1 Dec 2009 07:00
1 December 2009
Cyril Sweett Group plc
("Cyril Sweett" or "the Group")
Interim results for the six months ended 30 September 2009
Cyril Sweett is an international construction and property consultancy providing quantity surveying, project management, management consultancy and specialist services, operating in the UK, mainland Europe, the Middle East, India and Australasia. The Group works with and advises government agencies, private sector developers, occupiers, investors and construction companies, undertaking infrastructure and property projects across a diverse range of market sectors.
The Group is pleased to announce its unaudited interim results for the six months ended 30 September 2009.
Highlights
Chief Executive Officer Dean Webster said:
"Cyril Sweett remains on track to achieve its expectations for the current year despite some of its markets being adversely affected by the economic downturn.
"Since the downturn from September 2008, which affected particularly the commercial market, we have realised annualised cost savings totalling £11m and in the year we have generated cash from operations of £5.6m. We continue to focus on cash management and cost control whilst exploring new market opportunities and investing in aspects of the business that will enhance our future revenue. The combination of the financial strength of the business and our banking facilities leaves us confident of making good progress in 2010. The business is well positioned for the longer term and our confidence is evidenced by the declaration of an interim dividend of 0.8 pence per share."
Enquiries
| Cyril Sweett Group plc Dean Webster, Chief Executive Officer Chris Goscomb, Chief Financial Officer Caroline Covill, Head of Communications | 020 7061-9303 020 7061-9520 020 7061-9102 |
| Brewin Dolphin Investment Banking Andrew Kitchingman Sean Wyndham-Quin | 0845 213-4787 0845 213-4747 |
| Financial Dynamics Billy Clegg Georgina Bonham | 020 7831-3113 |
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Review of Operations
Our strategy of diversification, both by sector and geography, has continued to be successful in ensuring that the business remains in a defensive shape during the downturn. We have quickly adapted to changing market conditions in the UK and have continued to strengthen our international presence during the period. In the Middle East, North Africa and Asia, we have secured a number of significant projects and expect more awards.
In the UK we have maintained a diversified balance between private and public sector work, with the split currently standing at 40%/60%. Public sector has held up well during the period and whilst there is uncertainty around levels of future public expenditure with the forthcoming UK election, we are confident that our strong exposure to diverse sectors, coupled with the Group's flexibility to adapt to changing areas of demand, places us in a strong position to weather the downturn and are prepared for the upturn.
We proceed into the second half of the year with an order book of £64m and a strong balance sheet with minimal net debt. The Group has secured some important framework agreements which are not included in the order book. We will continue with a sharp focus on cost control in order to maintain our margins and profitability. Cash management will be central to our strategy going forward and we will persist with our emphasis on cash collection. We have improved cash management and our WIP/debtor days are down from 109 at 30 September 2008 to 80 at 30 September 2009 and in those 12 months, total cash generated from operations has amounted to £5.6m after making £0.5m of contributions to the closed defined benefit pension scheme.
Our PPP Investment business continues to perform well and we remain focused on continuing to grow this business across a wider sector base.
UK and Ireland operations
Public sector
| Proportion of Group revenue | ||
| H1 2009 | H1 2008 | |
| Education | 13.9% | 12.2% |
| Health | 14.7% | 11.3% |
| Transport & infrastructure | 7.6% | 6.2% |
| Prisons | 3.2% | 2.9% |
| Other | 6.5% | 12.7% |
| Total | 45.9% | 45.3% |
The public sector has held up strongly during the period, and our strong foothold in education and health (assisted by the acquisition of Nisbet) has contributed significantly to Group revenue, with both sectors increasing as a proportion of total revenue, compared with the same period last year.
Education continues to be a key focus as the Group is heavily involved in the Building Schools for the Future programme. Whilst the sector is at risk from a reduction in future government expenditure, it still remains a key growth area for Cyril Sweett and we are confident that we can maintain a healthy market share. We expect that a reduction in government spending may well lead to increased PFI and/ or debt finance, or self-funded development, for which we are well positioned. We also expect that we will see an increase in refurbishment projects, to take account of a reduction in capital spend, across all forms of education. Key projects secured in the period included: Exeter College; University of Glasgow; University of Edinburgh; Anglia Ruskin University; Coltness High School.
Health performed well in the first six months of the year and new work secured in the period is consistent with our expectations. We have a strong pipeline of work which importantly is diversified and contains a good balance of traditional procurement, PFI, P21 and LIFT projects. Whilst the market is extremely competitive, we shall continue to secure a good share as we remain a major player in the sector. Key projects secured in the period include: South East London NHS Trust's three major hospitals - Princess Royal Hospital Bromley, Queen Elizabeth Hospital Woolwich and Sidcup Hospital; Migdale Community Hospital; NHS Grampian Cancer Treatment Centre; Lister Hospital.
We continue to generate work in transport and infrastructure, particularly in the rail sector, and we are experiencing increasing workload through our agreement with BAA. On rail, Thameslink remains a strong generator of revenue. Opportunities with specialist rail systems contractors are also evident and we have recently secured a new framework agreement with Thales for the next 2 years. We also anticipate a considerable volume of work from light rail and the tube over the next few years. Key projects secured during the period include: Heathrow airport Terminal 3; London underground.
Other public sector work comprises work for governments and local authorities in areas such as prisons, defence and residential which have seen good levels of activity.
17% of Group revenue is derived from framework agreements (H1 2008: 14%). The trend has continued this year for public sector to use frameworks as a means to deliver capital programmes. The most significant national frameworks we have been awarded onto in the past six month period are: Express Lift, Royal Mail Group, Network Housing, Medical Research Council NHS Trusts, Cambridge University Hospitals NHS Foundation Trust, North Essex Partnership NHS Foundation Trust, Local Authorities, Inverclyde Council and Sheffield City Council. We have also had our framework with SWRDA extended for another 4 years.
Private sector
| Proportion of Group revenue | ||
| H1 2009 | H1 2008 | |
| Retail | 9.4% | 15.9% |
| Commercial | 17.3% | 11.5% |
| Hotels and leisure | 4.4% | 10.6% |
| Total | 31.1% | 38.0% |
Output in the retail sub-sector fell sharply in the first half of the year and new orders have declined over the same period. However, food retailers continue to invest in new and existing stores. Key projects secured include: Tesco projects at Bromley-by-Bow, Saville Street, Sheffield and Woolwich; Castle Piccadilly; Fareham shopping centre; Selfridges in London.
Whilst the commercial office market remains subdued we have noticed more activity over the past two months as companies take this opportunity to review their framework arrangements and preferred supplier lists. There is also a strong move towards refurbishment and recycling of stock and driving down costs. Sustainability is also mainstream and attracting more interest especially where it can deliver energy savings. Key projects secured include: Network Rail, York office; BBC relocation to Salford; Bank of England and JP Morgan service upgrades; Mapeley Estates Ltd.
Within the Hotels and Leisure sector demand is currently weak. However, as always there are some players in these markets who see the recession as an opportunity for expansion. Trends are also emerging such as an increased demand for budget hotels at the expense of mid-market hotels. Key projects secured include: Moorgate Hotel, London; London Eye Capsule Upgrade Project.
Overseas operations
We have a clear strategy to expand internationally to further diversify the business. Given our existing strong international foothold, our expansion plans are underpinned by the high barriers to entry in UK-style quantity surveying and project management expertise.
We are focused on targeting territories where management perceive long term growth opportunities. We have successfully reallocated resource into buoyant markets in the Middle East to offset the downturn and potential funding issues in Dubai. We are seeing strong growth in Saudi Arabia and have strengthened our business development resource in the area. We plan to open further offices throughout the Middle East and North Africa where major project opportunities are opening up to the Group.
Overseas activity levels
| Proportion of Group revenue | ||
| H1 2009 | H1 2008 | |
| Australia | 3.5% | 7.7% |
| Asia | 2.5% | 2.6% |
| Europe | 1.3% | 1.5% |
| Middle East | 14.0% | 4.9% |
| Total | 21.3% | 16.7% |
The Australian government has committed to providing stimulus for the construction industry. This includes support for infrastructure, which is the fastest growing sector of the Australian construction industry. Cyril Sweett is well placed to benefit from the growth in this market.
Key projects secured in Australia include: Hudsons store; BUPA aged care facility; Royal Northshore Hospital.
In terms of our Asian activities, our Singapore operations have performed well despite challenging market conditions with the construction market expected to recover in 2011. In Hong Kong we have obtained business registration and plan to commence operations using this base as a bridgehead into the wider Chinese market.
Key projects secured in Asia include: a new medical centre in Malaysia: Madame Tussauds Exhibition Centre in Bangkok.
Spain's construction sector is suffering in the wake of the global recession, having been one of the hardest hit countries in Western Europe. However, construction accounts for a significant portion of the Spanish economy and a high level of spending is expected in the public health, transportation and energy sectors between now and 2013. Our Spanish operations have performed particularly well in the current market.
In response to increasingly difficult market conditions, the Group has made the decision to restructure its French operations.
Key projects secured in Europe include: New Data Centre in Paris; Tower Feasibility Study in Paris; Retail Centre in Las Palmas in Spain; Retail Centre Gran Canaria in Spain.
The Group continues to benefit from major infrastructure investment in the Middle East region where we are working on a number of large projects and see a strong pipeline of future projects. This will ensure continuing activity in the region. Saudi Arabia continues to have a robust construction outlook, particularly in the commercial sector.
Key projects secured in the Middle East include: CMA Tower in Riydah; Westown/Eastown development in Egypt; Al Ain Hospital in Abu Dhabi.
Investment activity
The Investment business continues to gain increasing exposure with revenues for consultancy activities of £0.5m, accounting for 1.7% of Group revenues. We are delighted to be part of the consortium Express LIFT Investments Ltd (ELIL), which has been appointed by NHS Cumbria to form a Local Improvement Finance Trust (LIFT) company to finance and redevelop the county's existing community hospitals. The new LIFT company successfully reached financial close on 19 November 2009, and will deliver an initial pipeline of projects worth around £85 million over the first six years of the 20-year partnership.
There is an encouraging pipeline of projects currently at various short-listing stages.
Results
Revenue for the period was £32.7m, (H1 2008: £41.0m). Operating profit before exceptionals was £2.0m, (H1 2008: £3.4m) and after exceptionals, £1.5m. Operating profit margin before exceptionals was 6.0% (H1 2008: 8.3%) and after exceptionals 4.5%. Profit before tax (after exceptionals of £0.5m) was £1.3m (H1 2008: 3.3m). Exceptional costs are detailed at note 3. One-off costs absorbed within operating profits include a provision in respect of a debt in arbitration and exchange losses (combined value of £0.4m). Basic earnings per share before exceptionals was 2.3p (H1 2008: 4.2p), and after exceptionals 1.7p. At the period end the Group had net borrowings of £0.4m (H1 2008: 0.2m). Cash generated by operations during the period amounted to £2.2m (H1 2008: 0.1m absorbed) and the Group has committed undrawn term bank facilities, at the date of reporting, of approximately £3.2m which extend to 2013.
As a sign of its confidence in the resilience of the business, the Board has declared an interim dividend of 0.8 pence per share (H1 2008: 0.9 pence per share) payable on 11 January 2010 to shareholders on the register at 11 December 2009.
Principal risks and uncertainties
The Group operates a structured risk management and internal audit process which seeks to identify, evaluate and prioritise risk, review mitigation activities, and audit compliance with the Group's procedures. The principal risks and uncertainties facing the Group relate to reputation, changes in government policy and spending, retention of key employees, health, safety and the environment, foreign currency, professional negligence, business continuity, closed defined benefit pension scheme and contract pricing. The assessment of these risks and uncertainties has not altered since 31 March 2009 and they are described in more detail in the Annual Report for the year ended 31 March 2009.
Strategy
The Board has recently re-focused the business strategy to align with identified opportunities. Our strategy to 2012 will therefore focus on five core elements:-
We will deliver these objectives through organic growth and through carefully selected acquisitions in order to accelerate our advance in new markets or locations.
Management and staff
The Group has a strong experienced management team to steer the business through continued difficult conditions and benefit from the upturn. The Board would like to say that it really appreciates the hard work and extra effort that the management and staff are making to help to ensure that the Group succeeds during these challenging times.
Outlook
Cyril Sweett remains on track to achieve its expectations for the current year despite some of its markets being adversely affected by the economic downturn.
Since the downturn from September 2008, which affected particularly the commercial market, we have realised annualised cost savings totalling £11m and in the year we have generated cash from operations of £5.6m. We continue to focus on cash management and cost control whilst exploring new market opportunities and investing in aspects of the business that will enhance our future revenue. The combination of the financial strength of the business and our banking facilities leaves us confident of making good progress in 2010. The business is well positioned for the longer term and our confidence is evidenced by the declaration of an interim dividend of 0.8 pence per share.
The financial information contained in this announcement has not been audited. Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements.
Cyril Sweett Group plc
Consolidated Income Statement (unaudited)
for the six months ended 30 September 2009
|
| Notes | 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | ||
| £'000 | £'000 | £'000 | ||||
| Revenue | 2 | 32,713 | 41,006 | 78,912 | ||
| Cost of sales | (22,108) | (27,776) | (54,043) | |||
|
| ||||||
| Gross profit | 10,605 | 13,230 | 24,869 | |||
| Administrative expenses before exceptional expenses | (8,629) | (9,838) | (18,502) | |||
| Exceptional administrative expenses | 3 | (391) | - | (3,761) | ||
| Amortisation of acquired intangibles | (103) | - | (201) | |||
| Total administrative expenses | (9,123) | (9,838) | (22,464) | |||
|
| ||||||
| Operating profit before exceptional administrative expenses | 1,976 | 3,392 | 6,367 | |||
| Exceptional administrative expenses | 3 | (391) | - | (3,761) | ||
| Amortisation of acquired intangibles | (103) | - | (201) | |||
| Operating profit | 1,482 | 3,392 | 2,405 | |||
| Finance income | 12 | 207 | 249 | |||
| Finance cost | (189) | (282) | (452) | |||
| Net finance expense | (177) | (75) | (203) | |||
|
| ||||||
| Profit before taxation | 1,305 | 3,317 | 2,202 | |||
| Income tax expense | 4 | (352) | (895) | (568) | ||
| Profit for the period from continuing operations attributable to owners of the parent | 953 | 2,422 | 1,634 |
| Earnings per share: | ||||||
| Basic earnings per share (pence) | 6 | 1.7 | 4.2 | 2.9 | ||
| Diluted earnings per share (pence) | 6 | 1.7 | 4.0 | 2.8 |
Cyril Sweett Group plc
Consolidated Statement of Comprehensive Income (unaudited)
for the six months ended 30 September 2009
| Notes | 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | |||
| £'000 | £'000 | £'000 | ||||
| Profit after income tax for the period | 953 | 2,422 | 1,634 | |||
| Other comprehensive income: | ||||||
| Foreign exchange translation differences | (238) | 78 | 690 | |||
| Available for sale financial assets: | ||||||
| - Valuation loss taken to equity | - | - | (325) | |||
| - Deferred tax on valuation loss | - | - | 91 | |||
| Actuarial loss on pension scheme | (1,223) | (872) | (1,727) | |||
| Deferred tax on actuarial loss | 342 | 244 | 484 | |||
| Other comprehensive expense for the period, net of tax | (1,119) | (550) | (787) | |||
| Total comprehensive (loss) / income for the period attributable to owners of the parent | (166) | 1,872 | 847 |
Cyril Sweett Group plc
Consolidated Statement of Financial Position (unaudited)
| Notes | 30 September 2009 (unaudited) | 30 September 2008 (unaudited) | 31 March 2009 (audited) | ||||
| £'000 | £'000 | £'000 | |||||
| Non-current assets | |||||||
| Goodwill | 11,113 | 13,007 | 10,572 | ||||
| Other intangible assets | 1,845 | 496 | 1,920 | ||||
| Property, plant and equipment | 1,568 | 1,911 | 1,862 | ||||
| Financial assets | 962 | 947 | 627 | ||||
| Deferred income tax asset | 1,173 | 950 | 817 | ||||
| Total non-current assets | 16,661 | 17,311 | 15,798 | ||||
| Current assets | |||||||
| Trade and other receivables | 24,389 | 31,688 | 27,744 | ||||
| Cash and cash equivalents | 3,451 | 2,406 | 3,818 | ||||
| 27,840 | 34,094 | 31,562 | |||||
| Total assets | 44,501 | 51,405 | 47,360 | ||||
| Current liabilities | |||||||
| Financial liabilities | (202) | (249) | (277) | ||||
| Trade and other payables | (11,099) | (14,957) | (13,300) | ||||
| Current income tax liabilities | - | (639) | - | ||||
| Total current liabilities | (11,301) | (15,845) | (13,577) | ||||
| Net current assets | 16,539 | 18,249 | 17,985 | ||||
| Total assets less current liabilities | 33,200 | 35,560 | 33,783 | ||||
| Non-current liabilities | |||||||
| Financial liabilities | (3,609) | (2,333) | (3,431) | ||||
| Trade and other payables | - | (3,155) | (643) | ||||
| Deferred income tax liability | (77) | (168) | (77) | ||||
| Retirement benefit obligations | (2,349) | (646) | (1,290) | ||||
| Total non-current liabilities | (6,035) | (6,302) | (5,441) | ||||
| Net assets | 27,165 | 29,258 | 28,342 | ||||
| Equity | |||||||
| Share capital | 9 | 5,759 | 5,754 | 5,759 | |||
| Share premium | 9 | 11,955 | 11,971 | 11,955 | |||
| Treasury shares | 10 | (349) | (1,340) | (118) | |||
| Share option reserve | 312 | 657 | 249 | ||||
| Retained earnings | 9,488 | 12,216 | 10,497 | ||||
| Total equity shareholders' funds | 27,165 | 29,258 | 28,342 |
Cyril Sweett Group plc
Consolidated Statement of Changes in Equity (unaudited)
| Share capital £'000 | Share premium £'000 | Treasury shares £'000 | Share option reserves £'000 | Retained earnings £'000 | Total Equity £'000 | |
| At 1 April 2008 | 5,534 | 9,987 | (341) | 615 | 10,806 | 26,601 |
| Exchange differences | - | - | - | - | 78 | 78 |
| Profit for the period | - | - | - | - | 2,422 | 2,422 |
| Dividends | - | - | - | - | (920) | (920) |
| Actuarial loss | - | - | - | - | (872) | (872) |
| Deferred tax on actuarial loss | - | - | - | - | 244 | 244 |
| Purchase of shares by the EBT less exercise price of options exercised over these shares | - | - | - | - | (192) | (192) |
| Employee share option schemes | ||||||
| - value of services provided | - | - | - | 50 | - | 50 |
| - exercise of awards | - | - | - | (8) | 8 | - |
| New shares issued during the year | 220 | 1,984 | - | - | - | 2,204 |
| Acquisitions during the period | - | - | (999) | - | - | (999) |
| Revaluation of shares held in treasury | - | - | - | - | 642 | 642 |
| At 30 September 2008 | 5,754 | 11,971 | (1,340) | 657 | 12,216 | 29,258 |
| Exchange differences | - | - | - | - | 612 | 612 |
| Loss for the period | - | - | - | - | (788) | (788) |
| Dividends | - | - | - | - | (510) | (510) |
| Actuarial loss | - | - | - | - | (855) | (855) |
| Deferred tax on actuarial loss | - | - | - | - | 240 | 240 |
| Available for sale investments: | ||||||
| - valuation loss taken to equity | - | - | - | - | (325) | (325) |
| - deferred tax on valuation loss | - | - | - | - | 91 | 91 |
| Employee share option schemes | ||||||
| - value of services provided | - | - | - | 55 | - | 55 |
| - exercise of awards | - | - | - | (4) | 4 | - |
| Deferred tax on unexercised options | - | - | - | (459) | - | (459) |
| Purchase of shares by the EBT less exercise price of options exercised over these shares | - | - | - | - | (70) | (70) |
| Cost of treasury shares less value transferred in settlement of deferred acquisition consideration | (202) | (202) | ||||
| New shares issued during the period | 5 | 14 | - | - | - | 19 |
| Issue costs | - | (30) | - | - | - | (30) |
| Disposals during the period | - | - | 1,222 | - | - | 1,222 |
| Revaluation of shares held in treasury | - | - | - | - | 84 | 84 |
| At 31 March 2009 | 5,759 | 11,955 | (118) | 249 | 10,497 | 28,342 |
| Exchange differences | - | - | - | - | (238) | (238) |
| Profit for the period | - | - | - | - | 953 | 953 |
| Dividends | - | - | - | - | (830) | (830) |
| Actuarial loss | - | - | - | - | (1,223) | (1,223) |
| Deferred tax on actuarial loss | - | - | - | - | 342 | 342 |
| Purchase of shares by the EBT less the price attributable to the appropriation of shares under the terms of the Share Incentive Plan | - | - | - | - | (13) | (13) |
| Employee share option schemes | ||||||
| - value of services provided | - | - | - | 63 | - | 63 |
| Acquisitions during the period | - | - | (231) | - | - | (231) |
| At 30 September 2009 | 5,759 | 11,955 | (349) | 312 | 9,488 | 27,165 |
Cyril Sweett Group plc
Consolidated Statement of Cash Flows
| Notes | 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | ||||
| £'000 | £'000 | £'000 | |||||
| Cash flows from operating activities | |||||||
| Cash flows from operations | 8a | 2,537 | 815 | 3,912 | |||
| Interest received | 12 | 207 | 210 | ||||
| Interest paid | (133) | (113) | (240) | ||||
| Income taxes paid | (216) | (998) | (1,767) | ||||
| Net cash generated from / (used in) operating activities | 2,200 | (89) | 2,115 | ||||
| Cash flows from investing activities | |||||||
| Proceeds on disposal of property, plant and equipment | - | - | 4 | ||||
| Purchase of property, plant and equipment | (200) | (710) | (1,229) | ||||
| Purchase of computer software | (13) | (209) | (347) | ||||
| (Increase) / decrease in financial assets | (335) | (6) | 38 | ||||
| (Increase) / decrease in treasury shares | (231) | (272) | 223 | ||||
| Payment in respect of acquisition deferred consideration | 7 | (681) | - | - | |||
| Acquisition of subsidiaries, net of cash acquired | - | (3,439) | (4,228) | ||||
| Net cash used in investing activities | (1,460) | (4,636) | (5,539) | ||||
| Cash flows from financing activities | |||||||
| Dividends paid | 5 | (830) | (920) | (1,430) | |||
| Repayments of borrowings | (164) | (555) | (672) | ||||
| Repayments of obligations under finance leases | (4) | (86) | (115) | ||||
| Purchase of own shares in satisfaction of acquisition consideration | - | - | (881) | ||||
| Purchase of own shares in satisfaction of share options | (13) | (371) | (262) | ||||
| New bank loans raised | - | 2,333 | 3,606 | ||||
| Net cash (used in) / generated from financing activities | (1,011) | 401 | 246 | ||||
| Net decrease in cash, cash equivalents and bank overdraft | 8b | (271) | (4,324) | (3,178) | |||
| Cash and cash equivalents at beginning of period | 3,818 | 6,730 | 6,730 | ||||
| Exchange gains on cash and cash equivalents | (96) | - | 266 | ||||
| Cash and cash equivalents at end of period | 3,451 | 2,406 | 3,818 |
Cyril Sweett Group plc
Notes to the Financial Information
1. Basis of preparation
General information
Cyril Sweett Group plc is a company incorporated and domiciled in the United Kingdom. The address of the registered office is 60 Gray's Inn Road, London, WC1X 8AQ. The principal activities of the Group include the provision of construction cost consultancy, project management and other specialised consultancy services, including building surveying.
This financial information is presented in pounds sterling, the currency of the primary economic environment in which the group operates. The group comprises the company and entities controlled by the company (its subsidiaries).
Basis of preparation
The condensed consolidated financial information presented is for the six month periods to 30 September 2009 and 2008 and the full year to 31 March 2009.
The most recent statutory accounts of the Group, prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, are for the year ended 31 March 2009 which have been delivered to the Registrar of Companies and on which the auditors gave an unqualified opinion.
This condensed interim consolidated financial information has been prepared in accordance with the requirements of the AIM Rules and in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union and is presented on a basis consistent with the accounting policies adopted in the consolidated financial information of Cyril Sweett Group plc for the year ending on 31 March 2009, with the exception of the adoption of IAS 1 (Revised); Presentation of Financial Statements and IFRS 8; Operating Segments, both of which are described below. It does not constitute accounts as defined by section 434 of the Companies Act 2006. This condensed interim consolidated financial information has not been reviewed or audited.
Estimates and judgements
The preparation of accounts in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reported period. These estimates are based on historical experience and various other assumptions that management and directors believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.
Areas comprising critical judgements that may significantly affect the Group's earnings and financial position are revenue recognition, valuation of intangibles including goodwill, restructuring activities, provisions for pensions, income taxes, and share-based payments.
Accounting policies
Except as described below, the accounting policies applied in these consolidated interim financial statements are consistent with the Group's annual financial statements for the year ended 31 March 2009, as described in those financial statements.
The following standards, amendments and interpretations are mandatory for the first time for the financial year beginning 1 March 2009:
IAS1 (amendment) 'Presentation of financial statements'. The Group has adopted the 'two statement' approach and has presented both a consolidated income statement and a consolidated statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.
IAS23 (amendment) 'Borrowing costs'. This amendment does not have an impact on the Group financial statements as its requirements are already being applied.
IFRIC 15 'Agreements for the Construction of Real estate'. This standard does not have any impact on the Group financial statements.
IFRS8 'Operating Segments'. IFRS 8 replaces IAS14 'Segmental Reporting' and requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This standard has only a limited impact on the Group as the reporting segments were already presented on that basis.
The Group also adopted the following new and amended IFRS and IFRIC interpretation during the period which have an effect on the financial performance or position of the Group in the current or prior periods:
IFRS2 (amendment) 'Share based payments'. Impact of changes to vesting conditions. These were not material;
IFRIC16 'Hedges of a new investment in a foreign operation'. This standard does not have a material impact on the Group's financial statements.
The following standards, amendments and interpretations are mandatory for the first time for the current accounting period, but are not relevant for the Group's operations:
IAS 16 (amendment) 'Property, plant and equipment (and consequential amendment to IAS 7, 'Statement of cash flows');
IAS 29 (amendment) 'Financial reporting in hyperinflationary economies';
IAS 40 (amendment) 'Investment property' (and consequential amendments to IAS 16);
IAS 41 (amendment) 'Agriculture'.
The following new standards, amendments and interpretations have been issued, but are not effective for the financial period beginning 1 March 2009 and have not been early adopted:
IAS 28 'Investments in Associates' and IAS 31 'Interests in Joint Ventures', effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009;
IFRIC 17 'Distribution of non cash assets to owners', effective for annual accounting period beginning on or after 1 July 2009;
IFRIC 18 'Transfer of assets from customers', effective for annual accounting period beginning on or after 1 July 2009.
Non GAAP measures
Amortisation of identifiable intangible assets (excluding software) acquired on business combinations, is shown separately within the consolidated income statement since it is expected to increase in value with future business combinations. This denotes a change in accounting policy.
2. Segmental analysis
The Chief Operating Decision Maker has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on the reports used by the Board.
The Board considers Cyril Sweett's business by geography, being UK and Ireland and other overseas. Both categories generate revenues from the provision of quantity surveying, project management and specialist services / management consultancy.
The Board assesses performance based on a measure of earnings before interest and tax (EBIT). 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 result for each operating segment that is reviewed by the Board. Comparative information has been restated on the adoption of IFRS 8.
|
| 6 months | 6 months | |||||||||
| to 30 | to 30 | Year to | |||||||||
| September | September | 31 March | |||||||||
| 2009 | 2008 | 2009 | |||||||||
| (unaudited) | (unaudited) | (audited) | |||||||||
| UK and Ireland | Other overseas | Total | UK and Ireland | Other overseas | Total | UK and Ireland | Other overseas | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Revenue by geographical regions | |||||||||||
| External sales | 25,661 | 7,052 | 32,713 | 34,150 | 6,856 | 41,006 | 66,635 | 12,277 | 78,912 | ||
| Gross profit | 8,576 | 2,029 | 10,605 | 11,050 | 2,180 | 13,230 | 20,598 | 4,271 | 24,869 | ||
| Administrative expenses before exceptional expenses | (6,087) | (2,277) | (8,364) | (8,147) | (1,186) | (9,333) | (14,229) | (3,693) | (17,922) | ||
| Exceptional administrative expenses | (391) | - | (391) | - | - | - | (3,553) | (208) | (3,761) | ||
| Amortisation of acquired intangibles | (48) | (55) | (103) | - | - | - | (96) | (105) | (201) | ||
| Total administrative expenses | (6,526) | (2,332) | (8,858) | (8,147) | (1,186) | (9,333) | (17,878) | (4,006) | (21,884) | ||
| Segment results | 2,050 | (303) | 1,747 | 2,903 | 994 | 3,897 | 2,720 | 265 | 2,985 | ||
| Unallocated corporate costs | (265) | (505) | (580) | ||||||||
| Finance income | 12 | 207 | 249 | ||||||||
| Finance costs | (189) | (282) | (452) | ||||||||
| Profit before tax | 1,305 | 3,317 | 2,202 | ||||||||
| Taxation | (352) | (895) | (568) | ||||||||
| Profit for the period | 953 | 2,422 | 1,634 |
2. Segmental analysis (continued)
|
| 6 months | 6 months | Year | ||||||||
| to 30 | to 30 | ended | |||||||||
| September | September | 31 March | |||||||||
| 2009 | 2008 | 2009 | |||||||||
| (unaudited) | (unaudited) | (audited) | |||||||||
| UK and Ireland | Other overseas | Total | UK and Ireland | Other overseas | Total | UK and Ireland | Other overseas | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Other information | |||||||||||
| Capital additions | 37 | 176 | 213 | 731 | 162 | 893 | 2,145 | 1,377 | 3,522 | ||
| Depreciation and amortisation | 365 | 217 | 582 | 505 | 33 | 538 | 1,111 | 243 | 1,354 | ||
| Balance sheet | |||||||||||
| Assets | |||||||||||
| Segmental assets | 32,173 | 11,155 | 43,328 | 41,789 | 8,666 | 50,455 | 35,924 | 10,619 | 46,543 | ||
| Unallocated corporate assets | 1,173 | 950 | 817 | ||||||||
| Consolidated total assets | 44,501 | 51,405 | 47,360 | ||||||||
| Liabilities | |||||||||||
| Segmental liabilities | 9,964 | 3,561 | 13,525 | 12,588 | 6,338 | 18,926 | 11,511 | 3,799 | 15,310 | ||
| Unallocated corporate liabilities | 3,811 | 3,221 | 3,708 | ||||||||
| Consolidated total liabilities | 17,336 | 22,147 | 19,018 |
The assets of the segments include intangible assets, property, plant and equipment, assets from finance leases, financial assets, investments accounted for using the equity method, trade receivables and other receivable and cash and cash equivalents. The liabilities comprise trade and other payables and retirement benefit obligations. Unallocated corporate assets comprise deferred tax assets and unallocated corporate liabilities comprise financial liabilities and current income tax liabilities.
Segment assets and liabilities are reconciled to entity assets and liabilities as follows:
| 6 months | 6 months | Year | ||||||
| to 30 September | to 30 September | ended 31 March | ||||||
| 2009 | 2008 | 2009 | ||||||
| (unaudited) | (unaudited) | (audited) | ||||||
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Segment assets/liabilities | 43,328 | 13,525 | 50,455 | 18,926 | 46,543 | 15,310 | ||
| Unallocated: | ||||||||
| Deferred tax asset | 1,173 | - | 950 | - | 817 | - | ||
| Current tax | - | - | - | 639 | - | - | ||
| Current borrowings | - | 196 | - | 205 | - | 270 | ||
| Non-current borrowings | - | 3,605 | - | 2,333 | - | 3,424 | ||
| Current obligations under finance leases | - | 6 | - | 37 | - | 7 | ||
| Non-current obligations under finance leases | - | 4 | - | 7 | - | 7 | ||
| Total | 44,501 | 17,336 | 51,405 | 22,147 | 47,360 | 19,018 |
2. Segmental analysis (continued)
|
| 6 months to 30 September 2009 (unaudited) £'000 | 6 months to 30 September 2008 (unaudited) £'000 | Year ended 31 March 2009 (audited) £'000 | |||
| Revenue by business activity | ||||||
| Quantity Surveying | 13,708 | 18,767 | 39,172 | |||
| Project Management | 13,741 | 17,328 | 31,118 | |||
| Specialist Services / Management Consultancy | 5,264 | 4,911 | 8,622 | |||
| 32,713 | 41,006 | 78,912 | ||||
| Revenue by geographical destination | ||||||
| United Kingdom | 25,192 | 29,505 | 58,977 | |||
| Republic of Ireland | 435 | 2,135 | 2,853 | |||
| Other overseas | 7,086 | 9,366 | 17,082 | |||
| 32,713 | 41,006 | 78,912 | ||||
£3.9m of the other overseas turnover for the year ended 31 March 2009 and £1.3m for the 6 months ended 30 September 2008 relates to overseas turnover previously emanating from the UK which is now conducted overseas.
3. Exceptional administrative costs
Exceptional administrative expenses of £391,000 relate to expenditure incurred on a PFI project abandoned by Norfolk County Council after preferred bidder status had been achieved.
4. Income taxes
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. This is expected to be 27% for the full year on continuing operations (30 September 2008 26.9% and 31 March 2009: 25.8%) representing the benefit of the reduction in the UK corporation tax rate and the increased proportion of the Group's profits earned in lower tax jurisdictions.
5. Dividends
| 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | ||||
| £'000 | £'000 | £'000 | ||||
| Interim dividend paid | - | - | 510 | |||
| Final dividend paid | 830 | 920 | 920 | |||
| 830 | 920 | 1,430 |
The board has declared an interim dividend in respect of the half year of 0.8p per share (2008: 0.9p), which is not reflected in this financial information. The interim dividend is payable on 11 January 2010 to ordinary shareholders on the register at the close of business on 11 December 2009 and will be recorded in the financial statements for the year ended 31 March 2010. During the period the final dividend of 1.50p per share (2008: 1.60p per share) in respect of the year ended 31 March 2009 was paid. This amounted to £863,735 (2008: £920,637). Dividends in respect of shares held in treasury amounted to £33,487.
6. Earnings per share
| 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | ||||
| £'000 | £'000 | £'000 | ||||
| Profit for the financial period attributable to equity shareholders | 953 | 2,422 | 1,634 | |||
| Number | Number | Number | ||||
| Weighted average number of shares in issue | 56,240,116 | 57,164,795 | 57,184,008 | |||
| Basic earnings per share (pence) | 1.7 | 4.2 | 2.9 | |||
| Weighted average number of shares in issue | 56,240,116 | 57,164,795 | 57,184,008 | |||
| Diluted effect of share options | 1,184,933 | 3,068,383 | 1,345,095 | |||
| 57,425,049 | 60,233,178 | 58,529,103 | ||||
| Diluted earnings per share (pence) | 1.7 | 4.0 | 2.8 |
7. Business combinations
The Group made no acquisitions during the 6 month period to 30 September 2009 but it settled deferred acquisition consideration of £661,000 in respect of the acquisition of Nisbet LLP and £20,000 in respect of the acquisition of Roger Richards Partnership. Both of these acquisitions were made during the year ended 31 March 2009.
8a. Cash flow from operations
| 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | |||
| £'000 | £'000 | £'000 | |||
| Operating profit | 1,482 | 3,392 | 2,405 | ||
| Adjustments for: | |||||
| Depreciation of property, plant and equipment | 469 | 510 | 874 | ||
| Amortisation of intangible assets (including software) | 113 | 28 | 480 | ||
| Loss on disposal of plant and equipment | - | - | 21 | ||
| Share based payments | 63 | 50 | 105 | ||
| Operating cash flows before movements in working capital | 2,127 | 3,980 | 3,885 | ||
| Decrease / (increase) in receivables | 3,205 | (4,968) | (328) | ||
| (Decrease) / increase in payables | (2,795) | 1,803 | 355 | ||
| 2,537 | 815 | 3,912 |
8b. Reconciliation of net cash flow to
movement in net debt
| 6 months to 30 September 2009 (unaudited) | 6 months to 30 September 2008 (unaudited) | Year ended 31 March 2009 (audited) | |||
| £'000 | £'000 | £'000 | |||
| Net decrease in cash, cash equivalents and bank overdraft | (271) | (4,324) | (3,178) | ||
| New bank loans raised | - | (2,333) | (3,606) | ||
| Repayment of bank loans | 164 | 555 | 672 | ||
| Redemption of finance leases | 4 | 86 | 115 | ||
| Exchange losses on bank loans | (271) | - | 2 | ||
| Exchange (losses) / gains on cash, cash equivalents and bank overdrafts | (96) | - | 264 | ||
| Change in net debt | (470) | (6,016) | (5,731) | ||
| Net funds at the beginning of the period | 110 | 5,841 | 5,841 | ||
| Net (debt) / funds at the end of the period | (360) | (175) | 110 |
9. Share capital
| Number of shares (thousands) | Ordinary shares £'000 | Share premium £'000 | Total £'000 | |||
| Opening balance as at 1 April 2008 | 55,336 | 5,534 | 9,987 | 15,521 | ||
| New shares issued during the period | 2,204 | 220 | 1,984 | 2,204 | ||
| At 30 September 2008 | 57,540 | 5,754 | 11,971 | 17,725 | ||
| New shares issued during the period | 43 | 5 | 14 | 19 | ||
| Issue costs | - | - | (30) | (30) | ||
| Balance as at 31 March 2009 and at 30 September 2009 | 57,583 | 5,759 | 11,955 | 17,714 |
On 1 April 2008 Cyril Sweett Group plc allotted 2,203,928 ordinary shares of 10 pence at a premium of £0.9 per share, as part consideration for the acquisition of the trade, certain assets and goodwill of Nisbet LLP together with 100% of the share capital of Nisbet Project Safety Limited.
On 10 December 2008 the company issued 42,533 ordinary shares of 10 pence each at a premium of 34 p per share, in part satisfaction of the award of 'Free shares' to employees, in accordance with the terms of the Cyril Sweett All Employee Share Ownership Plan (SIP). The shares were issued to Cyril Sweett Trustee Company Limited, the corporate trustee of the SIP.
10. Treasury shares
| Number of shares (thousands) | Treasury shares £'000 | |
| Opening balance as at 1 April 2008 | 353 | 341 |
| Treasury shares purchased | 1,846 | 1,346 |
| Disposal of shares during the period | (341) | (347) |
| At 30 September 2008 | 1,858 | 1,340 |
| Disposal of shares during the period | (1,489) | (1,222) |
| At 31 March 2009 | 369 | 118 |
| Treasury shares purchased | 2,370 | 667 |
| Disposal of shares during the period | (1,397) | (436) |
| At 30 September 2009 | 1,342 | 349 |
During the period the Group acquired 675,000 of its own shares on the market through purchases by the Group's EBT. The total amount paid to acquire these shares was £0.2m. The Group also acquired 1,694,736 of its own shares on the market for £0.5m. During the period the Group's disposed of 1,396,362 of these shares in satisfaction of its share schemes. These shares are held as 'Treasury shares' and are shown as a deduction from shareholders' equity.