CSG.L Regulatory News (CSG)

2 July 2013

Sweett Group plc

("Sweett Group" or "the Group")

Audited preliminary results for the year ended 31 March 2013

Sweett Group is a global business with expertise in property and infrastructure professional services.

The Group is pleased to announce its audited preliminary results for the year ended 31 March 2013 which are a significant improvement on the prior year and are in line with expectations.

Financial highlights

GAAP measures

Non GAAP measures

Adjusted items exclude exceptional administrative expenses of £1.5m (2012: £1.2m) and amortisation of acquired intangible assets of £0.5m (2012: £0.5m).

Operational and outlook highlights

·; Asia Pacific region remains the Group's largest single growth market with revenue in China and Southeast Asia up by 20%

·; A return to profit in the Middle East

·; Proceeds from PPP asset sales of £2.8m received in the year, invested in developing the Group's trading operations, funding working capital and reducing bank borrowing

·; Won significant new commissions across our network of offices and are gaining market share from competitors

·; Order book of £100m as at 31 May 2013, an increase of £10m since August 2012

·; Trading in the first few months of the year has been in line with the Board's expectations

Chief Executive Officer Dean Webster said:

"2013 was a year of significantly improved financial performance, financial position and growth across our businesses in Europe, the Middle East and Asia Pacific. We have a lean and diverse business which is well placed to benefit from some of the green shoots we are seeing in the construction industry in some of our markets. We continue to win significant new commissions across our network of offices and are gaining market share from our competitors. Over recent years we have repositioned the business and have built a solid global platform. The next stage of our development will be to build on the platform we have created."

For further information:

Chairman's Statement

This has been an important year for the Group. We have a clear three year strategic plan to drive the business and position the Group at the forefront of the industry. This has galvanised the entire Group and our colleagues have embraced it enthusiastically. I am delighted that the plan is delivering and we are seeing the improved performance coming through strongly. During the year, the Group has made and continues to make real progress. Our integrated service offering across our network of offices is second to none and our footprint is helping us to deliver sustainable long term shareholder value. The solid platform of our three year plan is enabling us to drive our market share gains across all of our regions and is responsible for the Group's significantly improved order book.

The financial performance in this first year of our three year plan has been very encouraging. Revenue for the year was up 10.8% to £80.6m (2012: £72.8m). This helped drive a return to profitability and we reported a pre-tax profit of £1.8m (2012: loss of £1.0m) after exceptional administrative expenses, amortisation of acquired intangibles and net finance costs. Basic earnings per share were 1.9p (2012: loss of 2.1 p) and operating margins were 2.9% (2012: (0.2)%). We are very pleased that our current order book stands at £100m, an 11% increase from last year (2012: £90m), with a Non GAAP adjusted profit before tax of £3.7m (2012 £0.7m) and earnings for the year of 3.7p per share (2012: loss of 0.5p). Importantly, the Board recommends a final dividend of 0.7p per share (2012: 0.3p). This will make a total dividend of 1p for the year, which marks a significant increase on the previous year (2012: 0.5p). I hope that Shareholders will understand that this proposal signals a major sign of the Board's confidence in the future.

The Board is encouraged that the Group will continue to deliver organic growth and diversification whilst paying down debt and improving operating margins. During the past 18 months, our net debt position has reduced markedly, from just over £10.0m to £7.1m as at the year end. We have worked hard over the years to develop a positive working relationship with our bankers, who have given our three year strategic plan their full support. As our largest financing needs are in Asia, and China in particular, we are currently examining alternative funding arrangements in Hong Kong, giving us more direct access to local currency funding and less exposure to foreign exchange movements. We will update shareholders on this in due course.

At a General Meeting held in May, the Board received overwhelming support against the appointment of an Executive Chairman. On behalf of the Board, I would like to thank shareholders and staff for their support and reiterate that we wish to focus on executing our strategy without any further distractions.

Something that sets Sweett Group apart from its competitors, and indeed one of our greatest strengths, is our ability to attract and retain key staff across the business. During the year we have made significant senior level appointments across each of Europe, Asia and the Middle East and we are also in the process of achieving our Investors in People accreditation in the UK. The future for the Group is bright and we are pleased that we are able to attract consistently the best talent in our industry.

As part of our management succession plans, Chris Goscomb will be retiring as Chief Financial Officer at the end of December 2013 and will be succeeded by Patrick Sinclair, currently Group Financial Controller and Company Secretary. Chris has been with the Group since May 2007 and a member of the Board since January 2009. He has been an important influence on the cultural changes needed from the partnership era and his corporate knowledge will be sadly missed. We wish him a happy retirement and look forward to Patrick joining the Board.

On 8 March 2013, Jeffrey Hewitt resigned from the Board as a Non-Executive director and David Wilton was appointed as a Non-Executive Director and Chairman of the Audit Committee.

Finally, I would like to take this opportunity to reiterate that I will be retiring from the Board as Chairman no later than April 2014, subject to being re-elected at this year's Annual General Meeting. I have thoroughly enjoyed my time as a Director of Sweett Group, during one of the most transformational periods in the Company's history, and wish to thank everyone in the business for their hard work and support during this time. The Nominations Committee will commence the search for my successor in the near future and we will make further announcements in due course.

The Group is trading well in the current year. With a growing order book and a clear strategy, your Board looks to the future with confidence.

Michael Henderson, Chairman

Chief Executive's Review

Three-year strategy update

Last year the Group launched a three year strategy aimed at capitalising on our global platform to continue to grow the Group's presence and service offering, whilst at the same time focusing on cash generation and operating margin improvement. We also undertook to re-allocate capital, by disposing of our PPP investments business, into fast growth operating regions.

The fundamental themes of the strategy can be split into two parts:

1.0 Integrated global approach:

1.1 To expand our corporate client base by leveraging our local delivery capability

1.2 To offer a consistent quality of service based upon international standards whilst sympathetic to local market conditions

1.3 To attract and develop key people in new sectors and new geographies, thereby extending our sector expertise and service coverage

2.0 Regional expansion:

2.1 Europe - Increase our market share in our traditional sectors whilst expanding further into the energy and infrastructure markets. Extend our client base across continental Europe

2.2 Middle East and India - Capitalise on the economic recovery in the UAE and expand our operations in Saudi Arabia and into Oman and Qatar. Extend our presence in India from four to six regional offices

2.3 Asia Pacific - Leverage our existing range of services across our existing client base whilst extending our geographic coverage and sector expertise. Extend our exposure to new sectors in Australia

2.4 North America - Develop our relationships with our alliance partners and provide clients with QS expertise on both the East and West coasts

The first 12 months of the programme have been successful, with significant progress made across each of our operating regions.

In Europe, where our focus has been on improving operating margins, cash generation and utilisation rates, our management teams have made significant progress in reducing our lock-up, which now stands at 86 days (2012: 90 days). Although European markets remain, as a whole, depressed, we are experiencing an improved level of enquiries in the retail and commercial sectors which is leading to an increasing pipeline of new work not yet qualifying for inclusion on the order book. This improvement has coincided with our successful diversification into the infrastructure sector, which continues to see significant investment, both through the public and private sectors. Commissions across the water & utilities, energy and aviation sectors have resulted in a growing order book and a number of senior level appointments, including in the mining and oil and gas sectors, are expected to create further opportunities for the Group in the future. In Spain we are continuing to maintain a healthy level of activity from key client accounts, whilst at the same time using our multi-lingual staff to service projects throughout continental Europe.

In the Middle East, Africa and India (MEAI), where we are seeing a pick-up in bidding activity, we have continued to make progress in developing our presence across key growth markets and sectors. We are registering our business operations in Qatar, are actively pursuing opportunities in Oman and also developing our service offering and expertise in Saudi Arabia, through a number of new commissions, including iconic projects such as the Butterfly Dome in the King Abdullah Financial Centre in Riyadh.

Our India business, which has been growing steadily over the last few years, now employs over 130 consultants across four cities and is capitalising on a vibrant economy, foreign direct investment and the flow of work from corporate clients from other parts of the business, in particular Asia Pacific. A recent hospitality commission in Colombo has also allowed us to develop our presence in Sri Lanka from what has been largely a back-office function for the India and Middle East business, into a fully-fledged client facing operation, with local projects.

In Asia Pacific, the Group's main growth market, our focus during the past twelve months has been on continuing to grow organically across China and Southeast Asia, whilst investing in senior appointments to diversify our service offering. Key hires have been made in the data centre sector in Southeast Asia and in the project management field in Australia, both resulting in successful new commissions and reinforcing our integrated service stream across the region. One of our key focus areas in the next 12 months will be to appoint a head of project management in China, where the Group's main current service offer is cost management and dispute resolution. Our investment in new expertise, together with the need to move into larger premises in Hong Kong and Shanghai has had the effect of increasing our indirect cost base and thus had a plateau effect on profits. However we see this as necessary investment as we continue to develop our strength in these markets. In Australia we are successfully diversifying our strong public sector franchise into new sectors including commercial, hospitality and defence.

Our presence in North America, through our joint venture company VVA Sweett LLC, has made good progress during the year, with a joint office having opened in Boston and cost management staff from our UK business seconded to the VVA Sweett office in New York. Cross referral of new commissions is encouraging and we are now jointly bidding on projects by offering a combined delivery solution.

Our business model is at the heart of everything we do. Our services are aimed at helping to maximise the value of our clients' investment, through the efficient management of time and resources. To achieve this, our approach is always the same - to become a partner with our clients and deliver cost-efficient, timely solutions. The independence of our advice is at the core of these solutions.

Long term relationships

We optimise our clients' investment through a deep understanding of their business, built over many years. This means we can ensure projects are delivered on time and on budget.

Global knowhow

Our clients are truly global - and so is our business. Our network of offices covers the world's main trade and business hubs. Our geographic reach enables us to provide clients with a full range of integrated services, wherever they need them.

Local delivery

We use our global knowhow to deliver local, sustainable solutions. Our geographic presence allows us to recognise local constraints and challenges, gearing our services to each client, bringing in resources from across the Group, as necessary.

Review of operations

Group financial performance

Revenue for the year was £80.6m up 10.7% (2012: £72.8m). Pre-tax profit was £1.8m (2012: loss of £1.0m) after exceptional administrative expenses, as described in note 5, amortisation of acquired intangibles and net finance costs.

Basic earnings per share were 1.9 pence (2012: loss of 2.1 pence) and operating margins were 2.9% (2012: (0.2)%). Our current order book is approximately £100m, an increase from last year's reporting date of 11% (2012: £90m). Net debt at 31 March 2013 was £7.1m, down £1.1m from 31 March 2012. The Board has recommended a final dividend in respect of the year of 0.7p per share (2012: 0.3p) which, together with the interim dividend, totals 1p per share for the year (2012: 0.5p). The final dividend will be paid on 13 September 2013 to shareholders on the register on 16 August 2013.

Asia Pacific

Revenue from Asia Pacific accounted for 32.2% of Group revenues at £26.0m (2012: £22.9m). Segment profits before exceptional administrative expenses were £0.6m (2012: £1.3m) and the order book stands at £55m (2012: £51m). Of these numbers the Group's operations in China and Hong Kong contributed approximately £17.8m of revenues and £0.5m net profit. The segment's operating profit on a pre exceptional basis was £1.3m (2012: £1.9m) giving a margin of 5.0% (2012: 8.1%) which is satisfactory given the levels of investment in new resources that are being dedicated to the region.

Lock up remains a challenge for the business, principally in China. Over the year a robust set of procedures to minimise WIP and Debtor day durations has been implemented across the region together with a renewed management focus on driving down lock up times.

Asia Pacific remains the Group's largest single growth market and contributor to cross-selling of corporate clients and sector and service diversification. We now employ over 700 staff across the region, 630 of which are across mainland China and Hong Kong. During the year, the Group has developed its dispute resolution service throughout the region. It has also diversified its service offer by attracting senior members of staff from key competitors in Brisbane, Melbourne and Singapore.

Although growth in the Chinese construction market continues to slacken (albeit from a very high base), the Group has secured commissions across the infrastructure, residential, retail and commercial sectors, including major commissions with domestic developers such as New World China, Gaw Capital, and Huawei Technology and foreign investors such as Jimmy Choo, Nike and HSBC.

In Hong Kong, the Group's transportation team is now involved in four of the five major MTR upgrade programmes, totalling over £10bn in capital investment and has secured commissions on the new Cross Harbour Tunnel project, connecting Kowloon with Hong Kong Island. In other sectors the Hong Kong team has secured commissions on the 190,000m2 United Christian Hospital, the £200m Global Switch Data Centre and the 2,000 room Cotai Wynn Casino Hotel Complex in Macau.

In Southeast Asia the Singapore office has continued to secure work in the corporate real estate and hi- tech sectors with appointments by Barclays, Nomura, Global Switch and Qantas, while the Thailand office has grown quickly to a staff of over 20 and secured a number of appointments, mainly in the hospitality sector.

In Australia the business continued to benefit from a regular flow of health sector work both in the private and public sectors and consolidated its position as a major services provider on defence projects. In the commercial sector our appointment on the 45 storey 1 William Street office tower in Brisbane complemented the continuing work on the 111 Eagle Street office tower project also in the city's CBD.

Across the APAC region the impact of the move to a unified brand has been particularly beneficial and the ability of the business to service cross-border APAC organisations should attract an increasing number of international corporate clients in future. The business plans to continue its move towards offering its full range of services in all APAC markets to take advantage of the headroom created in locations where new services are added.

Europe (excluding Investments)

Revenue from Europe, which includes the Group's operations in the UK, Ireland and Continental Europe, was up to £42.1m (2011: £39.8m), accounting for 52.2% of the Group's revenue. In overall terms Europe's profits were £2.6m (2012: £2.4m). The order book stands at £39m (2011: £33m).

Although our order book has increased year on year, it continues to reflect the short-term nature of contracts across the region. A significant proportion of UK turnover is being achieved from framework agreements which, with the exception of contracted projects, are not included in our order book.

Our investments in the energy and infrastructure sectors have been successful, with new project commissions being signed during the year with North Blyth Biomass, the Energy Technology Institute, Greenwich Peninsula Energy, United Utilities and Northern Gas Networks, in addition to major on-going commissions with EDF Energy including Hinkley Point C.

The retail sector, in which the Group is a recognised market leader, has seen a significant pick-up in activity levels during the last year, with the Group securing a commission to provide cost management services on the joint venture Hammerson / Westfield development in Croydon. In Southern Europe, the Group has been commissioned by Primark to provide cost management services as it expands across France. In Turkey the Group has supported a longstanding global client with due diligence services.

Investment activities

Revenue from the Group's PFI/PPP business in the year totalled £0.6m (2012: £0.4m). Segment profit was £0.5m (2012: loss of £0.7m) and includes profit on investment activities of £1.4m (2012: £0.4m). Three asset sales were completed in the year, being interests in the Inverclyde Schools, Dumfries & Galloway Schools and Plymouth Lift projects. The Board has made a strategic decision to limit the Group's investments in PFI/PPP assets. After these sales, four assets remain, being interests in the Leeds Social Housing PFI and North Hub projects, Express Lift Investments Limited and 15% of the equity in the Dumfries & Galloway Schools project which was retained when the subordinated debt was sold. The investments business, whose staff complement has been reduced, is concentrating on offering consultancy services to PPP projects and it is not intended that it will invest in the equity or subordinated debt of future projects. Proceeds from PPP asset sales of £2.8m received in the year, have been invested in developing the Group's trading operations, funding working capital and reducing bank borrowing.

Middle East, Africa & India

Revenue from MEAI accounted for 14.8% of Group revenues at £11.9m (2012: £9.8m). Segment profits before exceptional administrative expenses were £0.8m (2012: loss of £1.2m) and the order book is currently at £6m (2012: £6m).

After a difficult previous year, our operations in the Middle East had a very strong year in what has remained a competitive market, resulting in a return to profit. Although many of the schemes and projects previously seen in the region have either been put on hold or cancelled altogether, the Group's strong reputation and established brand in the region have resulted in a number of commissions in the aviation, hospitality, health and commercial sectors, including projects for Etihad Airways and major hotel developments in Saudi Arabia, the UAE, Sri Lanka and Lebanon.

The Group continues to make progress in Saudi Arabia, one of the region's most vibrant economies, and is also registering to commence business operations in Qatar.

The Group's presence in India is growing faster than anticipated, with the residential sector in particular performing well, and with major developments recently secured in Bangalore, Gurgaon, Mumbai and Ahmedabad. We will continue to target key corporate clients and developers in the region, as well as capitalising on our innovative approach to service local and international clients.

Outlook

Trading in the first three months of the new financial year has been in line with expectations and business sentiment in our main areas of activity is becoming more positive. We have a lean and diverse business which is well placed to benefit from some of the green shoots we are seeing from some sectors of the market. We continue to win significant new commissions across our network of offices and we are gaining market share from our competitors. Over recent years we have repositioned the business and have built a solid global platform. The next stage of our development will be to build on the platform we have created.

Dean Webster, Chief Executive

Forward-looking statements

 Certain statements in this preliminary announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements involve risk and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Financial Review

Trading performance

The Group's financial performance in the year ended 31 March 2013 was greatly improved in comparison with the previous year in terms of revenues, operating profit, profit before taxation and net debt. It was also marked by the completion of three further asset sales following the sale of an interest in the South Ayrshire Schools project in the year ended 31 March 2012.

Group revenue was £80.6m (2012: £72.8m). Profit before taxation, after the impact of £1.5m of exceptional administrative expenses and £0.5m of amortisation of acquired intangibles as described in Note 5, amounted to £1.8m (2012: loss of £1m). This profit includes the gains on sale of the Group's interests in the Inverclyde Schools PFI project, which was deferred from the previous year, the Dumfries & Galloway Schools PFI project, and the Plymouth Lift project. The bulk of the Group's derivative-based currency cover in respect of Australian dollar exposures is now deemed effective under IAS39, such that the £0.6m charge in the previous year has been reduced and the Group's aggregate net finance cost reduced from £0.9m to £0.6m.

Revenue for the year increased by 10.7% to £80.6m (2012: £72.8m). Net revenue, after deduction of sub-consultant costs, was £72.4m (2012: £68.4m).

Adjusted profit before tax rose to £3.7m (2012: £0.7m). Pre-tax profit was £1.8m (2012: loss of £1m) after exceptional administrative expenses, amortisation of acquired intangibles and net finance costs.

Adjusted operating profit was £4.2m (2012: £1.6m) and the adjusted net operating profit margin was 5.8% (2012: 2.3%). Operating profit amounted to £2.3m (2012: loss of £0.2m) and operating margins were 2.9% (2012: (0.2)%).

Adjusted earnings and diluted earnings per share were 3.7p (2012: loss of 0.5p). Basic and diluted earnings per share were 1.9p (2012: loss of 2.1p).

Our current order book is approximately £100m, an increase from last year's reporting date of 11.1% (2012: £90m).

In presenting the Group's adjusted profit below, amortisation of acquired intangible assets, acquisition costs and exceptional administrative expenses have been excluded so as to assist understanding of the underlying performance of the Group:

The primary segmental analysis in Note 3 to the financial statements details the segmental revenue and result. In aggregate the Group's gross margin decreased from 29.5% to 28.8%, with segmental margins affected mainly by continued competitive pressures but with a recovery in the international business, particularly in the Middle East. The loss-making French operation was closed during the year.

Details of exceptional administrative expenses are provided in Note 5 to the financial statements. Exceptional administrative expenses of £1,455,000 (2012: £1,263,000) comprised in the main restructuring costs of £812,000 (2012: £1,193,000), interest payable to the vendors of Widnell Limited of £356,000 (2012: £nil), costs attaching to the general meeting of the shareholders held on 9 May 2013 of £170,000 (2012: £nil) and costs associated with the closure of our operations in France of £117,000 (2012: £nil). There was little change in the exchange rates to sterling of our major trading currencies and little impact on either revenues or profits at the pre-interest level.

Cash performance

Cash generated from / (used by) operations was £2.2m (2012: £(2.8)m). Note 11 analyses this generation, which arises largely through profit earned. The Group's work in progress net of fees in advance increased to £6,333,000 (2012: £5,766,000) and gross receivables to £24,263,000 (2012: £20,510,000). Overdue amounts increased to £8,450,000 (2012: £6,486,000) and there was a slight reduction in the amount of debt impaired to £1,722,000 (2012: £1,787,000). The lock-up calculation, which measures the number of days' activity included within work in progress and trade receivables, incorporates an annualisation of revenues based on the last three months' revenues. Management of working capital is a key issue as the Group continues to expand, particularly in the Asia Pacific region, and further steps are being taken to improve its management and reduce unnecessary utilisation of the Group's cash resources. Specific action is in hand to release funds held in mainland China and establish a financing facility for part of the Hong Kong trade receivables.

Key Performance Indicators

A number of metrics are used to monitor financial performance. These include turnover, operating profit, cash collection, pre-exceptional administrative expenses earnings per share and lock-up. Most of these Key Performance Indicators improved in the last year, with the exception of lock-up. The latter was affected by a retention balance of £1m (2012: £0.7m) on a project in the Middle East, the unprovisioned element of two trade receivables in Dubai of £0.5m (2012: £0.5m) and by a number of projects in mainland China which are subject to milestone billing arrangements. The pre-exceptional administration expenses basic and diluted earnings per share were 3.7p (2012: 0.7p) and the average number of lock-up days for the final quarter was 103 (2012: 100). The financial performance by segment is reported in Note 3.

Underlying profit margins

The gross profit margin was 28.8% (2012: 29.5%) on gross revenue and 32.1% (2012: 31.4%) on net revenue and the operating profit margin was 2.9% (2012: (0.2)%). The operating profit margin before exceptional administrative expenses was 4.7% (2012: 1.5%).

Finance costs

The Group's net finance cost, as disclosed in Note 4, reduced from £859,000 to £565,000. Within this total, finance income reduced from £233,000 to £170,000 as a result of the sale of income-generating assets and finance cost reduced from £1,092,000 to £735,000, largely as a result of a reduction from £0.6m to £0.3m in the charge required under IAS39 relating to the Group's AUD11.1m derivative-based currency contract. AUD8.7m of this contract is effective in terms of the standard. The balance covers income statement exposures. Since the balance sheet date the AUD2.4m ineffective portion of the contract has been closed. It is intended to reduce the remaining amount covered over the next three years.

Tax

The charge for the year was £476,000 or 26.8% of the profit before taxation. In 2012, the charge of £391,000 on a reported loss of £1,021,000 arose predominantly through the impact of expenses not deductible for tax purposes and deferred tax relief not recognised.

Earnings / (loss) per share

Basic earnings / (loss) per share amounted to 1.9p (2012: (2.1) p) and fully diluted earnings / (loss) per share were 1.9p (2012: (2.1)p). Tax-adjusted basic and diluted earnings per share prior to exceptional administrative expenses was 3.7p (2012: loss of 0.5p). Details of exceptional administrative expenses are provided in Note 5.

Balance sheet

The Group ended the year with:

- Net borrowings of £7.1m, compared with £8.2m at 31 March 2012;

- Net assets of £27.9m, compared with £28.8m at 31 March 2012;

- Work in progress (net of fees in advance) of £6.3m compared with £5.8m at 31 March 2012; and

- Trade receivables of £22.7m compared with £19.3m at 31 March 2012.

We continue to invest particularly in IT equipment and software 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, part of the Lloyds TSB group, which provides Sweett Group with overdraft, revolving credit, term loan and contract guarantee facilities as well as a guarantee facility to secure obligations to third parties.

At 31 March 2013, the amount undrawn under the Group's credit lines was £3m (2012: £5m). Amounts drawn under the term loan are shown as non-current liabilities to the extent that repayments are due after 31 March 2014. All other liabilities to Bank of Scotland plc and overseas banks are shown as current liabilities, including amounts drawn under the revolving credit facility, which expires and is expected to be replaced in capacity terms later this calendar year. All banking covenants were met during the financial year and at 31 March 2013. At 31 March 2012 all of the borrowings under the Group's credit lines were shown in the financial statements as current liabilities. The reason for this is that two of the financial covenants, being the cash flow cover and gearing covenants, were infringed at 31 March 2012. Bank of Scotland plc subsequently granted a waiver.

The Bank of Scotland plc facility agreements contain five separate financial covenants being:

·; Net worth shall not at any time be less than £25m

·; The ratio of EBITDA to Total Interest shall not at any time be less than 4:1

·; The ratio of Net Operating Cash flow to Bank Debt Service on each test date shall not be less than 1.1:1

·; The ratio of Total Net Debt to EBITDA shall not at any time exceed 3:1

·; The value of CS Investments' PPP/PFI investment portfolio as detailed in the annual audited accounts shall be no greater than 25% of the consolidated net assets

Going concern

A detailed examination of the Group's cash flow and trading forecasts has been undertaken to enable the board to conclude that the Group can operate within its banking covenants such that it could be established that the Group should continue to prepare its financial statements on the going concern basis. The Group's bankers have confirmed that, in the normal course of events, both the overdraft and revolving credit facilities will be replaced on expiry late in the 2013 calendar year.

Material considerations in a forward look at covenant compliance include:

·; The assumption that a retention balance of £1m on a Middle East contract will be recovered during the current financial year;

·; Assumptions as to the completion dates of financial close being achieved on the Leeds Social Housing project, where our exposure is £0.8m, and refinancing of our current (£0.8m) and future exposures on the Scottish North Hub project; and

·; Agreement, which has been obtained, as to deferral of residual payments to the vendors of Widnell Limited amounting to £2.1m, £0.6m having been paid since 31 March 2013.

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 still incomplete. Systems enhancements over the next year, based on the roll-out of an Agresso ERP system across the Group's overseas businesses, will further strengthen internal controls. As a temporary measure, more intense management review processes are in operation until such time as the roll-out is completed. The corporate governance section of this Report outlines further issues of internal control within the Group.

Treasury

Treasury matters and banking arrangements are overseen by a treasury committee, which is chaired by the Group chairman.

Dividends

An interim dividend for the year to 31 March 2013 of 0.3 pence per share at a cost of £203,000 (2012: 0.2 pence per share at a cost of £133,000) was paid on 17 January 2013 to all shareholders on the register on 14 December 2012. The directors are recommending a final dividend of 0.7p per share at a cost, assuming no issues of shares in the intervening period, of £474,000 (2012: 0.3 pence at a cost of £200,000) which, if approved by the shareholders at the AGM, will be paid on 13 September 2013 to all shareholders on the register on 16 August 2013. 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 Sweett Group 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.

Summary

Sweett Group's trading performance and internal control environment have been satisfactory for the year under review.

Chris Goscomb

Chief Financial Officer

Consolidated Income Statement for the year ended 31 March 2013

Consolidated Statement of Comprehensive Income for the year ended 31 March 2013

Consolidated Balance Sheet as at 31 March 2013

Consolidated statement of changes in equity for the year ended 31 March 2013

Consolidated Statement of Cash Flow for the year ended 31 March 2013

Notes to the Preliminary Announcement

1. General information

This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 March 2013. The financial information for the year ended 31 March 2013, 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 and Financial Statements for the year ended 31 March 2013. Statutory accounts for the year ended 31 March 2012 have been delivered to the Registrar of Companies and those for the year ended 31 March 2013 will be available to shareholders by 31 July 2013 for approval at the Annual General Meeting to be held on 30 August 2013. Those accounts have not yet been delivered to the Registrar. The auditors have reported on these accounts; their report was unqualified.

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

Basis of preparation

The accounting policies applied by the group were published in the Annual Report and Financial Statements for the year ended 31 March 2012, which is available on the Group's website at www.sweettgroup.com, and they will also be included in the Annual Report and Financial Statements for the year ended 31 March 2013. There have been no significant changes to the Group's accounting policies during the year.

Going concern

The Group's activities are funded by a combination of long-term equity funds, a reducing loan, revolving credit and overdraft facilities from the principal banker, Bank of Scotland plc, and smaller overdraft facilities overseas.

In considering the ability of the Group to meet its financial obligations as they fall due, the Board has considered the expected trading performance of the group, including pressures on margins working capital requirements, the level of overheads and interest to be funded, loan repayments and payments in respect of past and future acquisitions and the impact of proposed and potential asset sales.

The Board has modelled a wide range of scenarios in respect of each of these variables with particular regard to future compliance with the financial covenants to Bank of Scotland plc listed in the preceding financial review.

The Directors' believe that the principal sensitivities and actions required in order to maintain covenant compliance include: 

·; Reaching financial close on the Leeds Social Housing project, where the Group's interest and future subscription liability have been ceded to a third party. Financial close is believed to be imminent. However, the Group is exposed to work in progress and bid costs amounting to some £800,000;

·; Ensuring recovery of retentions amounting to £1m on a Middle East contract. The directors have no reason to believe that the outstanding sums will not be recovered, though timing is uncertain;

·; Managing working capital requirements across the Group;

·; Possible extension of the terms for the payment of deferred consideration of £1.5m to the former shareholders of Widnell Limited, all of which is now due under the terms of the July 2010 share purchase agreement. The vendors, all of whom continue to work within the Sweett Group, have represented that they will accept future payments such that there is no detrimental impact on the funding of the Group or its covenant compliance. Whilst there is no legally binding agreement in place to extend the terms, the directors believe it is reasonable to assume this deferral within their assessment of going concern;

·; Agreeing replacement facilities with Bank of Scotland plc for the overdraft and revolving credit facilities amounting in aggregate to £10m on expiry later in the calendar year. The Group's bankers have confirmed that, in the normal course of events, both facilities will be replaced on expiry late in the 2013 calendar year.

The directors are confident that they have the right strategy and action plan to operate within the requirements of the bank covenants and, on this basis, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's financial statements.

2. Significant accounting policies

The accounting policies adopted for the year ended 31 March 2013 are consistent with the policies included in the annual report and financial statements for the year ended 31 March 2012.

3. Segmental analysis

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

The Board considers Sweett Group's business and internal reporting by geography, being Europe (excluding the Investments business), Investments, the Middle East, North Africa & India and Asia Pacific. All four categories generate revenues from the provision of quantity surveying, project management and specialist services / management consultancy and the Investments business generates profits on the disposal of its PPP/PFI financial assets available for sale.

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.

Further details of the disposal of available for sale assets are provided at Note 10.

* Unallocated corporate costs comprise directors' remuneration, advertising, public relations, corporate financing costs, legal and professional fees and exceptional administrative expenses incurred by Sweett Group plc. They include for the year ended 31 March 2013 £170,000 (2012: £156,000) of exceptional administrative expenses.

The Group is domiciled in the UK. Its revenue from external customers in the UK is £40.7m (2012: £38.2m) and from external customers from other countries is £39.9m (2012: £34.6m).

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 total of non-current assets other than financial instruments and deferred taxation located in the UK is £13.6m (2012: £14.1m) and the total of such non-current assets in other countries is £7.5m (2012: £7.0m).

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

4. Net finance costs

The change in fair value of derivative financial instrument relates to a forward foreign exchange contract to hedge advances in Australian dollars to a subsidiary company, the bulk of which were capitalised in September 2011. This was rolled into a replacement instrument on maturity in March 2012 and subsequently in March 2013. Of the total contract value of AUD11.1m, AUD8.7m is effective in terms of IAS 39. The change in fair value is the charge on the ineffective part of the contract.

Interest expense on unwinding of discount relates to the notional interest on deferred acquisition consideration.

5. Profit / (loss) before taxation is stated after charging / (crediting):

Exceptional administrative expenses are those that the directors consider are of such unusual size or nature that they are required to be separately disclosed to allow the user of the financial statements to understand the underlying performance of the Group, notwithstanding that such items may be recurring in nature. These are shown on the face of the income statement as exceptional administrative expenses.

Restructuring costs comprise redundancy costs of £0.5m (2012: £0.8m), and other restructuring costs of £0.3m (2012: £0.4m).

A requisition for a general meeting of shareholders, eventually held on 9 May 2013, was received in March 2013. The costs have accordingly been expensed in these financial statements.

Interest on vendor liabilities comprises interest on late-paid sums to the vendors of Widnell Limited. £180,000 of this relates to prior periods.

During the year the operation in France was closed and redundancy and other closure costs amounted to £117,000.

The impairment loss recognised in 2012 on trade and other receivables relates to losses incurred as a result of the political unrest in the Middle East.

6. Income tax expense

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

The tax on the Group's profit / (loss) before taxation 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 is 26.8%. For 2012, since the Group reported a loss before taxation with a charge to taxation, there was no weighted average applicable tax rate. This arose predominantly through the impact of expenses not deductible for tax purposes, and deferred tax not recognised.

Changes to the main rate of corporation tax were announced in the Finance Act 2012, enacted in July 2012, which saw the main rate of corporation tax reduce from 25% to 24% from 1 April 2012. In addition, Finance Act 2012 provided for a further reduction in the main rate of corporation tax from 24% to 23% from 1 April 2013. The disclosures above include the effect of these changes.

In addition to the changes in rates of corporation tax noted above a number of further changes to the UK corporation tax system were announced in the December 2012 Autumn Statement and March 2013 Budget Statement, to be enacted in Finance Act 2013. These changes included further reductions in the main rate of corporation tax to 21% from 1 April 2014, reducing to 20% from 1 April 2015. These reductions had not been substantively enacted as at the balance sheet date and, therefore, are not included in these financial statements.

The effect of the changes expected to be included in Finance Act 2013 would be to reduce the deferred tax asset provided at the balance sheet date by £140,000. This £140,000 decrease in the deferred tax asset would decrease profit by £45,000 and decrease the total recognised gains in the statement of total recognised gains and losses by £95,000.

The Board has declared a final dividend in respect of the year ended 31 March 2013 of 0.7p per share (2012: 0.3p per share) amounting to 1.0p for the year (2012: 0.5p for the year). These preliminary results do not reflect the final dividend for 2013.