Companies: AUK   

Shares in architecture and design consultancy Aukett Group slipped to their lowest levels for two years following a 52 per cent interim profits drop. Leslie Copeland reports.

Aukett (AUK) shares had already been under pressure following a profits warning two months ago. But they fell a further 10 per cent today – to 8.5p – when the group announced a 52 per cent drop in pre-tax profits to £460,000 for the period to March.

Turnover increased by 22 per cent to £11.20 million, but this rise could not compensate for Aukett's poor performance in the UK, where profits collapsed 75 per cent to a mere £180,000. Executive chairman Andrew Lett says margins were undermined because the group had invested in new premises, people and equipment in the expectation that UK business would grow significantly.

However, instead of a British boom, the group witnessed many project delays and postponements. By contrast, on the European mainland, where Aukett operates four wholly owned practices and has a host of joint venture practices, trading was very much improved. A strong performance from its Amsterdam and Prague offices ensured European profits increased 24 per cent to £285,000 on turnover up from £2.92 million to £3.41 millon.

Lett remains lukewarm on how well the group will trade in the second half-year. He says that, while Aukett has been trimming its cost base, it is continuing to win new business and will definitely be pusing ahead with its European ambitions.

On the specific question of how well the UK arm (which accounts for 70 per cent of trade) would perform, he comments, 'UK growth is slowing, but there is not a recession. We are beginning to see that business is coming back....but it's to early to say where we will be for the full-year'.

Robert Mackenzie of house broker Williams de Broe now predicts that the company should make profits of around £1 million. That leaves the shares at 8.5p trading on a prospective p/e of 8.9 for this year. Considering the difficulties it is facing, this seems like fair value.