Final Results

Aukett Group PLC 28 January 2003 For immediate release 28 January 2003 AUKETT GROUP PLC 2002 PRELIMINARY RESULTS Board confident of sustained improvement after final quarter profit - Turnaround strategy in place Aukett Group Plc ('Aukett'), one of Europe's leading building design practices, with offices in 14 cities in 10 countries, announces Preliminary Results for the year ended 30 September 2002. Wholly owned subsidiaries are in the Netherlands, Czech Republic and Poland. There are also five European joint ventures. Financial Highlights Year ended 30 September 2002 2001 Change £'000 £'000 % Restated Turnover, including share of JV's and associate 15, 599 21, 748 -28% Group Work Done 13, 102 18, 999 -31% (Loss)/profit before tax on ordinary activities (2, 447) 480 (Loss)/earnings per share (Basic) (3.27p) 0.22p Dividends per share nil 0.15p Net assets 1, 102 3, 472 -68% Net gearing 217% 38% Commenting on the results, Chairman Ian Mavor said: 'The year 2001/02 has given us extremely disappointing financial results...the poorest for many years. We conducted the management review referred to in the interim report and I am pleased to announce that the measures taken have been a significant contributory factor to the reversal in the downward trend seen in the first half of the year with the Group recording a profit in the final quarter.' Extracts from the Chairman's Statement * Board changes: New Group Managing Director, November 2002 and Finance Director, October 2002. * Assessment of company's competitiveness, business processes, organisational structure, and management responsibilities. * Remained within banking facilities throughout year; banking facilities negotiated for 2003/4. * Measures to tighten financial controls and restructure around business units, aligned to sector expertise. * New projects secured from end of third quarter through fourth quarter. * Business unit successes: Office facilities: National air traffic facility Arlington Securities; South Cambridgeshire District Council; North side of Royal Albert Dock, London. Hotels: Le Meridien Hotel, Heathrow; Radisson SAS hotel, Stansted; UK Hilton chain. Corporate workplace: Premises refurbishment throughout Southern England for major financial institution. Transportation and Retail: Surface stations on North Kent line, eastern route; main subsurface Paddington station, crossrail development, London Underground network. * Adoption of new accounting rules at half year has reduced earnings. * Return to Group profit in final quarter of year sustained in early part of new financial year. Regarding future prospects Ian Mavor said: 'There are encouraging signs that secured projects in our chosen markets are obtaining committed financing and are progressing. The management emphasis placed on responsiveness to customers, financial control and market place awareness is having the effect we were seeking. The return to profit in the fourth quarter of the year has been sustained in the early part of the new financial year.... Your Board is confident that the improvement will be sustained in 2002/3.' Enquiries: Aukett Group Plc (website: www.aukett.com) Tel: 020 7924 4949 Ian Mavor, Non-Executive Chairman Patrick Carter, Group Finance Director Binns & Co PR Peter Binns, Charlotte Barker Tel: 020 7786 9600 AUKETT GROUP PLC Results for the twelve months ended 30 September 2002 Overview The year 2001/02 has given us extremely disappointing financial results. Whilst the second half results show an improvement over the first half the overall results are the poorest your company has had for many years. Our Interim Report in May referred to tough trading conditions with decisions on new projects being deferred and the start-up of contracted projects being delayed. Our adoption at the half-year of the new accounting rules dealing with the treatment of pre-contractual costs had the anticipated effect of reducing our earnings in the short-term. We conducted the management review referred to in the interim report and I am pleased to announce that the measures taken have been a significant contributory factor to the reversal in the downward trend seen in the first half of the year, with the Group recording a profit in the final quarter of the year. Board Changes We announced in May 2002 changes to our executive management team. Following on from those changes I am pleased to report that the Board appointed Geoff Harwood as Group Managing Director in November 2002. I am also pleased to announce that Patrick Carter was appointed to the Board as Group Finance Director in October 2002. He joined the company in June 2001 as Financial Controller and was appointed Company Secretary in July 2002. Geoff has led the reorganisation of the company's UK operations into separate business units and has provided the direction and focus to develop the required management responsibility and market responsiveness. This initiative, together with improvements to the financial controls introduced by Patrick, provide the commercial platform for the future development of the business. I am sorry that one of our most senior directors has left the company. John Thake resigned from the Board at the end of December 2002 after many years of loyal service to the Group. We wish him well with his new interests. Review of operations UK Operations From the end of the third quarter and through the fourth quarter we have seen a steady improvement in business as new projects have been secured. Clients have given the go-ahead on pre-existing projects and work done on existing projects has been converted into invoicing and cash. In April, the Board undertook a wide-ranging assessment of the company's competitiveness, business processes, organisational structure, and management responsibilities. The emphasis was firmly directed towards a solution that would generate the financial returns necessary to effect a business turnaround. The results have crystallised into a series of measures taken in the UK to tighten financial control and restructure around business units aligned on key market sectors where Aukett's specialist skills and experience can be maximised. Senior managers have been given clear responsibility for full business performance against set targets in their defined sectors. Their role is to ensure an effective and efficient translation of customer requirements into profitable business. European operations Our European businesses comprise wholly owned subsidiaries in the Netherlands, Czech Republic and Poland together with five associated businesses which are independent companies jointly owned ('Joint Ventures') with companies local to the market in which they operate. In addition, there are three joint marketing arrangements with local companies in other European cities. During the year, the wholly owned subsidiaries suffered from a similar decline to that experienced in the UK but nevertheless, together they made a small contribution to profit before the recharging of Group overheads. The performance of the Joint Ventures was very poor. The markets in which they operate are diverse and although all countries have suffered from difficult economic circumstances, the losses have resulted from the failure of management to take timely action in the face of project uncertainties, delays and cancellations. The market conditions on the continent do vary from country to country and cannot be compared directly with the UK. However, we are applying the same management and financial disciplines that we have introduced in the UK within the structures that we have with our subsidiaries and partners. New business is forthcoming and, subject to the uncertainties that lie at the heart of economic recovery, we expect an improved performance from our European businesses in 2003. Business unit highlights Our policy of sector diversification, strengthened by the introduction of market focused business units, continues to be developed. Highlights of notable successes during the latter part of the year are set out below. The office facilities business unit, which includes master and urban planning specialists, has been appointed by Arlington Securities to design the new National Air Traffic Services facility on the Solent Business Park near Portsmouth and for the next phase at Oxford Business Park. Development Securities have appointed us for the new headquarters building for South Cambridgeshire District Council. We have also received instructions for phase I of the redevelopment of the north side of Royal Albert Dock ('the Royals') in London, opposite City airport. The Hotels business unit is currently working to complete a 500 bed hotel at Stansted Airport for Radisson SAS. It is also busy with the refurbishment of the conference suite for Le Meridien Hotel at Heathrow as well as on-going refurbishment projects for the Hilton chain throughout the UK. The highlight for the corporate workplace business unit, which encompasses interior design, strategic space planning, engineering as well as architecture, was their securing of a two year framework agreement covering the refurbishment premises in the south of England for a large financial institution. Targeting by the transportation and retail business unit is producing results with the securing of several major contracts and the unit has started to make an important contribution to the company's business upturn. Surface stations on the North Kent Line Eastern Route and the main subsurface Paddington Station of the Crossrail development together with a number of refurbishments of sub-surface stations on the London Underground network are among our successful transport sector wins. Our expertise in retail led mixed-use developments which include residential, leisure and commercial elements is being recognised in a number of projects with leading retailers. We believe that there is significant potential in these kinds of projects where workplace, residential and leisure facilities are integrated to provide communities with the most valuable use of urban sites. Finance Despite the trading difficulties outlined above, the Group has remained within its banking facilities throughout the year. We have negotiated banking facilities for the next 12 months which the directors believe give the company sufficient flexibility to address the needs of the business over that period. The company was among the first to adopt, in its interim results, the new Urgent Issues Task Force rules dealing with the treatment of pre-contractual costs. The previous accounting treatment, in line with Statement of Accounting Practice 9, permitted pre-contractual costs to be carried on the balance sheet as work-in-progress from the point where management had cause to believe that a project was 'reasonably certain' to be converted into a contract. The new policy now requires pre-contractual work to be 'virtually certain' for it to be carried as work in progress. This has resulted in a significant reduction in work in progress carried on the balance sheet and hence reserves. However, risks relating to the valuation of assets held on the balance sheet are reduced as profit is no longer being taken until projects are virtually certain. In the long term, management believe that the majority of the projects to which these pre-contractual cost write offs relate will proceed and, in effect, those costs will be recouped from the revenue and profit so generated. This has started to happen, but the timing of profit from projects lags that under the previous treatment. This has largely contributed to the delay of the return to profitability to the fourth rather than the third quarter as had originally been forecast. Notwithstanding this impact on the profit & loss and the balance sheet, the discipline imposed by this 'virtual certainty' principle for carrying forward pre-contractual work does provide a robust base for our business forecasting and budgeting process. Management and staff Our success in the design consultancy market is dependent on the creativity, skill and enthusiasm of our staff. Throughout this difficult year they have continued to deliver high quality work responsive to our customers' needs. Our very high level of repeat business from satisfied customers as well as the winning of some major projects in new sectors is solid evidence of commitment to design excellence and delivery which is so crucial in a highly competitive marketplace. We work to improve our business environment so that high levels of creativity and design are encouraged to flourish profitably. On behalf of the Board I would like to thank the entire staff for their dedicated performance during this year. Prospects There are encouraging signs that secured projects in our chosen markets are obtaining committed financing and are progressing. The management emphasis placed on responsiveness to customers, financial control and market place awareness is having the effect we were seeking and the return to profit in the fourth quarter of the year has been sustained in the early part of the new financial year. The economic climate in both the UK and on the continent is fragile and there are uncertainties as to the timing of recovery in the various areas in which the Group works. Nevertheless, your Board is confident that the improvement will be sustained in 2002/3. I G F Mavor Chairman 28 January 2003 Aukett Group Plc 2 Great Eastern Wharf Parkgate Road London SW11 4TT Consolidated profit and loss account For the year ended 30 September 2002 2002 2001 £000 £000 (restated) Turnover: Group and share of joint ventures 15,415 21,518 Less: share of joint ventures' turnover (1,738) (2,739) Group turnover (note 1) 13,677 18,779 Movement in amounts recoverable on contracts (575) 220 Group work done (note 1) 13,102 18,999 Group operating (loss)/profit (1,337) 773 Share of operating loss in joint ventures and associate (568) (113) Exceptional charge relating to impairment of goodwill in joint venture (333) - Net interest payable by Group (209) (180) (Loss)/profit on ordinary activities before tax (note 3) (2,447) 480 Tax on (loss)/profit on ordinary activities 77 (322) (Loss)/profit on ordinary activities after tax (2,370) 158 Dividends - (109) Retained(loss)/profit for the year (2,370) 49 (Loss)/earnings per share: Basic (3.27p) 0.22p Diluted (3.27p) 0.21p Consolidated Balance Sheet At 30 September 2002 2002 2001 (restated) £000 £000 £000 £000 Fixed assets Intangible assets 595 957 Tangible assets 1,120 1,438 Investments in joint ventures: Share of gross assets 242 2,900 Share of gross liabilities (213) (2,872) 29 28 Investment in associate 25 74 1,769 2,497 Current assets Debtors 6,624 6,800 Cash at bank and in hand 429 488 7,053 7,288 Creditors falling due within one year (7,488) (5,882) Net current (liabilities)/assets (435) 1,406 Total assets less current liabilities 1,334 3,903 Creditors falling due after one year (232) (431) Net assets 1,102 3,472 Capital and reserves Share capital 724 724 Share premium account 1,794 1,794 Profit and loss account (1,416) 954 Equity shareholders' funds 1,102 3,472 Statement of total recognised gains and losses For the year ended 30 September 2002 2002 2001 (restated) £000 £000 (Loss)/profit for the financial year (2,370) 158 Foreign exchange differences - 31 Total gains and losses recognised since last annual report (2,370) 189 Prior Period adjustment (871) Total gains and losses recognised in year (3,241) Reconciliation of movements in shareholders' funds For the year ended 30 September 2002 2002 2001 (restated) £000 £000 Shareholders' funds at 1 October as originally 4,060 3,666 presented Prior period adjustments (588) (283) Shareholders' funds at 1 October as re-stated 3,472 3,383 Exercise of share options - 38 Capitalisation of ESOT contributions - (29) Exchange movement - 31 (Loss)/profit attributable to shareholders (2,370) 158 Dividends paid and proposed - (109) Shareholders' funds at 30 September 1,102 3,472 Consolidated Cash Flow Statement For the year ended 30 September 2002 2002 2001 £000 £000 £000 £000 Net cash (outflow)/inflow from operating (205) 1,379 activities Returns on investments and servicing of (198) (180) finance Tax paid (286) (427) Capital expenditure Purchase of tangible fixed assets (91) (216) Acquisitions Investment in subsidiary undertakings (3) - Investment in joint ventures (2) (21) (5) (21) Equity dividends paid - (290) Net cash inflow before financing (785) 245 Financing Issue of ordinary shares - 9 Repayment of loans (80) (160) Principal repayments under hire purchase contracts and finance leases (460) (444) Net cash outflow from financing (540) (595) Decrease in cash (1,325) (350) Reconciliation of net cash flow to movement in net debt Decrease in cash for the year (1,325) (350) Cash outflow from decrease in debt 540 604 New finance leases (283) (392) Movement in net debt during the year (1,068) (138) Net debt at 1 October (1,322) (1,184) Net debt at 30 September (2,390) (1,322) NOTES 1 Turnover and work done An analysis of turnover and work done by geographical area of destination is as follows: 2002 2001 United Rest of United Rest of Kingdom Europe Total Kingdom Europe Total £000 £000 £000 (restated) (restated) (restated) £000 £000 £000 Turnover Group 11,055 2,622 13,677 14,476 4,303 18,779 Share of joint ventures - 1,738 1,738 - 2,739 2,739 11,055 4,360 15,415 14,476 7,042 21,518 Share of associate - 184 184 - 230 230 Total 11,055 4,544 15,599 14,476 7,272 21,748 Movement in amounts recoverable on contracts Group (1,159) 584 (575) 777 (557) 220 Share of joint ventures - (262) (262) - 252 252 Share of associate - (19) (19) - 2 2 Total (1,159) 303 (856) 777 (303) 474 Work done Group 9.896 3,206 13,102 15,253 3,746 18,999 Share of joint ventures - 1,476 1,476 - 2,991 2,991 Share of associate - 165 165 - 232 232 Total 9,896 4,847 14,743 15,253 6,969 22,222 2 Group operating (loss)/profit 2002 2001 (restated) £000 £000 Group work done 13,102 18,999 Staff costs (7,471) (9,816) Amortisation of goodwill (29) (54) Depreciation (651) (670) Other operating charges (6,288) (7,686) Group operating (loss)/profit (1,337) 773 3 (Loss)/profit on ordinary activities before taxation An analysis of (loss)/profit on ordinary activities before taxation by geographical area is as follows: 2002 2001 United Rest of United Rest of Kingdom Europe Total Kingdom Europe Total (restated) (restated) (restated) £000 £000 £000 £000 £000 £000 Company and subsidiaries (1,660) (219) (1,879) 260 333 593 Share of joint ventures - (529) (529) - (90) (90) Share of associate - (39) (39) - (23) (23) Group total (1,660) (787) (2,447) 260 220 480 4 (Loss)/earnings per share The (loss)/earnings per share is calculated on the loss attributable to shareholders of £2,370,000 for the year ended 30 September 2002 (2001: £158,000 profit as restated) and on 72,421,394 (2001: 72,356,065) ordinary shares, being the weighted average number of shares in issue during the year. There is no additional dilution to the (loss)/earnings per share as a result of taking account of dilutive potential ordinary shares in accordance with FRS 14, Earnings per Share. 5 Amounts recoverable on contracts Payments on account, as included in creditors, exceeded amounts recoverable on contracts, as included in debtors, by £534,000 at 30 September 2002 (2001: Amounts recoverable on contracts exceeded payments on account by £41,000 (as restated)). These amounts comprise: 2002 2001 Amounts recoverable on Payments on Amounts recoverable Payments on contracts account on contracts account (restated) (restated) £000 £000 £000 £000 Value of work done 19,285 7,724 19,786 14,326 Fees rendered on account (18,590) (8,953) (18,654) (15,417) ------- ------- ------ ------- 695 (1,229) 1,132 (1,091) ======= ======= ====== ======= 6 Summary of effects of change in accounting policy The change in accounting policy has been introduced to reflect the new Abstract relating to pre-contract costs, issued by the Urgent Issues Task Force, which came into force for accounting periods ending June 2002. The new Abstract is based on a 'virtual certainty' principle for carrying forward pre-contractual work. As a result, the work in progress valuation at 30 September 2002 was £1,328,000 lower than would have been the case under the previous policy. Of this, £486,000 relates to the current year, reducing both work done and profit accordingly, and £842,000 relates to prior years and has therefore been taken as an adjustment to reserves. It remains the management's commercial judgement that the projects to which these adjustments relate will materialise in due course and therefore the resultant revenue and profit will be recognised in future periods. 7 Statutory accounts The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2002 or 2001 but is derived from those accounts. Statutory accounts for 2001 have been delivered to the Registrar of Companies and those for 2002 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. The Company's statutory accounts for 2002 will include the following note in respect of their basis of preparation: 'The Group meets its day to day working capital requirements through an overdraft facility which is repayable on demand. The nature of the Group's business is such that there can be considerable uncertainty over the timing of major projects and the commencement of cash flows arising therefrom. The directors have prepared projected cash flow information for the next twelve months and they consider that the Group will continue to operate within the overdraft facility recently agreed, which expires in January 2004. On this basis, the directors consider it appropriate to prepare the financial statements on the going concern basis. However, the margin of facilities over requirements is not large and inherently there can be no certainty as to these matters and, in the event that projects are delayed or expectations included in the directors' projections are otherwise not met, the Group may need to renegotiate its banking facilities. The financial statements do not include any adjustments that would result from a failure by the Group to obtain adequate future funding.' 8 Annual Report The Annual Report and Accounts is expected to be mailed to shareholders on or before 18 February 2002. Further copies will be available from the registered office of the Company, 2 Great Eastern Wharf, Parkgate Road, London SW11 4TT, or will be accessible via the Company's website at www.aukett.com. This information is provided by RNS The company news service from the London Stock Exchange

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