Final Results

RNS Number : 5167F

Aukett Fitzroy Robinson Group PLC

14 January 2010

 

Embargoed until 7am on Thursday 14 January 2010

Aukett Fitzroy Robinson Group Plc

Preliminary announcement of audited results 

for the year ended 30 September 2009

Aukett Fitzroy Robinson Group Plc, the international practice of architects and interior design specialists, announces its preliminary results for the year ended 30 September 2009.

Key points

• Half on half pre tax losses down from £1,216,000 to £660,000 due to restructuring even though second half revenues fell by 17%.
  
  
• Loss before tax of £1,876,000 (2008: profit of £2,415,000) and losses per share of 0.97p (2008: earnings per share of 1.19p).
  
  
• Current order book has been increased during the year by £1.73bn of construction value with a number of prestigious new projects.
  
  
• Further enhancement of position in the Middle East with the delivery of highly rated hotel projects in Abu Dhabi.
  
  
• Ongoing restructuring and cost reduction measures already implemented will produce cost savings of approximately £4m in the current year.
  
  
• Group operations have been stabilised at reduced capacity levels

Tim Hodgson, Chairman of Aukett Fitzroy Robinson commented:

"The downturn globally in construction, but especially in the United Kingdom, has had an inevitable impact on our financial results but enormous credit is due to our staff for continuing to produce internationally acclaimed work and increasing our order book despite this difficult environment."

Enquiries

Aukett Fitzroy Robinson - 020 7636 8033

Nicholas Thompson, Chief Executive Officer

Duncan Harper, Group Finance Director

FinnCap - 020 7600 1658

Clive Carver or Rose Herbert - Corporate Finance

Stephen Norcross or Simon Starr - Corporate Broking

Hermes Financial PR

Chris Steele - 07979 604687

Trevor Phillips - 07889 153628

  Chairman's statement

To say that the group's financial year 2008/09 was difficult would be an understatement, starting as it did in October 2008 in the middle of a global banking crisis and ending in September 2009 with the United Kingdom and many other major economies mired in economic recession. The postponement of a number of major projects, and the understandable reluctance of clients to commit to new development, has inevitably resulted in a significant reduction in the group's revenues.

Consequently, management's primary focus since mid 2008 has been to maintain financial stability whilst ensuring that the group remains favourably positioned to benefit from a return to economic growth. This has in turn required a realignment of the group's cost base to reflect the current workflow.

In the current market conditions success is relative and although the outcome in profit and loss is disappointing, this does not fairly reflect some extremely positive medium to long term underlying trends in the business.

As a result of the positive and effective steps taken by the management team to reduce and control costs, the loss in the second half of the year was less than that in the first half, notwithstanding a number of one off restructuring costs, and in cash flow terms the losses have been funded by existing facilities and working capital.

Our current pipeline of United Kingdom work has been enhanced this year by the addition of 16 new planning applications with a construction value of £1.73bn reflecting both the continued strength of our brand and the increased levels of activity in recent months.

The key assets of a professional services business are its brand, its personnel and its client base and these have been factors which have had a significant bearing on the way in which the cost base has been restructured. We have ensured that the breadth of our professional skills and geographical coverage has been maintained and our client base developed. The positive feedback we have received upon the completion of a number of major schemes, particularly for our hotels on Yas Island in Abu Dhabi, has significantly enhanced our brand. We are indebted to our management and professional teams for the skill, dedication and commitment they have shown in extremely difficult market conditions.

Although our primary focus has been on maintaining the financial equilibrium of the company, we remain alive to opportunities to grow organically and through merger or acquisition, in all our theatres of operation when the time is right.

We expect conditions in 2010 to remain challenging in the markets in which we are operating. We are encouraged by the number and quality of recent appointments and the increased flow of enquiries in the last six months. This along with the cost controls which have been implemented, the strong forward order book and the quality and strength of our professional teams and client base means we look to the future with confidence and optimism. However economic uncertainties, especially in the United Kingdom, mean that we cannot at this stage be certain as to when revenue streams will conclusively recover.

Tim Hodgson

Chairman

13 January 2010

  Chief Executive Officer's report

The decline in global property market activity has been extensively reported over the past eighteen months. This has had the knock-on effect of slowing construction output and therefore the demand for architectural services, particularly in the United Kingdom and Continental Europe. In the United Kingdom commercial construction output has seen a 25% decline since 2008. 

Against this background the group produced a loss before tax of £1,876,000 (2008: profit of £2,415,000).

At the half year we announced that 12 new planning applications with a construction value of £1.5bn were in progress. This number has now increased to 16 (with a construction value of £1.73bn) of which 13 (with a construction value of £1.46bn) have to date received consent, and of those 5 (with a construction value of £70m) are proceeding. This is in addition to our existing order book.

In recent months we have had considerable success in winning a number of prestigious commissions with Goldman Sachs, Imperial College, General Electric, Trinity Hall Cambridge, and the Mercers' Company.

Summary of results

Revenue for the year was £14,948,000 (2008: £22,598,000) a fall of 34%. This decline was greater in the second half of the year than the first and reflected the cumulative impact of project deferrals, reduced new enquiries and revised fee negotiations on some projects.

The loss before tax in the second half of the year at £660,000 was a substantial improvement on the first half loss of £1,216,000. This was achieved despite a 17% fall in second half revenues which fell to £6,771,000 from £8,177,000.

As a consequence our net cash position moved to net debt of £1,393,000 (2008: net funds of £410,000) and mirrored our trading loss for the year. We have been able to manage the trading deficit within our existing financial arrangements. We have extended our banking facilities in order to incorporate the current impact of later payment by clients due to the adverse economic conditions, but to date have not had to utilise such additional facilities.

Review of operations

The sharp decline in second half revenues necessitated further action to reduce costs in both the United Kingdom and Continental Europe where the second half revenue declines of 49% and 54% were the most severe.

The United Kingdom made an annual operating loss £3,188,000 (2008: profit of £1,730,000). As most United Kingdom cost savings emanated from staff level reductions there was no cost saving until later in the second half. 

Costs in the United Kingdom are now down by an annualised amount of £4m but are unlikely to fall further if we are to avoid adversely influencing the level of service and technical capabilities that we provide to clients. The final quarter of the financial year saw the first real evidence of the emergence of new commercial development enquiries, predominantly from clients for their own occupation or retention.

It is, however, pleasing to report that the United Kingdom successfully completed a number of projects during the year, including Wells and More (170,000 sq ft of offices in the West End) for Great Portland Estates, the new Carnival Cruises headquarters (150,000 sq ft in Southampton) for Development Securities and a speculative office development (260,000 sq ft in the North East) for Goodman.

Additionally we submitted new planning applications for Eastside Locks in Birmingham for Goodman (£450m), The Green in Solihull for PRUPIM (£180m), Lingfield Point in Darlington for Marchday (£300m) and Beaulieu Park in Essex for Countryside Properties which includes a new railway station complex. We anticipate progress on some of these schemes in 2010.

The Middle East operation in Abu Dhabi, which is resourced from the United Kingdom, centred around the delivery of seven hotel-led projects including two for Radisson Blu and Park Inn that were opened in record time for the inaugural F1 grand prix race on Yas Island in Abu Dhabi. These two hotels also received the highest marks in the star rating category on Yas Island. We hope to capitalise on these successes with future commissions in the region.

Continental Europe which includes Poland, Czech Republic and Slovakia experienced very similar economic circumstances to the United Kingdom with many commissions going on hold and clients being late in making payments. However, with a lower overhead base these operations were able to limit their operating losses to £208,000 (2008: profit of £497,000). Since then Poland has won further commissions with HSBC and Polkomtel (a telecommunications company) and a number of interior fit-out contracts on its recently completed apartment block in Kabaty.

Russia produced excellent results with revenues advancing 23% to £3,506,000 (2008: £2,860,000) and profits rose eight-fold to £1,267,000 (2008: £163,000). This result was supported by the projects for Rublyovo-Arkhangelskoe on the Moscow river. We announced in July 2009 that due to funding issues, the developer of this scheme had asked us to temporarily suspend work whilst these matters were resolved. Whilst there are indications that these issues may be resolved in the near future this cannot be guaranteed. However management still remain confident in the future of the Russian market.

The other main financial improvement came from the German joint ventures. In particular our continuing  instruction from the Bundesdruckerei (German bank note printing works) contributed to the Berlin office result.

The group has three major claims for fees under existing contracts with clients. Two of these claims relate to additional work performed whilst the third relates to the contractual fee due where recovery litigation is at an advanced stage. Further details are given in note 2 to this preliminary announcement.

People

Whilst we continue to take action to reduce costs and other commitments, management recognises that our real value lies in the skills of our staff and the quality of our service to clients. Therefore we shall continue to follow policies that preserve such skills within the practice. In this regard I would like to thank all staff within the group operations for their perseverance and positive contributions to the welfare of the practice through short-time working and in many cases salary sacrifices in order to maintain our market position and international network of offices. For this both I, and the board, are extremely grateful. 

Corporate strategy

The continued decline in work since we last reported at the interim stage has required a re-think of our revenue objectives. In the short-term we have focussed on re-basing the business at a new, lower, revenue level which provides a better platform to maximise the benefit of organic growth opportunities. Where appropriate we will augment this growth by mergers or acquisitions using the advantage of plc status. However we will need to re-grow our United Kingdom operation before we can capitalise, fully, on our overseas network.

 Summary

We appear to have seen the worst of the global property recession and our financial position has stabilised. Our focus will now be to convert as many of the new market opportunities that are available as possible whilst assisting our clients to continue with stalled projects. We see the forthcoming period as a challenge but one where more opportunities exist for a practice with our credentials and track record.

Nicholas Thompson

Chief Executive Officer

13 January 2010

Consolidated income statement

For the year ended 30 September 2009

		2009 £'000	2008 £'000
Revenue		14,948	22,598
Sub consultant costs		(3,868)	(5,623)
Revenue less sub consultant costs		11,080	16,975
Personnel related costs		(9,135)	(10,751)
Office related costs		(2,200)	(1,715)
Other operating expenses		(2,164)	(2,450)
Other operating income		290	331
Operating (loss) / profit		(2,129)	2,390
Finance income		219	70
Finance costs		(57)	(82)
(Loss) / profit after finance costs		(1,967)	2,378
Share of results of associate and joint ventures		91	37
(Loss) / profit before income tax		(1,876)	2,415
Income tax credit / (expense)		459	(687)
(Loss) / profit for the year attributable to equity holders of the company		(1,417)	1,728
Basic (losses) / earnings per share		(0.97)p	1.19p
Diluted (losses) / earnings per share		(0.97)p	1.19p
Dividends per share		0.11p	0.10p

Consolidated statement of recognised income and expense

For the year ended 30 September 2009

		2009 £'000	2008 £'000
Currency translation differences		53	90
Net income recognised directly in equity		53	90
(Loss) / profit for the year		(1,417)	1,728
Total income and expense recognised in year attributable to equity holders of the company		(1,364)	1,818

  Consolidated balance sheet

At 30 September 2009

		2009 £'000	2008 £'000
Non current assets
Goodwill		1,596	1,596
Property, plant and equipment		473	275
Investment in associate		175	77
Investment in joint venture		-	26
Deferred tax		398	122
Total non current assets		2,642	2,096
Current assets
Trade and other receivables		9,609	10,699
Current tax		622	34
Cash and cash equivalents		472	1,423
Total current assets		10,703	12,156
Total assets		13,345	14,252
Current liabilities
Trade and other payables		(6,230)	(6,924)
Current tax		(128)	(294)
Short term borrowings		(1,058)	(150)
Provisions		(435)	-
Total current liabilities		(7,851)	(7,368)
Non current liabilities
Investment in joint venture		(7)	-
Long term borrowings		(807)	(863)
Deferred tax		(291)	(108)
Total non current liabilities		(1,105)	(971)
Total liabilities		(8,956)	(8,339)
Net assets		4,389	5,913
Capital and reserves
Share capital		1,456	1,456
Foreign currency translation reserve		183	130
Retained earnings		308	1,725
Other distributable reserve		2,442	2,602
Total equity attributable to  equity holders of the company		4,389	5,913

  Consolidated cash flow statement

For the year ended 30 September 2009

		2009 £'000	2008 £'000
Cash flows from operating activities
Cash used by operations		(860)	(65)
Interest paid		(57)	(82)
Income taxes paid		(385)	(993)
Net cash outflow from operating activities		(1,302)	(1,140)
Cash flows from investing activities
Purchase of property, plant and equipment		(433)	(225)
Sale of property, plant and equipment		3	-
Acquisition of subsidiary (net of cash acquired)		8	-
Interest received		28	70
Dividends received		44	-
Net cash used in investing activities		(350)	(155)
Cash flows from financing activities
Repayment of bank loans		(173)	(112)
Inception of finance leases		184	-
Payment of finance lease liabilities		(27)	-
Dividends paid		(160)	(146)
Net cash used in financing activities		(176)	(258)
Net change in cash, cash equivalents and bank overdraft		(1,828)	(1,553)
Cash and cash equivalents and bank overdraft at start of year		1,423	2,819
Currency translation differences		32	157
Cash, cash equivalents and bank overdraft at end of year		(373)	1,423

  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 annual report for the year ended 30 September 2008.

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.

In preparing the financial information, 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:

Recognition of contractual revenue

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 a combination of the milestones in the contract and the proportion of total time expected to be required to undertake the contract which had been performed.

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.

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.

Unfortunately advance agreement of the quantum of variation fees is not always be possible, in particular when the timescales for project completion is changing or where the cost of variations cannot be determined until the work has been undertaken.

Included within the balance sheet are amounts totalling £976,000 (2008: £455,000) relating to claims for variation work on contracts where final agreement has not yet been reached with the client.

In such circumstances the revenue recognised is limited to the amounts considered both probably recoverable, and capable of reliable measurement, taking into account all the relevant circumstances of the individual project and client.

Impairment of trade receivables

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 impairment allowances if it is considered there is a significant risk of non payment. The factors assessed when considering an impairment allowance include the ownership of the development site, the general financial strength 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 impairment allowance.

Litigation

The group has been pursuing a significant claim for unpaid fees in connection with two related projects at Mentmore Towers in Buckinghamshire and 90-95 / 100 Piccadilly in Central London.

The group has now obtained a favourable judgment awarding the group £550,000 of fees for work performed together with interest. Judgment regarding the costs of the litigation is expected shortly. An assessment of the costs outcome considered probable has been included in this financial information although there remains uncertainty until cost awards are made.

There is some uncertainty as to collectability of the amounts awarded due to the off-shore incorporation of the clients meaning information on their financial position is not publically available, but the directors do expect the amounts awarded in the judgment to be recoverable.

Impairment of goodwill

The goodwill allocated to each cash generating unit is tested annually for impairment. The recoverable amount of a cash generating unit is determined based on value in use calculations. 

These calculations use pre tax cash flow projections covering a ten year period. A ten year period is considered appropriate based on the age of business and their survival through previous economic downturns coupled with the length of construction projects, the durability of client relationships and key staff retention periods.

The key assumptions in these cash flow projections are:

• The future level of revenue - which is based on knowledge of past property investment cycles and external forecasts such as the construction forecasts published by Experian. The long term growth rates used in the projections do not result in revenues exceeding those previously achieved by the operations.

• The discount rate - which is the group's pre tax weighted average cost of capital and has been calculated at approximately 14%. This has fallen compared to last year as the proportion of debt to equity has increased.

Measurement of provisions

The restructuring provision relates to costs associated with reducing staff numbers in the United Kingdom and Russia, and in relocating the London based staff to a single studio location. The restructuring provision arises from obligations contained in employment contracts and property lease contracts.

It is anticipated that provision at 30 September 2009 will be utilised in full during the year ending 30 September 2010. The amount provided in respect of the property lease contracts represents the directors' best estimate based on professional advice but is subject to uncertainty as to amount and timing since agreement has not yet been reached with the freeholder.

3    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		2009 £'000	2008 £'000
United Kingdom		10,094	17,279
Continental Europe		1,348	2,459
Russia and Former CIS		3,506	2,860
Revenue		14,948	22,598

Segment result		2009 £'000	2008 £'000
United Kingdom		(3,188)	1,730
Continental Europe		(208)	497
Russia and Former CIS		1,267	163
Operating (loss) / profit		(2,129)	2,390
Net finance income / costs		162	(12)
Share of results of associate and joint ventures		91	37
(Loss) / profit before income tax		(1,876)	2,415

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

		2009 £'000	2008 £'000
United Kingdom		5,955	10,675
Continental Europe		1,710	3,144
Russia and Former CIS		3,511	3,582
Middle East		3,772	5,197
Revenue		14,948	22,598

4    Earnings per share

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

Earnings	2009 £'000	2008 £'000
(Loss) / profit for the year	(1,417)	1,728

Number of shares	2009 Number	2008 Number
Weighted average of ordinary shares in issue	145,618,693	145,618,693
Effect of dilutive options	-	-
Diluted weighted average of ordinary shares in issue	145,618,693	145,618,693

5    Dividends

	2009 £'000	2008 £'000
2007/08 interim dividend of 0.10p per share	-	146
2007/08 final dividend of 0.11p per share	160	-
Total	160	146

6    Cash generated from operations

		2009 £'000	2008 £'000
(Loss) / profit before income tax		(1,876)	2,415
Finance income		(219)	(70)
Finance costs		57	82
Share of results of associate and joint ventures		(91)	(37)
Depreciation		253	232
Loss on disposal of property, plant and equipment		3	-
Goodwill written off		9	-
Change in trade and other receivables		1,323	(2,365)
Change in trade and other payables		(754)	(322)
Change in provisions		435	-
Net cash used in operations		(860)	(65)

7    Status of preliminary announcement

This preliminary announcement was approved by the board of directors on 13 January 2010.

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 2009 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 without qualifying their report, and did not contain a statement under either Section 498 (2) or (3) of the Companies Act 2006.

Statutory accounts for the year ended 30 September 2008 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 without qualifying their report, and did not contain a statement under either Section 498 (2) or (3) of the Companies Act 2006.

The financial information set out in this preliminary announcement does not constitute the group's statutory accounts for the year ended 30 September 2009.

 8    Annual general meeting

The annual general meeting of the Company will be held at 36-40 York Way, London, N1 9AB on 10:30am at Wednesday 24 March 2010.

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 (36-40 York Way, London, N1 9AB).

 

END

 

 

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