TIDMAUK
RNS Number : 3836U
Aukett Swanke Group PLC
28 March 2023
Aukett Swanke Group Plc
("Aukett Swanke", the "Company", or, together with its
subsidiaries, the "Group")
Final audited results
for the year ended 30 September 2022
Aukett Swanke Group plc, the international group of architects,
interior designers and engineers announces its final audited
results for the year ended 30 September 2022.
Highlights
Period under review
-- Revenue less sub consultant costs (from continuing
operations) up 13% to GBP7.127m (2021: GBP6.305m) due to increases
from the UK operations.
-- Trading loss before tax (from continuing operations) reduced to GBP72k (2021: GBP595k).
-- Continued strong performance from its German associate and
joint venture, recording profit of GBP327k (2021: GBP186k).
-- Disposal of John R Harris & Partners for GBP1.1m (AED
5.0m), and discontinuation of remaining loss making UAE
businesses.
-- One-off impairment of GBP1.75m goodwill from historic mergers
to better reflect the tangible position of the current
operations.
Since the financial year end
Acquisition of Torpedo Factory Group Limited which:
-- expands the Group technology offering relating to building systems;
-- increases access to recurring revenue opportunities;
-- strengthens the financial position of the enlarged Group; and
-- strengthens the executive management team.
Clive Carver, Chairman said:
"Our focus is on growing both the core architecture businesses
and our building systems capabilities."
Robert Fry, CEO said:
"During the period under review, market conditions across the
Group's continuing business segments improved, reflected in higher
revenues and stronger trading results in the second half of the
year.
This momentum has continued after the year end. We continue to
receive repeat instructions from longstanding clients and win new
business, resulting in an improved confirmed order book for the
architecture and interior design businesses, which is approximately
23% higher than the same time last year.
Having invested in retaining our existing key staff and
capabilities during the challenging times of the COVID-19 pandemic,
we are now in a sustained period of growth, with the UK
architecture and interior design operations recruiting to increase
technical staff numbers continually over the past nine months to
service this growing workload.
Significant investments have also been made in business
resilience measures to facilitate effective remote working,
improving Revit 3D modelling and rendering capability whilst
simultaneously increasing resilience to cybersecurity threats."
Copies of the 2022 audited accounts will be available today on
the Company's website ( www.aukettswankeplc.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.
Annual General Meeting ("AGM") and proposed Board Changes
Notice of the AGM, which is expected to be held on 21 April
2023, will be posted to shareholders in due course.
Robert Fry's appointment as interim CEO is scheduled to end at
the conclusion of the AGM, when it is proposed that Nick Clark
become the Group's permanent Chief Executive, with Robert becoming
a part time executive director and Deputy Chairman, with principal
responsibility for the Group's architecture businesses.
Raul Curiel has informed the Board that he does not propose to
offer himself for re-election at the forthcoming AGM. The Company
is in advanced stages on the appointment of a new independent
Non-Executive Director and looks forward to updating on this in due
course.
For further information please contact:
Aukett Swanke Group Plc +44 (0) 20 7843 3000
Clive Carver (Chairman)
Robert Fry (Chief Executive)
Antony Barkwith (Group Financial Director)
Strand Hanson Limited (Financial and Nominated Adviser) +44 (0) 20 7409 3494
Richard Johnson, James Bellman
Zeus Capital Limited (Broker) +44 (0) 20 3829 5000
Simon Johnson, Louisa Waddell
Investor/Media +44 (0) 7979 604 687
Chris Steele
Chairman's statement
I am pleased to present the financial statements for the year
ended 30 September 2022.
Leadership changes
Nicholas Thompson
After 28 years with the Group, of which the last 17 years were
as Chief Executive, Nicholas Thompson retired at the end of
December 2022.
Nicholas masterminded the 2005 merger between Aukett and Fitzroy
Robinson and the 2013 merger between Aukett Fitzroy Robinson and
Swanke Hayden Connell to form the current Aukett Swanke Group. He
then led the integration of these businesses and was instrumental
in the Group's international expansion.
In recent years he led the Group through difficult times,
succeeding in preserving for shareholders what might otherwise have
been a casualty to either the Global Financial Crisis or the Covid
inspired downturn.
Nicholas will act as a consultant to the Group and continue to
play a leading role at the WREN, the industry's leading
professional indemnity insurer.
Raul Curiel
Raul joined the Group in 1978 retiring in 2015. He returned as
Non-Executive Chairman in early 2019 until 8 December 2022, when he
relinquished the Chairman role but continued as a Non-Executive
Director.
Raul was one of the Group's most prominent and award winning
architects and responsible for numerous notable buildings. More
recently as Non-Executive Chairman he led the board in helping set
and oversee the Group's strategic plans.
Raul has informed the board that he does not propose to seek
re-election at the AGM scheduled for 21 April 2023 and will
therefore leave the board at that time.
The acquisition of Torpedo Factory Group ("TFG") and the
expansion of the Group's activities into Smart Buildings was
conceived under the leadership of Nicholas and Raul and will be
actively pursued by the current board.
The Investment Case
Background
The past few years have been difficult, and the board's focus
was principally to preserve the Group as intact as possible to form
the base for future growth.
As is set out more fully in the Chief Executive's Report, this
now has largely been achieved, with the continuing businesses
trading better than for some time and those businesses and offices
not deemed to be long term either sold, closed, or being moved onto
a licence basis where the responsibility for profit rests with the
local office concerned rather than the Group.
UK Businesses
Aukett Swanke Limited ("ASL") (design and architecture) and
Veretec Limited ("Veretec") (executive architecture) are core and
key to the Group's future.
These businesses can trace their roots back to 1906 and
currently employs over 80 FTE technical staff of which 54 are
qualified architects or architects in training.
The Group has enjoyed notable success across a range of building
types, including some of the most iconic in the UK. In recent years
this success has continued for buildings in the commercial office,
research and education, mixed use hybrid and hospitality sectors. A
feature of these businesses is the number of repeat instructions
from leading developers.
German investments
We also have meaningful investments in two successful German
architecture businesses. These are a 25% interest in the Berlin
based Aukett + Heese GmbH and a 50% interest in the Frankfurt based
Aukett + Heese Frankfurt GmbH.
As we account for these investments under IFRS rules, which do
not separately show revenues, shareholders may not fully realise
the strength of these investments.
The Berlin business employed an average of 90 FTE technical
staff with revenue of GBP12.20m in the year to 30 September 2022.
The Frankfurt business employed an average of 11 FTE technical
staff with revenue of GBP1.65m in the year to 30 September 2022. In
aggregate, the dividends received in the past two financial years
were GBP656,000.
These businesses are well positioned for further success.
Discontinued Businesses
In recent years we have exited by sale or closure from the
international offices in which trading was difficult.
Public Company Status
We are the UK's only listed architecture business and with the
costs involved in maintaining the listing this could be seen as an
unnecessary burden. Alternatively, it could be seen as a
differentiating feature that can help fuel further growth. We
believe the latter is the case and are working hard to make use of
the listing.
That said there is little benefit in operating as a public
company with a market capitalisation below GBP4 million, as has
been the case recently. We also have infrastructure in place that
could handle operations significantly greater than at present. We
therefore need to grow.
Growth
To increase the Group's share price, and hence market
capitalisation, we need to be profitable and to grow that profit.
Some improvement can be expected from actions already taken. In
part from growth in the existing core businesses, which have the
capacity to do better as markets improve, and in part from the
savings related to no longer being involved in the discontinued
businesses.
Growth in the architecture businesses is expected to come from
further investment in the core business through additional staffing
and from targeted mergers.
We recognise that growth from the core architecture businesses
solely through additional staffing will take time. The UK
businesses have been actively recruiting for the past 9 months
which represents a significant upfront investment, the benefits of
which will take time to be seen.
A characteristic of our industry is the changing nature of
ownership. In previous decades successful architects in their
thirties and forties would typically transition to ownership via
the partnership structures in place at most firms, which was good
for renewal and motivation but also provided an exit to older
architects looking to sell.
The younger generation of architects seem now less inclined or
less able to take on the large financial commitments required to
become owners, leaving a growing number of firms without viable
ownership succession plans. As the UK's only listed architecture
business, we are able to offer our shares to the owners of such
practices and will be looking to use this competitive advantage to
our benefit.
We are also looking to broaden the Group's exposure to the
property market by moving into closely allied fields but where the
business model is more favourable than with a traditional
architecture business and in particular with recurring revenues and
where growth is not solely a function of staff numbers.
A traditional architecture business has high fixed costs
(principally staff, office space, technology and insurance) and
where each project has to be won in competition with others who may
not be bidding at economic rates and where once the project is
completed there is no further income until the next project is
won.
This provides a high barrier to entry, which deters new
entrants. However, as we already have these fixed costs, we propose
to make the most of them by spreading them over a wider pool of
architecture staff and in particular staff at the director /
project leader level, which effectively determines how many
projects can be worked on.
A different business model, but one still focused on the
property sector, is one where revenues are generated monthly
throughout the lifetime of a building; where technology is used to
its utmost; where rapid growth is achievable without the often time
consuming and expensive recruitment of additional staff; and where
short-term fluctuations in economic activity do not dictate
customer buying decisions.
We have therefore identified extending our property related
activities via the deployment of new technologies. The first
venture relates to developing a market presence in the provision of
technical systems in buildings.
Torpedo Factory Group
The acquisition of TFG in March 2023 is the first step in
broadening the Group's activities. Further details of the
acquisition are detailed in the Post balance sheet event note
35.
In comparison with the traditional architecture business model,
which has high fixed costs and where almost all of the income from
a building is at the start of its life with little or no recurring
income, smart buildings can generate predictable income over the
lifetime of the building and is a business that is scalable without
adding proportionately to staff numbers.
TFG has a foothold in the provision of smart buildings with
further acquisition opportunities identified to extend the enlarged
Group's smart buildings offering. As such we believe it to be an
ideal complement to the traditional architecture business.
Additionally, having a significant portion of the Group revenues
from recurring payments on longer term contracts is also expected
to result in a re-rating of the enlarged Group's shares.
New board
While the extent of the senior management changes are greater in
number than typical, these have been a combination of inter alia,
long-term succession planning, making the current transition easier
to manage, and the recent TFG acquisition.
The changes allow the board to be refreshed to not only assist
in the direction of the Group but also to acknowledge prevailing
corporate governance, as is appropriate for the Group, at its
current stage.
Chairman
My first contact with the Group was in 2006 as the Group's
nominated adviser and broker, since when I followed the Group's
progress with great interest, becoming a Non-Executive Director in
2019.
Executive management team
Robert Fry, who is another of the Group's leading and
longstanding architects, and who became Interim Chief Executive
following the retirement of Nicholas Thompson, leads the management
team.
Nick Clark, the founder and CEO of TFG joined the board on 20
March 2023 on completion of the TFG acquisition and will take the
lead in developing the Group's presence in the smart building
sector.
Nick founded the TFG business in 1997. Prior to that he studied
physics at Imperial College followed by an MPhil in Microelectronic
Engineering and Semiconductor Physics at the University of
Cambridge.
Robert's appointment as interim CEO is scheduled to end at the
conclusion of the annual general meeting, when it is proposed that
Nick become permanent Group Chief Executive, with Robert becoming a
part time Executive Director and Deputy Chairman with principal
responsibility for the Group's architecture businesses.
Antony Barkwith, who has been Group Finance Director since 2019,
continues in that role for the enlarged Group.
Non-Executive directors
As noted above Raul Curiel has informed the board that he does
not propose to offer himself for re-election at the forthcoming
Annual General Meeting.
We are in advanced stages on the appointment of a new
independent Non-Executive Director and look forward to updating on
this in due course.
Further biographical details of the board are set out on pages
7-8.
Outlook
The Group's UK architecture businesses and its German
investments are high quality operations with strong brands and a
history of delivering outstanding buildings.
The effective stewardship of the Group in recent years has
provided the firm base for meaningful and scalable growth in the
coming years. The acquisition of TFG is the first step on this
path.
We will now look for further growth in the UK architecture
business and work towards becoming a master systems integrator in
the Smart Buildings arena, where scalability is not dependent
solely on headcount.
Clive Carver
Chairman
27 March 2023
Board of Directors
Clive Carver (Non-Executive Chairman) *(+ #)
FCA FCT Aged 62
Clive became Chairman in December 2022 having joined the board
in May 2019 as a Non-Executive Director.
He has been the Chairman of AIM listed Caspian Sunrise PLC since
2006, and over the past decade has been on the boards of 8
companies listed on the London Stock Exchange, often in the role of
Chairman.
He 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.
Raúl Curiel (Non-Executive Director and former Non-Executive
Chairman) *(+ #)
BA(Hons) MArch Aged 76
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 the 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.
In December 2022 Raúl passed the Group Chairman role to Clive
Carver, and has since continued as a Non-Executive Director.
Robert Fry ( Chief Executive Officer ) (#)
BA(Hons) DipArch MA RIBA Int'l AIA Aged 66
Robert was appointed CEO of the Aukett Swanke Group Plc Board in
January 2023 having joined the Board in March 2018 as Executive
Director and Managing Director - International. Following his
graduation from Sheffield University he spent his formative years
at 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.
Robert works closely with the Chairman and Group Finance
Director in the setting and development of the Group's overall
strategy. His considerable property and construction experience has
been used to allow the development of ASG's businesses.
Robert's appointment as interim CEO is scheduled to end when a
permanent Group Chief Executive is appointed, at which point Robert
will become a part time Executive Director and Deputy Chairman with
principal responsibility for the Group's architecture
businesses.
Antony Barkwith (Group Finance Director & Company
Secretary)
FCA MPhys (Hons) Aged 43
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 in 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.
Nick Clark (Executive Director)
BSc(Hons), MPhil Aged 48
Nick was appointed as an executive director of the Group in
March 2023 following the acquisition of TFG.
Nick is chief executive of TFG. He founded the business in 1997
and has grown it through a combination of acquisitions and organic
growth. In June 2022, Nick was appointed a non-executive director
at Drumz plc, the AIM-listed investing company focused on investing
in and acquiring established technology businesses. Prior to
starting TFG Nick studied physics at Imperial College graduating
with a BSc Hons 2(i) followed by an MPhil in Microelectronic
Engineering and Semiconductor Physics at the University of
Cambridge.
Board committees
The board has the following committees
-- Audit Committee
-- Remuneration Committee
-- Nomination Committee
However, in recent times given the relatively small size of the
board it has been the board as a whole that has taken the lead in
the work otherwise delegated to the committees.
Following the appointment of additional Non-Executive Directors,
the composition of the committees will be reviewed.
* Member of the Audit Committee
(+) Member of the Remuneration Committee
(#) Member of the Nomination Committee
Chief Executive's Report
I am pleased to present my first report as Chief Executive.
Business Review
Overview
During the period under review and subsequently, market
conditions improved across the full range of the Group's continuing
businesses, although the improvements were generally seen towards
the end of that period.
We continue to receive repeat and new business instructions that
have resulted in an improved confirmed order book, which is
approximately 23% higher than the same time last year.
In addition, we have taken action to deal with those parts of
the Group that your board did not consider to be in shareholders'
interests to continue with over the longer term.
United Kingdom
Notable Projects
Our architectural design business, Aukett Swanke Limited, saw
the completion of the STEAMhouse development for Birmingham City
University which has been shortlisted for a BCO award. Both the EQ
Office Headquarters building in Bristol for CEG and an office
building extension in Westminster for Asticus have started on
site.
Planning consents were granted for a mixed use office and
residential development in Maidenhead, and 7 Princes Street in the
City of London, the latter being a significant office strip
back-to-frame refurbishment of a Fitzroy Robinson designed 1970s
office building.
Interior design projects under way for prestigious clients
include a new workplace strategy for a major international bank and
a 196 key luxury hotel in London.
Veretec, our executive architecture business, completed the
21,300 sqm Featherstone building for Derwent working with Skanska
and Morris + Company. Projects in progress include Holloway Park,
the site of the former women's prison, a residential development
for Peabody with AHMM and two prominent buildings on Moorgate for
Osborne with Ben Adams. Heritage projects under way include the
Grade ll Listed 41 Lothbury for Pembroke RE with Stiff + Trevellion
and Greycoat Place in Westminster for Victoria Spaces with
SPPARC.
Investing in the future
We have also continued to focus upon retaining our existing
staff and recruiting new staff to service this workload.
Significant investments have also been made in business
resilience measures to facilitate effective remote working,
improving Revit 3D modelling and rendering capability whilst
simultaneously mitigating cybersecurity threats.
German Investments
The Continental group of operations were once again the best
performing of the group's geographic operations this year with
profits (excluding Group management charges) of GBP0.42m (2021:
GBP0.33m).
The main contributor was our associate office Aukett + Heese in
Berlin, which with its sister joint venture company in Frankfurt,
continued to navigate around the now post-pandemic era for the
third year running.
Berlin celebrated two major topping-out ceremonies on the 140m
tall, 34 storey Edge East Side Tower, let to Amazon and the tallest
building in Berlin and the residential complex of BUWOG Bauträger
GmbH, consisting of three new high-quality buildings and a
renovated old building of 109 apartments. The 57,000 m(2) Forum
Stieglitz refurbishment of Berlin's oldest shopping centre was
completed, and the newly renovated 40,000 m(2) shopping centre
formerly known as the "Potsdamer Platz Arkaden", has re-opened as
"The Playce".
In Frankfurt, completions included further landlord upgrades and
fit-outs for corporate and financial sector tenants in the iconic
Messeturm building. A first project in the Main Tower, another
well-known landmark, has cemented the office's status as a
significant architect of record for tall buildings. New BIM/Revit
projects have begun with a 14,000m(2) tenant fit-out in Berlin and
a major new refurbishment project has begun for an international
bank in Frankfurt together with a new building for a Tata Group
subsidiary company in Bonn in collaboration with the Berlin
office.
Other International activities
Istanbul
Our operation in Istanbul, a wholly owned subsidiary, recorded a
small loss this year of GBP0.05m (2021: loss GBP0.02m) in another
turbulent year of political and economic instability in Turkey.
The Istanbul office completed the first of two major fit-out
projects for Vakifbank at Tower A in Istanbul and three concept
design stage completions for Bayer Insaat on a 63,000 sqm mixed-use
urban regeneration project in the Be ikta district of Istanbul, a
prototype concept design for four separately located reception
areas for Eczacibasi, a prominent Turkish industrial products group
and a 7,000 sqm. concept design for Beycelik Gestamp A.S, an
international automotive industry supplier for their HQ building in
Bursa.
Middle East
Mid-way through the trading year (29 April 2022) the Group
concluded the disposal of its interest in John R Harris &
Partners Limited ("JRHP") to its local management team operating
out of the Middle East.
The disposal provided an initial inflow of cash consideration
along with a deferred consideration sum payable over 5 years, for a
total GBP1.1m (AED 5.0m). The Group entered into a Marketing
Agreement as a part of this transaction, covering the use of the
Group's project portfolio and associated materials, over the
deferred consideration period for an additional sum.
Torpedo Factory Group
The acquisition of TFG completed after the period under review.
Nevertheless, it underpins our strategy of broadening the services
offered by the Group by looking to become a master systems
integrator in the smart buildings arena.
TFG comprises three separate businesses:
-- Intelligent Environments
-- Intelligent Venues
-- Live Events
It will be through an extension of the operations of the
Intelligent Environments and the Intelligent Venues business and by
focused acquisition that we will build out our smart building
capabilities.
The acquisition adds approximately 60 new staff, and also
provides additional financial resources.
Robert Fry
Chief Executive Officer
27 March 2023
Financial review
The headline financial results of the Group were:
2022 2021
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Total revenues under management(1) 24,033 26,426
-------------------------------------------- --------- ---------
Continuing operations
Revenue 8,645 9,192
Revenue less sub consultant costs(1) 7,127 6,305
Net operating expenses (7,757) (7,330)
Other operating income 326 358
Net finance costs (95) (94)
Share of results of associate and
joint ventures 327 166
Trading loss from continuing operations (72) (595)
Goodwill impairment (1,752) -
Loss before tax from continuing operations (1,824) (595)
Tax credit 45 395
-------------------------------------------- --------- ---------
Loss from continuing operations (1,779) (200)
-------------------------------------------- --------- ---------
Loss from discontinued operations (503) (936)
-------------------------------------------- --------- ---------
Loss for the year (2,282) (1,136)
-------------------------------------------- --------- ---------
(1) Alternative performance measures, refer to page 18 for
definition
The result for the year is split between continuing operations
and the discontinued Middle East operations.
The trading loss was just GBP72k (2021: GBP595k) with
significant improvements in the results of both the United Kingdom
and Continental European operations.
The result of the discontinued Middle East operations was a loss
before tax of GBP0.50m (2021: GBP0.94m). JRHP was sold in in April
2022 and the remaining subsidiaries underwent a process to cease
trade and recover outstanding balances, incurring significant one
off closure costs, and provisions on outstanding trade debtors and
guarantees. The Middle East operations are shown in the financial
statements as a discontinued operation.
The GBP1.75m goodwill impairment relates almost entirely to the
acquisitions of Fitzroy Robinson Limited in 2005 and Swanke Hayden
Connell Europe Limited in 2013. Further details are provided in
note 12.
Revenues for the year from continuing operations were GBP8.65m,
a decrease of 6.0% on the previous year (2021: 9.19m). However, and
more importantly, revenues less sub consultants increased by 13.0%
to GBP7.13m (2021: GBP6.31m), with subconsultant costs falling by
47.4% to GBP1.52m (2012: GBP2.89m).
Both the Group's key hubs experienced better performance and
results. In the UK, revenue less sub consultant costs increased
15.0% to GBP6.98m (2021 GBP6.06m) as the UK operations continued to
rebuild following the reductions experienced during the COVID-19
pandemic.
In Continental Europe, stronger performance from the Berlin
associate and Frankfurt joint venture producing a combined share of
profits of GBP0.33m (2021: GBP0.18m), resulted in a significant
increase in the year-on-year profit for the segment.
Performance in Turkey was below expectations.
Operating expenses in the year increased by GBP0.43m, within
which personnel related costs increased by GBP0.64m, as the group
recruited to meet staffing commitments from projects won, partially
offset by a GBP0.21m reduction in other operating expenses.
Other operating income reduced by GBP32k, primarily due to the
end of government grants from the UK government furlough scheme
GBPnil (2021: GBP59k).
During the year under review, deferrals from previous periods,
UK VAT and rent holidays taken during the Covid-19 pandemic and
amounting in aggregate to GBP172k were repaid according to their
terms.
The Group managed technical staff numbers (UK net revenue per
FTE technical staff was maintained at GBP104k, whilst the UK
average FTE technical staff increased by 9 to 67), with the UK
still in a transition period of growth following the COVID-19 slow
down and not yet up to an optimum size for the fixed costs of the
operation.
The loss after tax at GBP2,282k gives an EPS loss of 1.38 pence
per share (2021: 0.69 pence per share), split as 1.08 pence from
continuing operations (of which 1.06 pence is due to the Goodwill
impairment) and 0.30 pence from discontinued operations.
United Kingdom
2022 2021
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Revenue 8.465 8.871
Revenue less sub consultant costs(1) 6,975 6,063
FTE technical staff(1) 67 58
Net revenue per FTE technical staff(1) 104 104
Profit/(loss) before tax (excluding
Group management charges)(1) 211 (308)
Loss before tax (including Group management
charges) (329) (848)
--------------------------------------------- --------- ---------
(1) Alternative performance measures, refer to page 18 for
definition
The UK's revenue less sub consultant costs increased 15.0% year
on year as the hub started to rebound from the COVID-19 slowdown.
Revenue decreased 4.6% as the projects that Veretec executive
architecture acted on as the lead consultant progressed into later
stages, requiring lower volumes of sub consultant expertise.
The first half of the year saw the UK business unable to grow
beyond the prior year second half with revenue less subconsultant
costs of GBP3.31m (2021: H2: GBP3.47m), however significant
improvements came in H2 with the award of a number of projects most
noticeably in the hotels sector in Aukett Swanke Limited with
projects with total fees in excess of GBP3.5m awarded, and in
Veretec a mixture of residential and commercial projects with total
fees in excess of GBP4.2m awarded. This enabled both companies to
begin to grow through the second half of the year with revenue less
subconsultant costs totalling GBP3.67m, and a stronger order book
leading into the year commencing 1 October 2022.
Staff numbers (FTE technical staff) started the year at 70 in
October 2021, but with lower workloads during the 2(nd) quarter of
the year numbers were reduced to a low point of 60. With the
successes of project wins in the second half of the year the
necessary recruitment enabled the UK to regrow to 77 FTE's by 30
September 2022.
This pro-active management of staffing resources enabled the UK
to report net revenue per FTE at GBP104k for the full year,
comparable with the prior year result.
The improvement in revenue particularly in H2, translated into a
reduction in the current year loss by GBP0.52m compared to the
prior year, and enabled the hub to record a profit before tax
(excluding Group management charges).
Continental Europe
The principal components of the Continental Europe hub are the
two German investments, for which under the prevailing accounting
rules we do not show revenue and costs but only report our share of
profits.
2022 2021
GBP'000 GBP'000
---------------------------------------- --------- ---------
Revenue 180 321
Revenue less sub consultant costs(1) 152 242
FTE technical staff(1) 7 8
Net revenue per FTE technical staff(1) 23 30
Profit before tax (excluding Group
management charges)(1) 422 330
Profit before tax (including Group
management charges) 275 149
Including 100% of associate & joint
ventures
Total revenues under management(1) 14,025 14,733
Revenue less sub consultant costs(1) 10,594 10,471
FTE technical staff(1) 108 127
Net revenue per FTE technical staff(1) 98 82
---------------------------------------- --------- ---------
(1) Alternative performance measures, refer to page 18 for
definition
The hub result before tax (including Group management charges) ,
including the joint venture and associate in Germany and the joint
venture in the Czech Republic (in the prior year, now liquidated),
was a profit of GBP275k (2021: GBP149k).
Continental Europe's result is materially dominated by the
associate Berlin and joint venture in Frankfurt. Having remained
profitable in the prior year but with lower levels of profit than
has been historically the case due to the effects of the COVID
pandemic, the year to September 2022 saw trading return back closer
to the expected pre pandemic levels of profitability. They together
contributed GBP328k (2021: GBP182k) profit ( including Group
management charges) to the Continental Europe result.
Reported revenues, comprise the Turkish subsidiary. Turkey
reported revenues for the year of GBP180k (2021: GBP321k), with
revenue less subconsultant costs decreasing to GBP152k (2021:
GBP242k). The reduction in earnings was principally due to a
further devaluation of the Turkish Lira across the period, with the
average TRY to GBP rate in the year at 18.44 (2021: 11.07).
However, whilst the year on year revenue was comparable in local
currency, clients pausing projects led to sub optimal efficiency of
staff time and the very high levels of inflation in Turkey
increased operating costs of the company whilst the existing
projects were priced at rates which were not able to fully absorb
the increased costs that followed. As a result, Turkey recorded a
local loss (including Group management charges) of GBP52k and loss
(excluding Group management charges) of GBP36k.
The liquidation of the Czech Republic joint venture was
completed early in the year under review with nominal residual
costs of GBP1k (2021: loss for the year of GBP16k).
Total revenues under management decreased 4.8%, whilst revenue
less sub consultant costs increased 1.2%. Staff numbers decreased
to 108 (2021: 127), partially due to the closure of the Czech
Republic office, but also with a reduction in average staff numbers
in Germany. However, more efficient working post COVID-19 and more
profitable projects in Germany led to a significant increase in net
revenue per FTE technical staff to GBP98k (2021: GBP82k) and with
it improved profitability.
Middle East - discontinued operation
2022 2021
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Revenue 1,543 2,822
Revenue less sub consultant costs(1) 1,256 2,517
FTE technical staff(1) 18 36
Net revenue per FTE technical staff(1) 68 69
Loss before tax (excluding Group management
charges)(1) (399) (538)
Loss before tax (including Group management
charges) (503) (936)
--------------------------------------------- --------- ---------
(1) Alternative performance measures, refer to page 18 for
definition
Revenues decreased 45.3% from GBP2.82m to GBP1.54m in the year
(revenues less subconsultant costs similarly reduced by 50.1%), due
to the continued effect of the slowdown in construction investment
in the region during the COVID-19 pandemic combined with the
disposal of JRHP in April 2022.
Average technical staff FTE numbers reduced to 18 (2021: 36) and
net revenue per FTE technical staff was relatively similar at
GBP68k (2021: GBP69k).
Whilst the loss was significantly lower than in the prior year,
the loss for the year included costs in the process of terminating
Shankland Cox Limited ("SCL") licenses and commencing the process
to reclaim associated guarantees.
The hub had no remaining Middle East based employees as at 30
September 2022.
With no further material revenue forecast post year end, the
Middle East hub has been treated as a discontinued operation.
Financing
The net deficit (see note 22) at the year end was significantly
down on the prior year as a result of the loss in the year combined
with the timing of UK debtor receipts. This gave a deficit of
GBP621k (2021: net funds GBP15k), comprising cash of GBP28k (2021:
GBP515k), a net overdraft of GBP232k (2021: nil), and a CBILS loan
of GBP417k (2021: GBP500k) drawn in May 2021.
The CBILS loan set out in note 21 was arranged with Coutts &
Co in response to the challenges impacting trade incurring losses
during the COVID pandemic. The loan is repayable over 3 years with
the first instalment made in June 2022, to be paid back in 24
monthly instalments through to May 2024. As at 30 September 2022,
the first 4 instalments had been made on time as planned.
The Group's overdraft facility from its bankers Coutts & Co
started the year at GBP500k and was renewed in November 2021. In
February 2022 the Group requested and Coutts & Co granted a
temporary waiver of the net gearing covenant from February to the
end of April 2022. The Group similarly agreed to temporarily reduce
the overdraft to GBP250k from February to May 2022. In May 2022,
the Group and Coutts & Co agreed to remove the covenants from
the facility agreement, and to maintain the overdraft at GBP250k up
to renewal in November 2022. This is discussed further in note
1.
In November 2022, Coutts & Co confirmed the renewal of the
GBP250k overdraft facility for another year, continuing to provide
working capital flexibility and to support the UK business. This is
renewable annually and will remain in place until November
2023.
The Group has four leases taken out by ASL to fund the purchase
of fit-out costs of the London office in June & November 2018
on 5 year terms, which are capitalised as right of use assets and
lease liabilities. The lease liability (see note 15) as at 30
September 2022 was down to GBP55k (2021: GBP133k).
The Group recognises 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 lease liability as at 30 September 2022 was GBP2,364k
(2021: GBP2,756k). There are no office leases remaining in the UAE
and the office lease in Turkey is short term. 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. Whilst covenants may have been removed from the Coutts
& Co facility during the year, management continue to review
monthly management account measurements indicating whether the
former covenants would be adhered to if they had been in force.
The overdraft was utilised throughout the year. Following the
acquisition of TFG on 20 March 2023 which significantly improves
short term available cash, utilisation of the facility is expected
to be very occasional and backed by other available cash within the
Group through the going concern period.
The Plc continues to act as the Group's central banker, and it
continued to seek 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.
Going Concern
We expect the coming year to present significantly more
opportunities to the Group than has been the case over the past few
years.
The losses incurred during the pandemic and sustained by the
Middle East during the period of discontinuing the remaining
offices, and the cost of administering the listed company
structure, has meant the main challenge post year end continued to
be maintaining working capital which has reduced over the period
along with Group net assets.
During the second half of the financial year, we saw our
revenues in the United Kingdom grow and both UK trading entities
began a period of recruitment to meet the needs of new client
instructions which has continued post year end. Management of cash
flow therefore continues to be key with the associated costs of
increasing staff numbers not perfectly aligned with initial
payments from clients.
In December 2022 the Group renewed its GBP250k overdraft
facility with Coutts & Co and continues to repay the CBILS loan
drawn during the pandemic.
The recently announced acquisition of TFG immediately adds a
significant available cash balance, as well as a significant boost
to the net assets of the Group, which will provide the Directors a
more stable platform to grow the existing combined business and
undertake future opportunities for acquisition and growth.
The TFG acquisition brings into the Group a freehold property
independently valued at GBP3.02m in July 2021 with a mortgage
balance of GBP1.48m as at December 2022, giving a loan to value
percentage of just 48%.
However, as the mortgage renewal date is less than 12 months
from the signing date of these accounts, the Board must consider
the remote possibility that if the mortgage could not be renewed,
then the Group may need to raise cash to repay the full balance of
the mortgage through alternative borrowing facilities, asset sales
or fund raising which are not wholly within the Group's
control.
Based on forecasts prepared and reviewed for the period to 31
March 2024 the Directors have a reasonable expectation that the
Group will have adequate resources to continue in operational
existence for the foreseeable future.
However, while the Board is confident of either being able to
re-mortgage the building or selling it should the need arise, the
requirement to refinance the building within the going concern
period indicates the possible existence of a material uncertainty
which may cause significant doubt on the Group's and the Parent
Company's ability to continue as a going concern.
The financial statements therefore do not include the
adjustments that would result if the Group or the Parent Company
was unable to continue as a going concern.
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.
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 hubs, there are
differing profiles:
-- The UK trades as two businesses: Veretec Limited and Aukett
Swanke Limited. Following the significant slowdown and
rationalisation of staff numbers during the COVID-19 pandemic,
Veretec has been re-growing its technical staff base. From a low of
26 FTE equivalent technical staff in March 2021, Veretec grew to
average 36 FTE technical staff in the year, finishing September
2022 with over 43 FTE technical staff. Aukett Swanke Limited
maintained a more steady core staff number starting October 2021 at
32 FTE technical staff, averaging 30 FTE technical staff across the
year, and ending September 2022 at 33 FTE technical staff. With
both companies experiencing increasing bid activity and improved
conversion of new projects in the second half of the year and in
the first quarter after the year end, both companies target further
growth in staff numbers and revenue in the coming year to achieve a
closer to optimum capacity to cover the fixed cost base of the
London studio.
-- The Middle East: Following the sale of JRHP in April 2022,
Management took the decision to allow the remaining trade licences
in SCL to expire and then undertake an orderly wind down of the
Middle East operations. As at September 2022 the remaining Group
Middle East subsidiaries no longer employed any UAE staff, and
future expectations are limited to clearing the balance sheets of
the companies by collecting the remaining debtor balances and
paying off associated creditors.
-- Continental Europe remains mixed across the portfolio. Having
made profits through the COVID-19 pandemic, the German businesses
continued to be strongest. Berlin in particular recorded profits
back to pre-covid levels in the year to September 2022 and has an
even stronger order book commencing the year to September 2023.
Turkey starts the coming year with a stronger order book than the
prior year but the ongoing very high levels of inflation and
uncertainty in the local economy will make returning to consistent
profitability challenging in the short term.
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 venture in Frankfurt and associate
in Berlin. This is used as a measurement of the overall size and
reach of the Group and is disclosed on pages 12 and 14. 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 14. Consolidated Group
revenue can be reconciled to total revenues under management by
adding i) the revenue of the associate disclosed in note 17; and
ii) double the share of revenue in joint ventures disclosed in note
18;
-- 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 12 to 15;
-- 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 13 to 15;
-- Result before taxation (excluding Group management charges),
and result before taxation (including Group management charges),
which are further assessed on pages 13 to 15;
-- Cash at bank and in hand and net funds / (debt), which is assessed further on page 2.
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 numbers, 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 13 to
15.
Antony Barkwith
Group Finance Director
27 March 2023
Strategic report
The Directors present their Strategic Report on the Group for
the year ended 30 September 2022.
Strategy
We are a professional services group that principally provides
architectural design services along with specialisms in master
planning, interior design, executive architecture and some
engineering services. With the acquisition of TFG we are also
looking to become a Smart Buildings master systems integrator.
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 an attractive and rewarding working environment for our
staff. In addition, we undertake to deliver projects throughout the
technical drawing stages onto site, and up to practical completion
and handover.
Our markets are subject to cyclical and other economic and
political influences in the geographies in which we operate, which
gives rise to peaks and troughs in our financial performance.
The pandemic, which affected all our operations, is an event
that has required specific responses. Similarly, the current
conflict in Ukraine creates an uncertain outlook in terms of both
continuity of project instructions and new business activity.
Business Model
Our architecture and interior design businesses operate in the
UK, Germany and Turkey with other locations operating through
licence based arrangements where the responsibility for profit
rests with local management and owners.
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 Continental European operations provide services offered
that are consistent with those in the UK.
The Group entered into a marketing agreement with JRHP following
the sale of the Dubai based operation in April 2022 maintaining the
Group's interest in this market. without the financial risk of
ownership.
As a Group, we now have a total average full time equivalent
("FTE") staff contingent of 223 (2021: 256) throughout our
organisation which includes both wholly owned and joint venture
operations. We are ranked by professional staff in the 2023 World
Architecture 100 at number 61 (2022 WA100 number 63).
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. Due
to lack of information in the relevant market places, 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.
We believe the main shocks of Brexit and Covid-19 are behind us,
although there are likely to be continued consequences for the
foreseeable future. We are conscious that the Ukraine conflict has
affected business sentiment and is likely to continue to do so
until the conflict ends.
Share price volatility
A strong share price and higher market capitalisation attract
new investors and provide the Group with greater flexibility when
considering M&A activity. Conversely a weaker share price
affords the Group less flexibility.
Operational gearing and funding
In common with other professional services businesses, the Group
has a relatively high level of operational gearing, through
staffing, IT and property costs, which makes it difficult to reduce
costs sufficiently quickly to immediately avoid losses and
associated cash outflows when faced with sharp and unpredicted
falls in revenue.
The UK continues to maintain a balance in the mix of permanent
vs. contract and agency staff to give flexibility to respond to
fluctuation in revenue as has been experienced in recent years.
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 losses sustained in the prior two years, the decline in
revenue in the Middle East, the final repayments of residual UK
deferred rent and VAT agreed during the COVID-19 pandemic and the
commencement of monthly repayments of the CBILS loans, tightened
the free cash available to be remitted to the Plc during the year
but was largely offset by the proceeds of the disposal of JRHP.
Furthermore, the month end timing of UK debtor receipts in
September 2022 meant that the Group was in a position of utilising
part of its overdraft facility at the year end. Dividends were
received from the Berlin associate during the year, but at lower
levels than in prior years, as the Berlin associate only remits
dividends on the basis of local GAAP accounting, which restricts
the recognition of profits until the final completion of individual
projects, and as such there is a lag between recognising
distributable reserves vs IFRS profits.
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, monthly
forecasting and cash flow, and weekly and daily cash reporting
processes in order to react immediately to a required change with
maximum flexibility.
The Group's principal bankers remain supportive and in December
2022 renewed the Group's overdraft facility until November 2023, at
the existing GBP250k level. In May 2021 a GBP500k CBILS loan was
also offered and drawn down. Repayments on this loan commenced
monthly from June 2022, with the last instalment scheduled for May
2024.
The acquisition of TFG on 20 March 2023 provides a significant
boost to the net assets and cash balance of the Group, reducing
immediate cash pressures on the business, but adding a mortgage
liability to be renewed in February 2024.
Staff skills and retention
Our business model relies upon a certain standard and number of
skilled individuals based on qualifications and project track
record. Failure to retain such skills makes the strategies of the
Group difficult to achieve.
The Group aims to ensure that knowledge is shared and that
particular skills are not unique to just one individual.
The Group conducts external surveys to ensure that salaries and
benefits are appropriate and comparable to market levels and
endeavours to provide an attractive 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 until recently parts 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.
Under performing 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 derives a 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 typically 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 27 March 2023
and signed on its behalf by
Antony Barkwith
Group Finance Director
Directors' report
The Directors present their report for the year ended 30
September 2022.
Corporate governance
In accordance with AIM Rule 26 the Company is required to apply
a recognised corporate code. The Board continues 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 in 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.
PRINCIPLE 1
Strategy and business model
The current strategy and business model for the Group is set out
in the Strategic Report on page 19.
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. The cyclical nature of the markets in which we operate gives
rise to peaks and troughs in our financial performance. Management
is cognisant that our business model needs to reflect this variable
factor in both our decision making and expectation of future
performance.
We operate a structure covering: the United Kingdom with our
office in London; Continental Europe with three offices in Berlin,
Frankfurt and Istanbul; along with a marketing agreement with an
operation in the Middle East with an office in Dubai.
The United Kingdom hub comprises three principal service
offerings: comprehensive architectural design including master
planning, interior design and fit-out capability and an executive
architectural delivery service operating under the 'Veretec'
brand.
Our Continental European operations provide services offered
that are consistent with those of the UK operation.
PRINCIPLE 2
Share capital and shareholders
Information about the Company's shares, listing information,
significant shareholders; Directors' shareholdings and share
donations are set out within the Investor relations section of the
Company's website and in the annual report.
The Executive Directors understand the importance of shareholder
dialogue and regularly seek to engage with shareholders at the time
of results' announcements, at the AGM or as requested. In addition,
there is a separate mailbox cosec@aukettswanke.com
The Directors also appreciate the value of a dividend policy and
they endeavour to ensure that the Company's policy is clear.
The primary contact for investors is Robert Fry, Chief Executive
Officer.
PRINCIPLE 3
Corporate Social Responsibility & Stakeholder Engagement
The About section of the Company's website sets out how we
engage with our clientele and related stakeholders in the practice
of architecture, master planning, urban and interior design. This
also provides the contact and separate website details of each
entity within the Group.
Our employees recognise that the professional services we offer
have a significant impact on not just our direct clientele but also
on the public realm, society and the environment as a whole, and
this is recognised in the websites for each subsidiary entity in
the Awards sections of each entity's website.
Client and stakeholder engagement and feedback are an integral
and iterative part of the design process undertaken on projects, as
expressed in the Awards sections of the websites.
Alongside the contribution made to our clientele and others
through the execution of our services we actively participate as
thought and practice leaders in initiatives and events in the
property and construction industry. We also undertake on occasion
voluntary and charitable endeavours that are featured in the News
sections of the Company and subsidiaries websites, internal
Intranet sites and social media platforms.
PRINCIPLE 4
Risk Management
The Group's risk management objective is to identify, document
and monitor those factors that represent risks to the Group in
fulfilling its strategic objectives and to manage those risks
consistent with agreed risk tolerances.
The Business Risk Review (BRR) is the principal tool by which
the Group carries out this process and allows the Board to assess
the business risks in the context of best practice consistent with
any codes of corporate governance. This tool sets out the level of
risk incurred and its probability of occurrence to establish a
level of tolerance applicable to the business.
The BBR is structured to allow monthly reporting from all local
businesses and elevated monthly to the Plc Board with any
significant risks given a 'Red Flag'. These Red Flag items reflect
the key Risks and Uncertainties as set out in the Report and
Accounts.
PRINCIPLE 5
Board structure and composition
The Board comprises two Non-Executive Directors (NED's) and
three Executive directors. The Board believes that the optimal
structure is balanced between NED's and Executives such that equal
weighting is given to oversight and governance, and strategic
development and operational performance in order to promote the
company.
Committees
These are set out in the Directors' Report on pages 29 to
30.
Additionally, each year the relevant Sub Committee produces its
own Business Plan for inclusion in the Group Business Plan setting
out any changes to its Terms of Reference and the principal
activities it is to undertake in the forthcoming financial period.
External surveys and internal analysis of implementation is
provided to the relevant committee.
PRINCIPLE 6
Directors experience and capabilities
The biographies of each current board member can be found on
pages 7-8.
Other roles
Board members are encouraged to take on other roles that do not
conflict with their membership of the Board or are seen as
supportive of their current role.
Robert Fry (Chief Executive Officer) is a member of the RIBA and
is a regular contributor and awards judge for World Architecture
News (WAN), Antony Barkwith (Group Finance Director) is a member of
the Architect's Financial Management Group (AFMG), Clive Carver
(Chairman and NED) holds various NED roles in the oil & gas and
other industries, and Nick Clark (Executive Director) is a NED in a
technology investment company which is AIM-listed.
Group management structure
The ultimate management of the Group is by the Board and its
committees. The role, remits and reports of the committees are set
out in the Directors report. Implicit within all remits is the
obligation of the Board under The Companies Act to promote the
company at all times.
Day to day and operational management is delegated to the CEO,
GFD and the Managing Directors. Each business in the group has its
own team under the Managing Director and its own board. The CEO and
GFD are represented on all boards.
Delegated responsibility is defined at each level and there are
authority matrices which set out limits of responsibility at
specific levels and for specific actions and activities. Each
individual board meets every month. The Directors and senior
members of staff review, mentor and develop colleagues on an
ongoing basis in a coaching and advisory capacity.
All members of the Board endeavour to keep up-to-date and attend
seminars and training courses as appropriate. Each Director is
required to complete CPD in accordance with his/her professional
qualification.
PRINCIPLE 7
Evaluation of the Board
The Nomination Sub Committee of the Board reviews the skills of
each board member on an annual basis using a matrix grid of core
requirements and level of each attribute achieved by the board
membership.
The Skills matrix covers 14 key skills identified as relevant to
the operations of the listed company and its key activities. Each
skill is given a weighting factor of 1 to 3 and graded by level of
knowledge and experience on a scale of 1 to 4. This then provides a
weighted ranking of the skills provided by the current board and
each member in relation to that ranking.
Following completion of the annual review the Nomination
Committee makes recommendations to the Board on further training or
mentoring requirements as necessary.
Appraisals are carried out by the Chairman of each board member
on an annual basis. The NED's appraise the Chairman. As a result of
these meetings, any mentoring and training needs are
established.
Board attendance & Effectiveness
Members are encouraged to personally attend all meetings and
where this is not possible the Board makes alternative provision
through changing of dates or allowing attendance via video
conferencing (VC) facilities. The VC facilities are used
consistently to permit Board members to reduce travel in the
Post-Covid 19 era. This has resulted in the high attendance
record.
The attendance record for the year is included in the Directors'
Report on page 31.
Board remit
The Board is a balanced team of Executives and Non-Executives
with the remit to ensure good, appropriate. safe governance and
compliance of the Group and to manage the staff and assets,
monitoring performance and developing and implementing strategy to
deliver the best possible results for the shareholders.
The principal matters reserved for the Board are set out within
the Investor Relations section of the Company's website.
Succession planning
The Nomination Committee is responsible for managing the
succession plan of the Board. This is carried out by maintaining a
succession planning matrix. This matrix contains information on:
the Role, Job Holder, Sub Committee membership, term and notice
period, AGM re-election dates, and alternatives for either
temporary or permanent replacement.
NED's hold office for no more than three successive terms of
three years - in line with industry norms.
Executives are on contracts of six months' notice duration.
PRINCIPLE 8
Corporate Governance - External
Key corporate governance statements relating to the company and
its operations are set out within the Investor Relations section of
the Company's website.
Our strategic health & safety statement acknowledging our
duties and responsibilities is signed by the CEO. Two Plc Board
members form a part of the H&S Steering Committee which meets
quarterly and reports into the Plc Board meetings.
Data Privacy (GDPR)
A data privacy notice outlines our policy and procedures
covering how information is collected and used whether via our
website or by visiting our studios, an individual's rights and the
measures to be adopted for reporting any breaches.
Corporate Governance - Internal
Our external statements are supported by other policy and
procedural documents located on our intranet site and in a Studio
Handbook (UK) for the benefit of our employees.
The company's intranet site provides details of our Group and
internal management structure, design culture, employment,
sustainability, health & safety, data privacy, anti-corruption
& bribery, social media, whistle blowing, equality &
diversity and modern slavery policies.
The Studio Handbook is a separate printable document available
on the intranet site which contains more detailed operational
information and requirements pertaining to the activities of
employees. It includes various sections covering Practice Profile,
Studio wellbeing, health & safety, fire evacuation, IT
protocols, CPD, mentoring, training and office administration.
The Project Handbook is a separate section of the intranet site
that covers the range of policy, procedures, guidelines and
templates for the application of our professional skills on the
projects we design and deliver for our clients. It includes project
execution, drawing and Revit/BIM protocols, guides and templates, a
design review methodology and data management tools.
Our business operation in the practice of architecture, master
planning and interior design in the UK is underpinned by
accreditation and certification by the British Standards Institute
for our Environmental Management System ISO 14001:2015 and our
Quality Management System ISO 9001:2016. These standards are
emulated in our overseas operations where relevant and in relation
to local standards and license requirements.
In addition, we have an extensive track record of peer
recognition and reward through award winning projects meeting
exacting design, delivery and environmental performance
requirements such as the RIBA, British Council for Offices, BREEAM,
LEED, SKA, Estidama and DGNB.
Performance and rewards
The Remuneration Committee is responsible for assessing the
Board on a performance and rewards basis. The Committee uses
industry available material to assess remuneration levels and has
undertaken external reviews of the level of reward for both
executive and non-executive directors. The most recent external
review was undertaken in 2017 by UHY Hacker Young and, the most
recent AIM survey information was provided by BDO in 2018.
PRINCIPLE 9
Roles
Chairman - the Chair leads the Board at its regular meetings,
sets the Agenda, oversees the governance aspects of the internal
control process and, monitors and challenges the strategic
direction of the company.
Chief Executive - the CEO provides guidance and information to
inform on the strategic direction of the company and its
operations. Along with the senior management team the CEO leads the
delivery of the strategy.
Non-Executive Directors - act as independent voices on the Board
and attend a maximum of 24 to 48 days per annum under their
contracts.
PRINCIPLE 10
Corporate information
The following documents are posted and held on the Company's
website:
-- Annual Report and Accounts
-- Interim Announcements
-- AGM notices (where separately issued and not contained in the Report and Accounts).
-- Trading updates
-- Memorandum and Articles of Association
Non-Compliance with Rule 26
The following requirements of the QCA code are not covered by
our website or Report and Accounts
8.3 Rewards reflecting company values
8.5 Rewarding ethical behaviour
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 two
independent Non-Executive Directors who bring a wide range of
experience and skills to the Company.
The Board considers 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.
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 by
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 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 is also reviewed through a sub-committee the
management of risk inherent in the business.
Remuneration Committee
The Remuneration Committee convenes not less than twice a year,
ordinarily on a six monthly basis, and during the year it met on
three occasions. The Committee currently comprises Clive Carver and
Raúl Curiel, with Raul Curiel as Chairman until 8 December 2022. 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 comparable market remuneration, 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.
Nomination Committee
The Nomination Committee is responsible for keeping under
regular review the size, structure and composition (including the
skills, knowledge, experience and diversity) of the Board. This
includes considering succession planning for the senior management
of the Group, taking into account the skills and expertise expected
to be needed in the future.
It is responsible for nominating new candidates for the Board,
for which selection criteria are agreed in advance of any new
appointment.
The Nomination Committee was chaired by Raúl Curiel until 8
December 2022 with the other current members being Robert Fry and
Clive Carver.
Directors
Antony Barkwith, Clive Carver, Raúl Curiel, Robert Fry and
Nicholas Thompson all served as Directors of the Company throughout
the year ended 30 September 2022.
Biographical details of the current Directors are set out on
pages 7 and 8.
The Company maintains directors' and officers' liability
insurance.
Attendance at board meetings by members of the Board were as
follows:
Number of meetings Number of meetings
while in office attended
Executive Directors
Nicholas Thompson 11 11
------------------- -------------------
Robert Fry 11 11
------------------- -------------------
Antony Barkwith 11 11
------------------- -------------------
Non-executive Directors
------------------- -------------------
Raúl Curiel 11 11
------------------- -------------------
Clive Carver 11 11
------------------- -------------------
Directors' interests
Directors' interests in the shares of the Company were as
follows:
Number of ordinary shares 30 September 30 September
2022 2021
--------------------------- ------------- -------------
Nicholas Thompson 16,802,411 16,802,411
Raúl Curiel 9,240,018 9,240,018
Clive Carver - -
Antony Barkwith - -
Robert Fry 2,150,000 2,150,000
--------------------------- ------------- -------------
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 had a rolling service contract with the Company
which was subject to twelve months' notice of termination by either
party, however since serving notice this expired on 31 December
2022. 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.
Substantial shareholdings
At 27 March 2023 the Company had been informed of the following
notifiable interests of three per cent or more in its share
capital:
Shareholder Notes Number Percentage
of ordinary of ordinary
shares shares
----------------------- -------------------------- ------------- -------------
* Keith McCullagh Former chairman of TFG 41,339,142 15.01%
* Nick Clark Director of the Company 40,531,539 14.72%
Braveheart Investment
Group Institutional Investor 35,332,351 12.83%
Former Director of the
Nicholas Thompson Company 16,802,411 6.10%
John-David Papworth Employee of the Group 16,274,624 5.91%
Former employee of the
Jeremy Blake Group 13,030,638 4.73%
Controlled by a former
Begonia 365 SL Director of the Company 9,515,192 3.46%
Non-Executive Director
Raúl Curiel of the Company 9,240,018 3.36%
* Keith McCullagh and Nick Clark's shares are included within a
Concert Party holding a total of 89,159,484 shares representing
32.38% of the number of ordinary shares.
Share price
The mid-market closing price of the shares of the Company at 30
September 2022 was 2.40 pence and the range of mid-market closing
prices of the shares during the year was between 1.45 pence and
2.40 pence.
Streamlined energy and carbon reporting ("SECR")
Under the Companies Act 2006 (Strategic Report and Directors'
Report) Regulations 2013 ('the 2013 Regulations') and the Companies
(Directors' Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018 ('the 2018 Regulations'), quoted
companies and large unquoted companies are required under part 13
of the companies Act 2006 to disclose information relating to their
energy usage and Greenhouse Gas ("GHG") emissions.
For these purposes, quoted companies defined as those whose
equity share capital is officially listed on the main market of the
London Stock Exchange ("LSE"); or is officially listed in an
European Economic Area State; or is admitted to dealing on either
the New York Stock Exchange or NASDAQ.
The Company is not large, and whilst the Company's shares are
traded on AIM, the Company is not listed on traded on the main
market of the LSE. The company is therefore not required to
disclose energy and carbon information.
Statement by the Directors in performance of their statutory
duties in accordance with s172 (1) Companies Act 2006
The Board is mindful of the duties of directors under S.172 of
the Companies Act 2006 to have regard to the following six
factors:
a) the likely consequences of any decisions in the long-term;
b) the interests of the Group's employees;
c) the need to foster the Group's business relationships with suppliers, customers and others;
d) the impact of the Group's operations on the community and environment;
e) the desirability of the Group maintaining a reputation for
high standards of business conduct; and
f) the need to act fairly as between shareholders of the Group.
Directors act in a way they consider, in good faith, to be most
likely to promote the success of the Group for the benefit of its
shareholders. In doing so, they each have regard to a range of
matters when making decisions for the long term success of the
Group.
Our culture is that of treating everyone fairly and with respect
and this extends to all our principal stakeholders. Through
engaging formally and informally with our key stakeholders, we have
been able to develop an understanding of their needs, assess their
perspectives and monitor their impact on our strategic
ambition.
As part of the Board's decision-making process, the Board and
its Committees consider the potential impact of decisions on
relevant stakeholders whilst also having regard to a number of
broader factors, including the impact of the Group's operations on
the community and environment, responsible business practices and
the likely consequences of decisions on the long term.
Our objective is to act in a way that meets the long term needs
of all our main stakeholder groups. However, in so doing we pay
particular regard to the longer term needs of shareholders.
We engage with investors on our financial performance, strategy
and business model. Our Annual General Meeting provided an
opportunity for investors to meet and engage with members of the
Board.
The Board continues to encourage senior management to engage
with staff, suppliers, customers and the community in order to
assist the Board in discharging its obligations.
Further details of how the Directors have had regard to the
issues, factors and stakeholders considered relevant in complying
with s172 (1) (a)-(f), the methods used to engage with stakeholders
and the effect on the Group's decisions during the year can be
found throughout this report and in particular in the Investment
Case section of the Chairmans statement on pages 3-5 (in relation
to decision-making), in the Strategic report on pages 19-23 (where
the Group's strategy, objectives and business model are addressed),
the following Employees statement (in relation to employees), and
the following Environmental Policy (in relation to social and
environmental matters).
We seek to attract and retain staff by acting as a responsible
employer. The health and safety of our employees is important to
the Company and is a standing item at all Group board meetings.
We continue to provide support to communities and governments
through the provision of employment, and high quality sustainable
design.
We have established long-term partnerships that complement our
in-house expertise and have built a network of specialised partners
within the industry and beyond.
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 79 '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.
Employees
As a professional services business, the Group's ability to
achieve its commercial objectives and to service the needs of its
clients in a profitable and effective manner depends upon the
contribution of its employees. The Group seeks to keep its
employees informed on all material aspects of the business
affecting them through the operation of a structured management
system, staff presentations and an intranet site.
The Group's employment policies do not discriminate between
employees, or potential employees, on the grounds of age, gender,
sexual orientation, ethnic origin or religious belief. The sole
criterion for selection or promotion is the suitability of any
applicant for the job.
It is the policy of the Group to encourage and facilitate the
continuing professional development of our employees to ensure that
they are equipped to undertake the tasks for which they are
employed, and to provide the opportunity for career development
equally and without discrimination. Training and development is
provided and is available to all levels and categories of
staff.
It is the Group's policy to give fair consideration to
application for employment for disabled persons wherever
practicable and, where existing employees become disabled, efforts
are made to find suitable positions for them.
Health and safety
The Group seeks to promote all aspects of health and safety at
work throughout its operations in the interests of employees and
visitors.
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.
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.
Independent Auditors
On the 12 October 2022, BDO LLP confirmed their resignation as
auditors of Aukett Swanke Group Plc.
The Directors appointed Moore Kingston Smith LLP as auditors of
the Group on 19 October 2022 for the year ended 30 September
2022.
The auditors, Moore Kingston Smith LLP have indicated their
willingness to continue in office and a resolution concerning their
reappointment will be proposed at the Annual General Meeting.
Future developments
An indication of likely future developments in the business of
the Group is contained in the Strategic Report.
Financial instruments
Information concerning the use of financial instruments by the
Group is given in notes 28 to 32 of the financial statements.
Dividends
The Board does not intend to pay a dividend in the forthcoming
year.
Going Concern
Measures taken around the world to restrict the spread of the
COVID-19 virus, followed by the macro-economic implications of
rising energy prices and inflation globally have had a significant
impact on the Company and the Group for the past 2 & 1/2 years
of trading.
Despite action taken in this time, management were only able to
partially mitigate the financial impact of the above on the Group
which resulted in a loss for the year, largely attributable to the
discontinued Middle East operation, and reduction in net assets of
the Group.
The Group has continued to operate within its banking limits, a
CBILS loan was agreed in May 2021, and subsequently the Gearing
Covenant and Debt Servicing covenant were removed from the facility
agreements.
On 20 March 2023, the Group acquired 100% of TFG with
consideration paid on a share for share basis. This provided a
significant boost to Group with approximately GBP1.7m of net
tangible assets including almost GBP1m of cash.
More details of the actions taken, and the results of
forecasting performed by the Group (upon which the going concern
assessment of the Company is dependent) in response to the global
macro-economic environment 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.
The TFG acquisition brings into the Group a freehold property
independently valued at GBP3.02m in July 2021 with a mortgage
balance of GBP1.48m as at December 2022 giving a loan to value
percentage of just 48%.
However, as the mortgage renewal date is less than 12 months
from the signing date of these accounts, the Board must consider
the remote possibility that if the mortgage could not be renewed,
then the Group may need to raise cash to repay the full balance of
the mortgage through alternative borrowing facilities, asset sales
or fund raising which are not wholly within the Group's
control.
Based on forecasts prepared and reviewed for the period to 31
March 2024, the Directors have a reasonable expectation that the
Group will have adequate resources to continue in operational
existence for the foreseeable future.
However, while the Board is confident of either being able to
re-mortgage the building or selling it should the need arise, the
requirement to refinance the building within the going concern
period indicates the possible existence of a material uncertainty
which may cause 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.
Annual General Meeting
Notice of the annual general meeting, which is expected to be
held on 21 April 2023, will be posted to shareholders in due
course.
The Directors' report was approved by the Board on 27 March 2023
and signed on its behalf by
Antony Barkwith
Company Secretary
Aukett Swanke Group Plc
Registered number 02155571
Statement of directors' responsibilities
Directors' responsibilities
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the Group and Company financial statements
in accordance with UK adopted 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 UK
adopted 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 Group and enable them to
ensure that the financial statements comply with the requirements
of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Independent auditor's report to the members of Aukett Swanke
Group Plc
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 2022 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 notes to the financial statements, including significant
accounting policies. The financial reporting framework that has
been applied in the preparation of the Group and parent Company
financial statements is applicable law and UK adopted International
Accounting Standards 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
Group's and of the parent Company's affairs as of 30 September 2022
and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards;
-- the parent Company financial statements have been properly
prepared in accordance with UK adopted International Accounting
Standards and as applied in accordance with the provisions of the
Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's Responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to Note 1 to the financial statements which
indicates that the Directors have assumed that the overdraft
facility of GBP250,000 will be renewed in November 2023 whilst
making their assessment of the Group's and parent Company's going
concern status. Whilst there are no indications that the overdraft
facility will not be renewed, it is not guaranteed.
The renewal of the GBP1.46m mortgage will only be reviewed later
in 2023, and as such there is a possibility that if the mortgage is
not renewed then the Group would need to repay the full balance of
the mortgage within 12 months of the signing date of these
accounts. In this case the Group may need to raise cash through
alternative borrowing facilities, asset sales or fund raising which
are not wholly within the Group's control.
As stated in Note 1, these conditions and the economic
uncertainty which exists, along with other matters as set out in
Note 1, indicate that a material uncertainty exists that may cause
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.
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors' assessment of the Group and the parent
Company's ability to continue to adopt the going concern basis of
accounting has been highlighted as a key audit matter based on our
assessment of the significance of the risk and the effect on our
audit strategy.
Our evaluation of the Directors' assessment of the Group and the
parent Company's ability to adopt the going concern basis of
accounting and our response to the key audit matters include:
-- A critical assessment of the detailed cash flow projections
prepared by the Directors, which are based on future revenue
pipelines and newly won contracts, we also evaluated the
sensitivities that the Directors performed against this
forecast.
-- We evaluated the key assumptions in the forecast, which were
consistent with our knowledge of the business and considered
whether these were supported by the evidence we obtained. We
obtained an understanding of all relevant uncertainties, including
those arising because of the impact of the COVID-19 pandemic over
the past years. We have factored the ongoing impact of COVID-19
into our analysis of the risks affecting the ability of the Group
and parent Company to continue to trade and meet its liabilities as
they fall due for at least twelve months from the date of approval
of the Group and parent Company financial statements.
-- We have inquired about revenue pipeline, and status of
outstanding bids. We have agreed submitted proposal documents and
newly won contracts where appropriate.
-- We have examined current year actual results against the
budget for the year to determine the accuracy of the budgeting and
forecasting by management.
-- We examined the disclosures relating to the going concern
basis of preparation and found that these provided an explanation
of the Directors' assessment that was consistent with the evidence
we obtained.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. 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.
The components of the Group were evaluated by the Group audit
team based on a measure of materiality, considering each component
as a percentage of the Group's net assets, gross revenue and
results before tax, which allowed the Group audit team to assess
the significance of each component and determine the planned audit
response. We determined there to be four significant components to
the Group, which were Aukett Swanke Group Plc, Aukett Swanke
Limited, Veretec Limited, and Aukett Swanke Architectural Design
Limited. They were all subjected to full scope audits.
Also, we have performed a full scope audit on John R Harris
& Partners Limited, Swanke Hayden Connell International
Limited, Aukett Fitzroy Robinson International Limited and
Shankland Cox Limited for the purpose of coverage and to cover
specific identified risk. All full-scope audits, excluding John R
Harris & Partners Limited were conducted by the group audit
engagement team. The audit of John R Harris & Partners Limited
was performed by a component audit firm in Dubai, UAE.
For significant components requiring a full scope approach, we
evaluated controls by performing walkthroughs over the financial
reporting systems identified as part of our risk assessment,
reviewed the accounts production process, and addressed critical
accounting matters. We then undertook substantive testing on
significant transactions and material account balances.
We have overall coverage of 100% of group profit before tax,
100% of Group revenue and 100% of Group total assets.
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, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. This is not a
complete list of all risks identified by our audit.
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 audit report.
Key Audit Matters How our scope addressed this matter
Going Concern
The Group has recognised a loss Our audit work and conclusion in
before tax of GBP2.3 Million (2021: respect of going concern has been
GBP1.5 Million). The cash and cash detailed in the 'Material uncertainty
equivalents balance were an overdraft related to going concern' section
of GBP0.2 Million in the current of our audit report.
year (2021: GBP0.51 Million). The
Group has continued incurring further
losses subsequent to the year end.
Given the performance in the year,
including the matter explained
in Note 1 and the 'Material uncertainty
related to going concern section
of our audit report' going concern
was considered to be a key audit
matter.
------------------------------------------------------------------------
Revenue recognition, including Our audit work included, but was
valuation and cut-off of contract not restricted to the following
assets and liabilities : procedures:
Refer to the accounting policies We evaluated the operating effectiveness
in Note 1 on page 62 to 63 and of certain key controls identified
Note 3 in the Group financial statements. in relation to revenue.
The measurement of revenue earned We evaluated the Group's accounting
on architectural services contracts policy in respect of revenue recognition
with customers is determined by to ensure it is compliant with
reference to the stage of completion IFRS 15.
of those contracts at the Statement
of Financial Position date. It We selected a sample of contracts
is a function of the cost (fee and the substantive testing procedures
earners and subcontractors) incurred included the following:
on the contract compared to the
total costs expected at the culmination * Confirming revenue from the revenue recognition model
of the contract as a proportion to the underlying contract and where relevant,
of agreed-upon contract revenue contract variations were agreed between the Group and
less any invoices raised to date. its customers.
As the above measurement requires
Directors to assess the final costs
expected on a contract to determine * Comparing historical margins achieved on projects
the stage of completion, there against the estimated margins expected on comparable
is inherent estimation uncertainty. on-going projects to confirm the accuracy of
The significant judgement arising management's estimation of total project costs. Also
in the formulation of these estimates discussed with management if there were material
could vary materially over time variances in this estimate. Further, subsequent
and is dependent on customer activity. invoices raised post the Statement of Financial
We therefore considered this to Position date and collections were tested to compare
be a key audit matter. the estimated margins to actuals.
As at 30 September 2022 the group
has recognised contract assets
of GBP 1.1 Million and contract * Verifying the chargeable time costs incurred to date
liabilities of GBP 1.2 Million. for the selected projects to a report generated from
Timemaster, a time recording system. A sample of
individual costs from the reports were agreed through
to supporting timecards and charge rate agreed to
group's charge rates to test the accuracy of the
recorded time.
* Confirming a sample of invoices recorded in the
accounting system to the supporting contract, a copy
of physical sales invoice raised, and cash received.
* Assessed and challenged the key stage of completion
judgments made by the Directors. This involved
testing 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.
* Reviewing material credit notes, invoices and
receipts post year end.
Key observations:
Based on the procedures performed,
we consider that the assumptions
made by management in recognising
revenue on part completed contracts
with customers at the Statement
of Financial Position date to be
appropriate and did not identify
any material misstatements in revenue
recognition.
------------------------------------------------------------------------
Annual impairment review of goodwill
Our audit work included, but was
Refer to the accounting policies not restricted to the following
in note 1 on page 59 and Notes procedures:
12 and 13 for key judgements in
the Group financial statements. * Obtained management's assessment of the Group CGU's
and critically assessed Value In Use (VIU) model for
In the financial statements goodwill each CGU to test compliance with the requirement of
arising from past acquisitions applicable accounting standards and mathematical
is valued at GBP1.75 Million. It accuracy of the model.
exists predominantly within the
UK (GBP1.74 Million) and the residual
GBP0.01M in the Turkey Cash Generating
Unit (CGU). While no goodwill is * The weighted average cost of capital (WACC) of the
allocated to the Shankland Cox models was re-computed with reference to external
Limited (SCL) CGU GBP0.25 Million data to test the accuracy of computation.
of other intangible assets are
situated within the SCL CGU. There
is a risk that these are impaired
in the context of results of the * Challenging the revenue cash flows within the model.
Group and the UK and UAE economic Future earnings potential was checked to secure
operating environments. pipeline via agreement verification. Potential wins
were assessed for progress in bids by verification of
The process for assessing whether correspondence. Future earnings were assessed by
impairment exists under International verification of historic conversion of new work.
Accounting Standard IAS 36 'Impairment
of Assets' is complex. The process
of determining the value in use,
through forecasting cash flows * Critically assessed the cost base for potential
(primarily revenue less subcontract omissions or unrealistic targets based on prior years
costs) and the determination of actuals and potential future changes in the business.
the appropriate discount rate and We challenged management where this fell outside our
other assumptions to be applied, expectation and checked that these were accurately
is highly judgemental and can significantly stated, reasonable and achievable in the light of the
impact the results of the impairment economic environment and future pipeline of work.
review.
Based on recent trading performance
there is uncertainty around future * Obtaining the sensitivity analysis performed by
revenue less subconsultant cost management to assess the impact of the movement in
pipelines and consequent profitability key variables in the model which would lead to an
of the CGUs. impairment. We tested this sensitivity analysis and
concluded on whether such scenarios were likely to
There is significant management occur.
judgement and estimation uncertainty
involved in the preparation of
value in use models under applicable
accounting standards for the group Key observation:
and as a result we consider this Based on the procedures performed
to be a key audit matter. and considering the assumptions
and methodology used by management
in preparing the VIU model, the
calculations are appropriate. Further,
during the course of the audit
it was discussed with management
that the Goodwill arising at the
time of these acquisition was no
longer reflective of the current
business, and it is impractical
to be able to determine what proportion
of cash flow projections of the
United Kingdom operations related
to the historic acquisitions. Management
have therefore taken the decision
to write off the full GBP1.74M
balance of Goodwill for the United
Kingdom operations and an audit
adjustment has been made to that
effect.
------------------------------------------------------------------------
Our application of materiality
The scope and focus of our audit were influenced by our
assessment and application of materiality. We define materiality as
the magnitude of misstatement that could reasonably be expected to
influence the readers and the economic decisions of the users of
the financial statements. We use materiality to determine the scope
of our audit and the nature, timing, and extent of our audit
procedures and to evaluate the effect of misstatements, both
individually and on the financial statements as a whole. We apply
the concept of materiality both in planning and performing our
audit, and in evaluating the effect of misstatements.
Based on our professional judgement we determined materiality
for the 2022 financial statements as a whole and performance
materiality as follows:
Group financial statements Parent company financial
statements
Materiality GBP153,000 GBP183,000
----------------------------------- --------------------------
Basis for determining 1.5% of gross revenue 3% of net assets
materiality before adjusting
for intercompany
balances.
----------------------------------- --------------------------
Rationale for The gross revenue has Due to the nature
the benchmark been used as a primary of the parent company,
applied measure of performance we considered net
which is a measure of assets to be the
demand for its services focus for the readers
and its penetration of the financial
into the geographic statements, accordingly
hubs in which it operates. this consideration
The "sub-consultants" influenced our judgement
i.e., the specialists' of materiality.
costs are agreed in
the bid and included
as part of the fees
that is marked up to
the client as Group's
revenue. The professional
indemnity insurance
covers the gross fees
chargeable to the customers
which includes the subconsultants
costs. The Group is
responsible for the
entire contract with
their customer. Based
on the above factors
the Gross revenue i.e.,
including sub-consultant
costs are to be considered
as most relevant benchmark
to check the performance
of the company rather
than Net Revenue.
----------------------------------- --------------------------
Performance GBP78,000 GBP73,000
materiality
----------------------------------- --------------------------
Basis for determining 50% of Group materiality 40% of Parent company
performance materiality materiality
----------------------------------- --------------------------
Performance materiality:
The performance materiality benchmark has been selected based of
the following considerations:
-- cumulative identification of errors noted in the previous
years that has been posted by management as per previous auditor
file review
-- our risk assessment, together with our assessment of the overall control environment
Component materiality:
We set materiality for each component of the Group based on a
percentage of Group materiality dependent on the size and our
assessment of risk of material misstatements of that component.
Component materiality, other than the parent Company's, ranged from
GBP91,000 to GBP3,000. In the audit of each component, we further
applied performance materiality levels of 50% of the component
materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately mitigated.
Trivial:
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP7,800 for the
Group and GBP7,600 for the parent Company. We also agreed to report
differences below this threshold that, in our view, warranted
reporting on qualitative grounds. We also reported to the Audit
Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The Directors are responsible for the
other information contained within the annual report. 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.
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 course of 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 themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Directors' Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
the parent Company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; 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.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement set out on page 37, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group's and the parent company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the audit of the financial
statements
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
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 is available on
the FRC's website at
https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for
This description forms part of our auditor's report.
Explanation as to what extent the audit was considered capable
of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below.
The objectives of our audit in respect of fraud, are; to
identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate
audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing
appropriate responses to those assessed risks; and to respond
appropriately to instances of fraud or suspected fraud identified
during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both management and
those charged with governance of the company.
Our approach was as follows:
-- We obtained an understanding of the legal and regulatory
requirements applicable to the company and considered that the most
significant are the Companies Act 2006, UK adopted international
accounting standards, the rules of the Alternative Investment
Market, and UK taxation legislation.
-- We obtained an understanding of how the Group and parent
Company complies with these requirements by discussions with
management and those charged with governance.
-- We assessed the risk of material misstatement of the
financial statements, including the risk of material misstatement
due to fraud and how it might occur, by holding discussions with
management and those charged with governance.
-- We inquired of management and those charged with governance
as to any known instances of non-compliance or suspected
non-compliance with laws and regulations.
-- Based on this understanding, we designed specific appropriate
audit procedures to identify instances of non-compliance with laws
and regulations. This included making enquiries of management and
those charged with governance and obtaining additional
corroborative evidence as required.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken for no purpose other than to
draw to the attention of the company's members those matters which
we are required to include in an auditor's report addressed to
them. To the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the company and the
company's members as a body, for our work, for this report, or for
the opinions we have formed.
Mital Shah (Senior Statutory Auditor)
for and on behalf of Moore Kingston Smith LLP
Chartered Accountants
Statutory Auditor
6th Floor
9 Appold Street
London
EC2A 2AP
27 March 2023
Consolidated income statement
For the year ended 30 September 2022
Note 2022 2021
GBP'000 GBP'000
------------------------------------------ ------- ---------- ----------
Continuing operations
Revenue 3 8,645 9,192
Sub consultant costs (1,518) (2,887)
------------------------------------------ ------- ---------- ----------
Revenue less sub consultant
costs 3 7,127 6,305
Personnel related costs (6,237) (5,594)
Property related costs (1,037) (1,041)
Other operating expenses (483) (695)
Other operating income 4 326 358
Operating loss (304) (667)
Finance costs 5 (95) (94)
------------------------------------------ ------- ---------- ----------
Loss after finance costs (399) (761)
Share of results of associate
and joint ventures 327 166
------------------------------------------ ------- ---------- ----------
Trading loss from continuing
operations (72) (595)
Impairment of intangibles 13 - -
Goodwill impairment 12 (1,752) -
Loss before tax from continuing
operations (1,824) (595)
Tax credit 9 45 395
------------------------------------------ ------- ---------- ----------
Loss from continuing operations (1,779) (200)
------------------------------------------ ------- ---------- ----------
Loss from discontinued operations 11 (503) (936)
------------------------------------------ ------- ---------- ----------
Loss for the year (2,282) (1,136)
------------------------------------------ ------- ---------- ----------
Loss attributable to:
Owners of Aukett Swanke Group
Plc (2,282) (1,123)
Non-controlling interests - (13)
------------------------------------------ ------- ---------- ----------
(2,282) (1,136)
------------------------------------------ ------- ---------- ----------
Basic and diluted earnings
per share for loss attributable
to the ordinary equity holders
of the Company:
From continuing operations (1.08p) (0.12p)
From discontinued operations (0.30p) (0.57p)
Total loss per share 10 (1.38p) (0.69p)
------------------------------------------ ------- ---------- ----------
Consolidated statement of comprehensive income
For the year ended 30 September 2022
2022 2021
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Loss for the year (2,282) (1,136)
Currency translation differences (7) (107)
Currency translation differences (209) -
on disposal recycled to gain on
disposal of discontinued operation
(note 11)
Currency translation differences
on translation of discontinued
operations (note 11) (168) (50)
Other comprehensive loss for the
year (384) (157)
Total comprehensive loss for the
year (2,666) (1,293)
------------------------------------------- ---------- ----------
Total comprehensive loss for the
year is attributable to:
Owners of Aukett Swanke Group
Plc (2,666) (1,280)
Non-controlling interests - (13)
Total comprehensive loss for the
year (2,666) (1,293)
------------------------------------------- ---------- ----------
Total comprehensive loss attributable
to the owners of Aukett Swanke
Group Plc arises from:
Continuing operations (1,786) (307)
Discontinued operations (880) (973)
(2,666) (1,280)
------------------------------------------ ---------- ----------
Consolidated statement of financial position
At 30 September 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------- ------- --------- ---------
Non current assets
Goodwill 12 - 2,370
Other intangible assets 13 210 324
Property, plant and equipment 14 69 155
Right-of-use assets 15 2,184 2,546
Investment in associate 17 760 587
Investments in joint ventures 18 247 209
Deferred tax 23 281 241
-------------------------------- ------- --------- ---------
Total non current assets 3,751 6,432
Current assets
Trade and other receivables 19 3,293 3,975
Contract assets 3 1,119 982
Cash at bank and in hand 28 515
-------------------------------- ------- --------- ---------
Total current assets 4,440 5,472
Total assets 8,191 11,904
Current liabilities
Trade and other payables 20 (3,169) (3,747)
Contract liabilities 3 (1,227) (829)
Borrowings 21 (482) (83)
Lease liabilities 15 (457) (539)
Total current liabilities (5,335) (5,198)
Non current liabilities
Trade and other payables 20 (44) -
Borrowings 21 (167) (417)
Lease liabilities 15 (1,962) (2,350)
Deferred tax 23 (33) (40)
Provisions 24 (249) (832)
-------------------------------- ------- --------- ---------
Total non current liabilities (2,455) (3,639)
Total liabilities (7,790) (8,837)
Net assets 401 3,067
-------------------------------- ------- --------- ---------
Capital and reserves
Share capital 25 1,652 1,652
Merger reserve 1,176 1,176
Foreign currency translation
reserve (557) (173)
Retained earnings (3,364) (1,082)
Other distributable reserve 1,494 1,494
-------------------------------- ------- --------- ---------
Total equity attributable to
equity holders of the Company 401 3,067
-------------------------------- ------- --------- ---------
Non-controlling interests - -
-------------------------------- ------- --------- ---------
Total equity 401 3,067
-------------------------------- ------- --------- ---------
The financial statements on pages 47 to 109 were approved and
authorised for issue by the Board of Directors on 27 March 2023 and
were signed on its behalf by:
Robert Fry Antony Barkwith
Chief Executive Officer Group Financial Director
Company statement of financial position
At 30 September 2022
Note 2022 2021
GBP'000 GBP'000
-------------------------------- ----- --------- ---------
Non current assets
Property, plant and equipment 14 7 11
Investments 16 2,089 3,290
Trade and other receivables 19 184 5
-------------------------------- ----- --------- ---------
Total non current assets 2,280 3,306
Current assets
Trade and other receivables 19 250 449
Cash at bank and in hand 457 211
Total current assets 707 660
Total assets 2,987 3,966
Current liabilities
Trade and other payables 20 (1,594) (1,750)
Borrowings 21 (250) (83)
-------------------------------- ----- --------- ---------
Total current liabilities (1,844) (1,833)
Non current liabilities
Trade and other payables 20 (44) -
Deferred tax (1) (2)
Borrowings 21 (167) (417)
-------------------------------- ----- --------- ---------
Total non current liabilities (212) (419)
Total liabilities (2,056) (2,252)
Net assets 931 1,714
-------------------------------- ----- --------- ---------
Capital and reserves
Share capital 25 1,652 1,652
Retained earnings (3,391) (2,608)
Merger reserve 1,176 1,176
Other distributable reserve 1,494 1,494
Total equity attributable to
equity holders of the Company 931 1,714
-------------------------------- ----- --------- ---------
The result for the year contained within the parent company's
income statement is a loss of GBP783k (2021: loss GBP1,179k).
The financial statements on pages 47 to 109 were approved and
authorised for issue by the Board of Directors on 27 March 2023 and
were signed on its behalf by:
Robert Fry Antony Barkwith
Chief Executive Officer Group Financial Director
Consolidated statement of cash flows
For the year ended 30 September 2022
Note 2022 2021
GBP'000 GBP'000
----------------------------------------- ------- ---------- ----------
Cash flows from operating activities
Cash expended by operations 27 (1,104) (896)
Income taxes received 99 262
----------------------------------------- ------- ---------- ----------
Net cash outflow from operating
activities (1,005) (634)
Cash flows from investing activities
Purchase of property, plant and
equipment (48) (33)
Sale of property, plant and equipment - 16
Purchase of investments - (123)
Sale of investments 927 -
Dividends received from associates
& joint ventures 140 528
----------------------------------------- ------- ---------- ----------
Net cash received in investing
activities 1,019 388
Net cash inflow/(outflow) before
financing activities 14 (246)
Cash flows from financing activities
Principal paid on lease liabilities (470) (455)
Interest paid on lease liabilities (76) (91)
Proceeds from bank loans - 500
Repayment of bank loans (83) (155)
Interest paid (19) (3)
Net cash outflow from financing
activities (648) (204)
Net change in cash and cash equivalents (634) (450)
Cash and cash equivalents at start
of year 515 992
Currency translation differences (85) (27)
Cash and cash equivalents at end
of year 22 (204) 515
----------------------------------------- ------- ---------- ----------
Cash and cash equivalents are comprised
of:
Cash at bank and in hand 28 515
Secured bank overdrafts (232) -
----------------------------------------- ------ ----
Cash and cash equivalents at end
of year (204) 515
------------------------------------------ ------ ----
Company statement of cash flows
For the year ended 30 September 2022
Note 2022 2021
GBP'000 GBP'000
------------------------------------------ ----- --------- ---------
Cash flows from operating activities
Cash expended by operations 27 (722) (702)
Interest paid (9) (1)
Net cash outflow from operating
activities (731) (703)
Cash flows from investing activities
Purchase of property, plant and - -
equipment
Purchase of investments - (123)
Sale of investments 927 -
Dividends received from associates
& joint ventures 133 528
Net cash generated from investing
activities 1,060 405
Net cash inflow/(outflow) before
financing activities 329 (298)
Cash flows from financing activities
Proceeds from bank loans - 500
Repayment of bank loans (83) (155)
Net cash (outflow)/inflow from financing
activities (83) 345
Net change in cash and cash equivalents 246 47
Cash and cash equivalents at start
of year 211 164
Cash and cash equivalents at end
of year 457 211
------------------------------------------ ----- --------- ---------
Cash and cash equivalents are comprised
of:
Cash at bank and in hand 457 211
Cash and cash equivalents at end
of year 457 211
------------------------------------------ ---- ----
Consolidated statement of changes in equity
For the year ended 30 September 2022
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 1 October
2020 1,652 (16) 41 1,494 1,176 4,347 27 4,374
Loss for the
year - - (1,123) - - (1,123) (13) (1,136)
Acquisition of
minority
interest - - - - - - (14) (14)
Other
comprehensive
income - (157) - - - (157) - (157)
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
Total
comprehensive
income - (157) (1,123) - - (1,280) (27) (1,307)
At 30
September
2021 1,652 (173) (1,082) 1,494 1,176 3,067 - 3,067
Loss for the
year - - (2,282) - - (2,282) - (2,282)
Other
comprehensive
income - (384) - - - (384) - (384)
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
Total
comprehensive
income - (384) (2,282) - - (2,666) - (2,666)
At 30
September
2022 1,652 (557) (3,364) 1,494 1,176 401 - 401
--------------- --------- ------------ --------- -------------- --------- --------- ---------------- ---------
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.
Company statement of changes in equity
For the year ended 30 September 2022
Share Retained Other Merger reserve Total
capital earnings distributable Equity
reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- ---------- --------------- --------------- ---------
At 1 October 2020 1,652 (1,429) 1,494 1,176 2,893
Loss and total
comprehensive income
for the year - (1,179) - - (1,179)
At 30 September
2021 1,652 (2,608) 1,494 1,176 1,714
Loss and total
comprehensive income
for the year - (783) - - (783)
At 30 September
2022 1,652 (3,391) 1,494 1,176 931
------------------------ --------- ---------- --------------- --------------- ---------
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 Significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below.
Basis of preparation
The financial statements for the Group and parent Company have
been prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006 .
New accounting standards, amendments and interpretations
applied
For the year ended 30 September 2022, one new standard became
applicable:
- COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16).
The Group did not have to change its accounting policies or make
retrospective adjustments as a result of adopting this
standard.
New accounting standards, amendments and interpretations not yet
applied
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the group has decided
not to adopt early.
The following amendments are effective for the period beginning
1 January 2022:
(i) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
(ii) Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
(iii) Annual Improvements to IFRS Standards 2018-2020
(Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
(iv) References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning
1 January 2023:
(i) Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
(ii) Definition of Accounting Estimates (Amendments to IAS 8); and
(iii) Deferred Tax Related to Assets and Liabilities arising
from a Single Transaction (Amendments to IAS 12).
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 were originally effective for annual reporting periods
beginning on or after 1 January 2022. However, in May 2020, the
effective date was deferred to annual reporting periods beginning
on or after 1 January 2023.
In response to feedback and enquiries from stakeholders, in
December 2020, the IFRS Interpretations Committee (IFRIC) issued a
Tentative Agenda Decision, analysing the applicability of the
amendments to three scenarios. However, given the comments received
and concerns raised on some aspects of the amendments, in April
2021, IFRIC decided not to finalise the agenda decision and
referred the matter to the IASB. In its June 2021 meeting, the IASB
tentatively decided to amend the requirements of IAS 1 with respect
to the classification of liabilities subject to conditions and
disclosure of information about such conditions and to defer the
effective date of the 2020 amendment by at least one year.
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.
Going concern
The Group's business activities, the principal risks and
uncertainties facing the Group, and the financial position of the
Group are described in the Strategic Report. The liquidity risks
faced by the Group are further described in note 32. 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 for additional financial flexibility and foreign currency
hedging purposes.
The overdraft facility is renewed annually and was renewed for a
further 12 months in November 2022, with a review in May 2023.
The GBP500k Coronavirus Business Interruption Loan Scheme
("CBILS") drawn in May 2021 has a duration of three years with
interest at 4.05% over the Coutts base rate (currently 4.25%) in
years two and three. The Group commenced paying the 24 monthly
instalments in June 2022. We expect to repay the CBILS loan before
the expiry of the term.
In May 2022, the net gearing covenant and debt servicing
covenants were removed from the CBILS loan agreements. The covenant
applicable to maintaining a level of UK eligible debtors have been
amended as an 'Other condition'. The Group similarly agreed to
reduce the overdraft facility to GBP250k. The GBP250k overdraft was
agreed to be maintained in the annual renewal in November 2022. We
have no reason not to expect that the overdraft facility would not
be renewed again in November 2023, however this is not
guaranteed.
On 20 March 2023 the Group acquired 100% of TFG with
consideration paid on a share for share basis. This provided a
significant boost to Group with approximately GBP1.7m of net
tangible assets including almost GBP1m of cash.
TFG have interest bearing loans and borrowings being a CBILS
loan and a mortgage which together totalled approximately GBP2.7m
as at December 2022. The CBILS loan was drawn in 2021 at GBP1.75m,
the December 2022 balance being GBP1.25m, and being repaid at
GBP29k per month. The loan is at a fixed rate of interest at
3.90%.
The Mortgage initially drawn in 2018 at GBP1.73m with a duration
of 5 years has been extended for a year and is due to expire in
January 2024. The balance as at December 2022 was GBP1.46m, with a
variable interest at base rate + 1.93%. The mortgage is secured
against TFG's freehold property in London. The Board's review of
going concern takes into account the need to re-mortgage the
property within 12 months of the signing date of the financial
statements.
Forecasts for the Group have been prepared for a period of at
least 12 months following the approval of the financial statements,
which comprise detailed income statements, statements of financial
position and cash flow statements for each of the Group's
operations.
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.
The risk of rising energy prices and inflation globally will
have macro-economic implications and could be a trigger for
recession in the short to medium term, and will have significant
impact on Entity's decision making, albeit as yet we have not
experienced any material indication to this effect. The delays in
clients making financial investment decisions due to the economic
uncertainty may result in the net earnings and cash flows of the
Group not being realised.
The Group has managed cash flow within its facilities so far,
and the acquisition of TFG significantly enhances the Group's short
term available cash. During the next 12 month going concern review
period, the forecast assumes that no additional external financing
is received when measuring the Group's ability to continue to
operate. The Group's assessment of going concern is therefore
focused on its ability to operate within the GBP250k overdraft
limit.
The Group's forecasts, indicate that, during the 12-month period
following the approval of the financial statements, the Group will
maintain a positive net cash balance with the full overdraft
facility available to be drawn down.
The Group's forecasts assume that the TFG mortgage is
successfully renewed in January 2024. The freehold property was
last independently valued in July 2021 at GBP3.02m, and as at
December 2022 the balance of the mortgage at GBP1.46m gave it a
loan to value percentage of just 48%.
However, as the mortgage renewal date is less than 12 months
from the signing date of these accounts, the Board must consider
the remote possibility that if the mortgage could not be renewed,
then the Group may need to raise cash to repay the full balance of
the mortgage through alternative borrowing facilities, asset sales
or fund raising which are not wholly within the Group's
control.
For this reason, the Board considers it appropriate to prepare
the financial statements on a going concern basis. H owever, the
mortgage term ending less than 12 months from the signing date of
these accounts indicates the possible existence of a material
uncertainty which may cause significant doubt on the Group's and
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.
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 statement of financial position 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 an 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
(in liquidation) where ownership is contractual and the agreements
require unanimous consent from all parties for relevant activities.
The entities are considered joint ventures.
Joint ventures are accounted for under the equity method.
Borrowings
Borrowings are initially recognised at fair value, net of any
transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Any difference between the proceeds (net of any
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, bank current
accounts held at call, bank deposits with very short maturity terms
and bank overdrafts where these form an integral part of the
group's cash management process, for the purposes of the statement
of cash flows.
Company income statement
The Company has taken advantage of the exemption provided by
section 408 of the Companies Act 2006 not to present its income
statement for the year. The Company's result is disclosed at the
foot of the Company's statement of financial position.
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.
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.
Dividends
Dividend payments are recognised as liabilities once they are no
longer at the discretion of the Company.
Dividend income from investments is recognised in the income
statement when the shareholders' rights to receive payment have
been established.
Equity instruments
Equity instruments issued by the Company are recorded as the
proceeds received, net of direct issue costs.
Foreign currency
Transactions in currencies other than the functional currency of
each operation are recorded at the rates of exchange prevailing on
the dates of the transactions. At the date of each statement of
financial position, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing at the date of the statement of financial position.
Gains and losses arising on retranslation are included in the
consolidated income statement for the year.
On consolidation, the assets and liabilities of the Group's
overseas operations are translated from their functional currencies
at exchange rates prevailing at the date of the statement of
financial position. Income and expense items are translated from
their functional currencies at the average exchange rates for the
year, which are materially consistent with the spot rates observed
in the year for those entities. Exchange differences arising are
recognised directly in equity and transferred to the Group's
foreign currency translation reserve. If an overseas operation is
disposed of then the cumulative translation differences are
recognised as realised income or an expense in the year disposal
occurs.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing exchange rate. The
Group has elected to treat goodwill and fair value adjustments
arising on acquisitions before the date of transition to IFRS as
sterling denominated assets and liabilities.
Goodwill
Goodwill arising on acquisitions represents the excess of the
fair value of the consideration given over the fair value of the
identifiable assets and liabilities acquired. Where the net fair
value of the identifiable assets and liabilities of the acquiree is
in excess of the consideration paid, negative goodwill is
recognised immediately in the income statement.
Goodwill is tested annually for impairment and an impairment
loss would be recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount.
Impairment
At the date of each statement of financial position, a review of
property, plant and equipment and intangible assets (excluding
goodwill) is carried out to determine whether there is any
indication that those assets have suffered any impairment. If any
such indications exist, the recoverable amount of the asset is
assessed as the higher of fair value less costs to sell and value
in use, 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.
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.
Other intangible assets
Intangible assets acquired in a business combination are
recognised at fair value at the acquisition date. Subsequently the
intangible assets are carried at cost less accumulated amortisation
and accumulated impairment. Amortisation is charged on a straight
line basis with the useful economic lives attributed as
follows:
Trade name - 25 years
Trade licence - 10 years
Customer relationships - 7 to 10 years
Order book - Over the life of the contracts
Amortisation is charged to other operating expenses within the
consolidated income statement.
Investments
Investments in subsidiaries, associates and joint ventures are
held in the statement of financial position of the Company at
historical cost less any allowance for impairment.
Leases and asset finance arrangements
The majority of the Group's accounting policies for leases are
set out in note 15.
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:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits
from use of the asset; and
(c) 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.
Operating segments
The Group's reportable operating segments are based on the
geographical areas in which its studios are located. Internally the
Group prepares discrete financial information for each of its
geographical segments.
Each reportable operating segment provides the same type of
service to clients, namely integrated professional design services
for the built environment and internally the Group does not sub
divide its business by type of service.
Other operating expenses
Other operating expenses include legal and professional costs,
professional indemnity insurance premiums, marketing expenses and
other general expenses.
Property, plant and equipment
All property, plant and equipment is stated at historical cost
of acquisition less depreciation and any impairment provisions.
Historical cost of acquisition includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation of property, plant and equipment is calculated to
write off the cost of acquisition over the expected useful economic
lives using the straight line method and over the following number
of years:
Leasehold improvements - Unexpired term of lease
Office furniture - 4 years
Office equipment - 4 years
Computer equipment - 2 years
Provisions
Provisions are recognised when a present obligation has arisen
as a result of a past event which 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 24).
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.
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.
Rental Income
Rental income from sublet property is credited to the
consolidated income statement in the year in which it accrues.
Revenue recognition
Revenue represents the value of services performed for customers
under contracts (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.
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 19.
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% (2021: 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 GBP0.20m, (2021:
GBP0.27m) trade receivables provision primarily against Middle East
and some UK 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 19 and 30.
Impairment of goodwill
Details of the impairment reviews undertaken in respect of the
carrying value of goodwill are given in note 12.
Impairment of investments in subsidiaries, associate and joint
ventures
The company's investment in subsidiaries, associate and joint
ventures is reviewed annually for impairment. The recoverable
amount is determined based on value in use calculations. These
calculations use pre-tax cash flow projections based on financial
budgets and forecasts covering a five year period. Cash flows
beyond the five year period are extrapolated using long term
average growth rates.
The key assumptions made in these projections are the same as
those given in relation to impairment of goodwill in note 12.
Critical accounting judgements
Critical judgements represent key decisions made by management
in the application of the Group's accounting policies. Where a
significant risk of materially different outcomes exists due to
management assumptions, this will represent a critical accounting
judgement. Accounting judgements are continually reviewed in light
of new information and are based on historical experience and other
factors, including expectations of future events that are believed
to be reasonable under the circumstances. The judgements which have
a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities are considered to be:
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 2022.
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 Landlord's 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.
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 (in
the comparative periods). The Middle East segment has been
re-presented as a discontinued operation and is set out in note
11.
Income statement segment information
Segment revenue 2022 2021
GBP'000 GBP'000
------------------------------------ --------- ---------
United Kingdom 8,465 8,871
Continental Europe 180 321
Revenue from continuing operations 8,645 9,192
Discontinued operations 1,543 2,822
------------------------------------- --------- ---------
Revenue 10,188 12,014
------------------------------------- --------- ---------
Segment revenue less sub consultant 2022 2021
costs GBP'000 GBP'000
------------------------------------- --------- ---------
United Kingdom 6,975 6,063
Continental Europe 152 242
Revenue less sub consultant
costs from continuing operations 7,127 6,305
Discontinued operations 1,256 2,517
-------------------------------------- --------- ---------
Revenue less sub consultant
costs 8,383 8,822
-------------------------------------- --------- ---------
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 19 are in respect of
the Group's contracts with customers.
Segment net finance expense
2022 2021
Continuing operations GBP'000 GBP'000
----------------------------- ---------- ----------
United Kingdom (86) (93)
Continental Europe - -
Group costs (9) (1)
------------------------------ ---------- ----------
Net finance expense (95) (94)
------------------------------ ---------- ----------
Segment depreciation 2022 2021
GBP'000 GBP'000
------------------------------ --------- ---------
United Kingdom 71 88
Continental Europe 3 4
Group costs 3 4
Depreciation from continuing
operations 77 96
Discontinued operations 20 33
------------------------------- --------- ---------
Depreciation 97 129
------------------------------- --------- ---------
Segment amortisation 2022 2021
GBP'000 GBP'000
------------------------------ --------- ---------
United Kingdom 398 399
Continental Europe - 3
Amortisation from continuing
operations 398 402
Discontinued operations 15 40
------------------------------- --------- ---------
Amortisation 413 442
------------------------------- --------- ---------
2022 Before goodwill Goodwill Sub-total Reallocation Total
Segment result and acquisition of group
adjustments management
GBP'000 charges
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----------------- --------- ---------- ------------- ---------
United Kingdom (329) - (329) 540 211
Continental
Europe 275 - 275 147 422
Group costs (18) - (18) (791) (809)
Goodwill impairment - (1,752) (1,752) - (1,752)
------------------------ ----------------- --------- ---------- ------------- ---------
Subtotal (72) (1,752) (1,824) (104) (1,928)
Group management
charges charged
to the
Middle East
discontinued
operation - - - 104 104
------------------------ ----------------- --------- ---------- ------------- ---------
Loss before
tax from continuing
operations (72) (1,752) (1,824) - (1,824)
Loss from discontinued
operations (503) - (503) - (503)
------------------------ ----------------- --------- ---------- ------------- ---------
Loss before
tax (575) (1,752) (2,327) - (2,327)
------------------------ ----------------- --------- ---------- ------------- ---------
2021 Before goodwill Goodwill Sub-total Reallocation Total
Segment result and acquisition of group
adjustments management
GBP'000 charges
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----------------- --------- ---------- ------------- ---------
United Kingdom (848) - (848) 540 (308)
Continental
Europe 149 - 149 181 330
Group costs 104 - 104 (1,119) (1,015)
------------------------ ----------------- --------- ---------- ------------- ---------
Subtotal (595) - (595) (398) (993)
Group management
charges charged
to the
Middle East
discontinued
operation - - - 398 398
Loss before
tax from continuing
operations (595) - (595) - (595)
Loss from discontinued
operations (936) - (936) - (936)
------------------------ ----------------- --------- ---------- ------------- ---------
Loss before
tax (1,531) - (1,531) - (1,531)
------------------------ ----------------- --------- ---------- ------------- ---------
The Group's share of results from associate and joint ventures
included within the Continental Europe segment result are shown in
notes 17 and 18.
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:
2022 2021
GBP'000 GBP'000
------------------------------------- --------- ---------
Current contract assets relating
to professional services contracts 1,200 988
Loss allowance (1) (6)
-------------------------------------- --------- ---------
Total contract assets 1,199 982
-------------------------------------- --------- ---------
Contract liabilities relating
to professional services contracts 1,227 829
Total contract liabilities 1,227 829
-------------------------------------- --------- ---------
Significant changes in contract asset and liabilities
Contract assets have increased as the Group provided higher
amounts of services ahead of invoicing. Most of the contract assets
are derived from contracts in the UK where the balance of contract
assets has increased to GBP1,012k (September 2021: GBP545k). This
was partially due to new projects undertaken where the first
invoice had not been raised as at year end.
Contract liabilities have increased as the Group has invoiced
for higher 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:
GBP'000
------------------------------------------------------ ----------
Total contract liabilities as at 1 October 2021 (829)
Revenue recognised that was included in the contract
liability balance at the beginning of the period 813
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 (1,211)
Total contract liabilities as at 30 September
2022 (1,227)
------------------------------------------------------ ----------
Statement of financial position segment information
Segment assets 2022 2021
GBP'000 GBP'000
-------------------------------- --------- ---------
United Kingdom 2,915 2,413
Middle East 430 1,427
Continental Europe 90 85
Trade receivables and contract
assets 3,435 3,925
Other current assets 1,005 1,547
Non current assets* 3,751 6,432
--------------------------------- --------- ---------
Total assets 8,191 11,904
--------------------------------- --------- ---------
*Non current assets include investments in associate and joint
ventures.
Segment liabilities 2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ---------
United Kingdom 3,114 3,067
Middle East 598 781
Continental Europe 68 57
Trade payables, contract liabilities
and accruals 3,780 3,905
Other current liabilities 1,555 1,293
Non current liabilities 2,455 3,639
--------------------------------------- --------- ---------
Total liabilities 7,790 8,837
--------------------------------------- --------- ---------
Geographical areas
Revenue 2022 2021
GBP'000 GBP'000
---------------------- --------- ---------
United Kingdom 8,465 8,871
----------------------- --------- ---------
Country of domicile 8,465 8,871
Turkey 180 321
United Arab Emirates 1,543 2,822
Foreign countries 1,720 3,143
Revenue 10,188 12,014
----------------------- --------- ---------
Non current assets 2022 2021
GBP'000 GBP'000
--------------------------------------- --------- ---------
United Kingdom 2,453 4,594
---------------------------------------- --------- ---------
Country of domicile 2,453 4,594
Czech Republic - 9
Germany 1,007 787
Turkey 10 43
United Arab Emirates - 758
Foreign countries 1,017 1,597
Non current assets excluding deferred
tax 3,470 6,191
Deferred tax 281 241
Non current assets 3,751 6,432
---------------------------------------- --------- ---------
Major clients
During the year ended 30 September 2022, the Group derived 10%
or more of its revenues from one client (2021: one client).
2022 2021
GBP'000 GBP'000
------------------------- --------- ---------
Largest client revenues 2,009 3,295
-------------------------- --------- ---------
The largest client revenues for 2022 relate to the United
Kingdom operating segment (2021: United Kingdom operating
segment).
Revenue by project site
The geographical split of revenue based on the location of
project sites was:
2022 2021
GBP'000 GBP'000
-------------------- --------- ---------
United Kingdom 7,804 8,528
Middle East 1,543 2,955
Continental Europe 696 490
Rest of the world 145 41
--------------------- --------- ---------
Revenue 10,188 12,014
--------------------- --------- ---------
4 Other operating income
2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ---------
Property rental income 147 153
Management charges to joint ventures
and associates 131 132
Government grants (UK furlough
scheme) - 59
Other sundry income 48 14
Total other operating income from
continuing operations 326 358
Discontinued operations - 2
--------------------------------------- --------- ---------
Total other operating income 326 360
--------------------------------------- --------- ---------
5 Finance costs
Continuing operations 2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ---------
Payable on bank loans and overdrafts 19 3
Finance lease interest payable 76 91
--------------------------------------- --------- ---------
Total finance costs 95 94
--------------------------------------- --------- ---------
6 Auditor remuneration
During the year the Group incurred the following costs in
relation to the Company's auditor and associates of the Company's
auditor, and to the Company's previous auditor:
2022 2021
GBP'000 GBP'000
----------------------------------------- --------- ---------
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts for the year ended September
2022 59 58
Additional fees paid to the Company's 33 -
previous auditor for the audit of the
Company's annual accounts for the year
ended September 2021
Fees payable to the Company's auditor
and its associates
for other services
Audit of the Company's subsidiaries
pursuant to legislation 71 70
------------------------------------------ --------- ---------
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 including directors employed by
the Group and Company during the year was as follows:
Group Company
---------------- ------------------ ------------------
2022 2021 2022 2021
Number Number Number Number
---------------- -------- -------- -------- --------
Technical 83 104 - -
Administrative 23 29 6 7
---------------- -------- -------- -------- --------
Total 106 133 6 7
---------------- -------- -------- -------- --------
In addition to the number of staff disclosed above, the Group's
associate and joint ventures employed an average of 137 persons
(2021: 146 persons).
The costs of the persons employed by the Group and Company
during the year were:
Group Company
-------------------------- -------------------- --------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- --------- ---------
Wages and salaries 5,200 5,874 574 534
Social security costs 468 444 56 65
Contributions to defined
contribution pension
arrangements 262 253 43 44
-------------------------- --------- --------- --------- ---------
Total 5,930 6,571 673 643
-------------------------- --------- --------- --------- ---------
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 24.
8 Directors' emoluments
2022 Aggregate Pension Total Waived Total
emoluments contributions received entitlement
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------ --------------- ---------- --------- -------------
Nicholas Thompson 209 10 219 - 219
Robert Fry 123 15 138 - 138
Clive Carver 30 - 30 - 30
Raúl Curiel 30 - 30 - 30
Antony Barkwith 163 18 181 - 181
Total 555 43 598 - 598
------------------- ------------ --------------- ---------- --------- -------------
2021 Aggregate Pension Total Waived Total
emoluments contributions received entitlement
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------ --------------- ---------- --------- -------------
Nicholas Thompson 214 10 224 - 224
John Bullough 15 - 15 - 15
Robert Fry 121 17 138 - 138
Clive Carver 30 - 30 - 30
Raúl Curiel 30 - 30 - 30
Antony Barkwith 123 16 139 - 139
Total 533 43 576 - 576
------------------- ------------ --------------- ---------- --------- -------------
Benefits were accruing to three Directors (2021: three
Directors) under defined contribution pension arrangements.
The aggregate emoluments of the highest paid Director were
GBP209,000 (2021: GBP214,000) together with pension contributions
of GBP10,000 (2021: GBP10,000).
9 Tax charge
2022 2021
GBP'000 GBP'000
--------------------------------------- --------- ---------
Current tax - -
Adjustment in respect of previous
years - (361)
---------------------------------------- --------- ---------
Total current tax - (361)
Origination and reversal of temporary
differences (45) (126)
Adjustment in respect of previous
years - 92
Changes in tax rates - -
--------------------------------------- --------- ---------
Total deferred tax (note 23) (45) (34)
Total tax credit (45) (395)
---------------------------------------- --------- ---------
The standard rate of corporation tax in the United Kingdom that
is applicable for the financial year was 19% (2021: 19%).
The tax assessed for the year differs from the United Kingdom
standard rate as explained below:
2022 2021
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Loss before tax (2,327) (1,531)
Loss before tax multiplied by the standard
rate of corporation tax in the United
Kingdom of 19% (2021: 19%) (442) (291)
Effects of:
Other non tax deductible expenses 279 60
Associate and joint ventures reported
net of tax (62) (32)
Tax losses not recognised 104 105
Current tax adjustment in respect
of previous years 4 (361)
Deferred tax adjustment in respect
of previous years 2 92
Income not taxable 70 32
--------------------------------------------- --------- ---------
Total tax credit (45) (395)
--------------------------------------------- --------- ---------
10 Earnings per share
The calculations of basic and diluted earnings per share are
based on the following data:
Earnings 2022 2021
GBP'000 GBP'000
------------------------- --------- ---------
Continuing operations (1,779) (200)
Discontinued operations (503) (923)
Loss for the year (2,282) (1,123)
------------------------- --------- ---------
Number of shares 2022 2021
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
-------------------------------------- ------------ ------------
As explained in note 26 the Company has granted options over
2,500,000 of its ordinary shares. These have not been included
above as i) the average share price on 1,500,000 of the options was
below the exercise price in 2022 and they therefore do not have a
dilutive effect, and ii) the average share price on the other
1,000,000 options was slightly above the exercise price in 2022 but
to the extent that the dilutive effect would be trivial.
11 Discontinued operations
11 (a) Description
In April 2022, the Group sold assets, as part of the Group's
disposal of JRHP constituting its John R Harris & Partners
Limited (Cyprus) subsidiary and John R Harris & Partners
(Dubai) entity, for a cash consideration of AED 5,000,000,
comprising AED 4,250,000 cash upfront and a further AED 750,000
deferred consideration paid over a 5 year period. This marked the
sale of the main trading operations in the Group's Middle East
segment. With closure costs incurred in the period relating to the
planned termination of a number of trading licenses in the Middle
East operations, the Middle East segment is presented as a
discontinued operation in the current period, and the comparative
period represented accordingly.
The post-tax gain on disposal of the JRHP operation was
determined as follows:
2022 2021
GBP'000 GBP'000
Cash consideration received 927 -
Deferred cash consideration 163 -
Total consideration received 1,090 -
Sale costs (9)
Cash disposed of (112) -
------------------------------------------- --------- ---------
Net cash inflow on disposal
of discontinued operation 969
-
Net assets disposed (other
than cash)
37
* Property, plant and equipment -
736
* Intangibles -
641
* Trade and other receivables -
* Contract assets 361
(954)
* Trade and other payables -
--------- ---------
821 -
Currency translation differences
recycled on disposal (209)
-------------------------------------------- --------- ---------
612 -
Pre-tax gain on disposal of 357
discontinued operation -
-------------------------------------------- --------- ---------
Related tax expenses - -
Gain on disposal of discontinued 357
operation -
-------------------------------------------- --------- ---------
11 (b) Financial performance and cash flow information
Result of discontinued operations
2022 2021
GBP'000 GBP'000
Revenue 1,543 2,822
Sub consultant costs (287) (305)
-------------------------------------- --------- ---------
Revenue less sub consultant
costs 1,256 2,517
Personnel related costs (1,233) (2,212)
Property related costs (109) (197)
Expenses (635) (326)
Group management charges (104) (398)
Finance expenses - -
Depreciation (20) (33)
Amortisation (15) (40)
Other operating income - 2
Gain on disposal of subsidiary 357 -
Impairment of intangibles - (249)
Loss before tax (503) (936)
Tax credit / (charge) - -
------------------------------------- --------- ---------
Loss from discontinued operations (503) (936)
Exchange differences on disposal (209)
recycled to gain on disposal
of subsidiary -
Exchange differences on translation
of discontinued operation (168) (50)
-------------------------------------- --------- ---------
Other comprehensive loss from
discontinued operations (880) (986)
-------------------------------------- --------- ---------
Earnings per share from discontinued operations
2022 2021
GBP'000 GBP'000
Basic and diluted loss per
share (0.30p) (0.57p)
Statement of cash flows
The statement of cash flows includes the following amounts
relating to discontinued operations:
2022 2021
GBP'000 GBP'000
Net cash outflow from operating
activities (53) (485)
Net cash inflow/(outflow)
from investing activities 35 (2)
Foreign exchange movements (204) (39)
---------------------------------- --------- ---------
Net cash from discontinued
operations (222) (526)
---------------------------------- --------- ---------
12 Goodwill
Group
GBP'000
---------------------- ----------
Cost
At 1 October 2020 2,392
Addition 9
Disposal -
Exchange differences (31)
At 30 September 2021 2,370
Addition -
Disposal (608)
Exchange differences (10)
------------------------ ----------
At 30 September 2022 1,752
------------------------ ----------
Impairment
At 1 October 2020 -
Disposal -
Exchange differences -
At 30 September 2021 -
Impairment 1,752
Disposal -
Exchange differences -
---------------------- ----------
At 30 September 2022 1,752
------------------------ ----------
Net book value
At 30 September 2022 -
At 30 September 2021 2,370
At 1 October 2020 2,392
------------------------ ----------
The disposal recorded in the year related to goodwill on JRHP
which was sold during the year. The gain on disposal of the
goodwill is included within the loss from discontinued operations
on the Consolidated Income Statement and the gain on disposal of
subsidiary in the result of discontinued operations in note 11
(b).
Goodwill from the United Kingdom operation arose as GBP1,244k
from the April 2005 acquisition of Fitzroy Robinson Limited and
GBP496k from the December 2013 acquisition of Swanke Hayden Connell
Europe Limited. In the years that have passed the UK operations
have been merged into the Aukett Swanke Limited and Veretec Limited
companies. Swanke Hayden Connell Europe Limited serves as a holding
company for Swanke Hayden Connell International Limited which no
longer employs staff or engages in architectural work but in turn
remains a holding company for the Turkey subsidiary.
Management believe that the Goodwill arising at the time of
these acquisitions is no longer reflective of the current business,
and it is impractical to be able to determine what proportion of
cash flow projections of the United Kingdom operations relates to
the historic acquisitions. Management have therefore taken the
decision to write off the full GBP1,740k balance of Goodwill for
the United Kingdom operations.
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 1 October 2020 1,740 26 626 2,392
Addition - - 9 9
Exchange differences - (4) (27) (31)
----------------------- --------- -------- -------- --------
At 30 September
2021 1,740 22 608 2,370
Disposal - - (608) (608)
Impairment (1,740) (12) - (1,752)
Exchange differences - (10) - (10)
----------------------- --------- -------- -------- --------
At 30 September
2022 - - - -
----------------------- --------- -------- -------- --------
13 Other intangible assets
Group Trade Customer Order Trade
name relationships book licence Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- --------------- -------- --------- --------
Cost
At 1 October 2020 672 373 - 76 1,121
Disposal - - - - -
Exchange differences (17) (19) - (3) (39)
---------------------- -------- --------------- -------- --------- --------
At 30 September 2021 655 354 - 73 1,082
Disposal (21) (183) - (73) (277)
Exchange differences 56 (11) - - 45
---------------------- -------- --------------- -------- --------- --------
At 30 September 2022 690 160 - - 850
---------------------- -------- --------------- -------- --------- --------
Amortisation
At 1 October 2020 169 259 - 40 468
Disposal - - - - -
Impairment 236 13 - - 249
Charge 25 26 - 8 59
Exchange differences (3) (13) - (2) (18)
---------------------- -------- --------------- -------- --------- --------
At 30 September 2021 427 285 - 46 758
Disposal (21) (125) - (50) (196)
Impairment - - - - -
Charge 13 11 - 4 28
Exchange differences 61 (11) - - 50
---------------------- -------- --------------- -------- --------- --------
At 30 September 2022 480 160 - - 640
---------------------- -------- --------------- -------- --------- --------
Net book value
At 30 September 2022 210 - - - 210
At 30 September 2021 228 69 - 27 324
At 1 October 2020 503 114 - 36 653
---------------------- -------- --------------- -------- --------- --------
Amortisation is included in other operating expenses in the
consolidated income statement.
Disposal
The disposal in the year related to the sale of JRHP in April
2022.
Impairment
The prior year impairment of GBP249k related to SCL following
the Group's decision to restructure the UAE business, SCL ongoing
contracts were reassigned into JRHP, with new work being contracted
by JRHP, and the remaining licences held by SCL being allowed to
expire.
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. The SHC trade name has
a remaining amortisation period of 17 years. The SCL trade name was
fully impaired in the prior year.
Customer relationships
The customer relationships were acquired as part of the
acquisition of SHC in December 2013, on the acquisition of 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 were amortised over a 7
year period which ended in December 2020. The customer
relationships acquired in June 2015 were disposed of in the year
with the sale of JRHP. The customer relationships acquired in
February 2016 relating to SCL were impaired in the prior year.
Trade licence
The trade licence was acquired as part of the acquisition of
JRHP in June 2015. This represented 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. The residual balance was
disposed of in the current year with the sale of JRHP.
14 Property, plant & equipment
Group Leasehold Furniture Total
improvements &
GBP'000 equipment GBP'000
GBP'000
---------------------- -------------- ----------- ---------
Cost
At 1 October 2020 14 1,606 1,620
Additions - 33 33
Disposals - (885) (885)
Exchange differences (3) (21) (24)
---------------------- -------------- ----------- ---------
At 30 September 2021 11 733 744
---------------------- -------------- ----------- ---------
Additions - 48 48
Disposals - (244) (244)
Exchange differences (5) (5) (10)
---------------------- -------------- ----------- ---------
At 30 September 2022 6 532 538
---------------------- -------------- ----------- ---------
Depreciation
At 1 October 2020 14 1,334 1,348
Charge - 129 129
Disposals - (871) (871)
Exchange differences (3) (14) (17)
---------------------- -------------- ----------- ---------
At 30 September 2021 11 578 589
Charge - 97 97
Disposals - (207) (207)
Exchange differences (5) (5) (10)
---------------------- -------------- ----------- ---------
At 30 September 2022 6 463 469
---------------------- -------------- ----------- ---------
Net book value
At 30 September 2022 - 69 69
At 30 September 2021 - 155 155
At 1 October 2020 - 272 272
---------------------- -------------- ----------- ---------
Company Furniture Total
&
equipment GBP'000
GBP'000
---------------------- ----------- ---------
Cost
At 1 October 2021 17 17
Additions - -
At 30 September 2022 17 17
----------------------- ----------- ---------
Depreciation
At 1 October 2021 6 6
Charge 4 4
At 30 September 2022 10 10
----------------------- ----------- ---------
Net book value
At 30 September 2022 7 7
At 1 October 2021 11 11
----------------------- ----------- ---------
15 Leases
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.
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 24).
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.
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.
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 expose 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 2022 the leases recognised do not include any
break clauses.
Right-of-use Assets
Land and Restoration Leasehold Total
buildings costs improvements
GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2020 2,478 166 285 2,929
Amortisation (324) (22) (37) (383)
------------------------ ----------- ------------ -------------- ---------
At 30 September 2021 2,154 144 248 2,546
Additions - - 23 23
Amortisation (324) (22) (39) (385)
At 30 September 2022 1,830 122 232 2,184
------------------------ ----------- ------------ -------------- ---------
Lease liabilities
Land and Leasehold Total
buildings improvements
GBP'000 GBP'000 GBP'000
At 1 October 2020 3,137 207 3,344
Additions - - -
Interest expense 83 8 91
Lease payments (464) (82) (546)
----------------------- ----------- -------------- ---------
At 30 September 2021 2,756 133 2,889
Additions - - -
Interest expense 72 4 76
Lease payments (464) (82) (546)
----------------------- ----------- -------------- ---------
At 30 September 2022 2,364 55 2,419
----------------------- ----------- -------------- ---------
GBP'000
Short-term lease expense 66
Low value lease expense 6
Expense relating to variable lease payments not
included in
the measurement of lease liabilities -
Aggregate undiscounted commitments for short-term
leases 11
The maturity analysis of lease liabilities of the Group at each
reporting date are as follows:
Between Between Between
Lease liabilities Up to 3 3 and 12 1 and 2 2 and 5 Over
months months years years 5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- ---------- --------- --------- ---------
At 30 September
2022 118 339 415 1,316 231
At 30 September
2021 115 353 459 1,280 682
--------------------- -------- ---------- --------- --------- ---------
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.
2022 2021
GBP'000 GBP'000
----------------------------------- --------- ---------
Not later than one year 44 74
Later than one year and not later - -
than five years
Later than five years - -
----------------------------------- --------- ---------
Total 44 74
------------------------------------ --------- ---------
16 Investments
Company Subsidiaries Joint Associate Total
ventures
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October
2020 10,177 21 12 10,210
Addition 23 - - 23
------------------ ------------- ---------- ---------- ---------
At 30 September
2021 10,200 21 12 10,233
Disposal (1,021) - - (1,021)
------------------ ------------- ---------- ---------- ---------
At 30 September
2022 9,179 21 12 9,212
Provisions
At 1 October
2020 6,862 - - 6,862
Charge 81 - - 81
------------------ ------------- ---------- ---------- ---------
At 30 September
2021 6,943 - - 6,943
Charge 180 - - 180
------------------ ------------- ---------- ---------- ---------
At 30 September
2022 7,123 - - 7,123
Net book value
At 1 October
2020 3,315 21 12 3,348
At 30 September
2021 3,257 21 12 3,290
At 30 September
2022 2,056 21 12 2,089
------------------ ------------- ---------- ---------- ---------
The increase in cost of GBP23k during the prior year related to
the acquisition of a further 5% equity shareholding in JRHP.
The disposal in the year related to the disposal of the
investment in JRHP (note 11).
A provision for impairment of GBP180k (2021: GBP81k) was made
during the year to reduce the Company's investment in Swanke Hayden
Connell Europe Limited down to the net book value of its balance
sheet.
The current net book values of the investments in subsidiaries
is GBP2,056k (2021: GBP3,257k) after charges made in the current
year, which is larger than the net assets of the consolidated
statement of financial position of GBP401k (2021: GBP3,067k). This
is primarily due to the Company's cost of investment in the UK
operations (Aukett Swanke Limited and Veretec Limited) being higher
than the Group's carrying value of Goodwill and other intangible
assets in these entities.
The net book values are supported by the value in use
calculations.
An annual impairment test is performed over cash generating
units ('CGUs') of the Group. The UK operations (Aukett Swanke
Limited and Veretec Limited) are considered to be one CGU.
The recoverable amount of a CGU 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 in the discounted cash flow projections for
the United Kingdom operation are:
-- the future level of revenue, set at a compound growth rate of
11.30% (2021: 8.31%) over the next five years - which is based on
two years of budgeted revenue targets, with following years
assuming annualised inflation of earnings (and costs) using a CPI
assumption of 9.30% based on the Nov-22 annualise UK CPI index.
-- long term growth rate - which has been assumed to be 1.5%
(2021: 2.0%) 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 18.32%
(2021: 11.34%).
Based on the discounted cash flow projections, the recoverable
amount of the UK CGU is estimated to exceed carrying values by
GBP4,475k (261%). An 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 69%, would result in
carrying amounts exceeding their recoverable amount. A decrease in
the effective compound growth rate of revenue to 9.50% instead of
the 11.30% 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
the investment remains recoverable despite this sensitivity given
the conservative nature of the underlying forecasts prepared.
Subsidiary operations
The following are the subsidiary undertakings at 30 September
2022:
Name Country of Proportion Nature of business
incorporation of ordinary
and registered equity held
office address
(see table
below)
2022 2021
----------------------------- ----------------- ------- ------ -------------------
Subsidiaries
Architecture
Aukett Swanke Limited (A) 100% 100% & design
Aukett Fitzroy Robinson Architecture
International Limited (A) 100% 100% & design
Architecture
Veretec Limited (A) 100% 100% & design
Swanke Hayden Connell Architecture
International Limited (A) 100% 100% & design
Swanke Hayden Connell Architecture
Mimarlik AS (B) 100% 100% & design
John R Harris & Partners Architecture
Limited (C) 0% 100% & design
Architecture
Shankland Cox Limited (A) 100% 100% & Engineering
Aukett Swanke Architectural Architecture
Design Limited (A) 100% 100% & design
Swanke Hayden Connell
Europe Limited (A) 100% 100% Non-trading
Fitzroy Robinson Limited (A) 100% 100% Dormant
Swanke Limited (A) 100% 100% Dormant
John R Harris & Partners
Limited (A) 0% 100% Dormant
Aukett Fitzroy Robinson
Limited (A) 100% 100% Dormant
Thomas Nugent Architects
Limited (A) 100% 100% Dormant
Aukett Fitzroy Robinson
Europe Limited (A) 100% 100% Dormant
Aukett Limited (A) 100% 100% Dormant
Aukett (UK) Limited (A) 100% 100% Dormant
Aukett Group Limited (A) 100% 100% Dormant
Fitzroy Robinson West
& Midlands Limited (A) 100% 100% Dormant
----------------------------- ----------------- ------- ------ -------------------
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 engaged through Aukett Swanke
Architectural Design Limited.
Aukett Swanke Architectural Design Limited is incorporated in
England & Wales, but operates principally in the United Arab
Emirates. The trade licence expired in March 2021 and the operation
is no longer undertaking new work.
John R Harris & Partners Limited (JRHP) is incorporated in
Cyprus and operates principally in the Middle East. The group's
full shareholding was sold in April 2022.
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, and Al Ain. These licenses expired/expire in January
and April 2022, with ongoing projects being reassigned to JRHP
prior to the sale of JRHP.
The UAE domiciled branches are consolidated into the Group
principally based on profit sharing agreements in place.
Interest in associate and joint ventures
Set out below are the associate and joint ventures of the Group
as at 30 September 2022. 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 Proportion Nature of Measure-ment method
incorporation and of ordinary equity held relationship
registered office
address
(see below)
2022 2021
--------------------- --------------------- ------------- ------------ --------------------- --------------------
Aukett + Heese
Frankfurt GmbH (D) 50% 50% Joint venture Equity
Aukett sro
(liquidated) (E) 0% 50% Joint venture Equity
Aukett + Heese GmbH (F) 25% 25% Associate Equity
--------------------- --------------------- ------------- ------------ --------------------- --------------------
All joint venture and associate entities provide architectural
and design services. There are no contingent liabilities or
commitments in relation to the joint ventures or associates.
Country of incorporation and registered office addresses
Ref Country of Incorporation Registered office address
---- ------------------------- -------------------------------------------------
(A) England & Wales 10 Bonhill Street, London, EC2A 4PE,
United Kingdom
(B) Turkey Esentepe Mahallesi Kore ehitleri
Caddesi 34, Deniz İ Hanı
K.6 34394 Zincirlikuyu, Istanbul,
Turkey
(C) Cyprus 17-19 Themistokli Dervi street, The
City House, 1066 Nicosia, Cyprus
(D) Germany Gutleutstrasse 163, 60327 Frankfurt
am Main, Germany
(E) Czech Republic ADVOKÁTNÍ KANCELÁ
JUDr. JAN JI ÍČEK, Legionář
947/2b, 182 00 Prague 8, Czech Republic
(F) Germany Budapester Strasse 43, 10787 Berlin,
Germany
17 Investment in associate
As disclosed in note 16, 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 2022 2021
GBP'000 GBP'000
-------------------------- --------- ---------
Assets
Non current assets 278 289
Current assets 6,229 4,693
--------------------------- --------- ---------
Total assets 6,507 4,982
Liabilities
Current liabilities (3,465) (2,635)
Total liabilities (3,465) (2,635)
Net assets 3,042 2,347
--------------------------- --------- ---------
Reconciliation to carrying amounts:
2022 2021
GBP'000 GBP'000
--------------------------------- --------- ---------
Opening net assets at 1 October 2,347 3,706
Profit for the period 1,139 470
Other comprehensive income 86 (185)
Dividends paid (531) (1,644)
---------------------------------- --------- ---------
Closing net assets 3,041 2,347
Group's share in % 25% 25%
Group's share in GBP'000 760 587
---------------------------------- --------- ---------
Carrying amount 760 587
---------------------------------- --------- ---------
Summarised statement of comprehensive 2022 2021
income GBP'000 GBP'000
--------------------------------------- --------- ---------
Revenue 12,198 12,243
Sub consultant costs (2,861) (3,492)
---------------------------------------- --------- ---------
Revenue less sub consultant costs 9,337 8,751
Operating costs (7,708) (8,078)
---------------------------------------- --------- ---------
Profit before tax 1,629 673
Taxation (490) (203)
---------------------------------------- --------- ---------
Profit for the period from continuing
operations 1,139 470
Other comprehensive income 86 (185)
---------------------------------------- --------- ---------
Total comprehensive income 1,225 285
---------------------------------------- --------- ---------
The Group received dividends of GBP126,000 after deduction of
German withholding taxes (2021: GBP395,000) from Aukett + Heese
GmbH. The principal risks and uncertainties associated with Aukett
+ Heese GmbH are the same as those detailed within the Group's
Strategic Report.
18 Investments in joint ventures
Frankfurt
As disclosed in note 16, the Group owns 50% of Aukett + Heese
Frankfurt GmbH which is based in Frankfurt, Germany.
GBP'000
---------------------- --------
At 1 October 2020 292
Share of profits 65
Dividends paid (142)
Exchange differences (14)
------------------------ --------
At 30 September 2021 201
Share of profits 40
Dividends paid -
Exchange differences 6
------------------------ --------
At 30 September 2022 247
------------------------ --------
The Group received dividends of GBPnil after deduction of German
withholding taxes (2021: GBP135,000) 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.
2022 2021
GBP'000 GBP'000
--------------------- --------- ---------
Assets
Non current assets 11 12
Current assets 369 288
---------------------- --------- ---------
Total assets 380 300
Liabilities
Current liabilities (133) (99)
Total liabilities (133) (99)
Net assets 247 201
---------------------- --------- ---------
2022 2021
GBP'000 GBP'000
----------------------------------- --------- ---------
Revenue 824 919
Sub consultant costs (271) (267)
------------------------------------ --------- ---------
Revenue less sub consultant costs 553 652
Operating costs (494) (541)
------------------------------------ --------- ---------
Profit before tax 59 111
Taxation (19) (46)
------------------------------------ --------- ---------
Profit after tax 40 65
------------------------------------ --------- ---------
The principal risks and uncertainties associated with Aukett +
Heese Frankfurt GmbH are the same as those detailed within the
Group's Strategic Report.
Prague
As disclosed in note 16, the Group owned 50% of Aukett sro which
is based in Prague, Czech Republic. The final liquidation of this
entity was completed during the year and a final distribution
received.
GBP'000
----------------------------------- --------
At 1 October 2020 25
Share of losses (16)
Exchange differences (1)
------------------------------------- --------
At 30 September 2021 8
Share of losses (1)
Liquidation dividend distribution
paid (7)
Exchange differences -
At 30 September 2022 -
------------------------------------- --------
The following amounts represent the Group's 50% share of the
assets and liabilities, and revenue and expenses of Aukett sro.
2022 2021
GBP'000 GBP'000
--------------------- ---------- ---------
Assets
Current assets - 11
---------------------- --------- ---------
Total assets - 11
Liabilities
Current liabilities - (3)
Total liabilities - (3)
Net assets - 8
---------------------- --------- ---------
2022 2021
GBP'000 GBP'000
----------------------------- --------- ---------
Revenue - 165
Sub consultant costs - (78)
------------------------------ --------- ---------
Revenue less sub consultant
costs - 87
Operating costs (1) (103)
------------------------------ --------- ---------
Loss before tax (1) (16)
Taxation - -
Loss after tax (1) (16)
------------------------------ --------- ---------
19 Trade and other receivables
Group 2022 2021
GBP'000 GBP'000
------------------------------------- --------- ---------
Gross trade receivables 2,514 3,215
Impairment allowances (199) (272)
-------------------------------------- --------- ---------
Net trade receivables 2,315 2,943
Other financial assets at amortised
cost 500 385
Amounts owed by associates and
joint ventures - 22
Corporate tax receivable - 99
Other current assets 478 526
-------------------------------------- --------- ---------
Total 3,293 3,975
-------------------------------------- --------- ---------
The corporate tax receivable of GBP99k relates to cash
receivable from UK R&D tax claims.
Company 2022 2021
GBP'000 GBP'000
------------------------------------- --------- ---------
Amounts due after more than one
year
Amounts owed by associate and
joint ventures - 5
Other financial assets at amortised
cost 184 -
Total amounts due after more than
one year 184 5
Amounts due within one year
Trade receivables 24 5
Amounts owed by subsidiaries 163 381
Amounts owed by associate and
joint ventures - 17
Other financial assets at amortised
cost 46 -
Other current assets 17 46
-------------------------------------- --------- ---------
Total amounts due within one year 250 449
Total 434 454
-------------------------------------- --------- ---------
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.
During the year, the Company made provisions totalling GBP298k
(2021: GBP1,733k) against amounts owed by subsidiaries. These are
amounts owed by Aukett Fitzroy Robinson International Limited,
Aukett Swanke Architectural Design Limited and SCL. Following the
Group's decision to restructure the UAE business either freezing or
allowing trade licenses in these companies to expire, Management
took the decision to make a provision against amounts owed by these
companies to the Group.
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 2022. 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.
Amounts due for contract work in the Middle East segment have
been material in prior years, with contracts in the Middle East
often billed in arrears. Sizeable write offs in prior years have
informed the overall rate calculated for the provisioning
matrix.
The total impairment allowance is down GBP73k compared to the
prior year, primarily due to the UAE entities formally writing off
old debtors which previously had carried an impairment allowance,
partially offset by new provisions being made against uncertain
remaining debtor balances as the Group continues the process of
discontinuing the operations of the remaining UAE entities.
Impairment allowances as a percentage of gross trade receivables
has therefore decreased to 7.9% (2021: 8.5%).
The loss allowance for the Middle East operating segment as at
30 September 2022 (excluding additional loss allowances measured on
a case-by-case basis) was determined as follows for both trade
receivables and contract assets:
Whilst the Middle East operations of Aukett Fitzroy Robinson
International Limited and Aukett Swanke Architectural Design
Limited have been in the process of closure as at 30 September 2022
there remained just 2 trade receivable balances to collect, which
were collected shortly after the year end. As at 30 September 2022
the loss allowance was applied to trade receivables and contract
assets in SCL.
More More More
1-30 than 30 than 60 than 90
30 September days past days past days past days past
2022 Current due due due due Total
Expected loss
rate (%) 2% 2% 4% 9% 12%
-------- ----------- ----------- ----------- ----------- -------
Gross carrying
amount (GBP'000) 27 - - - 34 61
-------- ----------- ----------- ----------- ----------- -------
Loss allowance
(GBP'000) through
CSOFP - - - - 4 4
-------- ----------- ----------- ----------- ----------- -------
The comparative loss allowance for the Middle East operating
segment as at 30 September 2021 was:
More More More
1-30 than 30 than 60 than 90
30 September days past days past days past days past
2021 Current due due due due Total
Expected loss
rate (%) 2% 2% 3% 6% 10%
-------- ----------- ----------- ----------- ----------- -------
Gross carrying
amount (GBP'000) 611 136 112 65 575 1,499
-------- ----------- ----------- ----------- ----------- -------
Loss allowance
(GBP'000) through
CSOFP 10 3 4 4 58 79
-------- ----------- ----------- ----------- ----------- -------
The loss allowance for the Middle East operating segment as at
30 September 2022 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
GBP5k arises which is taken through the foreign currency
translation reserve.
Contract Trade receivables
assets GBP'000
GBP'000
------------------------------------------- --------- -------------------
Opening loss allowance provision as
at 1 October 2021 6 74
Loss allowance provision - (38)
Disposal of JRHP (6) (32)
Amounts restated through opening Foreign
Currency
translation reserve - -
Loss allowance calculated based on ECL
loss matrices - 4
Additional provisions identified on
a case by case basis 24 195
-------------------------------------------- --------- -------------------
Total loss allowance as at 30 September
2022 - calculated under IFRS 9 24 199
-------------------------------------------- --------- -------------------
The loss allowances decreased by GBP70k to GBP4k for trade
receivables and decreased by GBP6k to GBPnil for contract assets
during the year to 30 September 2022.
A further allowance for impairment of trade receivables and
contract assets is established on a case-by-case basis amounting to
GBP195k at 30 September 2022 and GBP198k at 30 September 2021 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:
GBP'000
----------------------------------- --------
At 1 October 2020 1,031
Loss allowance provision (38)
Charged to the income statement
based on additional case by case
provisions 198
Allowance utilised (865)
Exchange differences (54)
-------------------------------------- --------
At 30 September 2021 272
Loss allowance provision (38)
Disposal of JRHP (32)
Charged to the income statement
based on additional case by case
provisions 133
Allowance written-off (162)
Exchange differences 26
-------------------------------------- --------
At 30 September 2022 199
-------------------------------------- --------
20 Trade and other payables
Group 2022 2021
GBP'000 GBP'000
------------------------------------- --------- ---------
Amounts due after more than one
year
Amounts owed to associate and joint 44 -
venture
------------------------------------- --------- ---------
Total amounts due after more than 44 -
one year
Amounts due within one year
Trade payables 1,354 2,112
Other taxation and social security 515 568
Other payables 101 103
Accruals 1,199 964
Total amounts due within one year 3,169 3,747
Total 3,213 3,747
-------------------------------------- --------- ---------
Company 2022 2021
GBP'000 GBP'000
------------------------------------- --------- ---------
Amounts due after more than one
year
Amounts owed to associate and joint 44 -
venture
------------------------------------- --------- ---------
Total amounts due after more than 44 -
one year
Amounts due within one year
Trade payables 58 44
Amounts owed to subsidiaries 1,212 1,551
Other taxation and social security 4 32
Other payables 28 31
Accruals 292 92
-------------------------------------- --------- ---------
Total amounts due within one year 1,594 1,750
Total 1,638 1,750
-------------------------------------- --------- ---------
See note 34 for further details of the amounts due to
subsidiaries.
21 Borrowings
Group 2022 2021
GBP'000 GBP'000
------------------------------------ --------- ---------
Secured bank overdrafts 232 -
Secured bank loan 417 500
Total borrowings 649 500
------------------------------------- --------- ---------
Amounts due for settlement within
12 months 482 83
------------------------------------- --------- ---------
Current liability 482 83
Amounts due for settlement between
one and two years 167 250
Amounts due for settlement between
two and five years - 167
Non current liability 167 417
Total borrowings 649 500
------------------------------------- --------- ---------
Company 2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ---------
Secured bank loan 417 500
--------------------------------------- --------- ---------
Total borrowings 417 500
--------------------------------------- --------- ---------
Instalments due within 12 months 250 83
--------------------------------------- --------- ---------
Current liability 250 83
Instalments due between one and two
years 167 250
Instalments due between two and five
years - 167
Non current liability 167 417
Total borrowings 417 500
--------------------------------------- --------- ---------
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 4.05%
(loan) and 3% (overdraft) above the Coutts Base rate for the
relevant currency.
22 Analysis of net (deficit) / funds
Group 2022 2021
GBP'000 GBP'000
------------------------------- --------- ---------
Cash at bank and in hand 28 515
Secured bank overdrafts (note (232) -
21)
Cash and cash equivalents (204) 515
Secured bank loan (note 21) (417) (500)
Net (deficit)/funds (621) 15
-------------------------------- --------- ---------
23 Deferred tax
Group Tax depreciation Other
on plant Trading temporary
and equipment losses differences Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --- ----------------- ---------- ------------- ----------
At 1 October
2020 43 185 (61) 167
Income statement (10) 45 (1) 34
Exchange differences - - - -
At 30 September
2021 33 230 (62) 201
Income statement 4 42 (1) 45
Exchange differences 1 1 - 2
----------------------- ----------------- ---------- ------------- ----------
At 30 September
2022 38 273 (63) 248
----------------------- ----------------- ---------- ------------- ----------
Group 2022 2021
GBP'000 GBP'000
-------------------------- --------- ---------
Deferred tax assets 281 241
Deferred tax liabilities (33) (40)
Net deferred tax balance 248 201
--------------------------- --------- ---------
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.
24 Provisions
Group Property Employee
lease benefit
provision obligations Total
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ------------- ----------
At 1 October 2020 210 782 992
Utilised - (213) (213)
Charged to the income statement - 92 92
Exchange differences - (39) (39)
At 30 September 2021 210 622 832
Utilised - (296) (296)
Charged to the income statement - 78 78
On disposal of subsidiary - (368) (368)
Exchange differences - 3 3
At 30 September 2022 210 39 249
---------------------------------- ----------- ------------- ----------
Property lease provision
The provision arose from lease obligations in respect of the
Company's leased London premises.
There are uncertainties around the provision due to the fact
that costs may increase over the period to maturity and the
eventual outturn will be dependent on the level of negotiation over
settlement of proposals with the Company's landlord.
The provision payable in greater than five years reflects the
future estimated cost of work to be performed.
The effect of time value 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.
As at 30 September 2022 the Group no longer employed any staff
within its Middle East subsidiaries. The Employee benefit
obligation provision relating to Middle East subsidiaries as at 30
September 2022 is therefore GBPnil. The balance of termination
payments due to former employees unpaid as at year end is
recognised as a current liability included in trade and other
payables (note 20).
The key actuarial assumptions used in the calculation are
detailed below:
2022 2021
------ --------
Combined average length of service N/A 5 years
Discount rate N/A 1.74%
Salary growth rate N/A 2.2%
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.
Impact on employee benefit
obligation
-----------------------------
Change Increase in Decrease
in assumption assumption in assumption
--------------- ------------ ---------------
Combined average length
of service 1 year N/A (3.78)%
Salary growth rate 1% N/A (0.15)%
Discount rate 1% N/A 0.15%
The Group's Turkish subsidiary is required to pay termination
indemnities to each employee who completes one year of service and
whose employment is terminated upon causes that qualify the
employee to receive termination indemnity. The liability has been
measured in line with IAS 19 and is funded from working
capital.
25 Share capital
Group and Company 2022 2021
GBP'000 GBP'000
------------------------------------------ --------- ---------
Allocated, called up and fully paid
165,213,652 (2021: 165,213,652) ordinary
shares of 1p each 1,652 1,652
------------------------------------------ --------- ---------
Number
---------------------- ------------
At 1 October 2020 165,213,652
No changes -
At 30 September 2021 165,213,652
No changes -
At 30 September 2022 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.
After the year end, the acquisition of TFG resulted in an
increase in the share capital as disclosed in note 35.
26 Share options
The Company has granted options over its Ordinary Shares to
Group employees as follows:
At 1 October At 30
2021 September Exercise Earliest Latest
Granted Lapsed 2022 price exercisable exercisable
Granted Number Number Number Number Pence date date
--------- ------------- ---------- --------- ----------- ----------- -------------- --------------
6 March 6 March 6 March
2017 500,000 - - 500,000 4.25 2019 2023
24 Aug 24 Aug 24 Aug
2020 1,000,000 - - 1,000,000 3.60 2022 2026
29 Jun 29 Jun 29 Jun
2021 1,000,000 - - 1,000,000 1.60 2023 2027
--------- ------------- ---------- --------- ----------- ----------- -------------- --------------
Total 2,500,000 - - 2,500,000
--------- ------------- ---------- --------- ----------- ----------- -------------- --------------
The 500,000 share options granted on 6 March 2017 related to
Beverley Wright, a former Director of the Company and after the
year end lapsed on 6 March 2023.
The 1,000,000 share options granted on 24 August 2020, and the
1,000,000 share options granted on 29 June 2021 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 34.
After the year end, the acquisition of TFG resulted in a further
8,400,000 share options being granted as disclosed in note 35.
27 Cash generated from operations
Group 2022 2021
GBP'000 GBP'000
----------------------------------------- --------- ---------
Loss before tax (2,327) (1,531)
Finance costs 95 94
Share of results of associate and
joint ventures (327) (166)
Intangible amortisation 28 59
Intangible impairment - 249
Depreciation 97 129
Goodwill impairment 1,752 -
Amortisation of right-of-use assets 385 383
Profit on disposal of property,
plant & equipment - (2)
Decrease/(increase) in trade and
other receivables 594 (843)
(Decrease) / increase in trade and
other payables (815) 892
Change in provisions (586) (160)
Unrealised foreign exchange differences - -
Net cash expended by operations (1,104) (896)
------------------------------------------ --------- ---------
Company 2022 2021
GBP'000 GBP'000
----------------------------------------- --------- ---------
Loss before income tax (783) (1,179)
Dividends receivable (133) (528)
Finance costs 9 1
Depreciation 4 4
Provision on investments 180 81
Loss on disposal of subsidiary 418 -
Write off of amounts owed by subsidiary (479) -
on disposal
Deferred consideration on disposal 163 -
Decrease in trade and other receivables 20 1,499
Decrease in trade and other payables (112) (579)
Unrealised foreign exchange differences (9) (1)
Net cash expended by operations (722) (702)
------------------------------------------ --------- ---------
Changes in liabilities arising from financing activities
including changes arising from cash flows and non-cash changes
Group Non- current Current
loans loans and
and borrowings borrowings Total
GBP'000 GBP'000 GBP'000
----------------------------------- ---------------- ------------ ---------
At 1 October 2020 2,805 694 3,499
Cash flows
- Repayment of borrowings - (155) (155)
- Payment of interest - (1) (1)
- Receipt of bank loan 500 - 500
- Payment of lease liabilities - (546) (546)
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified
as non-current at 30 September
2021 (538) 538 -
- Interest accrued in period - 92 92
At 30 September 2021 2,767 622 3,389
Cash flows
- Repayment of borrowings - (83) (83)
- Payment of interest - (9) (9)
- Receipt of bank loan - - -
- Payment of lease liabilities - (546) (546)
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified
as non-current at 30 September
2022 (638) 638 -
- Interest accrued in period - 85 85
----------------------------------- ---------------- ------------ ---------
At 30 September 2022 2,129 707 2,836
----------------------------------- ---------------- ------------ ---------
Company Non- current
loans Current loans
and borrowings and borrowings Total
GBP'000 GBP'000 GBP'000
----------------------------------- ---------------- ---------------- ---------
At 1 October 2021 - 155 155
Cash flows
- Repayment of borrowings - (155) (155)
- Payment of interest - (1) (1)
- Receipt of bank loan 500 - 500
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified
as non-current at 30 September
2021 (83) 83 -
- Interest accrued in period - 1 1
At 30 September 2021 417 83 500
Cash flows
- Repayment of borrowings - (83) (83)
- Payment of interest - (9) (9)
- Receipt of bank loan - - -
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified
as non-current at 30 September
2022 (250) 250 -
- Interest accrued in period - 9 9
----------------------------------- ---------------- ---------------- ---------
At 30 September 2022 167 250 417
----------------------------------- ---------------- ---------------- ---------
28 Financial instruments
Risk management
The Company and the Group hold financial instruments principally
to finance their operations or as a direct consequence of their
business activities. The principal risks considered to arise from
financial instruments are foreign currency risk and interest rate
risk (market risks), counterparty risk (credit risk) and liquidity
risk. Neither the Company nor the Group trade in financial
instruments.
Categories of financial assets and liabilities
2022 2021
Group GBP'000 GBP'000
------------------------------------- --------- ---------
Net trade receivables 2,315 2,943
Contract assets 1,119 982
Other financial assets at amortised
cost 500 385
Accrued income 23 33
Amounts owed by associate and
joint ventures - 22
Cash at bank and in hand 28 515
-------------------------------------- --------- ---------
Loans and receivables measured
at amortised cost 3,985 4,880
Trade payables (1,354) (2,112)
Other payables (101) (103)
Accruals (1,199) (964)
Lease liabilities (2,419) (2,889)
Secured bank loans and overdrafts (649) (500)
Financial liabilities measured
at amortised cost (5,722) (6,568)
Net financial instruments (1,737) (1,688)
-------------------------------------- --------- ---------
Company 2022 2021
GBP'000 GBP'000
------------------------------------- --------- ---------
Net trade receivables 24 5
Amounts owed by subsidiaries 163 381
Amount owed by associate and joint
ventures - 22
Accrued income 11 33
Other financial assets at amortised 230 -
cost
Cash at bank and in hand 457 211
-------------------------------------- --------- ---------
Loans and receivables measured
at amortised cost 885 652
Trade payables (58) (44)
Amounts owed to subsidiaries (1,212) (1,551)
Amount owed by associate and joint (44) -
ventures
Other payables (28) (31)
Accruals (292) (92)
Secured bank loan (417) (500)
-------------------------------------- --------- ---------
Financial liabilities measured
at amortised cost (2,051) (2,218)
Net financial instruments (1,166) (1,566)
-------------------------------------- --------- ---------
The Directors consider that there were no material differences
between the carrying values and the fair values of all the
Company's and all the Group's financial assets and financial
liabilities at each year end based on the expected future cash
flows.
Collateral
As disclosed in note 21 the bank loan and overdraft (undrawn at
2021 and GBP232k at 2022 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:
2022 2021
GBP'000 GBP'000
--------- --------- ---------
Group 2,641 3,612
Company 349 614
---------- --------- ---------
Other receivables in the consolidated statement of financial
position include a GBP238k rent security deposit (2021: GBP230k) in
respect of the Group's London studio premises. The rent deposit
redeems a cash sum of GBP279k at the end of the term of the lease
in May 2028.
29 Foreign currency risk
The Group's operations seek to contract with customers and
suppliers in their own functional currencies to minimise exposure
to foreign currency risk, however, for commercial reasons contracts
are occasionally entered into in foreign currencies.
Where contracts are denominated in other currencies the Group
usually seeks to minimise net foreign currency exposure from
recognised project related assets and liabilities by using foreign
currency denominated overdrafts.
The Group does not hedge future revenues from contracts
denominated in other currencies due to the rights of clients to
suspend or cancel 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 2022 2021
GBP'000 GBP'000
-------------------------------- --------- ---------
Czech Koruna - 5
EU Euro 45 166
Turkish Lira 16 -
UAE Dirham 2,283 2,046
UK Sterling (12) (7)
US Dollar 54 3
Net financial instruments held
in foreign currencies 2,386 2,213
--------------------------------- --------- ---------
Company 2022 2021
GBP'000 GBP'000
-------------------------------- --------- ---------
Czech Koruna - 5
EU Euro 46 130
Turkish Lira 16 -
US Dollar 18 3
UAE Dirham 113 254
Net financial instruments held
in foreign currencies 193 392
--------------------------------- --------- ---------
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.
2022 2021
Profit Equity Profit Equity
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- ---------
Group 29 (29) 39 101
Company 18 - 39 -
--------- --------- --------- --------- ---------
The following foreign exchange gains / (losses) arising from
financial assets and financial liabilities have been recognised in
the income statement:
2022 2021
GBP'000 GBP'000
--------- --------- ---------
Group 258 (45)
Company 280 (47)
---------- --------- ---------
30 Counterparty risk
Group
No collateral is held in respect of any financial assets and
therefore the maximum exposure to credit risk at the date of the
statement of financial position is the carrying value of financial
assets shown in note 28.
Counterparty risk is only considered significant in relation to
trade receivables, amounts due from customers for contract work,
other receivables and cash and cash equivalents.
The ageing of trade receivables against which an IFRS 9
impairment loss allowance has been made, as the directors consider
their recovery is probable, was:
Receivables loss Receivables
pre-allowance allowance post-allowance
2022 GBP'000 2022
GBP'000 GBP'000
-------------------------------- --------------- ----------- ----------------
Not overdue 1,100 - 1,100
Between 0 and 30 days overdue 661 - 661
Between 30 and 60 days overdue 283 - 283
Greater than 60 days overdue 275 (4) 271
Total 2,319 (4) 2,315
-------------------------------- --------------- ----------- ----------------
Receivables loss Receivables
pre-allowance allowance post-allowance
2021 GBP'000 2021
GBP'000 GBP'000
------------------------------- --------------- ----------- ----------------
Not overdue 1,210 (3) 1,207
Between 0 and 30 days overdue 923 (3) 920
Between 30 and 60 days
overdue 143 (4) 139
Greater than 60 days overdue 741 (64) 677
Total 3,017 (74) 2,943
------------------------------- --------------- ----------- ----------------
The processes undertaken when considering whether a trade
receivable may be impaired are set out in notes 2 and 19.
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
19.
The concentration of counterparty risk within the GBP3,434k
(2021: GBP3,925k) 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.
2022 2021
GBP'000 GBP'000
------------------------- --------- ---------
Largest exposure 640 646
Second largest exposure 295 240
Third largest exposure 252 240
-------------------------- --------- ---------
The Group's principal banker is Coutts & Co, a member of
NatWest Group.
At 30 September 2022 the largest exposure to a single financial
institution of the Group's cash and cash equivalents held by
various Group entities was represented by a net overdrawn position
of GBP229k (GBP3k cash less GBP232k overdrafts) with Coutts &
Co. (2021: the largest exposure to a single financial institution
represented 54% held with Coutts & Co.).
Company
The Company only has GBP24k trade receivables (2021: GBP5k) and
no amounts due from customers for contract work.
The amounts owed by United Kingdom subsidiaries were secured in
January 2013 by debentures over all the assets of the relevant
subsidiaries. These debentures rank after the debentures securing
the bank loan and overdraft. Prior to this all amounts owed by
United Kingdom subsidiaries and by associate and joint ventures
were unsecured. The amounts owed by associate and joint ventures
remain unsecured.
All of the Company's cash and cash equivalents are held by
Coutts & Co.
The Company is exposed to counterparty risk though the
guarantees set out in note 33.
31 Interest rate risk
Group 2022 2021
GBP'000 GBP'000
Rent deposit 278 278
Secured bank loans (417) (500)
Secured bank overdrafts (232) -
---------------------------------------- --------- ---------
Interest bearing financial instruments (371) (222)
----------------------------------------- --------- ---------
Company 2022 2021
GBP'000 GBP'000
---------------------------------------- --------- ---------
Secured bank loans (417) (500)
----------------------------------------- --------- ---------
Interest bearing financial instruments (417) (500)
----------------------------------------- --------- ---------
The property rent deposit earns variable rates of interest based
on short-term interbank lending rates.
Cash and cash equivalents are generally held in instant access
current accounts and 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 4.05% (loan) and
3% (overdraft) above the Coutts Base rate for 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.
2022 2021
GBP'000 GBP'000
--------- --------- ---------
Group (4) (2)
Company (4) (5)
---------- --------- ---------
32 Liquidity risk
The Group's cash balances are held at call or in deposits with
very short maturity terms.
At 30 September 2022 the Group had GBP850,000 (2021: GBP850,000)
of gross borrowing facility and GBP250,000 net borrowing facility
(2021: GBP500,000) under its United Kingdom bank overdraft
facility. In November 2021 Coutts & Co renewed the overdraft
facility at GBP500,000. The Group then agreed with Coutts & Co
to reduce the net overdraft facility to GBP250,000 from February
2022 onwards. In November 2022 Coutts & Co renewed the
overdraft facility maintaining the net overdraft facility at
GBP250,000. It is now next due for review in November 2023.
The maturity analysis of financial liabilities, including
expected future charges through the Income Statement is as shown
below.
Group Borrowings Lease liabilities Other financial Total
liabilities
GBP'000 GBP'000
Timing of cashflows GBP'000 GBP'000
------------------------------- ----------- ------------------ ---------------- ---------
Within one year 90 547 3,179 3,816
Between one and two years 263 522 - 785
Between two and five years 169 1,394 - 1,563
Greater than five years - 697 - 697
----------- ------------------
522 3,160 3,179 6,861
Expected future charges
through the income statement (22) (271) - (293)
------------------------------- ----------- ------------------ ---------------- ---------
Financial liabilities
at 30 September 2021 500 2,889 3,179 6,568
------------------------------- ----------- ------------------ ---------------- ---------
Timing of cashflows
------------------------------- ----- ------ ------------- ------
Within one year 503 522 2,654 3,679
Between one and two years 171 465 44 680
Between two and five years - 1,393 - 1,393
Greater than five years - 232 - 232
674 2,612 2,698 5,984
Expected future charges
through the income statement (25) (193) - (218)
------------------------------- ----- ------ ------------- ------
Financial liabilities
at 30 September 2022 649 2,419 2,698 5,766
------------------------------- ----- ------ ------------- ------
Lease liabilities includes the finance lease on leasehold
improvements and the land and buildings office lease (see note
15).
Company Borrowings Other financial Total
liabilities
GBP'000
Timing of cashflows GBP'000 GBP'000
------------------------------- ----------- ---------------- ---------
Within one year 90 1,718 1,808
Between one and two years 263 - 263
Between two and five years 169 - 169
522 1,718 2,240
Expected future charges
through the income statement (22) - (22)
-------------------------------- ----------- ---------------- ---------
Financial liabilities
at 30 September 2021 500 1,718 2,218
-------------------------------- ----------- ---------------- ---------
Borrowings Other financial Total
liabilities
GBP'000
Timing of cashflows GBP'000 GBP'000
------------------------------- ----------- ---------------- ---------
Within one year 271 1,590 1,861
Between one and two years 171 44 215
Between two and five years - - -
----------- ---------------- ---------
442 1,634 2,076
Expected future charges
through the income statement (25) - (25)
-------------------------------- ----------- ---------------- ---------
Financial liabilities
at 30 September 2022 417 1,634 2,051
-------------------------------- ----------- ---------------- ---------
33 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 21. At 30 September 2022 the
overdrafts of its United Kingdom subsidiaries guaranteed by the
Company totalled GBP729,000 (2021: GBPnil).
The Company and certain of its United Kingdom subsidiaries are
members of a group for Value Added Tax (VAT) purposes. At 30
September 2022 the net VAT payable balance of those subsidiaries
was GBP285,000 (2021: GBP218,000).
At the year end, one of the Group's Middle East subsidiaries had
outstanding letters of guarantee totalling GBP74,000 (2021:
GBP105,000). 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 GBPnil (2021:
GBP900) 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 GBPnil (2021:
GBP900).
34 Related party transactions
Key management personnel compensation
The key management personnel of the Group comprises the
Directors of the Company together with the managing and financial
directors of the United Kingdom and international operations.
Group 2022 2021
GBP'000 GBP'000
------------------------------ --------- ---------
Short term employee benefits 1,235 1,301
Post employment benefits 110 106
Total 1,345 1,407
------------------------------- --------- ---------
The key management personnel of the Company comprises its
Directors.
Company 2022 2021
GBP'000 GBP'000
------------------------------ --------- ---------
Short term employee benefits 613 600
Post employment benefits 43 43
Total 656 643
------------------------------- --------- ---------
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 GBP46,000 (2021: GBP47,000). Dividends of
GBPnil (2021: GBP135,000) 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 GBPnil
(2021: GBPnil).
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 GBP85,000 (2021: GBP81,000). Dividends of
GBP126,000 (2021: GBP393,000) were received from Aukett + Heese
GmbH during the year. The Group received a loan from Aukett + Heese
GmbH amounting to GBP44,000 (2021: GBPnil). The amount owed by the
Group to Aukett + Heese GmbH at 30 September 2022 was GBP44,000
(2021: GBPnil).
As disclosed in note 16, the Group owns 50% of Aukett + Heese
Frankfurt GmbH and 25% of Aukett + Heese GmbH. The remaining 50% of
Aukett + Heese Frankfurt GmbH and 75% of Aukett + Heese GmbH are
owned by Lutz Heese, a former director of the Company.
The Group charged name licence fees and management fees to
Aukett sro, a joint venture in which the Group had a 50% interest
until the joint venture was liquidated in the year. During the
year, charges of GBPnil (2021: GBP3,000) were made to Aukett sro in
respect of these services. Separately, Aukett sro owed the Group
and the Company GBPnil as at 30 September 2022 (2021: GBP5,000)
relating to previously declared but not yet paid dividends,
management fees and name licence charges.
None of the balances with the associate or joint ventures are
secured.
Transactions and balances with subsidiaries
The names of the Company's subsidiaries are set out in note
16.
The Company made management charges to its subsidiaries for
management services of GBP660,000 (2021: GBP992,000) and paid
charges to its subsidiaries for office accommodation and other
related services of GBP84,000 (2021: GBP91,000).
At 30 September 2022 the Company was owed GBP163,000 (2021:
GBP381,000) by its subsidiaries and owed GBP1,212,000 (2021:
GBP1,551,000) 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.
35 Post balance sheet event
On the 20 March 2023 the Group acquired 100% of the voting
equity instruments in Torpedo Factory Group Limited, an audio
visual and stage technology provider to organisations in the UK and
Europe.
The principal reason for this acquisition, is to become a master
systems designer, integrator and operator in the provision of smart
buildings technology, in addition to developing the Group's core
architecture businesses. Extending the Group's offering to its
clients to include such smart solutions is expected to provide a
competitive advantage to the Group's core business and to add new
income streams.
The financial effects of this transaction have not been
recognised at 30 September 2022. The operating results and assets
and liabilities of the acquired company will be consolidated from
20 March 2023.
As the acquisition was completed a short time before the
authorisation date of these financial statements, it was not
practical to disclose the book value of the net assets acquired as
at 20 March 2023. The following figures presented represent Torpedo
Factory Group Limited unaudited management accounts for 31 December
2022:
Provisional
31 Dec-22
GBP'000
--------------------------------------- ------------
Goodwill 679
Property, plant and equipment 3,501
Other intangible assets 78
Loans and other financial assets 243
Inventories 285
Trade and other receivables 1,524
Net cash 1,138
------------
Assets 7,448
------------
Trade and other payables 1,824
Contract liabilities 79
Interest bearing loans and borrowings 2,718
Lease liabilities 300
Deferred tax liability 125
------------
Liabilities 5,046
------------
Total net assets 2,402
---------------------------------------- ------------
At the date of authorisation of these financial statements a
detailed assessment of the fair value of the identifiable net
assets has not been completed.
Fair value of consideration paid
Consideration for the acquisition comprises:
i) 110,142,286 Ordinary Shares in Aukett Swanke Group Plc at an
issue price of 2.55p based on the closing price of Aukett Swanke
Group Plc shares on 1 March 2023.
ii) Up to 3,631,124 additional consideration shares proposed to
be issued to participating TFG Option Holders, at an issue price of
2.55p.
iii) 8,400,000 share options in Aukett Swanke Group Plc
exercisable at 1p. Fair value calculated at 1.55p per share based
on the closing price of Aukett Swanke Group Plc shares on 1 March
2023.
GBP'000
-------------------------------------------- --------
Shares in Aukett Swanke Group Plc 2,809
Maximum number of additional consideration
shares to be issues to the participating
option holders 92
Share options in Aukett Swanke Group
Plc 130
--------------------------------------------- --------
Total acquisition cost 3,031
--------------------------------------------- --------
Whilst fair value adjustments will result in recognised goodwill
of less than GBP629k, it is expected that some goodwill will be
recognised. The goodwill represents items, such as the assembled
workforce, which do not qualify as assets.
36 Corporate information
General corporate information regarding the Company is shown on
page 2. The addresses of the Group's principal operations are shown
on page 111. A description of the Group's operations and principal
activities is given within the Strategic Report.
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