Final Results - Pre-tax Profit Up 65%

Aukett Associates PLC 29 November 1999 AUKETT ASSOCIATES PLC 1999 PRELIMINARY RESULTS ANNOUNCEMENT Pre-exceptional charge: PTP up 137% at £1.5m and EPS up 103%; Dividend doubled Trading ahead of expectations; Growth in UK and across Europe; Strong Order Book Aukett Associates PLC ('Aukett'), one of Europe's leading building design practices, with offices in 11 cities in nine countries, announces Preliminary Results for the year ended 30 September 1999. Financial Highlights Year ended 30 September 1999 1998 change Turnover, including share of JV's £15.1m £10.0m +51% Group work done £13.9m £8.1m +72% Profit before tax and exceptional item £1.47m £0.62m +137% Exceptional UITF 17 charge (re: estimated directors' share awards) £0.45m - Profit before tax £1.02m £0.62m +65% Earnings per share before exceptional item 1.60p 0.79p +103% Earnings per share 0.97p 0.79p +23% Dividends per share 0.30p 0.15p +100% Net assets £2.50m £1.72m +45% Gearing 30% 32% Key Points of Chairman's Statement and Managing Director's Operational Review * Profit margins benefited from increased volume of business * Positive cashflow throughout year, gearing reduced. * Significant organic growth in UK and further successful selected acquisitions in Europe. * High level of repeat and pan-European business. * Increased sector and geographical spread plus greater presence in IT, Telecoms and Internet sectors (BT, One-2-One, Sun Microsystems, Colt Telecom, Level 3, Siemens,). * Current strong order book includes short and long term workload. Regarding Prospects, Chairman Gerry Deighton said: 'I am sure that the progress made during the last three years will be fully maintained. Aukett Associates is a confident, motivated and friendly company with an exciting future.' Enquiries: Aukett Associate PLC Gerry Deighton, Non-Executive Chairman Tel: 0171 786 9600 Andrew Lett, Managing Director until 12:45pm thereafter on Robert Warner, Finance Director Tel: 0171 924 4949 Binns & Co PR Ltd Peter Binns, Paul Vann Tel: 0171 786 9600 AUKETT ASSOCIATES PLC: Preliminary Results for the Year ended 30th September 1999 CHAIRMAN'S STATEMENT Aukett Associates has had a very good year, with trading ahead of expectations and profit margins benefiting from the increased volume of business. The Board's strategy of developing and improving the core business, together with carefully selected acquisitions and expansion in Europe has proved to be very successful. Growth in the United Kingdom has been organic and significantly stronger than last year, with good progress being made throughout Europe. Results Turnover for the year, including shares of joint venture operations, increased by 51% to £15.09 million from £10.00 million in the previous year. Work done increased by 72% to £13.85 million (1998: £8.05 million). If the share of joint venture work done is included these figures become 70% and £14.98 million (1998: £8.80 million) respectively. Operating profit before the exceptional item increased by 157% to £1.31 million from £0.51 million. The exceptional charge, required under UITF 17 and as explained further below, is based on the best estimate of the value of shares shortly to be issued to executive directors, as part of the long-term incentive plan set up in 1997. Profit before tax and exceptional item increased by 137% to £1.47 million (1998: £0.62 million) and profit before tax increased to £1.02 million (1998: £0.62 million). Earnings per share before exceptional item doubled to 1.60p (1998: 0.79p) and earnings per share increased to 0.97p from 0.79p. The tax charge on the profit before exceptional item, at 28% (1998: 17%), still benefited from some recoverable advanced corporation tax, but to a much lesser extent than last year. Dividend The Board is pleased to propose a final dividend of 0.30p per share (1998: 0.15p). Subject to approval at the Annual General Meeting, this will be paid on 3 March 2000 to shareholders on the Register on 4 February 2000. Balance Sheet and Cashflow Cashflow throughout the past year has been very positive and gearing continues to be reduced in line with the Board's previously declared objective. Sufficient working capital has been generated to enable the acquisitions made to be funded without recourse to share issues. In addition, significant investment has been made in IT equipment during the year in order to keep pace with the growth of the business. Most of this investment has been funded by way of finance leases in order to retain maximum flexibility within the Group's other facilities. As a result, net borrowings have increased from £557,000 to £751,000, including £508,000 in respect of finance leases, at 30 September 1999. Gearing reduced to 30% (1998: 32%) or just under 10% excluding finance leases. Shareholders' funds have increased to £2.50 million from £1.72 million last year. Corporate Development and Acquisitions The Company continues to improve the quality of creative design and service to our clients, with the ultimate aim of providing new building facilities faster and at the most economic cost. Selective expansion outside the United Kingdom has continued during the year with the 100% acquisition in October 1998 of an architectural practice in Prague. As planned, a further investment in our Madrid joint venture office was made in December 1998 to bring the Company's shareholding up to 50%. In both of these cases the goodwill arising on acquisition is being written off over 20 years, in line with the latest accounting standard. Since the balance sheet date, the Company has purchased, for £580,000 in cash, the 50% of the joint venture office in Amsterdam which it did not already own, the transaction being completed on 26 October 1999. Of the share of the operating profit generated during the year by joint venture and associated offices, over 50% of this was attributed to Amsterdam. The benefit of this full ownership is expected to make a significant contribution to future profits. The office in Paris, which for the past 12 months has been run in collaboration with our Brussels partners Art & Build, has now been formalised as a new joint venture company, with the Company owning 50%. This action has been well received by existing and new international clients and the future prospects are very encouraging. Board Appointments I am delighted to welcome Mr I G F Mavor, who was appointed a non-executive director on 1 May 1999. Ian Mavor is a lawyer, qualified in Scotland and France, and was one of four executive directors on the RAC's main board before its recent acquisition by Lex Service PLC. Prior to that he held a number of senior positions with IBM and his considerable commercial and legal experience will make a valuable contribution to our future plans. Executive Directors' Incentive Plan and UITF 17 Exceptional Charge In March 1997, shareholders approved a long-term incentive plan for the four executive directors. This consists of a conditional award of shares, which was granted in April 1997, when the share price was 6p. The scheme requires the achievement of both a minimum level of earnings per share for the year ended 30 September 1999 and an average share price for the ten business days following this announcement of not less than 14p. The earnings per share before exceptional item of 1.60p, as reported above, will result in each executive director being awarded 1.1 million new ordinary shares, on condition that the average share price over the next two weeks is 14p. To the extent that the price is greater than 14p, the number of shares awarded will be increased, up to a maximum of 1.4 million shares each for a share price of 17p or above. The price at close of business on 30 September 1999 was 13.25p and on 26 November 1999 was 23.25p. If the above conditions are met, an employee trust will subscribe for the appropriate number of new shares, at a subscription price of 6p per share, using funds contributed by the Group, such funds being repaid in full by the receipt of the subscription monies. Under current accounting practice, according to UITF 17, it is necessary to record an exceptional charge in the Group's profit and loss account. This should reflect the fair value of the award at the date of grant, being 6p per share, together with employer's national insurance on the current value of the share awards. As neither the exact value of the award (if any) nor the associated charge will be known until two weeks after the date of this report, the directors have estimated the most likely outcome. A charge of £450,000 has therefore been accounted for in these 1999 financial statements, being based on the assumption that the maximum number of shares will be awarded. Any adjustment that is required to this figure to reflect the actual outcome of the scheme will be charged or credited as a further exceptional item in the current financial year ending 30 September 2000. The Future Having been appointed Chairman at the time of flotation in 1988, this will be my last report to shareholders as I have decided to retire after the Annual General Meeting on the 26 January 2000. I will be succeeded by my colleague for more than 20 years Andrew Lett, who is currently Managing Director. Under Andrew's leadership I am sure that the progress made during the last three years will be fully maintained and future opportunities identified that will ensure improved returns for our shareholders and provide enhanced prospects for all of our colleagues. The first phase of the Group's strategy, aimed at restoring the core business to satisfactory profitability and financial health, following the recession of the early 1990's, has now been achieved. Today we can say that the Group is truly one of the leading European facilities design consultancies. I would like to thank our shareholders for their support and our many clients for continuing to use the professional services we have to offer in the United Kingdom and across Europe. On a personal note, I would like also to thank my board and many colleagues whose loyalty and strenuous efforts I have always appreciated. I leave the business in a strong financial position, with the order book continuing to expand, it being significantly ahead of the equivalent position last year. Currently taking advantage of the buoyant United Kingdom property and construction market, the Group has a unique European network and high profile client base, with the latter providing an excellent level of repeat business. Aukett Associates is a confident, motivated and friendly company with an exciting future. Gerry Deighton Chairman Operations Review 1. Introduction The Company has continued to grow during 1998-1999 despite the warnings of possible slowdown predicted at the end of 1998. Growth has been particularly significant in the United Kingdom, which has tended to obscure the good progress made in Europe. However, with the increased activity in the UK, management of business operations has required careful planning to ensure the current balance of resource capability and flexibility. The increased scale of business has given us the opportunity to increase the strength in depth of the professional skills that we offer and during the year we have been able to demonstrate the ability to deliver whether in terms of project scale, range of specialist skills or geographical demand. The increase in business has also enabled higher margins to be achieved through a better balance between fee earning professionals, their support staff, and other overheads. 2. Partnering Partnering is now seen by many in the design and construction industry as the way forward to achieve better value and more control over time and quality, particularly where serial contracts are concerned. The Egan report is now having an effect on the industry as a whole, but more so in privatised companies, multinational corporations, and major private developers where such an approach has particular relevance. A feature of the year has been the increase in business of this type, where our increased scale and profile in the industry is well suited to such projects. Our framework agreements with BT and DETR in the United Kingdom and with Level 3 throughout Europe are good examples of partnering and we look forward to seeing more agreements of this nature in future. This is a significant development for the Group, enabling longer term planning of both levels of business and related resources. The high level of repeat business which has been at the heart of this Company's growth over recent years has continued during 1998-1999. This is in itself a demonstration of partnering, albeit informal and our long and successful relationships with companies such as Akeler Developments and Royal & Sun Alliance are good examples. 3. New Sectors Our policy of sector and geographical spread continues, with progress being made in most areas. We are particularly well placed in the IT and Telecoms sector, which is amongst the fastest growing global industries. Our clients, which include BT, One 2 One, Oracle, Microsoft and Sun Microsystems, have new- build and fit-out projects underway in both the United Kingdom and mainland Europe. In addition, we have seen the emergence of what is almost a new sector, related to the growth of the Internet. This consists of projects to develop the infrastructure to support these new communications systems. The Group is responding to the challenge of these new projects and our range of design and engineering skills coupled with our geographical spread, make us particularly well suited to such business. We have commissions throughout Europe from companies such as Global Reach, Colt Telecom, Level 3, Siemens and Ericsson as a result. This is a dynamic and fast growing sector and our ability to respond to the demands of these programs has been impressive. 4. Scale of operation The growth of the business has been due to both the increase in number of projects and the scale of the projects themselves. The latter factor can be evidenced by the projects which are either under construction or at design stage, in the United Kingdom and in mainland Europe. Examples in the UK include the Lakeshore project at Heathrow, the Akeler project at Reading International, the Sun Microsystems consolidation project at Camberley, the Scottish Daily Record Office in Glasgow and The Chimes shopping centre at Uxbridge. These are all currently on site and have a construction value well in excess of £200 million. In mainland Europe examples such as the VNU headquarters in Amsterdam, the Postdam centre in Berlin and the Oracle project in Paris, demonstrate the increased scale of projects undertaken. When completed, these projects will further enhance our reputation and profile throughout Europe as an architectural, design and engineering consultant capable of delivering high quality major developments, from planning and concept design through to full fit out for occupation. 5. Single European Business The year 1998-1999 has seen the beginnings of a change in our approach to working outside the United Kingdom. Our strategy is to view progressively the whole of Europe, including the UK, as a single marketplace, where we will be able to provide a consistent level of service in terms of both design quality and delivery. This has already been evidenced by the increased movement of staff from one office to another either on short or long term assignments to ensure that as a group we are able to provide the appropriate skills, at the right time, whatever the demands of the client or project. This increased mobility of staff requires both close collaboration between the different offices and a willingness to acknowledge the demands placed on the individual, both at home and in the workplace. For young professionals, not only in the designing field, the acceptance and indeed willingness to move around the different regions and capitals of Europe is a feature of globalisation and the wider market place within which we operate. We have offices in eleven cities in nine countries throughout Europe and few other European design consultants have such a network. This in itself is an attraction to many of the bright ambitious young professionals who see Europe as the future and seek the opportunity they feel this will provide. 6. Offices LONDON: This office remains the largest of the Group. The scale and quality of projects handled during the year has proved the value of our investment in recent years in IT systems, and specialist professional skills. GLASGOW: This office has had its best year for some time, with a build up of resource, and a much improved contribution to profit. BERLIN: Our office in Berlin now has an established reputation and this should enable further progress to be made in this city in change. AMSTERDAM: This office continues to perform well against a full workload. It has developed an excellent reputation for high quality commercial projects in and around Amsterdam city and Schiphol airport area. PRAGUE: This office has progressed very satisfactorily since it joined the Group. It has a healthy mix of local and international clients which should ensure further progress during this next year. PARIS: This is our most recent joint venture in Europe. The office will focus on multi-nationals operating in and around Paris, and prospects are encouraging. MADRID: Despite a slow start to 1998/99, activity in this office has now increased markedly and we anticipate good progress during 1999/2000. BRUSSELS: With our partnership offices we continue to seek projects that DUBLIN: can be developed jointly, as the opportunity arises. We are MILAN: currently active in Dublin, and Brussels and Munich, and current MUNICH: prospects for Milan are encouraging. 7. Staff and Resources As has been stated in previous reports, we are very much a people business. Our people are our assets and their development, training and career progression are crucial to our overall health and well being. We currently have 250 staff in the UK, and the aggregate of our joint venture and partner offices around Europe amounts to another 250. As the business has expanded during recent years, it has become more important than ever to establish a management structure that can devolve responsibility, commensurate with the scale of operation. These structures are in place and, together with the management systems that have been carefully developed over a number of years, we will have the capacity for further growth without dilution of design quality or management control. Central to much of this planning for the future is investment, both in training of people and the provision of up to date IT systems and equipment, which are fundamental to today's pace of consultancy. 8. Marketing and Corporate Profile Our strategy of sector spread and geographical spread provides a matrix of opportunity for marketing and new business. This spread is important and during 1998-1999 we have seen further evidence of the success of this strategy. There have been an increasing number of projects of differing nature and geographic location, reducing our dependency on either one particular sector or one single economic or national region. A feature of our current and projected workload is that it includes projects of short and long timescale, both large and small, allowing considerable flexibility in the planning and management of resources. Our growth and establishment as a major building design consultant that has been evidenced through the last 2-3 years has helped to raise our profile in the industry. Our PR activity during the year has been consistent and effective, with events such as our charity bike ride for Providence Row, our private view of the Soane exhibition at the Royal Academy of Arts and our sponsorship and participation at the RIBA event in London, 'Briefing the Mayor', being notable highlights. We will continue to develop our image and profile in order to reinforce our message in the market place. This is vital to ensure that we continue to attract the quality of graduates and young professionals that our business requires. 9. Summary 1998-1999 has seen a significant increase in the level of operation of the Group. Our level of resource has increased and this has given us the extra capability and flexibility to respond to the pace and geographical spread of the modern consultancy market. Our structure and management systems have evolved to meet the new levels of business and these will be capable of handling further expansion and growth as we continue to develop and implement our strategy across Europe. Over recent years we have sought to bring about growth, but managed growth, to ensure that increased turnover can bring about increased reward and return. The results of the last year have demonstrated that this can be done and we believe that the systems, energy and motivation that are present within our business will enable further progress to be made. Andrew Lett Managing Director Consolidated profit and loss account Year ended 30 September 1999 Year ended Acquisitions Continuing Total 30 September 1998 £000 £000 £000 £000 Turnover: Group and share of joint ventures 428 14,660 15,088 10,001 Less: share of joint ventures' turnover -- (1,112) (1,112) (747) ------------ ------------ ------------ ------------ Group Turnover 428 13,548 13,976 9,254 Movement in amounts recoverable on contracts 88 (215) (127) (1,203) ------------ ------------ ------------ ------------ Group work done 516 13,333 13,849 8,051 ------------ ------------ ------------ ------------ Group operating profit before exceptional item 103 1,204 1,307 508 Exceptional item -- (450) (450) -- ------------ ------------ ------------ ------------ Group operating profit 103 754 857 508 Share of operating profit in joint ventures and associate 235 214 Net interest payable by Group (70) (99) ------------ ------------ Profit on ordinary activities before tax and exceptional item 1,472 623 Exceptional item (450) -- ------------ ------------ Profit on ordinary activities before tax 1,022 623 Tax on profit on ordinary activities (380) (107) ------------ ------------ Profit on ordinary activities after tax 642 516 Dividends (199) (99) ------------ ------------ Retained profit of the Group and its share of joint ventures and associate 443 417 ======= ======= Earnings per share(note 5): Basic before exceptional item 1.60p 0.79p Basic 0.97p 0.79p Diluted before exceptional item 1.56p 0.78p Diluted 0.95p 0.78p ------------ ------------ Consolidated Balance Sheet 30 September 1999 30 September 1998 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 675 -- Tangible assets 956 362 Investments in joint ventures: Share of gross assets 541 481 Share of gross liabilities (272) (322) ------------ ------------- 269 159 Investment in associate 69 28 ------------ ------------ 1,969 549 Current assets Debtors 5,828 4,372 Cash at bank and in hand 454 206 ------------ ------------- 6,282 4,578 Creditors falling due within one year (5,042) (2,886) ------------ ------------- Net current assets 1,240 1,692 ------------ ------------ Total assets less current liabilities 3,209 2,241 Creditors falling due after one year (703) (520) Provisions for liabilities and charges (4) (1) ------------ ------------ Net assets 2,502 1,720 ======= ======= Capital and reserves Share capital 661 660 Share premium account 1,458 1,456 Profit and loss account 383 (396) ------------ ------------ Equity shareholders' funds 2,502 1,720 ======= ======= Consolidated Cash Flow Statement Year ended 30 September 1999 1999 1998 £'000 £'000 £'000 £'000 Net cash flow from operating activities 1,572 1,091 Returns on investments and servicing of finance (170) (98) Taxation (56) (44) Capital Expenditure Purchase of tangible fixed assets (265) (89) Sale of tangible fixed assets - 6 ------------ ------------- (265) (83) Acquisitions and Disposals Acquisition of a subsidiary (346) - Acquisition of joint ventures (373) (284) ------------ ------------- (719) (284) ------------ ---------- Net cash inflow before financing 362 582 Financing Issues of ordinary shares 3 108 Repayment of loans (160) (220) Principal repayment under HP (52) - ------------ ------------- Net cash (outflow)/inflow from financing (209) (112) ------------ ---------- Increase in cash 153 470 ======== ======== Reconciliation of net cash flow to movement in net debt Increase in cash for the year 153 470 Cash (outflow)/inflow from increase/decrease in debt (347) 220 ------------ ---------- Movement in net debt during the year (194) 690 Net debt at 1 October 1998 (557) (1,247) ------------ ---------- Net debt at 30 September 1999 (751) (557) ======== ======== NOTES 1. Turnover and work done An analysis of turnover and work done by geographical area of destination is as follows: 1999 1998 United Rest of Total United Rest of Total Kingdom Europe Kingdom Europe £'000 £'000 £'000 £'000 £'000 £'000 Turnover Group 12,551 1,425 13,976 8,624 630 9,254 Share of Joint ventures 107 1,005 1,112 72 675 747 Share of associate - 472 472 - 599 599 _____ _____ _____ _____ _____ _____ Total 12,658 2,902 15,560 8,696 1,904 10,600 _____ _____ _____ _____ _____ _____ Movements in amounts recoverable on contracts Group (214) 87 (127) (1,200) (3) (1,203) Interests in joint ventures 2 16 18 2 4 6 Interests in associates - (42) (42) - (30) (30) _____ _____ _____ _____ _____ _____ Total (212) 61 (151) (1,198) (29) (1,227) _____ _____ _____ _____ _____ _____ Work done Group 12,337 1,512 13,849 7,424 627 8,051 Interests in joint ventures 109 1,021 1,130 74 679 753 Interests in associates - 430 430 - 569 569 _____ _____ _____ _____ _____ _____ Total 12,446 2,963 15,409 7,498 1,875 9,373 ===== ===== ===== ===== ===== ===== Group turnover generated outside the United Kingdom mostly relates to amounts invoiced to joint ventures and associates of the Company for work done. Such amounts have been deducted from the share of joint ventures' and associates' turnover and work done in the above table. 2. Group operating profit 1999 1998 £'000 £'000 Group work done 13,849 8,051 Staff costs (7,211) (4,561) Exceptional UITF 17 charge (see note 3) (450) - Amortisation of goodwill (29) - Depreciation (203) (128) Other operating charges (5,099) (2,854) _____ _____ Group operating profit 857 508 ===== ===== All operating profit in 1999 and 1998 derives from continuing operations. 3. Exceptional item The awards arising from the long-term incentive plan for executive directors of the Company, details of which are given in the chairman's statement, will be determined approximately two weeks following this announcement. In accordance with UITF 17, the directors have sought to estimate the value of these awards for the purpose of providing a charge in the year ended 30 September 1999. The amount shown of £450,000 is calculated by assuming that the average share price of the Company for the ten business days commencing on 29 November 1999 will be 17 pence or above. 4. Profit on ordinary activities before taxation An analysis of profit on ordinary activities before taxation by geographical area is as follows: 1999 1998 United Rest of Total United Rest of Total Kingdom Europe Kingdom Europe £'000 £'000 £'000 £'000 £'000 £'000 Company and subsidiaries 697 98 795 409 - 409 Interests in joint ventures (5) 176 171 (7) 171 164 Interests in associate 56 56 - 50 50 - _____ _____ _____ _____ _____ _____ Group total 692 330 1,022 402 221 623 ===== ===== ===== ===== ===== ===== 5. Earnings per share The earnings per share are calculated on the profit attributable to shareholders of £642,000 for the year ended 30 September 1999 and £1,058,000 before the exceptional item, adjusted for appropriate tax relief, (1998: £516,000) and on 66,077,090 (1998: 65,186,452) ordinary shares, being the weighted average number of shares in issue during the year. Diluted earnings per share are calculated on 67,681,800 (1998: 66,281,547) ordinary shares. 6. Amounts recoverable on contracts Payments on account, as included in creditors, exceeded the total of amounts recoverable on contracts, as included in debtors, by £223,000 at 30 September 1999 (1998: amounts recoverable on contracts exceeded payments on account by £52,000). These amounts comprise: 1999 1998 Amounts Payments Amounts Payments on recoverable on account recoverable Account on contracts on contracts £'000 £'000 £'000 £'000 Value of work done 11,552 7,431 6,898 4,592 Fees rendered on account (9,836) (9,370) (5,975) (5,463) ________ ________ ________ ________ 1,716 (1,939) 923 (871) ======== ======== ======== ======== 7. Year 2000 issues As has been widely reported, many computer systems may encounter date recognition and other problems during the months surrounding the change of millennium. The directors are aware of the problem, together with its possible consequences, and a programme is substantially complete, which will ensure as far as possible that all systems within the Group continue to operate. The programme included a review of the impact on the Group of Year 2000 failures by suppliers and clients. The nature of this issue is such that it is not possible to guarantee that no Year 2000 problems will remain. However, the Board considers that it is taking all necessary steps to protect the business in this regard. No significant additional external costs are anticipated which would not have been incurred in the ongoing upgrade of computer systems. 8. Statutory accounts The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 1999 or 1998 but is derived from those accounts. Statutory accounts for 1998 have been delivered to the registrar of companies and those for 1999 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. 9. Annual Report The Annual Report and Accounts is expected to be mailed to shareholders on or before 30 December 1999. Further copies will be available from the registered office of the Company, 2 Great Eastern Wharf, Parkgate Road, London SW11 4TT, or will be accessable via the Company's website at www.aukett.com.

Companies

Aukett Swanke Group (AUK)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today