purchase of property, plant and equipment Sale of property, plant and equipment Dividends received Net cash (expended on)/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 2020 £’000 151 (9) 218 360 (245) 16 211 (18) 342 (314) (154) (468) (126) 1,145 (27) 992 992 992 2019 £’000 647 (42) (1) 604 (90) 2 186 98 702 (36) (250) (286) 416 710 19 1,145 1,145 1,145 38 39 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Company statement of cash flows For the year eded 30 September 2020 Consolidated statement of changes in equity For the year ended 30 September 2020 Foreign currency translation reserve £’000 Retained earnings £’000 Other distributable reserve £’000 (24) (309) 1,494 Cash flows from operating activities Cash generated from operations Interest paid Net cash inflow/(outflow) from operating activities Cash flows from investing activities Purchase of property, plant and equipment Dividends received Net cash generated from investing activities Net cash inflow 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 Note 26 2020 £’000 45 (9) 36 (17) 211 194 230 (154) (154) 76 88 164 164 164 2019 £’000 10 (24) (14) - 186 186 172 (250) (250) (78) 166 88 88 88 Share capital £’000 1,652 - - - 1,652 - 1,652 - - - - At 30 September 2018 Profit for the year Other comprehensive income Total comprehensive income Balance at 30 September 2019 as originally presented Effect of adoption of IFRS16 (note 34) Restated total equity at 1 October 2019 Profit/(loss) for the year Acquisition of minority interest Other comprehensive income Total comprehensive income At 30 September 2020 1,652 346 - 346 37 (1) 36 5 - - 5 - 46 46 22 - 22 - - (38) (38) (16) Merger reserve £’000 1,176 - - - Total £’000 3,989 346 46 392 - - - 1,494 1,176 4,381 Non controlling interests £’000 147 (14) - (14) 133 Total equity £’000 4,136 332 46 378 4,514 - - (1) - (1) 1,494 1,176 4,380 - - - - - - - - 5 - (38) (33) 133 (25) (81) - 4,513 (20) (81) (38) (106) (139) 41 1,494 1,176 4,347 27 4,374 RECEPTION STUDY, LONDON 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 other distributable reserve was created in September 2007 during a court and shareholder approved process to reduce the capital of the Company. EDGE EAST SIDE TOWER, BERLIN (image ©EDGE) 40 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 41 Company statement of changes in equity For the year ended 30 September 2020 At 30 September 2018 Profit and total comprehensive income for the year At 30 September 2019 Share capital £’000 1,652 - 1,652 Retained earnings £’000 Other distributable reserve £’000 Merger reserve £’000 Total Equity £’000 51 335 386 1,494 1,176 4,373 - - 335 1,494 1,176 4,708 Loss and total comprehensive income for the year - (1,815) - - (1,815) At 30 September 2020 1,652 (1,429) 1,494 1,176 2,893 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. n Basis of preparation The financial statements for the Group and parent have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. n New accounting standards, amendments and interpretations applied For the year ended 30 September 2020, 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 16 Leases, and IFRIC 23 Uncertainty over income tax treatments The impact of the adoption of IFRS 16 and the new accounting policies are disclosed in note 34. There was no change to the Group on adoption of IFRIC 23. n 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 2020 and have not yet been adopted by the Group: PRIVATE RESIDENCE , MOSCOW i) IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment – Definition of Material) IFRS 3 Business Combinations (Amendment – Definition of Business) ii) iii) Revised Conceptual Framework for Financial Reporting In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non- current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that ‘settlement’ includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after 1 January 2022. At present the Group has not analysed the impact of these new accounting standards and amendments. 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. n 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 an overdraft facility of £500k for additional financial flexibility and foreign currency hedging purposes. This overdraft facility is renewed annually and was renewed for a further 12 months in November 2020, with a review in May 2021. 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 March 2020 by the Financial Reporting Council, “FRC guidance for companies and auditors during the COVID-19 crisis”. 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. As the COVID-19 pandemic developed through 2020 and into 2021 it affected all of the territories in which the Group operates to varying extents and other countries in which the Group has clients and projects. In March 2020 the Group moved to remote working without any significant disruption, ensuring that staff could continue to work efficiently and service active projects. 42 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 43 With the economic uncertainty that the pandemic presents, the Groups’ operational management took preventative steps including: implementing pay reductions in the UK and UAE operations, and the central administrative operation of varying percentages and durations; furloughing permanent staff; releasing temporary or freelance staff; and encouraging unpaid leave and part time working - all of which provided management with a range of tools that can be implemented at short notice and with immediate effect. The Group has also sought to remove non-essential or deferrable expenditure. Entities deferred operational cash flows where possible to provide short term support to the Groups’ working capital and therefore avoid any new external borrowings and limited use of existing facilities. However, those deferrals unwind in 2021, and haven’t as yet been replaced with similar assistance. The Groups’ 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, and we have no reason not to expect that the overdraft facility would not be renewed again in November 2021. Due to the uncertainty in forecasting profits during the COVID-19 pandemic Coutts & Co have agreed to waive the debt servicing covenant for the year ended 30 September 2020 and to remove the debt servicing covenant from the facility agreement for the year ending 30 September 2021 and as such if this covenant is reintroduced in the November 2021 renewal this covenant would next be due for assessment following the year ending 30 September 2022 (assessed on completion of the annual audit, anticipated in January 2023). During the year Coutts & Co supportively agreed to extend the terms of repayment of the outstanding US Dollar loan. This loan was originally scheduled to be cleared in November 2020, but was extended to July 2021. As at 17 February 2021 the balance on this loan is USD 120k. The other covenants applicable relate to a measure of the Groups’ gearing, and maintaining a level of UK eligible debtors. The Groups’ Directors are confident that the structure of the Group ensures that the covenants will continue to be satisfied so long as the Group operates within the £500k overdraft limit. Certain Governments have brought in support packages for businesses during the pandemic such as the UK government backed Coronavirus Business Interruption Loan Scheme (CBILS). However, there is limited information on how long these schemes with continue, with for example CBILS currently extended to 31 March 2021. The Group has managed cash flow within its existing facilities so far, but it is possible that such schemes will be withdrawn during the course of the next 12 month going concern review period, and as such our forecast assumes that no additional external financing is received when measuring the Groups ability to continue to operate. The Groups’ assessment of going concern is therefore focussed on its ability to operate within the £500k overdraft limit. The Group forecasts on the basis of earnings and billings from i) secure contractual work, ii) known potential work which is deemed to have a greater than 50% chance of being undertaken and is predominantly follow on stages of currently instructed work, on which a factoring is applied; and iii) new work from known sources such as competitive tenders and submitted fee proposals, or new work to be achieved based on historical experience of market activity and timescales in which work can be converted from an enquiry to an active project which varies by territory and the service each office in the Group provides. Aware that the risk of the COVID-19 pandemic could lead to recessions and delays in clients making financial investment decisions, the forecasts assessed by the Directors then apply sensitivities based on levels of earnings reductions sustained over the next 12 months, making controllable adjustments to the cost base through structural adjustments to staffing numbers and deferring and removing non-essential costs. We also assess overall cash levels across the Group and how those can be best deployed to ensure each of the entities in the Group has sufficient cash to operate. The above cost planning exercise and focus on near term secure income and contract extensions has resulted in the Group reforecasting based on cash inflows from turnover less sub consultant costs reduced by an average of 10% against management accounts over the next 12 months. This reforecasting ensures that where the business is sensitive to expected declines in cash inflows from work, management are able to plan ahead for this and manage cost outflows effectively. In the event that the level of turnover falls by more than the 10% indicated above, management have identified further cash flow initiatives around the Group which could be utilised to generate additional free cash to allow the company to continue to trade. This could include options to sublet, administrative staff and discretionary overhead cost savings and freeing up liquidity in our German associate and joint venture. In the shorter term management reviewed a number of scenarios, including a scenario modelling a pause on short term expected work amounting to 21.4% of income for 3 months, then followed by the same reductions in workload from the 12 month model (averaging out to over 14% across 12 months). The short-term impact would necessitate the Group moving a level of cash from the investments in joint ventures and associates into the Group, and an improved debtor collection rate than we normally forecast to remain within the limits of our facilities. The Directors note that the UK and other governments in the territories in which we operate, have been supportive in their efforts to enable construction and infrastructure projects to continue throughout the pandemic so far including whilst lock-down measures have been imposed. With the measures put in place by contractors and sites to date combined with lessons learnt from companies to enable continued operations through remote working, we see the industry now better positioned to reduce the risks of impact from further COVID-19 spikes. 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. However there remains a risk that in the current COVID-19 environment, the Group may find itself as the result of unexpected levels of delays on project work beyond its control requiring additional financing. For this reason, the Board considers it appropriate to prepare the financial statements on a going concern basis, however given the lack of certainty involved in preparing these cash flow forecasts, there is a material uncertainty which may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern and therefore their ability to realise their assets and discharge their liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group or the Parent Company was unable to continue as a going concern. n 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. n 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. n 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. n 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. n 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. n 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. 44 45 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020n 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. Identifying Leases The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy all of the following criteria: n Equity instruments Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs. n 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. n 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. n 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. n 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. n 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. n Leases and asset finance arrangements The majority of the Group’s accounting policies for leases are set out in note 14. a) There is an identified asset; b) c) The Group obtains substantially all the economic benefits from use of the asset; and The Group has the right to direct use of the asset. The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic benefits that arise from use of the asset, not those incidental to legal ownership or other potential benefits. In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Group considers whether it was involved in the design of the asset in a way that pre-determines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16. n 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. n Other operating expenses Other operating expenses include legal and professional costs, professional indemnity insurance premiums, marketing expenses and other general expenses. n 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 n 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. n 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. 46 47 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020n 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 of the 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 the Group 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. 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 contract assets. To the extent progress billings exceed relevant revenue, the excess is classified as contract liabilities. n 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 note 18. 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: 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% (2019: 6%) 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, (2019: £1.0m) 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 and 29. Impairment of goodwill Details of the impairment reviews undertaken in respect of the carrying value of goodwill are given in note 11. 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 11. 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: 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 no material fee claim revenue has been recognised at 30 September 2020. IFRS 16 Right-of-use asset and Lease liability The lease of its UK, Bonhill Street studio includes an upward rent review after 5 years, does not contain any break clauses and expires in May 2028. The lease includes provision for an additional 4 month rent free period on condition that the Group undertakes specific property improvements to the Landlords reasonable satisfaction. The Group estimates that the cost of installation of these improvements would be equivalent or higher in cost than the value of the 4 months rent free saving. As the Group would have to pay for the comfort cooling system to gain the rent free saving, the 4 month rent free period is not included within the IFRS 16 calculation for the right-of-use asset and associated lease liability. 48 49 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 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 is included within Continental Europe together with Germany and the Czech Republic. n Income statement segment information Segment revenue United Kingdom Middle East Continental Europe Revenue Segment revenue less sub consultant costs United Kingdom Middle East Continental Europe Revenue less sub consultant costs 2020 £’000 7,106 4,823 237 12,166 2020 £’000 6,990 4,122 224 11,336 2019 £’000 7,454 7,522 516 15,492 2019 £’000 7,379 5,900 432 13,711 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 Group costs Depreciation 50 2020 £’000 (104) - - (8) (112) 2020 £’000 29 40 3 2 74 2019 £’000 (18) - - (24) (42) 2019 £’000 101 48 1 - 150 Segment amortisation United Kingdom Middle East Continental Europe Amortisation 2020 Segment result United Kingdom Middle East Continental Europe Group costs Loss before tax 2019 Segment result United Kingdom Middle East Continental Europe Group costs Profit before tax 2020 £’000 367 43 9 419 Reallocation of group management charges £’000 496 449 146 (1,091) - Sub-total £’000 (282) (472) 511 197 (46) Reallocation of group management charges £’000 Sub-total £’000 (89) (69) 351 99 292 540 594 144 (1,278) - 2019 £’000 27 43 11 81 Total £’000 214 (23) 657 (894) (46) Total £’000 451 525 495 (1,179) 292 Before goodwill and acquisition adjustments £’000 Fair value gains on deferred consideration and acquisition settlement £’000 (282) (472) 511 197 (46) - - - - - Before goodwill and acquisition adjustments £’000 Fair value gains on deferred consideration and acquisition settlement £’000 (89) (123) 351 99 238 - 54 - - 54 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. n 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 2020 £’000 648 (20) 628 606 606 2019 £’000 680 (17) 663 836 836 51 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Significant changes in contract asset and liabilities There were no significant changes in Contract assets as the timing of providing services ahead of the agreed payment schedules for contracts remained largely unchanged. Most of the contract assets are derived from contracts in the Middle East operating segment. Contract liabilities have decreased as the Group has invoiced for lower amounts ahead of providing services. Contract liabilities derive 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 2019 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 2020 £’000 (836) 737 28 (535) (606) The Group did not recognise any revenue in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods. n 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 2020 £’000 1,354 1,562 91 3,007 2,140 7,704 2019 £’000 1,488 2,565 91 4,144 2,568 4,945 12,851 11,657 n Geographical areas Revenue United Kingdom Country of domicile Russia Turkey United Arab Emirates Foreign countries Revenue Non current assets United Kingdom Country of domicile Czech Republic Germany Turkey United Arab Emirates Foreign countries Non current assets excluding deferred tax Deferred tax Non current assets n Major clients During the year ended 30 September 2020, the Group did not derive 10% or more of its revenues from any client (2019: no client). * Non current assets include investments in associate and joint ventures. Largest client revenues Segment liabilities United Kingdom Middle East Continental Europe Trade payables, contract liabilities and accruals Other current liabilities Non current liabilities Total liabilities 52 2020 £’000 2,168 1,052 25 3,245 1,388 3,844 8,477 2019 £’000 2,989 1,594 85 4,668 1,027 1,448 7,143 The largest client revenues for 2020 relate to the United Kingdom operating segment (2019: Middle East operating segment). n 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 2020 £’000 6,769 4,994 373 30 12,166 2020 £’000 7,106 7,106 - 237 4,823 5,060 2019 £’000 7,454 7,454 254 262 7,522 8,038 12,166 15,492 2020 £’000 5,072 5,072 25 1,219 57 1,117 2,418 7,490 214 7,704 2020 £’000 877 2019 £’000 2,479 2,479 - 988 75 1,210 2,273 4,752 193 4,945 2019 £’000 940 2019 £’000 6,900 7,827 589 176 15,492 53 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 20204 OTHER OPERATING INCOME Property rental income Management charges to joint ventures and associates Government grants (UK furlough scheme) Other sundry income Fair value gain on the reduction of deferred consideration Total other operating income 5 FINANCE COSTS Payable on bank loans and overdrafts Finance lease interest payable Total finance costs 6 AUDITOR REMUNERATION 2020 £’000 148 122 158 27 - 455 2020 £’000 9 103 112 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 2020 £’000 53 69 - - 2019 £’000 170 114 - 33 54 371 2019 £’000 28 14 42 2019 £’000 42 65 - - 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 2020 Number 129 32 161 Company 2019 Number 2020 Number 2019 Number 152 36 188 - 7 7 - 7 7 In addition to the number of staff disclosed above, the Group’s associate and joint ventures employed an average of 141 persons (2019: 126 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 2020 £’000 6,958 461 273 7,692 2019 £’000 8,254 517 259 9,030 2020 £’000 542 65 41 648 2019 £’000 647 75 38 760 The Group contributes to defined contribution pension arrangements for its employees both in the UK and overseas. The assets of these arrangements are held by financial institutions entirely separately from those of the Group. The Group’s Turkish subsidiary is required to pay termination benefits to each employee who completes one year of service and whose employment is terminated upon causes that qualify the employee to receive termination indemnity payments. The Group’s Middle East subsidiaries are required to pay termination benefits to each employee who completes one year of service as stipulated by UAE labour laws. Further details of this can be found in note 23. SANOFI, ISTANBUL 54 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 55 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 20208 DIRECTORS’ EMOLUMENTS Directors with operational roles in the UK business, and the Executive Directors and Non-executive Directors of Aukett Swanke Group (“ASG”) Plc, waived part of their emoluments in the current year to reflect difficult trading conditions. The total amounts waived were 2020: £38k (2019: £nil). The tax assessed for the year differs from the United Kingdom standard rate as explained below: 2020 Nicholas Thompson John Bullough Robert Fry Clive Carver Raúl Curiel Antony Barkwith Total 2019 Anthony Simmonds Nicholas Thompson Beverley Wright John Bullough Robert Fry Clive Carver Raúl Curiel Antony Barkwith Total Aggregate emoluments £’000 Pension contributions £’000 Total received £’000 218 28 119 28 28 101 522 10 - 19 - - 13 42 228 28 138 28 28 114 564 Waived £’000 15 2 9 2 2 8 38 Total entitlement £’000 243 30 147 30 30 122 602 Aggregate emoluments £’000 Pension contributions £’000 Total received £’000 Total entitlement £’000 23 210 81 30 123 12 19 25 523 - 21 17 - 17 - - 3 58 23 231 98 30 140 12 19 28 581 23 231 98 30 140 12 19 28 581 Benefits were accruing to three Directors (2019: five Directors) under defined contribution pension arrangements. The aggregate emoluments of the highest paid Director were £218,000 (2019: £210,000) together with pension contributions of £10,000 (2019: £21,000). 9 TAX CHARGE Current tax Adjustment in respect of previous years Total current tax Origination and reversal of temporary differences Changes in tax rates Total deferred tax (note 22) Total tax credit 2020 £’000 - - - (26) - (26) (26) 2019 £’000 1 (218) (217) 83 94 177 (40) Loss/(profit) before tax Loss/(profit) before tax multiplied by the standard rate of corporation tax in the United Kingdom of 19% (2019: 19%) Effects of: Other non tax deductible (credits)/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 10 EARNINGS PER SHARE The calculations of basic and diluted earnings per share are based on the following data: Earnings Continuing operations Profit for the year Number of shares 2020 £’000 (46) (9) (12) (84) 84 - 7 (12) (26) 2020 £’000 5 5 2020 Number 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 As explained in note 25 the Company has granted options over 1,500,000 of its ordinary shares. These have not been included above as the average share price was below the exercise price in 2020 and they therefore do not have a dilutive effect. STEAMHOUSE, EASTSIDE LOCKS, BIRMINGHAM The standard rate of corporation tax in the United Kingdom is applicable for the financial year was 19% (2019: 19%) 56 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 57 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 202011 GOODWILL Group Cost At 1 October 2018 Exchange differences At 30 September 2019 Addition Disposal Exchange differences At 30 September 2020 Impairment At 1 October 2018 Exchange differences At 30 September 2019 Disposal Exchange differences At 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 At 30 September 2018 £’000 2,641 42 2,683 19 (271) (39) 2,392 269 2 271 (271) - - 2,392 2,412 2,372 The disposal recorded in the year related to Goodwill on a Russian subsidiary which was sold during the year as noted on page 18. As the Goodwill allocated to that entity had previously been fully impaired no gain or loss was recognised on disposal of the goodwill. The addition recorded in the year related to Goodwill on the acquisition of an additional 15% shareholding in John R Harris & Partners Limited increasing the Group’s shareholding from 80% to 95%. The net book value of goodwill is allocated to the Group’s cash generating units (“CGU”) as follows: At 30 September 2018 Exchange differences At 30 September 2019 Addition Exchange differences At 30 September 2020 United Kingdom £’000 Turkey £’000 Middle East £’000 1,740 - 1,740 - - 1,740 32 5 37 - (11) 26 600 35 635 19 (28) 626 Total £’000 2,372 40 2,412 19 (39) 2,392 An annual impairment test is performed over the cash generating units (‘CGUs’) of the Group where goodwill is allocable to those CGUs. While JRHP and SCL are identifiable as separate CGUs for the purposes of performing an impairment review under IAS 36, the goodwill of the two CGUs is aggregated here for reference purposes in the disclosure tables. 58 HYBRID MASTERPLAN 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 material. 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 3.7% 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. Projections consider a gradual return to economic health in the year to September 2021 due to the ongoing effects of the COVID-19 pandemic, then growing to an operation generating revenue in excess of £8m for subsequent years; long term growth rate - which has been assumed to be 2.0% (2019: 2.1%) 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 12.66% (2019: 13.3%). Based on the discounted cash flow projections, the recoverable amount of the UK CGU is estimated to exceed carrying values by £5,504k (282%). A 7% fall in all future forecast revenues (applied as a smooth reduction to the compound growth rate noted above) without a corresponding reduction in costs in the UK CGU, or an increase in the discount rate to over 39%, would result in carrying amounts exceeding their recoverable amount. A decrease in the effective compound growth rate of revenue to 2.1% instead of the 3.7% 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 5.5% (for JRHP) and 0.9% (for SCL) over the next five years - which is based on knowledge of the current and expected level of construction activity in the Middle East; Projections for SCL assume a continuation of the effect of economic slowdown through the year to September 2021 before returning to revenue in excess of AED 8.5m for subsequent years. For JRHP we assume earnings in the year to September 2021 of AED 9m with earnings rising above AED 10m from the year 2022/23. • 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 3.15% 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 13.7% (2019: 11.9%). • Based on the discounted cash flow projections, the recoverable amount of JRHP within the Middle East CGU is estimated to exceed carrying values by at least £1.50m (115%). A decrease in the effective compound growth rate of revenue to 3.6% instead of the 5.5% noted above, without a corresponding reduction in costs in the Middle Eastern CGU, would result in carrying amounts exceeding their recoverable amount. An increase in the discount rate to 30.7% would result in carrying amounts exceeding their recoverable amount. Based on the discounted cash flow projections, the recoverable amount of SCL within the Middle East CGU is estimated to exceed carrying values by at least £1.65m (296%). A decrease in the effective compound growth rate of revenue to minus (1.34)% instead of the 0.9% noted above, without a corresponding reduction in costs in the Middle Eastern CGU, would result in carrying amounts exceeding their recoverable amount. An increase in the discount rate to 51.4% 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. 59 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 202012 OTHER INTANGIBLE ASSETS Group Cost At 30 September 2018 Disposal Exchange differences At 30 September 2019 Disposal Exchange differences At 30 September 2020 Amortisation At 30 September 2018 Disposal Charge Exchange differences At 30 September 2019 Disposal Charge Exchange differences At 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 At 30 September 2018 Trade name £’000 Customer relationships £’000 Order book £’000 Trade licence £’000 677 - 24 701 - (29) 672 121 - 26 5 152 - 26 (9) 169 503 549 556 383 - 21 404 - (31) 373 180 - 47 10 237 - 45 (23) 259 114 167 203 157 (157) - - - - - 157 (157) - - - - - - - - - - 75 - 5 80 - (4) 76 24 - 8 2 34 - 8 (2) 40 36 46 51 Total £’000 1,292 (157) 50 1,185 - (64) 1,121 482 (157) 81 17 423 - 79 (34) 468 653 762 810 Amortisation is included in other operating expenses in the consolidated income statement. n 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 18 and 20 years, respectively. n Customer relationships The customer relationships were acquired as part of the acquisition of SHC in December 2013, on the acquisition of John R Harris & Partners Limited (“JRHP”) in June 2015 and on the acquisition of SCL in February 2016. This represents the value attributed to clients who provided repeat business to the Group on the strength of these relationships. Customer relationships are amortised on a straight line basis over a 7-10 year period from the acquisition dates. The customer relationships acquired in December 2013 have a remaining amortisation period of 3 months. The customer relationships acquired in June 2015 and February 2016 both have remaining amortisation periods of 5 years. 60 n 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 5 years. 13 PROPERTY, PLANT & EQUIPMENT Group Cost At 30 September 2018 Additions Disposals Exchange differences At 30 September 2019 Reclassification due to adoption of IFRS 16 (note 14) Additions Disposals Exchange differences At 30 September 2020 Depreciation At 30 September 2018 Charge Disposals Exchange differences At 30 September 2019 Reclassification due to adoption of IFRS 16 (note 14) Charge Disposals Exchange differences At 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 At 30 September 2018 Leasehold improvements £’000 Furniture & equipment £’000 671 241 (317) 2 597 (578) - - (5) 14 351 95 (317) 2 131 (112) - - (5) 14 - 466 320 1,426 59 (35) 23 1,473 - 245 (80) (32) 1,606 1,312 55 (35) 17 1,349 - 74 (64) (25) 1,334 272 124 114 Total £’000 2,097 300 (352) 25 2,070 (578) 245 (80) (37) 1,620 1,663 150 (352) 19 1,480 (112) 74 (64) (30) 1,348 272 590 434 61 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 Company Cost At 30 September 2019 Additions At 30 September 2020 Depreciation At 30 September 2019 Charge At 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 14 LEASES Furniture & equipment £’000 - 17 17 - 2 2 15 - Total £’000 - 17 17 - 2 2 15 - All leases are accounted for by recognising a right-of-use asset and a lease liability except for: - - Leases of low value assets; and Leases with a duration of 12 months or less. IFRS 16 was adopted 1 October 2019 without restatement of comparative figures. For an explanation of the transitional requirements that were applied as at 1 October 2019, see Note 34. The following policies apply subsequent to the date of initial application, 1 October 2019. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: - - - amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: - - - lease payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations – see note 23). Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss. Nova East, London SW1 n2, NOVA EVOLVED, LONDON SW1 When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification: - - - if the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy; in all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right- of-use asset being adjusted by the same amount; if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial of full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount. For contracts that both convey a right to the Group to use an identified asset and require services to be provided to the Group by the lessor, the Group has elected to account for the entire contract as a lease, i.e. it does allocate any amount of the contractual payments to, and account separately for, any services provided by the supplier as part of the contract. n Nature of leasing activities (in the capacity as lessee) The Group leases a number of properties in the jurisdictions from which it operates. In some jurisdictions it is customary for lease contracts to provide for payments to increase each year by inflation or and in others to be reset periodically to market rental rates. In some jurisdictions’ property leases the periodic rent is fixed over the lease term. The Group also leases certain items of plant and equipment. Leases of plant and equipment comprise only fixed payments over the lease terms. The lease liability recognised by the Group on land and buildings relates to the lease on the London premises. Rent on the premises is fixed, subject to a market value rent review in 2023. The payments on leasehold improvements are all fixed payments for the length of the leases. The Group sometimes negotiates break clauses in its property leases. On a case-by-case basis, the Group will consider whether the absence of a break clause would exposes the Group to excessive risk. Typically factors considered in deciding to negotiate a break clause include: - - - the length of the lease term; the economic stability of the environment in which the property is located; and whether the location represents a new area of operations for the Group. At 30 September 2020 the leases recognised do not include any break clauses. 62 63 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 202015 INVESTMENTS Company Cost At 30 September 2018 and 2019 Addition At 30 September 2020 Provisions At 30 September 2018 and 2019 Charge At 30 September 2020 Net book value At 30 September 2018 and 2019 At 30 September 2020 Subsidiaries £’000 Joint ventures £’000 Associate £’000 10,077 100 10,177 4,596 2,266 6,862 5,481 3,315 21 - 21 - - - 21 21 12 - 12 - - - 12 12 Total £’000 10,110 100 10,210 4,596 2,266 6,862 5,514 3,348 The increase in cost of £100k during the year relates to the acquisition of a further 15% equity shareholding in John R Harris & Partners Limited. A provision for impairment of £2,141k has also been made against the Company’s investment in Shankland Cox Limited as a result of the matters described in note 11, the value of that subsidiary is considered to have suffered a permanent diminution. A provision for impairment of £125k has also been made against the Company’s investment in Aukett Fitzroy Robinson International Limited, as the United Arab Emirates branch of the subsidiary ceased trading when its’ licence expired and was cancelled in July 2020. The current net book values of the investments in subsidiaries was £5,581k before charges made in the current year, which is larger than the net assets of the consolidated statement of financial position of £4,374k (2019: £4,514k). After the charge taken on Shankland Cox Limited the net book value of £3,440k is less than the net assets of the consolidated statement of financial position. The net book values are supported by the value in use calculations detailed further in note 11. POTSDAMER PLATZ, BERLIN n Right-of-use Assets At 1 October 2019 Additions Adjustment to brought forward amortisation Amortisation At 30 September 2020 n Lease liabilities At 1 October 2019 Additions Interest expense Lease payments At 30 September 2020 Short-term lease expense Low value lease expense Land and buildings £’000 2,803 - - (325) 2,478 Restoration costs £’000 Leasehold improvements £’000 188 - - (22) 166 Land and buildings £’000 3,277 - 92 (232) 3,137 278 - 44 (37) 285 Leasehold improvements £’000 278 - 11 (82) 207 Expense relating to variable lease payments not included in the measurement of lease liabilities Aggregate undiscounted commitments for short-term leases The maturity analysis of lease liabilities of the Group at each reporting date are as follows: Total £’000 3,269 - 44 (384) 2,929 Total £’000 3,555 - 103 (314) 3,344 £’000 142 17 - 66 At 30 September 2020 Up to 3 months £’000 Between 3 and 12 months £’000 Between 1 and 2 years £’000 Between 2 and 5 years £’000 Over 5 years £’000 Lease liabilities 114 340 469 1,300 1,121 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 leases. Not later than one year Later than one year and not later than five years Later than five years Total 2020 £’000 74 - - 74 2019 £’000 68 - - 68 64 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 65 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020n Subsidiary operations The following are the subsidiary undertakings at 30 September 2020: 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 Country of incorporation and registered office address (see table below) Proportion of ordinary equity held Nature of business 2020 2019 (A) (A) (A) (B) (A) (C) (D) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) 100% 100% 100% 0% 100% 100% 95% 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 Fitzroy Robinson West & Midlands Limited Aukett Swanke OOO was sold to a third party in October 2019. Aukett Fitzroy Robinson International Limited is incorporated in England & Wales. The entity operated principally through its Middle East branch which was registered in the Abu Dhabi emirate of the United Arab Emirates. The branch licence expired and was cancelled in July 2020, with new work continuing through Aukett Swanke Architectural Design Limited. 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 Group was increased from 80% to 95% on the 30th September 2020, non-controlling interests correspondingly decreased from 20% to 5%. 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. 66 n Interest in associate and joint ventures Set out below are the associate and joint ventures of the Group as at 30 September 2020. 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 2020 50% 50% 25% 2019 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 3 Malaya Polyanka Street, office 501, Moscow, 119180, 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 Germany 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. Summarised balance sheet Assets Non current assets Current assets Total assets Liabilities Current liabilities Total liabilities Net assets 2020 £’000 280 6,755 7,035 (3,329) (3,329) 3,706 2019 £’000 170 4,568 4,738 (1,896) (1,896) 2,842 67 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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 2020 £’000 2,842 1,201 102 (439) 3,706 25% 927 927 2020 £’000 13,208 (3,764) 9,444 (7,724) 1,720 (519) 1,201 102 1,303 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 The Group received dividends of £105,000 after deduction of German withholding taxes (2019: £100,000) 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. INDUSTRIAL / LEISURE HYBRID 17 INVESTMENTS IN JOINT VENTURES n Frankfurt As disclosed in note 15, the Group owns 50% of Aukett + Heese Frankfurt GmbH which is based in Frankfurt, Germany. At 30 September 2018 Share of profits Dividends paid Exchange differences At 30 September 2019 Share of profits Dividends paid Exchange differences At 30 September 2020 £’000 248 117 (86) (2) 277 117 (110) 8 292 The Group received dividends of £106,000 after deduction of German withholding taxes (2019: £86,000) 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 2020 £’000 18 500 518 (226) (226) 292 2020 £’000 1,233 (451) 782 (610) 172 (55) 117 2019 £’000 12 580 592 (315) (315) 277 2019 £’000 1,030 (343) 687 (516) 171 (54) 117 68 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 69 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 & ACCOUNTS 2020n Prague As disclosed in note 15, the Group owns 50% of Aukett sro which is based in Prague, Czech Republic. At 30 September 2018 Share of losses Exchange differences At 30 September 2019 Share of profits Exchange differences At 30 September 2020 The following amounts represent the Group’s 50% share of the assets and liabilities, and revenue and expenses of Aukett sro. Assets Current assets Total assets Liabilities Current liabilities Total liabilities Net assets / (liabilities) Revenue Sub consultant costs Revenue less sub consultant costs Operating costs Profit / (loss) before tax Taxation Profit / (loss) after tax 2020 £’000 105 105 (80) (80) 25 2020 £’000 347 (141) 206 (172) 34 (4) 30 £’000 - - - - 25 - 25 2019 £’000 88 88 (93) (93) (5) 2019 £’000 265 (124) 141 (146) (5) - (5) In the prior year the carrying value of the investment in the joint venture was limited to £nil as the company had net liabilities. The current year share of profit is therefore reduced by £5k so that the carrying value of the investment in joint venture matches the Groups’ share of the entities’ net assets being £25k as at 30 September 2020. 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 2020 £’000 3,410 (1,031) 2,379 419 41 - 688 3,527 2019 £’000 4,503 (1,022) 3,481 510 37 218 658 4,904 The corporate tax asset of £218k brought forward from the prior year related to cash receivable from UK R&D tax claims. The asset was received during the year as per the Income Taxes Received line in the Consolidated Statement of Cash Flows. 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 2020 £’000 26 26 1,830 14 30 54 1,928 1,954 2019 £’000 27 27 2,045 10 4 37 2,096 2,123 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. n 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 and Turkey have been immaterial in the historical period reviewed in order to establish the expected loss rate at 30 September 2020. In the UK 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. 70 71 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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. Whilst the total impairment allowance is comparable with the prior year, impairment allowances as a percentage of gross trade receivables has increased to 30% (2019: 23%). The reduction in gross trade receivables is primarily a result of the reduced trading in the Group in the final months of the year compared to the prior year and better rates of debtor collection. Whilst the gross trade receivables and impairment allowance both include a number of old specific balances maintained from prior years which have been provided for but as yet not formally written off. The loss allowance for the Middle East operating segment as at 30 September 2020 (excluding additional loss allowances measured on a case-by-case basis) was determined as follows for both trade receivables and contract assets: 30 September 2020 1-30 days past due More than 30 days past due More than 60 days past due More than 90 days past due Current Expected loss rate (%) Gross carrying amount (£’000) Loss allowance (£’000) through CSOFP 3% 1,080 33 4% 69 3 7% 161 11 12% 14 2 16% 552 89 The comparative loss allowance for the Middle East operating segment as at 30 September 2019 was: 30 September 2019 1-30 days past due More than 30 days past due More than 60 days past due More than 90 days past due Current Expected loss rate (%) Gross carrying amount (£’000) Loss allowance (£’000) through CSOFP 3% 1,955 67 4% 100 4 8% 193 16 15% 105 15 20% 399 78 Total 1,876 138 Total 2,752 180 The loss allowance for the Middle East operating segment as at 30 September 2020 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 (£8k) arises which is taken through the foreign currency translation reserve. Opening loss allowance provision as at 1 October 2019 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 2020 - calculated under IFRS 9 Contract assets £’000 Trade receivables £’000 17 3 - 20 - 20 163 (37) (8) 118 913 1,031 The loss allowances decreased by £45k to £118k for trade receivables and increased by £3k to £20k for contract assets during the year to 30 September 2020. A further allowance for impairment of trade receivables and contract assets is established on a case-by-case basis (amounting to £913k at 30 September 2020 and £859k at 30 September 2019 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. The movement on impairment allowances for trade receivables was as follows: At 30 September 2018 Loss allowance provision Charged to the income statement based on additional case by case provisions Allowance utilised Exchange differences At 30 September 2019 Loss allowance provision Charged to the income statement based on additional case by case provisions Allowance utilised Exchange differences At 30 September 2020 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 33 for further details of the amounts due to subsidiaries. £’000 1,095 (25) 137 (243) 58 1,022 (37) 105 (20) (39) 1,031 2019 £’000 1,760 573 123 2,072 4,528 2019 £’000 26 2,389 4 273 2,692 2020 £’000 1,713 549 145 926 3,333 2020 £’000 57 2,156 103 114 2,430 72 73 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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 2020 £’000 155 - 155 155 155 - - - 155 2019 £’000 325 278 603 331 331 136 136 272 603 Finance lease liabilities were included in borrowings until 30 September 2019, but were reclassified to lease liabilities on 1 October 2019 in the process of adopting the new leasing standard. See notes 14 & 34 for further information about the change in accounting policy for leases. 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 2020 £’000 155 155 155 155 - - - 155 2019 £’000 325 325 260 260 65 - 65 325 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 74 2020 £’000 992 992 (155) 837 2019 £’000 1,145 1,145 (325) 820 22 DEFERRED TAX Group At 30 September 2018 Income statement Exchange differences At 30 September 2019 Income statement Exchange differences At 30 September 2020 Group Deferred tax assets Deferred tax liabilities Net deferred tax balance Tax depreciation on plant and equipment £’000 89 (5) - 84 (41) - 43 Trading losses £’000 280 (163) - 117 68 - 185 Other temporary differences £’000 (53) (9) 1 (61) (1) 1 (61) 2020 £’000 214 (47) 167 Total £’000 316 (177) 1 140 26 1 167 2019 £’000 193 (53) 140 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 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 2018 Utilised Recorded in property, plant and equipment (note 15) Charged to the income statement Exchange differences At 30 September 2019 Utilised Charged to the income statement Exchange differences At 30 September 2020 Property lease provision £’000 Employee benefit obligations £’000 - - 210 - - 210 - - - 210 927 (232) - 163 55 913 (205) 121 (47) 782 Property lease provision The provision arose from lease obligations in respect of the Company’s leased London premises. Total £’000 927 (232) 210 163 55 1,123 (205) 121 (47) 992 75 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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. 25 SHARE OPTIONS The provision payable in greater than five years reflects the future estimated cost of work to be performed. The effect of time value of money 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 2020 5 years 1.04% 1.5% 2019 5 years 1.98% 1.2% 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% 1.34% 0.20% (0.19)% (3.79)% (0.20)% 0.20% 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 (2019: 165,213,652) ordinary shares of 1p each At 1 October 2018 No changes At 30 September 2019 No changes At 30 September 2020 2020 £’000 1,652 2019 £’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. 76 The Company has granted options over its Ordinary Shares to Group employees as follows: At 1 October 2019 Number 500,000 Granted Number - - 1,000,000 500,000 1,000,000 Granted 6 March 2017 24 Aug 2020 Total At 30 September 2020 Number 500,000 1,000,000 1,500,000 Lapsed Number - - - Exercise price Pence 4.25 3.60 Earliest exercisable date Latest exercisable date 6 March 2019 6 March 2023 24 Aug 2022 24 Aug 2026 The 500,000 share options granted on 6 March 2017 relate to Beverley Wright, a former Director of the Company. The 1,000,000 share options granted on 24 August 2020 relate to Antony Barkwith, a current Director of the Company. These share options vested and vest respectively 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 (Loss) / profit before tax – continuing operations Finance costs Share of results of associate and joint ventures Intangible amortisation Depreciation Amortisation of right-of-use assets Profit on disposal of property, plant & equipment Decrease in trade and other receivables (Decrease) / increase in trade and other payables Change in provisions Unrealised foreign exchange differences Net cash generated from operations Company (Loss) / profit before income tax Dividends receivable Finance costs Depreciation Provision on investments Decrease / (increase) in trade and other receivables (Decrease) / increase in trade and other payables Unrealised foreign exchange differences Net cash generated from operations 2020 £’000 (46) 112 (442) 79 74 340 - 989 (794) (79) (82) 151 2020 £’000 (1,812) (211) 9 2 2,266 169 (362) (16) 45 2019 £’000 292 42 (382) 81 150 - (3) 425 86 (68) 24 647 2019 £’000 335 (186) 24 - - (580) 395 22 10 77 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020n Changes in liabilities arising from financing activities including changes arising from cash flows and non-cash changes Group At 1 October 2019 (as originally stated) IFRS16 Lease Liabilities At 1 October 2019 (restated) Cash flows - Repayment of borrowings - Payment of interest - Payment of lease liabilities Non-cash flows - Effects of foreign exchange - Loans and borrowings classified as non-current at 30 September 2020 - Interest accrued in period At 30 September 2020 Company At 1 October 2019 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 2020 - Interest accrued in period At 30 September 2020 Non- current loans and borrowings £’000 Current loans and borrowings £’000 272 3,137 3,409 - - - - (604) - 2,805 331 140 471 (154) (9) (314) (16) 604 112 694 Non- current loans and borrowings £’000 Current loans and borrowings £’000 65 - - - (65) - - 260 (154) (9) (16) 65 9 155 Total £’000 603 3,277 3,880 (154) (9) (314) (16) - 112 3,499 Total £’000 325 (154) (9) (16) - 9 155 HAUS AN DER DAHME, BERLIN 27 FINANCIAL INSTRUMENTS n 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. n 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 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 2020 £’000 2,379 628 419 41 992 4,459 (1,713) (145) (926) (3,554) (155) (6,493) (2,034) 2020 £’000 1,830 40 30 164 2,064 (57) (2,156) (103) (114) (155) (2,585) (521) 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) 78 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 79 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 & ACCOUNTS 2020n Collateral As disclosed in note 20 the bank loan and overdraft (undrawn at 2019 and 2020 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 2020 £’000 3,052 1,025 2019 £’000 3,464 1,044 Other receivables in the consolidated statement of financial position include a £207k rent security deposit (2019: £279k) in respect of the Group’s London studio premises. The rent deposit redeems a cash sum of £279k at the end of the term of the lease in May 2028. As disclosed in Note 34, on adoption of IFRS 16 £60k was capitalised as a right of use asset with a (£1k) adjustment to retained earnings. 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 2020 £’000 26 21 - 1,844 (3) (11) 1,877 2020 £’000 26 20 - (12) 999 1,033 2019 £’000 37 18 719 1,993 (46) (252) 2,469 2019 £’000 37 18 40 (252) 945 788 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. Group Company 2020 Profit £’000 25 103 Equity £’000 132 - 2019 Profit £’000 1 79 Equity £’000 203 - The following foreign exchange gains / (losses) arising from financial assets and financial liabilities have been recognised in the income statement: Group Company 2020 £’000 (12) (19) 2019 £’000 (17) 18 29 COUNTERPARTY RISK n 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 IFRS 9 impairment loss allowance has been made, as the directors consider their recovery is probable, was: Not overdue Between 0 and 30 days overdue Between 30 and 60 days overdue Greater than 60 days overdue Total Not overdue Between 0 and 30 days overdue Between 30 and 60 days overdue Greater than 60 days overdue Total Receivables pre-allowance 2020 £’000 loss allowance £’000 Receivables post-allowance 2020 £’000 1,038 306 222 931 2,497 (13) (3) (11) (91) (118) 1,025 303 211 840 2,379 Receivables pre-allowance 2019 £’000 loss allowance £’000 Receivables post-allowance 2019 £’000 2,206 508 336 594 3,644 (49) (5) (16) (93) (163) 2,157 503 320 501 3,481 The processes undertaken when considering whether a trade receivable may be impaired are set out in notes 2 and 18. 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 18. The concentration of counterparty risk within the £3,007k (2019: £4,144k) 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. 80 81 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Largest exposure Second largest exposure Third largest exposure 2020 £’000 323 128 120 2019 £’000 759 304 203 The Group’s principal banker is Coutts & Co, a member of the Royal Bank of Scotland group. At 30 September 2020 the largest exposure to a single financial institution represented 55% of the Group’s cash and cash equivalents held by John R Harris & Partners Limited with The National Bank of Ras Al-Khaimah (P.S.C) (2019: 73% held by Shankland Cox Limited with Emirates NBD Bank PJSC, a Dubai government-owned bank). n 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 2020 £’000 278 (155) - 123 2020 £’000 (155) (155) 2019 £’000 278 (325) - (47) 2019 £’000 (325) (325) The property rent deposit earns variable rates of interest based on short-term interbank lending rates. Due to the current low levels of worldwide interest rates, and Group treasury management requirements, the cash and cash equivalents are in practice currently not interest bearing, and therefore have not been included in interest bearing financial instruments disclosures. The bank loan and overdraft carry interest at 2.5% above the London Interbank Offer Rate (LIBOR) of the relevant currency. A 1% rise in worldwide interest rates would have the following impact on profit, assuming that all other variables, in particular the interest bearing balance, remain constant. A 1% fall in worldwide interest rates would have an equal but opposite effect. Group Company 82 2020 £’000 1 (2) 2019 £’000 - (3) 31 LIQUIDITY RISK The Group’s cash balances are held at call or in deposits with very short maturity terms. At 30 September 2020 the Group had £850,000 (2019: £850,000) of gross borrowing facility and £500,000 net borrowing facility (2019: £500,000) under its United Kingdom bank overdraft facility. In November 2020 Coutts & Co renewed the overdraft facility, maintaining it at £500,000, which is now next due for review in November 2021, with an interim review in May 2021. 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 2019 Timing of cashflows Within one year Between one and two years Between two and five years Greater than five years Expected future charges through the income statement Financial liabilities at 30 September 2020 Borrowings £’000 Lease liabilities £’000 Other financial liabilities £’000 362 160 141 663 (34) 629 157 - - - 157 (2) 155 - - - - - - 547 547 1,450 1,161 3,705 (361) 3,344 3,955 - - 3,955 - 3,955 2,784 - - - 2,784 - 2,784 Total £’000 4,317 160 141 4,618 (34) 4,584 3,488 547 1,450 1,161 6,646 (363) 6,283 At 30 September 2019, borrowings included finance leases on leasehold Improvements. On adoption of IFRS16 these have been reclassified as lease liabilities. At 30 September 2020, lease liabilities includes the finance lease on leasehold improvements and the land and buildings office lease (see note 14) recognised on adoption of IFRS 16 (note 34). 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 2019 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 2020 Borrowings £’000 Other financial liabilities £’000 268 66 - 334 (9) 325 157 - - 157 (2) 155 2,692 - - 2,692 - 2,692 2,430 - - 2,430 - 2,430 Total £’000 2,960 66 - 3,026 (9) 3,017 2,587 - - 2,587 (2) 2,585 83 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020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 2020 the overdrafts of its United Kingdom subsidiaries guaranteed by the Company totalled £nil (2019: £75,000). The Company and certain of its United Kingdom subsidiaries are members of a group for Value Added Tax (VAT) purposes. At 30 September 2020 the net VAT payable balance of those subsidiaries was £376,000 (2019: £251,000). At the year end, one of the Group’s Middle East subsidiaries had outstanding letters of guarantee totalling £110,000 (2019: £95,000). 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 has contractual commitments totalling £nil (2019: £40,000) per annum in respect of software maintenance plans, which expired in December 2019. The total future commitments arising under these contracts as at the balance sheet date amount to £nil (2019: £40,000). The Group has contractual commitments totalling £3,000 (2019: 3,000) 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 £4,000 (2019: £7,000). 33 RELATED PARTY TRANSACTIONS n 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 2020 £’000 1,221 109 1,330 2020 £’000 585 42 627 2019 £’000 1,349 120 1,469 2019 £’000 589 58 647 n Transactions and balances with associate and joint ventures The Group makes management charges to Aukett + Heese Frankfurt GmbH. The amount charged during the year in respect of these services amounted to £47,000 (2019: £48,000). Aukett + Heese Frankfurt GmbH charged the Group £nil (2019: £nil) for architectural services. Dividends of £106,000 (2019: £86,000) 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 (2019: £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 £63,000 (2019: £64,000). Dividends of £105,000 (2019: £100,000) were received from Aukett + Heese GmbH during the year. The amount owed to the Group by Aukett + Heese GmbH at 30 September 2020 was £nil (2019: £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 £14,000 (2019: £5,000) were made to Aukett sro in respect of these services. The Group was also charged £nil (2019: £2,000) for architectural services provided by Aukett sro during the year, of which £nil (2019: £nil) was owed by the Group at the balance sheet date. Separately, Aukett sro owed the Group and the Company £40,000 as at 30 September 2020 (2019: £37,000) relating to previously declared but not yet paid dividends, management fees and name licence charges. 84 None of the balances with the associate or joint ventures are secured. n 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 £971,000 (2019: £1,164,000) and paid charges to its subsidiaries for office accommodation and other related services of £95,000 (2019: £90,000). At 30 September 2020 the Company was owed £1,830,000 (2019: £2,045,000) by its subsidiaries and owed £2,156,000 (2019: £2,389,000) 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 IFRS 9, 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. 34 CHANGES IN ACCOUNTING POLICIES This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements and discloses the new accounting policies that have been applied from 1 October 2019, where they are different to those applied in prior periods. The Group has adopted IFRS 16 retrospectively from 1 October 2019, but has not restated comparatives for the 2018-19 reporting period, as permitted under the modified retrospective cumulative catch-up transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 October 2019. n 34a) Adjustments recognised on adoption of IFRS 16 Operating lease commitments disclosed as at 30 September 2019 Adjustment for conditional rent free periods (Less): short-term leases recognised on a straight-line basis as expense (Less): low-value leases recognised on a straight-line basis as expense Discounted using the lessee’s incremental borrowing rate of at the date of initial application Add: finance lease liabilities recognised as at 30 September 2019 Lease liability recognised as at 1 October 2019 Of which are: Current lease liabilities Non-current lease liabilities £’000 3,637 193 (103) (12) 3,715 3,277 278 3,555 211 3,344 3,555 The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. Other right- of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 30 September 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application. 85 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020 The recognised right-of-use assets relate to the following types of assets: Properties (operating lease type assets) Properties (rent deposit) Leasehold improvements (finance lease type assets) Total right-of-use assets 30 September 2020 £’000 1 October 2019 £’000 2,426 52 451 2,929 2,743 60 466 3,269 n 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 2019 as originally presented £’000 Finance lease type assets IFRS 16 £’000 Restoration costs IFRS 16 £’000 Operating lease type assets IFRS 16 £’000 590 - 4,945 4,904 6,712 11,657 (4,528) (331) - (5,695) (272) - (1,123) (1,448) (7,143) 4,514 37 4,381 4,514 (278) 278 (188) 188 - - - - 71 (71) - 207 (207) - - - - - - - - - - - - - - - - - - - - - - - - 2,803 2,803 (60) (60) 2,743 533 - (140) 393 - (3,137) - (3,137) (2,744) (1) (1) (1) (1) 1 Oct 2019 as restated £’000 124 3,269 7,748 4,844 6,652 14,400 (3,995) (260) (211) (5,302) (65) (3,344) (1,123) (4,585) (9,887) 4,513 36 4,380 4,513 Property, plant & equipment Right-of-use assets Total non current assets Current Assets Trade and other receivables Total current assets Total assets Current liabilities Trade and other payables Borrowings Lease liabilities Total current liabilities Non current liabilities Borrowings Lease liabilities Provisions Total non current liabilities Total liabilities Net assets Retained Earnings Total equity attributable to equity holders of the Company Total equity 86 n Practical expedients applied In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard: - the accounting for operating leases with a remaining lease term of less than 12 months as at 1 October 2019 as short-term leases. The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease. As the Group has applied the modified retrospective transition approach, for leases previously classified as finance leases the lease liability on transition is unchanged, being the carrying amount of the lease liability immediately before the date of initial application. n 34b) The Group’s leasing activities and how these are accounted for The Group leases various offices, leasehold improvements relating to office fit-out costs, and IT equipment. Rental contracts are typically made for fixed periods of 3 to 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Until the financial year ended 30 September 2019, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease. From 1 October 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: - - - - - fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payment that are based on an index or a rate; amounts expected to be payable by the lessee under residual value guarantees; the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost comprising the following: - - - - the amount of the initial measurement of lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs; and restoration costs. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short- term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment with a value when new of £4,000 or less. 35 CORPORATE INFORMATION General corporate information regarding the Company is shown on page 14. The addresses of the Group’s principal operations are shown on page 2. A description of the Group’s operations and principal activities is given within the Strategic Report. 87 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020Shareholder information n 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 n 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. n 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 9.00am to 5.00pm, 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. n Investor relations In accordance with AIM Rule 26 regarding company information disclosure, various investor orientated information is available on our web site at www. aukettswankeplc.com. The Company Secretary can be contacted by email at cosec@aukettswanke.com. n 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. 88 Luke Schuberth, UK managing director of Aukett Swanke, said: “EQ will be a first class piece of architecture that we have enjoyed being involved in creating. It is testament to a client that has clear ambition and vision and a design team that has a strength in depth and a culture of pushing innovation. It has been a joy to design EQ, to stretch the boundaries of office design with health and well-being and a sustainable ethos that is at the core. The building will increase the energy of the people within it, whilst reducing the energy required to run it. We are delighted that it will now be realised and look forward to its completion.” EQ, BRISTOL “ EQ will be a first class piece of architecture that we have enjoyed being involved in creating. It is testament to a client that has clear ambition and vision and a design team that has a strength in depth and a culture of pushing innovation. It has been a joy to design EQ, to stretch the boundaries of office design with health and well-being and a sustainable ethos that is at the core. The building will increase the energy of the people within it, whilst reducing the energy required to run it. We are delighted that it will now be realised and look forward to its completion.” LUKE SCHUBERTH, MANAGING DIRECTOR - UK AUKETT SWANKE 89 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020www.aukettswankeplc.com Designed and produced by Aukett Swanke Graphics © Copyright 2021 / Aukett Swanke Group Plc 90 AUKETT SWANKE GROUP PLC / ANNUAL REPORT & ACCOUNTS 2020

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