Final Results

RNS Number : 6653L

Aukett Fitzroy Robinson Group PLC

15 January 2009

 



Embargoed until 7am on Thursday 15 January 2009

Aukett Fitzroy Robinson Group Plc

Preliminary announcement of results 

for the year ended 30 September 2008

Aukett Fitzroy Robinson Group Plc, the international practice of architects and interior design specialists, announces its preliminary results for the year ended 30 September 2008.

Key highlights

• Revenue up 14% to £22.6m with over 50% derived from non-UK projects.

• 10% growth in earnings to 1.19 pence per share.

• Recommended dividend up 5% to 0.21 pence per share. 

• Profit before tax rises 1% from £2.39m to £2.42m. 

• Shareholders' funds up 39% to £5.9m including £1.4m of cash. 

• No net gearing with net cash of £0.4m.

Nicholas Thompson, Chief Executive Officer of Aukett Fitzroy Robinson commented:

'Having achieved a creditable result in what has proved to be a difficult year; the real challenge for the group is one of achieving a reasonable level of financial performance in a market with fewer opportunities in the short term. We believe that our diverse business model will enable us to improve both our net asset value and cash position in 2009 thereby allowing continuation of our progressive dividend policy.'

Enquiries

Aukett Fitzroy Robinson - 020 7636 8033

Nicholas Thompson, Chief Executive Officer

Duncan Harper, Group Finance Director

FinnCap - 020 7600 1658
Sam Smith
Clive Carver

Adventis Financial PR - 020 7034 4759
Chris Steele
Tarquin Edwards

Chairman's statement

This is the company's first set of full year results to be announced since my appointment and I am delighted to report what is, in the currently demanding market, an impressive performance.

At the half year we said that the full year performance should see a year on year improvement in both revenue and profit and this has been achieved with profit before tax rising to £2.42m (2007: £2.39m) on revenues up from £19.75m to £22.60m.

The Board is recommending that a final dividend of 0.11 pence per share be paid to shareholders bringing the total for this year to 0.21 pence per share (2007: 0.20 pence per share).

This year has been one where the strength and qualities of your company have been much in evidence. Our focus has been on those areas of the international market where we are well represented and there is the opportunity for continued progress and growth. Although we experienced a reduction in commercial property activity in the UK market we were still able to exploit the growth opportunities that have been targeted in both the Middle East and to a lesser extent in Russia. This re-alignment of our income profile has contributed to the ability of your company to maintain its short-term financial performance.

I joined the Board in May this year at a time of immense challenges for the company but trust that the experience that I bring with me from a corporate and international property perspective will be of benefit to the company in assessing and responding to the opportunities that lie ahead.

Since joining the company I have spent time with all the directors and a number of other key practitioners and have been very impressed by the breadth and depth of talent and professionalism which, when aligned with the quality and experience of the management team, provides a robust platform upon which to base the development of a long term growth strategy for your company.

Tim Hodgson

Chairman

15 January 2009

Directors' report - Chief Executive Officer's report

Introduction

Our profit before tax performance for 2008 proved to be better in the second half of the year with the full year result moving marginally ahead of last year's. This result, whilst at the lower end of our growth expectations, fell entirely within the period of the 'Credit Crunch' and in that respect is a significant achievement.

Financial overview

The group achieved a profit before tax of £2.42m (2007: £2.39m) on revenues of £22.60m (2007: £19.75m).

Underlying operating profit margins, when measured against net revenues after eliminating sub-consultant pass-through costs, improved from 13.7% to 14.1%.

Net cash reduced to £0.4m (2007: £1.7m). During the year the group increased its exposure to non-UK revenue streams in both the Middle East and Russia, and at the same time absorbed a slow down in the UK commercial property market. As we anticipated, the impact of this was to increase our working capital requirement during the second half of the year and this was funded from our own resources. We believe that cash flow will revert to a more positive position over the coming financial period.

Review of operations

In addressing the forecast downturn in UK project commissions arising from the Credit Crunch we re-focused our resources to expand our services overseas where there were more favourable development opportunities. In doing so we achieved a significant shift in revenues to non-UK destinations which grew from 27% in 2007 to 53% this year. The main movement arose from new Middle East projects notably in the UAE which accounted for 23% (2007: 1%) of total revenues. UAE revenues amounted to £5.2m (2007: £0.2m).

As we outlined earlier last year the UK operation came under pressure from project cancellations and the slow down in new commissions during the latter months of 2007. Revenues advanced by only 8% as the financial crises impacted upon commercial property investment activity. The new revenue streams from the UAE generally compensated for the reduction in UK revenues. The UK operation currently carries out all services for Middle East projects.

Net UK revenues, after sub-consultant pass-through costs accounted for 84% (2007: 86%) of group net revenues. The impact of the fall in net revenue was matched by a reduction in costs such that operating profit also fell by 2%. The operating cost reduction was tempered by the need to support the new UAE projects which led to internal resourcing inefficiencies. Such inefficiencies should abate with continuing exposure to local (UAE) market practices and the need for re-location or recruitment of resources to deliver projects in the destination market in the longer term. 

Sector revenue in the UK exhibited a generally flat or declining profile with only four areas generating organic growth: Hotel Interiors and Architecture won seven notable commissions in Abu Dhabi for ALDAR; Transport continued its work to the new Farringdon station for Network Rail; our Southampton office has successfully won new business locally with a new industrial and office facility for Vestas; and Veretec continued with its work at Kings Cross for Argent/Kier, and, for other larger contractors notably, BAM.

Elsewhere our Retail sector suffered from the down turn in consumer spending which limited growth to 9% of UK revenues. However, we are currently commissioned on a variety of projects for Fenwick, a new M&S 'sustainable' store and completed the new Dunhill flagship store and its Alfred's Club in Mayfair. Whilst Offices performed consistently at 31% of revenues there are clear signs of client aversion to speculative developments in the year ahead. Major projects included developments for Land Securities, Great Portland Estates and Grafton Advisers in London and regionally for Goodman and PRUPIM in Birmingham, for the Carlyle Group in Bristol and Oxford, and for Development Securities in Southampton.

It will be necessary to further review our UK cost base in view of the decline in local project revenues to the extent that this is not offset by revenue generation and resourcing in non-UK project destinations.

Continental Europe saw revenues grow by 17% and operating profits by 44% led by our Czech operation which produced a record year arising from the successful delivery of projects in Prague and its subsidiary operation in Bratislava. Poland, which has performed poorly in recent times, broadly held its losses to prior year levels at £58,000 (2007: £52,000) and following management changes approached break-even in the final quarter. The office now has a number of projects including a country-wide, branch framework instruction from HSBC.

Internationally, Russia grew revenues by 72%. However this did not translate into growth in operating profit, which fell by 43%. Delays and cancellations due to availability of development capital affected projects in the former CIS state of Kazakhstan and regionally in Krasnodar. Notwithstanding the general slowdown in Moscow, we believe that our business has strengthened with the recent signing for the proekt stage (planning) of a new 4,000,000 sq ft office complex for a major Russian financial institution. 

Corporate strategy

Despite the slow down in the global economic environment and, with the UK in a potentially long term recession, we remain committed to our objective to increase our 'net' revenue to £25m by 2010. However, this is now likely to be driven by greater reliance on non-UK destination revenue resulting in limited progress being achieved in 2009. 

Any increase in operating margins will be reflected in our ability to continue to control staffing and other overhead costs in the short-term as we progress the re-alignment of our operations in relation to the changing profile of our revenue streams. We believe that progress can be made even in these more difficult market conditions as we shift the delivery of projects to the destination market. 

The structure of our business model is intentionally diverse in order to allow management to be flexible in the use of the company's resources at times of changing market demand. In this regard we believe our continuing commitment to the Russian market and our more recent exposure to the UAE will enable the group to continue its organic growth strategy. 

We continue to monitor a number of situations to expand our business through strategic acquisitions. However, we have now tightened our investment criteria to include the maintenance of our working capital position with the consequent effect that such activity is more likely to be via the issue of new shares rather than by cash or debt.

Summary

Having achieved a creditable result in what has proved to be a difficult year; the real challenge for the group is one of achieving a reasonable level of financial performance in a market with fewer opportunities in the short term. We believe that our diverse business model will enable us to improve both our net asset value and cash position in 2009 thereby allowing continuation of our progressive dividend policy.

Nicholas Thompson

Chief Executive Officer

15 January 2009

  Consolidated income statement

For the year ended 30 September 2008

	Note	2008 £'000	2007 £'000
Revenue	2	22,598	19,748
Sub consultant costs		(5,623)	(2,238)
Revenue less sub consultant costs		16,975	17,510
Personnel related costs		(10,751)	(11,321)
Office related costs		(1,715)	(1,790)
Other operating expenses		(2,450)	(2,111)
Other operating income		331	105
Operating profit		2,390	2,393
Finance income		70	55
Finance costs		(82)	(109)
Profit after finance costs		2,378	2,339
Share of results of associate and joint ventures		37	49
Profit before income tax	2	2,415	2,388
Income tax expense		(687)	(817)
Profit for the year attributable to equity holders of the company		1,728	1,571
Basic earnings per share		1.19p	1.08p
Diluted earnings per share		1.19p	1.08p
Dividends per share		0.10p	0.20p

Consolidated statement of recognised income and expense

For the year ended 30 September 2008

		2008 £'000	2007 £'000
Currency translation differences		90	40
Net income recognised directly in equity		90	40
Profit for the year		1,728	1,571
Total gains and losses recognised in year attributable to equity holders of the company		1,818	1,611

Consolidated balance sheet

At 30 September 2008

		2008 £'000	2007 £'000
Non current assets
Goodwill		1,596	1,596
Property, plant & equipment		275	275
Investment in associate		77	14
Investment in joint venture		26	46
Deferred tax		122	175
Total non current assets		2,096	2,106
Current assets
Trade and other receivables		10,699	8,041
Current tax		34	-
Cash and cash equivalents		1,423	2,819
Total current assets		12,156	10,860
Total assets		14,252	12,966
Current liabilities
Trade and other payables		(6,924)	(6,883)
Current tax		(294)	(713)
Short term borrowings		(150)	(150)
Total current liabilities		(7,368)	(7,746)
Non current liabilities
Investment in joint venture		-	(4)
Long term borrowings		(863)	(975)
Deferred tax		(108)	-
Total non current liabilities		(971)	(979)
Total liabilities		(8,339)	(8,725)
Net assets		5,913	4,241
Capital and reserves
Share capital		1,456	1,456
Foreign currency translation reserve		130	40
Retained earnings		1,725	(3)
Other distributable reserve		2,602	2,748
Total equity attributable to equity holders of the company		5,913	4,241

  Consolidated cash flow statement

For the year ended 30 September 2008

	Note	2008 £'000	2007 £'000
Cash flows from operating activities
Cash generated from operations	5	(65)	2,637
Interest paid		(82)	(112)
Income taxes paid		(993)	(192)
Net cash from operating activities		(1,140)	2,333
Cash flows from investing activities
Purchase of property, plant & equipment		(225)	(228)
Interest received		70	26
Net cash used in investing activities		(155)	(202)
Cash flows from financing activities
Proceeds from issue of share capital		-	34
Repayment of bank loan		(112)	(187)
Repayment of loan notes		-	(200)
Payment of finance lease liabilities		-	(9)
Dividends paid		(146)	(291)
Net cash used in financing activities		(258)	(653)
Net change in cash and cash equivalents		(1,553)	1,478
Cash and cash equivalents at start of year		2,819	1,341
Currency translation differences		157	-
Cash and cash equivalents at end of year		1,423	2,819

  Notes to the preliminary announcement

1    Basis of preparation

The financial information presented in this preliminary announcement has been prepared using accounting policies consistent with International Financial Reporting Standards as adopted by the European Union ('IFRS'). These accounting policies are as set out in the interim report for the six months ended 31 March 2008.

2    Segmental analysis

The group's operations currently comprise a single business segment and three separately reportable geographical segments. 

Geographical segments are based on the location of the group's offices from which the services are delivered. Group level activities (such as finance and marketing) are integrated within the United Kingdom operations and hence their costs are reported within the United Kingdom segment. The group's associate and joint ventures are all based in Continental Europe.

Segment revenue		2008 £'000	2007 £'000
United Kingdom		17,279	15,976
Continental Europe		2,459	2,108
Russia and Former CIS		2,860	1,664
Revenue		22,598	19,748

Segment result		2008 £'000	2007 £'000
United Kingdom		1,730	1,761
Continental Europe		497	344
Russia and Former CIS		163	288
Operating profit		2,390	2,393
Net finance costs		(12)	(54)
Share of results of associate and joint ventures		37	49
Profit before income tax		2,415	2,388

The geographical split of revenue based on the location of project sites was:

		2008 £'000	2007 £'000
United Kingdom		10,675	14,360
Continental Europe		3,144	2,824
Russia and Former CIS		3,582	2,344
Middle East		5,197	220
Revenue		22,598	19,748

3    Earnings per share

The calculations of basic and diluted earnings per share are based on the following data:

Earnings	2008 £'000	2007 £'000
Profit for the year	1,728	1,571

Number of shares	2008 Number	2007 Number
Weighted average of ordinary shares in issue	145,618,693	145,363,844
Effect of dilutive options	-	179,239
Diluted weighted average of ordinary shares in issue	145,618,693	145,543,083

4    Dividends

	2008 £'000	2007 £'000
2006/07 interim dividend of 0.20p per share	-	291
2007/08 interim dividend of 0.10p per share	146	-
Total	146	-

No final 2006/07 dividend was proposed or paid so the total dividend in respect of the year ended 30 September 2007 was 0.20 pence per share.

The directors have proposed a final 2007/08 dividend of 0.11 pence per share. The total dividend in respect of the year ended 30 September 2008 is therefore 0.21 pence per share.

5    Cash generated from operations

		2008 £'000	2007 £'000
Profit before income tax		2,415	2,388
Finance income		(70)	(55)
Finance costs		82	109
Share of results of associate and joint ventures		(37)	(49)
Depreciation		232	275
Change in trade and other receivables		(2,365)	(1,781)
Change in trade and other payables		(322)	1,750
Net cash generated from operations		(65)	2,637

6    Transition to IFRS

The date of transition from UK GAAP to IFRS was 1 October 2006.

In the transition from UK GAAP to IFRS, advantage has been taken of the following two exemptions contained in IFRS 1: First-time adoption of international financial reporting standards:

• Business combinations - Business combinations which occurred before the date of transition have not been accounted for in accordance with IFRS 3: Business combinations; and

• Currency translation differences - Currency translation differences arising from foreign operations prior to the date of conversion remain subsumed within retained earnings and will not be included in the gain or loss recognised in the income statement on any disposal.

In the transition from UK GAAP to IFRS, presentation adjustments have been required in the following areas:

• Associates and joint ventures - Under IFRS the group's share of profit after tax is shown as a single line on the face of the income statement whereas under UK GAAP the group's share of operating profit, finance costs and taxation were shown separately under the relevant headings;

• Deferred taxation - Under IFRS deferred tax balances are treated as non current assets whereas under UK GAAP they were treated as current assets;

• Cash flow statement - An IFRS cash flow statement has only three major categories and therefore headings in the previous UK GAAP cash flow have been reclassified; and

• Foreign currency translation reserve - Under UK GAAP foreign currency translation differences arising on consolidation were subsumed within retained earnings, whereas under IFRS they are required to be segregated in a separate reserve and included in the gain or loss recognised in the income statement on any disposal.

In addition to these presentation changes, a significant number of additional disclosures have been made in the financial statements including:

• Critical accounting estimates and judgements - Under IFRS disclosure is required of any assumptions made about uncertainties which have a significant risk of resulting in material adjustment with the next financial year.

In the transition from UK GAAP to IFRS measurement and recognition adjustments have been required in the following three areas:

• Goodwill amortisation reversal - Under UK GAAP goodwill with a finite life is required to be amortised over its useful economic life but under IFRS goodwill is not amortised;

• Staff holiday entitlement accrual - Under IFRS the value of holiday entitlements earned by members of staff but not yet taken must be recognised as a liability; and

• Tax on unremitted overseas earnings - Under IFRS deferred income tax liabilities are recognised in respect of the unremitted earnings of overseas operations where they are expected to be remitted to the UK in the foreseeable future.

Reconciliation of total equity attributable to equity holders of the company

		As at 30 September 2007 £'000	As at 1 October 2006 £'000
Goodwill amortisation reversal		51	-
Staff holiday entitlement accrual		(86)	(79)
Tax on unremitted overseas earnings		(10)	-
Total transition adjustments		(45)	(79)
Reported under UK GAAP		4,286	2,966
Reported under IFRS		4,241	2,887

  Reconciliation of profit for the year attributable to equity holders of the company

			Year ended 30 September 2007 £'000
Goodwill amortisation reversal			51
Staff holiday entitlement accrual			(7)
Tax on unremitted overseas earnings			(10)
Total transition adjustments			34
Reported under UK GAAP			1,537
Reported under IFRS			1,571

7    Status of preliminary announcement

This preliminary announcement was approved by the board of directors on 15 January 2009.

The financial information set out in this preliminary announcement has been extracted from the group's audited statutory accounts for the year ended 30 September 2008 which will be delivered to the Registrar of Companies following the company's annual general meeting. The auditor's report on these accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis with qualifying their report, and did not contain a statement under either Section 237 (2) or (3) of the Companies Act 1985.

Statutory accounts for the year ended 30 September 2007 have been delivered to the registrar of companies and the auditors' report on these accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis with qualifying their report, and did not contain a statement under either Section 237 (2) or (3) of the Companies Act 1985.

The financial information set out in this preliminary announcement does not constitute the group's statutory accounts for the year ended 30 September 2008.

8    Annual general meeting

The annual general meeting of the Company will be held at 14 Devonshire Street, London, W1G 7AE on 10:30am at 26 March 2009.

9    Annual report and accounts

Copies of the annual report and accounts will be dispatched to shareholders in due course. Copies will also be available on the company's website (www.aukettfitzroyrobinson.com) and from the registered office of the company (14 Devonshire Street, London, W1G 7AE).

 

END

 

 

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