Aukett Swanke Group Plc

Interim Results

For the six months ended 31 March 2015

Aukett Swanke Group Plc, the international practice of architects and interior design specialists, is pleased to announce its interim results for the six month period ended 31 March 2015.

Highlights

·      Revenues up 21% at £9.2m (2014: £7.6m)

·      Profit before tax up 9% at £815,000 (2014: £750,000)

·      Earnings per share up 39% at 0.43p (2014: 0.31p)

·      Net funds up at £2.5m at 31 March 2015 (£1.8m at 30 September 2014)

·      Interim dividend 0.11 pence per share (2014: 0.10 pence per share)

·      Third LEED Gold Award in Germany

·      Best Office Building at the Commercial Real Estate Awards in Moscow

·      Best City of London development at the Office Agents' Society awards

Commenting on today's interim results announcement, CEO Nicholas Thompson said;

"I am delighted to report on this set of interim results which shows a continuous improvement in performance when compared to the six month periods to 31 March and 30 September 2014, respectively. In the light of these results, our financial position and the Board's outlook, we are pleased to announce the payment of an increased interim dividend.

The Group's performance in the first half has been achieved despite a number of external factors which we have had to contend with.  The run up to the General Election in the UK caused some softening in the UK market in the first half whilst Russia and Turkey were impacted by, variously, currency volatility and political uncertainty which deferred local client decision-making.

We continue to invest in the Middle East which we believe has good growth prospects."

Enquiries

Aukett Swanke Group Plc - 020 7843 3000

Nicholas Thompson, Chief Executive Officer

Beverley Wright, Group Finance Director

finnCap - 020 7220 0500

Corporate Finance: Julian Blunt/James Thompson

Corporate Broking:  Stephen Norcross

Hermes Financial PR

Trevor Phillips - 07889 153628

Chris Steele - 07979 604687

Interim statement

Overview

We are pleased to report an increase in our first half profits to £815,000 (2014: £750,000).

Our half year revenues rose to £9.2m (2014: £7.6m) with revenues less subcontractors also increasing to £8.2m (2014: £6.6m). Profit before tax rose 9% to £815,000 (2014: £750,000), whilst EPS increased 39% to 0.43p (2014: 0.31p) reflecting a much reduced tax rate which benefitted from unprovided tax losses in Russia.  We outperformed our cash generation target with funds increasing to £2.5m (30 September 2014: net funds £1.8m) after taking account of investments, taxation and dividend payments.

Operations

UK revenues lifted to £7.5m (2014: £6.1m) with profits being slightly lower at £927,000 (2014: £945,000). Some 15 projects account for 73% of these revenues across offices, residential, retail, hotels, interior design and education sectors with no one sector accounting for more than 25% of revenues.

Whilst the first half benefited from a full half year's contribution from the Swanke business (acquired in December 2013), the period under review takes account of salary increases and headcount additions.  Both of these had become necessary as the general construction market strengthened and the level of work in hand and enquiry levels increased.  The UK construction market also quietened in the period leading up to the General Election which had an impact in the first half, though with a more stable political environment we now expect the pre-election slowdown to unwind and for the market to recover its former momentum. The regional phenomenon, which we highlighted in our last statement, continues apace with far more activity in the green-field business space market.

At present, the UK operation has over 2m square feet of construction work in hand with a follow-on order book being maintained. We are currently working with Blackstone, Fenwick, Grosvenor, Candy & Candy, Goodman, Land Securities, Richemont, Derwent London, Sir Robert McAlpine, M&G, Zurich Re, BNP Paribas, Development Securities, Orchard Street, Urban & Civic, Sheraton hotels and many others. Our office development at 125 Wood Street for Orchard Street Investment Management won the Best Office Development in the City of London at the recent Office Agents' Society awards.

Our Marks and Spencer (2012) store at Cheshire Oaks continues to win awards with the 2015 Building Award - Test of Time. In the AJ120 rankings of qualified staff our London Studio ranks No.20 (2014: No. 22). We continue to rank in the top 5 based on qualified staff in the Group for a UK based practice.

Russia almost broke even, tabling a small loss of £11,000 (2014: Loss £299,000) - arguably our best operational performance of the year given the results from 2014. Revenue was up at £692,000 (2014: £638,000).

Our current projects include schemes at Vernadskogo, Yamskoye Pole, Panavto, and Itar Tass, with clients such as AB Developments, JTI and PSN. Our office building, Arcus III, for AB Developments, has won the Golden Brick award at the CBRE awards. Also we won a Best Lobby award at the Best Office Awards 2015.

During the period we have downsized the operation to match market activity but had to contend with a major Rouble devaluation which in turn triggered a short period of higher internal costs before we could manage these down again.  A number of costs were contracted in a US dollar equivalent in the Russian market. The position has now stabilised and we expect to remain at or near break-even for the remainder of the year. Since the currency crisis abated we have seen some market improvement in enquiries giving some comfort to our shorter term prospects.

The Turkish operation remains in profit at £4,000 (2014: £82,000) on revenues of £555,000 (2014: £441,000). In the previous year, the quarter two revenue was well above expectations due to a windfall gain. We are currently working on two hotels at Eminuno and Atasehir, a residential scheme in Eston 7 and a fit out for Cengiz. With the recent election result and a quieter economy we are reliant on new project conversions in the second half to avoid a loss at the year end.

The Middle East is the current focus of our expansion plans as evidenced by our announcement yesterday of the acquisition of John R Harris & Partners Limited. The loss of £91,000 (2014: profit £4,000) in our continuing operation partially reflects a fall-off in work-load as our major project reaches the final phases of construction. Additionally we increased our staffing levels in order to improve our chances of winning new work.  Revenue remains substantially unchanged at £432,000 (2014: £419,000).

In respect of Continental Europe, Berlin maintained its performance at prior year levels with a raft of commissions including KfW bank, Berlin airport, Berlin Entertainment District, Siemens, Stone Brewing and is likely to continue in this mode for some time. Frankfurt posted a small profit but is expected to improve in the second half. The office won its third LEED Gold Award for the Bank of New York Melon's office fit out.  The Czech market is dogged by a lack of work and low pricing, however, break-even for the full year is the target.

The overall net result for our European operations (comprising JV and associate interests) is marginally down on the previous year at £159,000 (2014: £176,000) following a decline in the Euro.

Prospects

The final outturn for 2015 will be primarily dependent on the UK's second half performance which we expect to pick up in the aftermath of the General Election.  The operations in Russia, Turkey and the Middle East are expected to remain loss-making in the short term and subsequently return to profits. Continental European operations are expected to improve their profit performance based on current order books.

Overall the Board remains confident in the Group's performance as we progress through the second half, indeed with a period of less political uncertainty in the UK there should be more stability engendering a stronger market. With a maintained profit performance and strong cashflow we are pleased to announce the payment of an interim dividend of 0.11 per share on Monday 27 July 2015 to shareholders on the register at close of business on Friday 10 July 2015.

Nicholas Thompson

Chief Executive Officer

15 June 2015

Consolidated income statement

For the six months ended 31 March 2015

Consolidated statement of comprehensive income

For the six months ended 31 March 2015