TIDMAUK
RNS Number : 7240D
Aukett Swanke Group PLC
28 June 2019
Aukett Swanke Group Plc
Interim results
For the six months ended 31 March 2019
Aukett Swanke Group Plc (the "Group"), the international
practice of architects, interior designers and engineers, is
pleased to announce its interim results for the six month period
ended 31 March 2019.
Highlights
Revenues marginally down at GBP7.30m (2018: GBP7.41m)
Loss before tax significantly reduced to GBP371k (2018: GBP1.22m
loss)
Cash (net of overdraft) of GBP628k (2018: GBP317k) with net
funds of GBP199k (2018: net debt of GBP311k)
UK operation recovered strongly in H1 to achieve breakeven at a
loss of GBP15k (2018: loss GBP879k)
Middle East recovery delayed due to quieter market; losses
widened to GBP438k (2018: Loss GBP380k)
Continental Europe improved on associate and JV results to
GBP60k profit (2018: GBP18k)
Commenting on the interim results, CEO Nicholas Thompson
said:
Every section of the construction industry continues to struggle
with the slowdown arising from the uncertainty presented by the
current political and economic climate around the world; but we are
pleased to show an improvement in our figures as a result of the
vigorous actions taken by our management teams in the
reorganisation and restructuring of the business and have every
expectation of a return to profitability in the near future.
Enquiries
Aukett Swanke Group Plc - 020 7843 3000
Nicholas Thompson, Chief Executive Officer
Tony Barkwith, Group Finance Director
finnCap - 020 7220 0500
Corporate Finance: Julian Blunt; Giles Rolls / Corporate
Broking: Alice Lane
Investor/Media enquiries - 07979 604687
Chris Steele
Interim statement
Overview
The results for the six months to 31 March 2019 show a small
fall in revenue compared to the first half of last year at GBP7.30m
(2018: GBP7.41m) but evidence of half on half improvement when
compared with the second half of last year. With cost reductions
coming through, following management actions in the previous first
half period, the loss before tax was substantially reduced to
GBP371k (2018: GBP1.22m) which was mainly in the Middle East
operation.
The most dramatic improvement in performance was in the UK where
revenues grew by 16% and costs fell by 9% such that the operation
recovered to broadly a breakeven position. This is a significant
turnaround from the GBP879k loss last year.
On the reverse side, revenues in the Middle East fell by 9% in a
quieter market. Costs remain well controlled and were reduced,
however losses increased from GBP380k to GBP438k, representing
broadly all of the overall Group loss for the half year.
Both Russia and Turkey continued to experience falls in revenues
and with Russia unlikely to recover in the foreseeable future, we
continue to seek an alternative local ownership format. The German
associate and joint venture were both profitable such that
Continental Europe as whole was in profit.
The Group's cash position remains steady with a positive cash
position of GBP628k net of a small overdraft which compares
favourably with the 2018 position where net cash was GBP317k and is
only slightly lower than the year end position of GBP710k. We
continued to pay down the amortising loan advanced to fund the
acquisition of Shankland Cox Limited. After taking account of that,
net funds were GBP199k (2018: net debt of GBP311k) showing an
improvement since the year end where net funds stood at GBP157k. As
each period elapses our cash position continues to strengthen and
is underpinned by improved debtor collections, particularly in the
UK. The 24 month rent free period in respect of our London
headquarters does not currently provide any real benefit until
after May 2019 as it is largely offset by rent deposits until
then.
The Group adopted the new accounting standards IFRS 9 and IFRS
15 with effect from 1 October 2018. Whilst the adoption of IFRS 15
resulted in no material restatement of revenue recognition, the
impact of IFRS 9 was a restatement of the carrying value of trade
receivables and contract assets, reducing them by GBP221k as at 1
October 2018. This arose from the IFRS 9 requirement to make
expected loss provisions on current balances based on a measure of
historical losses incurred. This is detailed further in note 9 to
the Interim Report.
United Kingdom
Encouragingly the UK operation returned a breakeven result at
the half way stage which is a considerable improvement on the loss
of GBP879k this time last year and reflects a positive outcome in
both better revenue generation in the period and the impact of the
cost reduction decisions in staffing and property that were made in
the previous year.
Revenue rose by GBP512k (16%) to GBP3.73m (2018: 3.22m) largely
driven by a growing order book in the Veretec executive
architecture business. Costs, by contrast, fell by GBP352k (9%) as
a result of reductions in most overhead categories including
property.
Veretec contributed 60% of the first six months revenue which
included ongoing projects at Dovehouse for Multiplex, an apartment
block for Lodha in Carey Street, LBS Hackney Road, EDS Avantgarde,
and BAFTA's head office. This element of the UK business is
benefitting from its strong market position and continuation of
construction work in the London conurbation. For a fourth year
running Veretec was shortlisted for the AJ100 Executive Architect
of the Year and has previously won this Award on two occasions in
its four year history.
Aukett Swanke Limited, which provides a full architectural
service, was bolstered by renewed instructions on our educational
scheme in Birmingham for Birmingham City University at Eastside
Locks; planning on the Hub in Cambridge; six new instructions for
our hybrid building initiative or 'beds on sheds' schemes in the
London geography; planning on the Asticus building in Palmer
Street; preliminary work on a new hotel resort in Southern England
and completion of our work at Ten Trinity Square, the award winning
Four Seasons hotel in the City. We completed our interior design
work on our Chinese client's projects in the West End and Beijing
and, received further instructions for Deutsche Bank in
Reading.
Towards the end of the period the design team regained some of
its market share with a number of project wins crystallising
shortly after the half year.
Middle East - United Arab Emirates
A delay on our major retail project in the region coupled with a
series of project cancellations and deferrals plus reduced levels
of overall market activity led to a 9% fall in revenue (or 15%,
stripping out sub-consultant costs recharged to clients). Whilst
headcount reductions were made (the full benefit of which will be
evident in the second half) with costs falling GBP408k (12%) to
GBP3.11m (2018: GBP3.52m) the current year loss widened to GBP438k
(2018: GBP380k) and this figure is the main determinant of the
Group's overall loss at the Interim stage.
We continued our major refurbishment project at the Atlantis,
The Palm, in supporting the construction of the Leader Sports Mall
in Sports City, providing site services to the Al Ain Museum and
have been involved in a number of Pavilions for Dubai Expo
2020.
In March we won an international competition to design six
buildings in Abu Dhabi for ALDAR. The location of the buildings is
on The Grove development on Saadiyat Island home to the Guggenheim
Museum, Louvre and Sheikh Zayed Museum. In addition the Samanea
Market was finally instructed as detailed in our release earlier
this week and should contribute significantly to the second half
performance. This substantial concept design commission along with
continuing commissions is expected to lift our H2 revenues (and
more particularly our revenues less sub consultants) to levels that
will bring the region into profit for the second half.
Continental Europe
The performance of our businesses in Continental Europe has been
mixed with both Russia and Turkey making small losses. Revenue for
these two operations fell again to GBP234k (2018: GBP526k). Once we
include the contributions from the associate and two joint ventures
the overall result is a profit of GBP64k (2018: GBP18k).
Wholly owned operations
Turkey began the year with several projects beginning on site
including those for VM Ware in Bulgaria and Credit Suisse, Nike and
Sanofi in Istanbul. Russia has continued to operate at a minimal
cost level and, whilst making a small loss, is completing a suite
of small Moscow based residential apartments, revisions to the
Vernadskogo luxury apartment complex and some larger regional
residential and hotel project concept designs in various locations
including Tumen and Omsk.
Associate and joint venture operations
Both the Berlin and Frankfurt operations in Germany continue to
enjoy buoyant local markets. Major project completions this year
include the Mercedes Platz Arena, a major leisure and arts venue in
Berlin, several fit-outs and refurbishment works in the iconic
Messe Turm, the fit-out of Zurich Insurance's 17 storey HQ and the
Living Lyon housing project in Frankfurt.
The Prague office completed Dimension Data's HQ project
(shortlisted for an award) in Prague, and has begun work on two
significant projects including the refurbishment of the OC Repy
Triyaka Shopping Centre and the recently won 12,000 sqm fit out for
WPP in their HQ building in Prague.
Group costs
Group costs at GBP18k (2018: GBP17k) were consistent compared to
the prior period.
Prospects
Providing there is no delay to the recently won projects in the
UAE and that there is a better conversion rate on design-led
commissions in the UK the Board expects the second half to show a
considerable profit improvement over the first half and continues
to expect a full year profit.
Nicholas Thompson
Chief Executive Officer
27 June 2019
Consolidated income statement
For the six months ended 31 March 2019
Note Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Revenue 4 7,301 7,412 14,380
Sub consultant costs (725) (729) (1,286)
---------------------------------- ----- ------------- ------------- --------------
Revenue less sub consultant
costs 6,576 6,683 13,094
Personnel related costs (5,644) (5,995) (11,915)
Property related costs (812) (882) (2,029)
Other operating expenses (725) (1,098) (2,066)
Other operating income 5 154 83 287
---------------------------------- ----- ------------- ------------- --------------
Operating loss (451) (1,209) (2,629)
Finance costs (14) (18) (36)
---------------------------------- ----- ------------- ------------- --------------
Loss after finance costs (465) (1,227) (2,665)
Share of results of associate
and joint ventures 94 3 121
---------------------------------- ----- ------------- ------------- --------------
Loss before tax 4 (371) (1,224) (2,544)
Tax credit 17 134 171
---------------------------------- ----- ------------- ------------- --------------
Loss for the period (354) (1,090) (2,373)
---------------------------------- ----- ------------- ------------- --------------
Loss attributable to:
Owners of Aukett Swanke Group
Plc (315) (1,068) (2,345)
Non-controlling interests (39) (22) (28)
---------------------------------- ----- ------------- ------------- --------------
Loss for the period (354) (1,090) (2,373)
---------------------------------- ----- ------------- ------------- --------------
Basic and diluted earnings
per share for loss attributable
to the ordinary equity holders
of the Company:
From continuing operations (0.19)p (0.65)p (1.42)p
---------------------------------- ----- ------------- ------------- --------------
Total loss per share 6 (0.19)p (0.65)p (1.42)p
---------------------------------- ----- ------------- ------------- --------------
Consolidated statement of comprehensive income
For the six months ended 31 March 2019
Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Loss for the period (354) (1,090) (2,373)
Other comprehensive income:
Currency translation differences (16) (102) (31)
----------------------------------- -------------
Other comprehensive income for
the period (16) (102) (31)
Total comprehensive loss for
the period (370) (1,192) (2,404)
----------------------------------- ------------- ------------- --------------
Total comprehensive loss is
attributable to:
Owners of Aukett Swanke Group
Plc (343) (1,163) (2,370)
Non-controlling interests (27) (29) (34)
----------------------------------- ------------- ------------- --------------
Total comprehensive loss for
the period (370) (1,192) (2,404)
----------------------------------- ------------- ------------- --------------
Consolidated statement of financial position
At 31 March 2019
Note Unaudited Unaudited Restated
at 31 at 31 at 30
March March September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Non current assets
Goodwill 2,374 2,344 2,372
Other intangible assets 773 834 810
Property, plant and equipment 91 108 114
Investment in associate and
joint ventures 793 699 793
Deferred tax 391 343 377
-------------------------------- ----- ---------- ---------- -----------
Total non current assets 4,422 4,328 4,466
Current assets
Trade and other receivables 4,049 7,141 4,554
Contract assets 980 - 1,220
Cash at bank and in hand 8 705 1,030 710
-------------------------------- ----- ---------- ---------- -----------
Total current assets 5,734 8,171 6,484
Total assets 10,156 12,499 10,950
Current liabilities
Trade and other payables (4,209) (4,479) (4,386)
Contract liabilities (748) - (886)
Current tax - - (1)
Borrowings 8 (322) (941) (246)
Provisions - (190) -
Total current liabilities (5,279) (5,610) (5,519)
Non current liabilities
Borrowings 8 (184) (400) (307)
Deferred tax (56) (65) (61)
Provisions (871) (855) (927)
Total non current liabilities (1,111) (1,320) (1,295)
Total liabilities (6,390) (6,930) (6,814)
Net assets 3,766 5,569 4,136
-------------------------------- ----- ---------- ---------- -----------
Capital and reserves
Share capital 1,652 1,652 1,652
Merger reserve 1,176 1,176 1,176
Foreign currency translation
reserve (52) (87) (24)
Retained earnings (624) 1,182 (309)
Other distributable reserve 1,494 1,494 1,494
-------------------------------- ----- ---------- ---------- -----------
Total equity attributable
to
equity holders of the Company 3,646 5,417 3,989
-------------------------------- ----- ---------- ---------- -----------
Non-controlling interests 120 152 147
-------------------------------- ----- ----------
Total equity 3,766 5,569 4,136
-------------------------------- ----- ---------- ---------- -----------
Consolidated statement of cash flows
For the six months ended 31 March 2019
Note Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash expended by operations 7 (4) (576) (11)
Interest paid (14) (18) (36)
Income taxes paid (1) - -
---------------------------------- ----- ------------- ------------- --------------
Net cash outflow from operating
activities (19) (594) (47)
Cash flows from investing
activities
Purchase of property, plant
and equipment (5) - (79)
Sale of property, plant and
equipment - 25 26
Dividends received 66 66 99
---------------------------------- ----- ------------- ------------- --------------
Net cash received in investing
activities 61 91 46
Net cash inflow / (outflow)
before financing activities 42 (503) (1)
Cash flows from financing
activities
Repayment of bank loans (123) (117) (236)
Net cash outflow from financing
activities (123) (117) (236)
Net change in cash and cash
equivalents (81) (620) (237)
Cash and cash equivalents
at start of period 710 960 960
Currency translation differences (1) (23) (13)
---------------------------------- ----- ------------- ------------- --------------
Cash and cash equivalents
at end of period 8 628 317 710
---------------------------------- ----- ------------- ------------- --------------
Cash and cash equivalents are comprised
of:
Cash at bank and in hand 705 1,030 710
Secured bank overdrafts (77) (713) -
Cash and cash equivalents at end
of year 628 317 710
----------------------------------------- ----- ------ ----
Consolidated statement of changes in equity
For the six months ended 31 March 2019
Share Foreign Retained Other Merger Total Non Total
capital currency earnings distributable reserve controlling equity
translation reserve interests
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
Balance at 30
September
2018
as originally
presented 1,652 (17) (95) 1,494 1,176 4,210 147 4,357
Changes in
accounting
policy (note
9) - (7) (214) - - (221) - (221)
Restated total
equity at 1
October
2018 1,652 (24) (309) 1,494 1,176 3,989 147 4,136
Loss for the
period - - (315) - - (315) (39) (354)
Other
comprehensive
income - (28) - - - (28) 12 (16)
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
Total
comprehensive
loss - (28) (315) - - (343) (27) (370)
At 31 March
2019 1,652 (52) (624) 1,494 1,176 3,646 120 3,766
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
For the six months ended 31 March 2018
Share Foreign Retained Other Merger Total Non Total
capital currency earnings distributable reserve controlling equity
translation reserve interests
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
At 1 October
2017 1,652 8 2,250 1,494 1,176 6,580 181 6,761
Loss for the
period - - (1,068) - - (1,068) (22) (1,090)
Other
comprehensive
income - (95) - - - (95) (7) (102)
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
Total
comprehensive
loss - (95) (1,068) - - (1,163) (29) (1,192)
At 31 March
2018 1,652 (87) 1,182 1,494 1,176 5,417 152 5,569
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
For the year ended 30 September 2018 (as originally
presented)
Share Foreign Retained Other Merger Total Non Total
capital currency earnings distributable reserve controlling equity
translation reserve interests
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
At 1 October
2017 1,652 8 2,250 1,494 1,176 6,580 181 6,761
Loss for the
year - - (2,345) - - (2,345) (28) (2,373)
Other
comprehensive
loss - (25) - - - (25) (6) (31)
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
Total
comprehensive
loss - (25) (2,345) - - (2,370) (34) (2,404)
At 30
September
2018 1,652 (17) (95) 1,494 1,176 4,210 147 4,357
--------------- --------- ------------- ---------- -------------- --------- --------- -------------- ---------
Notes to the Interim Report
1 Basis of preparation
The financial information presented in this Interim Report has
been prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards ('IFRS')
as adopted by the EU that are expected to be applicable to the
financial statements for the year ending 30 September 2019 and on
the basis of the accounting policies expected to be used in those
financial statements.
2 New accounting standards applied
A number of new or amended standards became applicable for the
current reporting period and the Group had to change its accounting
policies to correctly reflect the requirements of the following
standards:
- IFRS 9 Financial Instruments, and
- IFRS 15 Revenue from Contracts with Customers.
The impact of the adoption of these standards and the new
accounting policies are disclosed in note 9 below.
3 New accounting standards not yet applied
IFRS 16 Leases
The standard will require almost all leases to be on the balance
sheet of lessees and introduces a single income statement model
which effectively brings the majority of leases onto the balance
sheet.
This standard is effective for accounting periods beginning on
or after 1 January 2019 and the Group expects to adopt this
standard for its accounting period beginning on 1 October 2019. The
impact of applying this standard is still being investigated.
4 Operating segments
The Group comprises a single business segment and three
separately reportable geographical segments (together with a Group
costs segment). Geographical segments are based on the location of
the operation undertaking each project. Turkey and Russia are
included within Continental Europe together with Germany and the
Czech Republic.
Segment revenue Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
United Kingdom 3,731 3,219 6,744
Middle East 3,336 3,667 6,819
Continental Europe 234 526 817
--------------------- -------------
Total 7,301 7,412 14,380
--------------------- ------------- ------------- --------------
Segment result before tax Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
United Kingdom (15) (879) (1,505)
Middle East (438) (380) (1,209)
Continental Europe 64 18 131
Group costs 18 17 39
---------------------------- ------------- ------------- --------------
Total loss (371) (1,224) (2,544)
---------------------------- ------------- ------------- --------------
5 Other operating income
Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Property rental income 86 11 28
Management charges to associate
and joint ventures 55 61 115
Licence fee income 2 2 -
Other sundry income 11 9 17
Fair value gain on the reduction
of deferred consideration - - 127
Gain recognised on acquisition
settlement - - -
---------------------------------- ------------- ------------- --------------
Total other operating income 154 83 287
----------------------------------- ------------- ------------- --------------
The increase in property rental income from GBP11,000 in the six
months to March 2018 to GBP86,000 in the six months to March 2019
is due to an increase in property sublet rental income to
efficiently match the Group's UK property requirement.
6 Earnings per share
The calculations of basic and diluted earnings per share are
based on the following data:
Earnings Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Loss for the period (315) (1,068) (2,345)
---------------------- ------------- ------------- --------------
Number of shares Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
'000 '000 '000
Weighted average number of shares 165,214 165,214 165,214
Effect of dilutive options - - -
----------------------------------- ------------- ------------- --------------
Diluted weighted average number
of shares 165,214 165,214 165,214
------------------------------------ ------------- ------------- --------------
7 Reconciliation of profit before tax to net cash from operations
Unaudited Unaudited Audited
six months six months year to
to 31 March to 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Loss before tax - continuing
operations (371) (1,224) (2,544)
Finance costs 14 18 36
Share of results of associate
and joint ventures (94) (3) (121)
Intangible amortisation 40 41 80
Depreciation 30 86 161
Profit on disposal of property,
plant and equipment (1) (14) (14)
Decrease in trade and other
receivables 711 457 1,952
(Decrease) / increase in trade
and other payables (282) 40 586
Change in provisions (58) 56 (117)
Unrealised foreign exchange
differences 7 (33) (30)
---------------------------------- ------------- ------------- --------------
Net cash expended by operations (4) (576) (11)
---------------------------------- ------------- ------------- --------------
8 Analysis of net funds
Unaudited Unaudited Audited
at 31 March at 31 March at
2019 2018 30 September
GBP'000 GBP'000 2018
GBP'000
Cash at bank and in hand 705 1,030 710
Secured bank overdrafts (77) (713) -
---------------------------- ------------- ------------- --------------
Cash and cash equivalents 628 317 710
Secured bank loan (429) (628) (553)
---------------------------- -------------
Net funds/(debt) 199 (311) 157
---------------------------- ------------- ------------- --------------
9 Changes in accounting policies
This note explains the impact of the adoption of IFRS 9
Financial Instruments and IFRS 15 Revenue from Contracts with
Customers on the Group's financial statements and also discloses
the new accounting policies that have been applied from 1 October
2018, where they are different to those applied in prior
periods.
Impact on the financial Statements
The following table shows the adjustments recognised for each
individual line item. Line items that were not affected by the
changes have not been included. As a result, the sub-totals and
totals disclosed cannot be recalculated from the numbers
provided.
30 Sep Unaudited Unaudited
2018 as 30 Sep 1 October
originally 2018 2018
presented IFRS 15 restated IFRS 9 restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Trade (and other)
receivables 5,995 (1,261) 4,734 (180) 4,554
Contract assets - 1,261 1,261 (41) 1,220
Total current assets 6,705 - 6,705 (221) 6,484
--------------------------- ------------ --------- ---------- ---------- -----------
Total assets 11,171 - 11,171 (221) 10,950
--------------------------- ------------ --------- ---------- ---------- -----------
Current liabilities
Trade and other
payables (5,272) 886 (4,386) - (4,386)
Contract liabilities - (886) (886) - (886)
--------------------------- ------------ --------- ---------- ---------- -----------
Net assets 4,357 - 4,357 (221) 4,136
--------------------------- ------------ --------- ---------- ---------- -----------
Foreign currency
translation reserve (17) - (17) (7) (24)
Retained Earnings (95) - (95) (214) (309)
Total equity attributable
to
equity holders of
the Company 4,210 - 4,210 (221) 3,989
--------------------------- ------------ --------- ---------- ---------- -----------
Total equity 4,357 - 4,357 (221) 4,136
--------------------------- ------------ --------- ---------- ---------- -----------
IRFS 9 Financial Instruments - Impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the
recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting.
The adoption of IFRS 9 Financial Instruments from 1 October 2018
resulted in changes in accounting policies and adjustments to the
amounts recognised in the financial statements. The new accounting
policies are set out in below. In accordance with the transitional
provisions in IFRS 9 7.2.15) and (7.2.26), comparative figures have
not been restated.
GBP'000
Closing retained earnings 30
September 2018 - IAS 39/IAS
18 (95)
Increase in provision for trade
receivables and contract assets (214)
-------------------------------------- ----------
Adjustment to retained earnings
from adoption of IFRS 9 on 1
October 2018 (214)
Opening retained earnings 1
October 2018 - IFRS 9 (before
restatements for IFRS 15) (309)
-------------------------------------- ----------
Impairment of financial assets
The Group has identified the following types of financial assets
that are subject to IFRS 9's new expected credit loss model:
- Trade receivables;
- Contract assets relating to unbilled work in progress and project retentions.
- Other financial assets at amortised cost.
Trade receivables and contract assets
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a
lifetime expected loss allowance for all trade receivables and
contract assets.
To measure the expected credit losses, trade receivables and
contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate
to unbilled work in progress and project retentions, and have
substantially the same risk characteristics as the trade
receivables for the same types of contracts. The Group has
therefore concluded that the expected loss rates for trade
receivables are a reasonable approximation of the loss rates for
the contract assets.
The Group engages with clients who are creditworthy, liquid
developers. Management identified that the loss allowances should
be calculated and applied separately based on geographic segments
of the Group, and more specifically to each country in which the
Group has operations. Whilst the specific terms each contract the
Group engages in may be different, certain common characteristics
can be applied.
Provisions on bad and doubtful debts in the UK, Turkey and
Russia have been immaterial in the historical period reviewed in
order to establish the expected loss rate at 1 October 2018. In the
UK and Russia the Group generally builds up advances for contract
work recognised as a credit to the balance sheet which reduces the
impact of potential bad debts. Amounts due for contract work not
yet billed are generally not material. No loss allowance provision
has been made for trade receivables and contracts assets owed to
Group entities operating in these countries.
Amounts due for contract work in the Middle East segment are
material, with contracts in the Middle East often billed in
arrears. Sizeable write offs in prior years have informed the
overall rate calculated for the provisioning matrix.
The loss allowance for the Middle East operating segment as at 1
October 2018 was determined as follows for both trade receivables
and contract assets:
More than More than More than
1-30 days 30 days 60 days 90 days
1 October 2018 Current past due past due past due past due Total
Expected loss
rate (%) 4% 5% 8% 13% 17%
-------- ---------- ---------- ---------- ---------- -------
Gross carrying
amount (GBP'000) 1,590 463 115 180 566 2,914
-------- ---------- ---------- ---------- ---------- -------
Loss allowance
(GBP'000) through
CSOFP 71 24 9 23 94 221
-------- ---------- ---------- ---------- ---------- -------
Loss allowance
(GBP'000) through
retained earnings 69 23 9 22 91 214
-------- ---------- ---------- ---------- ---------- -------
The loss allowance was initially calculated in United Arab
Emirate Dirhams (AED) being the functional currency of the Group
entities in the Middle East operating segment. On conversion to GBP
in the Group consolidation a foreign exchange difference of GBP7k
arises which is taken through the foreign currency translation
reserve.
The loss allowances for trade receivables and contract assets as
at 30 September 2018 reconcile to the opening loss allowances on 1
October 2018 as follows:
Contract Trade receivables
assets GBP'000
GBP'000
At 30 September 2018 - calculated under
IAS 39 - 915
Amounts restated through opening retained
earnings 40 174
Amounts restated through opening foreign
currency
translation reserve 1 6
----------------------------------------------- --------- -------------------
Opening total loss allowance as at 1
October 2018 - calculated under IFRS
9 41 1,095
----------------------------------------------- --------- -------------------
The loss allowances decreased by GBP54k to GBP126k for trade
receivables and by GBP7k to GBP34k for contract assets during the
six months to 31 March 2019.
At 31 March 2019 - calculated under
IAS 39 - 1,105
Loss allowance provision 34 126
Amounts restated through opening Foreign
Currency
translation reserve - -
--------------------------------------------- --- ------
Total loss allowance as at 31 March
2019 - calculated under IFRS 9 41 1,231
--------------------------------------------- --- ------
A further allowance for impairment of trade receivables and
contract assets is established on a case by case when there are
indicators suggesting that the specific debtor balance in question
has been impaired. Known significant financial difficulties of the
client and lengthy delinquency in receipt of payments are
considered indicators that a trade receivable may be impaired.
Where a trade receivable or contract asset is considered impaired
the carrying amount is reduced using an allowance and the amount of
the loss is recognised in the income statement within other
operating expenses.
Other financial assets at amortised cost
Other financial assets at amortised cost include rent deposits,
letters of guarantee secured by matching cash on deposit and other
receivables. No credit losses have been applied to these balances
as the Group has concluded that this risk is not material.
IFRS 15 Revenue from Contracts with Customers - Impact of
adoption
IFRS 15 is the new revenue standard which replaces existing
standards and guidance including IAS 18 Revenue and IAS 11
Construction Contracts. Applying IFRS 15, an entity recognises
revenue to depict the transfer of promised goods or services to the
customer in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services.
To recognise revenue under IFRS 15, an entity applies the
following five steps:
-- Step 1: Identify the contract(s) with a customer;
-- Step 2: Identify the performance obligations in the contract.
Performance obligations are promises in a contract to transfer to a
customer goods or services that are distinct;
-- Step 3: Determine the transaction price. The transaction
price is the amount of consideration to which an entity expects to
be entitled in exchange for transferring promised goods or services
to a customer. If the consideration promised in a contract includes
a variable amount, an entity must estimate the amount of
consideration to which it expects to be entitled in exchange for
transferring the promised goods or services to a customer;
-- Step 4: Allocate the transaction price to each performance
obligation on the basis of the relative stand-alone selling prices
of each distinct good or service promised in the contract; and
-- Step 5: Recognise revenue when a performance obligation is
satisfied by transferring a promised good or service to a customer.
A performance obligation may be satisfied at a point in time or
over time. For a performance obligation satisfied over time, an
entity would select an appropriate measure of progress to determine
how much revenue should be recognised as the performance obligation
is satisfied.
The Group has applied the new standard using the cumulative
transition method, with the cumulative effect of applying the
standard recorded as an adjustment to retained earnings on the date
of initial application, being the 1 October 2018. Our decision to
adopt this method rather than retrospectively restate prior periods
depends on a number of factors including time, cost and available
resources compared to the benefits to the users of the financial
statements.
Management has performed a review of the impact of adopting IFRS
15 to the Group's financial statements. The review demonstrated
that the measurement of revenues for the majority of contracts
still follows an "over time" pattern as previously recognised under
IAS 18. Some contracts have been noted as being recognised on a
"point in time" basis.
However management believes that the financial impact of
adjustments to revenue recognition following the adoption of IFRS
15 cumulatively as at 30 September 2018 are immaterial, and has
therefore not made an adjustment to the opening reserves for the
period commencing 1 October 2018.
Presentation of contract assets and contract liabilities
Aukett Swanke Group Plc has voluntarily changed the presentation
of certain amounts in the balance sheet to reflect the terminology
of IFRS 15 and IFRS 9:
Contract assets recognised in relation to amounts due on
contract work and project retentions were previously presented as
part of trade and other receivables.
Contract liabilities in relation advances form contract work
were previously included in trade and other payables.
10 Status of Interim Report
The Interim Report covers the six months ended 31 March 2019 and
was approved by the Board of Directors on 27 June 2019. The Interim
Report is unaudited.
The interim condensed set of consolidated financial statements
in the Interim Report are not statutory accounts as defined by
Section 434 of the Companies Act 2006.
Comparative figures for the year ended 30 September 2018 have
been extracted from the statutory accounts of the Group for that
period.
The statutory accounts for the year ended 30 September 2018 have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The audit report thereon was unqualified,
did not include references to matters to which the auditors drew
attention by way of emphasis without qualifying the report, and did
not contain a statement under Section 498 of the Companies Act
2006.
Where comparative figures have subsequently been restated
following the adoption of new accounting policies as explained in
notes 2 and 9, adjustments have not been audited by the Group's
auditors.
11 Further information
Copies of the Interim Report will be dispatched by post to
direct holders of 100,000 or more shares in due course. An
electronic version will be available on the Group's website
(www.aukettswanke.com).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFIRRIIDFIA
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