REG - Aukett Swanke Group - Final Results and Notice of AGM
28/03/2024 07:15
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RNS Number : 6085I Aukett Swanke Group PLC 28 March 2024
Aukett Swanke Group Plc
("Aukett Swanke", the "Company", or, together with its subsidiaries, the
"Group")
Final audited results for the year ended 30 September 2023
Notice of Annual General Meeting ("AGM")
Aukett Swanke (AIM: AUK), the group providing Smart Buildings, Architectural
and Design Services, announces its final audited results for the year ended 30
September 2023 and Notice of AGM.
Highlights
Period under review
· Revenue less sub consultant costs (from continuing operations) up
101% to £14.103m (2022: £7.127m) primarily due to the acquisition of Torpedo
Factory Group during the year
· Return to a trading profit before tax (from continuing
operations), of £28k (2022: loss £72k)
· Post tax profit £92k (2022: loss £2.282m)
· Earnings per share 0.04p (2022: loss per share 1.38p)
· Net assets up 741% to £3.373m (2022: £401k)
Strategic
· One year into the new twin architecture / smart buildings
strategy
· New board in place to take the Group forward
· Significant increase in employee shareholders
· Management and staff committed to greater share ownership through
new Share Schemes
Architecture
· Markets reflect the uncertainty in the UK economy
· However, both core UK architecture business performed better than
the previous year
· Architect capacity increased with targeted recruitment - now 102
UK architects
· International architect network restructured to focus on
profitable participants
· Successful German investments continue to be high yielding
Smart buildings
· 4 Smart Buildings acquisitions completed in the past 12 months
· Group now has extensive Smart Building Consultancy and Master
Systems Integration experience and expertise
· Developed software products acquired with small but established
client bases
· Software revenues expected to grow strongly
Current Year
· Current year expected to repeat last year's pattern of a first
half loss and second half profit
· Cash at close of business 26 March 2024 £659k plus available
overdraft of £250k
· Current cash balance includes £275,000 from share subscription
announced 21 March 2024, with a further £150,000 anticipated from directors
and management following announcement of these results
· Cash position continues to be carefully monitored
· Proposed sale of surplus freehold property is slower than hoped
but expected to eliminate net debt
Clive Carver, Chairman, said:
"The management team have made a strong start in implementing our twin
strategy approach of developing both the core architecture businesses and in
building a presence in the Smart Buildings space."
Nick Clark, Chief Executive, said:
"The board has recognised the need for a new approach. We plan to build on
the four completed Smart Buildings acquisitions to take advantage of what we
believe is a growing need to automate and integrate the systems of new and
existing buildings. This area is not well served presently and we see a
sizable market opportunity. Our recent acquisitions give us the expertise to
capitalise on that opportunity. Success in this area will significantly extend
the period of a building's lifetime during which the Group earns revenues,
without the need to continually increase costs as a growing component of the
Group's revenue is earned from software licences and associated smart building
services."
Copies of the 2023 audited accounts and Notice of AGM will be available today
on the investor section of the Company's website (www.aukettswankeplc.com) and
are being posted to shareholders who have elected to receive a printed version
imminently. The AGM will be held at the Company's registered office, 10
Bonhill Street, London EC2A 4PE, on Friday 26 April 2024 at 10:00am.
Contacts
Aukett Swanke Group
Plc
+44 (0) 20 7843 3000
Clive Carver,
Chairman
Nick Clark, Chief
Executive
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
About Aukett Swanke Group plc
Aukett Swanke Group has a strong foundation in architectural services and is
on a transformative journey to become a London-listed provider of Smart
Buildings and related services. ASG are uniquely positioned to ensure the
technical systems that run modern premises are designed as an integral part of
the structure, from the outset.
For more information go to https://www.aukettswankeplc.com
(https://www.aukettswankeplc.com)
Chairman's statement
Introduction
It is now 12 months since we embarked on our strategy to expand both our
traditional core architecture businesses and also to become a significant
force in the provision of smart building services.
In these financial statements we are pleased to set out our progress.
Strategy
Architecture
Aukett Swanke and Veretec are well respected names in their respective
architectural design and executive architecture markets. We are looking to
grow each of these businesses both organically through the recruitment of
additional architects and by the acquisition of existing architecture
practices.
In particular we are looking to use our status as the UK's only listed
architecture group to provide owners of suitable architecture practices with
the opportunity to exit.
Smart buildings
We are also looking to become a leading provider of smart buildings services.
Success here would significantly extend the period during which the Group
generates income over the life of a building without the upfront investment
required in staff and support services that are required in our traditional
architecture businesses.
In particular we are looking to introduce SaaS revenues from the provision of
services delivered by smart systems rather than just billing for staff on an
hourly or project rate.
In the past 12 months as set out in greater detail in the Chief Executive's
report we have completed four smart buildings related acquisitions, the most
recent of which, completed in March 2024, adds 13 staff and developed software
providing SaaS revenues.
We have also joined a consortium led by a university spin-out company
alongside industrial partners and a number of UK university research teams, to
work on an Innovate UK funded project developing the use of Responsible
Artificial Intelligence (AI) in building energy management.
One year in and it is clear to us from the reaction from our market that we
are on the right track in seeking to expand the use of technology to the
delivery of building related services.
Corporate actions
Over the past two years we have also taken steps to increase the Group's
profitability. Long standing investments in overseas offices in the Middle
East, Turkey and Prague where we did not have the critical mass to make a
difference, have been sold or closed. We have also been able to cease all
links with our former Russian activities, which were sold in 2019.
Our international investments are now limited to the Berlin and Frankfurt
offices which continue to thrive.
Board appointments
Over the past 12 months we have put in place a board to take the Group forward
to its next stage.
Management team.
Nick Clark, who founded Torpedo Factory Group Limited ("TFG") acquired in
March 2023, was appointed Chief Executive in April 2023. Freddie Jenner, who
was the Finance Director at TFG, was appointed Group Chief Operating Officer
in June 2023. Jason Brameld, Technical Director at TFG, serves as the
Group's Chief Technical Officer in a non-board role. Nick, Freddie and Jason
join Antony Barkwith, the Group's long standing Group Finance Director, to
form the core senior executive team.
Non-executive directors
In April 2023 Tandeep Minhas was appointed to the board. She is a vastly
experienced corporate lawyer, being head of corporate finance at Taylor
Wessing.
I am also pleased to report that Robert Fry, a noted architect and a long
standing executive director who served as Interim CEO until Nick Clark's
appointment when he became Deputy Chairman has agreed to become a
non-executive director following the completion of the 2024 AGM.
Trading
As set out more fully in the Chief Executive's report and the Financial
Review, the Group, for the year ended 30 September 2023, before exceptional
items returned to an overall profit with each of the continuing business units
making a contribution to central costs.
Stock Market conditions
As shareholders will be well aware, for some time now the market in smaller
and growth companies has failed to operate at anywhere near the levels seen in
previous periods with reduced liquidity generally, evidenced by low company
valuations and an absence of new IPOs.
While we cannot choose the market conditions in which we seek to grow the
Group's value we do recognise that at the current share price meaningful
dilution to finance acquisitions would only be justifiable for exceptional
opportunities such as the Vanti acquisition completed in March 2024.
Groupwide share schemes
Shortly after the year end, the Group introduced a number of innovative
employee share and option schemes designed to encourage all staff to become
shareholders. Interest from staff has been encouraging with approximately 40%
now signed up to make regular share purchases.
Outlook
The accompanying Chief Executive's report and financial review provide details
on trading in the period under review and subsequently.
While the market for our traditional architecture businesses inevitably
mirrors the uncertain UK economy with potential financially related pauses on
new developments, our leading brands and the quality of our architecture
stands us in good stead for these businesses continuing to make a positive
financial contribution to the Group as a whole.
The market however for smart buildings services looks more promising as
competition is less developed and once a building is up it needs to be
managed.
We look forward to updating shareholders with our progress in the coming
months.
Clive Carver
Chairman
27 March 2024
Chief Executive's Report
Introduction
I became Chief Executive in April 2023 and am pleased to present my first
annual report, which comes after twelve months of significant change in the
scale and nature of the Group's activities, encompassing four acquisitions and
two disposals.
In the first six months of the period under review the Group's focus was on
its core architecture businesses and completing the acquisition of Torpedo
Factory Group. In the second six months and subsequently, we have been
implementing our new strategy.
With the new management team now firmly bedded in and four completed
acquisitions we have made an encouraging start.
Our plan
Architecture
In the UK we have two established architecture businesses, Aukett Swanke, a
traditional full design business with roots going back to 1906, and Veretec,
an executive architecture business working with designers from other firms.
These businesses are well established in their chosen markets and our plan is
to grow them organically by the recruitment of additional architects, and by
acquisition.
As the UK's only listed architecture group we have a unique advantage in being
able to use our shares to fund the acquisition of successful architecture
practices where the traditional exit for owners of selling out to the next
generation typically no longer exists.
Smart buildings
By contrast we are a new entrant in the provision of smart building services,
but acquisitions allow us to bring in new technology, proprietary software,
relevant case studies and the staff whose expertise delivered those case
studies. In this manner we are able to demonstrate our credentials in this new
area, using the existing contacts of the architecture businesses to accelerate
our progress.
Our plan here is to become a leading provider of Smart Building services.
Breaking this down we plan to become:
· Smart Building Systems Designers
· Smart Building Systems Integrators
· Smart Building Systems Operators
We will do this via a buy and build strategy - but having completed four
acquisitions our short term focus will be getting our businesses sharing
skills, resources, and technologies. We hope the stock market will reward us
for progress in this area, allowing us to consider further acquisitions on
better terms for our investors.
Commercial rationale for Smart Buildings
In contrast to a traditional architecture business, which has high fixed costs
and where once the project is completed there is no further income, under a
Smart Buildings business model, there is more scope for revenues that
contractually recur over the lifetime of a building. Technology is used to its
utmost; rapid growth is achievable without the often time consuming and
expensive recruitment of additional staff; and short term fluctuations in
economic activity do not dictate customer buying decisions.
Smart buildings integrate advanced technologies, data analytics, and
automation to create vibrant ecosystems. They optimise energy consumption,
streamline operations, and personalise experiences for occupants. By
leveraging the Internet of Things (IoT) and artificial intelligence (AI),
smart buildings offer real-time monitoring, energy savings, improved comfort,
proactive maintenance, and cost reduction.
The challenge of both the architecture and system integration business models
is that revenue is project based. We need to continually sell new products
just to stand still and typically need to add more people and more working
capital in order to grow. By contrast under a SaaS business model customers
sign up for long-term contracts, and typically renew when those contracts
expire.
Such revenues do however take time to build - because today's order is only
recognised as revenue over many years. When a SaaS business makes a new sale,
however, the run rate of revenues increases. They have as a result become
highly prized and valued by investors.
We believe our strong architecture market presence will be a great help in
building meaningful SaaS revenues from smart building software.
Acquisitions
Torpedo Factory Group Limited
In March 2023 we acquired Torpedo Factory Group Limited ("TFG") an audio,
visual and stage technology systems integrator to organisations in the UK and
Europe by way of a share for share exchange, under which the shareholders of
TFG were issued 110,142,286 shares then representing 40% of the enlarged
Group. The enlarged Group has also issued 8,400,000 options to two TFG staff
exercisable at a price of 1p per share to replace TFG options that were
cancelled as part of the transaction. I know the TFG business well, having
founded it in 1997, and I joined your Group's board on completion of the
acquisition.
TFG is a technology systems integrator and services business operating in the
UK and continental Europe in two principal areas:
· Intelligent Environments, which designs, installs and maintains
integrated audio-visual systems for corporate and public sector clients,
primarily working directly with commercial property occupiers but also with
main contractors on construction fit-out projects;
· Stage Technology, which creates and maintains technologically
powerful systems for a wide range of performance spaces - typically theatres,
and drama spaces in education settings.
It also included a Live Events business, which was sold to its management, as
it was not core to the new strategy.
Anders + Kern U.K. Limited
In July 2023 we acquired Anders + Kern U.K. Limited ("A+K"), a business that
we have known for some time, from SmartSpace Software PLC for a cash
consideration of approximately £515,000.
A+K distributes smart workplace systems. Its revenues are principally derived
from the provision of hardware, software, and installation services for room
and desk booking systems, and the provision of Internet of Things ("IoT")
sensors to monitor environmental and occupancy data. The data created can be
analysed using Artificial Intelligence (AI) to get meaningful actionable
insights to improve occupier experience within the built environment.
A+K retains its status as a distributor of SpaceConnect, SmartSpace Software's
workspace optimisation SaaS product.
For the year ended 31 January 2023 SmartSpace reported A+K revenues of £2.09
million and a trading loss before tax of £169,000. During that period it
employed an average of 11 people, though by the time of acquisition this had
been reduced to 7.
ecoDriver Ltd
In October 2023 we acquired TR Control Solutions Limited (TRCS), a developer
of energy management software and provider of energy efficiency services. On
acquisition TRCS changed its name to ecoDriver Ltd ("ecoDriver").
ecoDriver's revenues are derived from the provision of its proprietary energy
monitoring software, energy efficiency consultancy services, and the provision
of IoT sensors, meters and other hardware to monitor environmental and energy
usage data.
ecoDriver operates in a high growth business segment, which we believe should
grow rapidly as part of the Group, by accessing the Group's wide customer base
and contacts, and utilising the Group's operational delivery capabilities.
The acquisition gives us scope to develop the use of Artificial Intelligence
(AI) in building management by using AI to deliver scalable decision-making
around energy usage in the built environment.
The consideration was £360,450, comprising the issue to the vendors of
17,800,000 shares at 1.525p per share and £89,000 in cash, half of which was
paid on completion with the remaining half due 12 months later. The
consideration shares are subject to a 12-month lock-in, followed by an orderly
market arrangement for a further 12 months.
In the few months since its acquisition ecoDriver has secured in excess of
£300,000 of new orders. This is equivalent to approximately 60% of its prior
year revenue and confirms our belief in its prospects as part of the wider
Group.
Vanti
On 20 March 2024 we acquired the assets of Vanti, a widely respected smart
building consultancy, master systems integrator, and smart building software
developer. 13 previous Vanti staff have joined us and their client base has
been hugely supportive. Vanti was previously an audio visual systems
integrator and their visionary approach saw them make an early transition to
the role of Master Systems Integrator ("MSI"). Their experience and their
expertise will help accelerate TFG's journey, making the same transition but
on a larger scale. The profits from their MSI activities were used to develop
two software products. One, Kahu, is a workplace technology platform of the
kind A+K distribute.
The second, Smart Core, is potentially transformational for our Group. Smart
Core is a Building Operating System. This controls a building's systems, and
provides for the appropriate sharing of data between landlord, tenants, and
users through APIs. Smart Core is in the early stages of development, but has
been deployed across several buildings in a number of different countries. It
is primarily used as an open source Community Edition, but an Enterprise
Edition has been developed and is ready to be marketed.
Smart Core can be sold either as a SaaS model, where the customer pays monthly
or annually over the long term, or a Capex licence model, where a one-off
licence sale is made, with a lower annual maintenance fee to cover support and
upgrades. We see attractions in both areas - Capex sales lend themselves well
to the existing model of procuring and delivering a new building, where a main
contractor manages a sizeable capital outlay, and the building owner wants to
keep a competitively low service charge. The SaaS model works well for the
retrofit market (where ecoDriver specialises), and where a Building Operating
System can more than pay for itself through savings from running the building
better, and from improved reporting across an entire portfolio of properties,
which may be running a wide variety of Building Management Systems from a
number of different legacy providers.
Synergies
The ecoDriver software provides our architects with a solution to their
client's needs. Also of note is that much of TFG Stage Technology's
installed client base is in the education sector, a key target for ecoDriver's
products.
The Vanti acquisition multiplies the number of synergies. ecoDriver can
potentially be used to share information with Kahu to provide a richer tenant
experience, and Kahu could provide information to ecoDriver to offer insight
into required energy usage. Our AI efforts can help Smart Core with its
building management. The smart building consultants employed alongside the
Vanti acquisition broaden the range of services our architects can provide,
while our architects ensure that smart building considerations are higher
priority than has been the case hitherto.
The trading year in review
Basis of inclusion
The year to 30 September 2023 includes a full year of trading from our
architecture businesses, but only six months from the Torpedo Factory Group
businesses, and less than three months from Anders+Kern.
In July 2023 we were pleased to note that The Architects' Journal recognised
our UK Architecture activities at 48(th) place in their AJ100 list of UK
architects by practice size, up from 70(th) place in 2022.
Aukett Swanke Limited - traditional full service architecture
Aukett Swanke worked on a number of notable projects during the year:
· Orchard Wharf is a River Thames fed 80,000 square feet logistics
building with additional residential and public realm targeting planning
submission in April 2024.
· SafeStore is an agile new generation 15,000 square feet warehouse
just south of London Bridge targeting planning submission in May 2024.
· We have created a 18.2 hectare multi-level and multi-use
intensification masterplan for Network Rail in South London.
· As part of the Kings Cross Knowledge Quarter, we have designed a
mixed use 230,000 square feet hybrid scheme of life sciences, light
industrial, public realm and with the potential for residential due for
planning in 2024.
· We are further developing our highly sustainable 100 year chassis
design approach for a 1m square feet riverside scheme that can accommodate a
vast array of uses with multi century potential.
Veretec Limited - executive architecture
Veretec, our executive architecture business completed the 15,000 square meter
n2 Nova building in Victoria in June 2023 for Landsec, working with Mace and
Lynch Architects.
Projects in progress include:
· Holloway Park, the site of the former women's prison, a
residential development for Peabody / London Square with AHMM; and
· London Dock for St George / The Berkeley Group with Patel Taylor.
Heritage projects under way include:
· Grade II listed 84 Moorgate for City of London with Osborne and
Ben Adams;
· 41 Lothbury for Pembroke RE with Stiff +Trevillion, also Grade II
listed;
· Greycoat Place in Westminster for Victoria Spaces with SPPAR; and
· West King Street Renewal Project (Hammersmith Town Hall) with
Ardmore and RSHP Architects.
84 Moorgate, 41 Lothbury and Greycoat Place are all due for completion in H1
2024.
German investments
Our German investments continued to perform strongly.
We own a 25% interest in Aukett + Heese GmbH, a Berlin architecture practice,
and have a joint venture in Aukett + Heese Frankfurt GmbH, in which we own
50%. Collectively these assets are valued in our accounts at £1,071,000 at 30
September 2023, reflecting our share of the underlying balance sheets. We
received management fees and dividends during the year of £382,000 more than
justifying the current accounting carrying value.
Torpedo Factory Group - Systems Integration
TFG's results are only consolidated from the date of acquisition in March
2023.
The Intelligent Environments business, which during the period developed a
particular niche in London offices for international law firms, performed
strongly from the date of acquisition.
The Stage Technology business also performed well from its acquisition, in
part as it has a seasonal bias with its best months over the summer when
schools and colleges are closed and in part as the result of a £2 million
project to deliver the technical infrastructure of a new entertainment venue
in Manchester.
The TFG businesses also bedded in the new ERP system implemented in the
previous year, which is designed to make the business more scalable.
Anders + Kern
We acquired Anders+Kern two and a half months before the year end, and include
its results from that date.
The operational highlights included the migration of the A+K business to the
Group's ERP systems and reshaping the sales team and product line-up, with the
benefits expected to accrue in future periods.
Employee Share Schemes
Before the TFG acquisition, a majority of the company's shares were held by
around two dozen former directors of the Group and its architecture
businesses, with almost no ownership by the existing management and staff.
Ownership is normal in professional services firms, and while there was an
eagerness from management to participate, there was no clear structure for it
to happen.
Following the year end, we have therefore implemented three routes to increase
employee ownership across the Group, as follows:
First, in November 2023, we implemented AESOP, a Share Incentive Plan. This is
a tax efficient method for all employees to build a base level of ownership
from their monthly salary. I am delighted to report that around 40% of the
Group's employees have chosen to become shareholders. We now have around 70
current director/employee shareholders, up from 10 a few months ago.
Second, we are implementing MSOP, our Management Share Ownership Plan. Under
this, the directors of the Group's businesses have been asked to commit to
invest sums equivalent to at least 5% of their gross salary in purchasing the
Group's shares on the open market. Purchases are expected to be made
approximately quarterly. The executive directors on the plc board will invest
8% of their gross salary, and a small number of senior management just below
subsidiary director level have been asked to invest 2.5% of their gross
salary. The commitment becomes optional once the director in question owns at
least 0.5% of the Group's share capital (0.25% for non directors).
Participation has been strong, with 32 members of the management team making
commitments, out of 34 members who were invited.
Third, a Company Share Option Plan allows for the grant of share options in a
tax efficient manner. Our intention is that option grants will be made
annually, but only to those employees who make the commitment under the MSOP
to invest in the business. This will build into a portfolio of options, acting
as an employee retention tool, as at any point those granted within the past
three years cannot ordinarily be exercised.
Collectively I expect these employee share schemes will provide a natural and
persistent demand for our shares to the benefit of the staff concerned
aligning their interests with those of shareholders. More importantly they are
already changing the culture of the Group, as staff become owners. It enables
so many people who are key to our future start to build meaningful ownership
stakes. I believe they also give us the best employee ownership package in the
market, and I am confident we can use this to attract and retain the best
talent available.
Current Trading & Outlook
It is difficult to predict with confidence how the current year will unfold.
We have a strong pipeline of projects but more so than in previous years the
starting point for these projects, and the dates from which we can charge, are
at risk of delay.
As was the case in the year under review there is likely to be a loss in the
first half of the year with the position improving in the second half.
The combination of pressure on cashflow from continuing to pay down the
Coronavirus Business Interruption Loan Scheme loans, project delays, and the
freehold property mortgage expiring in February 2025 leads the Board to give
careful consideration in the assessment of going concern. The material
uncertainty, the measures taken by the Board, and other mitigating options
which could be taken are discussed at length in the Financial Review, the
Directors' Report and note 1. This only serves to underline the need to
balance the nature of the Group's revenue streams.
Aukett Swanke Ltd designed the world's first Smartscore accredited smart
building in 2021, and the recent acquisition of Vanti allows the Group to
expand its smart building consultancy work.
It is too early in the Group's Smart Buildings operations to speak of the
likely outcome for the current year with confidence. However, TFG was already
starting to deliver Master Systems Integration activities and the recent Vanti
acquisition will accelerate this.
Smart buildings will clearly require artificial intelligence to take decisions
on how sites should best be run. We announced on 19 February 2024 that we are
participating in a consortium between 6 industrial and 3 research university
partners to develop AI for energy saving. This project is backed by an
Innovate UK grant. Our staff have completed AI courses at Oxford University
and we are exploring opportunities to further develop our AI capabilities.
While our smart building activities are at an early stage we seem to be on the
right track with growth expected across all our smart buildings offerings.
Our team
December 2023 saw the retirement of Keith Morgan, Veretec chairman, after 39
years with the Group. We are grateful for all he did to help Veretec become
one of the best respected and successful firms in its specialist field. In
connection with its acquisition by ASG, TFG also lost two longstanding
directors - Keith McCullagh, who retired as its non-executive chairman at
acquisition, and John-David Papworth, who departed with the disposal of the
Live Events business. I have worked with both of them since the 1990s and wish
them well.
There are however many new faces to welcome as we begin what I hope will be a
phase of rapid growth, to create a larger UK architecture business that
operates as part of a successful smart buildings group.
Rapid growth means rapid change, and change is often unsettling. I am
delighted at how well our people have responded to the changes so far, and
would like to thank all of them for their support. They make our business what
it is, and more importantly, they shape what it will become.
We have an exciting year ahead and I look forward to reporting on our
progress.
Nicholas Clark
Chief Executive
27 March 2024
Financial review
The headline financial results of the Group were:
2023 2022
£'000 £'000
Total revenues under management(1) 32,460 24,033
Continuing operations
Revenue 14,335 8,645
Revenue less sub consultant costs(1) 14,103 7,127
Cost of sales (2,627) -
Net operating expenses (11,869) (7,757)
Other operating income 326 326
Net finance costs (246) (95)
Share of results of associate and joint ventures 341 327
Trading profit/(loss) from continuing operations 28 (72)
Acquisition costs (379) -
Goodwill impairment - (1,752)
Loss before tax from continuing operations (351) (1,824)
Tax credit 433 45
Profit/(loss) from continuing operations 82 (1,779)
Profit/(loss) from discontinued operations 10 (503)
Profit/(loss) for the year 92 (2,282)
(1)Alternative performance measures, refer to pages 19-20 for definition
The result for the year is split between continuing operations and the
discontinued Middle East operations.
The Group reported a small trading profit of £28k (2022: loss £72k) with a
significant contribution from TFG and A+K post-acquisition, and an improvement
in the result of the United Kingdom architecture operation, partially offset
by higher central Group costs.
The result of the discontinued Middle East operations was a nominal profit
before tax of £10k (2022: loss £0.50m) with nominal activity.
Revenues for the year from continuing operations were £14.34m, an increase of
65.8% on the previous year (2022: 8.65m). Revenues less sub consultants
increased by 97.9% to £14.10m (2022: £7.13m), with subconsultant costs
falling by 84.7% to £0.23m (2022: £1.52m), due to growth in the UK hub
combined with revenue from the Torpedo Factory Group and Anders + Kern
acquisitions.
UK architectural hub, revenue less sub consultant costs increased 24.6% to
£8.69m (2022: £6.98m), their highest level in over 6 years, as the UK
operations further recovered following the lows experienced during the
COVID-19 pandemic.
In Continental Europe, another strong performance from the Berlin associate
and Frankfurt joint venture producing a combined share of profits of £0.34m
(2022: £0.33m), however performance in Turkey was below expectations as the
operation struggled with ongoing high inflation and stop start workloads. The
Turkey operation was sold to one of the local directors post year end.
Operating expenses in the year increased by £4.11m due to the operating costs
of TFG and A+K post-acquisition, combined with higher personnel related costs
in UK architecture as the group recruited to meet staffing needs for new
projects won.
Other operating income was unchanged from the prior year at £326k, due to
post acquisition sub-let rental income from TFG's London office, being offset
by lower property rental income from the London Bonhill Street office as the
subtenant occupied less space with the growth in UK architectural technical
staff headcount taking up the available space.
The Group increased technical staff numbers (UK net revenue per FTE technical
staff was down marginally at £102k, whilst the UK average FTE technical staff
increased by 18 to 85).
The Group incurred significant one-off acquisition costs totalling £379k
relating to the TFG and A+K acquisitions turning the small trading profit into
a loss before tax. Tax Credits then bring the post tax position back into
profit.
The profit after tax at £92k gives an EPS of 0.04 pence per share (2022: loss
1.38 pence per share),
United Kingdom
2023 2022
£'000 £'000
Revenue 8.858 8.465
Revenue less sub consultant costs(1) 8,692 6,975
FTE technical staff(1) 85 67
Net revenue per FTE technical staff(1) 102 104
Profit/(loss) before tax (excluding Group management charges)(1) 201 211
Loss before tax (including Group management charges) (93) (329)
(1)Alternative performance measures, refer to pages 19-20 for definition
( )
The UK's revenue increased 4.6%, however stripping on pass through
subconsultant costs revenue increased 24.6% year on year to its highest level
in over 6 years. The prior year revenue included projects that Veretec
executive architecture acted on as the lead consultant, as these progressed
into later stages sub consultant expertise reduced to nominal levels.
The first half of the year saw 11.4% growth in the UK business compared to the
prior year second half, with revenue less subconsultant costs of £4.09m
(2022: H2: £3.67m) as the business continued to win new work and rebound post
the lows of the COVID affected years.
Veretec was awarded and commenced £5.85m of new orders being a mixture of
residential and commercial projects, providing significant revenue growth
through H2 and a stronger order book leading into the year commencing 1
October 2023.
With the higher workload, recruitment enabled staff numbers (FTE technical
staff) being 77 in October 2022 to grow month on month through the year to 94
FTE's by 30 September 2023.
Net revenue per FTE was £102k for the full year a touch down on the £104k in
the prior year primarily due to the timing of project pauses.
The improvement in revenue particularly in H2, was partially offset by
inflationary pressures on staffing, utility and IT costs and the one off costs
of recruitment fees, whilst our net revenue per FTE was marginally lower. This
translated into the year on year segmental result being static compared to the
prior year, with the hub to recording a profit before tax (excluding Group
management charges) of £0.20m. This represented a year of transition with the
hub positioned with a larger order book and stronger staff offering to be able
to improve margins in the coming year.
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.
2023 2022
£'000 £'000
Revenue 194 180
Revenue less sub consultant costs(1) 128 152
FTE technical staff(1) 6 7
Net revenue per FTE technical staff(1) 21 22
Profit before tax (excluding Group management charges)(1) 423 422
Profit before tax (including Group management charges) 277 275
Including 100% of associate & joint ventures
Total revenues under management(1) 18,317 14,025
Revenue less sub consultant costs(1) 12,491 10,594
FTE technical staff(1) 121 108
Net revenue per FTE technical staff(1) 103 98
(1)Alternative performance measures, refer to pages 19-20 for definition
The hub result before tax (including Group management charges), including the
joint venture and associate in Germany, was a profit of £277k (2022: £275k).
Continental Europe's result is materially dominated by the associate Berlin
and joint venture in Frankfurt. The year to September 2023 represented another
profitable year. They together contributed £341k (2022: £328k) profit
(including Group management charges) to the Continental Europe result.
Reported revenues, comprise the Turkish subsidiary. Turkey reported revenues
for the year of £194k (2022: £180k), with revenue less subconsultant costs
decreasing to £128k (2022: £152k). The reduction in earnings was due to a
further devaluation of the Turkish Lira across the period, with the average
TRY to GBP rate in the year at 26.29 (2022: 18.44). However, whilst the year
on year revenue increased modestly in local currency, clients pausing projects
led to sub optimal efficiency of staff time with large gaps in workloads, and
the very high levels of inflation in Turkey increased operating costs of the
company whilst the rates on existing projects were not able to fully absorb
the increased costs that followed. As a result, Turkey recorded another year
of local losses (including Group management charges) of £64k (2022: £52k)
and loss (excluding Group management charges) of £53k (2022: £36k).
With ongoing high inflation and uncertainty in the Turkish economy and no
clear path to turn the losses around, management commenced a process to sell
the operation to the local directors which was completed after the year end
(note 28).
Total revenues under management increased 30.6%, whilst revenue less sub
consultant costs increased 17.9%. Staff numbers increased to 121 FTE's (2022:
108), due to growth in the Berlin office. The growth in Germany also led to an
increase in net revenue per FTE technical staff to £103k (2022: £98k) and
with it slightly improved profitability.
Middle East - discontinued operation
2023 2022
£'000 £'000
Revenue 2 1,543
Revenue less sub consultant costs(1) - 1,256
FTE technical staff(1) - 18
Net revenue per FTE technical staff(1) N/A 68
Profit/(loss) before tax (excluding Group management charges)(1) 10 (399)
Profit/(loss) before tax (including Group management charges) 10 (503)
(1)Alternative performance measures, refer to pages 19-20 for definition
Following the disposal of JRHP in April 2022, and management's decision to
take on no new projects and transition to cease activities in the region,
revenue and costs were nominal in the year. Minor gains on costs settled below
the levels of prior year accruals and a small gain on the movement of IFRS 9
loss allowance provisions enabled the hub to record a profit before tax of
£10k.
The Middle East hub continues to be treated as a discontinued operation.
Torpedo Factory Group
2023 2022
£'000 £'000
Revenue 4,816 -
Gross Profit 2,503 -
FTE technical staff(1) 14 -
Net revenue per FTE technical staff(1) 344 -
Profit before tax (excluding Group management charges)(1) 467 -
Profit before tax (including Group management charges) 401 -
(1)Alternative performance measures, refer to pages 19-20 for definition
The results shown above relate only to the performance from the date of
acquisition on 20 March 2023, when its results were consolidated into the
Group, to the new year end on 30 September 2023. TFG performed strongly
delivering revenues and profit in excess of its own internal budgets. The
profits are delivered by its two trading subsidiaries - at an entity level
Torpedo Factory Group Ltd continued to make losses while it holds on to its
freehold property and associated mortgage. The footprint of the building means
it is no longer a strategic fit for the underlying business after the disposal
of Torpedo Factory Ltd.'s Live Events business announced in April 2023, and
the property is being marketed for sale.
The subsidiary TFG Stage Technology Ltd contributed the majority of the TFG
profit with an excellent performance in its projects department, internal
teams utilised the relatively new ERP system to help deliver its largest ever
project which contributed revenues in excess of £2m.
While Torpedo Factory Ltd did not perform as strongly as the Stage Technology
business it still delivered small profits after internal management charges.
Recurring revenue within the service department has continued to increase
making the company less reliant on projects wins although this is still the
majority of the revenue within the entity.
Anders + Kern
2023 2022
£'000 £'000
Revenue 467 -
Gross Profit 153 -
FTE technical staff(1) 1 -
Net revenue per FTE technical staff(1) 467 -
Profit before tax (excluding Group management charges)(1) 62 -
Profit before tax (including Group management charges) 62 -
(1)Alternative performance measures, refer to pages 19-20 for definition
Anders + Kern U.K. Ltd performed marginally ahead of internal budgets for the
period from acquisition on 17 July 2023 to the year end, and results for that
brief period are shown above. The company transitioned well to new premises
with a more streamlined team to deliver its revenues and planned the changes
that have been implemented following the year end.
Financing
The net deficit (see note 25) at the year end was significantly higher than
the prior year as a result of the mortgage and secure bank Coronavirus
Business Interruption Loan Scheme ("CBILS") loans consolidated into the
Group on acquisition of TFG in the year. This gave a deficit of £2,140k
(2022: £621k), comprising cash of £522k (2022: £28k), cash included in
assets held for sale (see note 28) of £30k (2022: £nil), a net overdraft of
£122k (2022: £232k), the Coutts CBILS loan which reduced to £167k (2022:
£417k), a NatWest CBILS loan of £992k, and a mortgage of £1,411k both
consolidated into the Group from the acquisition with TFG.
The Group's £250k overdraft facility from its bankers Coutts & Co and was
renewed in December 2022.
In December 2023, Coutts & Co confirmed the renewal of the £250k
overdraft facility for an initial period to 31 March 2024, and subsequently
has agreed to extend this renewal to 30 September 2024, continuing to provide
working capital flexibility and to support the UK business. This is discussed
further in note 1.
The Coutts CBILS loan set out in note 24 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 2023, the first 16 instalments had been made on time as
planned, as have all subsequent scheduled payments.
The mortgage and the NatWest CBILS bank loan set out in note 24 were arranged
by National Westminster Bank plc (NatWest) and are secured by way of a first
legal charge over The Old Torpedo Factory freehold property, a debenture and
cross guarantee from Torpedo Factory Group Limited, Torpedo Factory Limited
and TFG Stage Technology Limited. The bank loan initially drawn at £1.75m is
being repaid at £29k per month. The loan is at a fixed rate of interest of
3.66%pa.
The mortgage that subsisted during the year was initially drawn in 2018 at
£1.73m with a duration of 5 years and was extended for a year during the
pandemic, so was due to expire in February 2024, and is therefore wholly shown
due for settlement within 12 months. The mortgage carried interest at base
rate + 1.93%. The mortgage has recently been renewed for a further 12 month
period to February 2025 carrying a higher interest rate of base rate + 5.00%pa
pending a disposal of the associated freehold property.
The Group had four leases taken out by Aukett Swanke Limited ("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 16) as at 30 September 2023 was
down to £1k (2022: £55k), and has been fully paid off post year end.
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 2023 was £1,961k (2022: £2,364k).
With the acquisition of TFG, the Group now recognises right of use assets and
lease liabilities on two further buildings and a number of motor vehicles. The
aggregate lease liability of these assets as at 30 September 2023 was £275k.
There are no office leases remaining in the UAE. The office lease in Turkey is
short term and responsibility for it left us as part of the disposal.
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 prior 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. The acquisition of TFG on 20
March 2023 improved short term available cash, which was partly (£515k)
utilised in the consideration for the acquisition of A+K in July 2023.
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
Excluding the freehold property held for sale, net current liabilities as at
30 September 2023 were approximately £3.0 million, and in the period
following the year end so far, project billing and cash collection has been
lower than we originally budgeted resulting in an overdue quarterly VAT
balance due in February 2024 and an overdue balance of PAYE due to HMRC. As
such the assessment of going concern needs careful consideration. The Board
has therefore produced cash flow forecasts for a period of at least 12 months
from the approval of the financial statements, which comprise detailed income
statements, statements of the financial position and cash flow statements for
each of the Group's operations. The Board has also considered the risks and
uncertainties associated with the principal operations and the funding
position in general, including the consideration of a number of differing
scenarios based on varying trading performance across the Group.
The Group's forecasts are prepared using information on secure contracted work
and potential work which is deemed to have a greater than 50% chance of being
undertaken, with the income figures suitably discounted, and on new work based
on historical experience.
As part of this review the Directors note that for the year ended 30 September
2023 both the core UK architecture businesses reported stronger performance
than in the previous financial year with each making an improved contribution
to central costs. The Directors also note the continued strong performance and
cash contribution from the Group's German investments but more importantly
that the Group has now successfully exited from all its unprofitable and cash
consuming overseas investments.
In the financial year ended 30 September 2023, the net cash position of the
Group, largely as the result of the TFG acquisition, improved by more than
£500,000. The Group has continued to invest in growth, most notably with
the acquisition of Anders+Kern in July 2023 which had a cash cost before
expenses of £515,057. Since the end of the financial year the Group acquired
TR Control Solutions Limited (later renamed ecoDriver Limited) with an initial
cash cost of £44,500 (with a further £44,500 deferred for a year) and some
working capital support paid into the company.
With the ever increasing costs associated with being a quoted company, which
the Board estimates to be currently in excess of £1 million annually, there
is no point in staying as we are. The Board's stated intention is to achieve a
leading presence in the provision of smart buildings services through a
combination of organic growth and targeted acquisitions. Inevitably this
requires an element of cash, as part of the purchase consideration and for the
associated professional fees.
To date, including the acquisition of TFG, the Group has made four Smart
Building related acquisitions and plans to make others in the coming months
and years. In connection with this assessment of going concern the Directors
note that each such acquisition is a discretionary event as is the proportion
of the consideration paid in cash. The Board's plan is to avoid placing undue
stress on the Group's cashflows from expanding at a pace faster than can be
sensibly funded.
Whilst we continue to pay down the mortgage and CBILS loans, lower than
originally budgeted project billings and cash collection in the period after
the year end so far due to a combination of project instruction delays and
cash to invest in strengthening staffing in the recent acquisitions which will
take time to convert into generating higher revenues, has resulted in the
Group delaying payment on the UK architecture quarterly VAT balance due in
February 2024 and an overdue balance of PAYE due to HMRC. The Group's
forecasts, indicate that this shortfall is a temporary position which will
improve during the 12-month period following the approval of the financial
statements, and we are actively engaging in communications with HMRC and will
seek to agree a short term repayment plan if required.
A prime issue when considering the Group's cashflows over the next 12 months
is that the mortgage on the freehold property (balance of £1.39m as at Jan
2024) is due to be renewed before the end of the 12 month assessment period in
February 2025. Although it is the Board's intention to sell the underlying
property and repay the mortgage well before renewal is due, there is no
certainty this will be the case or that if required the mortgage would be
renewed.
Additionally, given the Group's current cash balances and the nature of the
Group's activities, which remain largely project based with the inherent risks
that projects are not won; are won at too low a fee; do not start on time;
stall; or that the client fails to pay on time or at all, the Directors
consider that there is a material uncertainty over the going concern
assessment, 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 Group has recently agreed with Coutts to extend the £250,000 overdraft
through to 30 September 2024, announced it is raising £425,000 through the
issue of new equity (see note 39), and Torpedo Factory Limited has received a
fully approved offer for a £500,000 loan which can be drawn down whenever
needed, subject only to the approval of the proposed guarantors (Nick Clark
and Freddie Jenner).
Should either the cash generation from the Group's existing business units
further decline and / or the push for growth in the smart buildings arena lead
to a prolonged shortfall in cash the Board has the following funding or
mitigating options beyond the typical cost cutting in the face of declining
activities:
· The Group continues to seek a buyer for the freehold property
acquired as part of the TFG acquisition in March 2023. The Board believes the
commercial value of the building very comfortably exceeds its commercial
mortgage of £1.41 million as at 30 September 2023. Additionally, the Group's
property agent has confirmed that it is reasonable to expect offers well in
excess of the mortgage liability.
· The Board believes the commercial value of its German investments
is substantial in relation to the Group as a whole and if necessary could be
realised by a sale for in excess of book value.
· The Board also believes that in the event of the introduction of
invoice discounting the Group, which typically has in excess of £3.0 million
tied up in trade debtors at each month end, could release a significant
proportion of this amount. In this regard, Torpedo Factory Limited has
received updated indicative terms from a leading provider of sales ledger
finance of an invoice discounting line to the value of 50% of eligible debtors
or £600,000, whichever is lower. Formal approval of this facility would be
subject to an audit of the Torpedo Factory Limited systems by the lender. For
18 years from 2003-2021 Torpedo Factory Limited had an invoice discounting
facility so is fully familiar with the processes.
· The Group is currently paying off its liabilities in respect of
state funding provided during the Covid pandemic. The balance of the CBILS
drawn by the Group in May 2021 will be fully repaid in May 2024. The CBILS
loan drawn by TFG will be fully repaid by July 2026. By replacing this debt
with a new facility repayable over a longer period the annual cash costs
associated with this debt would fall.
· As a company with shares listed on the London Stock Exchange
there is the option to seek additional equity investment from the issue of new
shares, as was demonstrated by the recent share subscription in connection
with the Vanti transaction.
The recently announced proposal to sell the Old Torpedo Factory freehold would
pay off the remaining balance on the mortgage, prepay a portion of the NatWest
CBILS loan, and provide a significant balance of cash to the Group eliminating
the net deficit. Other funding and mitigating options available to the board
are also discussed in note 1.
Notwithstanding the material uncertainty described above, after making
enquiries and assessing the progress against the forecast, projections and the
feasibility of the mitigating actions referred to above, which if not
achieved 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 Directors have a reasonable expectation that the Group and the Parent
Company will continue in operation and meet its commitments as they fall due
over the going concern period.
For this reason, the Board considers it appropriate to prepare the financial
statements on a going concern basis.
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.
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 18; and ii) double the share of revenue in joint
ventures disclosed in note 19;
· 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 16;
· 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 16;
· Result before taxation (excluding Group management charges), and
result before taxation (including Group management charges), which are further
assessed on pages 13 to 16;
· 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 8 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 8. Full time equivalent technical members of
staff are given for each hub on pages 13 to 16.
Antony Barkwith
Group Finance Director
27 March 2024
Strategic report
The Directors present their Strategic Report for the Group for the year ended
30 September 2023.
Strategy
For most of the Group's existence we have been a professional services group
that principally provides architectural design services along with specialisms
in master planning, interior design, executive architecture; audio visual and
stage technology; smart workplace systems and energy management software.
Our strategic objective is to become a leading provider of Smart Building
services as Smart Building Systems designers, integrators and operators, while
maintaining our status as leading architects in the UK.
We aim to create shareholder value over the longer term by increasing profits
and at the same time provide an attractive and rewarding working environment
for our staff.
Business Model
Architecture
Our architecture and interior design businesses operate in the UK and Germany.
Our operation in Turkey was sold to local management post year end, and along
with other locations will continue to operate through licence based
arrangements where the responsibility for profit rests with local management
and owners.
The United Kingdom hub comprises two 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.
Additionally, we have equity interest in leading architecture practices in
Berlin and Frankfurt and brand licence arrangements in the UAE and Turkey.
Our architecture business model is to charge on a time or project basis for
the work of our professional staff.
Smart Buildings
We are looking to establish a leading presence in the delivery of smart
buildings services in the UK building on the experience from the Torpedo
Factory Group's operations, the three subsequent acquisitions, and by future
targeted acquisitions and organic development.
As this side of the Group's activities develops and as we come to own our own
systems, we will look to charge on a SaaS basis for the services provided. In
so doing this element of the Group's business will be far more scalable than
the traditional architecture model where growth generally requires the
recruitment of additional staff and once a project is completed there is no
further revenue.
As a Group, we now have a total average full time equivalent ("FTE") staff
contingent of 303 (2022: 223) throughout our organisation which includes both
wholly owned and joint venture operations. We are ranked by professional staff
in the 2024 World Architecture 100 at number 60 (2023 WA100 number 61).
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.
The Ukraine conflict and global inflationary pressure and interest rate rises
have 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.
UK architecture 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 operation. Payment terms are typically:
· Aukett Swanke Limited and Veretec: 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);
· Torpedo Factory Ltd, TFG Stage Technology Ltd, Anders + Kern U.K.
Ltd: Standard payment terms for all companies are 30 days for smaller works
completed. It is usual on larger projects to agree in advance with the client
at the start of the project a monthly billing schedule which generally leads
to relatively low levels of contracts assets (and consequentially higher
levels of contract liabilities). These larger projects tend to be 30 days
although certain JCT contracts may extend to 60 day terms. Service Contracts
as standard are billed annually in advance for a 12 month period.
The losses sustained in the prior three years during the COVID-19 pandemic and
in the recovery period since, tightened the free cash available within the
Group. However, the acquisition of TFG in March 2023 provided a significant
boost to the net assets and cash balance of the Group, but adding further
CBILS loan and a mortgage liability.
The month end timing of UK architecture debtor receipts in September 2023
meant that the Group was in a position of utilising part of its overdraft
facility at the year end, though having net cash in the accounts of other
Group subsidiaries.
Dividends were received from the Berlin associate during the year, however 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 2023 renewed
the Group's overdraft facility for an initial period until 31 March 2024, and
subsequently have agreed to extend this renewal to 30 September 2024 at the
existing £250k level.
The mortgage on the Old Torpedo Factory freehold has been extended for another
year to February 2025, while the Group are actively marketing it for sale.
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 architecture 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, 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.
Future developments
An indication of likely future developments in the business of the Group is
contained in the Chief Executive's Report on page 10.
The Strategic Report was approved by the Board on 27 March 2024 and signed on
its behalf by
Nicholas Clark
Chief Executive
Board of
Directors
Clive Carver (Non-Executive Chairman)
FCA FCT Aged 63
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 served 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.
Clive chairs the Audit committee and is a member of the Remuneration and Risk
Committees.
Robert Fry (Deputy Chairman)
BA(Hons) DipArch MA RIBA Aged 67
Robert was appointed interim CEO of Aukett Swanke Group Plc 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 and becoming Managing Director of the UK and Europe group in 2005.
Following Nick Clark's appointment as Group Chief Executive in April 2023
Robert became a part time executive director and Deputy Chairman with
responsibly for the Group's UK architecture and international operations.
Robert will become a non-executive director following the conclusion of the
2024 AGM, which is expected to take place at the end of April 2024.
Robert is Chairman of the board's Risk committee and following the 2024 AGM
will become a member of both the Remuneration and Audit Committees.
Nick Clark (Chief Executive)
BSc(Hons), MPhil Aged 49
Nick was appointed as an executive director of the Group in March 2023
following the acquisition of TFG and became Chief Executive in April 2023.
He founded the TFG business in 1997 and has grown it through a combination of
acquisitions and organic growth. Nick is also a non-executive director at
Acuity RM Group plc, the AIM-listed provider of risk management software.
Prior to starting TFG Nick studied physics at Imperial College, followed by an
MPhil in Microelectronic Engineering and Semiconductor Physics at the
University of Cambridge.
Nick is a member of the Remuneration Committee.
Antony Barkwith (Group Finance Director)
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.
Freddie Jenner (Group Chief Operating Officer)
FCCA BSc(Hons) Aged 40
Freddie was appointed to the Board in June 2023 as Chief Operating Officer.
Freddie joined the finance team at what is now Torpedo Factory Ltd in 2007,
becoming Finance Director of the parent company Torpedo Factory Group Limited
when he qualified as a chartered certified accountant in 2012. He was
instrumental in driving growth in value of TFG through acquisitions and
upgrading systems and processes over the following decade, prior to the
acquisition of TFG by the Group in March 2023.
Tandeep Minhas (Non-executive director)
LLB (Hons), LPC, CF (Aged 53)
Tandeep was appointed to the board as a non-executive director in April 2023.
Tandeep is a partner in international law firm Taylor Wessing LLP, where she
heads the Corporate Finance practice. She advises on all aspects of corporate
finance M&A work, including public takeovers, fundraisings and IPOs,
company and business acquisitions and disposals, joint ventures and
reorganisations.
She has specialist knowledge of the public markets in the UK and has advised
on numerous flotations and secondary fundraisings on both the Main Market and
AIM, acting for both companies and corporate finance/broking houses, nomads
and sponsors.
She has particular experience in advising international companies across a
wide variety of sectors and is lead corporate partner in Taylor Wessing's
India Business Group. She also sits on the Board of the Corporate Finance
Faculty of the Institute of Chartered Accountants in England & Wales.
Tandeep chairs the Remuneration Committee and is a member of the Audit and
Risk Committees.
Board committees
The board has the following committees
· Audit Committee
· Remuneration Committee
· Risk Committee
Directors' report
The Directors present their report for the year ended 30 September 2023.
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 21.
Our strategic objective is to improve the performance of our architecture
activities and create shareholder value over the longer term by developing the
group into a quoted holding company for an ecosystem of smart buildings
businesses. The cyclical nature of the markets in which we currently 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 will reduce
this effect by developing business streams that have a high degree of
contractually recurring long term revenues, which can be scaled without a
proportionate scaling of costs.
We operate a structure covering the United Kingdom with sites in London,
Manchester, and East Anglia; Continental Europe with significant investments
in Berlin and Frankfurt; along with a Licensee operation in Istanbul and a
Marketing Agreement with an operation in the Middle East with an office in
Dubai.
The UK Architecture hub comprises two principal service offerings:
comprehensive architectural design including master planning, interior design
and fit-out capability under the 'Aukett Swanke' brand, and an executive
architectural delivery service operating under the 'Veretec' brand.
Our Continental European Architecture operations provide services offered that
are consistent with those of the UK Architecture operation.
Our Licence Agreement is marketed under the 'Aukett Swanke' brand. The service
offers within the regions they operate within include architectural and
interior design, post contract delivery services including architect of record
and project execution stage services.
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 plcenquiries@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 Nick Clark, Chief Executive.
PRINCIPLE 3
Corporate Social Responsibility & Stakeholder Engagement
The About section of the Company's website sets out our vision and explains
how we engage with our clientele and related stakeholders. 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 recognized in the
websites for each entity in the Awards sections of each 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 proptech industries.
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 four Executive
directors. The Board believes that the optimal structure is balanced between
NEDs 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 33 to 34.
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 25-26.
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.
Nick Clark (Chief Executive) is a non-executive director of an AIM-quoted SaaS
business, Antony Barkwith (Group Finance Director) is a member of the
Architect's Financial Management Group (AFMG), Clive Carver (Chairman and NED)
holds also chairs another AIM company, and Robert Fry (Deputy Chairman) is a
member of the RIBA and is a regular contributor and awards judge for World
Architecture News (WAN). Tandeep Minhas (NED) is head of Corporate Finance at
a leading law firm.
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 2006 to promote the success of the company.
Day to day and operational management is delegated to the Chief Executive,
Group Finance Director, Chief Operating Officer, Chief Technical Officer and
the subsidiary directors. Each business in the group has its own management
team and its own board. At least two of the Chief Executive, COO, CTO 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 formally at least
quarterly, and informally more frequently. 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. Directors are required to complete CPD in
accordance with their professional qualification where relevant.
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.
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.
The Chairman carries out appraisals of each board member on an annual basis.
The NEDs appraise the Chairman. As a result of these meetings, any mentoring
and training needs are established.
Board attendance & Effectiveness
Microsoft Teams or similar online meeting technologies 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 Board meets formally on a
bi-monthly basis.
The attendance record for the year is included in the Directors' Report on
page 35.
Board remit
The Board is a balanced team of executives and non-executives with the remit
to ensure good, appropriate, safe governance and compliance with 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 Remuneration 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.
NEDs 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 Chief Executive. 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
sites, 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, share dealing 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 - 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 - provides guidance and information to inform the strategic
direction of the company and its operations. Along with the senior management
team the Chief Executive 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 held on the Company's website:
· Annual Report and Accounts
· Interim Announcements
· General Meeting 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 four 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 Tandeep Minhas 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 Tandeep
Minhas, and they report to the Board on matters discussed at the Committee
meetings.
During the year the Committee met on three occasions to review, in addition to
the above, budgets, monthly management accounts and working capital
requirements by reference to the Company's financial strategy. It also
reviewed through a sub-committee the management of risk inherent in the
business.
Remuneration Committee
The Remuneration Committee convenes not less than twice a year, ordinarily on
a six monthly basis, and during the year it met on three occasions. The
Committee currently comprises Tandeep Minhas, as Chair and Clive Carver. 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.
Risk Committee
The Risk 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 Risk Committee currently comprises Robert Fry, as Chairman, Clive Carver
and Tandeep Minhas plus other members with specialist knowledge drawn from the
Group's staff.
Directors
Antony Barkwith, Clive Carver, and Robert Fry all served as Directors of the
Company throughout the year ended 30 September 2023.
On 31 December 2022 Nicholas Thompson resigned as a Director of the Company.
On 20 March 2023 Nick Clark was appointed as a Director of the Company.
On 21 April 2023 Raúl Curiel resigned as a Director of the Company.
On 24 April 2023 Tandeep Minhas was appointed as a Director of the Company.
On 26 June 2023 Freddie Jenner was appointed as a Director of the Company.
Biographical details of the current Directors are set out on pages 25 and 26.
The Company maintains directors' and officers' liability insurance.
Attendance at board meetings by members of the Board were as follows:
Number of meetings while in office Number of meetings attended
Executive Directors
Nicholas Thompson 3 3
Robert Fry 14 13
Antony Barkwith 14 14
Nick Clark 8 8
Freddie Jenner 4 4
Non-executive Directors
Raúl Curiel 8 8
Clive Carver 14 14
Tandeep Minhas 6 6
Directors' interests
Directors' interests in the shares of the Company were as follows:
Number of ordinary shares 30 September 30 September
2023 2022
Nicholas Thompson 16,802,411 16,802,411
Raúl Curiel 9,240,018 9,240,018
Nick Clark 40,531,539 -
Freddie Jenner 6,064,817 -
Tandeep Minhas - -
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, Robert Fry, Nick Clark and
Freddie Jenner 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 2024 the Company had been informed of the following notifiable
interests of three per cent or more in its share capital:
Shareholder Notes Number of ordinary shares Percentage of ordinary shares
* Keith McCullagh Former chairman of TFG 41,339,142 12.89%
* Nick Clark Director of the Company 40,531,539 12.64%
Braveheart Investment Group Plc Institutional Investor 28,782,351 8.98%
Nicholas Thompson Former Director of the Company 21,129,111 6.59%
Philip J Milton & Company Plc Institutional Investor 20,832,048 6.50%
John-David Papworth Former employee of the Group 16,274,624 5.08%
Jeremy Blake Former employee of the Group 13,030,638 4.06%
* Keith McCullagh and Nick Clark's shares are included within a Concert Party
holding a total of 89,159,484 shares representing 27.81% of the number of
ordinary shares.
Share price
The mid-market closing price of the shares of the Company at 30 September 2023
was 1.825 pence and the range of mid-market closing prices of the shares
during the year was between 1.80 pence and 2.80 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 or 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 Chairman's statement on pages 3-4 (in relation to
decision-making), in the Strategic report on pages 21-24 (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 80 'Excellent' or
'Very Good' BREEAM (Building Research Establishment Environmental Assessment
Method) ratings awarded to buildings designed or carried out 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
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.
Financial instruments
Information concerning the use of financial instruments by the Group is given
in notes 32 to 36 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 3 & 1/2 years of trading.
During the year, the Group has consolidated its architectural operations to
focus on the larger and more profitable key markets in the UK and Germany,
significantly increased the total equity of the Group, acquired TFG, A+K, and
post year end ecoDriver, diversifying its income streams into new markets and
enabling the start of the Group's strategy to build its Smart Buildings
offering.
The Group reports a small trading profit of £28k for the year, and a trading
profit in the second half of the year of £315k (compared to the unaudited
interim results to 31 March 23 half year trading loss of £287k).
The Group continued to operate within its banking limits, and has paid each of
the monthly instalments on the Coutts CBILS loan and the NatWest CBILS loan
and mortgage consolidated into the Group with the TFG acquisition on time.
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.
Whilst we continue to pay down the mortgage and CBILS loans, lower than
originally budgeted project billings and cash collection in the period after
the year end so far due to a combination of project instruction delays and
cash to invest in strengthening staffing in the recent acquisitions which will
take time to convert into generating higher revenues, has resulted in the
Group delaying payment on the UK architecture quarterly VAT balance due in
February 2024 and an overdue balance of PAYE due to HMRC. The Group's
forecasts, indicate that this shortfall is a temporary position which will
improve during the 12-month period following the approval of the financial
statements, and we are actively engaging in communications with HMRC and will
seek to agree a short term repayment plan if required.
The Group has recently agreed with Coutts to extend the £250,000 overdraft
through to 30 September 2024, announced it is raising £425,000 through the
issue of new equity (see note 39), and Torpedo Factory Limited has received a
fully approved offer for a £500,000 loan which can be drawn down whenever
needed, subject only to the approval of the proposed guarantors (Nick Clark
and Freddie Jenner).
The recently announced proposal to sell The Old Torpedo Factory freehold would
pay off the remaining balance on the mortgage, prepay a portion of the NatWest
CBILS loan, and provide a significant balance of cash to the Group eliminating
the net deficit. Other funding and mitigating options available to the board
are discussed in note 1.
Notwithstanding the material uncertainty described above, after making
enquiries and assessing the progress against the forecast, projections and the
feasibility of the mitigating actions referred to above, which if not achieved
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
Directors have a reasonable expectation that the Group and the Parent Company
will continue in operation and meet its commitments as they fall due over the
going concern period.
For this reason, the Board considers it appropriate to prepare the financial
statements on a going concern basis.
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 26 April
2024, will be issued alongside this report and accounts and posted to
shareholders contemporaneously.
The Directors' report was approved by the Board on 27 March 2024 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 2023 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 state
of the Group's and of the parent Company's affairs as of 30 September 2023 and
of the Group's profit 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 of £250,000 will be renewed in
October 2024 whilst making their assessment of the Group's and parent
Company's going concern status. Whilst there are no indications that the
overdraft will not be renewed, it is not guaranteed. The Directors have also
assumed that a debt factoring facility can be put in place over its Trade
Receivables and that the loan facility of £500,000 will be available when
required to fund a short-term cash deficit. The Directors have given clear
indication that they are actively willing to sell the property currently held
in current assets as an asset held for sale if required to realise cash to
meet its liabilities as they fall due.
The renewal of the £1.36m mortgage will only be reviewed later in 2024, 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 matter 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 have factored the ongoing
impact of unpaid HMRC liabilities 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 enquired 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.
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 seven significant
components to the Group, which were Aukett Swanke Group Plc, Aukett Swanke
Limited, Veretec Limited, Shankland Cox Limited, Torpedo Factory Group
Limited, Torpedo Factory Limited and TFG Stage Technology Limited. They were
all subjected to full scope audits.
Also, we have performed full scope audit on Aukett Fitzroy Robinson
International Limited, Swanke Hayden Connell International Limited, Swanke
Hayden Connell Europe Limited and Anders + Kern Limited for the purpose of
coverage and to cover specific identified risk. All full-scope audits were
conducted by the group audit engagement team.
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 for 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 before tax of £0.3 Million (2022: £2.3 Our audit work and conclusion in respect of going concern has been detailed in
Million). The Group has continued to incur further losses subsequent to the the 'Material uncertainty related to going concern' section of our audit
year end. Discussion with management and review of the post year end cashflow report.
forecasts indicates a material uncertainty on going concern.
Given the performance in the year, including the matters 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 valuation and cut-off of contract assets and Our audit work included, but was not restricted to the following procedures:
liabilities:
We evaluated the operating effectiveness of certain key controls identified in
Refer to the accounting policies in Note 1 on pages 67 to 68 and Note 4 in the relation to revenue.
Group financial statements.
We evaluated the Group's accounting policy in respect of revenue recognition
to ensure it is compliant with IFRS 15.
The measurement of revenue earned on architectural services contracts with
customers is determined by reference to the stage of completion of those
contracts at the Statement of Financial Position date. It is a function of the We selected a sample of contracts and the substantive testing procedures
cost (fee earners and subcontractors) incurred on the contract compared to the included the following:
total costs expected at the culmination of the contract as a proportion of
agreed-upon contract revenue less any invoices raised to date.
· Confirming revenue from the revenue recognition model to the
underlying contract and where relevant, contract variations were agreed
As the above measurement requires Directors to assess the final costs expected between the Group and its customers.
on a contract to determine the stage of completion, there is inherent
estimation uncertainty. The significant judgement arising in the formulation
of these estimates could vary materially over time and is dependent on
customer activity. We therefore considered this to be a key audit matter. · Comparing historical margins achieved on projects against the
estimated margins expected on comparable on-going projects to confirm the
accuracy of management's estimation of total project costs. Also discussed
with management if there were material variances in this estimate. Further,
As at 30 September 2023 the group has recognised contract assets of £0.8 subsequent invoices raised post the Statement of Financial Position date and
Million (2022: £1.1 Million) and contract liabilities of £ 1.4 Million collections were tested to compare the estimated margins to actuals.
(2022: £1.2 Million).
· Verifying the chargeable time costs incurred to date 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 not restricted to the following procedures:
Refer to the accounting policies in note 1 on page 64 and Notes 13 and 14 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 each CGU to test compliance
with the requirement of applicable accounting standards and mathematical
In the financial statements goodwill arising from current year acquisitions is accuracy of the model.
valued at £1.5 Million. Acquisitions in the year comprise of Torpedo Factory
Group Cash Generating Unit (CGU) in March 2023 giving rise to Goodwill of
£1.24 Million (at acquisition £1.46 Million and subsequent impairment of
£0.22 Million, and the acquisition of Anders + Kern UK Limited (CGU) in July · The weighted average cost of capital (WACC) of the models was
2023 giving rise to Goodwill of £0.26 Million. re-computed with reference to external data to test the accuracy of
computation.
The process for assessing whether impairment exists under International
Accounting Standard IAS 36 'Impairment of Assets' is complex. The process of · Challenging the revenue cash flows within the model. Future
determining the value in use, through forecasting cash flows (primarily revenue was checked to secure pipeline via contract verification. Potential
revenue less subcontract costs) and the determination of the appropriate wins were assessed for progress in bids by verification of correspondence.
discount rate and other assumptions to be applied, is highly judgemental and Future earnings were assessed by verification of historic conversion of new
can significantly impact the results of the impairment review. work.
There is significant management judgement and estimation uncertainty involved · Critically assessed the cost base for potential omissions or
in the preparation of value in use models under applicable accounting unrealistic targets based on actual and potential future changes in the
standards for the group and as a result we consider this to be a key audit business. We challenged management where this fell outside our expectation and
matter. checked that these were accurately stated, reasonable and achievable in the
light of the economic environment and future pipeline of work.
· Obtaining the sensitivity analysis performed by management to
assess the impact of the movement in key variables in the model which would
lead to an impairment. We tested this sensitivity analysis and concluded on
whether such scenarios were likely to occur.
Key observation:
Based on the procedures performed and considering the assumptions and
methodology used by management in preparing the VIU model, the calculations
are appropriate.
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 2023
financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
Materiality £215,000 £163,000
Basis for determining materiality 1.5% of gross revenue 3% of net assets before adjusting for intercompany balances.
Rationale for the benchmark applied The gross revenue has been used as a primary measure of performance which is a Due to the nature of the parent company, we considered net assets to be the
measure of demand for its services and the different sectors in which it focus for the readers of the financial statements, accordingly this
operates. The "sub-consultants" i.e., the specialists' costs are agreed in the consideration influenced our judgement of materiality.
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 materiality £107,500 £81,500
Basis for determining performance materiality 50% of Group materiality 50% of Parent company 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
· 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 £90,700 to £17,600. 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 £10,750 for the Group and £8,150 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 41, 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
(https://www.frc.org.uk/auditors/audit-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor%E2%80%99s-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.
· 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 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 2024
Consolidated income statement
For the year ended 30 September 2023
Note 2023 2022
£'000 £'000
Continuing operations
Revenue 4 14,335 8,645
Sub consultant costs (232) (1,518)
Revenue less sub consultant costs 4 14,103 7,127
Cost of sales (2,627) -
Gross profit 11,476 7,127
Personnel related costs (9,031) (6,237)
Property related costs (1,322) (1,037)
Other operating expenses (1,375) (483)
Distribution costs (141) -
Other operating income 5 326 326
Operating loss (67) (304)
Finance income 9 -
Finance costs 6 (255) (95)
Loss after finance costs (313) (399)
Share of results of associate and joint ventures 341 327
Trading profit/(loss) from continuing operations 28 (72)
Acquisition costs (379) -
Goodwill impairment 13 - (1,752)
Loss before tax from continuing operations (351) (1,824)
Tax credit 10 433 45
Profit/(loss) from continuing operations 82 (1,779)
Profit/(loss) from discontinued operations 12 10 (503)
Profit/(loss) for the year 92 (2,282)
Profit/(loss) attributable to:
Owners of Aukett Swanke Group Plc 92 (2,282)
Non-controlling interests - -
92 (2,282)
Basic and diluted earnings per share for profit/(loss) attributable to the
ordinary equity holders of the Company:
From continuing operations 0.04p (1.08p)
From discontinued operations 0.00p (0.30p)
Total profit/(loss) per share 11 0.04p (1.38p)
Consolidated statement of comprehensive income
For the year ended 30 September 2023
2023 2022
£'000 £'000
Profit/(loss) for the year 92 (2,282)
Revaluation of freehold property 60 -
Deferred tax movement on revaluation (15) -
Goodwill impairment on fair value adjustment of share options (notes 13 and (222) -
30)
Currency translation differences 26 (7)
Currency translation differences on disposal recycled to gain on disposal of - (209)
discontinued operation (note 12)
Currency translation differences on translation of discontinued operations - (168)
(note 12)
Other comprehensive loss for the year (151) (384)
Total comprehensive loss for the year (59) (2,666)
Total comprehensive loss for the year is attributable to:
Owners of Aukett Swanke Group Plc (59) (2,666)
Non-controlling interests - -
Total comprehensive loss for the year (59) (2,666)
Total comprehensive profit/(loss) attributable to the owners of Aukett Swanke
Group Plc arises from:
Continuing operations (69) (1,786)
Discontinued operations 10 (880)
(59) (2,666)
Consolidated statement of financial position
At 30 September 2023 2023 2022
Note £'000 £'000
Non current assets
Goodwill 13 1,502 -
Other intangible assets 14 404 210
Property, plant and equipment 15 238 69
Right-of-use assets 16 2,132 2,184
Investment in associate 18 786 760
Investments in joint ventures 19 285 247
Loans and other financial assets 20 89 -
Trade and other receivables 22 100 184
Deferred tax 26 625 281
Total non current assets 6,161 3,935
Current assets
Inventories 21 372 -
Trade and other receivables 22 3,847 3,109
Contract assets 4 790 1,119
Cash at bank and in hand 522 28
5,531 4,256
Assets in disposal groups classified as held for 28 3,208 -
sale
Total current assets 8,739 4,256
Total assets 14,900 8,191
Current liabilities
Trade and other payables 23 (4,589) (3,169)
Contract liabilities 4 (1,398) (1,227)
Borrowings 24 (2,050) (482)
Lease liabilities 16 (492) (457)
(8,529) (5,335)
Liabilities directly associated with assets in 28 (148) -
Disposal groups classified as held for sale
Total current liabilities (8,677) (5,335)
Non current liabilities
Trade and other payables 23 (87) (44)
Borrowings 24 (642) (167)
Lease liabilities 16 (1,750) (1,962)
Deferred tax 26 (161) (33)
Provisions 27 (210) (249)
Total non current liabilities (2,850) (2,455)
Total liabilities (11,527) (7,790)
Net assets 3,373 401
Capital and reserves
Share capital 29 2,754 1,652
Merger reserve 2,883 1,176
Revaluation reserve 45 -
Foreign currency translation reserve (531) (557)
Retained earnings (3,272) (3,364)
Other distributable reserve 1,494 1,494
Total equity attributable to 3,373 401
equity holders of the Company
The financial statements on pages 51 to 124 were approved and authorised for
issue by the Board of Directors on 27 March 2024 and were signed on its behalf
by:
Nicholas Clark Antony Barkwith
Chief Executive Group Financial Director
Company statement of financial position
At 30 September 2023
Note 2023 2022
£'000 £'000
Non current assets
Property, plant and equipment 15 1 7
Investments 17 5,406 2,089
Deferred tax 26 203 -
Trade and other receivables 22 100 184
Total non current assets 5,710 2,280
Current assets
Trade and other receivables 22 168 250
Cash at bank and in hand 1 457
Total current assets 169 707
Total assets 5,879 2,987
Current liabilities
Trade and other payables 23 (2,556) (1,594)
Borrowings 24 (167) (250)
Total current liabilities (2,723) (1,844)
Non current liabilities
Trade and other payables 23 (87) (44)
Deferred tax 26 - (1)
Borrowings 24 - (167)
Total non current liabilities (87) (212)
Total liabilities (2,810) (2,056)
Net assets 3,069 931
Capital and reserves
Share capital 29 2,754 1,652
Retained earnings (4,062) (3,391)
Merger reserve 2,883 1,176
Other distributable reserve 1,494 1,494
Total equity attributable to 3,069 931
equity holders of the Company
The result for the year contained within the parent company's income statement
is a loss of £671k (2022: loss £783k).
The financial statements on pages 51 to 124 were approved and authorised for
issue by the Board of Directors on 27 March 2024 and were signed on its behalf
by:
Nicholas Clark Antony Barkwith
Chief Executive Group Financial Director
Consolidated statement of cash flows
For the year ended 30 September 2023
Note 2023 2022
£'000 £'000
Cash flows from operating activities
Cash generated from/(expended by) operations 31 1,013 (1,104)
Income taxes received 196 99
Net cash inflow/(outflow) from operating activities 1,209 (1,005)
Cash flows from investing activities
Purchase of property, plant and equipment (154) (48)
Sale of property, plant and equipment - -
Sale of investments 33 927
Net cash received on acquisition of subsidiaries 367 -
Dividends received from associates & joint ventures 262 140
Net cash received in investing activities 508 1,019
Net cash inflow before financing activities 1,717 14
Cash flows from financing activities
Principal paid on lease liabilities (496) (470)
Interest paid on lease liabilities (72) (76)
Proceeds from bank loans - -
Repayment of bank loans (459) (83)
Interest paid (93) (19)
Net cash outflow from financing activities (1,120) (648)
Net change in cash and cash equivalents 597 (634)
Cash and cash equivalents at start of year (204) 515
Currency translation differences 37 (85)
Cash and cash equivalents at end of year 25 430 (204)
Cash and cash equivalents are comprised of:
Cash at bank and in hand 522 28
Net cash included in assets held for sale 30 -
Secured bank overdrafts (122) (232)
Cash and cash equivalents at end of year 430 (204)
Company statement of cash flows
For the year ended 30 September 2023
Note 2023 2022
£'000 £'000
Cash flows from operating activities
Cash generated from/(expended by) operations 31 52 (722)
Interest paid (24) (9)
Net cash inflow/(outflow) from operating activities 28 (731)
Cash flows from investing activities
Purchase of investments (515) -
Sale of investments 33 927
Dividends received from associates & joint ventures 248 133
Net cash (expended by)/generated from investing activities (234) 1,060
Net cash (outflow)/inflow before financing activities (206) 329
Cash flows from financing activities
Repayment of bank loans (250) (83)
Net cash (outflow)/inflow from financing activities (250) (83)
Net change in cash and cash equivalents (456) 246
Cash and cash equivalents at start of year 457 211
Cash and cash equivalents at end of year 1 457
Cash and cash equivalents are comprised of:
Cash at bank and in hand 1 457
Cash and cash equivalents at end of year 1 457
Consolidated statement of changes in equity
For the year ended 30 September 2023
Share capital Foreign Retained Other Merger reserve Revaluation reserve Total
currency earnings distributable equity
translation reserve £'000
£'000 reserve £'000
£'000 £'000 £'000 £'000
At 1 October 2021 1,652 (173) (1,082) 1,494 1,176 - 3,067
Loss for the year - - (2,282) - - - (2,282)
Other comprehensive income - (384) - - - - (384)
Total comprehensive income - (384) (2,282) - - - (2,666)
At 30 September 2022 1,652 (557) (3,364) 1,494 1,176 - 401
Profit for the year - - 92 - - - 92
Other comprehensive income - 26 - - (222) 45 (151)
Total comprehensive income - 26 92 - (222) 45 (59)
Issue of ordinary shares in relation to business combination 1,102 - - - 1,707 - 2,809
Employee share schemes - Value issued in relation to business combination - - - - 222 - 222
(note 3)
At 30 September 2023 2,754 (531) (3,272) 1,494 2,883 45 3,373
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.
This was then increased through a business combination in March 2023
representing the issue of 110,142,286 new ordinary shares at a price of 2.55
pence per share.
Company statement of changes in equity
For the year ended 30 September 2023
Share capital Retained Other Merger reserve Total Equity
earnings distributable
£'000 reserve £'000 £'000
£'000 £'000
At 1 October 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
Loss for the year - (671) - - (671)
Other comprehensive income - - - (222) (222)
Total comprehensive income - (671) - (222) (893)
Issue of ordinary shares in relation to business combination 1,102 - - 1,707 2,809
Employee share schemes - Value issued in relation to business combination - - - 222 222
(note 3)
At 30 September 2023 2,754 (4,062) 1,494 2,883 3,069
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.
This was then increased through a business combination in March 2023
representing the issue of 110,142,286 new ordinary shares at a price of 2.55
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 2023, the Group has applied the following
amendments for the first time:
(i) Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16
(ii) Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS
37
(iii) Annual Improvements to IFRS Standards 2018-2020, and
(iv) Reference to the Conceptual Framework - Amendments to IFRS 3.
The group also elected to adopt the following amendments early:
(i) Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - amendments to IAS 12, and
(ii) Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
New accounting standards, amendments and interpretations not yet applied
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 30 September
2023 reporting periods and have not been early adopted by the Group. These
standards, amendments or interpretations are not expected to have a material
impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
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 36. 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 Group £250k Coutts overdraft facility is renewed annually and was renewed
for an initial 4 months in December 2023 through to 31 March 2024, and
subsequently Coutts has agreed to extend this renewal to 30 September 2024. We
have no reason not to expect that the overdraft facility would not be renewed
again in October 2024, however this is not guaranteed.
The £500k CBILS drawn in May 2021 has a duration of three years with interest
at 4.05% over the Coutts base rate (currently 5.25%) in years two and three.
As at 30 September 2023 the balance on the loan was £167k with the final
monthly repayment due in May 2024.
The March 2023 acquisition of TFG provided a significant boost to Group
equity. TFG have interest bearing loans and borrowings being a CBILS loan and
a mortgage with NatWest. The CBILS loan was drawn in 2021 at £1.75m, the 30
September 2023 balance being £0.99m, and being repaid at £29k per month. The
loan is at a fixed rate of interest at 3.66%pa.
The Mortgage balance as at 30 September 2023 was £1.41m, with a variable
interest at base rate + 1.93%pa. The mortgage is secured against TFG's
freehold property in London. The mortgage has recently been extended for a
further 12 month period to February 2025 with a variable rate of interest of
base rate + 5.00%pa.
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
or to sell the property and repay the mortgage before February 2025.
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 continue to have
macro-economic implications, and continue to have significant impact on
decision making. To date we have seen some clients in specific construction
sectors pause decision making on commencing and committing to future stages of
development, but many developers are continuing with projects and some sectors
as yet do not appear to be materially affected. Delays in clients making
financial investment decisions due to economic uncertainty may result in the
net earnings and cash flows of the Group not being realised if sufficient
alternative work is not secured to offset delays. However, the Group's order
book for the current year is stronger than a year ago.
Whilst we continue to pay down the mortgage and CBILS loans, lower than
originally budgeted project billings and cash collection in the period after
the year end so far due to a combination of project instruction delays and
cash to invest in strengthening staffing in the recent acquisitions which will
take time to convert into generating higher revenues, has resulted in the
Group delaying payment on the UK architecture quarterly VAT balance due in
February 2024 and an overdue balance of PAYE due to HMRC. The Group's
forecasts indicate that this shortfall is a temporary position which will
improve during the 12-month period following the approval of the financial
statements, and we are actively engaging in communications with HMRC and will
seek to agree a short term repayment plan if required.
This shortfall would also be mitigated by the sale of the freehold property.
The Board believes the commercial value of the building very comfortably
exceeds its commercial mortgage of £1.41 million as at 30 September 2023.
Additionally the Group's property agent has confirmed that it is reasonable to
expect offers well in excess of the mortgage liability.
The Group has recently agreed with Coutts to extend the £250,000 overdraft
through to 30 September 2024, announced it is raising £425,000 through the
issue of new equity (see note 39), and Torpedo Factory Limited has received a
fully approved offer for a £500,000 loan which can be drawn down whenever
needed, subject only to the approval of the proposed guarantors (Nick Clark
and Freddie Jenner).
Other funding or mitigating options available to the Board beyond the typical
cost cutting in the face of declining activities include:
· The Board believes the commercial value of its German investments
is substantial in relation to the Group as a whole and if necessary could be
realised by a sale for in excess of book value.
· The Board also believes that in the event of the introduction of
invoice discounting the Group, which typically has in excess of £3.0m tied up
in trade debtors at each month end, could release a significant proportion of
this amount. In this regard, Torpedo Factory Limited has received updated
indicative terms a a leading provider of sales ledger finance of an invoice
discounting line to the value of 50% of eligible debtors or £600,000,
whichever is lower. Formal approval of this facility would be subject to an
audit of the Torpedo Factory Limited systems by the lender. For 18 years from
2003-2021 Torpedo Factory Limited had an invoice discounting facility so is
fully familiar with the processes.
· The Group is currently paying off its liabilities in respect of
state funding provided during the Covid pandemic. The balance of the CBILS
drawn by the Group in May 2021 will be fully repaid in May 2024. The CBILS
loan drawn by TFG will be fully repaid by July 2026. By replacing this debt
with a new facility repayable over a longer period the annual cash costs
associated with this debt would fall.
· As a company with shares listed on the London Stock Exchange
there is the option to seek additional equity investment from the issue of new
shares, as was demonstrated by the recent share subscription in connection
with the Vanti transaction.
Notwithstanding the material uncertainty described above, after making
enquiries and assessing the progress against the forecast, projections and the
feasibility of the mitigating actions referred to above, which if not
achieved 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 Directors have a reasonable expectation that the Group and the Parent
Company will continue in operation and meet its commitments as they fall due
over the going concern period.
For this reason, the Board considers it appropriate to prepare the financial
statements on a going concern basis.
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 venture.
Associate
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 venture
The Group has a joint venture in Frankfurt where ownership is contractual and
the agreements require unanimous consent from all parties for relevant
activities. The entity is considered a joint venture.
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.
Government Grants
Government grants are recognised when there is reasonable assurance that the
entity will comply with grant conditions and that the grant will be received.
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.
Inventories
Inventories as designated at the lower of cost and net realisable value, after
making due allowance for obsolete and slow moving items.
Freehold property
The directors have considered the fair value of the freehold property of The
Old Torpedo Factory, taking into account current rental yields and the market
value of similar properties in the area they consider they consider that the
fair value is materially different to the depreciated historical cost of the
property. As a result of this they have adopted the accounting policy to value
freehold property at the fair value.
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.
The listed investments are traded in an active market, therefore the
unadjusted quoted prices as at the period end date are used to determine the
fair value of the investments.
Unlisted investments are carried at cost, as an approximation of the fair
value, unless any indications exist to suggest a material difference in the
value of the investments as at the reporting date.
Leases and asset finance arrangements
The majority of the Group's accounting policies for leases are set out in note
16.
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 have previously been based on the
geographical areas in which its studios are located, as each reportable
operating segment provided the same type of service to clients, namely
integrated professional design services for the built environment. Internally
the Group prepares discrete financial information for each of its geographical
professional design service segments.
With the acquisitions of TFG and A+K in the year the Group now further divides
its business by types of service, with reporting segments expanded as
professional design service regions, TFG and A+K.
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 either the
straight line method or on a reducing balance and over the following number of
years:
Leasehold improvements - Unexpired term of
lease straight line method
Office furniture 4
years
straight line method
Office equipment 2-4
years
straight line method
Computer equipment 2-4
years
straight line method
Motor Vehicles 25%
reducing balance method
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 27).
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
Architectural Contracts
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.
Audio Visual Systems
Revenue is recognised when the goods or services are provided, subject to the
Group's specific revenue recognition policy for services rendered detailed
below.
Maintenance contracts, consultancy and revenue arising from contracts for the
design, supply and installation of audio visual systems to which there is a
contractual commitment at the balance sheet date are treated as long term
contracts. Profit on these contracts is taken as the work is carried out if
the final outcome can be assessed with reasonable certainty. The profit
included is calculated on a prudent basis to reflect the proportion of the
work carried out at the year end, by recording turnover and related costs as
contract activity progresses. Revenue is calculated as that proportion of
total contract value which costs incurred to date bear to total expected costs
for that contract. Revenues derived from variations on contracts are
recognised only when they have been accepted by the customer. Full provision
is made for losses on all contracts in the year in which they are first
foreseen.
Distribution and Installation of Workplace Technology
The Group derives revenue from the transfer of goods and services over time
and at a point in time. Revenues from external customers come from the sale of
hardware and systems integration. The Group has a number of different types of
contractual arrangements and consequently applies a variety of methods of
revenue recognition. The revenue and profit in any period are based on the
delivery of performance obligations and an assessment of when control is
transferred to the customer. In determining the amount of revenue and profits
to record and related balance sheet items (such as trade receivables, accrued
income and deferred income) to recognise in the period, management is required
to form a number of judgements and assumptions. Revenue is recognised when the
performance obligation in a contract has been performed (so 'point in time'
recognition) or over time as the performance obligation is transferred to the
customer.
The transaction price, being the amount to which the Group expects to be
entitled and has rights to under the contract, is allocated to the identified
performance obligations. For each performance obligation, the Group determines
if revenue will be recognised over time or at a point in time. Where the Group
recognises revenue over time for long-term contracts, this is in general due
to the Group performing and the customer simultaneously receiving and
consuming the benefits provided over the life of the contract. For each
performance obligation to be recognised over time, the Company applies a
revenue recognition method that faithfully depicts the Company's performance
in transferring control of the goods or services to the customer. This
decision requires assessment of the real nature of the goods or services that
the Group has promised to transfer to the customer. The Group applies the
relevant output or input method consistently to similar performance
obligations in other contracts. If performance obligations in a contract do
not meet the over time criteria, the Group recognises revenue at a point in
time.
Share based payments
The Group has issued share options to certain employees, in return for which
the Group receives services from those employees. The fair value of the
employee services received in exchange for the grant of the options is
recognised as an expense other than where management perceive the fair value
to be immaterial.
The total amount to be expensed is determined by reference to the fair value
of the options granted including any market performance conditions (for
example the Company's share price) but excluding the impact of any service or
non market performance vesting conditions (for example the requirement of the
grantee to remain an employee of the Group).
The fair value of the options granted is estimated by management by utilising
a Black-Scholes option pricing model with reference to expected volatility,
vesting period, exercise price, and market share price at the time of grant.
Non market vesting conditions are included in the assumptions regarding the
number of options that are expected to vest. The total expense is recognised
over the vesting period. At the end of each period the Group revises its
estimates of the number of options expected to vest based on the non market
vesting conditions. It recognises the impact of any revision in the income
statement with a corresponding adjustment to equity.
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 22.
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 design services, audio visual and stage
technology, smart workplace systems, energy management software 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 5% (2022: 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 £0.16m,
(2022: £0.20m) trade receivables provision primarily against historic Middle
East trade receivables. Given the nature of these, there remains the potential
to collect these in future years. Further quantitative information concerning
trade receivables is shown in notes 22 and 34.
Impairment of goodwill and other intangible assets
Details of the impairment reviews undertaken in respect of the carrying value
of goodwill and other intangible assets are given in note 17.
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 17.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and where applicable direct labour costs. When an
inventory check is carried out obsolete inventories identified are written off
to cost of sales. The carrying value of inventories at the year end was £372k
(2022: £nil). No provision for inventories has been included in the year end
accounts as it was deemed that all inventories will realise in excess of its
carrying value.
Freehold property
Freehold property is stated at fair value, on periodic valuations by external
independent valuers, taking into account current rental yields and the market
value of similar properties in the area.
Useful lives of other intangible assets
The useful economic live of customer relationships acquired in the TFG
business combination is estimated to be at least 7 years based on analysis of
the retention rate of recurring maintenance contracts in recent years.
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 2023.
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 in May 2023, 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 a 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.
The lease of Torpedo Factory Limited's Farnham premises, includes a break
clause after 3 years in July 2025, and expires on 1 July 2027. The lease
includes a break penalty of £5k equivalent to 3 months rent.
3 Business combinations
Torpedo Factory Group
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.
Consideration for the acquisition comprised:
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.
£'000
Shares in Aukett Swanke Group Plc 2,809
Maximum number of additional consideration shares to be issued to the 92
participating option holders
Share options in Aukett Swanke Group Plc 130
Total acquisition cost 3,031
The TFG option holders were granted a 6 month option period after completion
to exercise the additional consideration shares. The options have not been
exercised, and expired on 20 September 2023.
20 Mar-23
£'000
Goodwill 1,464
Property, plant and equipment 3,222
Right-of-use assets 331
Other intangible assets 227
Loans and other financial assets 169
Inventories 326
Contract assets -
Trade and other receivables 1,580
Net cash 799
Assets 8,118
Trade and other payables 1,709
Contract liabilities 286
Interest bearing loans and borrowings 2,626
Lease liabilities 314
Deferred tax liability 152
Liabilities 5,087
Total net assets 3,031
Property, Plant and Equipment included £3,020k net book value of freehold
property, being the Old Torpedo Factory building in London, previously
revalued in July 2021.
Acquisition related costs of £354k are disclosed as acquisition costs in the
consolidated income statement.
Significant estimate: contingent consideration
The 3,631,124 additional consideration shares were measured at the fair value
based on an issue price of 2.55p. This consideration was contingent on the
participants exercising their options by 20 September 2023. The participants
did not exercise their options, and the options expired. As at 30 September
2023 the contingent consideration has been derecognised resulting in an
impairment of £92k to goodwill (note 13) recorded as a loss of £92k in other
comprehensive income.
The 8,400,000 share options were measured at fair value of 1.55p per share
being the difference between the 1p exercise price and the 2.55p closing price
of Aukett Swanke Group Plc shares on 1 March 2023. The options (and therefore
the consideration) are contingent on the holders remaining in employment with
the Group on the second anniversary of the date of grant (being 20 March
2025), at which point they become exercisable. The options lapse on the sixth
anniversary of the date of grant. As at 30 September 2023 the contingent
consideration has been derecognised as explained in note 30 due to the
reduction in the share Price of Aukett Swanke Group Plc following the
acquisition, resulting in an impairment of £130k to goodwill (note 13)
recorded as a loss of £130k in other comprehensive income.
Anders + Kern
On the 14 July 2023 the Group acquired 100% of the voting equity instruments
in Anders + Kern U.K. Limited, a distributor of smart workplace systems.
Consideration for the acquisition comprised: £515,057 payable in cash.
14 Jul-23
£'000
Goodwill 260
Property, plant and equipment 9
Deferred tax asset 147
Inventories 108
Contract assets 60
Trade and other receivables 220
Net cash 97
Assets 901
Trade and other payables 278
Contract liabilities 108
Liabilities 386
Total net assets 515
Acquisition related costs of £25k are disclosed as acquisition costs in the
consolidated income statement.
4 Operating segments
The Group historically comprised a single business segment with separately
reportable geographical segments (together with a Group costs segment).
Geographical segments being based on the location of the operation undertaking
each project.
The Group's operating geographical segments consist of the United Kingdom, the
Middle East and Continental Europe. Turkey is included within Continental
Europe together with Germany.
As set out in note 28, the board concluded the sale of the Turkey subsidiary
Aukett Swanke Mimarlik AS on 27 December 2023, and has classified the assets
and liabilities of that subsidiary as assets held for sale as at 30 September
2023. The Group identifies geographical areas of operation aligned to its
geographical segments. The Group retains its significant investments in its
joint venture and associate in Germany and considers the subsidiary sold to
have represented a small proportion of the geographical segment. Accordingly,
Aukett Swanke Mimarlik AS has not been re-presented as a discontinued
operation.
The Middle East segment has been re-presented as a discontinued operation and
is set out in note 12.
With the acquisition of Torpedo Factory Group and Anders + Kern during the
period, Torpedo Factory Group and Anders + Kern operations have been disclosed
as additional separate business segments.
Income statement segment information
Segment revenue 2023 2022
£'000 £'000
United Kingdom 8,858 8,465
Torpedo Factory Group 4,816 -
Anders+Kern 467 -
Continental Europe 194 180
Revenue from continuing operations 14,335 8,645
Discontinued operations 2 1,543
Revenue 14,337 10,188
Segment revenue less sub consultant costs 2023 2022
£'000 £'000
United Kingdom 8,692 6,975
Torpedo Factory Group 4,816 -
Anders+Kern 467 -
Continental Europe 128 152
Revenue less sub consultant costs from continuing operations 14,103 7,127
Discontinued operations - 1,256
Revenue less sub consultant costs 14,103 8,383
Most 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 22 are in respect of the Group's
contracts with customers.
Segment net finance expense
2023 2022
Continuing operations £'000 £'000
United Kingdom (77) (86)
Torpedo Factory Group (145) -
Anders+Kern - -
Continental Europe - -
Group costs (24) (9)
Net finance expense (246) (95)
Segment depreciation 2023 2022
£'000 £'000
United Kingdom 60 71
Torpedo Factory Group 24 -
Anders+Kern 1 -
Continental Europe 2 3
Group costs 5 3
Depreciation from continuing operations 92 77
Discontinued operations - 20
Depreciation 92 97
Segment amortisation 2023 2022
£'000 £'000
United Kingdom 403 398
Torpedo Factory Group 63 -
Anders+Kern -
Continental Europe - -
Amortisation from continuing operations 466 398
Discontinued operations - 15
Amortisation 466 413
Segment result before tax 2023 2022
£'000 £'000
United Kingdom (94) (329)
Torpedo Factory Group*^ 401 -
Anders+Kern 62 -
Continental Europe 277 275
Group costs* (997) (18)
Goodwill impairment - (1,752)
Loss before tax from continuing operations (351) (1,824)
Profit/(loss) from discontinued operations 10 (503)
Total loss before tax (341) (2,327)
Segment result before tax 2023 2022
(before reallocation of group management charges) £'000 £'000
United Kingdom 202 211
Torpedo Factory Group * ^ 467 -
Anders+Kern 62 -
Continental Europe 423 422
Group costs (#) * (1,505) (809)
Goodwill impairment - (1,752)
Subtotal (351) (1,928)
Group management charges charged to the - 104
Middle East discontinued operation
Loss before tax from continuing operations (351) (1,824)
Profit/(loss) from discontinued operations 10 (503)
Total loss before tax (341) (2,327)
(#) Segmental results before tax include £25k of exceptional costs being
transactional costs for the acquisition of Anders + Kern allocated within
Group costs.
* Segmental results before tax include £260k of exceptional costs being
transactional costs for the acquisitions of Torpedo Factory Group and Anders +
Kern allocated as £210k within Group costs, and £50k within Torpedo Factory
Group.
^ TFG segmental result before tax includes £94k of one-off costs relating to
the settlement of TFG employees company share option costs and the loss on
assets disposed of as part of the Live Events disposal.
The Group's share of results from associate and joint ventures included within
the Continental Europe segment result are shown in notes 18 and 19.
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:
2023 2022
£'000 £'000
Current contract assets relating to professional services contracts 790 1,200
Loss allowance - (1)
Total contract assets 790 1,199
Contract liabilities relating to professional services contracts 1,398 1,227
Total contract liabilities 1,398 1,227
Significant changes in contract asset and liabilities
Contract assets have decreased as the Group provided lower amounts of services
ahead of invoicing. Most of the contract assets are derived from the TFG and
A+K businesses acquired in the year, combining to £614k. However, for UK
architecture, the balance of contract assets decreased significantly to £176k
(September 2022: £1,012k). The prior year balance included a project which
had been paused as at September 2022 with a balance of WIP for UK architecture
and sub-consultants of £773k. Following the resumption of this project the
WIP balance fell significantly.
Contract liabilities have increased as the Group has invoiced for higher
amounts ahead of providing services. The increase is primarily due to the TFG
and A+K acquisitions in the year, combining to £299k of contract liabilities
as at September 2023. The remaining balance of contract liabilities derive
primarily from contracts in the UK architecture 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:
£'000
Total contract liabilities as at 1 October 2022 (1,227)
Revenue recognised that was included in the contract liability balance at the 1,217
beginning of the period
Credits issued relating to the contract liability balance at the beginning of 2
the year, previously invoiced but not recognised as revenue.
Cash received in advance of performance and not recognised as revenue in the (1,390)
period
Total contract liabilities as at 30 September 2023 (1,398)
Statement of financial position segment information
Segment assets 2023 2022
£'000 £'000
United Kingdom 1,890 2,915
Torpedo Factory Group 1,444 -
Anders+Kern 339 -
Middle East 5 430
Continental Europe 50 90
Trade receivables and contract assets 3,728 3,435
Other current assets 5,111 1,005
Non current assets* 6,061 3,751
Total assets 14,900 8,191
*Non current assets include investments in associate and joint ventures.
Segment liabilities 2023 2022
£'000 £'000
United Kingdom 2,637 3,114
Torpedo Factory Group 1,602 -
Anders+Kern 346 -
Middle East 198 598
Continental Europe 72 68
Trade payables, contract liabilities and accruals 4,855 3,780
Other current liabilities 3,822 1,555
Non current liabilities 2,850 2,455
Total liabilities 11,527 7,790
Geographical areas
Revenue 2023 2022
£'000 £'000
United Kingdom 14,141 8,465
Country of domicile 14,141 8,465
Turkey 194 180
United Arab Emirates 2 1,543
Foreign countries 196 1,723
Revenue 14,337 10,188
Non current assets 2023 2022
£'000 £'000
United Kingdom 4,376 2,453
Country of domicile 4,376 2,453
Czech Republic - -
Germany 1,071 1,007
Turkey - 10
United Arab Emirates - -
Foreign countries 1,071 1,017
Non current assets excluding deferred tax 5,447 3,470
Deferred tax 625 281
Non current assets 6,072 3,751
Major clients
During the year ended 30 September 2023, the Group derived 10% or more of its
revenues from one client (2022: one client).
2023 2022
£'000 £'000
Largest client revenues 1,636 2,009
The largest client revenues for 2023 relate to the United Kingdom operating
segment (2022: United Kingdom operating segment).
Revenue by project site
The geographical split of revenue based on the location of project sites was:
2023 2022
£'000 £'000
United Kingdom 13,831 7,804
Middle East 2 1,543
Continental Europe 479 696
Rest of the world 25 145
Revenue 14,337 10,188
5 Other operating income
2023 2022
£'000 £'000
Property rental income 163 147
Management charges to joint ventures and associates 134 131
Other sundry income 29 48
Total other operating income from continuing operations 326 326
Discontinued operations - -
Total other operating income 326 326
6 Finance costs
Continuing operations 2023 2022
£'000 £'000
Fair value movement on investments 80 -
Payable on bank loans and overdrafts 89 19
Finance lease interest payable 74 76
Other interest payable 12 -
Total finance costs 255 95
7 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:
2023 2022
£'000 £'000
Fees payable to the Company's auditor for the audit of the Company's annual 135 59
accounts for the year ended September 2023
Additional fees paid to the Company's previous auditor for the audit of the - 33
Company's annual accounts for the year ended September 2022
Fees payable to the Company's auditor and its associates
for other services
Audit of the Company's subsidiaries pursuant to legislation 124 71
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.
8 Employee information
The average number of persons including directors employed by the Group and
Company during the year was as follows:
Group Company
2023 2022 2023 2022
Number Number Number Number
Technical 97 83 - -
Administrative 35 23 6 6
Total 132 106 6 6
In addition to the number of staff disclosed above, the Group's associate and
joint ventures employed an average of 153 persons (2022: 137 persons).
The costs of the persons employed by the Group and Company during the year
were:
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Wages and salaries 6,471 5,200 550 574
Social security costs 703 468 67 56
Contributions to defined contribution pension arrangements 331 262 47 43
Total 7,505 5,930 664 673
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.
9 Directors' emoluments
2023 Aggregate Pension Total Waived Total
emoluments contributions received entitlement
£'000 £'000 £'000 £'000 £'000
Nicholas Thompson 39 3 42 - 42
Robert Fry 90 15 105 - 105
Clive Carver 77 - 77 - 77
Raúl Curiel 20 - 20 - 20
Tandeep Minhas 14 - 14 - 14
Nick Clark 73 9 82 - 82
Freddie Jenner 34 4 38 - 38
Antony Barkwith 138 17 155 - 155
Total 485 48 533 - 533
2022 Aggregate Pension Total Waived Total
emoluments contributions received entitlement
£'000 £'000 £'000 £'000 £'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
Benefits were accruing to five Directors (2022: three Directors) under defined
contribution pension arrangements.
The aggregate emoluments of the highest paid Director were £138,000 (2022:
£209,000) together with pension contributions of £17,000 (2022: £10,000).
10 Tax charge
2023 2022
£'000 £'000
Current tax - -
Adjustment in respect of previous years (196) -
Total current tax (196) -
Origination and reversal of temporary differences (79) (45)
Adjustment in respect of previous years (56) -
Changes in tax rates (102) -
Total deferred tax (note 26) (237) (45)
Total tax credit (433) (45)
The standard rate of corporation tax in the United Kingdom that is applicable
for the financial year was 22% (2022: 19%).
The tax assessed for the year differs from the United Kingdom standard rate as
explained below:
2023 2022
£'000 £'000
Loss before tax (330) (2,327)
Loss before tax multiplied by the standard (73) (442)
rate of corporation tax in the United
Kingdom of 22% (2022: 19%)
Effects of:
Other non tax deductible expenses 66 279
Associate and joint ventures reported net of tax (75) (62)
Tax losses not recognised 7 104
Impact on deferred tax of change in UK tax rate (102) -
Current tax adjustment in respect of previous years (196) 4
Deferred tax adjustment in respect of previous years (56) 2
(Losses)/Income not taxable (4) 70
Total tax credit (433) (45)
11 Earnings per share
The calculations of basic and diluted earnings per share are based on the
following data:
Earnings 2023 2022
£'000 £'000
Continuing operations 82 (1,779)
Discontinued operations 10 (503)
Profit/(loss) for the year 92 (2,282)
Number of shares 2023 2022
Number Number
Weighted average of ordinary shares in issue 223,915,859 165,213,652
Effect of dilutive options - -
Diluted weighted average of ordinary shares in issue 223,915,859 165,213,652
As explained in note 29 the Company has granted options over 10,400,000 of its
ordinary shares. These have not been included above as i) the average share
price on 1,000,000 of the options was below the exercise price in 2023 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 2023
but to the extent that the dilutive effect would be trivial. The remaining
8,400,000 options granted in the year are not exercisable until March 2025.
12 Discontinued operations
12 (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:
2023 2022
£'000 £'000
Cash consideration received 33 927
Deferred cash consideration (33) 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)
- Property, plant and equipment - 37
- Intangibles - 736
- Trade and other receivables - 641
- Contract assets - 361
- Trade and other payables - (954)
- 821
Currency translation differences recycled on disposal - (209)
- 612
Pre-tax gain on disposal of discontinued operation - 357
Related tax expenses - -
Gain on disposal of discontinued operation - 357
12 (b) Financial performance and cash flow information
Result of discontinued operations
2023 2022
£'000 £'000
Revenue 2 1,543
Sub consultant costs (2) (287)
Revenue less sub consultant costs - 1,256
Personnel related costs - (1,233)
Property related costs (2) (109)
Expenses 12 (635)
Group management charges - (104)
Finance expenses - -
Depreciation - (20)
Amortisation - (15)
Other operating income - -
Gain on disposal of subsidiary - 357
Impairment of intangibles - -
Profit/(loss) before tax 10 (503)
Tax credit / (charge) - -
Profit/(loss) from discontinued operations 10 (503)
Exchange differences on disposal recycled to gain on disposal of subsidiary - (209)
Exchange differences on translation of discontinued operation - (168)
Other comprehensive profit/(loss) from discontinued operations 10 (880)
Earnings per share from discontinued operations
2023 2022
£'000 £'000
Basic and diluted profit/(loss) per share 0.00p (0.30p)
Statement of cash flows
The statement of cash flows includes the following amounts relating to
discontinued operations:
2023 2022
£'000 £'000
Net cash outflow from operating activities - (53)
Net cash inflow from investing activities - 35
Foreign exchange movements - (204)
Net cash from discontinued operations - (222)
13 Goodwill
Group
£'000
Cost
At 1 October 2021 2,370
Addition -
Disposal (608)
Exchange differences (10)
At 30 September 2022 1,752
Additions 1,724
Disposal -
Exchange differences -
At 30 September 2023 3,476
Impairment
At 1 October 2021 -
Impairment 1,752
Disposal -
Exchange differences -
At 30 September 2022 1,752
Impairment 222
Disposal -
Exchange differences -
At 30 September 2023 1,974
Net book value
At 30 September 2023 1,502
At 30 September 2022 -
At 1 October 2021 2,370
The disposal recorded in the prior year related to goodwill on JRHP which was
sold during the prior 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 12 (b).
Goodwill from the United Kingdom operation arose as £1,244k from the April
2005 acquisition of Fitzroy Robinson Limited and £496k 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. In the prior year,
Management therefore took the decision to write off the full £1,740k balance
of Goodwill for the United Kingdom operations in the prior year.
Additions in the current year comprise the acquisition of TFG in March 2023
giving rise to Goodwill of £1,464k, and the acquisition of Anders + Kern in
July 2023 giving rise to Goodwill of £260k as detailed in note 3.
As explained in note 3, £92k of the TFG goodwill relates to additional
consideration shares, which were not exercised and expired on 20 September
2023. Management have made an impairment to goodwill matching this amount.
As explained in note 3, £130k of the TFG goodwill relates to the fair value
of share options issued as part of the acquisition consideration of the
business combination. For the reasons detailed note 30, Management has taken
the decision to impair the goodwill associated with the fair value acquisition
cost represented by these share options.
The net book value of goodwill is allocated to the Group's cash generating
units ("CGU") as follows:
Torpedo Factory Group Anders + Kern United Kingdom Turkey Middle Total
East
£'000 £'000 £'000 £'000 £'000
At 1 October 2021 - - 1,740 22 608 2,370
Disposal - - - - (608) (608)
Impairment - - (1,740) (12) - (1,752)
Exchange differences - - - (10) - (10)
At 30 September 2022 - - - - - -
Additions 1,464 260 - - - 1,724
Disposal - - - - - -
Impairment (222) - - - - (222)
Exchange differences - - - - - -
At 30 September 2023 1,242 260 - - - 1,502
An annual impairment test is performed over the cash generating units ('CGUs')
of the Group where goodwill and intangible assets are allocable to those CGUs.
The net book values are supported by the value in use calculations detailed
further in note 17.
14 Other intangible assets
Group Trade name Customer IT assets Trade Total
relationships
licence
£'000 £'000 £'000 £'000 £'000
Cost
At 1 October 2021 655 354 - 73 1,082
Disposal (21) (183) - (73) (277)
Exchange differences 56 (11) - - 45
At 30 September 2022 690 160 - - 850
Acquired through business combinations - 152 75 - 227
Exchange differences (36) (12) - - (48)
At 30 September 2023 654 300 75 - 1,029
Amortisation
At 1 October 2021 427 285 - 46 758
Disposal (21) (125) - (50) (196)
Charge 13 11 - 4 28
Exchange differences 61 (11) - - 50
At 30 September 2022 480 160 - - 640
Disposal - - - - -
Impairment - - - - -
Charge 13 11 7 - 31
Exchange differences (34) (12) - - (46)
At 30 September 2023 459 159 7 - 625
Net book value
At 30 September 2023 195 141 68 - 404
At 30 September 2022 210 - - - 210
At 1 October 2021 228 69 - 27 324
Amortisation is included in other operating expenses in the consolidated
income statement.
Disposal
The disposal in the prior year related to the sale of JRHP in April 2022.
Impairment
An annual impairment test is performed over the cash generating units ('CGUs')
of the Group where goodwill and intangible assets are allocable to those CGUs.
The net book values are supported by the value in use calculations detailed
further in note 17.
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 16 years.
Customer relationships
Customer relationships were acquired as part of the acquisition of SHC in
December 2013, on the acquisition of JRHP in June 2015. 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 prior year with the sale of JRHP.
In the year to 30 September 2023, the assets acquired were part of the
acquisition of Torpedo Factory Group in March 2023 (note 3). This represents
the value attributed to clients who provided repeat business to the Group on
the strength of these relationships. The fair value was ascertained by
analysing the net present value of recurring maintenance contracts adjusted
for retention rates based on historical customer retention data. The customer
relationships are being amortised on a straight line basis over a 7 year
period from the acquisition date.
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 prior year with the sale of JRHP.
IT assets
The IT assets were acquired as part of the acquisition of Torpedo Factory
Group in March 2023 (note 3) and consist of domain names, computer software
and website development costs.
15 Property, plant & equipment
Group Freehold Leasehold Furniture & Motor vehicles Total
Property improvements equipment £'000
£'000 £'000 £'000 £'000
Cost
At 1 October 2021 - 11 733 - 744
Additions - - 48 - 48
Disposals - - (244) - (244)
Exchange differences - (5) (5) - (10)
At 30 September 2022 - 6 532 - 538
Acquired through business combinations 3,020 41 110 60 3,231
Additions - - 102 - 102
Disposals - (5) (60) (8) (73)
Revaluation 60 - - - 60
Assets classified as held for sale (3,080) - - - (3,080)
Exchange differences - - (9) - (9)
At 30 September 2023 - 42 675 52 769
Depreciation
At 1 October 2021 - 11 578 - 589
Charge - - 97 - 97
Disposals - - (207) - (207)
Exchange differences - (5) (5) - (10)
At 30 September 2022 - 6 463 - 469
Charge - 3 80 9 92
Disposals - (5) (9) (7) (21)
Exchange differences - (1) (8) - (9)
At 30 September 2023 - 3 526 2 531
Net book value
At 30 September 2023 - 39 149 50 238
At 30 September 2022 - - 69 - 69
At 1 October 2021 - - 155 - 155
Company Furniture & Total
equipment
£'000 £'000
Cost
At 1 October 2022 17 17
Additions - -
Disposals (10) (10)
At 30 September 2023 7 7
Depreciation
At 1 October 2022 10 10
Charge 5 5
Disposals (9) (9)
At 30 September 2023 6 6
Net book value
At 30 September 2023 1 1
At 1 October 2022 7 7
16 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 27).
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 2023, the lease of Torpedo Factory Limited's Farnham premises,
includes a break clause after 3 years in July 2025, and expires on 1 July
2027. The lease includes a break penalty of £5k equivalent to 3 months rent.
Right-of-use Assets
Land and buildings Restoration costs Leasehold Motor vehicles Total
£'000 £'000 improvements £'000
£'000 £'000
At 1 October 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
Acquired through business combinations 214 - - 117 331
Additions - - 52 - 52
Amortisation (351) (22) (44) (18) (435)
1,693 100 240 2,132
At 30 September 2023 99
Lease liabilities
Land and buildings Leasehold Motor vehicles Total
£'000 improvements £'000
£'000 £'000
133 2,889
At 1 October 2021 2,756 -
Additions - - - -
Interest expense 72 4 - 76
Lease payments (464) (82) - (546)
At 30 September 2022 2,364 55 - 2,419
Acquired through business combinations 213 - 106 319
Additions - - - -
Interest expense 67 1 4 72
Lease payments (494) (55) (19) (568)
At 30 September 2023 1 2,242
2,150 91
£'000
37
Short-term lease expense
Low value lease expense 20
Expense relating to variable lease payments not included in -
the measurement of lease liabilities
Aggregate undiscounted commitments for short-term leases 33
The maturity analysis of lease liabilities of the Group at each reporting date
are as follows:
Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years
Lease liabilities
£'000 £'000 £'000 £'000 £'000
At 30 September 2023 122 370 508 1,242 -
At 30 September 2022 118 339 415 1,316 231
The Group acts as a lessor through the sub-let of part of the third floor at
its Bonhill Street studio, part of its North Acton studio, and its Farnham
premises. The following is the aggregate minimum future receivables under
these leases.
2023 2022
£'000 £'000
Not later than one year 71 44
Later than one year and not later than five years 16 -
Later than five years - -
Total 87 44
17 Investments
Company Subsidiaries Joint Associate Total
ventures
£'000 £'000 £'000 £'000
Cost
At 1 October 2021 10,200 21 12 10,233
Disposal (1,021) - - (1,021)
At 30 September 2022 9,179 21 12 9,212
Additions 3,546 - - 3,546
At 30 September 2023 12,725 21 12 12,758
Provisions
At 1 October 2021 6,943 - - 6,943
Charge 180 - - 180
At 30 September 2022 7,123 - - 7,123
Charge 229 - - 229
At 30 September 2023 7,352 - - 7,352
Net book value
At 1 October 2021 3,257 21 12 3,290
At 30 September 2022 2,056 21 12 2,089
At 30 September 2023 5,373 21 12 5,406
The increase in cost of £3,546k during the year related to the acquisitions
of a Torpedo Factory Group Limited (£3,031k) and Anders + Kern U.K. Limited
(£515k), see note 3.
The disposal in the prior year related to the disposal of the investment in
JRHP (note 12).
A provision for impairment of £222k has been made to reduce the Company's
investment in Torpedo Factory Group Limited. As explained in note 3, £92k of
the TFG investment relates to additional consideration shares, which were not
exercised and expired on 20 September 2023. Management have made an impairment
to investments matching this amount. £130k of the TFG investment relates to
the fair value of share options issued as part of the acquisition
consideration of the business combination. For the reasons detailed note 30,
Management has taken the decision to impair the investment associated with the
fair value acquisition cost represented by these share options.
A provision for impairment of £7k (2022: £180k) 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 £5,373k
(2022: £2,056k) after charges made in the current year, which is larger than
the net assets of the consolidated statement of financial position of £3,373k
(2022: £401k). 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 architectural operations (Aukett Swanke Limited and Veretec
Limited) are considered to be one CGU. Torpedo Factory Group Limited along
with its subsidiaries Torpedo Factory Limited and TFG Stage Technology 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 architectural operation are:
· the future level of revenue, set at a compound growth rate of
8.12% (2022: 11.30%) 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 4.20% based on the Nov-23
annualise UK CPI index.
· long term growth rate - which has been assumed to be 1.7% (2022:
1.5%) 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 18.13% (2022: 18.32%).
Based on the discounted cash flow projections, the recoverable amount of the
UK CGU is estimated to exceed carrying values by £6,498k (437%). An 8.4% 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 86%, would result in carrying
amounts exceeding their recoverable amount. A decrease in the effective
compound growth rate of revenue to 5.98% instead of the 8.12% 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.
The same assumptions on CPI, the long term growth rate and the discount rate
were also applied for the reviews of the TFG and A+K operations.
· For Anders + Kern the future level of revenue, set at a compound
growth rate of 9.49% (2022: N/A) over the next five years - is based on two
years of budgeted revenue targets, with following years assuming annualised
inflation of earnings (and costs) using a CPI assumption of 4.20% based on the
Nov-23 annualised UK CPI index.
Based on the discounted cash flow projections, the recoverable amount of the
A+K CGU is estimated to exceed carrying values by £1,253k (243%). A 17.3%
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 A+K CGU, or an increase in the discount rate to over 50%, would result
in carrying amounts exceeding their recoverable amount. A decrease in the
effective compound growth rate of revenue to 5.42% instead of the 9.49% noted
above, without a corresponding reduction in costs in the A+K 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.
· For Torpedo Factory Group the future level of revenue, set at a
compound growth rate of 4.51% (2022: N/A%) over the next five years - is based
on two years of budgeted revenue targets, with following years assuming
annualised inflation of earnings (and costs) using a CPI assumption of 4.20%
based on the Nov-23 annualise UK CPI index.
Based on the discounted cash flow projections, the recoverable amount of the
TFG CGU is estimated to exceed carrying values by £2,832k (101%). A 13.0%
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 TFG CGU would result in carrying amounts exceeding their recoverable
amount. The base model is largely insensitive to discount rates as it assumes
the CGU is profitable, with an assumption of a sale of the freehold property
at the balance sheet carrying value which covers the investment carrying
value. A decrease in the effective compound growth rate of revenue to 1.64%
instead of the 4.51% noted above, without a corresponding reduction in costs
in the TFG 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 2023:
Name Country of Proportion Nature of business
incorporation and registered office address of ordinary equity held
(see table below)
2023 2022
Subsidiaries
Aukett Swanke Limited (A) 100% 100% Architecture & design
Aukett Fitzroy Robinson International Limited (A) 100% 100% Architecture & design
Veretec Limited (A) 100% 100% Architecture & design
Swanke Hayden Connell International Limited (A) 100% 100% Architecture & design
Aukett Swanke Mimarlik AS (formerly Swanke Hayden Connell Mimarlik AS) (B) 100% 100% Architecture & design
Shankland Cox Limited (A) 100% 100% Architecture & Engineering
Aukett Swanke Architectural Design Limited (A) 100% 100% Architecture & design
Anders + Kern U.K. Limited (A) 100% 0% Distribution and installation of workplace technology
Torpedo Factory Group Limited (C) 100% 0% Holding company
Torpedo Factory Limited (C) 100% 0% Design, supply and installation of audio visual systems
TFG Stage Technology Limited (C) 100% 0% Design, supply and installation of stage technology, stage engineering and
associated audio visual systems
Swanke Hayden Connell Europe Limited (A) 100% 100% Non-trading
Fitzroy Robinson Limited (A) 100% 100% Dormant
Swanke Limited (A) 100% 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
Foresight Audio Visual Limited (C) 100% 0% Dormant
Pinnerton Video Systems Limited (C) 100% 0% Dormant
Orion Audio Visual Limited (C) 100% 0% 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.
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 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 2023. 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 relationship Measure-ment method
incorporation and registered office address of ordinary equity held
(see below)
2023 2022
Aukett + Heese Frankfurt GmbH (D) 50% 50% Joint venture Equity
Aukett + Heese GmbH (E) 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 Alkaranfil Sk. No:8 Levent, 34330, Istanbul, Turkey
(C) England & Wales The Old Torpedo Factory, St Leonard's Road, London, NW10 6ST, United Kingdom
(D) Germany Gutleutstrasse 163, 60327 Frankfurt am Main, Germany
(E) Germany Budapester Strasse 43, 10787 Berlin, Germany
18 Investment in associate
As disclosed in note 17, 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 2023 2022
£'000 £'000
Assets
Non current assets 213 278
Current assets 7,883 6,229
Total assets 8.096 6,507
Liabilities
Current liabilities (4.953) (3,465)
Total liabilities (4,953) (3,465)
Net assets 3,143 3,042
Reconciliation to carrying amounts:
2023 2022
£'000 £'000
Opening net assets at 1 October 3,041 2,347
Profit for the period 1,194 1,139
Other comprehensive income (46) 86
Dividends paid (1,046) (531)
Closing net assets 3,143 3,041
Group's share in % 25% 25%
Group's share in £'000 786 760
Carrying amount 786 760
Summarised statement of comprehensive income 2023 2022
£'000 £'000
Revenue 16,460 12,198
Sub consultant costs (5,216) (2,861)
Revenue less sub consultant costs 11,244 9,337
Operating costs (9,521) (7,708)
Profit before tax 1,723 1,629
Taxation (529) (490)
Profit for the period from continuing operations 1,194 1,139
Other comprehensive income (46) 86
Total comprehensive income 1,148 1,225
The Group received dividends of £248,000 after deduction of German
withholding taxes (2022: £126,000) 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.
19 Investments in joint ventures
Frankfurt
As disclosed in note 17, the Group owns 50% of Aukett + Heese Frankfurt GmbH
which is based in Frankfurt, Germany.
£'000
At 1 October 2021 201
Share of profits 40
Dividends paid -
Exchange differences 6
At 30 September 2022 247
Share of profits 42
Dividends paid -
Exchange differences (4)
At 30 September 2023 285
The Group received dividends of £nil after deduction of German withholding
taxes (2022: £nil) 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.
2023 2022
£'000 £'000
Assets
Non current assets 4 11
Current assets 371 369
Total assets 375 380
Liabilities
Current liabilities (90) (133)
Total liabilities (90) (133)
Net assets 285 247
2023 2022
£'000 £'000
Revenue 832 824
Sub consultant costs (272) (271)
Revenue less sub consultant costs 560 553
Operating costs (498) (494)
Profit before tax 62 59
Taxation (20) (19)
Profit after tax 42 40
The principal risks and uncertainties associated with Aukett + Heese Frankfurt
GmbH are the same as those detailed within the Group's Strategic Report.
Prague
The Group owned 50% of Aukett sro which is based in Prague, Czech Republic.
The final liquidation of this entity was completed during the prior year and a
final distribution received.
£'000
At 1 October 2021 8
Share of losses (1)
Liquidation dividend distribution paid (7)
Exchange differences -
At 30 September 2022 and at -
30 September 2023
The following amounts represent the Group's 50% share of the assets and
liabilities, and revenue and expenses of Aukett sro.
2023 2022
£'000 £'000
Assets
Current assets - -
Total assets - -
Liabilities
Current liabilities - -
Total liabilities - -
Net assets - -
2023 2022
£'000 £'000
Revenue - -
Sub consultant costs - -
Revenue less sub consultant costs - -
Operating costs - (1)
Loss before tax - (1)
Taxation - -
Loss after tax - (1)
20 Loans and other financial assets
Group
Listed investments Unlisted investments
£'000 £'000 Total
£'000
Cost or valuation
At 1 October 2022 - - -
Acquisition of subsidiary (note 3) 119 50 169
Additions - - -
Disposals - - -
Revaluations (30) (50) (80)
At 30 September 2023 89 - 89
21 Inventories
Group 2023 2022
£'000 £'000
372 -
Goods for resale
The cost of inventories recognised as an expense within cost of sales amounted
to £nil (2022: £nil) in relation to obsolete stock.
22 Trade and other receivables
Group 2023 2022
£'000 £'000
Amounts due after more than one year
Other financial assets at amortised cost 100 184
Total amounts due after more than one year 100 184
Amounts due within one year
Gross trade receivables 3,053 2,514
Impairment allowances (167) (199)
Net trade receivables 2,886 2,315
Other financial assets at amortised cost 289 316
Amounts owed by associates and joint ventures - -
Corporate tax receivable - -
Other current assets 672 478
Total amounts due within one year 3,847 3,109
Total 3,947 3,293
Company 2023 2022
£'000 £'000
Amounts due after more than one year
Other financial assets at amortised cost 100 184
Total amounts due after more than one year 100 184
Amounts due within one year
Trade receivables 11 24
Amounts owed by subsidiaries 111 163
Amounts owed by associate and joint ventures - -
Other financial assets at amortised cost 34 46
Other current assets 12 17
Total amounts due within one year 168 250
Total 268 434
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 £13k (2022: £298k)
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 architecture and Turkey have
been immaterial in the historical period reviewed in order to establish the
expected loss rate at 30 September 2023. 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.
For Torpedo Factory Ltd, TFG Stage Technology Ltd and A+K, provisions on bad
and doubtful debts have been immaterial in the period post acquisition, and in
the historical pre-acquisition period reviewed. Standard payment terms for all
companies are 30 days for smaller works completed. It is usual on larger
projects to agree in advance with the client at the start of the project a
monthly billing schedule which generally leads to relatively low levels of
contracts assets (and consequentially higher levels of contract liabilities).
These larger projects tend to be 30 days although certain JCT contracts may
extend to 60 day terms. Service Contracts as standard are billed annually in
advance for a 12 month period. No loss allowance provision has been made for
trade receivables and contracts assets owed to these Group entities.
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.
However, the Middle East operations of the Group are currently not undertaking
new work and are not expected to trade in the future. No loss allowance has
been made as at 30 September 2023. The balance of contract assets as at 30
September 2023 was AED Nil, and the closing balance of trade receivables
balance comprised 1 outstanding immaterial debtor.
The total impairment allowance is down £32k compared to the prior year,
primarily due to the write-off of old provisions and low amounts of new
provisions required in the year. Impairment allowances as a percentage of
gross trade receivables has therefore decreased to 5.0% (2022: 7.9%).
The comparative loss allowance for the Middle East operating segment as at 30
September 2022 was:
Current 1-30 days past due More than 30 days past due More than 60 days past due More than 90 days past due Total
30 September 2022
Expected loss rate (%) 2% 2% 4% 9% 12%
Gross carrying amount (£'000) 27 - - - 34 61
Loss allowance (£'000) through CSOFP - - - - 4 4
The loss allowance for the Middle East operating segment as at 30 September
2023 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 £nil arises which is taken through the foreign currency translation
reserve.
Contract assets Trade receivables
£'000 £'000
- 4
Opening loss allowance provision as at 1 October 2022
- (4)
Loss allowance provision
Amounts restated through opening Foreign Currency - -
translation reserve
Loss allowance calculated based on ECL loss matrices - -
Additional provisions identified on a case by case basis - 167
- 167
Total loss allowance as at 30 September 2023 - calculated under IFRS 9
The loss allowances decreased by £4k to nil for trade receivables and
remained unchanged at £nil for contract assets during the year to 30
September 2023.
A further allowance for impairment of trade receivables and contract assets is
established on a case-by-case basis amounting to £167k at 30 September 2023
and £195k at 30 September 2022 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:
£'000
At 1 October 2021 272
Loss allowance provision (38)
Disposal of JRHP (32)
Charged to the income statement based on additional case by case provisions 133
Allowance utilised (162)
Exchange differences 26
At 30 September 2022 199
Loss allowance provision (4)
Charged to the income statement based on additional case by case provisions 14
Allowance written-off (29)
Exchange differences (13)
At 30 September 2023 167
23 Trade and other payables
Group 2023 2022
£'000 £'000
Amounts due after more than one year
Amounts owed to associate and joint venture 87 44
Total amounts due after more than one year 87 44
Amounts due within one year
Trade payables 1,808 1,354
Other taxation and social security 1,086 515
Other payables 118 101
Accruals 1,577 1,199
Total amounts due within one year 4,589 3,169
Total 4,676 3,213
Company 2023 2022
£'000 £'000
Amounts due after more than one year
Amounts owed to associate and joint venture 87 44
Total amounts due after more than one year 87 44
Amounts due within one year
Trade payables 117 58
Amounts owed to subsidiaries 2,082 1,212
Other taxation and social security 45 4
Other payables 19 28
Accruals 293 292
Total amounts due within one year 2,556 1,594
Total 2,643 1,638
See note 38 for further details of the amounts due to subsidiaries.
24 Borrowings
Group 2023 2022
£'000 £'000
Secured bank overdrafts 122 232
Mortgage 1,411 -
Secured bank loan (NatWest) 992 -
Secured bank loan (Coutts) 167 417
Total borrowings 2,692 649
Amounts due for settlement within 12 months 2,050 482
Current liability 2,050 482
Amounts due for settlement between one and two years 350 167
Amounts due for settlement between two and five years 292 -
Non current liability 642 167
Total borrowings 2,692 649
Company 2023 2022
£'000 £'000
Secured bank loan 167 417
Total borrowings 167 417
Instalments due within 12 months 167 250
Current liability 167 250
Instalments due between one and two years - 167
Instalments due between two and five years - -
Non current liability 167 167
Total borrowings 167 417
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.
The mortgage and the bank loan (NatWest) are secured by way of a first legal
charge over freehold property, a debenture and cross guarantee from Torpedo
Factory Group Limited, Torpedo Factory Limited and TFG Stage Technology
Limited. The bank loan initially drawn at £1.75m is being repaid at £29k per
month. The loan is at a fixed rate of interest of 3.66%pa.
The mortgage initially drawn in 2018 at £1.73m with a duration of 5 years was
previously extended for a year, and after the year end expired in February
2024, and is therefore wholly shown due for settlement within 12 months. The
mortgage carried interest at base rate + 1.93%pa. The mortgage has recently
been extended for a further 12 month period to February 2025 with a variable
rate of interest of base rate + 5.00%pa.
25 Analysis of net deficit
Group 2023 2022
£'000 £'000
Cash at bank and in hand 522 28
Secured bank overdrafts (note 24) (122) (232)
Net cash included in assets held for sale (note 28) 30 -
Cash and cash equivalents 430 (204)
Mortgage (note 24) (1,411) -
Secured bank loan (note 24) (992) -
Secured bank loan (note 24) (167) (417)
Net deficit (2,140) (621)
26 Deferred tax
Group Freehold property revaluation Tax depreciation Other
on plant and equipment Trading temporary
£'000 losses differences Total
£'000 £'000 £'000
At 1 October 2021 - 33 230 (62) 201
Income statement - 4 42 (1) 45
Exchange differences - 1 1 - 2
At 30 September 2022 - 38 273 (63) 248
Acquired through business combinations (157) (10) 144 18 (5)
Income statement - 6 198 33 237
Revaluation reserve (15) - - - (15)
Exchange differences - - - (1) (1)
At 30 September 2023 (172) 34 615 (13) 464
Company Tax depreciation Other
on plant and equipment Trading temporary
£'000 losses differences Total
£'000 £'000 £'000
At 1 October 2021 (2) - - (2)
Income statement 1 - - 1
At 30 September 2022 (1) - - (1)
Income statement - 204 - 204
At 30 September 2023 (1) 204 - 203
Group 2023 2022
£'000 £'000
Deferred tax assets 625 281
Deferred tax liabilities (161) (33)
Net deferred tax balance 464 248
Company 2023 2022
£'000 £'000
Deferred tax assets 203 -
Deferred tax liabilities - (1)
Net deferred tax balance 203 (1)
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.
27 Provisions
Group Property lease Employee benefit
provision obligations
£'000 £'000 Total
£'000
At 1 October 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
Utilised - (12) (12)
Charged to the income statement - 2 2
Reclassified as Liabilities directly associated with assets in Disposal groups (17) (17)
classified as held for sale
Exchange differences - (12) (12)
At 30 September 2023 210 - 210
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 four 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 and 30 September 2023 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 2023 is
therefore £nil (2022: £nil).
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.
28 Assets and liabilities classified as held for sale
2023
£'000
Non-current assets held for sale (i) 3,080
Current assets held for sale (ii) 128
Liabilities held for sale (ii) (148)
Total assets held for sale 3,060
(i) Freehold Property
Prior to the year end, the board decided to market the freehold property of
The Old Torpedo Factory in West London as the property is larger than is
needed for the Group. Commercial property agents were instructed in October
2023 and the property was valued in July 2023 by a third party firm of
surveyors at £3.08m.
(ii) Aukett Swanke Mimarlik AS (formerly Swanke Hayden Connell Mimarlik AS)
Prior to the year end, the board began discussions with the directors of
Aukett Swanke Mimarlik AS regarding a sale of the subsidiary to local
management. The sale was concluded on 27 December 2023 for a nominal sum.
The following major classes of assets and liabilities relating to Aukett
Swanke Mimarlik AS have been classified as held for sale in the consolidated
statement of financial position as at 30 September 2023:
2023
£'000
Trade and other receivables 65
Contract assets 33
Net cash 30
Assets held for sale 128
Trade and other payables (100)
Contract liabilities (31)
Provisions (17)
Liabilities held for sale (148)
Total net liabilities (20)
29 Share capital
Group and Company 2023 2022
£'000 £'000
Allocated, called up and fully paid
275,355,938 (2022: 165,213,652) ordinary shares of 1p each 2,754 1,652
Number
At 1 October 2021 165,213,652
No changes -
At 30 September 2022 165,213,652
Issue for acquisition of subsidiary (note 3) 110,142,286
At 30 September 2023 275,355,938
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 TR Control Solutions Limited resulted
in an increase in the share capital of 17,800,000 new ordinary shares of 1p,
as disclosed in note 39.
After the year end, in March 2024, the Group announced a share subscription
raising an aggregate up to £425,000 through the issue and allotment of a
total of up to 42,500,000 new ordinary shares of 1p, as disclosed in note 39.
30 Share options
The Company has granted options over its Ordinary Shares to Group employees as
follows:
At 1 October At 30
2022 September 2023 Exercise Earliest Latest
Granted Lapsed price exercisable exercisable
Granted Number Number Number Number Pence date date
6 March 2017 500,000 - (500,000) - 4.25 6 March 2019 6 March 2023
24 Aug 2020 1,000,000 - - 1,000,000 3.60 24 Aug 2022 24 Aug 2026
29 Jun 2021 1,000,000 - - 1,000,000 1.60 29 Jun 2023 29 Jun 2027
20 Mar 2023 - 8,400,000 - 8,400,000 1.00 20 Mar 2025 20 Mar 2029
Total 2,500,000 8,400,000 (500,000) 10,400,000
The 500,000 share options granted on 6 March 2017 related to Beverley Wright,
a former Director of the Company, 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 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.
The 8,400,000 share options granted on 20 March 2023 as part consideration for
the acquisition of Torpedo Factory Group (note 3) are i) 3,700,000 to Freddie
Jenner, a current Director of the Company; ii) 4,700,000 to Jason Brameld a
current employee of the Company. These share options vest after 2 years'
service and are exercisable between 2 and 6 years after grant.
The 8,400,000 options were initially valued at £130k based on a fair value of
1.55p per share using the closing price of Aukett Swanke Group Plc shares on 1
March 2023 being 2.55p, and recognised in the total acquisition cost of the
business combination (note 3). As at the 30 September 2023 the closing share
price of Aukett Swanke Group Plc was 1.825p, and following a subsequent
reduction in share price post year end Management took the decision to impair
the goodwill associated with the fair value acquisition cost represented by
these share options.
In December 2023, all of the 10,400,000 share options were surrendered by the
respective recipients, replaced by the new options under a Company Share
Option Plan. This is further detailed in note 39.
Further details of transactions with related parties can be found in note 38.
31 Cash generated from operations
Group 2023 2022
£'000 £'000
Loss before tax (341) (2,327)
Finance income (9) -
Finance costs 255 95
Share of results of associate and joint ventures (341) (327)
Intangible amortisation 31 28
Intangible impairment - -
Depreciation 92 97
Goodwill impairment - 1,752
Amortisation of right-of-use assets 435 385
Loss on disposal of property, plant & equipment 52 -
Decrease in trade and other receivables 1,405 594
Decrease in inventories 61 -
Decrease in trade and other payables (617) (815)
Change in provisions (10) (586)
Unrealised foreign exchange differences - -
Net cash generated from/(expended by) operations 1,013 (1,104)
Company 2023 2022
£'000 £'000
Loss before income tax (876) (783)
Dividends receivable (248) (133)
Finance costs 24 9
Depreciation 5 4
Provision on investments 7 180
Loss on disposal of fixed assets 1 -
Loss on disposal of subsidiary - 418
Write off of amounts owed by subsidiary on disposal - (479)
Deferred consideration on disposal - 163
Decrease in trade and other receivables 134 20
Increased/(decrease) in trade and other payables 1,005 (112)
Unrealised foreign exchange differences - (9)
Net cash generated from/expended by operations 52 (722)
Changes in liabilities arising from financing activities including changes
arising from cash flows and non-cash changes
Group Non- current loans and borrowings Current loans and borrowings Total
£'000 £'000 £'000
At 1 October 2021 2,767 622 3,389
Cash flows
- Repayment of borrowings - (83) (83)
- Payment of interest - (9) (9)
- Receipt of bank overdraft - 232 232
- 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 2,129 939 3,068
Cash flows
- Repayment of borrowings - (583) (583)
- Payment of interest - (161) (161)
- Receipt of bank overdraft - - -
- Payment of lease liabilities - (496) (496)
Non-cash flows
- Amounts recognised on business combinations 1,044 1,901 2,945
- Effects of foreign exchange - - -
- Loans and borrowings classified as non-current at 30 September 2023 (781) 781 -
- Interest accrued in period - 161 161
At 30 September 2023 2,392 2,542 4,934
Company Non- current loans and borrowings Current loans and borrowings Total
£'000 £'000 £'000
At 1 October 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
Cash flows
- Repayment of borrowings - (250) (250)
- Payment of interest - (24) (24)
- Receipt of bank loan - - -
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified as non-current at 30 September 2023 (167) 167 -
- Interest accrued in period - 24 24
At 30 September 2023 - 167 167
32 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
Group 2023 2022
£'000 £'000
Net trade receivables 2,886 2,315
Contract assets 790 1,119
Other financial assets at amortised cost 389 500
Accrued income - 23
Inventories 372 -
Cash at bank and in hand 522 28
Loans and receivables measured at amortised cost 4,959 3,985
Trade payables (1,808) (1,354)
Amount owed to associate and joint ventures (87) (44)
Other payables (118) (101)
Accruals (1,577) (1,199)
Lease liabilities (2,242) (2,419)
Secured bank loans and overdrafts (2,692) (649)
Financial liabilities measured at amortised cost (8,524) (5,766)
Net financial instruments (3,565) (1,781)
Company 2023 2022
£'000 £'000
Net trade receivables 11 24
Amounts owed by subsidiaries 111 163
Accrued income - 11
Other financial assets at amortised cost 134 230
Cash at bank and in hand 1 457
Loans and receivables measured at amortised cost 257 885
Trade payables (117) (58)
Amounts owed to subsidiaries (2,082) (1,212)
Amount owed to associate and joint ventures (87) (44)
Other payables (19) (28)
Accruals (293) (292)
Secured bank loan (167) (417)
Financial liabilities measured at amortised cost (2,765) (2,051)
Net financial instruments (2,508) (1,166)
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 24 the Coutts bank loan and overdraft (£232k at 2022 and
£122k at 2023 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:
2023 2022
£'000 £'000
Group 1,900 2,641
Company 128 349
Other receivables in the consolidated statement of financial position include
a £244k rent security deposit (2022: £238k) in respect of the Group's London
studio premises. The rent deposit redeems a cash sum of £279k at the end of
the term of the lease in May 2028.
33 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 2023 2022
£'000 £'000
EU Euro (155) 45
Turkish Lira - 16
UAE Dirham - 2,283
UK Sterling - (12)
US Dollar 51 54
Net financial instruments held in foreign currencies (104) 2,386
Company 2023 2022
£'000 £'000
EU Euro (86) 46
Turkish Lira - 16
US Dollar 1 18
UAE Dirham - 113
Net financial instruments held in foreign currencies (85) 193
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.
2023 2022
Profit Equity Profit Equity
£'000 £'000 £'000 £'000
Group (10) (64) 29 (29)
Company (8) - 18 -
The following foreign exchange gains / (losses) arising from financial assets
and financial liabilities have been recognised in the income statement:
2023 2022
£'000 £'000
Group (57) 258
Company (46) 280
34 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 32.
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 post-allowance
pre-allowance allowance 2023
2023 £'000 £'000
£'000
Not overdue 2,065 - 2,065
Between 0 and 30 days overdue 373 - 373
Between 30 and 60 days overdue 371 - 371
Greater than 60 days overdue 77 - 77
Total 2,886 - 2,886
Receivables loss Receivables post-allowance
pre-allowance allowance 2022
2022 £'000 £'000
£'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
The processes undertaken when considering whether a trade receivable may be
impaired are set out in notes 2 and 22.
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 22.
The concentration of counterparty risk within the £3,947k (2022: £3,434k) 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.
2023 2022
£'000 £'000
Largest exposure 540 640
Second largest exposure 191 295
Third largest exposure 163 252
The Group's principal banker is Coutts & Co, a member of NatWest Group.
At 30 September 2023 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 £372k (£374k cash less £2k overdrafts) with NatWest.
(2022: the largest exposure to a single financial institution represented by a
net overdrawn position of £229k held with Coutts & Co.).
Company
The Company only has £11k trade receivables (2022: £24k) 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 37.
35 Interest rate risk
Group 2023 2022
£'000 £'000
Rent deposit 278 278
Mortgage (1,411)
Secured bank loan (NatWest) (992) -
Secured bank loan (Coutts) (167) (417)
Secured bank overdrafts (122) (232)
Interest bearing financial instruments (2,414) (371)
Company 2023 2022
£'000 £'000
Secured bank loans (167) (417)
Interest bearing financial instruments (167) (417)
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 Coutts bank loan and overdraft carry interest at 4.05%pa (loan) and 3%pa
(overdraft) above the Coutts Base rate for the relevant currency. The NatWest
bank loan carries interest at a fixed rate of interest at 3.66%pa. The
mortgage until expiry in February 2024 carried interest at base rate +
1.93%pa. In February 2024 a new 1 year mortgage extension was agreed carrying
interest at base rate + 5%pa.
A 1% rise in 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 interest rates would have an equal but opposite
effect.
2023 2022
£'000 £'000
Group (14) (4)
Company (2) (4)
36 Liquidity risk
The Group's cash balances are held at call or in deposits with very short
maturity terms.
At 30 September 2023 the Group had £850,000 (2022: £850,000) of gross
borrowing facility and £250,000 net borrowing facility (2022: £250,000)
under its United Kingdom bank overdraft facility with Coutts & Co. In
November 2023 and again in March 2024 Coutts & Co renewed the overdraft
facility maintaining the net overdraft facility at £250,000. It is now next
due for review in October 2024.
The maturity analysis of financial liabilities, including expected future
charges through the Income Statement is as shown below.
Group Borrowings Lease liabilities Other financial liabilities Total
£'000
£'000
Timing of cashflows £'000 £'000
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
Timing of cashflows
Within one year 2,119 556 3,503 6,178
Between one and two years 368 556 87 1,011
Between two and five years 297 1,289 - 1,586
Greater than five years - - - -
2,784 2,401 3,590 8,775
Expected future charges through the income statement (92) (159) - (251)
Financial liabilities at 30 September 2023 2,692 2,242 3,590 8,524
Lease liabilities includes the finance lease on leasehold improvements and the
land and buildings office lease (see note 16).
Company Borrowings Other financial liabilities Total
£'000
Timing of cashflows £'000 £'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
Borrowings Other financial liabilities Total
£'000
Timing of cashflows £'000 £'000
Within one year 172 2,511 2,683
Between one and two years - 87 87
Between two and five years - - -
172 2,598 2,770
Expected future charges through the income statement (5) - (5)
Financial liabilities at 30 September 2023 167 2,598 2,765
37 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 24. At 30 September 2023 the overdrafts of its United Kingdom
subsidiaries guaranteed by the Company totalled £124,000 (2022: £729,000).
The Company and certain of its United Kingdom subsidiaries are members of a
group for Value Added Tax (VAT) purposes. At 30 September 2023 the net VAT
payable balance of those subsidiaries was £406,000 (2022: £285,000).
At the year end, one of the Group's Middle East subsidiaries had outstanding
letters of guarantee totalling £74,000 (2022: £74,000). 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.
Torpedo Factory Group Limited has provided an unlimited cross guarantee and
debenture to National Westminster Bank plc, for liabilities arising in Torpedo
Factory Limited and TFG Stage Technology Limited. The contingent liability at
30 September 2023 was £Nil.
Prior to acquisition, Torpedo Factory Group Limited received a grant of £137k
to assist in expanding its operations into the 'smart building infrastructure'
sector. As at the year end, not all of the grant conditions had been satisfied
and as such only £8k of the grant has been recognised in income. If the grant
conditions are not met then the grant could be repayable. No provision has
been made in the accounts as the directors consider that the grant conditions
will be satisfied.
38 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 2023 2022
£'000 £'000
Short term employee benefits 1,611 1,235
Post employment benefits 158 110
Total 1,769 1,345
The key management personnel of the Company comprises its Directors.
Company 2023 2022
£'000 £'000
Short term employee benefits 543 613
Post employment benefits 49 43
Total 592 656
Transactions and balances with associate and joint ventures
The Group makes management charges to Aukett + Heese Frankfurt GmbH. The
amount charged during the year in respect of these services amounted to
£47,000 (2022: £46,000). Dividends of £nil (2022: £nil) were received from
Aukett + Heese Frankfurt GmbH during the year. The amount owed to the Group by
Aukett + Heese Frankfurt GmbH at the balance sheet date was £nil (2022:
£nil).
The Group makes management charges to Aukett + Heese GmbH. The amount charged
by the Group during the year in respect of these services amounted to £87,000
(2022: £85,000). Dividends of £248,000 (2022: £126,000) were received from
Aukett + Heese GmbH during the year. The Group received a loan from Aukett +
Heese GmbH amounting to £43,000 (2022: £44,000). The amount owed by the
Group to Aukett + Heese GmbH at 30 September 2023 was £87,000 (2022:
£44,000).
As disclosed in note 17, 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.
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 17.
The Company made management charges to its subsidiaries for management
services of £373,000 (2022: £660,000) and paid charges to its subsidiaries
for office accommodation and other related services of £96,000 (2022:
£84,000).
At 30 September 2023 the Company was owed £111,000 (2022: £163,000) by its
subsidiaries and owed £2,082,000 (2022: £1,212,000) 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.
39 Post balance sheet events
Acquisition of ecoDriver
On 17 October 2023 the Group acquired 100% of the voting equity instruments in
TR Control Solutions Limited ("TRCS"), a developer of energy management
software and provider of energy efficiency services. Shortly after completing
the acquisition Management changed the name of the company to ecoDriver Ltd
("ecoDriver").
The acquisition is a further step in the Group's strategy to become a leading
provider of Smart Building technology.
The financial effects of this transaction have not been recognised at 30
September 2023. The operating results and assets and liabilities of the
acquired company will be consolidated from 17 October 2023.
Provisional
17 Oct-23
£'000
Goodwill 498
Trade and other receivables 52
Assets 550
Trade and other payables 77
Contract liabilities 54
Net overdraft 27
Interest bearing loans and borrowings 32
Liabilities 190
Total net assets 360
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) 17,800,000 Ordinary Shares in Aukett Swanke Group Plc at
an issue price of 1.525p based on the closing price of Aukett Swanke Group Plc
shares on 17 October 2023.
ii) £89,000 in cash. Half the cash consideration was
payable on completion, with the remaining £44,500 payable on the first
anniversary of completion.
£'000
Shares in Aukett Swanke Group Plc 271
Cash 89
Total acquisition cost 360
Whilst fair value adjustments will result in recognised goodwill of less than
£498k, it is expected that some goodwill will be recognised. The goodwill
represents items, such as the assembled workforce, which do not qualify as
assets.
Acquisition of RTS Technology Solutions Limited
On 20 March 2024 Torpedo Factory Ltd, a wholly owned subsidiary of the Group,
acquired certain assets from the liquidator of RTS Technology Solutions
Limited which formerly traded as Vanti ("RTS"). RTS was a master systems
integrator, and a developer of building operating system software and Kahu
workplace technology software and hardware.
The acquisition is an important step in the Group's strategy to become a
leading provider of Smart Building technology, and in particular to develop
Torpedo Factory Group as a Master Systems Integrator, and for the Group to
expand its range of smart building software.
The financial effects of this transaction have not been recognised at 30
September 2023. The acquisition will affect the assets, liabilities, and
financial performance of Torpedo Factory Ltd from 20 March 2024.
Provisional
20 Mar-24
£'000
Property, plant and equipment 20
Other intangible assets 66
Inventories 1
Assets 87
Total net assets 87
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 £37,003 in cash which was payable
on completion, and contingent deferred consideration of up to £50,000 in cash
payable over a period of up to 18 months.
£'000
Cash 37
Deferred consideration 50
Total expected acquisition cost 87
Whilst fair value assessments have not been completed, it is not expected that
any goodwill will be recognised.
Share subscription
On 20 March 2024 the Group announced that it is raising in aggregate up to
£425,000 through the issue of new equity, for the purposes of providing the
Group with working capital for its increased scale. £275,000 was raised by
way of direct subscriptions by certain existing and institutional investors
(the "Investors"). In addition, certain directors and managers of the
Group indicated their intention to subscribe for up to £150,000 on the same
terms as the Investors (the "Subscription").
In aggregate the Subscription will result in the issue and allotment of a
total of up to 42,500,000 new ordinary shares of 1 penny each in the Company
(the "Subscription Shares") at an issue price of 1 penny. Subscribers will
receive warrants, exercisable for 3 years, to be issued (subject to certain
conditions) on the basis of one warrant for every one Subscription Share with
an exercise price of 1 penny. The Subscription Shares are being issued under
the Company's existing share authorities; the warrants will require a specific
authority to be sought at the forthcoming annual general meeting.
Property Mortgage
The mortgage that subsisted during the year, with balance of £1,411k as at 30
September 2023, expired in February 2024. The mortgage carried interest at
base rate + 1.93%pa.
In February 2024, the mortgage was renewed for a further 12 month period to
February 2025 carrying a higher interest rate of base rate + 5.00%pa.
Company Share Option Plans
All Employee Share Option Plan
In November 2023 the Company implemented an All Employee Share Option Plan
("AESOP"). The AESOP entitles all eligible employees to invest between £10
and £150 per month in purchasing shares in the Group from their pre-tax
salary. The Group will match this contribution pound-for-pound on the first
£50 per month by purchasing matching shares for the relevant employee as a
staff retention tool. These are ordinarily forfeit if the relevant employee
leaves within 3 years.
Management Share Ownership Plan
In December 2023 the Company created a Management Share Ownership Plan
("MSOP"). The Company recognises that the management of the Group's businesses
wish to build an ownership stake. Therefore, it invited 34 members of the
senior management of the Company and UK subsidiaries to commit to purchasing
shares. 32 of the 34 have made a contractual commitment to spend an amount
equivalent to between 2.5% and 10% of their gross annual salary on the
purchase of Company shares, until such time as each of them own a minimum of
either 0.25% or 0.5% of the Company's issued share capital - though they are
free to acquire larger stakes if they wish. Shares will be purchased on the
open market subject to concert party considerations.
All who have expressed an intent have indicated they will be purchasing their
shares within their pension plans, as their investments are intended to build
long term stakes in the business.
Company Share Option Plan and surrender of existing EMI options
In December 2023 the Company created a Company Share Option Plan ("CSOP").
Pursuant to the CSOP, an aggregate 25,591,666 options have been granted to the
32 members of the senior management team of the company and UK subsidiaries
who have made commitments under the MSOP. The CSOP options vest between the
third and tenth anniversary of grant, and are exercisable at 1.0p, being the
nominal value of each share and a 17.6% premium to the closing mid-market
price on 22 December 2023 (save for 1,000,000 CSOP replacement options granted
to Antony Barkwith, Director, as detailed below).
Additionally, the Company has agreed with option holders in the Company's
existing EMI option scheme for the surrender of their options, comprising in
aggregate 10.4m EMI options. These replacement options are included within the
CSOP grants detailed above.
A total of 8.4m CSOP options are being granted at an exercise price of 1.0p
per share to Freddie Jenner (Group COO) and Jason Brameld (Group CTO, a
non-board PDMR) to replace 8.4m EMI options that were issued on the purchase
of Torpedo Factory Group Ltd ("TFG"). The EMI options surrendered had an
exercise price of 1p.
Antony Barkwith (Group Finance Director) has surrendered 1,000,000 EMI options
with an exercise price of 1.6p which are being replaced with 1,000,000 CSOP
options with an exercise price of 1.6p, and surrendered 1,000,000 EMI options
with an exercise price of 3.6p which are not being replaced.
Freddie, Jason and Antony are also each receiving CSOP options in their
capacity as parties who have made the MSOP commitment.
CSOP Options being granted to Directors/PDMRs are as follows:
Name Number of
CSOP options Exercise Price Notes
Nick Clark 2,000,000
1.0p
Freddie Jenner 4,700,000
1.0p
Of which 3.7m replace EMI
Jason Brameld (PDMR) 5,700,000 1.0p
Of which 4.7m replace EMI
Tony Barkwith 1,000,000
1.0p
1,000,000 1.6p
Replacing EMI
The total 25,591,666 CSOP options now in issue represent 8.73% of the shares
in issue. There are no EMI options outstanding.
40 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 126. A
description of the Group's operations and principal activities is given within
the Strategic Report.
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