CSG.L Regulatory News (CSG)

8 June 2016

Sweett Group plc ("Sweett Group" or "the Group")

Audited final results for the year ended 31 March 2016

Sweett Group plc (AIM: CSG.L), the global provider of professional services for the construction and management of building and infrastructure projects, announces its audited final results for the year ended 31 March 2016.

Financial

In presenting the Group's non GAAP measures, the following adjustments have been made:

* Adjusted profit excludes:

1. Exceptional administrative expenses of £5.1m (2015: £1.7m);

2. Amortisation of acquired intangible assets of £0.5m (2015: £0.4m);

3. Performance Share Plan credit of £nil (2015: £0.3m);

4. Impairment of Australian and MENA goodwill of £nil (2015: £2.4m);

5. Loss on the disposal of the APAC and India businesses of £13.7m (2015: £nil).

**Lockup is measured as the aggregate days' activity represented by debtors and work in progress - see Financial Review for further details.

Ø On 25 May 2016 recommended cash offer by WSP to acquire Sweett Group for 35p per share was announced, This represents a 52.2% premium to the closing share price of 23p on the day prior to the announcement

Ø APAC and India businesses sold in October 2015, reducing debt significantly following which the term loan was repaid. Withdrawal from the MENA region in progress

Ø Strong core UK and Europe business focussing on profitability and cash generation

Ø Successful reorganisation of the ongoing business into five regions; London and the South East, England and Wales, Scotland and Ireland, Mainland Europe and North America, significantly improving accountability and re-energising the business

Ø SFO investigation concluded with £2.3m payable between March 2016 and February 2018

Ø No final dividend payment being recommended due to the focus on reducing debt

Ø Group's order book for the ongoing business currently stands at £50.0m (2015: £52.8m)

Douglas McCormick, CEO of Sweett Group, commented:

"It has been a busy year for Sweett Group, a year in which we have delivered against all the key strategic priorities outlined in the spring of 2015. We have sold the APAC and India businesses; announced our exit from MENA; concluded the legacy SFO issues; and restructured the Group to operate across five separate regions.

Most recently, it was announced on 25 May 2016 that the Board had reached agreement on the terms of a recommended cash offer by WSP to acquire the Company at 35p per share, a premium of approximately 52.2% to the share price on the preceding day. Joining WSP will provide Sweett with a stronger platform both operationally and financially for growth in the years ahead. I look forward with great enthusiasm as we embark on the next stage of our journey."

ENDS

For further information, call:

About Sweett Group

Sweett Group is a provider of professional services for the construction and management of building and infrastructure projects. We offer cost consulting and project management services supporting clients through every stage of the project life cycle based upon our international expertise and local knowledge.

Our strength is our people's world class talent through which, we have time and again, delivered exceptional results. A modern, progressive company, Sweett Group sets itself apart through people, culture, and aptitude to change. By collaborative practices and innovative thinking supported at all levels, our clients receive an offering that is constantly evolving and improving in response to project needs.

www.sweettgroup.com

Chairman's Statement

Strong Global Platform for Growth

On 25 May 2016, Sweett Group ("Sweett") announced that the Board had reached an agreement on the terms of a recommended cash offer by WSP Global Inc. ("WSP") to acquire Sweett (the "Offer"). This transaction supports the realisation of both companies' strategic aims and provides a strong global platform for growth. It allows Sweett to accelerate its growth potential with the support of WSP's global presence and financial strength. The combination of both sets of skills and the compatibility of our cultures will also provide a great foundation for the two companies to work together constructively and effectively, creating attractive and competitive solutions for our respective clients.

Proposed terms

Under the terms of the Offer, Sweett shareholders will be entitled to receive 35 pence in cash for each share held. This represents a premium of approximately 52.2 per cent to the closing share price of 23 pence on 24 May 2016 (being the last business day prior to the announcement of the Offer) and 73.6 per cent premium to the six month average price per share of 20 pence (being the average closing price for the six month period ending on 24 May 2016 being the last business day prior to the announcement of the Offer). The Sweett directors, who have been so advised by Stockdale Securities, consider the terms of the Offer to be fair and reasonable so far as Sweett shareholders are concerned.

Next Steps

Shareholder approval is required for the Offer, which, if approved, will be implemented by way of a scheme of arrangement (the "Scheme"). Shareholders will have the opportunity to attend and vote at the required shareholders' meetings, which will be held on 29 June 2016 to approve the Scheme. The relevant documents and voting forms are being sent to shareholders with these financial statements ahead of the shareholders' meetings. The Sweett directors unanimously recommend that shareholders vote in favour of the Scheme and associated resolutions to be proposed at the shareholders' meetings. If the Scheme is approved by shareholders and the Court, the Scheme is expected to become effective on 8 July 2016. In the event that the Scheme is not approved, the Group faces potential significant difficulty without the renewal and/or renegotiation of its banking facilities beyond 30 June 2016 when they are due to expire.

Strategy

Aside from the Offer, I am pleased to report that the strategy set out by the Board in April 2015 has largely been delivered, with the sale of our APAC and India businesses, the resolution of the SFO investigation, the closing of the Middle East business, which is progressing well and the restructuring of the ongoing business into five regions.

Colleagues and the Board

There have been a number of changes to the Board in the year. Kim Berry and Derek Pitcher, both Executive Directors, left the Board and Roger Mabey, a Non-executive Director, retired. I would like to give my thanks to each of them for their contribution to the business over many years.

Finally, I would like to thank the current Board and all our employees for their continued commitment and hard work, without whom the business would not have delivered these results.

John Dodds - Chairman

Chief Executive's Review

Summary

It has been a busy year at Sweett Group. The strategy that the Board agreed in April 2015, shortly after my arrival as CEO, has largely been delivered. My opinion remains that the strengths of the Group are our loyal, highly-skilled people, our brand, our clients and our strong market positions; all of which continue to provide a strong platform for growth as we begin a new chapter in our history.

Strategy

The sale of the Group's APAC and India businesses was concluded in October 2015. They were sold to Currie & Brown Holdings Limited ("Currie & Brown") for £9.3 million in cash (before transaction and separation costs) (the "Sale"). In March 2016, Sweett announced that it had been notified by Currie & Brown that it believed an adjustment of £1.8 million (since amended to £1.7 million) fell to be made in its favour under the terms of the Sale. On 7 June 2016, the Group announced that it had received the determination from the expert who found that a payment of £1.3 million was due by the Company to Currie & Brown. This will be paid in due course and concludes the matter.

The SFO investigation into bribery in the Middle East was resolved this year. On 19 February 2016, the Group was sentenced for an offence under Section 7(1) of the UK Bribery Act 2010 (failing to prevent an associated person bribing another to obtain or retain business for the company). This was in regards to two related contracts in the Middle East, entered into in early 2013, identified by the Group, and self-reported to the SFO. Any offence under Section 7(1) does not attract mandatory debarment from public sector tendering under EU/UK law. The Group was sentenced with a confiscation of £851,152 and a fine of £1.4 million by Southwark Crown Court. The confiscation was paid in May 2016 and the fine will be paid in two equal instalments, the first in February 2017 and the second in February 2018. The Group has also paid £95,000 to meet the prosecution's legal costs. This brings closure for the Group and while the cash implications are material, the issue is settled and the Group can move forward positively.

As part of the work done to conclude the SFO investigation, the Company appointed KPMG in 2013 and 2015 to provide an independent review of its anti-bribery and corruption controls and procedures. Following the 2013 review, the Company established a dedicated governance team, headed by our Group Risk and Compliance Director, to oversee the Group's governance procedures and to ensure compliance with relevant legislation. I am pleased to say that following the 2015 review, the Company has closed out all of the actions from 2013 and is now executing a programme of continuous review and improvement.

As part of the work in relation to the SFO investigation, in December 2015 the Board resolved to withdraw from the Middle East market, a process which is well advanced and at a lower cost than expected. This process is anticipated to be largely complete by 31 March 2017.

In December 2015, we restructured the Group to operate across five separate regions: London and the South East; England and Wales; Scotland, Ireland and Investments; Mainland Europe (France, Italy and Spain); and North America (USA and Canada). With the exception of North America, where we are currently recruiting, each region is headed by a Regional Managing Director, who forms part of the Senior Leadership Team (SLT), together with colleagues from Finance, HR, Risk and Compliance, Marketing and Communications and Company Secretariat. This restructuring has provided a clear focus on our strategic objectives for the coming year, which centre on cash and profit, clients, people and technology.

The Board has considered very carefully the Company's strategic options taking account of the material cash impact of the SFO sentence, the potential outcome of the Sale determination and the cost of withdrawing from the Middle East. At the same time, the Company has been in negotiations with its banker regarding the nature and renewal and/or renegotiation of its future facilities, as the current facilities are due to expire on 30 June 2016 unless it is able to raise new equity, find an alternative source of debt finance or find an alternative buyer and complete a sale in the time available.

During this process, as announced on 25 May 2016, the Board has reached agreement on the terms of a recommended cash offer by WSP to acquire the issued and to be issued share capital of the Company at 35p per share, to be effected by means of a court sanctioned Scheme of Arrangement under Part 26 of the Companies Act 2006. I believe this transaction will provide Sweett with enhanced opportunities and the combined entity will achieve increased prominence in the global markets in which we work. Joining WSP will provide Sweett with a stronger platform both operationally and financially for growth in the years ahead.

The Sweett Directors unanimously recommend that shareholders vote in favour of the Scheme and associated resolutions to be proposed at the shareholders' meetings on 29 June 2016. If it is approved by shareholders and the Court, the Scheme is expected to become effective on 8 July 2016. In the event that the Scheme is not approved, the Group faces potential significant difficulty without the renewal and/or renegotiation of its banking facilities beyond 30 June 2016.

Results

Trading in the year to 31 March 2016 in the Group's ongoing business (excluding MENA) which now predominantly comprises the UK has been strong with revenue of £54.9 million, representing growth of 6.6 per cent (2015: £51.5 million).

Profit before tax, adjusted for exceptional administrative expenses and amortisation of acquired intangibles for the ongoing business decreased in the year to approximately £2.2m (2015: £2.9m). This decrease is due principally to one-off property costs of £0.3m, legal costs resulting from a historical arbitration claim in Ireland of £0.2m and costs associated with the refinancing of the Group's banking facilities of £0.3m.

The Board is not recommending the payment of a final dividend in respect of the year ended 31 March 2016 (2015: nil pence per share).

Market

The UK construction industry is influenced by the prevailing economic conditions and sentiment in the UK and Europe. The current ongoing period of low interest rates has encouraged businesses to invest in capital projects, rather than holding cash, and also to borrow while debt is relatively low-cost. This relative financial stability is countered, however, by political uncertainty which can have an adverse effect on the economy. With uncertainty surrounding the EU Referendum on 23 June 2016 and the potential for Brexit, investors are mindful of the economic effect of any political outcome.

Given this mixed backdrop, overall growth forecasts for the UK construction market remain robust with assumed growth of 4.1% forecast between 2015 and 2020 (Source: Business Monitor International, Marketline). More specifically, the UK engineering consultancy market is forecast to grow by 7.8% to £17.8bn in 2017. While there is likely to be variation within different subsectors, our diversified range of services and target markets should enable us to focus resource and expertise appropriately to capitalise on any market opportunities which arise.

Growth in the construction sector continues to be negatively impacted by a general skills shortage. 60% of contributors to the RICS: UK Construction Market Survey, suggested short supply of quantity surveyors is an issue. This is also inflating wages across the industry (Source: RICS: UK Construction Market Survey, Q4 2015) with wages increasing by c.6% in 2015. The attrition rate of staff in the construction consultancy industry is c.20% pa illustrating the importance of employee retention and its ability to effect market performance. Currently the Group's rate of attrition is in line with the wider market.

The health sub-sector, a core strength of the Group, will be boosted by a 20% increase in the NHS capital spending budget and an extra £1.2bn of funding for investment in GP services announced in the 2014 Autumn Statement.

Public sector non-housing output is expected to be limited to below 2%pa until 2018 due to Government austerity measures and spending cuts. However, education, a particular strength of Sweett Group, accounts for 50% of this market and will be driven by increased workloads through the £4.4bn Priority School Building Programme.

In the commercial sector, the office market is expected to drive growth with continued strong activity in London, as well as in regional markets such as Manchester, Leeds and Birmingham.

In the rail sector, Crossrail and Thameslink spending has now peaked and the electrification of cross country rail routes is forecast to be the main source of growth through to 2018. Additionally, High Speed 2 brings a further major opportunity for Sweett Group.

Retail growth has been driven largely through supermarket expansion which has experienced slower growth in recent years, as construction of smaller convenience stores and discount chains have replaced traditional superstores. Key pipeline developments worked on include £1bn developments at Brent Cross, Croydon and the Shepherd's Bush Westfield extension.

In the year, we have seen our bidding increase 10% in volume with our overall win rate increasing from 37% to 40%. Public Sector OJEU procurement was down 54% on the previous financial year, largely because many of the major frameworks are up for renewal in 2017 and 2018. However, use of the existing framework mini tenders was up 61% on the previous year. We saw a 68% rise in non OJEU tendering in the period.

People

Sweett Group is a people business and the skill and loyalty of our people continues to deeply impress me. This year, we established Staff Voice, an elected group of staff representatives, who meet as a board on a quarterly basis and whose Chair attends the SLT meetings to allow us to listen to our staff and learn from them.

We also have a Junior Advisory Group (JAG) which accepts applications from all staff at Associate level and below. Our JAG provides junior employees with the opportunity to present research and recommendations to the SLT on a wide range of strategic business challenges. This has led to significant changes across the business, including the launch of the employee survey, development of our staff magazine and the creation of the CSR committee.

In 2014 we launched a Quantity Surveying Apprenticeship programme that reflects our commitment to the organic development of our workforce. Since 2014, the Group has recruited 18 apprentices and was highly commended at The National Apprenticeship Awards in 2015 due to its significant contribution to talent growth. The Group was also confirmed as a Top 100 Apprenticeship Employer in 2015. Sweett Group maintained its Investor in People (IIP) standard, gaining the Silver award in 2015.

In February 2016, we held our Staff Awards ceremony. The black tie event was attended by over 80 of our staff, nominated by their colleagues, and I was delighted to present a range of awards to the winners for their significant contributions across various areas of the Group.

Finally

I would like to take this opportunity to thank our clients, the Board and all of our staff for their loyalty and contribution to these results. I look forward with great enthusiasm as we embark on the next stage of our journey.

Douglas McCormick - Chief Executive Officer

Despite the decision to withdraw from the MENA region and the considerable progress made towards achieving this objective, for accounting purposes the MENA results remain included within Continuing Operations.

Group revenue in the year was up 2.2% to £59.3m (2015: £58.0m). Within this increase of £1.3m, Europe increased by £3.5m and MENA decreased by £2.2m.

Loss before taxation amounted to £5.1m (2015: £nil) and adjusted profit before tax (excluding exceptional administrative expenses, amortisation of acquired intangibles and the Performance Share Plan), amounted to £0.2m (2015: £2m).

On an ongoing basis excluding MENA, adjusted profit before tax decreased to £2.2m (2015: £3.2m), this variance was principally due to a number of non-recurring items including one-off property costs of £0.3m, legal costs resulting from a historical arbitration claim in Ireland of £0.2m and costs associated with the refinancing of the Group's banking facilities of £0.3m.

Details of exceptional administrative expenses are provided in Note 5. Earlier this year, the Group announced the resolution of the SFO investigation. This resulted in an order to pay a confiscation of £851,152 in May 2016 and a fine of £1.4m, 50 per cent of which is to be paid by February 2017, with the remaining sum to be paid by February 2018. Costs associated with the investigation were £1.4m (2015: £1.6m).

In addition, within exceptional administrative expenses are included costs as a result of the withdrawal from MENA of £1.3m (2015: £nil).

Group revenue for the APAC and India businesses, which were sold to Currie & Brown on 21 October 2015, was £17.7m (2015: £30.3m) and those businesses generated an operating loss of £0.2m (2015: £1.0m) and loss before taxation of £0.3m (2015: £1.1m).

The disposal of these businesses resulted in proceeds of £9.3m prior to transaction and separation costs and a loss to the Group of £13.7m. Details of the computation of this loss and the impact on cash flows are provided at Note 29 to the financial statements. The overall Group loss before tax on discontinued operations was therefore £14.0m.

As announced on 8 March 2016, Currie & Brown notified Sweett Group that it believed an adjustment of £1.8m (since amended to £1.7m) fell to be made in its favour under the terms of the Sale. On 6 June 2016, the Group announced that it had received the determination from the expert who found that a payment of £1.3 million was due by the Company to Currie & Brown. This will be paid in due course and concludes the matter.

Foreign currency impact

The Group's major currencies during the year were the Euro, Hong Kong Dollar, Chinese Renminbi, UAE Dirham, Indian Rupee and Australian Dollar. During the year Sterling depreciated against all of these currencies except the Indian Rupee, resulting in a net negative impact of approximately £0.8m on revenue. The impact of this on operating profit was negligible.

Cash performance

Cash generated from operations in the year was £3.1m (2015: £3.5m). This arises largely through adjusted operating profit and working capital movements.

The Group's work in progress net of fees in advance decreased to £3.9m (2015: £12.6m) following the disposal of subsidiaries and net trade receivables decreased to £11.7m (2015: £20.3m) giving a total value of lockup (work in progress and trade receivables) of £15.6m (2015: £32.9m).

For the Group's ongoing business, work in progress net of fees in advance decreased to £3.9m (2015: £4.8m) and net trade receivables decreased from £12.1m to £11.7m giving a total value of lockup of £15.6m (2015: £16.9m).

Management of working capital remains a key priority and further steps are being taken to improve its management and reduce unnecessary utilisation of the Group's cash resources.

Finance income

The Group's net finance income/(costs), is disclosed in Note 4. Finance income includes £0.2m of dividends received. Finance costs of £0.4m (2015: £0.5m) reduced through a combination of the effect of the disposal of the APAC business and the repayment of the remaining term loan following this disposal.

Tax

The charge for the year was £0.3m, on a Group loss before tax of £19.1m (2015: tax charge of £0.8m on a loss before tax of £1.1m). This is analysed further in Note 6.

Earnings per share

Basic and diluted loss per share amounted to 28.3p (2015: loss of 2.7p). Adjusted basic and diluted loss per share was 0.6p (2015: earnings of 2.8p). Further details are provided at Note 7.

Balance sheet

The Group ended the year with:

• Net borrowings of £2.6m, compared with £9.7m at 31 March 2015;

• Net current assets of £2.6m compared with £15.8m at 31 March 2015; and

• Net assets of £8.7m, compared with £25.4m at 31 March 2015.

Going Concern and banking facilities

Set out below is the text of Note 1:

The Group funds its activities through cash generated from operations supplemented with bank borrowings. The Group's principal banker is Bank of Scotland plc, part of the Lloyds Banking Group ("Lloyds"), which provides Sweett Group with overdraft and guarantee facilities. At 31 March 2016 the amount undrawn under the Group's credit lines was £3.1m (2015: £1.9m). The term loan, which stood at £5.625m at 31 March 2015, was repaid following the sale of the APAC and India businesses in October 2015. All liabilities to Bank of Scotland plc are shown as current liabilities as they are repayable on demand.

Due to the material one-off cash outflows following 31 March 2016 resulting from the conclusion of the SFO investigation, the closure of the MENA business and the claim from Currie & Brown (described in further detail in the Chief Executive's Review), the Group's cash position is likely to deteriorate materially in the short-term. In response, the Company entered into discussions with its banker regarding the renewal and/or renegotiation of its facilities which are due to expire on 30 June 2016 and the Board was exploring a number of options including a potential fundraising by the issue of new equity which was in progress at the time the Offer was made.

On 25 May 2016, a recommended cash offer for the Group was made by WSP at 35p per share. This is subject, inter alia, to shareholder approval at the shareholders' meetings on 29 June 2016. As a result, the current banking facilities, which are due to expire on 30 June 2016, have not yet been renewed. The Group's banker has however provided an assurance that they will extend the current banking facilities until 8 July 2016, the expected effective date of the Scheme and therefore the date of change of control.

The Sweett Directors have prepared a business plan and cash flow forecast for the period to 31 March 2018. The forecast contains certain assumptions about future sales, the gross margins achievable and the level of other operating expenses. In addition, the Directors have considered various downside sensitivities and management actions that could be undertaken to ensure the ongoing operation of the Group and the Company, based on an assumed level of funding.

Having reviewed the business plan and subject to the uncertainties described above, the Directors have a reasonable expectation that the Group and the Company will have adequate resources to continue operating for the foreseeable future. Therefore the Directors continue to adopt the going concern basis in preparing the financial statements and these financial statements do not include adjustments that would result if the Group and the Company were unable to continue as a going concern. Should the sale to WSP or another bona fide alternative purchaser not materialise, the Directors would need to seek alternative sources of funding in order for the Group and Company to be able to meet their debts as they fall due upon expiry of the Group's current banking facilities.

As a result, the Directors have concluded that pending the acquisition of Sweett Group by WSP being completed as expected or successful agreement to raise additional funding being reached, there exists a material uncertainty which may cast significant doubt over the ability of the Group and the Company to continue as a going concern.

Internal controls

There has been continued significant emphasis on our internal control environment during the financial year following the creation of a Risk and Compliance Director role and the roll-out of new financial policies and procedures across the Group in 2015.

Treasury

Treasury matters and banking arrangements are overseen by a treasury committee, which is chaired by Alan Lovell, the Senior Independent Director.

Dividends

No interim dividend for the year to 31 March 2016 or 2015 was paid. The Directors are not recommending the payment of a final dividend for the year ended 31 March 2016 (2015: £nil).

Summary

The key strategic objective of the year to 31 March 2016, being the sale of the Group's APAC and India businesses, was met and the closure of our MENA offices is well progressed. The conclusion of the SFO investigation and the subsequent financial consequences has left the Group needing to further strengthen its balance sheet, a process which was well underway prior to the offer from WSP being made. Going forward, with a strengthened balance sheet either following completion of the acquisition by WSP or successful fundraising and following the restructuring of the ongoing business, the Group is well-placed for the future.

Patrick Sinclair - Chief Financial Officer

Consolidated Income Statement for the year ended 31 March 2016

Consolidated Income Statement for the year ended 31 March 2016 continued

Consolidated Statement of Comprehensive Income for the year ended 31 March 2016

Consolidated Balance Sheet as at 31 March 2016

Consolidated statement of changes in equity for the year ended 31 March 2016

Consolidated Statement of Cash Flows for the year ended 31 March 2016

1. General information

This preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 March 2016 as defined in section 434 of the Companies Act 2006. It has however been extracted from the audited financial statements contained within the Annual Report for the year ended 31 March 2016. Statutory financial statements for the year ended 31 March 2015 have been delivered to the Registrar of Companies and those for the year ended 31 March 2016 will be available to shareholders on 8 June 2016 for approval at the Annual General Meeting on a date to be advised to shareholders in due course. Those financial statements have not yet been delivered to the Registrar.

Sweett Group plc is a public limited company whose shares are traded on the Alternative Investment Market and is incorporated and domiciled in the United Kingdom under the Companies Act 2006. The address of the registered office is 60 Gray's Inn Road, London WC1X 8AQ. The Company is the parent company of a group of international companies and the principal activities of the Group include the provision of construction cost consultancy, project management and other specialised consultancy services, including building surveying. These activities are carried out in Europe, Middle East and North Africa (MENA) and North America, the Group's operating segments.

Basis of preparation

The accounting policies applied by the Group were published in the Annual Report for the year ended 31 March 2015, which is available on the Group's website at www.sweettgroup.com, and they are also included in the Annual Report for the year ended 31 March 2016. There have been no significant changes to the Group's accounting policies during the year.

Audit Opinion

The auditors have reported on these financial statements for years ended 31 March 2015 and 31 March 2016; their audit report was unmodified for both years but in respect of the year ended 31 March 2016, their report did contain an Emphasis of Matter paragraph in respect of a material uncertainty around going concern. The emphasis of matter is set out below.

Emphasis of matter - Going concern

In forming our opinion on the Group and parent Company financial statements, which is not modified, we have considered the adequacy of the disclosure made in Note 1 to the financial statements concerning the Group and parent Company's ability to continue as a going concern. The directors are awaiting shareholder approval for the acquisition by WSP. Should this be unsuccessful, upon expiry of the Group's current banking facilities, the Group and parent Company would not be able to meet their debts as they fall due in the foreseeable future and the Directors would need to seek alternative sources of funding. These conditions, along with the other matters explained in Note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group and parent Company's ability to continue as a going concern. The Group and parent Company financial statements do not include the adjustments that would result if the Group and parent Company were unable to continue as a going concern.

Going Concern and banking facilities

The Group funds its activities through cash generated from operations supplemented with bank borrowings. The Group's principal banker is Bank of Scotland plc, part of the Lloyds Banking Group ("Lloyds"), which provides Sweett Group with overdraft and guarantee facilities. At 31 March 2016 the amount undrawn under the Group's credit lines was £3.1m (2015: £1.9m). The term loan, which stood at £5.625m at 31 March 2015, was repaid following the sale of the APAC and India businesses in October 2015. All liabilities to Bank of Scotland plc are shown as current liabilities as they are repayable on demand.

Due to the material one-off cash outflows following 31 March 2016 resulting from the conclusion of the SFO investigation, the closure of the MENA business and the claim from Currie & Brown (described in further detail in the Chief Executive's Review), the Group's cash position is likely to deteriorate materially in the short-term. In response, the Company entered into discussions with its banker regarding the renewal and/or renegotiation of its facilities which are due to expire on 30 June 2016 and the Board was exploring a number of options including a potential fundraising by the issue of new equity which was in progress at the time the Offer was made.

On 25 May 2016, a recommended cash offer for the Group was made by WSP at 35p per share. This is subject, inter alia, to shareholder approval at the shareholders' meetings on 29 June 2016. As a result, the current banking facilities, which are due to expire on 30 June 2016, have not yet been renewed. The Group's banker has however provided an assurance that they will extend the current banking facilities until 8 July 2016, the expected effective date of the Scheme and therefore the date of change of control.

The Sweett Directors have prepared a business plan and cash flow forecast for the period to 31 March 2018. The forecast contains certain assumptions about future sales, the gross margins achievable and the level of other operating expenses. In addition, the Directors have considered various downside sensitivities and management actions that could be undertaken to ensure the ongoing operation of the Group and the Company, based on an assumed level of funding.

Having reviewed the business plan and subject to the uncertainties described above, the Directors have a reasonable expectation that the Group and the Company will have adequate resources to continue operating for the foreseeable future. Therefore the Directors continue to adopt the going concern basis in preparing the financial statements and these financial statements do not include adjustments that would result if the Group and the Company were unable to continue as a going concern. Should the sale to WSP or another bona fide alternative purchaser not materialise, the Directors would need to seek alternative sources of funding in order for the Group and Company to be able to meet their debts as they fall due upon expiry of the Group's current banking facilities.

As a result, the Directors have concluded that pending the acquisition of Sweett Group by WSP being completed as expected or successful agreement to raise additional funding being reached, there exists a material uncertainty which may cast significant doubt over the ability of the Group and the Company to continue as a going concern.

2. Significant accounting policies

The principal accounting policies in the preparation of this financial information are set out below. These policies have been consistently applied to financial statements for the years ended 31 March 2016 and 31 March 2015, unless otherwise stated.

3 Segmental analysis

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as being the Board.

The Board considers Sweett Group's business and internal reporting by geography, being Europe, the Middle East and North Africa, India and Asia Pacific. All four categories generate revenues from the provision of quantity surveying, project management and specialist services/management consultancy with the exception of India which generates revenue from the provision of quantity surveying and project management consultancy only.

Following the sale of the APAC and India businesses and the decision to close the operations in the MENA region, from April 2016 the reporting to the board, which continues to be the chief operating decision-maker, will be based on the following regions: London, England & Wales, Scotland & Ireland, Mainland Europe and North America. The comparative amounts disclosures will be amended to reflect this new segmental basis.

The Board assesses performance based on a measure of earnings before interest, tax depreciation and amortisation (EBITDA). This measurement is net of intra-group trading balances and this basis excludes the effects of corporate and central costs. Interest income and expenditure are not included in the results for each operating segment that is reviewed by the Board.

The Group is domiciled in the UK. Its revenue from external customers in the UK is £51.4m (2015: £48.4m) and from external customers from other countries is £25.7m (2015: £39.9m).

Capital additions comprise the acquisition of property, plant and equipment and other intangible assets.

The assets of the segments include intangible assets, property, plant and equipment, assets from finance leases, financial assets, trade and other receivables, deferred tax assets and cash and cash equivalents. The liabilities comprise trade and other payables, current tax liabilities, financial liabilities, deferred tax liabilities, provisions and retirement benefit obligations.

The total of non-current assets other than financial instruments and deferred taxation located in the UK is £8.2m (2015: £13.4m) and the total of such non-current assets in other countries is £0.2m (2015: £3.0m).

Sales between segments are transacted at arm's length. External revenue reported to the Board is measured in a manner consistent with that in the income statement.

* Unallocated corporate costs comprise Directors' remuneration, advertising, public relations, corporate financing costs, legal and professional fees incurred by Sweett Group plc. The unallocated exceptional administrative expenses and Performance Share Plan charge are those relating specifically to Sweett Group plc.

* Unallocated corporate costs comprise Directors' remuneration, advertising, public relations, corporate financing costs, legal and professional fees incurred by Sweett Group plc. The unallocated exceptional administrative expenses and Performance Share Plan credit are those relating specifically to Sweett Group plc.

Analysis of the result of discontinued operations and the result recognised on the disposal of subsidiaries:

4. Net finance income/(costs)

5. Loss before taxation

Loss before taxation is stated after charging:

In presenting the Group's results the income statement separately identifies the following items within administrative expenses:

Exceptional administrative expenses are those that the Directors consider are of such unusual size or nature that they are required to be separately disclosed to allow the user of the financial statements to understand the underlying performance of the Group, notwithstanding that such items may be recurring in nature.

The Performance Share Plan of £nil (2015: credit of £0.3m) represents management's best estimate of the accrued cost of the live schemes at the balance sheet date.

6. Income tax expense

(a) Analysis of charge in the year

(b) Factors affecting the tax charge for the year:

The tax on the Group's loss before taxation differs from the UK statutory rate as follows:

Since the Group is reporting a loss before taxation with a charge to taxation, for both 2016 and 2015 there is no weighted average applicable tax rate.

A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016. The change announced is to reduce the main rate to 17% from 1 April 2020. Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 had already been substantively enacted on 26 October 2015.

As the change to 17% had not been substantively enacted at the balance sheet date its effects are not included in these financial statements. The overall effect of that change, if it had applied to the deferred tax balance at the balance sheet date, would be to reduce the deferred tax asset by an additional £30,000 and increase the tax expense for the year by £30,000.

The income tax (charged)/credited to equity during the year was as follows:

7. Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares. The weighted number of shares also excludes shares held by employee trusts.

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company's dilutive potential ordinary shares are share options. A calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Due to the loss making nature of the Group there was no dilutive effect in 2016.

There were no acquisitions during the years to 31 March 2016 or 2015.

The Group's goodwill arose predominantly on the acquisitions of Cyril Sweett Limited, Nisbet LLP, BurnsBridge Holdings Pty Limited and Widnell Limited and the Company's goodwill arose on the acquisitions of Cyril Sweett Limited

Goodwill is allocated to the Group's cash-generating units ("CGUs"), which are generally the smallest operating level at which the Directors believe that they can prepare appropriate cash flow forecasts, these are UK, Ireland, MENA, India, China and Hong Kong combined, Singapore and Australia. In October 2015 the Group disposed of its entire interest in its APAC and India businesses and the goodwill relating to the MENA CGU was fully impaired in the previous financial year. The remaining recoverable amount, which approximates to the Net Book Value, of the UK and Ireland CGUs was determined based on value in use calculations. The calculations used were based on short-term financial projections approved by management. The projections indicated that the value in use of each CGU exceeded the carrying amount of the CGU, including goodwill.

The financial projections used in these calculations were based on the following key data and assumptions:

1. Budgeted revenue and profit after taxation for 2017, as agreed by the Board, is used for the basis of determining projected net profit margins and hence anticipated future cash flows. The Group budget is based on a combination of past performance, the order book and an assessment of future market conditions.

2. Net profit margins were projected forward having regard to relative markets and risk profiles and a growth factor of 2.5% was applied. These cash flows were projected forward for a total of five years plus a discounted terminal value at five years, with 0% growth rate.

3. Maintaining gross profit margins and net profit margins at 2017 budgeted levels.

4. Applying the pre-tax discount rate of 12% (the Group's pre-tax weighted average cost of capital (WACC)). The WACC is calculated using the capital asset pricing model according to market data and the level of debt to equity in existence.

5. Sensitivity analysis on the pre-tax discount rate and growth rates was performed to identify the level of headroom in the calculation for each CGU. A range of changes to assumptions was tested including: an increase of two percentage-points being applied to the pre-tax discount rate; reducing growth rates by one percentage-point; and assuming zero growth. Previous operating performance was also considered in the context of determining the forecast profits used in the calculations.