Results for the year ended 30 September 2022
28/03/2023 07:00
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RNS Number : 3836U Aukett Swanke Group PLC 28 March 2023
Aukett Swanke Group Plc
("Aukett Swanke", the "Company", or, together with its subsidiaries, the
"Group")
Final audited results
for the year ended 30 September 2022
Aukett Swanke Group plc, the international group of architects, interior
designers and engineers announces its final audited results for the year ended
30 September 2022.
Highlights
Period under review
· Revenue less sub consultant costs (from continuing operations) up
13% to £7.127m (2021: £6.305m) due to increases from the UK operations.
· Trading loss before tax (from continuing operations) reduced to
£72k (2021: £595k).
· Continued strong performance from its German associate and joint
venture, recording profit of £327k (2021: £186k).
· Disposal of John R Harris & Partners for £1.1m (AED 5.0m),
and discontinuation of remaining loss making UAE businesses.
· One-off impairment of £1.75m goodwill from historic mergers to
better reflect the tangible position of the current operations.
Since the financial year end
Acquisition of Torpedo Factory Group Limited which:
· expands the Group technology offering relating to building
systems;
· increases access to recurring revenue opportunities;
· strengthens the financial position of the enlarged Group; and
· strengthens the executive management team.
Clive Carver, Chairman said:
"Our focus is on growing both the core architecture businesses and our
building systems capabilities."
Robert Fry, CEO said:
"During the period under review, market conditions across the Group's
continuing business segments improved, reflected in higher revenues and
stronger trading results in the second half of the year.
This momentum has continued after the year end. We continue to receive repeat
instructions from longstanding clients and win new business, resulting in an
improved confirmed order book for the architecture and interior design
businesses, which is approximately 23% higher than the same time last year.
Having invested in retaining our existing key staff and capabilities during
the challenging times of the COVID-19 pandemic, we are now in a sustained
period of growth, with the UK architecture and interior design operations
recruiting to increase technical staff numbers continually over the past nine
months to service this growing workload.
Significant investments have also been made in business resilience measures to
facilitate effective remote working, improving Revit 3D modelling and
rendering capability whilst simultaneously increasing resilience to
cybersecurity threats."
Copies of the 2022 audited accounts will be available today on the Company's
website (www.aukettswankeplc.com (http://www.aukettswankeplc.com) ) for the
purposes of AIM rule 26 and will be posted to shareholders who have elected to
receive a printed version in due course.
Annual General Meeting ("AGM") and proposed Board Changes
Notice of the AGM, which is expected to be held on 21 April 2023, will be
posted to shareholders in due course.
Robert Fry's appointment as interim CEO is scheduled to end at the conclusion
of the AGM, when it is proposed that Nick Clark become the Group's permanent
Chief Executive, with Robert becoming a part time executive director and
Deputy Chairman, with principal responsibility for the Group's architecture
businesses.
Raul Curiel has informed the Board that he does not propose to offer himself
for re-election at the forthcoming AGM. The Company is in advanced stages on
the appointment of a new independent Non-Executive Director and looks forward
to updating on this in due course.
For further information please contact:
Aukett Swanke Group
Plc
+44 (0) 20 7843 3000
Clive Carver
(Chairman)
Robert Fry (Chief Executive)
Antony Barkwith (Group Financial
Director)
Strand Hanson Limited (Financial and Nominated Adviser)
+44 (0) 20 7409 3494
Richard Johnson, James
Bellman
Zeus Capital Limited
(Broker)
+44 (0) 20 3829 5000
Simon Johnson, Louisa Waddell
Investor/Media
+44 (0) 7979 604 687
Chris Steele
Chairman's statement
I am pleased to present the financial statements for the year ended 30
September 2022.
Leadership changes
Nicholas Thompson
After 28 years with the Group, of which the last 17 years were as Chief
Executive, Nicholas Thompson retired at the end of December 2022.
Nicholas masterminded the 2005 merger between Aukett and Fitzroy Robinson and
the 2013 merger between Aukett Fitzroy Robinson and Swanke Hayden Connell to
form the current Aukett Swanke Group. He then led the integration of these
businesses and was instrumental in the Group's international expansion.
In recent years he led the Group through difficult times, succeeding in
preserving for shareholders what might otherwise have been a casualty to
either the Global Financial Crisis or the Covid inspired downturn.
Nicholas will act as a consultant to the Group and continue to play a leading
role at the WREN, the industry's leading professional indemnity insurer.
Raul Curiel
Raul joined the Group in 1978 retiring in 2015. He returned as Non-Executive
Chairman in early 2019 until 8 December 2022, when he relinquished the
Chairman role but continued as a Non-Executive Director.
Raul was one of the Group's most prominent and award winning architects and
responsible for numerous notable buildings. More recently as Non-Executive
Chairman he led the board in helping set and oversee the Group's strategic
plans.
Raul has informed the board that he does not propose to seek re-election at
the AGM scheduled for 21 April 2023 and will therefore leave the board at that
time.
The acquisition of Torpedo Factory Group ("TFG") and the expansion of the
Group's activities into Smart Buildings was conceived under the leadership of
Nicholas and Raul and will be actively pursued by the current board.
The Investment Case
Background
The past few years have been difficult, and the board's focus was principally
to preserve the Group as intact as possible to form the base for future
growth.
As is set out more fully in the Chief Executive's Report, this now has largely
been achieved, with the continuing businesses trading better than for some
time and those businesses and offices not deemed to be long term either sold,
closed, or being moved onto a licence basis where the responsibility for
profit rests with the local office concerned rather than the Group.
UK Businesses
Aukett Swanke Limited ("ASL") (design and architecture) and Veretec Limited
("Veretec") (executive architecture) are core and key to the Group's future.
These businesses can trace their roots back to 1906 and currently employs over
80 FTE technical staff of which 54 are qualified architects or architects in
training.
The Group has enjoyed notable success across a range of building types,
including some of the most iconic in the UK. In recent years this success has
continued for buildings in the commercial office, research and education,
mixed use hybrid and hospitality sectors. A feature of these businesses is the
number of repeat instructions from leading developers.
German investments
We also have meaningful investments in two successful German architecture
businesses. These are a 25% interest in the Berlin based Aukett + Heese GmbH
and a 50% interest in the Frankfurt based Aukett + Heese Frankfurt GmbH.
As we account for these investments under IFRS rules, which do not separately
show revenues, shareholders may not fully realise the strength of these
investments.
The Berlin business employed an average of 90 FTE technical staff with revenue
of £12.20m in the year to 30 September 2022. The Frankfurt business employed
an average of 11 FTE technical staff with revenue of £1.65m in the year to 30
September 2022. In aggregate, the dividends received in the past two financial
years were £656,000.
These businesses are well positioned for further success.
Discontinued Businesses
In recent years we have exited by sale or closure from the international
offices in which trading was difficult.
Public Company Status
We are the UK's only listed architecture business and with the costs involved
in maintaining the listing this could be seen as an unnecessary burden.
Alternatively, it could be seen as a differentiating feature that can help
fuel further growth. We believe the latter is the case and are working hard to
make use of the listing.
That said there is little benefit in operating as a public company with a
market capitalisation below £4 million, as has been the case recently. We
also have infrastructure in place that could handle operations significantly
greater than at present. We therefore need to grow.
Growth
To increase the Group's share price, and hence market capitalisation, we need
to be profitable and to grow that profit. Some improvement can be expected
from actions already taken. In part from growth in the existing core
businesses, which have the capacity to do better as markets improve, and in
part from the savings related to no longer being involved in the discontinued
businesses.
Growth in the architecture businesses is expected to come from further
investment in the core business through additional staffing and from targeted
mergers.
We recognise that growth from the core architecture businesses solely through
additional staffing will take time. The UK businesses have been actively
recruiting for the past 9 months which represents a significant upfront
investment, the benefits of which will take time to be seen.
A characteristic of our industry is the changing nature of ownership. In
previous decades successful architects in their thirties and forties would
typically transition to ownership via the partnership structures in place at
most firms, which was good for renewal and motivation but also provided an
exit to older architects looking to sell.
The younger generation of architects seem now less inclined or less able to
take on the large financial commitments required to become owners, leaving a
growing number of firms without viable ownership succession plans. As the
UK's only listed architecture business, we are able to offer our shares to the
owners of such practices and will be looking to use this competitive advantage
to our benefit.
We are also looking to broaden the Group's exposure to the property market by
moving into closely allied fields but where the business model is more
favourable than with a traditional architecture business and in particular
with recurring revenues and where growth is not solely a function of staff
numbers.
A traditional architecture business has high fixed costs (principally staff,
office space, technology and insurance) and where each project has to be won
in competition with others who may not be bidding at economic rates and where
once the project is completed there is no further income until the next
project is won.
This provides a high barrier to entry, which deters new entrants. However, as
we already have these fixed costs, we propose to make the most of them by
spreading them over a wider pool of architecture staff and in particular staff
at the director / project leader level, which effectively determines how many
projects can be worked on.
A different business model, but one still focused on the property sector, is
one where revenues are generated monthly throughout the lifetime of a
building; where technology is used to its utmost; where rapid growth is
achievable without the often time consuming and expensive recruitment of
additional staff; and where short-term fluctuations in economic activity do
not dictate customer buying decisions.
We have therefore identified extending our property related activities via the
deployment of new technologies. The first venture relates to developing a
market presence in the provision of technical systems in buildings.
Torpedo Factory Group
The acquisition of TFG in March 2023 is the first step in broadening the
Group's activities. Further details of the acquisition are detailed in the
Post balance sheet event note 35.
In comparison with the traditional architecture business model, which has high
fixed costs and where almost all of the income from a building is at the start
of its life with little or no recurring income, smart buildings can generate
predictable income over the lifetime of the building and is a business that is
scalable without adding proportionately to staff numbers.
TFG has a foothold in the provision of smart buildings with further
acquisition opportunities identified to extend the enlarged Group's smart
buildings offering. As such we believe it to be an ideal complement to the
traditional architecture business.
Additionally, having a significant portion of the Group revenues from
recurring payments on longer term contracts is also expected to result in a
re-rating of the enlarged Group's shares.
New board
While the extent of the senior management changes are greater in number than
typical, these have been a combination of inter alia, long-term succession
planning, making the current transition easier to manage, and the recent TFG
acquisition.
The changes allow the board to be refreshed to not only assist in the
direction of the Group but also to acknowledge prevailing corporate
governance, as is appropriate for the Group, at its current stage.
Chairman
My first contact with the Group was in 2006 as the Group's nominated adviser
and broker, since when I followed the Group's progress with great interest,
becoming a Non-Executive Director in 2019.
Executive management team
Robert Fry, who is another of the Group's leading and longstanding architects,
and who became Interim Chief Executive following the retirement of Nicholas
Thompson, leads the management team.
Nick Clark, the founder and CEO of TFG joined the board on 20 March 2023 on
completion of the TFG acquisition and will take the lead in developing the
Group's presence in the smart building sector.
Nick founded the TFG business in 1997. Prior to that he studied physics at
Imperial College followed by an MPhil in Microelectronic Engineering and
Semiconductor Physics at the University of Cambridge.
Robert's appointment as interim CEO is scheduled to end at the conclusion of
the annual general meeting, when it is proposed that Nick become permanent
Group Chief Executive, with Robert becoming a part time Executive Director and
Deputy Chairman with principal responsibility for the Group's architecture
businesses.
Antony Barkwith, who has been Group Finance Director since 2019, continues in
that role for the enlarged Group.
Non-Executive directors
As noted above Raul Curiel has informed the board that he does not propose to
offer himself for re-election at the forthcoming Annual General Meeting.
We are in advanced stages on the appointment of a new independent
Non-Executive Director and look forward to updating on this in due course.
Further biographical details of the board are set out on pages 7-8.
Outlook
The Group's UK architecture businesses and its German investments are high
quality operations with strong brands and a history of delivering outstanding
buildings.
The effective stewardship of the Group in recent years has provided the firm
base for meaningful and scalable growth in the coming years. The acquisition
of TFG is the first step on this path.
We will now look for further growth in the UK architecture business and work
towards becoming a master systems integrator in the Smart Buildings arena,
where scalability is not dependent solely on headcount.
Clive Carver
Chairman
27 March 2023
Board of Directors
Clive Carver (Non-Executive Chairman) *(+ #)
FCA FCT Aged 62
Clive became Chairman in December 2022 having joined the board in May 2019 as
a Non-Executive Director.
He has been the Chairman of AIM listed Caspian Sunrise PLC since 2006, and
over the past decade has been on the boards of 8 companies listed on the
London Stock Exchange, often in the role of Chairman.
He spent 15 years as a Qualified Executive with a number of City broking firms
and was until 2011 Head of Corporate Finance at finnCap. He qualified as a
Chartered Accountant with Coopers & Lybrand and has worked in the
corporate finance departments of Kleinwort Benson, Price Waterhouse, Williams
de Broe and Seymour Pierce. He is also a qualified Corporate Treasurer.
Raúl Curiel (Non-Executive Director and former Non-Executive Chairman) *(+ #)
BA(Hons) MArch Aged 76
Raúl's extensive career as a professional architect spanned some 40 years
before his retirement from Aukett Fitzroy Robinson in 2015. During this
period, he delivered over 300,000sqm of space in Central London, throughout
the rest of the UK and internationally, specialising in the design of
large-scale corporate offices, business parks and master planning.
As well as a practising architect, he has been Chairman of Fitzroy Robinson,
European Managing Director of its successor Aukett Fitzroy Robinson, and
subsequently a Non-Executive Director of the Group until 2010. He was
appointed Non-Executive Group Chairman in 2019.
In December 2022 Raúl passed the Group Chairman role to Clive Carver, and has
since continued as a Non-Executive Director.
Robert Fry (Chief Executive Officer) (#)
BA(Hons) DipArch MA RIBA Int'l AIA Aged 66
Robert was appointed CEO of the Aukett Swanke Group Plc Board in January 2023
having joined the Board in March 2018 as Executive Director and Managing
Director - International. Following his graduation from Sheffield University
he spent his formative years at Milton Keynes Development Corporation. In 1987
Robert became a founding member of Swanke Hayden Connell's London office
joining its Board in 2002, becoming Managing Director of the UK and Europe
group in 2005.
Robert works closely with the Chairman and Group Finance Director in the
setting and development of the Group's overall strategy. His considerable
property and construction experience has been used to allow the development of
ASG's businesses.
Robert's appointment as interim CEO is scheduled to end when a permanent Group
Chief Executive is appointed, at which point Robert will become a part time
Executive Director and Deputy Chairman with principal responsibility for the
Group's architecture businesses.
Antony Barkwith (Group Finance Director & Company Secretary)
FCA MPhys (Hons) Aged 43
Tony is the Group Finance Director of Aukett Swanke Group Plc. He joined the
Group in November 2018 as Group Financial Controller, was promoted to Group
Finance Director (non-Board) in April 2019 and was subsequently appointed to
the Board in July 2019.
Tony is a Chartered Accountant, having qualified with BDO LLP, and has a
master's degree from the University of Warwick. He was previously Group
Financial Controller for Advanced Power, an international power generation
developer, owner and asset manager, working there from 2010 until 2018.
Nick Clark (Executive Director)
BSc(Hons), MPhil Aged 48
Nick was appointed as an executive director of the Group in March 2023
following the acquisition of TFG.
Nick is chief executive of TFG. He founded the business in 1997 and has grown
it through a combination of acquisitions and organic growth. In June 2022,
Nick was appointed a non-executive director at Drumz plc, the AIM-listed
investing company focused on investing in and acquiring established technology
businesses. Prior to starting TFG Nick studied physics at Imperial College
graduating with a BSc Hons 2(i) followed by an MPhil in Microelectronic
Engineering and Semiconductor Physics at the University of Cambridge.
Board committees
The board has the following committees
· Audit Committee
· Remuneration Committee
· Nomination Committee
However, in recent times given the relatively small size of the board it has
been the board as a whole that has taken the lead in the work otherwise
delegated to the committees.
Following the appointment of additional Non-Executive Directors, the
composition of the committees will be reviewed.
* Member of the Audit Committee
(+) Member of the Remuneration Committee
(#) Member of the Nomination Committee
Chief Executive's Report
I am pleased to present my first report as Chief Executive.
Business Review
Overview
During the period under review and subsequently, market conditions improved
across the full range of the Group's continuing businesses, although the
improvements were generally seen towards the end of that period.
We continue to receive repeat and new business instructions that have resulted
in an improved confirmed order book, which is approximately 23% higher than
the same time last year.
In addition, we have taken action to deal with those parts of the Group that
your board did not consider to be in shareholders' interests to continue with
over the longer term.
United Kingdom
Notable Projects
Our architectural design business, Aukett Swanke Limited, saw the completion
of the STEAMhouse development for Birmingham City University which has been
shortlisted for a BCO award. Both the EQ Office Headquarters building in
Bristol for CEG and an office building extension in Westminster for Asticus
have started on site.
Planning consents were granted for a mixed use office and residential
development in Maidenhead, and 7 Princes Street in the City of London, the
latter being a significant office strip back-to-frame refurbishment of a
Fitzroy Robinson designed 1970s office building.
Interior design projects under way for prestigious clients include a new
workplace strategy for a major international bank and a 196 key luxury hotel
in London.
Veretec, our executive architecture business, completed the 21,300 sqm
Featherstone building for Derwent working with Skanska and Morris + Company.
Projects in progress include Holloway Park, the site of the former women's
prison, a residential development for Peabody with AHMM and two prominent
buildings on Moorgate for Osborne with Ben Adams. Heritage projects under way
include the Grade ll Listed 41 Lothbury for Pembroke RE with Stiff +
Trevellion and Greycoat Place in Westminster for Victoria Spaces with SPPARC.
Investing in the future
We have also continued to focus upon retaining our existing staff and
recruiting new staff to service this workload.
Significant investments have also been made in business resilience measures to
facilitate effective remote working, improving Revit 3D modelling and
rendering capability whilst simultaneously mitigating cybersecurity
threats.
German Investments
The Continental group of operations were once again the best performing of the
group's geographic operations this year with profits (excluding Group
management charges) of £0.42m (2021: £0.33m).
The main contributor was our associate office Aukett + Heese in Berlin, which
with its sister joint venture company in Frankfurt, continued to navigate
around the now post-pandemic era for the third year running.
Berlin celebrated two major topping-out ceremonies on the 140m tall, 34 storey
Edge East Side Tower, let to Amazon and the tallest building in Berlin and the
residential complex of BUWOG Bauträger GmbH, consisting of three new
high-quality buildings and a renovated old building of 109 apartments. The
57,000 m² Forum Stieglitz refurbishment of Berlin's oldest shopping centre
was completed, and the newly renovated 40,000 m² shopping centre formerly
known as the "Potsdamer Platz Arkaden", has re-opened as "The Playce".
In Frankfurt, completions included further landlord upgrades and fit-outs for
corporate and financial sector tenants in the iconic Messeturm building. A
first project in the Main Tower, another well-known landmark, has cemented the
office's status as a significant architect of record for tall buildings. New
BIM/Revit projects have begun with a 14,000m² tenant fit-out in Berlin and a
major new refurbishment project has begun for an international bank in
Frankfurt together with a new building for a Tata Group subsidiary company in
Bonn in collaboration with the Berlin office.
Other International activities
Istanbul
Our operation in Istanbul, a wholly owned subsidiary, recorded a small loss
this year of £0.05m (2021: loss £0.02m) in another turbulent year of
political and economic instability in Turkey.
The Istanbul office completed the first of two major fit-out projects for
Vakifbank at Tower A in Istanbul and three concept design stage completions
for Bayer Insaat on a 63,000 sqm mixed-use urban regeneration project in the
Beşiktaş district of Istanbul, a prototype concept design for four
separately located reception areas for Eczacibasi, a prominent Turkish
industrial products group and a 7,000 sqm. concept design for Beycelik Gestamp
A.S, an international automotive industry supplier for their HQ building in
Bursa.
Middle East
Mid-way through the trading year (29 April 2022) the Group concluded the
disposal of its interest in John R Harris & Partners Limited ("JRHP") to
its local management team operating out of the Middle East.
The disposal provided an initial inflow of cash consideration along with a
deferred consideration sum payable over 5 years, for a total £1.1m (AED
5.0m). The Group entered into a Marketing Agreement as a part of this
transaction, covering the use of the Group's project portfolio and associated
materials, over the deferred consideration period for an additional sum.
Torpedo Factory Group
The acquisition of TFG completed after the period under review. Nevertheless,
it underpins our strategy of broadening the services offered by the Group by
looking to become a master systems integrator in the smart buildings arena.
TFG comprises three separate businesses:
· Intelligent Environments
· Intelligent Venues
· Live Events
It will be through an extension of the operations of the Intelligent
Environments and the Intelligent Venues business and by focused acquisition
that we will build out our smart building capabilities.
The acquisition adds approximately 60 new staff, and also provides additional
financial resources.
Robert Fry
Chief Executive Officer
27 March 2023
Financial review
The headline financial results of the Group were:
2022 2021
£'000 £'000
Total revenues under management(1) 24,033 26,426
Continuing operations
Revenue 8,645 9,192
Revenue less sub consultant costs(1) 7,127 6,305
Net operating expenses (7,757) (7,330)
Other operating income 326 358
Net finance costs (95) (94)
Share of results of associate and joint ventures 327 166
Trading loss from continuing operations (72) (595)
Goodwill impairment (1,752) -
Loss before tax from continuing operations (1,824) (595)
Tax credit 45 395
Loss from continuing operations (1,779) (200)
Loss from discontinued operations (503) (936)
Loss for the year (2,282) (1,136)
(1)Alternative performance measures, refer to page 18 for definition
The result for the year is split between continuing operations and the
discontinued Middle East operations.
The trading loss was just £72k (2021: £595k) with significant improvements
in the results of both the United Kingdom and Continental European operations.
The result of the discontinued Middle East operations was a loss before tax of
£0.50m (2021: £0.94m). JRHP was sold in in April 2022 and the remaining
subsidiaries underwent a process to cease trade and recover outstanding
balances, incurring significant one off closure costs, and provisions on
outstanding trade debtors and guarantees. The Middle East operations are shown
in the financial statements as a discontinued operation.
The £1.75m goodwill impairment relates almost entirely to the acquisitions of
Fitzroy Robinson Limited in 2005 and Swanke Hayden Connell Europe Limited in
2013. Further details are provided in note 12.
Revenues for the year from continuing operations were £8.65m, a decrease of
6.0% on the previous year (2021: 9.19m). However, and more importantly,
revenues less sub consultants increased by 13.0% to £7.13m (2021: £6.31m),
with subconsultant costs falling by 47.4% to £1.52m (2012: £2.89m).
Both the Group's key hubs experienced better performance and results. In the
UK, revenue less sub consultant costs increased 15.0% to £6.98m (2021
£6.06m) as the UK operations continued to rebuild following the reductions
experienced during the COVID-19 pandemic.
In Continental Europe, stronger performance from the Berlin associate and
Frankfurt joint venture producing a combined share of profits of £0.33m
(2021: £0.18m), resulted in a significant increase in the year-on-year profit
for the segment.
Performance in Turkey was below expectations.
Operating expenses in the year increased by £0.43m, within which personnel
related costs increased by £0.64m, as the group recruited to meet staffing
commitments from projects won, partially offset by a £0.21m reduction in
other operating expenses.
Other operating income reduced by £32k, primarily due to the end of
government grants from the UK government furlough scheme £nil (2021: £59k).
During the year under review, deferrals from previous periods, UK VAT and rent
holidays taken during the Covid-19 pandemic and amounting in aggregate to
£172k were repaid according to their terms.
The Group managed technical staff numbers (UK net revenue per FTE technical
staff was maintained at £104k, whilst the UK average FTE technical staff
increased by 9 to 67), with the UK still in a transition period of growth
following the COVID-19 slow down and not yet up to an optimum size for the
fixed costs of the operation.
The loss after tax at £2,282k gives an EPS loss of 1.38 pence per share
(2021: 0.69 pence per share), split as 1.08 pence from continuing operations
(of which 1.06 pence is due to the Goodwill impairment) and 0.30 pence from
discontinued operations.
United Kingdom
2022 2021
£'000 £'000
Revenue 8.465 8.871
Revenue less sub consultant costs(1) 6,975 6,063
FTE technical staff(1) 67 58
Net revenue per FTE technical staff(1) 104 104
Profit/(loss) before tax (excluding Group management charges)(1) 211 (308)
Loss before tax (including Group management charges) (329) (848)
(1)Alternative performance measures, refer to page 18 for definition
( )
The UK's revenue less sub consultant costs increased 15.0% year on year as the
hub started to rebound from the COVID-19 slowdown. Revenue decreased 4.6% as
the projects that Veretec executive architecture acted on as the lead
consultant progressed into later stages, requiring lower volumes of sub
consultant expertise.
The first half of the year saw the UK business unable to grow beyond the prior
year second half with revenue less subconsultant costs of £3.31m (2021: H2:
£3.47m), however significant improvements came in H2 with the award of a
number of projects most noticeably in the hotels sector in Aukett Swanke
Limited with projects with total fees in excess of £3.5m awarded, and in
Veretec a mixture of residential and commercial projects with total fees in
excess of £4.2m awarded. This enabled both companies to begin to grow through
the second half of the year with revenue less subconsultant costs totalling
£3.67m, and a stronger order book leading into the year commencing 1 October
2022.
Staff numbers (FTE technical staff) started the year at 70 in October 2021,
but with lower workloads during the 2(nd) quarter of the year numbers were
reduced to a low point of 60. With the successes of project wins in the second
half of the year the necessary recruitment enabled the UK to regrow to 77
FTE's by 30 September 2022.
This pro-active management of staffing resources enabled the UK to report net
revenue per FTE at £104k for the full year, comparable with the prior year
result.
The improvement in revenue particularly in H2, translated into a reduction in
the current year loss by £0.52m compared to the prior year, and enabled the
hub to record a profit before tax (excluding Group management charges).
Continental Europe
The principal components of the Continental Europe hub are the two German
investments, for which under the prevailing accounting rules we do not show
revenue and costs but only report our share of profits.
2022 2021
£'000 £'000
Revenue 180 321
Revenue less sub consultant costs(1) 152 242
FTE technical staff(1) 7 8
Net revenue per FTE technical staff(1) 23 30
Profit before tax (excluding Group management charges)(1) 422 330
Profit before tax (including Group management charges) 275 149
Including 100% of associate & joint ventures
Total revenues under management(1) 14,025 14,733
Revenue less sub consultant costs(1) 10,594 10,471
FTE technical staff(1) 108 127
Net revenue per FTE technical staff(1) 98 82
(1)Alternative performance measures, refer to page 18 for definition
The hub result before tax (including Group management charges), including the
joint venture and associate in Germany and the joint venture in the Czech
Republic (in the prior year, now liquidated), was a profit of £275k (2021:
£149k).
Continental Europe's result is materially dominated by the associate Berlin
and joint venture in Frankfurt. Having remained profitable in the prior year
but with lower levels of profit than has been historically the case due to the
effects of the COVID pandemic, the year to September 2022 saw trading return
back closer to the expected pre pandemic levels of profitability. They
together contributed £328k (2021: £182k) profit (including Group management
charges) to the Continental Europe result.
Reported revenues, comprise the Turkish subsidiary. Turkey reported revenues
for the year of £180k (2021: £321k), with revenue less subconsultant costs
decreasing to £152k (2021: £242k). The reduction in earnings was principally
due to a further devaluation of the Turkish Lira across the period, with the
average TRY to GBP rate in the year at 18.44 (2021: 11.07). However, whilst
the year on year revenue was comparable in local currency, clients pausing
projects led to sub optimal efficiency of staff time and the very high levels
of inflation in Turkey increased operating costs of the company whilst the
existing projects were priced at rates which were not able to fully absorb the
increased costs that followed. As a result, Turkey recorded a local loss
(including Group management charges) of £52k and loss (excluding Group
management charges) of £36k.
The liquidation of the Czech Republic joint venture was completed early in the
year under review with nominal residual costs of £1k (2021: loss for the year
of £16k).
Total revenues under management decreased 4.8%, whilst revenue less sub
consultant costs increased 1.2%. Staff numbers decreased to 108 (2021: 127),
partially due to the closure of the Czech Republic office, but also with a
reduction in average staff numbers in Germany. However, more efficient working
post COVID-19 and more profitable projects in Germany led to a significant
increase in net revenue per FTE technical staff to £98k (2021: £82k) and
with it improved profitability.
Middle East - discontinued operation
2022 2021
£'000 £'000
Revenue 1,543 2,822
Revenue less sub consultant costs(1) 1,256 2,517
FTE technical staff(1) 18 36
Net revenue per FTE technical staff(1) 68 69
Loss before tax (excluding Group management charges)(1) (399) (538)
Loss before tax (including Group management charges) (503) (936)
(1)Alternative performance measures, refer to page 18 for definition
Revenues decreased 45.3% from £2.82m to £1.54m in the year (revenues less
subconsultant costs similarly reduced by 50.1%), due to the continued effect
of the slowdown in construction investment in the region during the COVID-19
pandemic combined with the disposal of JRHP in April 2022.
Average technical staff FTE numbers reduced to 18 (2021: 36) and net revenue
per FTE technical staff was relatively similar at £68k (2021: £69k).
Whilst the loss was significantly lower than in the prior year, the loss for
the year included costs in the process of terminating Shankland Cox Limited
("SCL") licenses and commencing the process to reclaim associated guarantees.
The hub had no remaining Middle East based employees as at 30 September 2022.
With no further material revenue forecast post year end, the Middle East hub
has been treated as a discontinued operation.
Financing
The net deficit (see note 22) at the year end was significantly down on the
prior year as a result of the loss in the year combined with the timing of UK
debtor receipts. This gave a deficit of £621k (2021: net funds £15k),
comprising cash of £28k (2021: £515k), a net overdraft of £232k (2021:
nil), and a CBILS loan of £417k (2021: £500k) drawn in May 2021.
The CBILS loan set out in note 21 was arranged with Coutts & Co in
response to the challenges impacting trade incurring losses during the COVID
pandemic. The loan is repayable over 3 years with the first instalment made in
June 2022, to be paid back in 24 monthly instalments through to May 2024. As
at 30 September 2022, the first 4 instalments had been made on time as
planned.
The Group's overdraft facility from its bankers Coutts & Co started the
year at £500k and was renewed in November 2021. In February 2022 the Group
requested and Coutts & Co granted a temporary waiver of the net gearing
covenant from February to the end of April 2022. The Group similarly agreed to
temporarily reduce the overdraft to £250k from February to May 2022. In May
2022, the Group and Coutts & Co agreed to remove the covenants from the
facility agreement, and to maintain the overdraft at £250k up to renewal in
November 2022. This is discussed further in note 1.
In November 2022, Coutts & Co confirmed the renewal of the £250k
overdraft facility for another year, continuing to provide working capital
flexibility and to support the UK business. This is renewable annually and
will remain in place until November 2023.
The Group has four leases taken out by ASL to fund the purchase of fit-out
costs of the London office in June & November 2018 on 5 year terms, which
are capitalised as right of use assets and lease liabilities. The lease
liability (see note 15) as at 30 September 2022 was down to £55k (2021:
£133k).
The Group recognises a right of use asset and lease liability on the London
office which was taken out on a 10 year lease to May 2028. The lease liability
as at 30 September 2022 was £2,364k (2021: £2,756k). There are no office
leases remaining in the UAE and the office lease in Turkey is short term.
Other leases in the Group are low value, therefore no IFRS16 capitalisation of
these leases has been made.
Throughout the year there has continued to be a very strong focus on cash
management, liquidity forecasts and covenant compliance. Whilst covenants may
have been removed from the Coutts & Co facility during the year,
management continue to review monthly management account measurements
indicating whether the former covenants would be adhered to if they had been
in force.
The overdraft was utilised throughout the year. Following the acquisition of
TFG on 20 March 2023 which significantly improves short term available cash,
utilisation of the facility is expected to be very occasional and backed by
other available cash within the Group through the going concern period.
The Plc continues to act as the Group's central banker, and it continued to
seek to optimise the Group's position by maximising cash flows and flexibility
across geographies. The overdraft is effectively assigned to the UK
businesses. All other businesses are required to be cash generative or as a
minimum cash neutral. Subject to formal approval, short term working capital
advances or small funding loans may be made.
Going Concern
We expect the coming year to present significantly more opportunities to the
Group than has been the case over the past few years.
The losses incurred during the pandemic and sustained by the Middle East
during the period of discontinuing the remaining offices, and the cost of
administering the listed company structure, has meant the main challenge post
year end continued to be maintaining working capital which has reduced over
the period along with Group net assets.
During the second half of the financial year, we saw our revenues in the
United Kingdom grow and both UK trading entities began a period of recruitment
to meet the needs of new client instructions which has continued post year
end. Management of cash flow therefore continues to be key with the associated
costs of increasing staff numbers not perfectly aligned with initial payments
from clients.
In December 2022 the Group renewed its £250k overdraft facility with Coutts
& Co and continues to repay the CBILS loan drawn during the pandemic.
The recently announced acquisition of TFG immediately adds a significant
available cash balance, as well as a significant boost to the net assets of
the Group, which will provide the Directors a more stable platform to grow the
existing combined business and undertake future opportunities for acquisition
and growth.
The TFG acquisition brings into the Group a freehold property independently
valued at £3.02m in July 2021 with a mortgage balance of £1.48m as at
December 2022, giving a loan to value percentage of just 48%.
However, as the mortgage renewal date is less than 12 months from the signing
date of these accounts, the Board must consider the remote possibility that if
the mortgage could not be renewed, then the Group may need to raise cash to
repay the full balance of the mortgage through alternative borrowing
facilities, asset sales or fund raising which are not wholly within the
Group's control.
Based on forecasts prepared and reviewed for the period to 31 March 2024 the
Directors have a reasonable expectation that the Group will have adequate
resources to continue in operational existence for the foreseeable future.
However, while the Board is confident of either being able to re-mortgage the
building or selling it should the need arise, the requirement to refinance the
building within the going concern period indicates the possible existence of a
material uncertainty which may cause significant doubt on the Group's and the
Parent Company's ability to continue as a going concern.
The financial statements therefore do not include the adjustments that would
result if the Group or the Parent Company was unable to continue as a going
concern.
The going concern statement in the Directors report and corresponding section
in note 1 provide a summary of the assessments made by the directors to
establish the financial risk to the Group over the next 12 months. This is
further supplemented by the principal risks and uncertainties section in the
Strategic Report.
Future work
Tracking and keeping an accurate record of the pipeline of future work is key
to understanding the business and managing its future shape and portfolio. It
is also essential in order to afford the directors time to react to any
changes.
With the distribution of the business across the hubs, there are differing
profiles:
· The UK trades as two businesses: Veretec Limited and Aukett
Swanke Limited. Following the significant slowdown and rationalisation of
staff numbers during the COVID-19 pandemic, Veretec has been re-growing its
technical staff base. From a low of 26 FTE equivalent technical staff in March
2021, Veretec grew to average 36 FTE technical staff in the year, finishing
September 2022 with over 43 FTE technical staff. Aukett Swanke Limited
maintained a more steady core staff number starting October 2021 at 32 FTE
technical staff, averaging 30 FTE technical staff across the year, and ending
September 2022 at 33 FTE technical staff. With both companies experiencing
increasing bid activity and improved conversion of new projects in the second
half of the year and in the first quarter after the year end, both companies
target further growth in staff numbers and revenue in the coming year to
achieve a closer to optimum capacity to cover the fixed cost base of the
London studio.
· The Middle East: Following the sale of JRHP in April 2022,
Management took the decision to allow the remaining trade licences in SCL to
expire and then undertake an orderly wind down of the Middle East operations.
As at September 2022 the remaining Group Middle East subsidiaries no longer
employed any UAE staff, and future expectations are limited to clearing the
balance sheets of the companies by collecting the remaining debtor balances
and paying off associated creditors.
· Continental Europe remains mixed across the portfolio. Having
made profits through the COVID-19 pandemic, the German businesses continued to
be strongest. Berlin in particular recorded profits back to pre-covid levels
in the year to September 2022 and has an even stronger order book commencing
the year to September 2023. Turkey starts the coming year with a stronger
order book than the prior year but the ongoing very high levels of inflation
and uncertainty in the local economy will make returning to consistent
profitability challenging in the short term.
Key Performance Indicators ("KPIs")
The key performance indicators used within the Group for assessing financial
performance are:
· Total revenues under management. This includes 100% of the
revenues generated by our joint venture in Frankfurt and associate in Berlin.
This is used as a measurement of the overall size and reach of the Group and
is disclosed on pages 12 and 14. As total revenues under management includes
revenue derived from subconsultants, this figure can vary significantly year
on year depending on the nature of external expertise required on individual
projects as described on page 14. Consolidated Group revenue can be
reconciled to total revenues under management by adding i) the revenue of the
associate disclosed in note 17; and ii) double the share of revenue in joint
ventures disclosed in note 18;
· Revenue less sub consultant costs which reflects the revenue
generated by our own technical staff but excludes the revenue attributable to
sub consultants, which are mainly passed through at cost. This is the key
driver of profitability for our business, and is discussed by segment on pages
12 to 15;
· Revenue less sub consultant costs being generated per full time
equivalent (FTE) technical member of staff ('net revenue per FTE technical
staff'). For our larger operations this provides a barometer of near term
efficiency and financial health. This figure when compared to the movement in
total costs provides an insight into the likely direction of profitability and
is a key measure of productivity. This KPI is only analysed on a segmental
basis and calculations for each segment can be found on pages 13 to 15;
· Result before taxation (excluding Group management charges), and
result before taxation (including Group management charges), which are further
assessed on pages 13 to 15;
· Cash at bank and in hand and net funds / (debt), which is
assessed further on page 2.
The numbers of full time equivalent technical members of staff differ from the
employee numbers disclosed in note 7 as, at times, the Group uses some
non-employed workers through agencies and freelance contracts. Staff working
on a part time basis, or on long term leave, are also pro-rated in the number
of full time equivalent staff numbers, which differs from the method of
calculating the average number of employees for the year under the Companies
Act 2006 as disclosed in note 7. Full time equivalent technical members of
staff are given for each hub on pages 13 to 15.
Antony Barkwith
Group Finance Director
27 March 2023
Strategic report
The Directors present their Strategic Report on the Group for the year ended
30 September 2022.
Strategy
We are a professional services group that principally provides architectural
design services along with specialisms in master planning, interior design,
executive architecture and some engineering services. With the acquisition of
TFG we are also looking to become a Smart Buildings master systems integrator.
Our strategic objective is to provide a range of high-quality design
orientated solutions to our clients that allow us to create shareholder value
over the longer term and at the same time provides an attractive and rewarding
working environment for our staff. In addition, we undertake to deliver
projects throughout the technical drawing stages onto site, and up to
practical completion and handover.
Our markets are subject to cyclical and other economic and political
influences in the geographies in which we operate, which gives rise to peaks
and troughs in our financial performance.
The pandemic, which affected all our operations, is an event that has required
specific responses. Similarly, the current conflict in Ukraine creates an
uncertain outlook in terms of both continuity of project instructions and new
business activity.
Business Model
Our architecture and interior design businesses operate in the UK, Germany and
Turkey with other locations operating through licence based arrangements where
the responsibility for profit rests with local management and owners.
The presentation of the results of our operations is at local, underlying,
trading level and before the allocation of central costs in order to provide a
level playing field in terms of comparable performance across the hubs as many
only incur a small management charge.
The United Kingdom hub comprises three principal service offers: comprehensive
architectural design including master planning, interior design and fit-out
capability and an executive architectural delivery service operating under the
'Veretec' brand.
Our Continental European operations provide services offered that are
consistent with those in the UK.
The Group entered into a marketing agreement with JRHP following the sale of
the Dubai based operation in April 2022 maintaining the Group's interest in
this market. without the financial risk of ownership.
As a Group, we now have a total average full time equivalent ("FTE") staff
contingent of 223 (2021: 256) throughout our organisation which includes both
wholly owned and joint venture operations. We are ranked by professional staff
in the 2023 World Architecture 100 at number 61 (2022 WA100 number 63).
Principal Risks and Uncertainties
The directors consider the principal risks and uncertainties facing the
business are as follows:
Levels of property development activity
Changes in development activity levels have a direct impact on the number of
projects that are available. These changes can be identified by rises and
falls in overall GDP, construction output, planning application submissions,
construction tenders and starts, investment in the property sector and numbers
of new clients. Due to lack of information in the relevant market places, we
have to adapt to the information flow that is available.
In addressing this risk, the Group considers which markets and which clients
to focus upon based on the strength of their financial covenant so that there
is clear ability to provide both project seed capital and geared funding to
complete the delivery process. This avoids the dual risk of delays between
stages and deferrals of projects.
Geo-political factors
Political events and decisions, or the lack thereof, can seriously affect the
markets and economies in which the Group operates, leading to a lack of
decisions by government bodies and also by clients. In turn this directly
impacts workload and can even delay committed projects.
We believe the main shocks of Brexit and Covid-19 are behind us, although
there are likely to be continued consequences for the foreseeable future. We
are conscious that the Ukraine conflict has affected business sentiment and is
likely to continue to do so until the conflict ends.
Share price volatility
A strong share price and higher market capitalisation attract new investors
and provide the Group with greater flexibility when considering M&A
activity. Conversely a weaker share price affords the Group less flexibility.
Operational gearing and funding
In common with other professional services businesses, the Group has a
relatively high level of operational gearing, through staffing, IT and
property costs, which makes it difficult to reduce costs sufficiently quickly
to immediately avoid losses and associated cash outflows when faced with sharp
and unpredicted falls in revenue.
The UK continues to maintain a balance in the mix of permanent vs. contract
and agency staff to give flexibility to respond to fluctuation in revenue as
has been experienced in recent years.
The project payment arrangements under which the Group operates vary
significantly by geographical location. Payment terms by jurisdiction are
typically:
· in the United Kingdom it is usual to agree in advance with the
client at the start of a project a monthly billing schedule which generally
leads to relatively low levels of contracts assets (and consequentially higher
levels of contract liabilities);
· in Turkey it is usual to either agree in advance with the client
a monthly billing schedule or to agree a billing schedule based on deliverable
work stages; and
· in the Middle East it is usual to bill clients monthly, but the
value of the monthly invoices raised is dependent upon demonstrating specific
progress from the work performed, which generally leads to higher levels of
contract assets. Payment also tends to take longer in the Middle East.
The losses sustained in the prior two years, the decline in revenue in the
Middle East, the final repayments of residual UK deferred rent and VAT agreed
during the COVID-19 pandemic and the commencement of monthly repayments of the
CBILS loans, tightened the free cash available to be remitted to the Plc
during the year but was largely offset by the proceeds of the disposal of
JRHP. Furthermore, the month end timing of UK debtor receipts in September
2022 meant that the Group was in a position of utilising part of its overdraft
facility at the year end. Dividends were received from the Berlin associate
during the year, but at lower levels than in prior years, as the Berlin
associate only remits dividends on the basis of local GAAP accounting, which
restricts the recognition of profits until the final completion of individual
projects, and as such there is a lag between recognising distributable
reserves vs IFRS profits.
The Directors seek to ensure that the Group retains appropriate funding
arrangements and regularly and stringently monitor expected future
requirements through the Group's annual budgeting, monthly forecasting and
cash flow, and weekly and daily cash reporting processes in order to react
immediately to a required change with maximum flexibility.
The Group's principal bankers remain supportive and in December 2022 renewed
the Group's overdraft facility until November 2023, at the existing £250k
level. In May 2021 a £500k CBILS loan was also offered and drawn down.
Repayments on this loan commenced monthly from June 2022, with the last
instalment scheduled for May 2024.
The acquisition of TFG on 20 March 2023 provides a significant boost to the
net assets and cash balance of the Group, reducing immediate cash pressures on
the business, but adding a mortgage liability to be renewed in February 2024.
Staff skills and retention
Our business model relies upon a certain standard and number of skilled
individuals based on qualifications and project track record. Failure to
retain such skills makes the strategies of the Group difficult to achieve.
The Group aims to ensure that knowledge is shared and that particular skills
are not unique to just one individual.
The Group conducts external surveys to ensure that salaries and benefits are
appropriate and comparable to market levels and endeavours to provide an
attractive working environment for staff.
Staff training programmes, career appraisals and education assistance are
provided, including helping our professionally qualified staff comply with
their continuing professional development obligations. Training programmes
take various forms including external courses and external speakers.
Quality of technical delivery
In common with other firms providing professional services, the Group is
subject to the risk of claims of professional negligence from clients.
The Group seeks to minimise these risks by retaining skilled professionals at
all levels and operating quality assurance systems which have many facets.
These systems include identifying specific individuals whose roles include
focusing on maintaining quality assurance standards and spreading best
practice.
The Group's UK operation is registered under ISO 9001 which reflects the
quality of the internal systems under which we work. As part of these
registrations an external assessor undertakes regular compliance reviews. In
addition, as part of its service to members, the Mutual, which provides
professional indemnity insurance to the UK and until recently parts of the
Middle East operations, undertakes annual quality control assessments.
The Group maintains professional indemnity insurance in respect of
professional negligence claims but is exposed to the cost of excess
deductibles on any successful claims.
Contract pricing
All mature markets are subject to downward pricing pressures as a result of
the wide spectrum of available suppliers to each project. This pressure is
increased if activity levels are low such as in the economic downturns and
global recession. Additionally, architects may be under pressure to work
without fees (for a time) in order to win a project or retain sufficient
qualified staff to complete the project if won. The Group mitigates this risk
by focusing on markets where it has clear skills that are well above average,
or avoids it by not lowering prices, thus risking the loss of such work.
All fee proposals to clients are prepared by experienced practice directors
who will be responsible for the delivery of the projects. Fee proposals are
based on appropriate due diligence regarding the scope and nature of the
project, knowledge of similar projects previously undertaken by the Group and
estimates of the resources necessary to deliver the project. Fee proposals for
larger projects are subject to review and approval by senior Group management
and caveats are included where appropriate.
When acting as general designer for projects located outside the UK, the Group
is usually exposed to the risk of actual sub consultant costs varying from
those anticipated when the overall fee was agreed with the client. To mitigate
this risk, fee proposals are usually sought from sub consultants covering the
major design disciplines as part of the process of preparing the overall fee
proposal.
Under performing acquisitions
The acquisition of businesses for too high a price or which do not trade as
expected can have a material negative impact on the Group, affecting results
and cash, as well as absorbing excessive management time.
The Group invests senior management time and Group resources into both pre-
and post-acquisition work. Pre-acquisition there is a due diligence process
and price modelling based on several criteria. Agreements entered into are
subject to commercial and legal review. Post-acquisition there is structured
implementation planning and ongoing monitoring and review.
Overseas diversification
The Group derives a proportion of its revenues from projects located outside
the UK. This offers some protection for the Group by providing diversification
but in turn exposes the Group to the economic environments and currencies of
those locations. Building regulations, working practices and contractual
arrangements often differ in these overseas businesses when compared to the UK
and these may significantly increase the risks to the Group. To mitigate these
risks:
· the overseas operations are managed by nationals or highly experienced
expatriates, with oversight from senior Group management. All offices are
regularly visited by senior Group management to monitor and review the
businesses. There is regular, comprehensive reporting and KPIs are used
extensively;
· the Group seeks to work for multinational or the larger and more
established domestic clients who themselves often have significant
international experience;
· when acting as general designer for projects located outside the UK, the
Group typically seeks to appoint sub consultants with an established and
successful track record on similar projects;
· within the boundaries imposed by local laws and commercial constraints, the
Group seeks to structure contractual arrangements with clients and sub
consultants to minimise the significant contractual risks which can arise; and
· as far as possible foreign currency flows are matched to minimise any
impact of exchange rate movements and significant exposures are hedged.
The Strategic Report was approved by the Board on 27 March 2023 and signed on
its behalf by
Antony Barkwith
Group Finance Director
Directors' report
The Directors present their report for the year ended 30 September 2022.
Corporate governance
In accordance with AIM Rule 26 the Company is required to apply a recognised
corporate code. The Board continues to adopt the QCA Corporate Governance Code
(2018) published by the Quoted Companies Alliance.
The QCA Corporate Governance Code (2018) comprises 10 Principles.
We set out our compliance with these Principles in a matrix ('the QCA
Matrix'). This lists the Principles, as well as related considerations and
requirements, all of which have been assigned a sub-number within each
Principle.
PRINCIPLE 1
Strategy and business model
The current strategy and business model for the Group is set out in the
Strategic Report on page 19.
Our strategic objective is to provide a range of high-quality design
orientated solutions to our clients that allow us to create shareholder value
over the longer term and at the same time provides a pleasant and rewarding
working environment for our staff. The cyclical nature of the markets in which
we operate gives rise to peaks and troughs in our financial performance.
Management is cognisant that our business model needs to reflect this variable
factor in both our decision making and expectation of future performance.
We operate a structure covering: the United Kingdom with our office in London;
Continental Europe with three offices in Berlin, Frankfurt and Istanbul; along
with a marketing agreement with an operation in the Middle East with an office
in Dubai.
The United Kingdom hub comprises three principal service offerings:
comprehensive architectural design including master planning, interior design
and fit-out capability and an executive architectural delivery service
operating under the 'Veretec' brand.
Our Continental European operations provide services offered that are
consistent with those of the UK operation.
PRINCIPLE 2
Share capital and shareholders
Information about the Company's shares, listing information, significant
shareholders; Directors' shareholdings and share donations are set out within
the Investor relations section of the Company's website and in the annual
report.
The Executive Directors understand the importance of shareholder dialogue and
regularly seek to engage with shareholders at the time of results'
announcements, at the AGM or as requested. In addition, there is a separate
mailbox cosec@aukettswanke.com
The Directors also appreciate the value of a dividend policy and they
endeavour to ensure that the Company's policy is clear.
The primary contact for investors is Robert Fry, Chief Executive Officer.
PRINCIPLE 3
Corporate Social Responsibility & Stakeholder Engagement
The About section of the Company's website sets out how we engage with our
clientele and related stakeholders in the practice of architecture, master
planning, urban and interior design. This also provides the contact and
separate website details of each entity within the Group.
Our employees recognise that the professional services we offer have a
significant impact on not just our direct clientele but also on the public
realm, society and the environment as a whole, and this is recognised in the
websites for each subsidiary entity in the Awards sections of each entity's
website.
Client and stakeholder engagement and feedback are an integral and iterative
part of the design process undertaken on projects, as expressed in the Awards
sections of the websites.
Alongside the contribution made to our clientele and others through the
execution of our services we actively participate as thought and practice
leaders in initiatives and events in the property and construction industry.
We also undertake on occasion voluntary and charitable endeavours that are
featured in the News sections of the Company and subsidiaries websites,
internal Intranet sites and social media platforms.
PRINCIPLE 4
Risk Management
The Group's risk management objective is to identify, document and monitor
those factors that represent risks to the Group in fulfilling its strategic
objectives and to manage those risks consistent with agreed risk tolerances.
The Business Risk Review (BRR) is the principal tool by which the Group
carries out this process and allows the Board to assess the business risks in
the context of best practice consistent with any codes of corporate
governance. This tool sets out the level of risk incurred and its probability
of occurrence to establish a level of tolerance applicable to the business.
The BBR is structured to allow monthly reporting from all local businesses and
elevated monthly to the Plc Board with any significant risks given a 'Red
Flag'. These Red Flag items reflect the key Risks and Uncertainties as set out
in the Report and Accounts.
PRINCIPLE 5
Board structure and composition
The Board comprises two Non-Executive Directors (NED's) and three Executive
directors. The Board believes that the optimal structure is balanced between
NED's and Executives such that equal weighting is given to oversight and
governance, and strategic development and operational performance in order to
promote the company.
Committees
These are set out in the Directors' Report on pages 29 to 30.
Additionally, each year the relevant Sub Committee produces its own Business
Plan for inclusion in the Group Business Plan setting out any changes to its
Terms of Reference and the principal activities it is to undertake in the
forthcoming financial period. External surveys and internal analysis of
implementation is provided to the relevant committee.
PRINCIPLE 6
Directors experience and capabilities
The biographies of each current board member can be found on pages 7-8.
Other roles
Board members are encouraged to take on other roles that do not conflict with
their membership of the Board or are seen as supportive of their current role.
Robert Fry (Chief Executive Officer) is a member of the RIBA and is a regular
contributor and awards judge for World Architecture News (WAN), Antony
Barkwith (Group Finance Director) is a member of the Architect's Financial
Management Group (AFMG), Clive Carver (Chairman and NED) holds various NED
roles in the oil & gas and other industries, and Nick Clark (Executive
Director) is a NED in a technology investment company which is AIM-listed.
Group management structure
The ultimate management of the Group is by the Board and its committees. The
role, remits and reports of the committees are set out in the Directors
report. Implicit within all remits is the obligation of the Board under The
Companies Act to promote the company at all times.
Day to day and operational management is delegated to the CEO, GFD and the
Managing Directors. Each business in the group has its own team under the
Managing Director and its own board. The CEO and GFD are represented on all
boards.
Delegated responsibility is defined at each level and there are authority
matrices which set out limits of responsibility at specific levels and for
specific actions and activities. Each individual board meets every month. The
Directors and senior members of staff review, mentor and develop colleagues on
an ongoing basis in a coaching and advisory capacity.
All members of the Board endeavour to keep up-to-date and attend seminars and
training courses as appropriate. Each Director is required to complete CPD in
accordance with his/her professional qualification.
PRINCIPLE 7
Evaluation of the Board
The Nomination Sub Committee of the Board reviews the skills of each board
member on an annual basis using a matrix grid of core requirements and level
of each attribute achieved by the board membership.
The Skills matrix covers 14 key skills identified as relevant to the
operations of the listed company and its key activities. Each skill is given a
weighting factor of 1 to 3 and graded by level of knowledge and experience on
a scale of 1 to 4. This then provides a weighted ranking of the skills
provided by the current board and each member in relation to that ranking.
Following completion of the annual review the Nomination Committee makes
recommendations to the Board on further training or mentoring requirements as
necessary.
Appraisals are carried out by the Chairman of each board member on an annual
basis. The NED's appraise the Chairman. As a result of these meetings, any
mentoring and training needs are established.
Board attendance & Effectiveness
Members are encouraged to personally attend all meetings and where this is not
possible the Board makes alternative provision through changing of dates or
allowing attendance via video conferencing (VC) facilities. The VC facilities
are used consistently to permit Board members to reduce travel in the
Post-Covid 19 era. This has resulted in the high attendance record.
The attendance record for the year is included in the Directors' Report on
page 31.
Board remit
The Board is a balanced team of Executives and Non-Executives with the remit
to ensure good, appropriate. safe governance and compliance of the Group and
to manage the staff and assets, monitoring performance and developing and
implementing strategy to deliver the best possible results for the
shareholders.
The principal matters reserved for the Board are set out within the Investor
Relations section of the Company's website.
Succession planning
The Nomination Committee is responsible for managing the succession plan of
the Board. This is carried out by maintaining a succession planning matrix.
This matrix contains information on: the Role, Job Holder,
Sub Committee membership, term and notice period, AGM re-election dates, and
alternatives for either temporary or permanent replacement.
NED's hold office for no more than three successive terms of three years - in
line with industry norms.
Executives are on contracts of six months' notice duration.
PRINCIPLE 8
Corporate Governance - External
Key corporate governance statements relating to the company and its operations
are set out within the Investor Relations section of the Company's website.
Our strategic health & safety statement acknowledging our duties and
responsibilities is signed by the CEO. Two Plc Board members form a part of
the H&S Steering Committee which meets quarterly and reports into the Plc
Board meetings.
Data Privacy (GDPR)
A data privacy notice outlines our policy and procedures covering how
information is collected and used whether via our website or by visiting our
studios, an individual's rights and the measures to be adopted for reporting
any breaches.
Corporate Governance - Internal
Our external statements are supported by other policy and procedural documents
located on our intranet site and in a Studio Handbook (UK) for the benefit of
our employees.
The company's intranet site provides details of our Group and internal
management structure, design culture, employment, sustainability, health &
safety, data privacy, anti-corruption & bribery, social media, whistle
blowing, equality & diversity and modern slavery policies.
The Studio Handbook is a separate printable document available on the intranet
site which contains more detailed operational information and requirements
pertaining to the activities of employees. It includes various sections
covering Practice Profile, Studio wellbeing, health & safety, fire
evacuation, IT protocols, CPD, mentoring, training and office administration.
The Project Handbook is a separate section of the intranet site that covers
the range of policy, procedures, guidelines and templates for the application
of our professional skills on the projects we design and deliver for our
clients. It includes project execution, drawing and Revit/BIM protocols,
guides and templates, a design review methodology and data management tools.
Our business operation in the practice of architecture, master planning and
interior design in the UK is underpinned by accreditation and certification by
the British Standards Institute for our Environmental Management System ISO
14001:2015 and our Quality Management System ISO 9001:2016. These standards
are emulated in our overseas operations where relevant and in relation to
local standards and license requirements.
In addition, we have an extensive track record of peer recognition and reward
through award winning projects meeting exacting design, delivery and
environmental performance requirements such as the RIBA, British Council for
Offices, BREEAM, LEED, SKA, Estidama and DGNB.
Performance and rewards
The Remuneration Committee is responsible for assessing the Board on a
performance and rewards basis. The Committee uses industry available material
to assess remuneration levels and has undertaken external reviews of the level
of reward for both executive and non-executive directors. The most recent
external review was undertaken in 2017 by UHY Hacker Young and, the most
recent AIM survey information was provided by BDO in 2018.
PRINCIPLE 9
Roles
Chairman - the Chair leads the Board at its regular meetings, sets the Agenda,
oversees the governance aspects of the internal control process and, monitors
and challenges the strategic direction of the company.
Chief Executive - the CEO provides guidance and information to inform on the
strategic direction of the company and its operations. Along with the senior
management team the CEO leads the delivery of the strategy.
Non-Executive Directors - act as independent voices on the Board and attend a
maximum of 24 to 48 days per annum under their contracts.
PRINCIPLE 10
Corporate information
The following documents are posted and held on the Company's website:
· Annual Report and Accounts
· Interim Announcements
· AGM notices (where separately issued and not contained in the
Report and Accounts).
· Trading updates
· Memorandum and Articles of Association
Non-Compliance with Rule 26
The following requirements of the QCA code are not covered by our website or
Report and Accounts
8.3 Rewards reflecting company values
8.5 Rewarding ethical behaviour
Board of Directors
The Group is headed by a Board of Directors which leads and controls the
Group, and which is accountable to shareholders for good corporate governance
of the Group.
The Board currently comprises three Executive Directors and two independent
Non-Executive Directors who bring a wide range of experience and skills to the
Company.
The Board considers Clive Carver and Raúl Curiel to be independent
Non-Executive Directors.
The Board meets regularly to determine the policy and business strategy of the
Group and has adopted a schedule of matters that are reserved as
responsibilities of the Board. The Board has delegated certain authorities to
Board committees, each with formal terms of reference.
Audit Committee
The main role and responsibility of the Audit Committee is to monitor the
integrity of the information published by the Group about its financial
performance and position. It does this by keeping under review the adequacy
and effectiveness of the internal financial controls and by reviewing and
challenging the selection and application of important accounting policies,
the key judgements and estimates made in the preparation of the financial
information and the adequacy of the accompanying narrative reporting.
The Audit Committee is also responsible for overseeing the relationship with
the external auditor, which includes considering its selection, independence,
terms of engagement, remuneration and performance. A formal statement of
independence is received from the external auditor each year.
It meets at least twice a year with the external auditor to discuss audit
planning and the audit findings, with certain executive directors attending by
invitation. If appropriate, the external auditor attends part of each
committee meeting without the presence of any executive directors.
The Audit Committee currently comprises Clive Carver, as Chairman and Raúl
Curiel, and they report to the Board on matters discussed at the Committee
meetings.
During the year the Committee met on three occasions to review, in addition to
the above, budgets, monthly management accounts and working capital
requirements by reference to the Company's financial strategy. It is also
reviewed through a sub-committee the management of risk inherent in the
business.
Remuneration Committee
The Remuneration Committee convenes not less than twice a year, ordinarily on
a six monthly basis, and during the year it met on three occasions. The
Committee currently comprises Clive Carver and Raúl Curiel, with Raul Curiel
as Chairman until 8 December 2022. It is responsible for determining
remuneration policy and all aspects of the Executive Directors' remuneration
and incentive packages including pension arrangements, bonus provisions,
discretionary share options, relevant performance targets and the broader
terms and conditions of their service contracts.
In fulfilling its duties, the Committee initiates research as appropriate into
comparable market remuneration, appointing third party advisors as required.
In liaison with the Nomination Committee, it has regard to succession planning
and makes recommendations to the Board in relation to proposed remuneration
packages for any proposed new executive and non-executive appointments.
Where appropriate the Committee consults the Chief Executive Officer regarding
its proposals. No Director plays a part in any discussion regarding his or her
own remuneration.
Nomination Committee
The Nomination Committee is responsible for keeping under regular review the
size, structure and composition (including the skills, knowledge, experience
and diversity) of the Board. This includes considering succession planning for
the senior management of the Group, taking into account the skills and
expertise expected to be needed in the future.
It is responsible for nominating new candidates for the Board, for which
selection criteria are agreed in advance of any new appointment.
The Nomination Committee was chaired by Raúl Curiel until 8 December 2022
with the other current members being Robert Fry and Clive Carver.
Directors
Antony Barkwith, Clive Carver, Raúl Curiel, Robert Fry and Nicholas Thompson
all served as Directors of the Company throughout the year ended 30 September
2022.
Biographical details of the current Directors are set out on pages 7 and 8.
The Company maintains directors' and officers' liability insurance.
Attendance at board meetings by members of the Board were as follows:
Number of meetings while in office Number of meetings attended
Executive Directors
Nicholas Thompson 11 11
Robert Fry 11 11
Antony Barkwith 11 11
Non-executive Directors
Raúl Curiel 11 11
Clive Carver 11 11
Directors' interests
Directors' interests in the shares of the Company were as follows:
Number of ordinary shares 30 September 30 September
2022 2021
Nicholas Thompson 16,802,411 16,802,411
Raúl Curiel 9,240,018 9,240,018
Clive Carver - -
Antony Barkwith - -
Robert Fry 2,150,000 2,150,000
Directors' service contracts
The Company's policy is to offer service agreements to Executive Directors
with notice periods of not more than twelve months. Nicholas Thompson had a
rolling service contract with the Company which was subject to twelve months'
notice of termination by either party, however since serving notice this
expired on 31 December 2022. Antony Barkwith and Robert Fry have rolling
service contracts with the Company which are subject to six months' notice of
termination by either party.
The remuneration packages of Executive Directors comprise basic salary,
contributions to defined contribution pension arrangements, discretionary
annual bonus, discretionary share options and benefits in kind such as medical
expenses insurance.
Non-Executive Directors do not have service contracts with the Company, but
the appointment of each is recorded in writing. Their remuneration is
determined by the Board. Non-Executive Directors do not receive any benefits
in kind and are not eligible for bonuses or participation in either the share
option schemes or pension arrangements.
Substantial shareholdings
At 27 March 2023 the Company had been informed of the following notifiable
interests of three per cent or more in its share capital:
Shareholder Notes Number of ordinary shares Percentage of ordinary shares
* Keith McCullagh Former chairman of TFG 41,339,142 15.01%
* Nick Clark Director of the Company 40,531,539 14.72%
Braveheart Investment Group Institutional Investor 35,332,351 12.83%
Nicholas Thompson Former Director of the Company 16,802,411 6.10%
John-David Papworth Employee of the Group 16,274,624 5.91%
Jeremy Blake Former employee of the Group 13,030,638 4.73%
Begonia 365 SL Controlled by a former Director of the Company 9,515,192 3.46%
Raúl Curiel Non-Executive Director of the Company 9,240,018 3.36%
* Keith McCullagh and Nick Clark's shares are included within a Concert Party
holding a total of 89,159,484 shares representing 32.38% of the number of
ordinary shares.
Share price
The mid-market closing price of the shares of the Company at 30 September 2022
was 2.40 pence and the range of mid-market closing prices of the shares during
the year was between 1.45 pence and 2.40 pence.
Streamlined energy and carbon reporting ("SECR")
Under the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013 ('the 2013 Regulations') and the Companies (Directors'
Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 ('the 2018 Regulations'), quoted companies and large unquoted
companies are required under part 13 of the companies Act 2006 to disclose
information relating to their energy usage and Greenhouse Gas ("GHG")
emissions.
For these purposes, quoted companies defined as those whose equity share
capital is officially listed on the main market of the London Stock Exchange
("LSE"); or is officially listed in an European Economic Area State; or is
admitted to dealing on either the New York Stock Exchange or NASDAQ.
The Company is not large, and whilst the Company's shares are traded on AIM,
the Company is not listed on traded on the main market of the LSE. The company
is therefore not required to disclose energy and carbon information.
Statement by the Directors in performance of their statutory duties in
accordance with s172 (1) Companies Act 2006
The Board is mindful of the duties of directors under S.172 of the Companies
Act 2006 to have regard to the following six factors:
a) the likely consequences of any decisions in the long-term;
b) the interests of the Group's employees;
c) the need to foster the Group's business relationships with suppliers,
customers and others;
d) the impact of the Group's operations on the community and environment;
e) the desirability of the Group maintaining a reputation for high
standards of business conduct; and
f) the need to act fairly as between shareholders of the Group.
Directors act in a way they consider, in good faith, to be most likely to
promote the success of the Group for the benefit of its shareholders. In doing
so, they each have regard to a range of matters when making decisions for the
long term success of the Group.
Our culture is that of treating everyone fairly and with respect and this
extends to all our principal stakeholders. Through engaging formally and
informally with our key stakeholders, we have been able to develop an
understanding of their needs, assess their perspectives and monitor their
impact on our strategic ambition.
As part of the Board's decision-making process, the Board and its Committees
consider the potential impact of decisions on relevant stakeholders whilst
also having regard to a number of broader factors, including the impact of the
Group's operations on the community and environment, responsible business
practices and the likely consequences of decisions on the long term.
Our objective is to act in a way that meets the long term needs of all our
main stakeholder groups. However, in so doing we pay particular regard to the
longer term needs of shareholders.
We engage with investors on our financial performance, strategy and business
model. Our Annual General Meeting provided an opportunity for investors to
meet and engage with members of the Board.
The Board continues to encourage senior management to engage with staff,
suppliers, customers and the community in order to assist the Board in
discharging its obligations.
Further details of how the Directors have had regard to the issues, factors
and stakeholders considered relevant in complying with s172 (1) (a)-(f), the
methods used to engage with stakeholders and the effect on the Group's
decisions during the year can be found throughout this report and in
particular in the Investment Case section of the Chairmans statement on pages
3-5 (in relation to decision-making), in the Strategic report on pages 19-23
(where the Group's strategy, objectives and business model are addressed), the
following Employees statement (in relation to employees), and the following
Environmental Policy (in relation to social and environmental matters).
We seek to attract and retain staff by acting as a responsible employer. The
health and safety of our employees is important to the Company and is a
standing item at all Group board meetings.
We continue to provide support to communities and governments through the
provision of employment, and high quality sustainable design.
We have established long-term partnerships that complement our in-house
expertise and have built a network of specialised partners within the industry
and beyond.
Environmental policy
The Group promotes wherever possible a 'green' and ecologically sound policy
in all its work, but always takes into account the considerable pressures of
budget, commercial constraints and client preferences. Sustainability is
essential to our design philosophy and studio ethos. It is an attitude of mind
that is embedded within our thinking from the start of any project. We design
innovative solutions and focus on:
· incorporating passive design principles that mitigate solar gain
and heat loss from the outset;
· reducing energy demand through active and passive renewable
energy sources;
· the use of energy and resource efficient materials, methods and
forms;
· the re-use of existing buildings and materials and flexibility
for future change;
· and importantly the careful consideration of the experience and
wellbeing of the end user in our buildings.
We believe ourselves to be at the forefront of sustainability amongst our
peers which is demonstrated by our track record in achieving 79 'Excellent' or
'Very Good' BREEAM (Building Research Establishment Environmental Assessment
Method) ratings awarded to buildings designed by the Group. We have also
achieved 1 Ska 'Gold' and 2 Ska 'Silver' environmental assessment ratings and
9 LEED (Leadership in Energy and Environmental Design) 'Gold' award and 5
'Silver' awards.
Employees
As a professional services business, the Group's ability to achieve its
commercial objectives and to service the needs of its clients in a profitable
and effective manner depends upon the contribution of its employees. The Group
seeks to keep its employees informed on all material aspects of the business
affecting them through the operation of a structured management system, staff
presentations and an intranet site.
The Group's employment policies do not discriminate between employees, or
potential employees, on the grounds of age, gender, sexual orientation, ethnic
origin or religious belief. The sole criterion for selection or promotion is
the suitability of any applicant for the job.
It is the policy of the Group to encourage and facilitate the continuing
professional development of our employees to ensure that they are equipped to
undertake the tasks for which they are employed, and to provide the
opportunity for career development equally and without discrimination.
Training and development is provided and is available to all levels and
categories of staff.
It is the Group's policy to give fair consideration to application for
employment for disabled persons wherever practicable and, where existing
employees become disabled, efforts are made to find suitable positions for
them.
Health and safety
The Group seeks to promote all aspects of health and safety at work throughout
its operations in the interests of employees and visitors.
The Group has a Health and Safety Steering Committee, chaired by Robert Fry,
to guide the Group's health and safety policies and activities. Health and
safety is included on the agenda of each board meeting. Antony Barkwith is
also a member of the Committee.
Group policies on health and safety are regularly reviewed and revised and are
made available on the intranet site. Appropriate training for employees is
provided on a periodic basis.
Disclosure of information to auditor
Each of the Directors who were in office at the date of approval of these
financial statements has confirmed that:
· so far as they are aware, there is no relevant audit information
of which the auditor is unaware; and
· they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that the Company's auditor is aware of that information.
Independent Auditors
On the 12 October 2022, BDO LLP confirmed their resignation as auditors of
Aukett Swanke Group Plc.
The Directors appointed Moore Kingston Smith LLP as auditors of the Group on
19 October 2022 for the year ended 30 September 2022.
The auditors, Moore Kingston Smith LLP have indicated their willingness to
continue in office and a resolution concerning their reappointment will be
proposed at the Annual General Meeting.
Future developments
An indication of likely future developments in the business of the Group is
contained in the Strategic Report.
Financial instruments
Information concerning the use of financial instruments by the Group is given
in notes 28 to 32 of the financial statements.
Dividends
The Board does not intend to pay a dividend in the forthcoming year.
Going Concern
Measures taken around the world to restrict the spread of the COVID-19 virus,
followed by the macro-economic implications of rising energy prices and
inflation globally have had a significant impact on the Company and the Group
for the past 2 & 1/2 years of trading.
Despite action taken in this time, management were only able to partially
mitigate the financial impact of the above on the Group which resulted in a
loss for the year, largely attributable to the discontinued Middle East
operation, and reduction in net assets of the Group.
The Group has continued to operate within its banking limits, a CBILS loan was
agreed in May 2021, and subsequently the Gearing Covenant and Debt Servicing
covenant were removed from the facility agreements.
On 20 March 2023, the Group acquired 100% of TFG with consideration paid on a
share for share basis. This provided a significant boost to Group with
approximately £1.7m of net tangible assets including almost £1m of cash.
More details of the actions taken, and the results of forecasting performed by
the Group (upon which the going concern assessment of the Company is
dependent) in response to the global macro-economic environment are summarised
in the Going Concern section of note 1.
In addressing any going concern issues the Directors are required to consider
likely cashflows over at least a 12 month period following the date of the
approval of the Financial Statements.
The TFG acquisition brings into the Group a freehold property independently
valued at £3.02m in July 2021 with a mortgage balance of £1.48m as at
December 2022 giving a loan to value percentage of just 48%.
However, as the mortgage renewal date is less than 12 months from the signing
date of these accounts, the Board must consider the remote possibility that if
the mortgage could not be renewed, then the Group may need to raise cash to
repay the full balance of the mortgage through alternative borrowing
facilities, asset sales or fund raising which are not wholly within the
Group's control.
Based on forecasts prepared and reviewed for the period to 31 March 2024, the
Directors have a reasonable expectation that the Group will have adequate
resources to continue in operational existence for the foreseeable future.
However, while the Board is confident of either being able to re-mortgage the
building or selling it should the need arise, the requirement to refinance the
building within the going concern period indicates the possible existence of a
material uncertainty which may cause significant doubt on the Group's and the
Parent Company's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if
the Group or the Parent Company was unable to continue as a going concern.
Annual General Meeting
Notice of the annual general meeting, which is expected to be held on 21 April
2023, will be posted to shareholders in due course.
The Directors' report was approved by the Board on 27 March 2023 and signed on
its behalf by
Antony Barkwith
Company Secretary
Aukett Swanke Group Plc
Registered number 02155571
Statement of directors' responsibilities
Directors' responsibilities
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
Group and Company financial statements in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006. Under Company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the profit or
loss of the Group for that period. The Directors are also required to prepare
financial statements in accordance with the rules of the London Stock Exchange
for companies trading securities on AIM.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgments and accounting estimates that are reasonable and
prudent;
· state whether they have been prepared in accordance with UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006, subject to any material departures disclosed and
explained in the financial statements;
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
Group and enable them to ensure that the financial statements comply with the
requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Independent auditor's report to the members of Aukett Swanke Group Plc
Opinion
We have audited the financial statements of Aukett Swanke Group Plc (the
'parent Company') and its subsidiaries (the 'Group') for the year ended 30
September 2022 which comprise the Consolidated Income Statement, the
Consolidated Statement of Comprehensive Income, the Consolidated and Company
Statements of Financial Position, the Consolidated and Company Statements of
Changes in Cash Flows, the Consolidated and Company Statements of Changes in
Equity and notes to the financial statements, including significant accounting
policies. The financial reporting framework that has been applied in the
preparation of the Group and parent Company financial statements is applicable
law and UK adopted International Accounting Standards and, as regards the
parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the Group's
and of the parent Company's affairs as of 30 September 2022 and of the Group's
loss for the year then ended;
· the Group financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards;
· the parent Company financial statements have been properly
prepared in accordance with UK adopted International Accounting Standards and
as applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 1 to the financial statements which indicates that
the Directors have assumed that the overdraft facility of £250,000 will be
renewed in November 2023 whilst making their assessment of the Group's and
parent Company's going concern status. Whilst there are no indications that
the overdraft facility will not be renewed, it is not guaranteed.
The renewal of the £1.46m mortgage will only be reviewed later in 2023, and
as such there is a possibility that if the mortgage is not renewed then the
Group would need to repay the full balance of the mortgage within 12 months of
the signing date of these accounts. In this case the Group may need to raise
cash through alternative borrowing facilities, asset sales or fund raising
which are not wholly within the Group's control.
As stated in Note 1, these conditions and the economic uncertainty which
exists, along with other matters as set out in Note 1, indicate that a
material uncertainty exists that may cause significant doubt on the Group's
and parent Company's ability to continue as a going concern. Our opinion is
not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors'
assessment of the Group and the parent Company's ability to continue to adopt
the going concern basis of accounting has been highlighted as a key audit
matter based on our assessment of the significance of the risk and the effect
on our audit strategy.
Our evaluation of the Directors' assessment of the Group and the parent
Company's ability to adopt the going concern basis of accounting and our
response to the key audit matters include:
· A critical assessment of the detailed cash flow projections
prepared by the Directors, which are based on future revenue pipelines and
newly won contracts, we also evaluated the sensitivities that the Directors
performed against this forecast.
· We evaluated the key assumptions in the forecast, which were
consistent with our knowledge of the business and considered whether these
were supported by the evidence we obtained. We obtained an understanding of
all relevant uncertainties, including those arising because of the impact of
the COVID-19 pandemic over the past years. We have factored the ongoing impact
of COVID-19 into our analysis of the risks affecting the ability of the Group
and parent Company to continue to trade and meet its liabilities as they fall
due for at least twelve months from the date of approval of the Group and
parent Company financial statements.
· We have inquired about revenue pipeline, and status of
outstanding bids. We have agreed submitted proposal documents and newly won
contracts where appropriate.
· We have examined current year actual results against the budget
for the year to determine the accuracy of the budgeting and forecasting by
management.
· We examined the disclosures relating to the going concern basis
of preparation and found that these provided an explanation of the Directors'
assessment that was consistent with the evidence we obtained.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
The components of the Group were evaluated by the Group audit team based on a
measure of materiality, considering each component as a percentage of the
Group's net assets, gross revenue and results before tax, which allowed the
Group audit team to assess the significance of each component and determine
the planned audit response. We determined there to be four significant
components to the Group, which were Aukett Swanke Group Plc, Aukett Swanke
Limited, Veretec Limited, and Aukett Swanke Architectural Design Limited. They
were all subjected to full scope audits.
Also, we have performed a full scope audit on John R Harris & Partners
Limited, Swanke Hayden Connell International Limited, Aukett Fitzroy Robinson
International Limited and Shankland Cox Limited for the purpose of coverage
and to cover specific identified risk. All full-scope audits, excluding John R
Harris & Partners Limited were conducted by the group audit engagement
team. The audit of John R Harris & Partners Limited was performed by a
component audit firm in Dubai, UAE.
For significant components requiring a full scope approach, we evaluated
controls by performing walkthroughs over the financial reporting systems
identified as part of our risk assessment, reviewed the accounts production
process, and addressed critical accounting matters. We then undertook
substantive testing on significant transactions and material account balances.
We have overall coverage of 100% of group profit before tax, 100% of Group
revenue and 100% of Group total assets.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of all risks
identified by our audit.
In addition to the matter described in the material uncertainty related to
going concern section, we have determined the matters described below to be
the key audit matters to be communicated in our audit report.
Key Audit Matters How our scope addressed this matter
Going Concern
The Group has recognised a loss before tax of £2.3 Million (2021: £1.5 Our audit work and conclusion in respect of going concern has been detailed in
Million). The cash and cash equivalents balance were an overdraft of £0.2 the 'Material uncertainty related to going concern' section of our audit
Million in the current year (2021: £0.51 Million). The Group has continued report.
incurring further losses subsequent to the year end.
Given the performance in the year, including the matter explained in Note 1
and the 'Material uncertainty related to going concern section of our audit
report' going concern was considered to be a key audit matter.
Revenue recognition, including 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 page 62 to 63 and Note 3 in the relation to revenue.
Group financial statements.
We evaluated the Group's accounting policy in respect of revenue recognition
The measurement of revenue earned on architectural services contracts with to ensure it is compliant with IFRS 15.
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
cost (fee earners and subcontractors) incurred on the contract compared to the
total costs expected at the culmination of the contract as a proportion of We selected a sample of contracts and the substantive testing procedures
agreed-upon contract revenue less any invoices raised to date. included the following:
As the above measurement requires Directors to assess the final costs expected · Confirming revenue from the revenue recognition model to the
on a contract to determine the stage of completion, there is inherent underlying contract and where relevant, contract variations were agreed
estimation uncertainty. The significant judgement arising in the formulation between the Group and its customers.
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
As at 30 September 2022 the group has recognised contract assets of £ 1.1 accuracy of management's estimation of total project costs. Also discussed
Million and contract liabilities of £ 1.2 Million. with management if there were material variances in this estimate. Further,
subsequent invoices raised post the Statement of Financial Position date and
collections were tested to compare the estimated margins to actuals.
· 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 59 and Notes 12 and 13 for
key judgements in the Group financial statements.
· Obtained management's assessment of the Group CGU's and
critically assessed Value In Use (VIU) model for each CGU to test compliance
with the requirement of applicable accounting standards and mathematical
In the financial statements goodwill arising from past acquisitions is valued accuracy of the model.
at £1.75 Million. It exists predominantly within the UK (£1.74 Million) and
the residual £0.01M in the Turkey Cash Generating Unit (CGU). While no
goodwill is allocated to the Shankland Cox Limited (SCL) CGU £0.25 Million of
other intangible assets are situated within the SCL CGU. There is a risk that · The weighted average cost of capital (WACC) of the models was
these are impaired in the context of results of the Group and the UK and UAE re-computed with reference to external data to test the accuracy of
economic operating environments. computation.
The process for assessing whether impairment exists under International · Challenging the revenue cash flows within the model. Future
Accounting Standard IAS 36 'Impairment of Assets' is complex. The process of earnings potential was checked to secure pipeline via agreement verification.
determining the value in use, through forecasting cash flows (primarily Potential wins were assessed for progress in bids by verification of
revenue less subcontract costs) and the determination of the appropriate correspondence. Future earnings were assessed by verification of historic
discount rate and other assumptions to be applied, is highly judgemental and conversion of new work.
can significantly impact the results of the impairment review.
· Critically assessed the cost base for potential omissions or
Based on recent trading performance there is uncertainty around future revenue unrealistic targets based on prior years actuals and potential future changes
less subconsultant cost pipelines and consequent profitability of the CGUs. in the business. We challenged management where this fell outside our
expectation and checked that these were accurately stated, reasonable and
achievable in the light of the economic environment and future pipeline of
work.
There is significant management judgement and estimation uncertainty involved
in the preparation of value in use models under applicable accounting
standards for the group and as a result we consider this to be a key audit
matter. · 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. Further, during the course of the audit it was discussed with
management that the Goodwill arising at the time of these acquisition was no
longer reflective of the current business, and it is impractical to be able to
determine what proportion of cash flow projections of the United Kingdom
operations related to the historic acquisitions. Management have therefore
taken the decision to write off the full £1.74M balance of Goodwill for the
United Kingdom operations and an audit adjustment has been made to that
effect.
Our application of materiality
The scope and focus of our audit were influenced by our assessment and
application of materiality. We define materiality as the magnitude of
misstatement that could reasonably be expected to influence the readers and
the economic decisions of the users of the financial statements. We use
materiality to determine the scope of our audit and the nature, timing, and
extent of our audit procedures and to evaluate the effect of misstatements,
both individually and on the financial statements as a whole. We apply the
concept of materiality both in planning and performing our audit, and in
evaluating the effect of misstatements.
Based on our professional judgement we determined materiality for the 2022
financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
Materiality £153,000 £183,000
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 its penetration into the geographic focus for the readers of the financial statements, accordingly this
hubs in which it operates. The "sub-consultants" i.e., the specialists' costs consideration influenced our judgement of materiality.
are agreed in the bid and included as part of the fees that is marked up to
the client as Group's revenue. The professional indemnity insurance covers the
gross fees chargeable to the customers which includes the subconsultants
costs. The Group is responsible for the entire contract with their customer.
Based on the above factors the Gross revenue i.e., including sub-consultant
costs are to be considered as most relevant benchmark to check the performance
of the company rather than Net Revenue.
Performance materiality £78,000 £73,000
Basis for determining performance materiality 50% of Group materiality 40% 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 as per previous auditor file review
· our risk assessment, together with our assessment of the overall
control environment
Component materiality:
We set materiality for each component of the Group based on a percentage of
Group materiality dependent on the size and our assessment of risk of material
misstatements of that component. Component materiality, other than the parent
Company's, ranged from £91,000 to £3,000. In the audit of each component, we
further applied performance materiality levels of 50% of the component
materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Trivial:
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £7,800 for the Group and £7,600 for the
parent Company. We also agreed to report differences below this threshold
that, in our view, warranted reporting on qualitative grounds. We also
reported to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
Directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements, or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the Directors'
Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the Strategic Report and the Directors' Report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent
Company and their environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors'
Report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the parent Company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities statement set out
on page 37, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the parent company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities is available on the FRC's
website at
https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for
(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.
Our approach was as follows:
· We obtained an understanding of the legal and regulatory
requirements applicable to the company and considered that the most
significant are the Companies Act 2006, UK adopted international accounting
standards, the rules of the Alternative Investment Market, and UK taxation
legislation.
· We obtained an understanding of how the Group and parent Company
complies with these requirements by discussions with management and those
charged with governance.
· We assessed the risk of material misstatement of the financial
statements, including the risk of material misstatement due to fraud and how
it might occur, by holding discussions with management and those charged with
governance.
· We inquired of management and those charged with governance as to
any known instances of non-compliance or suspected non-compliance with laws
and regulations.
· Based on this understanding, we designed specific appropriate
audit procedures to identify instances of non-compliance with laws and
regulations. This included making enquiries of management and those charged
with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken for no purpose other than to draw to the attention of the company's
members those matters which we are required to include in an auditor's report
addressed to them. To the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the company and the company's
members as a body, for our work, for this report, or for the opinions we have
formed.
Mital Shah (Senior Statutory Auditor)
for and on behalf of Moore Kingston Smith LLP
Chartered Accountants
Statutory
Auditor
6th Floor
9 Appold Street
London
EC2A 2AP
27 March 2023
Consolidated income statement
For the year ended 30 September 2022
Note 2022 2021
£'000 £'000
Continuing operations
Revenue 3 8,645 9,192
Sub consultant costs (1,518) (2,887)
Revenue less sub consultant costs 3 7,127 6,305
Personnel related costs (6,237) (5,594)
Property related costs (1,037) (1,041)
Other operating expenses (483) (695)
Other operating income 4 326 358
Operating loss (304) (667)
Finance costs 5 (95) (94)
Loss after finance costs (399) (761)
Share of results of associate and joint ventures 327 166
Trading loss from continuing operations (72) (595)
Impairment of intangibles 13 - -
Goodwill impairment 12 (1,752) -
Loss before tax from continuing operations (1,824) (595)
Tax credit 9 45 395
Loss from continuing operations (1,779) (200)
Loss from discontinued operations 11 (503) (936)
Loss for the year (2,282) (1,136)
Loss attributable to:
Owners of Aukett Swanke Group Plc (2,282) (1,123)
Non-controlling interests - (13)
(2,282) (1,136)
Basic and diluted earnings per share for loss attributable to the ordinary
equity holders of the Company:
From continuing operations (1.08p) (0.12p)
From discontinued operations (0.30p) (0.57p)
Total loss per share 10 (1.38p) (0.69p)
Consolidated statement of comprehensive income
For the year ended 30 September 2022
2022 2021
£'000 £'000
Loss for the year (2,282) (1,136)
Currency translation differences (7) (107)
Currency translation differences on disposal recycled to gain on disposal of (209) -
discontinued operation (note 11)
Currency translation differences on translation of discontinued operations (168) (50)
(note 11)
Other comprehensive loss for the year (384) (157)
Total comprehensive loss for the year (2,666) (1,293)
Total comprehensive loss for the year is attributable to:
Owners of Aukett Swanke Group Plc (2,666) (1,280)
Non-controlling interests - (13)
Total comprehensive loss for the year (2,666) (1,293)
Total comprehensive loss attributable to the owners of Aukett Swanke Group Plc
arises from:
Continuing operations (1,786) (307)
Discontinued operations (880) (973)
(2,666) (1,280)
Consolidated statement of financial position
At 30 September 2022
2022 2021
Note £'000 £'000
Non current assets
Goodwill 12 - 2,370
Other intangible assets 13 210 324
Property, plant and equipment 14 69 155
Right-of-use assets 15 2,184 2,546
Investment in associate 17 760 587
Investments in joint ventures 18 247 209
Deferred tax 23 281 241
Total non current assets 3,751 6,432
Current assets
Trade and other receivables 19 3,293 3,975
Contract assets 3 1,119 982
Cash at bank and in hand 28 515
Total current assets 4,440 5,472
Total assets 8,191 11,904
Current liabilities
Trade and other payables 20 (3,169) (3,747)
Contract liabilities 3 (1,227) (829)
Borrowings 21 (482) (83)
Lease liabilities 15 (457) (539)
Total current liabilities (5,335) (5,198)
Non current liabilities
Trade and other payables 20 (44) -
Borrowings 21 (167) (417)
Lease liabilities 15 (1,962) (2,350)
Deferred tax 23 (33) (40)
Provisions 24 (249) (832)
Total non current liabilities (2,455) (3,639)
Total liabilities (7,790) (8,837)
Net assets 401 3,067
Capital and reserves
Share capital 25 1,652 1,652
Merger reserve 1,176 1,176
Foreign currency translation reserve (557) (173)
Retained earnings (3,364) (1,082)
Other distributable reserve 1,494 1,494
Total equity attributable to 401 3,067
equity holders of the Company
Non-controlling interests - -
Total equity 401 3,067
The financial statements on pages 47 to 109 were approved and authorised for
issue by the Board of Directors on 27 March 2023 and were signed on its behalf
by:
Robert Fry Antony Barkwith
Chief Executive Officer Group Financial Director
Company statement of financial position
At 30 September 2022
Note 2022 2021
£'000 £'000
Non current assets
Property, plant and equipment 14 7 11
Investments 16 2,089 3,290
Trade and other receivables 19 184 5
Total non current assets 2,280 3,306
Current assets
Trade and other receivables 19 250 449
Cash at bank and in hand 457 211
Total current assets 707 660
Total assets 2,987 3,966
Current liabilities
Trade and other payables 20 (1,594) (1,750)
Borrowings 21 (250) (83)
Total current liabilities (1,844) (1,833)
Non current liabilities
Trade and other payables 20 (44) -
Deferred tax (1) (2)
Borrowings 21 (167) (417)
Total non current liabilities (212) (419)
Total liabilities (2,056) (2,252)
Net assets 931 1,714
Capital and reserves
Share capital 25 1,652 1,652
Retained earnings (3,391) (2,608)
Merger reserve 1,176 1,176
Other distributable reserve 1,494 1,494
Total equity attributable to 931 1,714
equity holders of the Company
The result for the year contained within the parent company's income statement
is a loss of £783k (2021: loss £1,179k).
The financial statements on pages 47 to 109 were approved and authorised for
issue by the Board of Directors on 27 March 2023 and were signed on its behalf
by:
Robert Fry Antony Barkwith
Chief Executive Officer Group Financial Director
Consolidated statement of cash flows
For the year ended 30 September 2022
Note 2022 2021
£'000 £'000
Cash flows from operating activities
Cash expended by operations 27 (1,104) (896)
Income taxes received 99 262
Net cash outflow from operating activities (1,005) (634)
Cash flows from investing activities
Purchase of property, plant and equipment (48) (33)
Sale of property, plant and equipment - 16
Purchase of investments - (123)
Sale of investments 927 -
Dividends received from associates & joint ventures 140 528
Net cash received in investing activities 1,019 388
Net cash inflow/(outflow) before financing activities 14 (246)
Cash flows from financing activities
Principal paid on lease liabilities (470) (455)
Interest paid on lease liabilities (76) (91)
Proceeds from bank loans - 500
Repayment of bank loans (83) (155)
Interest paid (19) (3)
Net cash outflow from financing activities (648) (204)
Net change in cash and cash equivalents (634) (450)
Cash and cash equivalents at start of year 515 992
Currency translation differences (85) (27)
Cash and cash equivalents at end of year 22 (204) 515
Cash and cash equivalents are comprised of:
Cash at bank and in hand 28 515
Secured bank overdrafts (232) -
Cash and cash equivalents at end of year (204) 515
Company statement of cash flows
For the year ended 30 September 2022
Note 2022 2021
£'000 £'000
Cash flows from operating activities
Cash expended by operations 27 (722) (702)
Interest paid (9) (1)
Net cash outflow from operating activities (731) (703)
Cash flows from investing activities
Purchase of property, plant and equipment - -
Purchase of investments - (123)
Sale of investments 927 -
Dividends received from associates & joint ventures 133 528
Net cash generated from investing activities 1,060 405
Net cash inflow/(outflow) before financing activities 329 (298)
Cash flows from financing activities
Proceeds from bank loans - 500
Repayment of bank loans (83) (155)
Net cash (outflow)/inflow from financing activities (83) 345
Net change in cash and cash equivalents 246 47
Cash and cash equivalents at start of year 211 164
Cash and cash equivalents at end of year 457 211
Cash and cash equivalents are comprised of:
Cash at bank and in hand 457 211
Cash and cash equivalents at end of year 457 211
Consolidated statement of changes in equity
For the year ended 30 September 2022
Share capital Foreign Retained Other Merger reserve Total Non-controlling Total
currency earnings distributable interests equity
translation reserve
£'000 reserve £'000 £'000
£'000 £'000 £'000 £'000 £'000
At 1 October 2020 1,652 (16) 41 1,494 1,176 4,347 27 4,374
Loss for the year - - (1,123) - - (1,123) (13) (1,136)
Acquisition of minority interest - - - - - - (14) (14)
Other comprehensive income - (157) - - - (157) - (157)
Total comprehensive income - (157) (1,123) - - (1,280) (27) (1,307)
At 30 September 2021 1,652 (173) (1,082) 1,494 1,176 3,067 - 3,067
Loss for the year - - (2,282) - - (2,282) - (2,282)
Other comprehensive income - (384) - - - (384) - (384)
Total comprehensive income - (384) (2,282) - - (2,666) - (2,666)
At 30 September 2022 1,652 (557) (3,364) 1,494 1,176 401 - 401
The other distributable reserve was created in September 2007 during a court
and shareholder approved process to reduce the capital of the Company.
The merger reserve was created through a business combination in December 2013
representing the issue of 19,594,959 new ordinary shares at a price of 7.00
pence per share.
Company statement of changes in equity
For the year ended 30 September 2022
Share capital Retained Other Merger reserve Total Equity
earnings distributable
£'000 reserve £'000 £'000
£'000 £'000
At 1 October 2020 1,652 (1,429) 1,494 1,176 2,893
Loss and total comprehensive income for the year - (1,179) - - (1,179)
At 30 September 2021 1,652 (2,608) 1,494 1,176 1,714
Loss and total comprehensive income for the year - (783) - - (783)
At 30 September 2022 1,652 (3,391) 1,494 1,176 931
The other distributable reserve was created in September 2007 during a court
and shareholder approved process to reduce the capital of the Company.
The merger reserve was created through a business combination in December 2013
representing the issue of 19,594,959 new ordinary shares at a price of 7.00
pence per share.
Notes to the financial statements
1 Significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below.
Basis of preparation
The financial statements for the Group and parent Company have been prepared
in accordance with UK adopted international accounting standards in conformity
with the requirements of the Companies Act 2006.
New accounting standards, amendments and interpretations applied
For the year ended 30 September 2022, one new standard became applicable:
- COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendments to
IFRS 16).
The Group did not have to change its accounting policies or make retrospective
adjustments as a result of adopting this standard.
New accounting standards, amendments and interpretations not yet applied
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January
2022:
(i) Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to IAS 37);
(ii) Property, Plant and Equipment: Proceeds before Intended
Use (Amendments to IAS 16);
(iii) Annual Improvements to IFRS Standards 2018-2020
(Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
(iv) References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning 1 January
2023:
(i) Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2);
(ii) Definition of Accounting Estimates (Amendments to IAS 8);
and
(iii) Deferred Tax Related to Assets and Liabilities arising
from a Single Transaction (Amendments to IAS 12).
In January 2020, the IASB issued amendments to IAS 1, which clarify the
criteria used to determine whether liabilities are classified as current or
non-current. These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the
reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendments also clarify that
'settlement' includes the transfer of cash, goods, services, or equity
instruments unless the obligation to transfer equity instruments arises from a
conversion feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The amendments were
originally effective for annual reporting periods beginning on or after 1
January 2022. However, in May 2020, the effective date was deferred to annual
reporting periods beginning on or after 1 January 2023.
In response to feedback and enquiries from stakeholders, in December 2020, the
IFRS Interpretations Committee (IFRIC) issued a Tentative Agenda Decision,
analysing the applicability of the amendments to three scenarios. However,
given the comments received and concerns raised on some aspects of the
amendments, in April 2021, IFRIC decided not to finalise the agenda decision
and referred the matter to the IASB. In its June 2021 meeting, the IASB
tentatively decided to amend the requirements of IAS 1 with respect to the
classification of liabilities subject to conditions and disclosure of
information about such conditions and to defer the effective date of the 2020
amendment by at least one year.
At present the Group has not analysed the impact of these new accounting
standards and amendments.
There are no other IFRSs or International Financial Reporting Interpretations
Committee interpretations that are not yet effective that would be expected to
have a material impact on the Group.
Going concern
The Group's business activities, the principal risks and uncertainties facing
the Group, and the financial position of the Group are described in the
Strategic Report. The liquidity risks faced by the Group are further described
in note 32. These factors are all considered when assessing the Group's
ability to operate as a going concern.
The Group currently meets its day to day working capital requirements through
its cash balances. It maintains an overdraft facility for additional financial
flexibility and foreign currency hedging purposes.
The overdraft facility is renewed annually and was renewed for a further 12
months in November 2022, with a review in May 2023.
The £500k Coronavirus Business Interruption Loan Scheme ("CBILS") drawn in
May 2021 has a duration of three years with interest at 4.05% over the Coutts
base rate (currently 4.25%) in years two and three. The Group commenced paying
the 24 monthly instalments in June 2022. We expect to repay the CBILS loan
before the expiry of the term.
In May 2022, the net gearing covenant and debt servicing covenants were
removed from the CBILS loan agreements. The covenant applicable to maintaining
a level of UK eligible debtors have been amended as an 'Other condition'. The
Group similarly agreed to reduce the overdraft facility to £250k. The £250k
overdraft was agreed to be maintained in the annual renewal in November 2022.
We have no reason not to expect that the overdraft facility would not be
renewed again in November 2023, however this is not guaranteed.
On 20 March 2023 the Group acquired 100% of TFG with consideration paid on a
share for share basis. This provided a significant boost to Group with
approximately £1.7m of net tangible assets including almost £1m of cash.
TFG have interest bearing loans and borrowings being a CBILS loan and a
mortgage which together totalled approximately £2.7m as at December 2022. The
CBILS loan was drawn in 2021 at £1.75m, the December 2022 balance being
£1.25m, and being repaid at £29k per month. The loan is at a fixed rate of
interest at 3.90%.
The Mortgage initially drawn in 2018 at £1.73m with a duration of 5 years has
been extended for a year and is due to expire in January 2024. The balance as
at December 2022 was £1.46m, with a variable interest at base rate + 1.93%.
The mortgage is secured against TFG's freehold property in London. The Board's
review of going concern takes into account the need to re-mortgage the
property within 12 months of the signing date of the financial statements.
Forecasts for the Group have been prepared for a period of at least 12 months
following the approval of the financial statements, which comprise detailed
income statements, statements of financial position and cash flow statements
for each of the Group's operations.
The Group forecasts on the basis of earnings and billings from i) secure
contractual work, ii) known potential work which is deemed to have a greater
than 50% chance of being undertaken and is predominantly follow on stages of
currently instructed work, on which a factoring is applied; and iii) new work
from known sources such as competitive tenders and submitted fee proposals, or
new work to be achieved based on historical experience of market activity and
timescales in which work can be converted from an enquiry to an active project
which varies by territory and the service each office in the Group provides.
The risk of rising energy prices and inflation globally will have
macro-economic implications and could be a trigger for recession in the short
to medium term, and will have significant impact on Entity's decision making,
albeit as yet we have not experienced any material indication to this effect.
The delays in clients making financial investment decisions due to the
economic uncertainty may result in the net earnings and cash flows of the
Group not being realised.
The Group has managed cash flow within its facilities so far, and the
acquisition of TFG significantly enhances the Group's short term available
cash. During the next 12 month going concern review period, the forecast
assumes that no additional external financing is received when measuring the
Group's ability to continue to operate. The Group's assessment of going
concern is therefore focused on its ability to operate within the £250k
overdraft limit.
The Group's forecasts, indicate that, during the 12-month period following the
approval of the financial statements, the Group will maintain a positive net
cash balance with the full overdraft facility available to be drawn down.
The Group's forecasts assume that the TFG mortgage is successfully renewed in
January 2024. The freehold property was last independently valued in July 2021
at £3.02m, and as at December 2022 the balance of the mortgage at £1.46m
gave it a loan to value percentage of just 48%.
However, as the mortgage renewal date is less than 12 months from the signing
date of these accounts, the Board must consider the remote possibility that if
the mortgage could not be renewed, then the Group may need to raise cash to
repay the full balance of the mortgage through alternative borrowing
facilities, asset sales or fund raising which are not wholly within the
Group's control.
For this reason, the Board considers it appropriate to prepare the financial
statements on a going concern basis. However, the mortgage term ending less
than 12 months from the signing date of these accounts indicates the possible
existence of a material uncertainty which may cause significant doubt on the
Group's and Parent Company's ability to continue as a going concern and
therefore their ability to realise their assets and discharge their
liabilities in the normal course of business.
The financial statements do not include the adjustments that would result if
the Group or the Parent Company was unable to continue as a going concern.
Basis of consolidation and equity accounting
The consolidated financial statements incorporate those of the Company and its
subsidiaries. Subsidiaries are all entities over which the Group has
control. The Group controls an entity when it is exposed to variable returns
from the investee, in addition to the ability to direct the investee and
affect those returns through exercising its power. Intra group transactions,
balances and any unrealised gains and losses on transactions between Group
companies are eliminated on consolidation.
Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated income statement, statement of comprehensive
income, statement of changes in equity and statement of financial position
respectively.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given and equity instruments issued. Identifiable assets
acquired and liabilities assumed in an acquisition are measured initially at
their fair values at the acquisition date, irrespective of any non-controlling
interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
The consolidated financial statements also include the Group's share of the
results and reserves of its associate and joint ventures.
Associates
The associate in Berlin is an entity for which the Group has significant
influence but not control or joint control. This is presumed to be the case
where the Group holds between 20% and 50% of the voting rights, but
consideration is given to the substance of the contractual governance
agreements in place. Investments in associates are accounted for under the
equity method.
Joint ventures
The Group has joint ventures in Frankfurt and the Czech Republic (in
liquidation) where ownership is contractual and the agreements require
unanimous consent from all parties for relevant activities. The entities are
considered joint ventures.
Joint ventures are accounted for under the equity method.
Borrowings
Borrowings are initially recognised at fair value, net of any transaction
costs incurred. Borrowings are subsequently stated at amortised cost. Any
difference between the proceeds (net of any transaction costs) and the
redemption value is recognised in the income statement over the period of the
borrowings using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, bank current accounts held at
call, bank deposits with very short maturity terms and bank overdrafts where
these form an integral part of the group's cash management process, for the
purposes of the statement of cash flows.
Company income statement
The Company has taken advantage of the exemption provided by section 408 of
the Companies Act 2006 not to present its income statement for the year. The
Company's result is disclosed at the foot of the Company's statement of
financial position.
Current Taxation
Current taxes are based on the results shown in the financial statements and
are calculated according to local tax rules, using tax rates enacted or
substantially enacted by the statement of financial position date.
Deferred taxation
Deferred income tax is provided in full, using the statement of financial
position liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amount in the financial
statements, and measured at an undiscounted basis.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the date of the statement of financial
position and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profits will be generated against which the temporary
differences can be utilised.
Dividends
Dividend payments are recognised as liabilities once they are no longer at the
discretion of the Company.
Dividend income from investments is recognised in the income statement when
the shareholders' rights to receive payment have been established.
Equity instruments
Equity instruments issued by the Company are recorded as the proceeds
received, net of direct issue costs.
Foreign currency
Transactions in currencies other than the functional currency of each
operation are recorded at the rates of exchange prevailing on the dates of the
transactions. At the date of each statement of financial position, monetary
assets and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing at the date of the statement of financial
position. Gains and losses arising on retranslation are included in the
consolidated income statement for the year.
On consolidation, the assets and liabilities of the Group's overseas
operations are translated from their functional currencies at exchange rates
prevailing at the date of the statement of financial position. Income and
expense items are translated from their functional currencies at the average
exchange rates for the year, which are materially consistent with the spot
rates observed in the year for those entities. Exchange differences arising
are recognised directly in equity and transferred to the Group's foreign
currency translation reserve. If an overseas operation is disposed of then the
cumulative translation differences are recognised as realised income or an
expense in the year disposal occurs.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing exchange rate. The Group has elected to treat
goodwill and fair value adjustments arising on acquisitions before the date of
transition to IFRS as sterling denominated assets and liabilities.
Goodwill
Goodwill arising on acquisitions represents the excess of the fair value of
the consideration given over the fair value of the identifiable assets and
liabilities acquired. Where the net fair value of the identifiable assets and
liabilities of the acquiree is in excess of the consideration paid, negative
goodwill is recognised immediately in the income statement.
Goodwill is tested annually for impairment and an impairment loss would be
recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Impairment
At the date of each statement of financial position, a review of property,
plant and equipment and intangible assets (excluding goodwill) is carried out
to determine whether there is any indication that those assets have suffered
any impairment. If any such indications exist, the recoverable amount of the
asset is assessed as the higher of fair value less costs to sell and value in
use, in order to determine the extent of any impairment.
Where the asset does not generate cash flows that are independent from other
assets, the recoverable amount of the cash generating unit to which the asset
belongs is estimated.
The recoverable amount of a cash generating unit is determined based on value
in use calculations. These calculations use pre-tax cash flow projections
based on financial budgets and forecasts covering a five year period. Cash
flows beyond the five year period are extrapolated using long term average
growth rates.
Other intangible assets
Intangible assets acquired in a business combination are recognised at fair
value at the acquisition date. Subsequently the intangible assets are carried
at cost less accumulated amortisation and accumulated impairment. Amortisation
is charged on a straight line basis with the useful economic lives attributed
as follows:
Trade name - 25 years
Trade licence - 10 years
Customer relationships - 7 to 10 years
Order book - Over the life of the contracts
Amortisation is charged to other operating expenses within the consolidated
income statement.
Investments
Investments in subsidiaries, associates and joint ventures are held in the
statement of financial position of the Company at historical cost less any
allowance for impairment.
Leases and asset finance arrangements
The majority of the Group's accounting policies for leases are set out in note
15.
Identifying Leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy all of the following
criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits from use of the
asset; and
(c) The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights.
If the supplier does have those rights, the contract is not identified as
giving rise to a lease.
In determining whether the Group obtains substantially all the economic
benefits from use of the asset, the Group considers only the economic benefits
that arise from use of the asset, not those incidental to legal ownership or
other potential benefits.
In determining whether the Group has the right to direct use of the asset, the
Group considers whether it directs how and for what purpose the asset is used
throughout the period of use. If there are no significant decisions to be made
because they are pre-determined due to the nature of the asset, the Group
considers whether it was involved in the design of the asset in a way that
pre-determines how and for what purpose the asset will be used throughout the
period of use. If the contract or portion of a contract does not satisfy these
criteria, the Group applies other applicable IFRSs rather than IFRS 16.
Operating segments
The Group's reportable operating segments are based on the geographical areas
in which its studios are located. Internally the Group prepares discrete
financial information for each of its geographical segments.
Each reportable operating segment provides the same type of service to
clients, namely integrated professional design services for the built
environment and internally the Group does not sub divide its business by type
of service.
Other operating expenses
Other operating expenses include legal and professional costs, professional
indemnity insurance premiums, marketing expenses and other general expenses.
Property, plant and equipment
All property, plant and equipment is stated at historical cost of acquisition
less depreciation and any impairment provisions. Historical cost of
acquisition includes expenditure that is directly attributable to the
acquisition of the items.
Depreciation of property, plant and equipment is calculated to write off the
cost of acquisition over the expected useful economic lives using the straight
line method and over the following number of years:
Leasehold improvements - Unexpired term of lease
Office furniture - 4 years
Office equipment - 4 years
Computer equipment - 2 years
Provisions
Provisions are recognised when a present obligation has arisen as a result of
a past event which is probable will result in an outflow of economic benefits
that can be reliably estimated.
Where the effect of the time value of money is material, the provision is
based on the present value of future outflows, discounted at the pre-tax
discount rate that reflects the risks specific to the liability.
Employee benefits
In those geographies where it is a legal requirement, provision is also made
for end of service benefit ('EOSB'), being amounts payable to employees when
their contract with the Group ends (see note 24).
The charge to the income statement comprises the service cost and the interest
on the liability and is included in personnel related expenses. The obligation
has been measured at the reporting date using the projected unit credit method
in accordance with IAS 19 and is funded from working capital.
Post retirement benefits
Costs in respect of defined contribution pension arrangements are charged to
the income statement on an accruals basis in line with the amounts payable in
respect of the accounting period. The Group has no defined benefit pension
arrangements.
Rental Income
Rental income from sublet property is credited to the consolidated income
statement in the year in which it accrues.
Revenue recognition
Revenue represents the value of services performed for customers under
contracts (excluding value added taxes). Revenue from contracts is assessed on
an individual basis with revenue earned being ascertained based on the stage
of completion of the contract which is estimated using each performance
obligation within the contract and the proportion of total time expected to be
required to undertake each performance obligation which had been or is being
performed.
Step 1) Identification of the contract
Contracts with clients are mostly on a fixed basis with the consideration
generally being stipulated based on a percentage of the build cost.
Contract variations are treated as variations to a specific performance
obligation, with any additional fees associated with that variation, and the
time and cost required to fulfil the variations, included within the overall
assessment of the time required to complete the overall performance
obligation. This is on the basis that those variations are normally not
distinct in themselves (modifications to existing elements of the obligations)
and therefore are repriced as if they were part of the original contract.
Step 2) Identification of performance obligations
Whilst the nature of performance obligations may vary from project to project,
they are generally split by identification of Royal Institute of British
Architects ('RIBA') work stages (delivered as either an individual work stage
or a group of work stages depending on the exact nature of the contract),
which constitute individual and distinctive promises within the contract.
These are capable of being delivered independently. Local equivalents of RIBA
apply depending on the jurisdiction of the contract, and may be identified.
Step 3) Identify the consideration
Consideration is generally fixed and agreed within the contract for services
between the Group and the client, subject to modifications as noted above in
step 1.
Step 4) Allocate the transaction price
The performance obligations within the contract are billed on the basis of a
fee allocated to each element of the project, however revenue is allocated to
the performance obligations based on the total expected time cost and contract
cost expected to be required to undertake each performance obligation within
the contract. This leads to recognition of revenue being reallocated between
work stages where Management assess that the billing milestones associated to
specific stages as stated in the contract do not fairly reflect the total time
and cost required to complete those tasks.
Estimates of the total time expected to be required to undertake the contracts
are made on a regular basis and subject to management review. These estimates
may differ from the actual results due to a variety of factors such as
efficiency of working, accuracy of assessment of progress to date and client
decision making.
Step 5) Recognition of revenue
For all contracts undertaken by Management, the measurement of revenues
follows an "over time" pattern.
The basis on which this is the case is that the work performed by the Group
has no alternative use and the contracts contain provisions by which
consideration can be recovered for part-performance of obligations in the
event that a contract is terminated. The revenue recoverable in such an
instance would approximate to compensating the Group for the selling price of
the services rendered to date.
The amount by which revenue exceeds progress billings is classified as
contract assets. To the extent progress billings exceed relevant revenue, the
excess is classified as contract liabilities.
Trade receivables
Trade receivables are amounts due from clients for services provided in the
ordinary course of business and are stated net of any provision for
impairment.
Following the adoption of IFRS 9, the Group followed the simplified approach
and so makes an expected credit loss allowance using lifetime expected credit
losses for all trade receivables and contract assets. The estimates and
judgements applied are detailed further in note 19.
The Group endeavours to undertake work only for clients who have the financial
strength to complete projects but even so, much property development is
financed by funds not unconditionally committed at the commencement of the
project. Problems with financing can on occasion unfortunately lead to clients
being unable to pay their debts either on a temporary or more permanent basis.
The Group monitors receipts from clients closely and undertakes a range of
actions if there are indications a client is experiencing funding problems.
The Group makes further loss allowances if it is considered that there is a
significant risk of non-payment. The factors assessed when considering a loss
allowance include the ownership of the development site, the general financial
strength and financial difficulties of the client, likely use / demand for the
completed project, and the length of time likely to be necessary to resolve
the funding problems.
The Group strives to maintain good relations with clients, but on occasions
disputes do arise with clients requiring litigation to recover outstanding
monies. In such circumstances, the directors carefully consider the individual
facts relating to each case (such as strength of the legal arguments and
financial strength of the client) when deciding the level of any further
impairment allowance.
2 Accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Accounting estimates
In preparing the financial statements, the directors make estimates and
assumptions concerning the future. The resulting accounting estimates, by
definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are considered to be:
Impairment of trade receivables
The Group provides architectural, interior design and related services to a
wide variety of clients including property developers, owner occupiers and
governmental organisations, both in the United Kingdom and overseas.
An increase of 6% (2021: 6%) as a percentage of total trade receivables would
lead to a material bad debt exposure. Based on the combination of credit loss
allowances and specifically identified further provisions, there is a £0.20m,
(2021: £0.27m) trade receivables provision primarily against Middle East and
some UK trade receivables. Given the nature of these, there remains the
potential to collect these in future years. Further quantitative information
concerning trade receivables is shown in notes 19 and 30.
Impairment of goodwill
Details of the impairment reviews undertaken in respect of the carrying value
of goodwill are given in note 12.
Impairment of investments in subsidiaries, associate and joint ventures
The company's investment in subsidiaries, associate and joint ventures is
reviewed annually for impairment. The recoverable amount is determined based
on value in use calculations. These calculations use pre-tax cash flow
projections based on financial budgets and forecasts covering a five year
period. Cash flows beyond the five year period are extrapolated using long
term average growth rates.
The key assumptions made in these projections are the same as those given in
relation to impairment of goodwill in note 12.
Critical accounting judgements
Critical judgements represent key decisions made by management in the
application of the Group's accounting policies. Where a significant risk of
materially different outcomes exists due to management assumptions, this will
represent a critical accounting judgement. Accounting judgements are
continually reviewed in light of new information and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The judgements which have
a significant risk of causing a material adjustment to the carrying amount of
assets and liabilities are considered to be:
Recognition of fee claim revenue
The nature of the project work undertaken by the Group means sometimes the
scale and scope of a project increases after work has commenced. Subsequent
changes to the scale and scope of the work may require negotiation with the
clients for variations.
Advance agreement of the quantum of variation fees is not always possible, in
particular when the timescale for project completion is changing or where the
cost of variations cannot be determined until the work has been undertaken.
The Group have limited numbers of situations where we are entitled to a fee
claim, on which estimation of the amount we would be entitled to in such a
claim is considered on a case by case basis, and only recognised when it is
highly probable that there will not be a subsequent reversal of the estimated
revenues of a probable outcome under the requirements of IFRS 15 for variable
consideration.
In the current year no material fee claim revenue has been recognised at 30
September 2022.
IFRS 16 Right-of-use asset and Lease liability
The lease of its UK, Bonhill Street studio includes an upward rent review
after 5 years, does not contain any break clauses and expires in May 2028.
The lease includes provision for an additional 4 month rent free period on
condition that the Group undertakes specific property improvements to the
Landlord's reasonable satisfaction. The Group estimates that the cost of
installation of these improvements would be equivalent or higher in cost than
the value of the 4 months' rent free saving. As the Group would have to pay
for the comfort cooling system to gain the rent free saving, the 4 month rent
free period is not included within the IFRS 16 calculation for the
right-of-use asset and associated lease liability.
3 Operating segments
The Group comprises three separately reportable geographical segments
('hubs'), together with a group costs segment. Geographical segments are based
on the location of the operation undertaking each project.
The Group's operating segments consist of the United Kingdom, the Middle East
and Continental Europe. Turkey is included within Continental Europe together
with Germany and the Czech Republic (in the comparative periods). The Middle
East segment has been re-presented as a discontinued operation and is set out
in note 11.
Income statement segment information
Segment revenue 2022 2021
£'000 £'000
United Kingdom 8,465 8,871
Continental Europe 180 321
Revenue from continuing operations 8,645 9,192
Discontinued operations 1,543 2,822
Revenue 10,188 12,014
Segment revenue less sub consultant costs 2022 2021
£'000 £'000
United Kingdom 6,975 6,063
Continental Europe 152 242
Revenue less sub consultant costs from continuing operations 7,127 6,305
Discontinued operations 1,256 2,517
Revenue less sub consultant costs 8,383 8,822
All of the Group's revenue relates to the value of services performed for
customers under construction type contracts. These contracts are generally
fixed price and take place over a long term basis.
No segmentation of timing of revenue recognition is provided as all services
continue to be provided on an 'over time' basis.
All impairment losses recognised in note 19 are in respect of the Group's
contracts with customers.
Segment net finance expense
2022 2021
Continuing operations £'000 £'000
United Kingdom (86) (93)
Continental Europe - -
Group costs (9) (1)
Net finance expense (95) (94)
Segment depreciation 2022 2021
£'000 £'000
United Kingdom 71 88
Continental Europe 3 4
Group costs 3 4
Depreciation from continuing operations 77 96
Discontinued operations 20 33
Depreciation 97 129
Segment amortisation 2022 2021
£'000 £'000
United Kingdom 398 399
Continental Europe - 3
Amortisation from continuing operations 398 402
Discontinued operations 15 40
Amortisation 413 442
2022 Before goodwill and acquisition adjustments Goodwill Sub-total Reallocation of group management charges Total
Segment result £'000 £'000
£'000 £'000 £'000
United Kingdom (329) - (329) 540 211
Continental Europe 275 - 275 147 422
Group costs (18) - (18) (791) (809)
Goodwill impairment - (1,752) (1,752) - (1,752)
Subtotal (72) (1,752) (1,824) (104) (1,928)
Group management charges charged to the - - - 104 104
Middle East discontinued operation
Loss before tax from continuing operations (72) (1,752) (1,824) - (1,824)
Loss from discontinued operations (503) - (503) - (503)
Loss before tax (575) (1,752) (2,327) - (2,327)
2021 Before goodwill and acquisition adjustments Goodwill Sub-total Reallocation of group management charges Total
Segment result £'000 £'000
£'000 £'000 £'000
United Kingdom (848) - (848) 540 (308)
Continental Europe 149 - 149 181 330
Group costs 104 - 104 (1,119) (1,015)
Subtotal (595) - (595) (398) (993)
Group management charges charged to the - - - 398 398
Middle East discontinued operation
Loss before tax from continuing operations (595) - (595) - (595)
Loss from discontinued operations (936) - (936) - (936)
Loss before tax (1,531) - (1,531) - (1,531)
The Group's share of results from associate and joint ventures included within
the Continental Europe segment result are shown in notes 17 and 18.
Revenue from contracts with customers
Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to
contracts with customers:
2022 2021
£'000 £'000
Current contract assets relating to professional services contracts 1,200 988
Loss allowance (1) (6)
Total contract assets 1,199 982
Contract liabilities relating to professional services contracts 1,227 829
Total contract liabilities 1,227 829
Significant changes in contract asset and liabilities
Contract assets have increased as the Group provided higher amounts of
services ahead of invoicing. Most of the contract assets are derived from
contracts in the UK where the balance of contract assets has increased to
£1,012k (September 2021: £545k). This was partially due to new projects
undertaken where the first invoice had not been raised as at year end.
Contract liabilities have increased as the Group has invoiced for higher
amounts ahead of providing services. Contract liabilities derive primarily
from contracts in the UK operating segment.
Revenue recognised in relation to contract liabilities
The following table shows how much of the revenue recognised in the current
reporting period relates to carried-forward contract liabilities and how much
relates to performance obligations that were satisfied in a prior year:
£'000
Total contract liabilities as at 1 October 2021 (829)
Revenue recognised that was included in the contract liability balance at the 813
beginning of the period
Credits issued relating to the contract liability balance at the beginning of -
the year, previously invoiced but not recognised as revenue.
Cash received in advance of performance and not recognised as revenue in the (1,211)
period
Total contract liabilities as at 30 September 2022 (1,227)
Statement of financial position segment information
Segment assets 2022 2021
£'000 £'000
United Kingdom 2,915 2,413
Middle East 430 1,427
Continental Europe 90 85
Trade receivables and contract assets 3,435 3,925
Other current assets 1,005 1,547
Non current assets* 3,751 6,432
Total assets 8,191 11,904
*Non current assets include investments in associate and joint ventures.
Segment liabilities 2022 2021
£'000 £'000
United Kingdom 3,114 3,067
Middle East 598 781
Continental Europe 68 57
Trade payables, contract liabilities and accruals 3,780 3,905
Other current liabilities 1,555 1,293
Non current liabilities 2,455 3,639
Total liabilities 7,790 8,837
Geographical areas
Revenue 2022 2021
£'000 £'000
United Kingdom 8,465 8,871
Country of domicile 8,465 8,871
Turkey 180 321
United Arab Emirates 1,543 2,822
Foreign countries 1,720 3,143
Revenue 10,188 12,014
Non current assets 2022 2021
£'000 £'000
United Kingdom 2,453 4,594
Country of domicile 2,453 4,594
Czech Republic - 9
Germany 1,007 787
Turkey 10 43
United Arab Emirates - 758
Foreign countries 1,017 1,597
Non current assets excluding deferred tax 3,470 6,191
Deferred tax 281 241
Non current assets 3,751 6,432
Major clients
During the year ended 30 September 2022, the Group derived 10% or more of its
revenues from one client (2021: one client).
2022 2021
£'000 £'000
Largest client revenues 2,009 3,295
The largest client revenues for 2022 relate to the United Kingdom operating
segment (2021: United Kingdom operating segment).
Revenue by project site
The geographical split of revenue based on the location of project sites was:
2022 2021
£'000 £'000
United Kingdom 7,804 8,528
Middle East 1,543 2,955
Continental Europe 696 490
Rest of the world 145 41
Revenue 10,188 12,014
4 Other operating income
2022 2021
£'000 £'000
Property rental income 147 153
Management charges to joint ventures and associates 131 132
Government grants (UK furlough scheme) - 59
Other sundry income 48 14
Total other operating income from continuing operations 326 358
Discontinued operations - 2
Total other operating income 326 360
5 Finance costs
Continuing operations 2022 2021
£'000 £'000
Payable on bank loans and overdrafts 19 3
Finance lease interest payable 76 91
Total finance costs 95 94
6 Auditor remuneration
During the year the Group incurred the following costs in relation to the
Company's auditor and associates of the Company's auditor, and to the
Company's previous auditor:
2022 2021
£'000 £'000
Fees payable to the Company's auditor for the audit of the Company's annual 59 58
accounts for the year ended September 2022
Additional fees paid to the Company's previous auditor for the audit of the 33 -
Company's annual accounts for the year ended September 2021
Fees payable to the Company's auditor and its associates
for other services
Audit of the Company's subsidiaries pursuant to legislation 71 70
The figures presented above are for Aukett Swanke Group Plc and its
subsidiaries as if they were a single entity. Aukett Swanke Group Plc has
taken the exemption permitted by United Kingdom Statutory Instrument 2008/489
to omit information about its individual accounts.
7 Employee information
The average number of persons including directors employed by the Group and
Company during the year was as follows:
Group Company
2022 2021 2022 2021
Number Number Number Number
Technical 83 104 - -
Administrative 23 29 6 7
Total 106 133 6 7
In addition to the number of staff disclosed above, the Group's associate and
joint ventures employed an average of 137 persons (2021: 146 persons).
The costs of the persons employed by the Group and Company during the year
were:
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Wages and salaries 5,200 5,874 574 534
Social security costs 468 444 56 65
Contributions to defined contribution pension arrangements 262 253 43 44
Total 5,930 6,571 673 643
The Group contributes to defined contribution pension arrangements for its
employees both in the UK and overseas. The assets of these arrangements are
held by financial institutions entirely separately from those of the Group.
The Group's Turkish subsidiary is required to pay termination benefits to each
employee who completes one year of service and whose employment is terminated
upon causes that qualify the employee to receive termination indemnity
payments.
The Group's Middle East subsidiaries are required to pay termination benefits
to each employee who completes one year of service as stipulated by UAE labour
laws. Further details of this can be found in note 24.
8 Directors' emoluments
2022 Aggregate Pension Total Waived Total
emoluments contributions received entitlement
£'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
2021 Aggregate Pension Total Waived Total
emoluments contributions received entitlement
£'000 £'000 £'000 £'000 £'000
Nicholas Thompson 214 10 224 - 224
John Bullough 15 - 15 - 15
Robert Fry 121 17 138 - 138
Clive Carver 30 - 30 - 30
Raúl Curiel 30 - 30 - 30
Antony Barkwith 123 16 139 - 139
Total 533 43 576 - 576
Benefits were accruing to three Directors (2021: three Directors) under
defined contribution pension arrangements.
The aggregate emoluments of the highest paid Director were £209,000 (2021:
£214,000) together with pension contributions of £10,000 (2021: £10,000).
9 Tax charge
2022 2021
£'000 £'000
Current tax - -
Adjustment in respect of previous years - (361)
Total current tax - (361)
Origination and reversal of temporary differences (45) (126)
Adjustment in respect of previous years - 92
Changes in tax rates - -
Total deferred tax (note 23) (45) (34)
Total tax credit (45) (395)
The standard rate of corporation tax in the United Kingdom that is applicable
for the financial year was 19% (2021: 19%).
The tax assessed for the year differs from the United Kingdom standard rate as
explained below:
2022 2021
£'000 £'000
Loss before tax (2,327) (1,531)
Loss before tax multiplied by the standard (442) (291)
rate of corporation tax in the United
Kingdom of 19% (2021: 19%)
Effects of:
Other non tax deductible expenses 279 60
Associate and joint ventures reported net of tax (62) (32)
Tax losses not recognised 104 105
Current tax adjustment in respect of previous years 4 (361)
Deferred tax adjustment in respect of previous years 2 92
Income not taxable 70 32
Total tax credit (45) (395)
10 Earnings per share
The calculations of basic and diluted earnings per share are based on the
following data:
Earnings 2022 2021
£'000 £'000
Continuing operations (1,779) (200)
Discontinued operations (503) (923)
Loss for the year (2,282) (1,123)
Number of shares 2022 2021
Number Number
Weighted average of ordinary shares in issue 165,213,652 165,213,652
Effect of dilutive options - -
Diluted weighted average of ordinary shares in issue 165,213,652 165,213,652
As explained in note 26 the Company has granted options over 2,500,000 of its
ordinary shares. These have not been included above as i) the average share
price on 1,500,000 of the options was below the exercise price in 2022 and
they therefore do not have a dilutive effect, and ii) the average share price
on the other 1,000,000 options was slightly above the exercise price in 2022
but to the extent that the dilutive effect would be trivial.
11 Discontinued operations
11 (a) Description
In April 2022, the Group sold assets, as part of the Group's disposal of JRHP
constituting its John R Harris & Partners Limited (Cyprus) subsidiary and
John R Harris & Partners (Dubai) entity, for a cash consideration of AED
5,000,000, comprising AED 4,250,000 cash upfront and a further AED 750,000
deferred consideration paid over a 5 year period. This marked the sale of the
main trading operations in the Group's Middle East segment. With closure costs
incurred in the period relating to the planned termination of a number of
trading licenses in the Middle East operations, the Middle East segment is
presented as a discontinued operation in the current period, and the
comparative period represented accordingly.
The post-tax gain on disposal of the JRHP operation was determined as follows:
2022 2021
£'000 £'000
Cash consideration received 927 -
Deferred cash consideration 163 -
Total consideration received 1,090 -
Sale costs (9)
Cash disposed of (112) -
Net cash inflow on disposal of discontinued operation 969
-
Net assets disposed (other than cash)
- 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 -
11 (b) Financial performance and cash flow information
Result of discontinued operations
2022 2021
£'000 £'000
Revenue 1,543 2,822
Sub consultant costs (287) (305)
Revenue less sub consultant costs 1,256 2,517
Personnel related costs (1,233) (2,212)
Property related costs (109) (197)
Expenses (635) (326)
Group management charges (104) (398)
Finance expenses - -
Depreciation (20) (33)
Amortisation (15) (40)
Other operating income - 2
Gain on disposal of subsidiary 357 -
Impairment of intangibles - (249)
Loss before tax (503) (936)
Tax credit / (charge) - -
Loss from discontinued operations (503) (936)
Exchange differences on disposal recycled to gain on disposal of subsidiary (209) -
Exchange differences on translation of discontinued operation (168) (50)
Other comprehensive loss from discontinued operations (880) (986)
Earnings per share from discontinued operations
2022 2021
£'000 £'000
Basic and diluted loss per share (0.30p) (0.57p)
Statement of cash flows
The statement of cash flows includes the following amounts relating to
discontinued operations:
2022 2021
£'000 £'000
Net cash outflow from operating activities (53) (485)
Net cash inflow/(outflow) from investing activities 35 (2)
Foreign exchange movements (204) (39)
Net cash from discontinued operations (222) (526)
12 Goodwill
Group
£'000
Cost
At 1 October 2020 2,392
Addition 9
Disposal -
Exchange differences (31)
At 30 September 2021 2,370
Addition -
Disposal (608)
Exchange differences (10)
At 30 September 2022 1,752
Impairment
At 1 October 2020 -
Disposal -
Exchange differences -
At 30 September 2021 -
Impairment 1,752
Disposal -
Exchange differences -
At 30 September 2022 1,752
Net book value
At 30 September 2022 -
At 30 September 2021 2,370
At 1 October 2020 2,392
The disposal recorded in the year related to goodwill on JRHP which was sold
during the year. The gain on disposal of the goodwill is included within the
loss from discontinued operations on the Consolidated Income Statement and the
gain on disposal of subsidiary in the result of discontinued operations in
note 11 (b).
Goodwill from the United Kingdom operation arose as £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. Management have
therefore taken the decision to write off the full £1,740k balance of
Goodwill for the United Kingdom operations.
The net book value of goodwill is allocated to the Group's cash generating
units ("CGU") as follows:
United Kingdom Turkey Middle Total
East
£'000 £'000 £'000 £'000
At 1 October 2020 1,740 26 626 2,392
Addition - - 9 9
Exchange differences - (4) (27) (31)
At 30 September 2021 1,740 22 608 2,370
Disposal - - (608) (608)
Impairment (1,740) (12) - (1,752)
Exchange differences - (10) - (10)
At 30 September 2022 - - - -
13 Other intangible assets
Group Trade name Customer Order book Trade Total
relationships
licence
£'000 £'000 £'000 £'000 £'000
Cost
At 1 October 2020 672 373 - 76 1,121
Disposal - - - - -
Exchange differences (17) (19) - (3) (39)
At 30 September 2021 655 354 - 73 1,082
Disposal (21) (183) - (73) (277)
Exchange differences 56 (11) - - 45
At 30 September 2022 690 160 - - 850
Amortisation
At 1 October 2020 169 259 - 40 468
Disposal - - - - -
Impairment 236 13 - - 249
Charge 25 26 - 8 59
Exchange differences (3) (13) - (2) (18)
At 30 September 2021 427 285 - 46 758
Disposal (21) (125) - (50) (196)
Impairment - - - - -
Charge 13 11 - 4 28
Exchange differences 61 (11) - - 50
At 30 September 2022 480 160 - - 640
Net book value
At 30 September 2022 210 - - - 210
At 30 September 2021 228 69 - 27 324
At 1 October 2020 503 114 - 36 653
Amortisation is included in other operating expenses in the consolidated
income statement.
Disposal
The disposal in the year related to the sale of JRHP in April 2022.
Impairment
The prior year impairment of £249k related to SCL following the Group's
decision to restructure the UAE business, SCL ongoing contracts were
reassigned into JRHP, with new work being contracted by JRHP, and the
remaining licences held by SCL being allowed to expire.
Trade name
The trade name was acquired as part of the acquisition of Swanke Hayden
Connell Europe Limited ("SHC") in December 2013 and also on the acquisition of
Shankland Cox Limited ("SCL") in February 2016. The SHC trade name reflects
the inclusion of the Swanke name in the enlarged Group. Trade names are
amortised on a straight line basis over a 25 year period from the acquisition.
The SHC trade name has a remaining amortisation period of 17 years. The SCL
trade name was fully impaired in the prior year.
Customer relationships
The customer relationships were acquired as part of the acquisition of SHC in
December 2013, on the acquisition of JRHP in June 2015 and on the acquisition
of SCL in February 2016. This represents the value attributed to clients who
provided repeat business to the Group on the strength of these relationships.
Customer relationships are amortised on a straight line basis over a 7-10 year
period from the acquisition dates. The customer relationships acquired in
December 2013 were amortised over a 7 year period which ended in December
2020. The customer relationships acquired in June 2015 were disposed of in the
year with the sale of JRHP. The customer relationships acquired in February
2016 relating to SCL were impaired in the prior year.
Trade licence
The trade licence was acquired as part of the acquisition of JRHP in June
2015. This represented the value of licences granted to JRHP for architectural
activities in the regions in which it operates. The licence is amortised on a
straight line basis over a 10 year period from the acquisition date. The
residual balance was disposed of in the current year with the sale of JRHP.
14 Property, plant & equipment
Group Leasehold Furniture & Total
improvements equipment
£'000 £'000 £'000
Cost
At 1 October 2020 14 1,606 1,620
Additions - 33 33
Disposals - (885) (885)
Exchange differences (3) (21) (24)
At 30 September 2021 11 733 744
Additions - 48 48
Disposals - (244) (244)
Exchange differences (5) (5) (10)
At 30 September 2022 6 532 538
Depreciation
At 1 October 2020 14 1,334 1,348
Charge - 129 129
Disposals - (871) (871)
Exchange differences (3) (14) (17)
At 30 September 2021 11 578 589
Charge - 97 97
Disposals - (207) (207)
Exchange differences (5) (5) (10)
At 30 September 2022 6 463 469
Net book value
At 30 September 2022 - 69 69
At 30 September 2021 - 155 155
At 1 October 2020 - 272 272
Company Furniture & Total
equipment
£'000 £'000
Cost
At 1 October 2021 17 17
Additions - -
At 30 September 2022 17 17
Depreciation
At 1 October 2021 6 6
Charge 4 4
At 30 September 2022 10 10
Net book value
At 30 September 2022 7 7
At 1 October 2021 11 11
15 Leases
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
- Leases of low value assets; and
- Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
Group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
- amounts expected to be payable under any residual value guarantee;
- the exercise price of any purchase option granted in favour of the
Group if it is reasonably certain to assess that option;
- any penalties payable for terminating the lease, if the term of the
lease has been estimated on the basis of termination option being exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
- lease payments made at or before commencement of the lease;
- initial direct costs incurred; and
- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset
(typically leasehold dilapidations - see note 24).
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted
using a revised discount rate. The carrying value of lease liabilities is
similarly revised when the variable element of future lease payments dependent
on a rate or index is revised, except the discount rate remains unchanged. In
both cases an equivalent adjustment is made to the carrying value of the
right-of-use asset, with the revised carrying amount being amortised over the
remaining (revised) lease term. If the carrying amount of the right-of-use
asset is adjusted to zero, any further reduction is recognised in profit or
loss.
When the Group renegotiates the contractual terms of a lease with the lessor,
the accounting depends on the nature of the modification:
- if the renegotiation results in one or more additional assets being
leased for an amount commensurate with the standalone price for the additional
rights-of-use obtained, the modification is accounted for as a separate lease
in accordance with the above policy;
- in all other cases where the renegotiated increases the scope of the
lease (whether that is an extension to the lease term, or one or more
additional assets being leased), the lease liability is remeasured using the
discount rate applicable on the modification date, with the right-of-use asset
being adjusted by the same amount;
- if the renegotiation results in a decrease in the scope of the
lease, both the carrying amount of the lease liability and right-of-use asset
are reduced by the same proportion to reflect the partial of full termination
of the lease with any difference recognised in profit or loss. The lease
liability is then further adjusted to ensure its carrying amount reflects the
amount of the renegotiated payments over the renegotiated term, with the
modified lease payments discounted at the rate applicable on the modification
date. The right-of-use asset is adjusted by the same amount.
For contracts that both convey a right to the Group to use an identified asset
and require services to be provided to the Group by the lessor, the Group has
elected to account for the entire contract as a lease, i.e. it does allocate
any amount of the contractual payments to, and account separately for, any
services provided by the supplier as part of the contract.
Nature of leasing activities (in the capacity as lessee)
The Group leases a number of properties in the jurisdictions from which it
operates. In some
jurisdictions it is customary for lease contracts to provide for payments to
increase each year by inflation or and in others to be reset periodically to
market rental rates. In some jurisdictions' property leases the periodic rent
is fixed over the lease term.
The Group also leases certain items of plant and equipment. Leases of plant
and equipment comprise only fixed payments over the lease terms.
The lease liability recognised by the Group on land and buildings relates to
the lease on the London premises. Rent on the premises is fixed, subject to a
market value rent review in 2023.
The payments on leasehold improvements are all fixed payments for the length
of the leases.
The Group sometimes negotiates break clauses in its property leases. On a
case-by-case basis, the Group will consider whether the absence of a break
clause would expose the Group to excessive risk. Typically factors considered
in deciding to negotiate a break clause include:
- the length of the lease term;
- the economic stability of the environment in which the property is
located; and
- whether the location represents a new area of operations for the
Group.
At 30 September 2022 the leases recognised do not include any break clauses.
Right-of-use Assets
Land and buildings Restoration costs Leasehold Total
£'000 £'000 improvements
£'000 £'000
At 1 October 2020 2,478 166 285 2,929
Amortisation (324) (22) (37) (383)
At 30 September 2021 2,154 144 248 2,546
Additions - - 23 23
Amortisation (324) (22) (39) (385)
1,830 122 232 2,184
At 30 September 2022
Lease liabilities
Land and buildings Leasehold Total
£'000 improvements
£'000 £'000
207 3,344
At 1 October 2020 3,137
Additions - - -
Interest expense 83 8 91
Lease payments (464) (82) (546)
At 30 September 2021 2,756 133 2,889
Additions - - -
Interest expense 72 4 76
Lease payments (464) (82) (546)
At 30 September 2022 55 2,419
2,364
£'000
66
Short-term lease expense
Low value lease expense 6
Expense relating to variable lease payments not included in -
the measurement of lease liabilities
Aggregate undiscounted commitments for short-term leases 11
The maturity analysis of lease liabilities of the Group at each reporting date
are as follows:
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 2022 118 339 415 1,316 231
At 30 September 2021 115 353 459 1,280 682
The Group acts as a lessor through the sub-let of part of the third floor at
its Bonhill Street studio. The following is the aggregate minimum future
receivables under these leases.
2022 2021
£'000 £'000
Not later than one year 44 74
Later than one year and not later than five years - -
Later than five years - -
Total 44 74
16 Investments
Company Subsidiaries Joint Associate Total
ventures
£'000 £'000 £'000 £'000
Cost
At 1 October 2020 10,177 21 12 10,210
Addition 23 - - 23
At 30 September 2021 10,200 21 12 10,233
Disposal (1,021) - - (1,021)
At 30 September 2022 9,179 21 12 9,212
Provisions
At 1 October 2020 6,862 - - 6,862
Charge 81 - - 81
At 30 September 2021 6,943 - - 6,943
Charge 180 - - 180
At 30 September 2022 7,123 - - 7,123
Net book value
At 1 October 2020 3,315 21 12 3,348
At 30 September 2021 3,257 21 12 3,290
At 30 September 2022 2,056 21 12 2,089
The increase in cost of £23k during the prior year related to the acquisition
of a further 5% equity shareholding in JRHP.
The disposal in the year related to the disposal of the investment in JRHP
(note 11).
A provision for impairment of £180k (2021: £81k) 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 £2,056k
(2021: £3,257k) after charges made in the current year, which is larger than
the net assets of the consolidated statement of financial position of £401k
(2021: £3,067k). This is primarily due to the Company's cost of investment in
the UK operations (Aukett Swanke Limited and Veretec Limited) being higher
than the Group's carrying value of Goodwill and other intangible assets in
these entities.
The net book values are supported by the value in use calculations.
An annual impairment test is performed over cash generating units ('CGUs') of
the Group. The UK operations (Aukett Swanke Limited and Veretec Limited) are
considered to be one CGU.
The recoverable amount of a CGU is determined based on value in use
calculations. These calculations use pre-tax cash flow projections based on
financial budgets and forecasts covering a five year period. Cash flows beyond
the five year period are extrapolated using long term average growth rates.
The key assumptions in the discounted cash flow projections for the United
Kingdom operation are:
· the future level of revenue, set at a compound growth rate of
11.30% (2021: 8.31%) over the next five years - which is based on two years of
budgeted revenue targets, with following years assuming annualised inflation
of earnings (and costs) using a CPI assumption of 9.30% based on the Nov-22
annualise UK CPI index.
· long term growth rate - which has been assumed to be 1.5% (2021:
2.0%) per annum based on the average historical growth in gross domestic
product in the United Kingdom over the past fifty years; and
· the discount rate - which is the UK segment's pre-tax weighted
average cost of capital and has been assessed at 18.32% (2021: 11.34%).
Based on the discounted cash flow projections, the recoverable amount of the
UK CGU is estimated to exceed carrying values by £4,475k (261%). An 7% fall
in all future forecast revenues (applied as a smooth reduction to the compound
growth rate noted above) without a corresponding reduction in costs in the UK
CGU, or an increase in the discount rate to over 69%, would result in carrying
amounts exceeding their recoverable amount. A decrease in the effective
compound growth rate of revenue to 9.50% instead of the 11.30% noted above,
without a corresponding reduction in costs in the UK CGU, would result in
carrying amounts exceeding their recoverable amount. Management believes that
the carrying value of the investment remains recoverable despite this
sensitivity given the conservative nature of the underlying forecasts
prepared.
Subsidiary operations
The following are the subsidiary undertakings at 30 September 2022:
Name Country of Proportion Nature of business
incorporation and registered office address of ordinary equity held
(see table below)
2022 2021
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
Swanke Hayden Connell Mimarlik AS (B) 100% 100% Architecture & design
John R Harris & Partners Limited (C) 0% 100% Architecture & design
Shankland Cox Limited (A) 100% 100% Architecture & Engineering
Aukett Swanke Architectural Design Limited (A) 100% 100% Architecture & design
Swanke Hayden Connell Europe Limited (A) 100% 100% Non-trading
Fitzroy Robinson Limited (A) 100% 100% Dormant
Swanke Limited (A) 100% 100% Dormant
John R Harris & Partners Limited (A) 0% 100% Dormant
Aukett Fitzroy Robinson Limited (A) 100% 100% Dormant
Thomas Nugent Architects Limited (A) 100% 100% Dormant
Aukett Fitzroy Robinson Europe Limited (A) 100% 100% Dormant
Aukett Limited (A) 100% 100% Dormant
Aukett (UK) Limited (A) 100% 100% Dormant
Aukett Group Limited (A) 100% 100% Dormant
Fitzroy Robinson West & Midlands Limited (A) 100% 100% Dormant
Aukett Fitzroy Robinson International Limited is incorporated in England &
Wales. The entity operated principally through its Middle East branch which
was registered in the Abu Dhabi emirate of the United Arab Emirates. The
branch licence expired and was cancelled in July 2020, with new work engaged
through Aukett Swanke Architectural Design Limited.
Aukett Swanke Architectural Design Limited is incorporated in England &
Wales, but operates principally in the United Arab Emirates. The trade licence
expired in March 2021 and the operation is no longer undertaking new work.
John R Harris & Partners Limited (JRHP) is incorporated in Cyprus and
operates principally in the Middle East. The group's full shareholding was
sold in April 2022.
Shankland Cox Limited is incorporated in England & Wales, but operates
principally through its Middle East branches registered in emirates of the
United Arab Emirates including Abu Dhabi, Dubai, and Al Ain. These licenses
expired/expire in January and April 2022, with ongoing projects being
reassigned to JRHP prior to the sale of JRHP.
The UAE domiciled branches are consolidated into the Group principally based
on profit sharing agreements in place.
Interest in associate and joint ventures
Set out below are the associate and joint ventures of the Group as at 30
September 2022. The entities listed below have share capital consisting solely
of ordinary shares, held directly by the Group. The country of incorporation
is also their principal place of business, and the proportion of ownership
interest is the same as the proportion of voting rights held.
Name of entity Country of Proportion Nature of relationship Measure-ment method
incorporation and registered office address of ordinary equity held
(see below)
2022 2021
Aukett + Heese Frankfurt GmbH (D) 50% 50% Joint venture Equity
Aukett sro (liquidated) (E) 0% 50% Joint venture Equity
Aukett + Heese GmbH (F) 25% 25% Associate Equity
All joint venture and associate entities provide architectural and design
services. There are no contingent liabilities or commitments in relation to
the joint ventures or associates.
Country of incorporation and registered office addresses
Ref Country of Incorporation Registered office address
(A) England & Wales 10 Bonhill Street, London, EC2A 4PE, United Kingdom
(B) Turkey Esentepe Mahallesi Kore Şehitleri Caddesi 34, Deniz İş Hanı K.6 34394
Zincirlikuyu, Istanbul, Turkey
(C) Cyprus 17-19 Themistokli Dervi street, The City House, 1066 Nicosia, Cyprus
(D) Germany Gutleutstrasse 163, 60327 Frankfurt am Main, Germany
(E) Czech Republic ADVOKÁTNÍ KANCELÁŘ JUDr. JAN JIŘÍČEK, Legionářů 947/2b, 182 00
Prague 8, Czech Republic
(F) Germany Budapester Strasse 43, 10787 Berlin, Germany
17 Investment in associate
As disclosed in note 16, the Group owns 25% of Aukett + Heese GmbH which is
based in Berlin, Germany. The table below provides summarised financial
information for Aukett + Heese GmbH as it is material to the Group. The
information disclosed reflects Aukett + Heese GmbH's relevant financial
statements and not the Group's share of those amounts.
Summarised balance sheet 2022 2021
£'000 £'000
Assets
Non current assets 278 289
Current assets 6,229 4,693
Total assets 6,507 4,982
Liabilities
Current liabilities (3,465) (2,635)
Total liabilities (3,465) (2,635)
Net assets 3,042 2,347
Reconciliation to carrying amounts:
2022 2021
£'000 £'000
Opening net assets at 1 October 2,347 3,706
Profit for the period 1,139 470
Other comprehensive income 86 (185)
Dividends paid (531) (1,644)
Closing net assets 3,041 2,347
Group's share in % 25% 25%
Group's share in £'000 760 587
Carrying amount 760 587
Summarised statement of comprehensive income 2022 2021
£'000 £'000
Revenue 12,198 12,243
Sub consultant costs (2,861) (3,492)
Revenue less sub consultant costs 9,337 8,751
Operating costs (7,708) (8,078)
Profit before tax 1,629 673
Taxation (490) (203)
Profit for the period from continuing operations 1,139 470
Other comprehensive income 86 (185)
Total comprehensive income 1,225 285
The Group received dividends of £126,000 after deduction of German
withholding taxes (2021: £395,000) from Aukett + Heese GmbH. The principal
risks and uncertainties associated with Aukett + Heese GmbH are the same as
those detailed within the Group's Strategic Report.
18 Investments in joint ventures
Frankfurt
As disclosed in note 16, the Group owns 50% of Aukett + Heese Frankfurt GmbH
which is based in Frankfurt, Germany.
£'000
At 1 October 2020 292
Share of profits 65
Dividends paid (142)
Exchange differences (14)
At 30 September 2021 201
Share of profits 40
Dividends paid -
Exchange differences 6
At 30 September 2022 247
The Group received dividends of £nil after deduction of German withholding
taxes (2021: £135,000) from Aukett + Heese Frankfurt GmbH. The following
amounts represent the Group's 50% share of the assets and liabilities, and
revenue and expenses of Aukett + Heese Frankfurt GmbH.
2022 2021
£'000 £'000
Assets
Non current assets 11 12
Current assets 369 288
Total assets 380 300
Liabilities
Current liabilities (133) (99)
Total liabilities (133) (99)
Net assets 247 201
2022 2021
£'000 £'000
Revenue 824 919
Sub consultant costs (271) (267)
Revenue less sub consultant costs 553 652
Operating costs (494) (541)
Profit before tax 59 111
Taxation (19) (46)
Profit after tax 40 65
The principal risks and uncertainties associated with Aukett + Heese Frankfurt
GmbH are the same as those detailed within the Group's Strategic Report.
Prague
As disclosed in note 16, the Group owned 50% of Aukett sro which is based in
Prague, Czech Republic. The final liquidation of this entity was completed
during the year and a final distribution received.
£'000
At 1 October 2020 25
Share of losses (16)
Exchange differences (1)
At 30 September 2021 8
Share of losses (1)
Liquidation dividend distribution paid (7)
Exchange differences -
At 30 September 2022 -
The following amounts represent the Group's 50% share of the assets and
liabilities, and revenue and expenses of Aukett sro.
2022 2021
£'000 £'000
Assets
Current assets - 11
Total assets - 11
Liabilities
Current liabilities - (3)
Total liabilities - (3)
Net assets - 8
2022 2021
£'000 £'000
Revenue - 165
Sub consultant costs - (78)
Revenue less sub consultant costs - 87
Operating costs (1) (103)
Loss before tax (1) (16)
Taxation - -
Loss after tax (1) (16)
19 Trade and other receivables
Group 2022 2021
£'000 £'000
Gross trade receivables 2,514 3,215
Impairment allowances (199) (272)
Net trade receivables 2,315 2,943
Other financial assets at amortised cost 500 385
Amounts owed by associates and joint ventures - 22
Corporate tax receivable - 99
Other current assets 478 526
Total 3,293 3,975
The corporate tax receivable of £99k relates to cash receivable from UK
R&D tax claims.
Company 2022 2021
£'000 £'000
Amounts due after more than one year
Amounts owed by associate and joint ventures - 5
Other financial assets at amortised cost 184 -
Total amounts due after more than one year 184 5
Amounts due within one year
Trade receivables 24 5
Amounts owed by subsidiaries 163 381
Amounts owed by associate and joint ventures - 17
Other financial assets at amortised cost 46 -
Other current assets 17 46
Total amounts due within one year 250 449
Total 434 454
The amounts owed by subsidiaries were secured in January 2013 by debentures
over all the assets of the relevant subsidiaries. These debentures rank after
the debentures securing the bank loan and overdraft.
During the year, the Company made provisions totalling £298k (2021: £1,733k)
against amounts owed by subsidiaries. These are amounts owed by Aukett Fitzroy
Robinson International Limited, Aukett Swanke Architectural Design Limited and
SCL. Following the Group's decision to restructure the UAE business either
freezing or allowing trade licenses in these companies to expire, Management
took the decision to make a provision against amounts owed by these companies
to the Group.
Impairment allowances
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade receivables
and contract assets.
To measure the expected credit losses, trade receivables and contract assets
have been grouped based on shared credit risk characteristics and the days
past due. The contract assets relate to unbilled work in progress and project
retentions, and have substantially the same risk characteristics as the trade
receivables for the same types of contracts. The Group has therefore concluded
that the expected loss rates for trade receivables are a reasonable
approximation of the loss rates for the contract assets.
The Group engages with clients who are creditworthy, liquid developers.
Management identified that the loss allowances should be calculated and
applied separately based on geographic segments of the Group, and more
specifically to each country in which the Group has operations. Whilst the
specific terms each contract the Group engages in may be different, certain
common characteristics can be applied.
Provisions on bad and doubtful debts in the UK and Turkey have been immaterial
in the historical period reviewed in order to establish the expected loss rate
at 30 September 2022. In the UK the Group generally builds up advances for
contract work recognised as a credit to the balance sheet which reduces the
impact of potential bad debts. Amounts due for contract work not yet billed
are generally not material. No loss allowance provision has been made for
trade receivables and contracts assets owed to Group entities operating in
these countries.
Amounts due for contract work in the Middle East segment have been material in
prior years, with contracts in the Middle East often billed in arrears.
Sizeable write offs in prior years have informed the overall rate calculated
for the provisioning matrix.
The total impairment allowance is down £73k compared to the prior year,
primarily due to the UAE entities formally writing off old debtors which
previously had carried an impairment allowance, partially offset by new
provisions being made against uncertain remaining debtor balances as the Group
continues the process of discontinuing the operations of the remaining UAE
entities. Impairment allowances as a percentage of gross trade receivables has
therefore decreased to 7.9% (2021: 8.5%).
The loss allowance for the Middle East operating segment as at 30 September
2022 (excluding additional loss allowances measured on a case-by-case basis)
was determined as follows for both trade receivables and contract assets:
Whilst the Middle East operations of Aukett Fitzroy Robinson International
Limited and Aukett Swanke Architectural Design Limited have been in the
process of closure as at 30 September 2022 there remained just 2 trade
receivable balances to collect, which were collected shortly after the year
end. As at 30 September 2022 the loss allowance was applied to trade
receivables and contract assets in SCL.
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 comparative loss allowance for the Middle East operating segment as at 30
September 2021 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 2021
Expected loss rate (%) 2% 2% 3% 6% 10%
Gross carrying amount (£'000) 611 136 112 65 575 1,499
Loss allowance (£'000) through CSOFP 10 3 4 4 58 79
The loss allowance for the Middle East operating segment as at 30 September
2022 was determined as follows for both trade receivables and contract assets:
The loss allowance was initially calculated in United Arab Emirate Dirhams
(AED) being the functional currency of the Group entities in the Middle East
operating segment. On conversion to GBP in the Group consolidation, the
carried forward loss allowance is converted at the balance sheet rate, whereas
the movement in the loss allowance in the year is converted at the average
rate in the statement of comprehensive income. A foreign exchange difference
of £5k arises which is taken through the foreign currency translation
reserve.
Contract assets Trade receivables
£'000 £'000
6 74
Opening loss allowance provision as at 1 October 2021
- (38)
Loss allowance provision
Disposal of JRHP (6) (32)
- -
Amounts restated through opening Foreign Currency
translation reserve
Loss allowance calculated based on ECL loss matrices - 4
Additional provisions identified on a case by case basis 24 195
24 199
Total loss allowance as at 30 September 2022 - calculated under IFRS 9
The loss allowances decreased by £70k to £4k for trade receivables and
decreased by £6k to £nil for contract assets during the year to 30 September
2022.
A further allowance for impairment of trade receivables and contract assets is
established on a case-by-case basis amounting to £195k at 30 September 2022
and £198k at 30 September 2021 when there are indicators suggesting that the
specific debtor balance in question has experienced a significant
deterioration in credit worthiness. Known significant financial difficulties
of the client and lengthy delinquency in receipt of payments are considered
indicators that a trade receivable may be impaired. Where a trade receivable
or contract asset is considered impaired the carrying amount is reduced using
an allowance and the amount of the loss is recognised in the income statement
within other operating expenses.
The movement on impairment allowances for trade receivables was as follows:
£'000
At 1 October 2020 1,031
Loss allowance provision (38)
Charged to the income statement based on additional case by case provisions 198
Allowance utilised (865)
Exchange differences (54)
At 30 September 2021 272
Loss allowance provision (38)
Disposal of JRHP (32)
Charged to the income statement based on additional case by case provisions 133
Allowance written-off (162)
Exchange differences 26
At 30 September 2022 199
20 Trade and other payables
Group 2022 2021
£'000 £'000
Amounts due after more than one year
Amounts owed to associate and joint venture 44 -
Total amounts due after more than one year 44 -
Amounts due within one year
Trade payables 1,354 2,112
Other taxation and social security 515 568
Other payables 101 103
Accruals 1,199 964
Total amounts due within one year 3,169 3,747
Total 3,213 3,747
Company 2022 2021
£'000 £'000
Amounts due after more than one year
Amounts owed to associate and joint venture 44 -
Total amounts due after more than one year 44 -
Amounts due within one year
Trade payables 58 44
Amounts owed to subsidiaries 1,212 1,551
Other taxation and social security 4 32
Other payables 28 31
Accruals 292 92
Total amounts due within one year 1,594 1,750
Total 1,638 1,750
See note 34 for further details of the amounts due to subsidiaries.
21 Borrowings
Group 2022 2021
£'000 £'000
Secured bank overdrafts 232 -
Secured bank loan 417 500
Total borrowings 649 500
Amounts due for settlement within 12 months 482 83
Current liability 482 83
Amounts due for settlement between one and two years 167 250
Amounts due for settlement between two and five years - 167
Non current liability 167 417
Total borrowings 649 500
Company 2022 2021
£'000 £'000
Secured bank loan 417 500
Total borrowings 417 500
Instalments due within 12 months 250 83
Current liability 250 83
Instalments due between one and two years 167 250
Instalments due between two and five years - 167
Non current liability 167 417
Total borrowings 417 500
The bank loan and overdraft are secured by debentures over all the assets of
the Company and certain of its United Kingdom subsidiaries. The bank loan and
overdraft carry interest at 4.05% (loan) and 3% (overdraft) above the Coutts
Base rate for the relevant currency.
22 Analysis of net (deficit) / funds
Group 2022 2021
£'000 £'000
Cash at bank and in hand 28 515
Secured bank overdrafts (note 21) (232) -
Cash and cash equivalents (204) 515
Secured bank loan (note 21) (417) (500)
Net (deficit)/funds (621) 15
23 Deferred tax
Group Tax depreciation Other
on plant and equipment Trading temporary
£'000 losses differences Total
£'000 £'000 £'000
At 1 October 2020 43 185 (61) 167
Income statement (10) 45 (1) 34
Exchange differences - - - -
At 30 September 2021 33 230 (62) 201
Income statement 4 42 (1) 45
Exchange differences 1 1 - 2
At 30 September 2022 38 273 (63) 248
Group 2022 2021
£'000 £'000
Deferred tax assets 281 241
Deferred tax liabilities (33) (40)
Net deferred tax balance 248 201
Deferred income tax assets are recognised for tax losses carried forward to
the extent that the realisation of the related tax benefit through future
taxable profits is probable.
The Group also did not recognise deferred income tax in respect of taxable
losses carried forward against future taxable income of certain of its
subsidiaries which are incorporated in the UK but operate wholly through
permanent establishments in the Middle East and future profits are therefore
anticipated to be non-taxable.
24 Provisions
Group Property lease Employee benefit
provision obligations
£'000 £'000 Total
£'000
At 1 October 2020 210 782 992
Utilised - (213) (213)
Charged to the income statement - 92 92
Exchange differences - (39) (39)
At 30 September 2021 210 622 832
Utilised - (296) (296)
Charged to the income statement - 78 78
On disposal of subsidiary - (368) (368)
Exchange differences - 3 3
At 30 September 2022 210 39 249
Property lease provision
The provision arose from lease obligations in respect of the Company's leased
London premises.
There are uncertainties around the provision due to the fact that costs may
increase over the period to maturity and the eventual outturn will be
dependent on the level of negotiation over settlement of proposals with the
Company's landlord.
The provision payable in greater than five years reflects the future estimated
cost of work to be performed.
The effect of time value of money is not considered material, having been
assessed by Management as a risk free rate of 10 year UK government bonds.
Employee benefit obligations
The Group's Middle East subsidiaries are required to pay termination
indemnities to each employee who completes one year of service as stipulated
by UAE labour laws. The applicable labour laws currently require a percentage
of final salary to be paid upon resignation or termination. The percentage is
determined by reference to the number of years of continuous employment and
cannot exceed two years' salary.
As at 30 September 2022 the Group no longer employed any staff within its
Middle East subsidiaries. The Employee benefit obligation provision relating
to Middle East subsidiaries as at 30 September 2022 is therefore £nil. The
balance of termination payments due to former employees unpaid as at year end
is recognised as a current liability included in trade and other payables
(note 20).
The key actuarial assumptions used in the calculation are detailed below:
2022 2021
Combined average length of service N/A 5 years
Discount rate N/A 1.74%
Salary growth rate N/A 2.2%
The Group determined discount rates on the basis of current yields on 5 year
high quality corporate bonds in the same currency as the liabilities. Forecast
consumer price inflation ("CPI") in the region has been used as a proxy for
forecast salary growth.
The sensitivity of the employee benefit obligation to changes in assumptions
is set out below. The effects of a change in assumption are weighted
proportionally to the total plan obligations to determine the total impact for
each assumption presented.
Impact on employee benefit obligation
Change in assumption Increase in assumption Decrease in assumption
Combined average length of service 1 year N/A (3.78)%
Salary growth rate 1% N/A (0.15)%
Discount rate 1% N/A 0.15%
The Group's Turkish subsidiary is required to pay termination indemnities to
each employee who completes one year of service and whose employment is
terminated upon causes that qualify the employee to receive termination
indemnity. The liability has been measured in line with IAS 19 and is funded
from working capital.
25 Share capital
Group and Company 2022 2021
£'000 £'000
Allocated, called up and fully paid
165,213,652 (2021: 165,213,652) ordinary shares of 1p each 1,652 1,652
Number
At 1 October 2020 165,213,652
No changes -
At 30 September 2021 165,213,652
No changes -
At 30 September 2022 165,213,652
The Company's issued ordinary share capital comprises a single class of
ordinary share. Each share carries the right to one vote at general meetings
of the Company.
The objectives, policies and processes for managing capital are outlined in
the strategic report.
After the year end, the acquisition of TFG resulted in an increase in the
share capital as disclosed in note 35.
26 Share options
The Company has granted options over its Ordinary Shares to Group employees as
follows:
At 1 October At 30
2021 September 2022 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
Total 2,500,000 - - 2,500,000
The 500,000 share options granted on 6 March 2017 related to Beverley Wright,
a former Director of the Company and after the year end lapsed on 6 March
2023.
The 1,000,000 share options granted on 24 August 2020, and the 1,000,000 share
options granted on 29 June 2021 relate to Antony Barkwith, a current Director
of the Company. These share options vested and vest respectively after 2
years' service and are exercisable between 2 and 6 years after grant. The fair
value of these options is not considered to be material. Further details of
transactions with related parties can be found in note 34.
After the year end, the acquisition of TFG resulted in a further 8,400,000
share options being granted as disclosed in note 35.
27 Cash generated from operations
Group 2022 2021
£'000 £'000
Loss before tax (2,327) (1,531)
Finance costs 95 94
Share of results of associate and joint ventures (327) (166)
Intangible amortisation 28 59
Intangible impairment - 249
Depreciation 97 129
Goodwill impairment 1,752 -
Amortisation of right-of-use assets 385 383
Profit on disposal of property, plant & equipment - (2)
Decrease/(increase) in trade and other receivables 594 (843)
(Decrease) / increase in trade and other payables (815) 892
Change in provisions (586) (160)
Unrealised foreign exchange differences - -
Net cash expended by operations (1,104) (896)
Company 2022 2021
£'000 £'000
Loss before income tax (783) (1,179)
Dividends receivable (133) (528)
Finance costs 9 1
Depreciation 4 4
Provision on investments 180 81
Loss on disposal of subsidiary 418 -
Write off of amounts owed by subsidiary on disposal (479) -
Deferred consideration on disposal 163 -
Decrease in trade and other receivables 20 1,499
Decrease in trade and other payables (112) (579)
Unrealised foreign exchange differences (9) (1)
Net cash expended by operations (722) (702)
Changes in liabilities arising from financing activities including changes
arising from cash flows and non-cash changes
Group Non- current loans and borrowings Current loans and borrowings Total
£'000 £'000 £'000
At 1 October 2020 2,805 694 3,499
Cash flows
- Repayment of borrowings - (155) (155)
- Payment of interest - (1) (1)
- Receipt of bank loan 500 - 500
- Payment of lease liabilities - (546) (546)
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified as non-current at 30 September 2021 (538) 538 -
- Interest accrued in period - 92 92
At 30 September 2021 2,767 622 3,389
Cash flows
- Repayment of borrowings - (83) (83)
- Payment of interest - (9) (9)
- Receipt of bank loan - - -
- Payment of lease liabilities - (546) (546)
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified as non-current at 30 September 2022 (638) 638 -
- Interest accrued in period - 85 85
At 30 September 2022 2,129 707 2,836
Company Non- current loans and borrowings Current loans and borrowings Total
£'000 £'000 £'000
At 1 October 2021 - 155 155
Cash flows
- Repayment of borrowings - (155) (155)
- Payment of interest - (1) (1)
- Receipt of bank loan 500 - 500
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified as non-current at 30 September 2021 (83) 83 -
- Interest accrued in period - 1 1
At 30 September 2021 417 83 500
Cash flows
- Repayment of borrowings - (83) (83)
- Payment of interest - (9) (9)
- Receipt of bank loan - - -
Non-cash flows
- Effects of foreign exchange - - -
- Loans and borrowings classified as non-current at 30 September 2022 (250) 250 -
- Interest accrued in period - 9 9
At 30 September 2022 167 250 417
28 Financial instruments
Risk management
The Company and the Group hold financial instruments principally to finance
their operations or as a direct consequence of their business activities. The
principal risks considered to arise from financial instruments are foreign
currency risk and interest rate risk (market risks), counterparty risk (credit
risk) and liquidity risk. Neither the Company nor the Group trade in financial
instruments.
Categories of financial assets and liabilities
Group 2022 2021
£'000 £'000
Net trade receivables 2,315 2,943
Contract assets 1,119 982
Other financial assets at amortised cost 500 385
Accrued income 23 33
Amounts owed by associate and joint ventures - 22
Cash at bank and in hand 28 515
Loans and receivables measured at amortised cost 3,985 4,880
Trade payables (1,354) (2,112)
Other payables (101) (103)
Accruals (1,199) (964)
Lease liabilities (2,419) (2,889)
Secured bank loans and overdrafts (649) (500)
Financial liabilities measured at amortised cost (5,722) (6,568)
Net financial instruments (1,737) (1,688)
Company 2022 2021
£'000 £'000
Net trade receivables 24 5
Amounts owed by subsidiaries 163 381
Amount owed by associate and joint ventures - 22
Accrued income 11 33
Other financial assets at amortised cost 230 -
Cash at bank and in hand 457 211
Loans and receivables measured at amortised cost 885 652
Trade payables (58) (44)
Amounts owed to subsidiaries (1,212) (1,551)
Amount owed by associate and joint ventures (44) -
Other payables (28) (31)
Accruals (292) (92)
Secured bank loan (417) (500)
Financial liabilities measured at amortised cost (2,051) (2,218)
Net financial instruments (1,166) (1,566)
The Directors consider that there were no material differences between the
carrying values and the fair values of all the Company's and all the Group's
financial assets and financial liabilities at each year end based on the
expected future cash flows.
Collateral
As disclosed in note 21 the bank loan and overdraft (undrawn at 2021 and
£232k at 2022 year ends) are secured by a debenture over all the present and
future assets of the Company and certain of its United Kingdom subsidiaries.
The carrying amount of the financial assets covered by this debenture were:
2022 2021
£'000 £'000
Group 2,641 3,612
Company 349 614
Other receivables in the consolidated statement of financial position include
a £238k rent security deposit (2021: £230k) 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.
29 Foreign currency risk
The Group's operations seek to contract with customers and suppliers in their
own functional currencies to minimise exposure to foreign currency risk,
however, for commercial reasons contracts are occasionally entered into in
foreign currencies.
Where contracts are denominated in other currencies the Group usually seeks to
minimise net foreign currency exposure from recognised project related assets
and liabilities by using foreign currency denominated overdrafts.
The Group does not hedge future revenues from contracts denominated in other
currencies due to the rights of clients to suspend or cancel projects. The
Board has taken a decision not to hedge the net assets of the Group's overseas
operations.
Financial instruments which are denominated in a currency other than the
functional currency of the entity by which they are held are as follows:
Group 2022 2021
£'000 £'000
Czech Koruna - 5
EU Euro 45 166
Turkish Lira 16 -
UAE Dirham 2,283 2,046
UK Sterling (12) (7)
US Dollar 54 3
Net financial instruments held in foreign currencies 2,386 2,213
Company 2022 2021
£'000 £'000
Czech Koruna - 5
EU Euro 46 130
Turkish Lira 16 -
US Dollar 18 3
UAE Dirham 113 254
Net financial instruments held in foreign currencies 193 392
A 10% percent weakening of UK Sterling against all currencies at 30 September
would have increased / (decreased) equity by the amounts shown below. This
analysis is applied currency by currency in isolation (i.e. ignoring the
impact of currency correlation and assumes that all other variables, in
particular interest rates, remain consistent). A 10% strengthening of UK
Sterling against all currencies would have an equal but opposite effect.
2022 2021
Profit Equity Profit Equity
£'000 £'000 £'000 £'000
Group 29 (29) 39 101
Company 18 - 39 -
The following foreign exchange gains / (losses) arising from financial assets
and financial liabilities have been recognised in the income statement:
2022 2021
£'000 £'000
Group 258 (45)
Company 280 (47)
30 Counterparty risk
Group
No collateral is held in respect of any financial assets and therefore the
maximum exposure to credit risk at the date of the statement of financial
position is the carrying value of financial assets shown in note 28.
Counterparty risk is only considered significant in relation to trade
receivables, amounts due from customers for contract work, other receivables
and cash and cash equivalents.
The ageing of trade receivables against which an IFRS 9 impairment loss
allowance has been made, as the directors consider their recovery is probable,
was:
Receivables loss Receivables 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
Receivables loss Receivables post-allowance
pre-allowance allowance 2021
2021 £'000 £'000
£'000
Not overdue 1,210 (3) 1,207
Between 0 and 30 days overdue 923 (3) 920
Between 30 and 60 days overdue 143 (4) 139
Greater than 60 days overdue 741 (64) 677
Total 3,017 (74) 2,943
The processes undertaken when considering whether a trade receivable may be
impaired are set out in notes 2 and 19.
All amounts overdue have been individually considered for any indications of
impairment and specific provision for impairment made where considered
appropriate. All of the trade receivables specifically considered to be
impaired were greater than 90 days overdue.
An additional expected loss allowance provision has then been applied to the
residual trade receivables as detailed in note 19.
The concentration of counterparty risk within the £3,434k (2021: £3,925k) of
trade receivables and amounts due from customers for contract work is
illustrated in the table below showing the three largest exposures to
individual clients at 30 September.
2022 2021
£'000 £'000
Largest exposure 640 646
Second largest exposure 295 240
Third largest exposure 252 240
The Group's principal banker is Coutts & Co, a member of NatWest Group.
At 30 September 2022 the largest exposure to a single financial institution of
the Group's cash and cash equivalents held by various Group entities was
represented by a net overdrawn position of £229k (£3k cash less £232k
overdrafts) with Coutts & Co. (2021: the largest exposure to a single
financial institution represented 54% held with Coutts & Co.).
Company
The Company only has £24k trade receivables (2021: £5k) and no amounts due
from customers for contract work.
The amounts owed by United Kingdom subsidiaries were secured in January 2013
by debentures over all the assets of the relevant subsidiaries. These
debentures rank after the debentures securing the bank loan and overdraft.
Prior to this all amounts owed by United Kingdom subsidiaries and by associate
and joint ventures were unsecured. The amounts owed by associate and joint
ventures remain unsecured.
All of the Company's cash and cash equivalents are held by Coutts & Co.
The Company is exposed to counterparty risk though the guarantees set out in
note 33.
31 Interest rate risk
Group 2022 2021
£'000 £'000
Rent deposit 278 278
Secured bank loans (417) (500)
Secured bank overdrafts (232) -
Interest bearing financial instruments (371) (222)
Company 2022 2021
£'000 £'000
Secured bank loans (417) (500)
Interest bearing financial instruments (417) (500)
The property rent deposit earns variable rates of interest based on short-term
interbank lending rates.
Cash and cash equivalents are generally held in instant access current
accounts and in practice currently not interest bearing, and therefore have
not been included in interest bearing financial instruments disclosures.
The bank loan and overdraft carry interest at 4.05% (loan) and 3% (overdraft)
above the Coutts Base rate for the relevant currency.
A 1% rise in worldwide interest rates would have the following impact on
profit, assuming that all other variables, in particular the interest bearing
balance, remain constant. A 1% fall in worldwide interest rates would have an
equal but opposite effect.
2022 2021
£'000 £'000
Group (4) (2)
Company (4) (5)
32 Liquidity risk
The Group's cash balances are held at call or in deposits with very short
maturity terms.
At 30 September 2022 the Group had £850,000 (2021: £850,000) of gross
borrowing facility and £250,000 net borrowing facility (2021: £500,000)
under its United Kingdom bank overdraft facility. In November 2021 Coutts
& Co renewed the overdraft facility at £500,000. The Group then agreed
with Coutts & Co to reduce the net overdraft facility to £250,000 from
February 2022 onwards. In November 2022 Coutts & Co renewed the overdraft
facility maintaining the net overdraft facility at £250,000. It is now next
due for review in November 2023.
The maturity analysis of financial liabilities, including expected future
charges through the Income Statement is as shown below.
Group Borrowings Lease liabilities Other financial liabilities Total
£'000
£'000
Timing of cashflows £'000 £'000
Within one year 90 547 3,179 3,816
Between one and two years 263 522 - 785
Between two and five years 169 1,394 - 1,563
Greater than five years - 697 - 697
522 3,160 3,179 6,861
Expected future charges through the income statement (22) (271) - (293)
Financial liabilities at 30 September 2021 500 2,889 3,179 6,568
Timing of cashflows
Within one year 503 522 2,654 3,679
Between one and two years 171 465 44 680
Between two and five years - 1,393 - 1,393
Greater than five years - 232 - 232
674 2,612 2,698 5,984
Expected future charges through the income statement (25) (193) - (218)
Financial liabilities at 30 September 2022 649 2,419 2,698 5,766
Lease liabilities includes the finance lease on leasehold improvements and the
land and buildings office lease (see note 15).
Company Borrowings Other financial liabilities Total
£'000
Timing of cashflows £'000 £'000
Within one year 90 1,718 1,808
Between one and two years 263 - 263
Between two and five years 169 - 169
522 1,718 2,240
Expected future charges through the income statement (22) - (22)
Financial liabilities at 30 September 2021 500 1,718 2,218
Borrowings Other financial 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
33 Guarantees, contingent liabilities and other commitments
A cross guarantee and offset agreement is in place between the Company and
certain of its United Kingdom subsidiaries in respect of the United Kingdom
bank loan and overdraft facility. Details of the UK bank loan are disclosed in
note 21. At 30 September 2022 the overdrafts of its United Kingdom
subsidiaries guaranteed by the Company totalled £729,000 (2021: £nil).
The Company and certain of its United Kingdom subsidiaries are members of a
group for Value Added Tax (VAT) purposes. At 30 September 2022 the net VAT
payable balance of those subsidiaries was £285,000 (2021: £218,000).
At the year end, one of the Group's Middle East subsidiaries had outstanding
letters of guarantee totalling £74,000 (2021: £105,000). These guarantees
are secured by matching cash on deposit, which is included within trade and
other receivables.
In common with other firms providing professional services, the Group is
subject to the risk of claims of professional negligence from clients. The
Group maintains professional indemnity insurance in respect of these risks but
is exposed to the cost of excess deductibles on any successful claims. The
directors assess each claim and make accruals for excess deductibles where, on
the basis of professional advice received, it is considered that a liability
is probable.
The Group has contractual commitments totalling £nil (2021: £900) per annum
in respect of an IT hardware plan, expiring in December 2021. The total future
commitments arising under this contract as at the balance sheet date amount to
£nil (2021: £900).
34 Related party transactions
Key management personnel compensation
The key management personnel of the Group comprises the Directors of the
Company together with the managing and financial directors of the United
Kingdom and international operations.
Group 2022 2021
£'000 £'000
Short term employee benefits 1,235 1,301
Post employment benefits 110 106
Total 1,345 1,407
The key management personnel of the Company comprises its Directors.
Company 2022 2021
£'000 £'000
Short term employee benefits 613 600
Post employment benefits 43 43
Total 656 643
Transactions and balances with associate and joint ventures
The Group makes management charges to Aukett + Heese Frankfurt GmbH. The
amount charged during the year in respect of these services amounted to
£46,000 (2021: £47,000). Dividends of £nil (2021: £135,000) were received
from Aukett + Heese Frankfurt GmbH during the year. The amount owed to the
Group by Aukett + Heese Frankfurt GmbH at the balance sheet date was £nil
(2021: £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 £85,000
(2021: £81,000). Dividends of £126,000 (2021: £393,000) were received from
Aukett + Heese GmbH during the year. The Group received a loan from Aukett +
Heese GmbH amounting to £44,000 (2021: £nil). The amount owed by the Group
to Aukett + Heese GmbH at 30 September 2022 was £44,000 (2021: £nil).
As disclosed in note 16, the Group owns 50% of Aukett + Heese Frankfurt GmbH
and 25% of Aukett + Heese GmbH. The remaining 50% of Aukett + Heese Frankfurt
GmbH and 75% of Aukett + Heese GmbH are owned by Lutz Heese, a former director
of the Company.
The Group charged name licence fees and management fees to Aukett sro, a joint
venture in which the Group had a 50% interest until the joint venture was
liquidated in the year. During the year, charges of £nil (2021: £3,000) were
made to Aukett sro in respect of these services. Separately, Aukett sro owed
the Group and the Company £nil as at 30 September 2022 (2021: £5,000)
relating to previously declared but not yet paid dividends, management fees
and name licence charges.
None of the balances with the associate or joint ventures are secured.
Transactions and balances with subsidiaries
The names of the Company's subsidiaries are set out in note 16.
The Company made management charges to its subsidiaries for management
services of £660,000 (2021: £992,000) and paid charges to its subsidiaries
for office accommodation and other related services of £84,000 (2021:
£91,000).
At 30 September 2022 the Company was owed £163,000 (2021: £381,000) by its
subsidiaries and owed £1,212,000 (2021: £1,551,000) to its subsidiaries.
These balances arose through various past transactions including working
capital advances, treasury management and management charges. The amounts owed
at the year-end are non interest bearing and repayable on demand.
Under IFRS 9, the Company has recorded no allowance for expected credit
losses, as all subsidiaries owing funds to the Company are in a position to
repay the amounts owed in line with the payment terms stipulated by the
Company.
The amounts owed by United Kingdom subsidiaries were secured in January 2013
by debentures over all the assets of the relevant subsidiaries. These
debentures rank after the debentures securing the bank loan and overdraft.
Prior to this all amounts owed by subsidiaries were unsecured.
35 Post balance sheet event
On the 20 March 2023 the Group acquired 100% of the voting equity instruments
in Torpedo Factory Group Limited, an audio visual and stage technology
provider to organisations in the UK and Europe.
The principal reason for this acquisition, is to become a master systems
designer, integrator and operator in the provision of smart buildings
technology, in addition to developing the Group's core architecture
businesses. Extending the Group's offering to its clients to include such
smart solutions is expected to provide a competitive advantage to the Group's
core business and to add new income streams.
The financial effects of this transaction have not been recognised at 30
September 2022. The operating results and assets and liabilities of the
acquired company will be consolidated from 20 March 2023.
As the acquisition was completed a short time before the authorisation date of
these financial statements, it was not practical to disclose the book value of
the net assets acquired as at 20 March 2023. The following figures presented
represent Torpedo Factory Group Limited unaudited management accounts for 31
December 2022:
Provisional
31 Dec-22
£'000
Goodwill 679
Property, plant and equipment 3,501
Other intangible assets 78
Loans and other financial assets 243
Inventories 285
Trade and other receivables 1,524
Net cash 1,138
Assets 7,448
Trade and other payables 1,824
Contract liabilities 79
Interest bearing loans and borrowings 2,718
Lease liabilities 300
Deferred tax liability 125
Liabilities 5,046
Total net assets 2,402
At the date of authorisation of these financial statements a detailed
assessment of the fair value of the identifiable net assets has not been
completed.
Fair value of consideration paid
Consideration for the acquisition comprises:
i) 110,142,286 Ordinary Shares in Aukett Swanke Group Plc at
an issue price of 2.55p based on the closing price of Aukett Swanke Group Plc
shares on 1 March 2023.
ii) Up to 3,631,124 additional consideration shares proposed
to be issued to participating TFG Option Holders, at an issue price of 2.55p.
iii) 8,400,000 share options in Aukett Swanke Group Plc
exercisable at 1p. Fair value calculated at 1.55p per share based on the
closing price of Aukett Swanke Group Plc shares on 1 March 2023.
£'000
Shares in Aukett Swanke Group Plc 2,809
Maximum number of additional consideration shares to be issues to the 92
participating option holders
Share options in Aukett Swanke Group Plc 130
Total acquisition cost 3,031
Whilst fair value adjustments will result in recognised goodwill of less than
£629k, it is expected that some goodwill will be recognised. The goodwill
represents items, such as the assembled workforce, which do not qualify as
assets.
36 Corporate information
General corporate information regarding the Company is shown on page 2. The
addresses of the Group's principal operations are shown on page 111. A
description of the Group's operations and principal activities is given within
the Strategic Report.
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