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Archial goes into administration

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Archial, the sixth largest practice in the UK, has gone into administration after failing to hammer out a deal over unpaid tax bills with HM Revenue and Customs

The listed-company, which suspended its shares following a sharp drop in prices to 1.3p on Friday (17 September), becomes the largest architectural casualty of the recession so far.

The future of 519 staff across the group - including 200 architects - now hangs in the balance although there is already speculation the more successful parts of the business could be quickly sold off, such as Alsop Sparch.

One practice insider said: ‘As we’ve seen with the administration of Connaught, the most profitable parts of the business could be sold off for cash and there are elements which could be attractive to possible suitors.

‘There may well be other architectural firms who may be thinking that this an opportunity for them [to buy up parts].’

The writing was on the wall for Archial last month (26 August) when the company - which revealed it had a large net debt of £13.5 million at the end of 2009 - issued a surprise profit warning. Its share price subsequently dropped 61 per cent.

It is a sad decline for the company which only six months ago had publicly stated it was on the acquisition trail.

In March, Archial announced it intended to acquire new firms despite revenue falling from £42.5 million to £33.9 million in 2009, with underlying pre-tax profits down to £1.49 million from £1.53 million.

Between 2004 and 2006, the company, then operating as SMC Group, bought out 14 firms. But since the announcement there have been no new acquisitions.

Speaking on Monday before today’s shock announcement former employee Will Alsop, who left Archial in October 2009 to work for RMJM, said: ‘I would not wish this new hardship on any of them, but they never had trust in architecture.’

Alsop added: ‘There are no [practising] architects on the board.’

The AJ understands Archial has issued a diktat to its offices demanding they rein in expenditure. An ongoing programme of savings will reduce its annual spend by £4.25 million.

Archial ranked sixth in the AJ100 survey of the UK’s largest practices. Just six months ago, chief executive Chris Littlemore revealed the firm’s aspirations for international success, saying: ‘I believe that we would like to be in the top 10 globally in the next three to four years.’

Interim accounts for this year were due to be published next week.

Postscript

Maxwell Hutchinson, non-executive director of the practice said: ‘It has been a very successful architecture practice winning a lot of work and awards. We were a very good architecture practice, we were good architects doing really good work and winning awards, but the economic climate has prevailed against us.’

Previous story (AJ 01.10.09)

Archial plunges deep into the red

First-half pre-tax losses of £4.3 million for Archial – compared with a £1.6 million profit in the same period last year

Cancelled projects have already forced Archial, one of only two dedicated architectural practices listed on the London Stock Exchange, to close offices and lose dozens of staff.

With year-on-year turnover down by £4 million to just over £18 million, chief executive Chris Littlemore (pictured) has warned that more offices will have to close, with more job losses.

Cost-cutting measures will save £4.1 million for the whole of 2009, he said, while the firm’s forward-order book has grown to £34.7 million, of which 37 per cent is public-sector work.

But he notes: ‘The unprecedented trading conditions in the UK over the past 12 months have led to a portion of the group’s secured work being cancelled or postponed, and the directors feel it is now prudent to make a provision against trade and other receivables of £3.85 million.’

 

 

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