CSG.L Regulatory News (CSG)

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

Audited preliminary results for the year ended 31 March 2011

Cyril Sweett Group plc is an international construction and property consultancy offering expertise in quantity surveying, project management, management consultancy and a comprehensive range of specialist services such as health and safety consultancy, sustainability, building surveying, dispute resolution and contract advice.

Established in 1928, the company has grown through strategic development into a global consultancy employing over 1,200 people in offices across Europe, Middle East, North Africa, India, Sri Lanka, Asia Pacific and Australia. In addition we have a further 1,600 people in 24 countries as part of alliances, providing a service capability of 2,800 people throughout the world.

In 2007, Cyril Sweett was the first quantity surveying practice to be quoted on the London Stock Exchange Alternative Investment Market in order to further develop the business.

The Group is pleased to announce its audited preliminary results for the year ended 31 March 2011.

GAAP measures

♦After the impact of exceptional administrative expenses of £1.0m and amortisation of acquired intangible assets of £0.4m.

+ After the impact of exceptional administrative expenses of £0.7m and amortisation of acquired intangible assets of £0.2m.

Non GAAP measures

Chief Executive Officer Dean Webster said:

"Since the Global Financial Crisis we have continued with our strategy of sector and geographical diversification which has created a robust business, the benefits of which can be seen in these full year results.

"The market is expected to continue to remain variable in outlook; Europe will continue to be challenging; in Middle East, Africa and India, we see a shifting market focus and have reduced our overall levels of activity to manage what we see as further downside risk in the short term; in Asia Pacific, we continue to be encouraged by our expanding order book, particularly so in mainland China; and in the Americas, we see an opportunity to develop the new links we have formed with our US partners, by building a capability for the longer term.

"We enter the new financial year with an order book of £84m, up from £58m a year earlier."

Enquiries

Chairman's Statement

It is my pleasure to present Cyril Sweett Group plc's audited preliminary results for the year ended 31 March 2011.

The Group has undergone significant changes during the past 12 months, both operationally, through our increasing geographic presence and diversification, and at Board level, with the retirement of our former Chairman, Francis Ives.

Francis led Cyril Sweett for almost 20 years. His dedication and vision helped create a stronger foundation for the future of Cyril Sweett. We all wish Francis the very best for the future. As he departs, I am pleased to welcome Jeff Hewitt to the Board as a Non-Executive Director. Jeff, who is a Chartered Accountant, brings a wealth of commercial experience to the Board.

The Group's achievements are built on a solid financial platform, supported by a culture of client-focused delivery throughout the organisation and experienced leadership in the form of our Board of Directors. Our business is our people. Their ability to adapt quickly and efficiently to changing market conditions, whilst continuing to provide clients with the independent expertise and service we are known for, is second to none.

We continue to build a critical mass across Europe, in particular in the UK and Ireland, where we have invested in key growth sectors during the year. Our capabilities in the retail, health, commercial and hospitality sectors, to name a few, are being complemented by a rapidly developing skills base in the infrastructure and energy sectors - both of which will provide significant opportunities for us in the future.

The pace at which we continue to deliver on an ambitious international expansion and integration strategy is yet another testament to the exceptional skills of our people. In China, the world's fastest growing construction market, our acquisition of Widnell Limited has significantly strengthened the Group, adding to our capabilities across India, Australia, North America, the Middle East and the Far East.

The Remuneration Committee's work during the year has included the development of a performance based long-term incentive plan for the Senior Management team. Closely linked with the Group's financial performance and shareholder returns, this scheme will be implemented during this financial year if approved at the Annual General Meeting.

Construction and property markets across the world will continue to be affected by economic conditions in varying degrees across the sectors and regions in which we operate. Given our wide service offering and regional presence we are well positioned to take advantage of opportunities wherever they occur and we will continue to support our people in their provision of client focused services.

Michael Henderson, Chairman

BUSINESS REVIEW

Introduction

I am pleased to report a robust performance across the Group over the last 12 months. The increasingly diverse nature of our operations both in terms of sectors and regions has enabled the Group to grow the business despite unprecedented economic challenges. Our strategy continues to be to expand the Group internationally in order to better service our global clients and improve our risk profile.

The Group has made significant progress in integrating and developing its international service offering and we now employ over 1,200 people in 44 offices across 18 countries. In addition we have a further 1,600 people in 24 countries as part of alliances, providing a service capability of 2,800 people throughout the world. Our ability to offer a consistent, high quality, diverse range of services across the globe has enabled the Group to secure a roster of blue chip, international clients including Pepsi, Nike, Tesco, Grosvenor, Barclays Capital, HSBC, Standard Chartered, Macquarie, Merlin Entertainments, Shangri-La Hotels Group and Hilton Hotels.

In line with the Group's strategy of growing its global offering, the order book at year end stood at 43% in Europe and 57% in the rest of the world. The successful integration of Widnell Sweett Limited, the third largest quantity surveying business in the Asia Pacific region, which was acquired in July 2010, has played a large part in driving the growth in our international business but we are continuing to see opportunities for further growth in other regions across Asia, Europe, the Middle East and the Americas.

The Group has delivered a solid financial performance and we continue to manage our cost base responsibly to reflect the increasingly competitive nature of certain sectors and regions. Against this backdrop we ended the year with an operating profit of £2.4m after the impact of £1.0m of exceptional items. Our balance sheet remains strong with a comfortable level of borrowings and we are well placed to grow organically and through further acquisitions where suitable, with enhanced banking facilities in place.

The construction sector has been very challenging over the last 12 months, and I cannot stress enough that our success is down to the hard work and dedication of our staff, the extent of which has been outstanding. I am sincerely grateful to each and every one of them for playing their part.

Financial Performance

Revenue for the year was £72.8m (2010: £65.6m). Operating profit, before tax and exceptional and other expenses increased to £3.8m (2010: £3.2m) and on a post-exceptional basis increased to £2.4m (2010: £2.3m). Basic earnings per share were 2.6p (2010: 2.5p) and operating margins were 3.3% (2010: 3.5%). Our current order book is approximately £84m, a year on year increase of 44% (2010: £58m). The segmental analysis in note 3 to the financial statements has been amended to align to the internal reporting regime now in use, resulting in three segments, being Europe, Middle East, Africa and India and Asia Pacific.

The improved results are a reflection both of the acquisition of Widnell and the Group's financial discipline; we responded to the economic down-turn quickly and have managed the cost base responsibly to deliver a robust financial performance.

The Board has proposed a final dividend in respect of the year of 0.8p per share which, together with the interim dividend, totals 1.3p per share for the year. The final dividend will be paid on 9 September 2011 to shareholders on the register on 12 August 2011.

Review of operations

Europe

Revenue from Europe, which comprises our operations in the UK, Eire, France and Spain, was down to £44.6m (2010: £51.3m), accounting for 61.3% of the Group's revenues, the reduction being predominantly in the UK. Segment profits were £2.6m (2010: £3.5m) before unallocated corporate costs and net finance costs and the order book is £37m (2010: £39m). The Group continues to benefit from its cross-selling capabilities across the region with many of our international clients engaging our services on multinational contracts. A good example is the work we have been undertaking for Primark on their retail development programme across the UK, Spain and Portugal.

The UK market remains very competitive but we are well placed given our diversified service offering. Activity levels and profitability in London and the South East have proven more resilient than those in the regions. We have continued to focus on securing a growing number of long-term framework contracts, including partnering with other organisations as appropriate, to secure work. Our partnering experience and proven track record of delivering for clients has enabled the Group to be appointed by BAA on a framework agreement alongside Jacobs Engineering at Heathrow Airport. While public sector spending cuts is a challenge, the Group has benefited from its strength in the health and education sectors, and has also seen the defence sector produce increased activity levels. The Group continues to win framework positions with hospitals, national and regional transportation providers and central and local government agencies, including UK Parliamentary Estates. We have also secured new work with c20 universities in the year, including both Cambridge and Oxford.

The Group is beginning to see recovery within the UK private sector, most notably in the retail sector where we are receiving appointments on a substantial number of retail schemes and retail park developments with work to be carried out over the next 12-36 months. Our business in Eire remains stable and the French and Spanish operations continue to generate new business, particularly the latter. The Group continues to grow into the hospitality and leisure sector and is securing commissions with the world's leading hotel brands, including Shangri-La Hotels Group and Merlin Entertainments. Looking ahead we are continuing to explore opportunities to diversify into new sectors with significant growth potential and with this in mind, we are making good progress in energy and infrastructure and look forward to updating shareholders in due course.

The order book reflects the short term nature of contracts across the region with projects being awarded in smaller amounts on a contingent or stage by stage basis. Despite this, the level of our order book has stabilised over the last 6 months confirming we have a highly experienced management team in place that is capable of directing the business in all market conditions as they occur. Given our diversified geography and sector coverage, together with a wide range of potential projects at feasibility stage, we are well positioned to take advantage of opportunities within Europe.

Investment activities

In March of this year, we reached financial close on hub North Territory and formed hub North Scotland Ltd, which will deliver both capital and revenue projects during the 25 year concession period, including a ten year exclusivity provision with the North Territory Health Boards. The Group's PPP joint venture, Express Lift Investments, reached agreement on the UK's first scheme under the national Express LIFT initiative by closing the arrangements for a new health centre in Cumbria and there is a pipeline of further projects to follow.

The Group has made significant progress with its investment activities during the year and we continue to explore potential opportunities to realise value across the portfolio. The Group sold its 5% participation in the South Ayrshire Schools PFI project in June 2011, raising nearly £800,000 before costs and expenses. This is the first of the PFI/PPP portfolio to be "recirculated" into further investment opportunities.

Middle East, Africa and India (MEAI)

Group revenue for MEAI accounted for 14.5% of Group revenues at £10.6m (2010: £8.8m). The segment broke even (2010: profit of £0.4m) before unallocated corporate costs and net finance costs and the order book is £7m (2010: £13m) reflecting lower activity levels in the UAE.

The main focus of the Group in the Middle East remains its activities in the United Arab Emirates and Saudi Arabia, in which we continue to work on a number of projects across a range of sectors. We are taking an active part in the development of the King Abdullah Financial District in Saudi Arabia, including our work on the Kingdom's tallest tower, the Capital Market Authority Tower at over 90 storeys. Whilst uncertainty remains in various parts of the region, and we have consequently dealt with exposures in Libya and Egypt through exceptional administration expenses, we continue to manage our risk carefully to ensure the most secure return on capital employed. We believe that opportunities remain in the region and we are investigating potential expansion into Qatar, Oman and Kuwait where there is growing demand for our services.

We have further strengthened our position in India with a new regionalised management structure that distributes key personnel throughout the country. The new directors are extremely experienced with local knowledge and have the skills to drive our presence throughout the regions of India.

Asia Pacific

Group revenue for Asia Pacific accounted for 24.2% of Group revenues at £17.6m (2010: £5.5m). Segment profits were £1.8m (2010: losses of £0.5m) before unallocated corporate costs and net finance costs and the order book is £40m (2010: £6.0m). Widnell performed better than expected at the time of its acquisition both in terms of revenues and profits, contributing approximately £8.4m of revenues and £1.4m of net profit.

Indeed, the past 12 months have been transformational for the Group in the Asia Pacific region following the acquisition of Widnell, the third largest quantity surveying business in the Asia Pacific region. The company has been fully integrated into the wider Group and has played a key role in strengthening our global offering as well as establishing a platform for Cyril Sweett to service clients across the region. Widnell Sweett now employs over 450 staff across its nine offices in China, an increase of almost 15% since its integration into the Group, and is currently engaged on over 300 projects across mainland China and the Special Administrative Regions of Macau and Hong Kong. Three further offices are being opened.

Our presence in Singapore has positioned the group to take advantage of both the recent upswing in activity in the Singapore market as well as providing a regional hub to serve clients throughout the Southern Asia Pacific region.

The quality of our client list in the region, which includes large European based multi-national companies such as Tesco and Standard Chartered as well as Asian based multi-national firms including HSBC, Huawei and the Mingly Corporation, is testament to the Group's local knowledge and growing network of offices in the region, enabling us to provide a quality, seamless offering to our clients as they look to expand either in to, or out of, the Asia Pacific region.

The Group continues its dual strategy to open new offices and develop alliances in order to build a comprehensive presence in the region. In May, we established a joint venture company with our Japanese alliance partner, Meiho Facility Works, and created our first alliance in Malaysia with Perunding C&T. We are also establishing a presence in Thailand and Vietnam.

Our management team in Australia has been strengthened, contributing to our on-going development there.

The segment's order book has continued to grow and we are well positioned to take advantage of the continued economic growth forecast across the region.

Developments in North America

In March 2011 the Group signed alliance agreements with two leading project management firms in North America, Alpha Corporation and VVA Inc. These alliances are a further step in developing the Group's global service offering in the commercial and infrastructure sectors whilst providing a supplementary means to develop a new service concept in project delivery. Not only are these relationships providing Cyril Sweett with the opportunity to develop a foothold in the US market but also the enabling of the Group to access US based global clients, many of whom are investing in other regions across the globe where we already have a presence.

I have been very pleased with the progress that has been made with the alliance partners in a short space of time and believe the joint service offering we will be able to provide to clients will create exciting opportunities for the alliances in the coming 12 months.

Re-branding

To strengthen our position in the market, the Group is embarking on a brand consolidation exercise that will start with our Australian offices and roll out throughout the Group over the next 12 months, with the parent to be re-named Sweett Group plc and all operations to be conducted under the Sweett rather than Cyril Sweett brand.

Outlook

It is now some three years since the Global Financial Crisis (GFC) started and the effect on the construction industry, particularly in the UK, has been significant. Over that same period, we have continued with our strategy of sector and geographical diversification. As a result, we have created a robust business, with committed people who are enthusiastic in helping our clients, with a delivery capability around the globe. We are benefitting from a Group with a solid financial platform, under a common ownership with a common ethos to support one another.

The market is expected to continue to remain variable in outlook; Europe will continue to be challenging, with much depending on whether the desire to develop the private sector can be matched by user demand and improved access to funds. As for the public sector, spend has returned to pre-GFC levels and opportunities in PPP still exist. In the Middle East, Africa and India, we see a shifting market focus and have reduced our overall levels of activity to manage what we see as further downside risk in the short term, whilst we re-align our operations to match evolving market opportunity. In Asia Pacific, we continue to be encouraged by our expanding order book, particularly so in mainland China. Lastly, in the Americas, we see this as an opportunity to develop the new links we have formed with our US partners, by building a capability for the longer term.

So, all in all, we face a mixture of challenge and opportunity around the globe. Most importantly, we have exceptional people in our organisation. It is they that will pull together to continue to drive the business forward and maintain our success.

We believe the business has competed well in the year, will continue to do so and is well positioned to take advantage of the opportunities within the market.

Dean Webster, Chief Executive

Financial Review

Trading performance

The year to 31 March 2011 was a further year of consolidation for Cyril Sweett in the UK, where trading volumes remain stable, whilst activity levels overseas increased significantly following the acquisition of Widnell Limited in July 2010.

Group revenue increased to £72.8m (2010: £65.6m). Profit before taxation, after the impact of £1.0m of exceptional expenses and £0.4m of amortisation of acquired intangibles as described in note 5 to the financial statements, increased to £2.3m (2010: £2.1m). Net assets increased to £30.9m (2010: £27.8m).

Cash generated from operations was £1.5m (2010: £5.4m) and was £2.0m (2010: £5.9m) when adjusted for contributions to fund the pension scheme deficit. There was little change in the exchange rates to sterling of our major trading currencies and little impact on either revenues or profits.

Key events

A key event during the year under review was the acquisition in July 2010 of Widnell Limited. Now rebranded as Widnell Sweett, this is the third largest quantity surveying business in the Asia Pacific region. Integration with the Group is complete and the business has continued to expand since the acquisition. Details of this acquisition are provided at note 26 to the consolidated financial statements.

Alliance agreements were entered into in Japan, Malaysia and the USA, the former progressing to a joint venture relationship after the year-end.

In terms of financial and business systems, Agresso, an ERP product, was implemented in the UK business in February 2011. This will enhance our overall business information and operating systems and will become standard across the group as it is rolled out globally. Non-capitalised internal costs associated with the project of £350,000 were expensed within administration expenses, which also include a £400,000 write-back of dilapidation provisions made in previous years in respect of the Group's London head office property.

We also completed the re-negotiation of our bank facilities with Bank of Scotland plc, which became effective in April 2011. Details of the new facilities appear in note 18 to the financial statements.

Underlying profit margins

The gross profit margin was 35.9% (2010: 31.9%) and the operating profit margin was 3.3% (2010: 3.5%). The operating profit margin before exceptional administrative expenses was 4.7% (2010: 4.5%).

Tax

The effective tax rate for the year was 29% (2010: 31.5%) and there was a charge in respect of previous years of £306,000. The change is as a result of the determination of prior year liabilities that were different from the estimates reflected in the financial statements, net of the effect of lower tax rates on overseas earnings and the reversal of expenditure disallowed in previous periods, now allowed.

Earnings per share

Basic earnings per share increased to 2.6p (2010: 2.5p) and fully diluted earnings per share increased to 2.6p (2010: 2.5p). Tax-adjusted earnings per share prior to exceptional administrative expenses increased to 3.7p (2010: 3.3p) Earnings per share are calculated by deducting shares held by employee trusts from the weighted average number of shares.

The Group ended the year with:

- Net borrowings of £4.9m, compared with £0.5m at 31 March 2010;

- Net assets of £30.9m, which compared with net assets of £27.8m at 31 March 2010;

- Work in progress (net of fees in advance) of £4.1m compared with £3.4m at 31 March 2010; and

- Trade receivables of £17.8m compared with £15.1m at 31 March 2010.

Each of these was impacted by the acquisition of Widnell Limited.

We continue to invest in fixed assets to ensure that, as the business environment becomes more complex and technology evolves, the Group's IT systems and equipment are kept up-to-date and properly serve the business.

Banking facilities

The Group funds its activities through cash generated from operations and supplemented, where necessary and appropriate, with bank borrowings and asset funding.

The Group's principal banker is Bank of Scotland plc, which provides Cyril Sweett withoverdraft, revolving credit and loan facilities as well as a letter of credit facility in relation to the ongoing equity and debt obligations of the Group's PPP investment projects.

At 31 March 2011, the amount undrawn under the Group's credit lines was £7m (2010: £8m). As noted above, the UK facilities have been re-negotiated and became effective in April 2011, providing the Group with overall capacity of £21.5m (2010: £15m).

Internal Controls

In the established parts of the Group there are well developed policies and procedures to support a sound internal control environment. These policies are being rolled out across the enlarged Group but this standardisation is not yet complete. Systems enhancements over the next two years will further strengthen internal controls. Meanwhile more intense management review processes are in operation.

Dividends

An interim dividend for the year to 31 March 2011 of 0.5p per share at a cost of £325,000 (2010: 0.8p per share at a cost of £455,000) was paid on 11 January 2011 to all shareholders on the register on 10 December 2010. The directors are recommending a final dividend of 0.8 p per share at a cost, assuming no issues of shares in the intervening period, of £523,000 (2010: 0.8p at a cost of £516,000) which, if approved by the shareholders at the AGM, will be paid on 9 September 2011 to all shareholders on the register on 12 August 2011. A dividend reinvestment service is available through the Registrar.

Employee Benefit Trust

The Group's Employee Benefit Trust (EBT) is a separately administered discretionary trust in Jersey for the benefit of employees. Shares owned by the EBT are shown as a reduction in capital and reserves as Treasury shares. Periodically, payments are made by Cyril Sweett to the EBT to reimburse the EBT for awarding shares or transferring shares to employees on the exercise of options.

Share Incentive Plan

The Share Incentive Plan (SIP), originally launched in February 2001, enables UK resident employees to acquire shares in the Group out of untaxed income and provides a tax-efficient means of awarding shares to employees. Dividends received by the plan in cash are used to purchase additional shares on behalf of employees. Free shares may be awarded to qualifying employees based on remuneration. Shares held in the plan which have not been allocated to individual employees are shown as a reduction in capital and reserves as Treasury shares. The granting of matching shares whereby individuals' purchases of SIP shares were matched on a 4 for 5 basis was withdrawn with effect from 31 December 2010.

Key Performance Indicators

A number of metrics are used to monitor financial performance. These include turnover, revenue per head, operating profit, fee-earner utilisation, cash collection, pre-exceptional administration costs earnings per share and lock-up (which is a measure of the aggregate days' activity represented by debtors and work in progress). Most of these Key Performance Indicators remained stable in the last year. The pre-exceptional administration costs earnings per share were 3.7p (2010: 3.3p) and the average number of lock-up days for the final quarter was 94 (2010: 89). KPI data will be published more fully once the board is comfortable on consistency of reporting.

Risk management

Risk management involves identifying the principal risks relating to the Group and its business, establishing appropriate controls to manage those risks and ensuring that appropriate monitoring and reporting systems are in place. The Group's risk management process balances cost against risk and is consistent with the prudent management of a diverse professional organisation. However, as with internal controls, risk and its management vary in some of our international operations for reasons of scale and, for companies acquired, in the immediate post-acquisition period.

The Group is exposed to a range of risks inherent in most parts of its business, the principal ones of which are:

·; Market conditions

Some of the market sectors in which the Group operates are funded and regulated by government bodies. These sectors are subject to changes in UK and overseas governments, government policy, spending, regulation and procurement practices. There is a risk that reductions in public sector funding would impact our operations. The Group is also at risk, particularly in the UK, from continuing reduced spend in the private sector, which is a function of changing demand patterns and lack of funding availability.

We mitigate these risks by working across a broad spectrum of sectors and geographies, regularly monitoring public sector spending patterns, ensuring that our resource levels are aligned to market activity and ensuring retention of key employees. 

·; Contract management

Some commissions may be offered with onerous contract terms or no cap on liability. Further, some commissions have an inherently higher risk profile than others, particularly certain international ones where we may be working in unfamiliar jurisdictions and PFI/PPP related ones with a long lifespan.

Procedures are in place for approval and management of these commissions but some residual risk may remain.

·; Professional negligence

The Group's business may be subject to claims for professional negligence. The professional services provided by the Group involve risk of contractual and professional errors and omissions and other liability claims. This risk applies to the work carried out by Cyril Sweett's own employees and by the other professional firms and individuals regularly employed by the Group in a sub-consultant capacity and for whose work Cyril Sweett is contractually liable.

This risk is mitigated by the existence of quality management systems and accreditation processes and a global Professional Indemnity insurance policy such that the direct risk to the Group is limited to the policy excess. The board considers that these arrangements are adequate to minimise the risk to the Group.

·; Pricing

The Group faces two distinct pricing risks. The first of these relates to possible mis-pricing of its contract selling prices and/or the costs to execute a project in accordance with contracted scope. The second relates to the current state of certain of the Group's markets, where some customers continue to exert downward pressure on tender prices, leading to a highly-competitive environment.

These issues are both mitigated. In the first instance, this is through thorough review of prices and costs before proposals are submitted; in the second by maintaining an ongoing relationship and dialogue with our principal clients and by ensuring that the cost of our resource base, both internal and external, is commensurate with our contracted order book values.

·; Growth and integration

The Group's policy is to spread its risks by developing overseas. This brings its own risks in terms of control of the targets and their integration into the Group, its systems and business practices.

These risks are mitigated by thorough due diligence reviews of potential targets, particularly of their finances and human resources, by internal and external means, making the group's policies, procedures, standards and management control systems available as early as possible.

·; Systems and IT

In common with most businesses, the Group is dependent on its operational and IT systems and their reliability for protection of its intellectual capital and availability of timely management information. There is a latent risk of downtime, data loss, insufficient capacity and disparity in the manner in which the core systems are operated.

We are mitigating these risks by moving all of the Group's businesses onto a common ERP system with consistent operating criteria, back-up and disaster recovery with sufficient local processing and data transfer capacity.

·; Financial

Financial risks are inherent in the Group's business, mainly in respect of liquidity, foreign currency, interest rates, credit and capital. Of these, the greatest is foreign currency risk.

The Board reviews and agrees policies for managing each of these risks and they are summarised at note 28 to the financial statements. The aggregate foreign exchange exposure was re-hedged shortly after the year end by forward contracts valued at £9.4m (31 March 2010: £5.9m).

It is the Group's policy that no speculative trading in financial instruments shall be undertaken.

·; Reputation

The board considers reputational risk to be one of the most significant risks in a professional service organisation. Our reputation for being able to deliver large projects relies heavily on the perception of our clients and how this is portrayed in the public arena. Awareness of the importance of the Group's reputation and individual integrity underpins our business ethics and culture.

We mitigate this risk by ensuring we have robust cost and project management systems linked to our internal quality processes, which are regularly audited by independent consultants against industry standards.

·; Health, safety and the environment

The Group's business is concerned with the built environment and this presents risks and impacts in terms of health, safety and the environment. Should the Group's policy or practice in this area prove inadequate there is a consequent risk to employees, clients, contractors and third parties.

In mitigation, given that the Group takes its health, safety and environmental responsibilities very seriously, policies are in place setting out its approach to these matters. With specific respect to the environment, our Head Office has obtained certification for our Environmental Management System to the International Standard, ISO 14001 and we are reviewing how the benefits of this initiative can be extended across the Group. The Group's policies are supported by a range of more detailed guidance and documentation, which are in the process of being normalised across the regions of operation. In addition, the company has specialist teams engaged in the delivery of specialist external professional services in both Health & Safety and Sustainability. The experience and knowledge of these teams is drawn upon to inform our own internal processes.

Summary

Cyril Sweett has performed well in the last year and is concentrating on diversification and expansion into overseas markets whilst actively managing the attendant risks. It continues to be in a strong financial condition with a well-structured and adequately financed balance sheet with sufficient capacity for further acquisitions as appropriate.

Chris Goscomb, Chief Financial Officer

Cyril Sweett Group plc

Consolidated Income Statement

for the year ended 31 March

Cyril Sweett Group plc

Consolidated Statement of Comprehensive Income

for the year ended 31 March

Cyril Sweett Group plc

Consolidated Balance Sheet

as at 31 March

Cyril Sweett Group plc

Consolidated statement of changes in equity

For the year ended 31 March

Cyril Sweett Group plc

Company statement of changes in equity (continued)

For the year ended 31 March

Cyril Sweett Group plc

Consolidated Statement of Cash Flow for the year ended 31 March

Cyril Sweett Group plc

Notes to the Financial Statements

1. General information

This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 March 2011. The financial information for the year ended 31 March 2010, set out in this announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and has been extracted from the Annual Report for the year ended 31 March 2010. Statutory accounts for the year ended 31 March 2010 have been delivered to the Registrar of Companies and those for the year ended 31 March 2011 will be available to shareholders by 12 August 2011 for approval at the Annual General Meeting to be held on 2 September 2011. Those accounts have not yet been delivered to the Registrar.

Cyril Sweett Group plc is an unlisted company, quoted on the Alternative Investment Market, and is incorporated and domiciled in the United Kingdom under the Companies Act 1985. 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.

2. Significant accounting policies

The accounting policies adopted for the year ended 31 March 2011 are consistent with the policies included in the annual report for the year ended 31 March 2010.

Basis of preparation

The Group's and parent company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and IFRIC Interpretations as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 March 2011. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by available-for-sale financial assets, and financial assets and financial liabilities at fair value through profit or loss.

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 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. During the year management has undertaken a reassessment of the Group's operating segments, which has led to a change in the Group's segmental reporting.

The Board considers Cyril Sweett's business by geography, being Europe, the Middle East North Africa & India and Asia Pacific. All three categories generate revenues from the provision of quantity surveying, project management and specialist services / management consultancy. Previously, the geographic segments were the UK & Ireland and the rest of the world. Comparative information has been restated in accordance with this change.

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.

Primary segments

* Unallocated corporate costs comprise directors' remuneration, advertising, public relations, corporate financing costs and legal and professional fees incurred by Cyril Sweett Group plc.

Further analysis of revenue by service is presented as follows:

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 receivables 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 2011 restructuring costs comprise redundancy costs of £0.5m and costs of closing an office in Brisbane, Australia of £0.2m.

The impairment loss recognised on trade and other receivables relates to losses incurred as a result of the political unrest in Egypt and Libya.

The 2010 restructuring costs relate solely to the closure of the branch in France and comprise redundancy costs of £0.2m and other restructuring costs of £0.1m.

* Expenditure incurred on a PFI project abandoned by Norfolk County Council after preferred bidder status had been achieved.

5. Taxation

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

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows:

The weighted average applicable tax rate was 29.0% (2010: 31.5%). The reduction is as a result of the effect of lower tax rates on overseas earning and the reversal of expenditure disallowed in previous periods, now allowed, net of the determination of prior year liabilities that were different from the estimates reflected in the financial statements.

In the 2011 Budget statement, the UK Government announced a reduction of 1% in the UK Corporate Tax rate and this was enacted on 29 March 2011, reducing it to 26% effective from 1 April 2011. Legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April 2012 is expected to be included in the Finance Act 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 23% by 1 April 2014. None of these expected rate reductions other than the near-term rate of 26% has been substantively enacted at the balance sheet date and therefore UK deferred tax has been calculated at 26%.

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

The Board has declared a final dividend in respect of the year ended 31 March 2011 of 0.8 pence per share (2010: 0.8 pence per share) amounting to 1.3p for the year (2010: 1.6p for the year). These financial statements do not reflect the final dividend for 2011.

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity shareholders 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.

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 done 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.

Before exceptional administrative expenses

Tax-adjusted earnings per share before exceptional administrative expenses are calculated after amortisation of acquired intangibles using the weighted average number of shares.

On 9 July 2010, the Company announced the acquisition by Cyril Sweett International (Holdings) Limited of the entire share capital of Hong Kong-registered Widnell Limited, since rebranded as Widnell Sweett Limited. The fair value of assets and liabilities acquired amounted to £1.2m.

On 4 March 2010 Cyril Sweett Australia Pty Limited, the company's wholly owned subsidiary undertaking in Australia, completed the acquisition of Padgham & Partners Pty Limited. At 31 March 2010, estimated goodwill arising on this acquisition amounted to £1m. During the year to 31 March 2011 a fair value exercise was undertaken resulting in a reclassification of £0.25m from goodwill to other intangibles (note 9).

Further details of the above acquisitions are included at note 10.

Goodwill is allocated to the Group's cash-generating units ("CGUs") identified according to IAS36 (as amended). The recoverable amount of all CGUs was determined based on value in use calculations. The calculations used were based on short-term financial projections approved by management. The short-term projections indicated that the value in use of each CGU exceeded the goodwill carrying values. The carrying value of goodwill was tested for impairment at the reporting date. No provision for impairment was considered necessary.

Further details of these acquisitions are included at note 10.

Customer lists and order book values are established in relation to each acquisition having regard to the markets in which the target company operates and the potential longevity of relationships with regard to repeat business.

Assets under the course of construction relate to costs incurred in the implementation of an Enterprise Resource Planning management and financial system. This system was successfully implemented on 1 February 2011 in the UK business with implementation internationally, scheduled to complete in the year ending 31 March 2012.

Amortisation of £597,000 (2010: £380,000) is included in 'administrative expenses'.

10. Acquisitions

The primary reason for recent acquisitions was the strategic need to expand the Group overseas so as to provide a global service offering to our clients.

2011

On 9 July 2010, the Company announced the acquisition by Cyril Sweett International (Holdings) Limited, effective from 1 July 2010, of the entire share capital of Hong Kong-registered Widnell Limited, the third largest quantity surveying business in the Asia Pacific region, employing nearly 400 people in Hong Kong, mainland China and Macau. The company has been successfully integrated into the Group and has been rebranded as Widnell Sweett Limited. The maximum consideration, a mixture of cash and shares, is £5.2m, of which 60% was settled at completion on 9 July with the balance due with regard to post-acquisition performance on the first and second anniversaries of completion. Net tangible assets at completion in excess of the minimum HKD15m (approximately £1.3m) in the contract are scheduled for distribution to the vendors by 1 April 2011. This excess is HKD42m and is included in trade and other payables. The vendors also retain entitlement to 40% of the post-acquisition profits for the current year and 20% for next.

The fair value of assets and liabilities acquired amounted to £1.2m.

Widnell Sweett Limited contributed revenues of approximately £8.4m during the period since 1 July 2010 and a net profit of approximately £1.4m.

Elements of the deferred consideration are contingent upon the satisfactory outcome of certain financial performance criteria. The fair value of the contingent consideration of £2,041,000 was estimated by applying the income approach. The fair value estimates are based on a discount rate of 5%. The remaining element of the deferred consideration of £1,250,000 has not been discounted since this is expected to be settled within two years from the balance sheet date and therefore the impact of discounting is immaterial.

The fair value of 5,626,558 Ordinary shares issued as part of the consideration paid was based on the average mid market closing share price for the 10 days preceding settlement.

Had the company been consolidated from 1 April 2010 the income statement, it would have contributed revenues of approximately £11.8m and profit of approximately £1.7m.

2010

On 4 March 2010 the Group acquired 100% of the equity of Padgham & Partners Pty Limited, whose principal activity is that of construction consultancy.

Padgham & Partners Pty Limited contributed revenues of approximately £1.6m during the period since 1 April 2009 and a net profit of approximately £0.1m.

The following tables below summarise the consideration paid and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.

Transaction costs incurred in respect of the acquisition of Widnell Limited amounting to £150,000 have been recognised in the income statement.

None of the goodwill recognised is expected to be deductible for income tax purposes.

The fair values of assets and liabilities at the dates of acquisition were as follows:

The fair value adjustments in respect of intangible assets for both acquisitions relate to customer relationships and order books. These have been valued and further details are given in note 11 to the consolidated financial statements. Goodwill represents the value of synergies arising from the acquisitions, the acquired workforce and other benefits not capable of valuation.