TIDMAUK
RNS Number : 4984P
Aukett Swanke Group PLC
18 February 2021
Aukett Swanke Group Plc
Announcement of final audited results
for the year ended 30 September 2020
Announcement of final audited results for the year ended 30
September 2020
Aukett Swanke Group plc ("the Group"), the international group
of architects, interior designers and engineers announces its final
audited results for the year ended 30 September 2020.
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:
GBP4.79m, H2 2019: GBP8.19m)
-- Profit before tax - focus on costs contained loss before tax
to a creditable GBP46k (2019: profit GBP292k)
-- Cash - cash preserved through cost focus above and
restructuring of loan payments, with net funds of GBP837k at 30
September 2020 (2019: GBP820k)
-- Structural reorganisation through remote working and reduced
number of Middle East licences and offices
Nicholas Thompson, CEO said
"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."
Enquiries
Aukett Swanke Group Plc - 020 7843 3000
-- Nicholas Thompson, Chief Executive Officer
-- Antony Barkwith, Group Finance Director
Arden Partners Plc - 020 7614 5900
-- Corporate Finance: John Llewellyn-Lloyd / Benjamin Cryer
Investor / Media Enquiries - 07979 604687
-- Chris Steele
17 February 2021
Extract from the 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 GBP46k (2019:
profit GBP292k).
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.
Raúl Curiel
Chairman
17 February 2021
Extracts from chief executive's statement, strategic and
directors' reports
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 GBP46k 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.
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 GBP3.32m (21%) to GBP12.17m (2019: GBP15.49m)
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 GBP46k (2019: profit GBP292k).
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 GBP992k (2019:
GBP1,145k) After deducting the final balance due on the Group's
long term loan, net funds stood at GBP837k (2019: GBP820k). 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.
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 GBP7.11m
(2019: GBP7.45m) and loss before tax (including management charges)
at GBP282k (2019: GBP89k), whilst profit before group management
charge fell to a respectable GBP214k (2019: GBP451k) 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 East Side Locks and our
GBP60m EQ head quarter 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.
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.
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 GBP4.82m (2019: GBP7.52m)
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 GBP23k (2019: profit
GBP525k) 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.
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 GBP657k (2019: GBP495k). 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.
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
GBP285k against the prior period spend of GBP1.18m.
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.
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.
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.
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.
Nicholas Thompson Antony Barkwith
Chief Executive Officer Group Finance Director
17 February 2021
Consolidated income statement
For the year ended 30 September 2020
Note 2020 2019
GBP'000 GBP'000
------------------------------------------ ------ ---------- ----------
Revenue 2 12,166 15,492
Sub consultant costs (830) (1,781)
------------------------------------------ ------ ---------- ----------
Revenue less sub consultant costs 2 11,336 13,711
Personnel related costs (9,600) (11,294)
Property related costs (1,295) (1,542)
Other operating expenses (1,324) (1,294)
Other operating income 455 371
Operating loss (428) (48)
Finance costs (112) (42)
------------------------------------------ ------ ---------- ----------
Loss after finance costs (540) (90)
Gain on disposal of subsidiary 52 -
Share of results of associate
and joint ventures 442 382
------------------------------------------ ------ ---------- ----------
(Loss) / profit before tax (46) 292
Tax credit 26 40
------------------------------------------ ------ ---------- ----------
(Loss) / profit for the year 2 (20) 332
------------------------------------------ ------ ---------- ----------
(Loss) / profit attributable to:
Owners of Aukett Swanke Group
Plc 5 346
Non-controlling interests (25) (14)
------------------------------------------ ------ ---------- ----------
(20) 332
------------------------------------------ ------ ---------- ----------
Basic and diluted earnings per
share for profit attributable
to the ordinary equity holders
of the Company:
From continuing operations 0.00p 0.21p
Total profit per share 3 0.00p 0.21p
------------------------------------------ ------ ---------- ----------
Consolidated statement of comprehensive income
For the year ended 30 September 2020
2020 2019
GBP'000 GBP'000
------------------------------------------ ---------- ----------
(Loss) / profit for the year (20) 332
Currency translation differences (38) 46
Other comprehensive (loss)/profit
for the year (38) 46
Total comprehensive (loss)/profit
for the year (58) 378
------------------------------------------- ---------- ----------
Total comprehensive (loss)/profit
for the year is attributable to:
Owners of Aukett Swanke Group
Plc (33) 392
Non-controlling interests (25) (14)
(58) 378
------------------------------------------ ---------- ----------
Consolidated statement of financial position
At 30 September 2020
Note 2020 2019
GBP'000 GBP'000
-------------------------------- ------ --------- ---------
Non current assets
Goodwill 6 2,392 2,412
Other intangible assets 653 762
Property, plant and equipment 272 590
Right-of-use assets 2,929 -
Investment in associate 7 927 711
Investments in joint ventures 8 317 277
Deferred tax 214 193
-------------------------------- ------ --------- ---------
Total non current assets 7,704 4,945
Current assets
Trade and other receivables 3,527 4,904
Contract assets 628 663
Cash at bank and in hand 992 1,145
-------------------------------- ------ --------- ---------
Total current assets 5,147 6,712
Total assets 12,851 11,657
Current liabilities
Trade and other payables (3,333) (4,528)
Contract liabilities (606) (836)
Borrowings (155) (331)
Lease liabilities (539) -
Total current liabilities (4,633) (5,695)
Non current liabilities
Borrowings - (272)
Lease liabilities (2,805) -
Deferred tax (47) (53)
Provisions (992) (1,123)
-------------------------------- ------ --------- ---------
Total non current liabilities (3,844) (1,448)
Total liabilities (8,477) (7,143)
Net assets 4,374 4,514
-------------------------------- ------ --------- ---------
Capital and reserves
Share capital 9 1,652 1,652
Merger reserve 1,176 1,176
Foreign currency translation
reserve (16) 22
Retained earnings 41 37
Other distributable reserve 1,494 1,494
-------------------------------- ------ --------- ---------
Total equity attributable to
equity holders of the Company 4,347 4,381
-------------------------------- ------ --------- ---------
Non-controlling interests 27 133
-------------------------------- ------ --------- ---------
Total equity 4,374 4,514
-------------------------------- ------ --------- ---------
Consolidated statement of cash flows
For the year ended 30 September 2020
Note 2020 2019
GBP'000 GBP'000
----------------------------------------- ------ ---------- ----------
Cash flows from operating activities
Cash generated from operations 4 151 647
Interest paid (9) (42)
Income taxes received/(paid) 218 (1)
----------------------------------------- ------ ---------- ----------
Net cash inflow from operating
activities 360 604
Cash flows from investing activities
Purchase of property, plant and
equipment (245) (90)
Sale of property, plant and equipment 16 2
Dividends received 211 186
----------------------------------------- ------ ---------- ----------
Net cash (expended on)/received
in investing activities (18) 98
Net cash inflow before financing
activities 342 702
Cash flows from financing activities
Payments of lease liabilities (314) (36)
Repayment of bank loans (154) (250)
Net cash outflow from financing
activities (468) (286)
Net change in cash and cash equivalents (126) 416
Cash and cash equivalents at start
of year 1,145 710
Currency translation differences (27) 19
Cash and cash equivalents at end
of year 992 1,145
----------------------------------------- ------ ---------- ----------
Cash and cash equivalents are comprised
of:
Cash at bank and in hand 992 1,145
Cash and cash equivalents at end
of year 992 1,145
------------------------------------------ ---- ------
Consolidated statement of changes in equity
For the year ended 30 September 2020
Share Foreign Retained Other Merger Total Non-controlling Total
capital currency earnings distributable reserve interests equity
translation reserve
reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
At 30
September
2018 1,652 (24) (309) 1,494 1,176 3,989 147 4,136
Profit for the
year - - 346 - - 346 (14) 332
Other
comprehensive
income - 46 - - - 46 - 46
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
Total
comprehensive
income - 46 346 - - 392 (14) 378
Balance at 30
September
2019
as originally
presented 1,652 22 37 1,494 1,176 4,381 133 4,514
Effect of
adoption
of IFRS16 - - (1) - - (1) - (1)
Restated total
equity at 1
October
2019 1,652 22 36 1,494 1,176 4,380 133 4,513
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
Profit/(loss)
for the year - - 5 - - 5 (25) (20)
Acquisition of
minority
interest - - - - - - (81) (81)
Other
comprehensive
income - (38) - - - (38) - (38)
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
Total
comprehensive
income - (38) 5 - - (33) (106) (139)
At 30
September
2020 1,652 (16) 41 1,494 1,176 4,347 27 4,374
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
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 audited final results
1 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.
Going concern
The Group currently meets its day to day working capital
requirements through its cash balances. It maintains an overdraft
facility of GBP500k 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.
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, 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 GBP500k 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 GBP500k 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.
2 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.
Income statement segment information
Segment revenue 2020 2019
GBP'000 GBP'000
-------------------- --------- ---------
United Kingdom 7,106 7,454
Middle East 4,823 7,522
Continental Europe 237 516
Revenue 12,166 15,492
--------------------- --------- ---------
Segment revenue less sub consultant 2020 2019
costs GBP'000 GBP'000
------------------------------------- --------- ---------
United Kingdom 6,990 7,379
Middle East 4,122 5,900
Continental Europe 224 432
Revenue less sub consultant
costs 11,336 13,711
-------------------------------------- --------- ---------
2020 Before goodwill Fair value Sub-total Reallocation Total
Segment result and acquisition gains on GBP'000 of group GBP'000
adjustments deferred management
GBP'000 consideration charges
and acquisition GBP'000
settlement
GBP'000
----------------- ----------------- ----------------- ---------- ------------- ---------
United Kingdom (282) - (282) 496 214
Middle East (472) - (472) 449 (23)
Continental
Europe 511 - 511 146 657
Group costs 197 - 197 (1,091) (894)
----------------- ----------------- ----------------- ---------- ------------- ---------
Loss before
tax (46) - (46) - (46)
----------------- ----------------- ----------------- ---------- ------------- ---------
2019 Before goodwill Fair value Sub-total Reallocation Total
Segment result and acquisition gains on GBP'000 of group GBP'000
adjustments deferred management
GBP'000 consideration charges
and acquisition GBP'000
settlement
GBP'000
----------------- ----------------- ----------------- ---------- ------------- ---------
United Kingdom (89) - (89) 540 451
Middle East (123) 54 (69) 594 525
Continental
Europe 351 - 351 144 495
Group costs 99 - 99 (1,278) (1,179)
----------------- ----------------- ----------------- ---------- ------------- ---------
Profit before
tax 238 54 292 - 292
----------------- ----------------- ----------------- ---------- ------------- ---------
3 Earnings per share
The calculations of basic and diluted earnings per share are
based on the following data:
Earnings 2020 2019
GBP'000 GBP'000
----------------------- --------- ---------
Continuing operations 5 346
Profit for the year 5 346
----------------------- --------- ---------
Number of shares 2020 2019
Number Number
-------------------------------------- ------------ ------------
Weighted average of ordinary shares
in issue 165,213,652 165,213,652
Effect of dilutive options - -
-------------------------------------- ------------ ------------
Diluted weighted average of ordinary
shares in issue 165,213,652 165,213,652
-------------------------------------- ------------ ------------
4 Cash generated from operations
Group 2020 2019
GBP'000 GBP'000
----------------------------------------- --------- ---------
(Loss) / profit before tax -
continuing operations (46) 292
Finance costs 112 42
Share of results of associate
and joint ventures (442) (382)
Intangible amortisation 79 81
Depreciation 74 150
Amortisation of right-of-use 340 -
assets
Profit on disposal of property,
plant & equipment - (3)
Decrease in trade and other receivables 989 425
(Decrease) / increase in trade
and other payables (794) 86
Change in provisions (79) (68)
Unrealised foreign exchange differences (82) 24
Net cash generated from operations 151 647
------------------------------------------ --------- ---------
5 Analysis of net funds
Group 2020 2019
GBP'000 GBP'000
--------------------------- --------- ---------
Cash at bank and in hand 992 1,145
Cash and cash equivalents 992 1,145
Secured bank loan (155) (325)
Net funds 837 820
---------------------------- --------- ---------
6 Goodwill
Group GBP'000
---------------------- ---------
Cost
At 1 October 2018 2,641
Exchange differences 42
At 30 September 2019 2,683
Addition 19
Disposal (271)
Exchange differences (39)
------------------------ ---------
At 30 September 2020 2,392
------------------------ ---------
Impairment
At 1 October 2018 269
Exchange differences 2
At 30 September 2019 271
Disposal (271)
Exchange differences -
---------------------- ---------
At 30 September 2020 -
---------------------- ---------
Net book value
At 30 September 2020 2,392
At 30 September 2019 2,412
At 30 September 2018 2,372
------------------------ ---------
The disposal recorded in the year related to Goodwill on a
Russian subsidiary which was sold during the year. 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:
United Middle
Kingdom Turkey East Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- -------- -------- --------
At 30 September
2018 1,740 32 600 2,372
Exchange differences - 5 35 40
----------------------- --------- -------- -------- --------
At 30 September
2019 1,740 37 635 2,412
Addition - - 19 19
Exchange differences - (11) (28) (39)
----------------------- --------- -------- -------- --------
At 30 September
2020 1,740 26 626 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.
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 GBP8m 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
GBP5,504k (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 GBP1.50m (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 GBP1.65m (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.
7 Investment in associate
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 2020 2019
GBP'000 GBP'000
-------------------------- --------- ---------
Assets
Non current assets 280 170
Current assets 6,755 4,568
--------------------------- --------- ---------
Total assets 7,035 4,738
Liabilities
Current liabilities (3,329) (1,896)
Total liabilities (3,329) (1,896)
Net assets 3,706 2,842
--------------------------- --------- ---------
Reconciliation to carrying amounts:
2020 2019
GBP'000 GBP'000
--------------------------------- --------- ---------
Opening net assets at 1 October 2,842 2,179
Profit for the period 1,201 1,065
Other comprehensive income 102 (4)
Dividends paid (439) (398)
---------------------------------- --------- ---------
Closing net assets 3,706 2,842
Group's share in % 25% 25%
Group's share in GBP'000 927 711
---------------------------------- --------- ---------
Carrying amount 927 711
---------------------------------- --------- ---------
Summarised statement of comprehensive 2020 2019
income GBP'000 GBP'000
--------------------------------------- --------- ---------
Revenue 13,208 13,425
Sub consultant costs (3,764) (5,372)
---------------------------------------- --------- ---------
Revenue less sub consultant costs 9,444 8,053
Operating costs (7,724) (6,525)
---------------------------------------- --------- ---------
Profit before tax 1,720 1,528
Taxation (519) (463)
---------------------------------------- --------- ---------
Profit for the period from continuing
operations 1,201 1,065
Other comprehensive income 102 (4)
---------------------------------------- --------- ---------
Total comprehensive income 1,303 1,061
---------------------------------------- --------- ---------
The Group received dividends of GBP105,000 after deduction of
German withholding taxes (2019: GBP100,000) 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.
8 Investments in joint ventures
Frankfurt
The Group owns 50% of Aukett + Heese Frankfurt GmbH which is
based in Frankfurt, Germany.
GBP'000
---------------------- --------
At 30 September 2018 248
Share of profits 117
Dividends paid (86)
Exchange differences (2)
------------------------ --------
At 30 September 2019 277
Share of profits 117
Dividends paid (110)
Exchange differences 8
------------------------ --------
At 30 September 2020 292
------------------------ --------
The Group received dividends of GBP106,000 after deduction of
German withholding taxes (2019: GBP86,000) 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.
2020 2019
GBP'000 GBP'000
--------------------- --------- ---------
Assets
Non current assets 18 12
Current assets 500 580
---------------------- --------- ---------
Total assets 518 592
Liabilities
Current liabilities (226) (315)
Total liabilities (226) (315)
Net assets 292 277
---------------------- --------- ---------
2020 2019
GBP'000 GBP'000
----------------------------------- --------- ---------
Revenue 1,233 1,030
Sub consultant costs (451) (343)
------------------------------------ --------- ---------
Revenue less sub consultant costs 782 687
Operating costs (610) (516)
------------------------------------ --------- ---------
Profit before tax 172 171
Taxation (55) (54)
------------------------------------ --------- ---------
Profit after tax 117 117
------------------------------------ --------- ---------
The principal risks and uncertainties associated with Aukett +
Heese Frankfurt GmbH are the same as those detailed within the
Group's Strategic Report.
Prague
The Group owns 50% of Aukett sro which is based in Prague, Czech
Republic.
GBP'000
---------------------- --------
At 30 September 2018 -
Share of losses -
Exchange differences -
---------------------- --------
At 30 September 2019 -
Share of profits 25
Exchange differences -
At 30 September 2020 25
------------------------ --------
The following amounts represent the Group's 50% share of the
assets and liabilities, and revenue and expenses of Aukett sro.
2020 2019
GBP'000 GBP'000
---------------------------- --------- ---------
Assets
Current assets 105 88
----------------------------- --------- ---------
Total assets 105 88
Liabilities
Current liabilities (80) (93)
Total liabilities (80) (93)
Net assets / (liabilities) 25 (5)
----------------------------- --------- ---------
2020 2019
GBP'000 GBP'000
----------------------------- --------- ---------
Revenue 347 265
Sub consultant costs (141) (124)
------------------------------ --------- ---------
Revenue less sub consultant
costs 206 141
Operating costs (172) (146)
------------------------------ --------- ---------
Profit / (loss) before tax 34 (5)
Taxation (4) -
Profit / (loss) after tax 30 (5)
------------------------------ --------- ---------
In the prior year the carrying value of the investment in the
joint venture was limited to GBPnil as the company had net
liabilities. The current year share of profit is therefore reduced
by GBP5k so that the carrying value of the investment in joint
venture matches the Groups' share of the entities' net assets being
GBP25k as at 30 September 2020.
9 Share capital
Group and Company 2020 2019
GBP'000 GBP'000
------------------------------------------ --------- ---------
Allocated, called up and fully paid
165,213,652 (2019: 165,213,652) ordinary
shares of 1p each 1,652 1,652
------------------------------------------ --------- ---------
Number
---------------------- ------------
At 1 October 2018 165,213,652
No changes -
At 30 September 2019 165,213,652
No changes -
At 30 September 2020 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.
10 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.
10(a) Adjustments recognised on adoption of IFRS 16
GBP'000
Operating lease commitments disclosed as at 30 September
2019 3,637
Adjustment for conditional rent free periods 193
(Less): short-term leases recognised on a straight-line
basis as expense (103)
(Less): low-value leases recognised on a straight-line
basis as expense (12)
---------
3,715
Discounted using the lessee's incremental borrowing
rate of at the date of initial application 3,277
Add: finance lease liabilities recognised as at
30 September 2019 278
Lease liability recognised as at 1 October 2019 3,555
------------------------------------------------------------ ---------
Of which are:
Current lease liabilities 211
Non-current lease liabilities 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.
The recognised right-of-use assets relate to the following types
of assets:
30 September 1 October
2020 2019
GBP'000 GBP'000
Properties (operating lease
type assets) 2,426 2,743
Properties (rent deposit) 52 60
Leasehold improvements (finance
lease type assets) 451 466
Total right-of-use assets 2,929 3,269
------------------------------------ ------------- ----------
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 1 Oct
2019 Finance Restoration Operating 2019
lease type costs lease
assets type assets
as originally
presented IFRS 16 IFRS 16 IFRS 16 as restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Property, plant & equipment 590 (278) (188) - 124
Right-of-use assets - 278 188 2,803 3,269
Total non current assets 4,945 - - 2,803 7,748
------------------------------- --------------- ------------ ------------ -------------- -------------
Current Assets
Trade and other receivables 4,904 - - (60) 4,844
------------------------------- --------------- ------------ ------------ -------------- -------------
Total current assets 6,712 (60) 6,652
------------------------------- --------------- ------------ ------------ -------------- -------------
Total assets 11,657 - - 2,743 14,400
------------------------------- --------------- ------------ ------------ -------------- -------------
Current liabilities
Trade and other payables (4,528) - - 533 (3,995)
Borrowings (331) 71 - - (260)
Lease liabilities - (71) - (140) (211)
------------------------------- --------------- ------------ ------------ -------------- -------------
Total current liabilities (5,695) - - 393 (5,302)
------------------------------- --------------- ------------ ------------ -------------- -------------
Non current liabilities
Borrowings (272) 207 - - (65)
Lease liabilities - (207) - (3,137) (3,344)
Provisions (1,123) - - - (1,123)
------------------------------- --------------- ------------ ------------ -------------- -------------
Total non current liabilities (1,448) - - (3,137) (4,585)
Total liabilities (7,143) - - (2,744) (9,887)
------------------------------- --------------- ------------ ------------ -------------- -------------
Net assets 4,514 - - (1) 4,513
------------------------------- --------------- ------------ ------------ -------------- -------------
Retained Earnings 37 - - (1) 36
------------------------------- --------------- ------------ ------------ -------------- -------------
Total equity attributable
to equity holders of
the Company 4,381 - - (1) 4,380
------------------------------- --------------- ------------ ------------ -------------- -------------
Total equity 4,514 - - (1) 4,513
------------------------------- --------------- ------------ ------------ -------------- -------------
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.
10(b) 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 GBP4,000 or less.
11 Status of final audited results
This announcement of final audited results was approved by the
Board of Directors on 17 February 2021.
The financial information presented in this announcement has
been extracted from the Group's audited statutory accounts for the
year ended 30 September 2020 which will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting.
The auditor's report on these accounts was unqualified, but
contained references to matters to which the auditors drew
attention by way of emphasis without qualifying their report,
namely around going concern, specifically the Group may find itself
as a result of unexpected levels of delays on project work beyond
its control requiring additional financing. The auditor's report
did not contain a statement under section 498 of the Companies Act
2006.
Statutory accounts for the year ended 30 September 2019 have
been delivered to the registrar of companies and the auditors'
report on these accounts was unqualified, did not include
references to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and did not
contain a statement under section 498 of the Companies Act
2006.
The financial information presented in this announcement of
final audited results does not constitute the Group's statutory
accounts for the year ended 30 September 2020.
12 Annual General Meeting
The Annual General Meeting will be held at 10.00am on Monday 29
March 2021 at 10 Bonhill Street, London, EC2A 4PE.
13 Annual report and accounts
Copies of the 2020 audited accounts will be available today on
the Company's website ( www.aukettswanke.com ) for the purposes of
AIM rule 26 and will be posted to shareholders who have elected to
receive a printed version in due course.
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END
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