The merger of Aukett Group with Fitzroy Robinson to form Aukett Fitzroy Robinson took place at the end of March 2005. Aukett was trading poorly and, although it was retaining clients such as Royal Bank of Scotland, Norwich Union and Diageo, they were giving it less of their business. Following the merger, however, chief executive Nicholas Thompson claims Aukett’s customers are increasing the amount of business they place with the group.

In contrast, the profitable Fitzroy Robinson, while it had significant customers such as Arlington, Great Portland Estates and Land Securities, was finding it difficult to win larger projects because it was perceived to be small.

A skilful marriage brings scale
Merging the two, creating a larger, more financially sound group, has given the business a better chance of winning work on larger projects. The average project size is now £20 million but some, such as the St Mary le Port project in Bristol, are worth as much as £150 million. Furthermore the group is now run far more tightly, with Thompson personally approving all new contracts only if they yield sufficient returns.

The strategy now at Aukett Fitzroy Robinson, which moved to Aim from the main board in April and has a £25 million order book stretched over three years, is to double turnover within five years. Annualised sales appear to be running at around £14 million.

Some of that growth will be organic, but it will be supplemented by acquisitions in the newer member states of the European Union. The group already has six offices in continental Europe. Russia and Poland are doing particularly well, with the Russian office sporting an order book worth £6 million.

Savings to shine through
Net debt (£1.4 million at the end of March) should fall sharply as profits increase. At the interim, Aukett Fitzroy Robinson moved from losses of £165,000 to profits of £47,000, and there should be a lot more to come. The closure of Aukett’s former head office and other cost savings will knock a minimum of £600,000 off annual overheads and possibly even more. Those savings will start to show through in the second half of the year to September 2006, but the full effect won’t come through until the new financial year just beginning.

There are currently no forecasts for the group. However, in the year to September 2007, it could easily make profits of between £800,000 and £1 million. Most of Aukett’s tax losses are capital losses but it does have some trading losses. Even if those are ignored and a 30 per cent tax charge is assumed then, on the lower end of this profits range, Aukett Fitzroy Robinson is trading on around nine times prospective earnings for 2006-07. That could prove to be a conservative estimate.

Directors and management own more than half of the company. Stephen Embley, a director of the main subsidiary, bought 550,500 shares in September at prices between 4.13p and 4.5p. His fellow subsidiary director Paul Newman bought shares at 4.25p in July. Both were former Aukett Group directors who stepped down from the holding company board at the time of the merger, so it shows that they are happy with the way the merged entity is going. The current 4.88p represents an attractive price
for investors to buy for recovery and growth.

Aukett Fitzroy Robinson Group	AIM	£10.19m	7.00p	0.00p
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