1 Jul 2009 07:00
1 July 2009
Cyril Sweett Group plc ("Cyril Sweett" or "the Group")
Unaudited preliminary results for the year ended 31 March 2009
Cyril Sweett is an international construction and property consultancy providing quantity surveying, project management, management consultancy and specialist services, operating in the UK, Europe, the Middle East, India and Australasia. The Group works with and advises government agencies, private sector developers, occupiers, investors and construction companies, undertaking infrastructure and property projects across a diverse range of market sectors.
The Group is pleased to announce its unaudited preliminary results for the year ended 31 March 2009.
Highlights
Revenue for the year up 26% to £78.9m (2008: £62.7m)
Profit before tax and before exceptional expenses of £5.96m (2008: £5.86m)
Exceptional administrative expenses of £3.76m (restructuring, doubtful debts and vacant property costs)
Profit before tax of £2.20m (2008: £5.86m)
Basic pre-exceptional earnings per share of 7.6p (2008: 8.3p)
Basic post-exceptional earnings per share of 2.9p (2008: 8.3p)
Contracted order book stands at £74m (2008: £86m)
Strong balance sheet with no net debt
Final dividend of 1.5p taking the full year dividend to 2.4p (2008: 2.4p)
Chief Executive Officer Dean Webster said:
"We have seen another good underlying trading performance despite the tough market conditions.
"Cyril Sweett continues to have a strong and diverse market position. We operate in both the public and private sectors across an increasingly broad range of geographies.
"We responded quickly and decisively in the second half of the year to adapt and adjust the business to the downturn, by matching our personnel levels to our expectations for the year ahead. The management team, which has experience of running businesses through previous recessions, remains confident that Cyril Sweett is well placed to gain market share during the current economic downturn and is well positioned to benefit when its markets improve, particularly since the business remains financially strong with net cash."
Enquiries
| Cyril Sweett Group plc Dean Webster, Chief Executive Officer Chris Goscomb, Chief Financial Officer Caroline Covill, Head of Communications | 020 7061-9303 020 7061-9520 020 7061-9102 |
| Brewin Dolphin Investment Banking Andrew Kitchingman Sean Wyndham-Quin | 0845 213-4787 0845 213-4747 |
| Financial Dynamics Billy Clegg Georgina Bonham | 020 7831-3113 |
Chairman's Statement
I have pleasure in introducing our unaudited preliminary results for the year ended 31 March 2009.
Cyril Sweett had a strong year of growth and development, exceeding its past performance in revenue and profitability, before exceptional expenses, thereby meeting market expectations on this basis. This robust performance reflects the swift and decisive actions taken by management during the period to pro-actively manage the downturn. Trading conditions in the construction and property sector in particular have been tough and are likely to remain uncertain for some time. Given these tough conditions, I am pleased with the overall strong performance of the Group.
It has been a year of adjustment for the Group. At the beginning of the year acquisitions were completed to advance our strategy to grow the Group globally, further diversify the business and secure a greater proportion of UK public sector workload. All of the acquisitions have been successfully integrated into the Group and we are delighted that, having joined us, the excellent senior management have embraced their new roles in the enlarged organisation.
By the mid point in the year, our expectation of a toughening economic climate had been realised, and management took the difficult but necessary action to right size the cost base of the business to fit the market conditions. This responsive action, combined with our strong balance sheet and net cash position, has ensured a robust business that will be able to flex and adjust to future market conditions.
Each member of the management team has experience of dealing with recessions in the past, and the recent appointment of Chris Goscomb as Chief Financial Officer has further strengthened the Executive. All of Cyril Sweett's management and staff upheld excellent standards throughout the year by continuing to develop new business and deliver high quality advice and services to our clients. Our people are central to our success and without their diligence and spirit we would not have delivered such a good performance. On behalf of the Group board I would like to thank them sincerely for all their hard work.
As reported at the half year, I shall become Non Executive Chairman following the September AGM, but I do so with full confidence that the Executive Team is well placed to steer the Group through this difficult period and to continue to diversify the business to meet opportunities as they arise.
Outlook
We anticipate that the retail and commercial markets will remain uncertain for some time and there is likely to be some slowdown in UK public expenditure from early 2010. Overseas markets will also depend on the economic welfare of each individual country or region, and some will fare better than others. Whilst we will therefore be responsive to the short term environment and focus on our strong market positions, we will also look to develop the business in line with our 2012 Strategic plan. This will drive the extension of our offering into new sectors in the UK, the development of our position as a leader in sustainable development and the establishment of our services in a wider range of territories overseas.
With a clear focus on operational development, cash management and client delivery, we are confident that the business will emerge from the downturn stronger and leaner and will be well placed to benefit from the recovery.
Francis Ives - Chairman
Chief Executive's Review
1.0 Introduction
Cyril Sweett is an international construction, property consultancy and investment Group, delivering expertise in quantity surveying, project and facilities management, management consultancy and a comprehensive range of specialist services.
The Group floated on the AIM market of the London Stock Exchange over 18 months ago, and there is no doubt that conditions in the construction sector have deteriorated since then, particularly over the last 12 months.
The Group continues to expand its services across a wide range of sectors including commercial and retail, health, education, prisons, social housing, life sciences, rail, air, waste, energy and infrastructure. The Group operates from 30 offices throughout the UK, Europe, Middle East, India and Australasia. From these bases the Group is providing services in 15 countries.
The resilience of the Group in dealing with the ongoing tough conditions in the construction sector is centred on its diverse sector and geographic penetration, combined with the willingness of our employees to be flexible, mobile and adaptable across the markets in which we now operate.
The responsiveness of the Group has been demonstrated by the rapid and decisive action it took between November and February to close two offices, reduce the cost base and right size the business to 750 people.
The financial strength of the Group is underpinned by a very strong balance sheet, a net cash position and long term banking facilities. The order book stands at £74m and continues to be supported by increasing levels of repeat appointments, framework based commissions and opportunities in emerging sectors.
Additionally, the expansion to our overseas workload is underpinned by the high barriers to entry in UK-style quantity surveying and project management, as global construction markets become more focused on the capital cost, life cycle and sustainability of the built environment.
Going forward we are confident that the Group is well positioned to gain market share during the downturn and emerge stronger when its markets improve.
Financial performance
Revenue increased by 26% to £78.9m. Operating profit before exceptional expenses increased by 6% to £6.2m, but decreased by 59% on a post exceptional basis, adversely affecting basic earnings per share, which are down to 2.9p. At the same time, operating margins pre exceptional expenses decreased from 9% to 8%. Our activities were cash generative at an operational level and we ended the year debt free. Whilst the business in the UK had to be right sized to take the downturn into consideration, both the international and investment businesses made excellent progress. The Group's order book currently stands at £74 million. The board has proposed a final dividend in respect of the year of 1.5p per share, which together with the interim dividend totals 2.4p per share. The final dividend will be paid on 18 September 2009 to shareholders on the register at 21 August 2009.
2.0 Group strategy
The downturn in the construction and property sector is evident on a global basis. Nevertheless, the highly fragmented nature of our traditional markets, combined with the high demand for UK-style quantity surveying and project management expertise overseas, will create significant opportunities for the Group.
In anticipation of a prolonged period of difficult conditions, we have recently re-focused our business strategy to align with the opportunities that do exist in the future. Our strategy to 2012 will therefore focus on six core elements:-
Penetrate our existing sectors and concentrate on winning further framework agreements;
Develop our resources to diversify into sectors that present growth opportunity including energy and utilities;
Utilise our expertise in construction sustainability by developing a much wider range of services in the cost and project management arena;
In addition to our new offices in Saudi Arabia and Hong Kong, we now plan to continue expanding in Asia, Middle East/North Africa and Australasia;
Continue to grow our PPP Investment business across a wider sector base; and
Leverage our skill set up and down the value chain.
Initially we aim to deliver these objectives organically, whilst at the same time preserving our balance sheet strength and lack of debt. Nevertheless, we are in a position where we are able to acquire either distressed businesses that fit our model, or, alternatively, to pursue other acquisition opportunities in order to accelerate our advance in new markets or locations.
3.0 Future
The Group's diversity and flexibility, when combined with its financial strength, will allow it to continue to be responsive to market conditions. I am confident that Cyril Sweett remains a strong business with exciting growth prospects, the foundations of which are being promoted in our 2012 Strategic Plan.
Therefore, despite the tough market conditions, we look forward to the year ahead with confidence.
4.0 Review of operations
Cyril Sweett has continued to grow progressively since its buy out in 1998, as a result of both continued organic growth and selective acquisition. Throughout this period the expansion of the Group has been as a result of a focus on diversification across a range of sectors, geographies and new routes to market.
During 2008/09 we continued with developing our strategy by:
Acquiring three businesses which together extended our public sector base in the UK, supported our growth in the Middle East, and delivered new markets in Singapore and Australia;
Consolidating our PPP Investment business with two further wins and providing support to clients on other successful bids;
Opening an office in Saudi Arabia and winning our first major commission;
Publishing industry leading sustainability research with Investment Property Forum, WRAP and Communities and Local Government (CLG);
Increasing overseas exposure to further diversify our business model, with overseas now accounting for 30% of our forward order book;
Consolidating our longer term order book with 17 new frameworks;
Restructuring our management teams under one new Executive Committee that will co-ordinate the activities of the whole business;
Implementing a new intranet and launching a new Group website which encompass our global experience and capabilities; and
Ensuring active cash management in order to maximise our liquid resources.
Nevertheless, in the face of tough construction market conditions, particularly in the commercial and retail sectors, the management team took decisive action between November 2008 and February 2009 to right size the business.
This required the business to be scaled down from 950 to 750 employees through a combination of natural wastage and voluntary and compulsory redundancies. This initiative applied to personnel in the UK and Ireland, Middle East, India and Australia offices. In addition, having right sized our resources to match our future workload expectations, the management instigated further economies by reducing salaries across all levels of personnel. The aim is to ensure the ongoing competitiveness of the Group in the face of increasing pressure on margins and pricing.
The cost of right sizing the business, which has been treated as exceptional for trading purposes, amounted to £1.5m, and this has been reflected in the income statement. Further exceptional costs of £1.8m and £0.5m were recognised for bad debt provisions and onerous leases respectively. In the case of the bad debt provisions, management decided that, in view of the credit crunch affecting clients' ability to pay, the establishment of these provisions was necessary. Of this amount, 76% represented UK clients and 24% overseas.
In the case of empty office space, this is largely as a result of the Drury Lane, London accommodation that came with the acquisition of Nisbet LLP. Re-occupation of this space is no longer anticipated before the expiration of the lease of our main London premises in 2011. Between now and 2011 we will seek ways to alleviate our premises costs.
Whilst managed under one main Executive Committee, the Group activity is co-ordinated via three main operating units: UK and Ireland, International and PFI/PPP Investments.
The operational review of each unit is as follows:
4.1 UK and Ireland Operations
Cyril Sweett continues to gain market share in its UK and Irish markets with revenue up 9% to £61.8m, accounting for 78% of Group revenues. The UK and Ireland business is structured via five main regional hubs, co-ordinating 18 regional offices.
In terms of service quality, we are committed to offering our clients the highest standards of service and expertise. Our quality management systems are managed centrally across our network of offices enabling us to ensure that local delivery is maintained at a constant standard across every project. Our service won Project Management Firm of the Year by Building magazine in 2008, which acknowledged our excellence, innovation and professionalism.
In the year we have integrated the acquisitions of Nisbet LLP and Roger Richards Partnership and have been able to promote a wider range of services via our new offices in Cardiff, Leamington Spa, Plymouth and Truro. We have also been able to achieve operational efficiencies by the consolidation of our offices in Bristol, Exeter, Leeds and London.
The UK and Ireland operations comprise 600 people having adjusted the overall size of the operation to meet the expected workload for the 2009/10 financial year. The business operates across a range of sectors which we continue to diversify progressively. Our progress during the reporting year includes:
Public
The public sector represents 60% of UK and Ireland revenue (2008: 58%).
Within the public sector, Cyril Sweett has strengthened its capabilities with the acquisition of Nisbet, particularly the 'purchaser side' of our public sector client base which complements our existing depth of 'provider side' clients. We continue to regard education and health as key growth areas for the Group and we have continued to be extremely active in providing a broad range of services. The buoyant pipeline of contracts in these areas has enabled us to redeploy staff from the UK private commercial sector where many projects have been delayed or put on hold.
Our work continues throughout the different stages of the education life cycle. We have been particularly successful in securing work through the Partnerships for Schools framework on the Building Schools for the Future programme .Contracts over the last year have been secured across the UK in Barnsley, Coventry, Doncaster, Greenwich, Hertfordshire, Hull, Kent, Lewisham, Luton, Newcastle, Lambeth, Tower Hamlets, Waltham Forest and Westminster. Further and higher education contracts have been a growing area for the business over the last year, due partly to our appointment on the University Partnerships Programme framework. We are currently advising Anglia Ruskin University, Cambridge University, King's College, Napier University, Robert Gordon University and University of Warwick with their redevelopment programmes.
In the health sector Cyril Sweett continues to be the market leader in providing a broad range of services to trusts, SPVs, contractors and banks. We have been particularly successful in securing P21 contracts because of our strong contractor relationships and we are actively working on projects in North Tees and Hartlepool, Brighton, Sherwood Forest, Bradgate & Belvoir. A major win for our Scottish business was our appointment to the Construction Integrated Supply Chain NHS Scotland for the Common Service Agency framework.
Our UK transport division has performed well and has secured additional contracts as part of our ongoing framework at Heathrow Airport. In rail our role has been extended by Network Rail on the Kings Cross redevelopment project and capacity enhancement plans at Waterloo Station. Our work on Thameslink continues at London Bridge, Blackfriars and Farringdon Stations where we are additionally involved in incorporating enabling works for Crossrail. In Scotland, as Programme Managers with Transport Scotland, we continue to work on the portfolio of rail and tram schemes underway.
Prisons and Custodial continues to be a strong sector for us. As part of our ongoing strategic alliance with the Ministry of Justice (MOJ), new contracts have been secured at Belmarsh, Coltishall, Maidstone and Brixton as well as other commissions throughout the MOJ estate. New commissions are also being secured as the UKBA (United Kingdom Borders Agency) increase their custodial portfolio including a major new facility at Bullingdon.
We continue to advise clients across other public sectors including defence and social housing. In addition, as part of our strategy to diversify into emerging sectors, we have secured a number of commissions in the Waste Management sector and are currently active on four UK waste schemes at the planning and procurement stage.
PrivateThe private sector represents 40% of UK and Ireland (2008: 42%) which is a reflection of the spend pattern in the current recession.
Due to the softening of activity in UK property development we have redeployed some of our staff to work on public sector contracts as the balance of workload has altered and have also reduced headcount where it became necessary. Despite the downturn there has nevertheless been ongoing activity in the private sector, particularly with our corporate client base. We have been able to build on our strong profile and we successfully secured contracts with Prudential Assurance Company, ING Real Estate, JP Morgan Chase and Bank of England.
Going forward we are actively developing areas which are still experiencing recurring workload such as the budget hotel market and developments for the food retailing market. Over the last year we have secured further contracts with Premier Inn, Tesco and Selfridge & Co and we are actively researching other opportunities in this arena. It is our intention to increase our penetration in a number of markets where we can add value to our clients' activities, at the same time further diversifying our service offering and spreading our operational risk.
4.2 Overseas Operations
Cyril Sweett continues to gain increasing international exposure with revenue of £17.1m, up from £6.2m and now accounting for 22% of Group revenues. Since the Group's flotation, the international business has made significant progress both organically and through acquisitions. We have grown our headcount by 194% and established a healthy order book, which currently stands at over £21m.
The integration of BurnsBridge into the Group has been very successful and the management teams in Australia, Singapore and Abu Dhabi now help lead our activities in these regions. These offices are driving expansion into wider territories in South East Asia and China. In the period, we opened an office in Hong Kong and registered a business in Bangkok.
Strong demand for our services continues in the Middle East. As a result we have widened our client base and expanded our geographic capabilities. We have opened an office in Riyadh, Saudi Arabia, where we secured a contract to provide both Project and Cost Management on the tallest building in the Kingdom. We plan to open further offices throughout the Middle East where major project opportunities are opening up to the Group as a result of our investment over the last nine months.
In continental Europe our offices in Paris and Madrid remain strong despite challenging local market conditions. The Spanish office has been retained for further commissions for Primark in both Spain and Portugal and has expanded its operation into Gibraltar. In France we have entered the energy market by supporting a client on two power stations.
4.3 Investment activities
The Group's Investment business was established in 2007 to work with strategic partners offering a unique consultancy led approach to bid manage, direct and invest in Special Purpose Vehicles (SPVs) in PFI and PPP projects. The business specialises in a number of key UK sectors including community health, education, emergency services, social housing, student accommodation and waste markets. The Investment team has continued to build a highly successful reputation in the PPP marketplace for having the capabilities to manage, direct and invest in projects that have been specifically identified as opportunities where we can add best value.
The Investment business continues to gain increasing exposure with revenues for consultancy activities up 24% to £1.16m, accounting for 1.5% of Group revenues. There is an encouraging pipeline of potential future projects currently at various short-listing stages.
During the period our first Schools investment, South Ayrshire Schools, was successfully completed and became operational. In terms of expanding our pipeline of opportunities, we achieved financial close on the £80m Inverclyde Schools project, supported mandates to financial close on Salford and Wigan BSF and Enniskillen Hospital. In March 2009 our consortium was appointed to the LIFT Partners for the Express LIFT (Local Improvement Finance Trust) framework providing us with access to a range of future LIFT programmes as both an equity investor and service provider.
The Investment team works in close collaboration with other parts of the Group to ensure effective project delivery. By undertaking the delivery within the Group we can ensure that the best service is delivered to our clients, partners and ultimately the public sector.
Dean Webster - Chief Executive Officer
Cyril Sweett Group plc
Consolidated Income Statement (unaudited)
for the year ended 31 March
|
| Notes | 2009 |
| 2008 |
|
| £'000 | £'000 | ||
| Revenue | 3 | 78,912 | 62,705 | |
| Cost of sales | (54,043) | (40,394) | ||
|
|
| |||
| Gross profit | 24,869 | 22,311 | ||
| Administrative expenses before exceptional expenses | (18,703) | (16,501) | ||
| Exceptional administrative expenses | 4 | (3,761) | - | |
| Total administrative expenses | (22,464) | (16,501) | ||
|
|
|
| ||
| Operating profit before exceptional administrative expenses | 6,166 | 5,810 | ||
| Exceptional administrative expenses | 4 | (3,761) | - | |
| Operating profit | 2,405 | 5,810 | ||
| Finance income | 249 | 222 | ||
| Finance expense | (452) | (173) | ||
| Net finance (expense) / income | (203) | 49 | ||
|
| ||||
| Profit before taxation | 2,202 | 5,859 | ||
| Taxation | 5 | (568) | (1,809) | |
| Profit for the year | 1,634 | 4,050 | ||
| Profit attributable to: | ||||
| Equity shareholders of the parent | 1,634 | 4,050 | ||
|
| ||||
| Basic earnings per share (pence) | 6 | 2.9 | 8.3 | |
| Diluted earnings per share (pence) | 6 | 2.8 |
| 7.8 |
Cyril Sweett Group plc
Consolidated statement of recognised income and expense (unaudited)
for the year ended 31 March
|
|
| 2009 | 2008 | |
| Group | Group | |||
|
| £'000 | £'000 | ||
| Foreign exchange translation difference | 690 | 280 | ||
| Available for sale investments: | ||||
| Valuation loss taken to equity | (325) | - | ||
| Deferred tax on valuation loss | 91 | - | ||
| Adjustment to change in tax rates | - | 12 | ||
| Actuarial (loss) / gain on pension scheme | (1,727) | 651 | ||
| Deferred tax on actuarial (loss) / gain | 484 | (182) | ||
|
|
| |||
| Net (expense) / income recognised directly in equity | (787) | 761 | ||
| Profit for the year | 1,634 | 4,050 | ||
| Total recognised income for the year | 847 | 4,811 | ||
|
| ||||
| Attributable to: | ||||
| Equity shareholders | 847 | 4,811 | ||
Cyril Sweett Group plc
Consolidated Balance Sheet (unaudited)
as at 31 March
|
|
| 2009 |
| 2008 |
|
| Notes | £'000 | £'000 | |
| Non-current assets | ||||
| Goodwill | 7 | 10,572 | 3,320 | |
| Other intangible assets | 8 | 1,920 | 354 | |
| Property, plant and equipment | 1,862 | 1,279 | ||
| Financial assets | 627 | 941 | ||
| Deferred income tax asset | 817 | 769 | ||
| Total non-current assets | 15,798 | 6,663 | ||
|
| ||||
| Current assets | ||||
| Trade and other receivables | 27,744 | 24,438 | ||
| Cash and cash equivalents | 3,818 | 6,730 | ||
|
| 31,562 | 31,168 | ||
| Current liabilities | ||||
| Financial liabilities | (277) | (793) | ||
| Trade and other payables | (13,300) | (9,368) | ||
| Current income tax liabilities | - | (805) | ||
| Total current liabilities | (13,577) | (10,966) | ||
|
| ||||
| Net current assets | 17,985 | 20,202 | ||
|
| ||||
| Total assets less current liabilities | 33,783 | 26,865 | ||
|
| ||||
| Non-current liabilities | ||||
| Financial liabilities | (3,431) | (96) | ||
| Trade and other payables | (643) | - | ||
| Deferred income tax liability | (77) | (168) | ||
| Retirement benefit obligations | (1,290) | - | ||
| Total non-current liabilities | (5,441) | (264) | ||
|
| ||||
| Net assets | 28,342 | 26,601 | ||
| Equity | ||||
| Share capital | 9 | 5,759 | 5,534 | |
| Share premium | 9 | 11,955 | 9,987 | |
| Treasury shares | 9 | (118) | (341) | |
| Share option reserve | 9 | 249 | 615 | |
| Retained earnings | 9 | 10,497 | 10,806 | |
| Total equity shareholders' funds | 9 | 28,342 | 26,601 |
Cyril Sweett Group plc
Consolidated Cash Flow Statement (unaudited)
for the year ended 31 March
|
| Notes | 2009 | 2008 | |
|
| £'000 | £'000 | ||
| Cash flows from operating activities | ||||
| Cash flows from operations | 11 | 3,912 | 3,939 | |
| Interest received | 210 | 210 | ||
| Interest paid | (240) | (178) | ||
| Income taxes paid | (1,767) | (1,341) | ||
| Net cash generated from | 2,115 | 2,630 | ||
| operating activities | ||||
| Cash flows from investing activities | ||||
| Proceeds on disposal of property, plant and equipment | 4 | 3 | ||
| Purchase of property, plant and equipment | (1,229) | (628) | ||
| Purchase of computer software | (347) | (203) | ||
| Decrease / (increase) in financial assets | 38 | (37) | ||
| Decrease in treasury shares | 223 | 13 | ||
| Acquisition of subsidiary, net of cash acquired | 10 | (4,228) | 68 | |
| Net cash used in investing activities | (5,539) | (784) | ||
|
| ||||
| Cash flows from financing activities | ||||
| Dividends paid | (1,430) | (1,390) | ||
| Repayments of borrowings | (672) | (1,772) | ||
| Repayments of obligations under finance leases | (115) | (262) | ||
| Proceeds on issue of Ordinary shares | - | 10,715 | ||
| Issue costs | - | (1,568) | ||
| Purchase of own shares in satisfaction of acquisition consideration | (959) | - | ||
| Purchase of own shares in satisfaction of share options | (184) | (595) | ||
| New bank loans raised | 3,606 | 786 | ||
| Net cash generated from financing activities | 246 | 5,914 | ||
| Net (decrease) / increase in cash and cash equivalents | (3,178) | 7,760 | ||
| Cash, cash equivalents and bank overdrafts at beginning of year | 6,730 | (1,084) | ||
| Exchange gains on cash, cash equivalents and bank overdrafts | 266 | 54 | ||
| Cash and cash equivalents at end of year |
| 3,818 | 6,730 |
Cyril Sweett Group plc
Notes to the unaudited preliminary statements
1. General information
This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 March 2009. The financial information for the year ended 31 March 2008, set out in this announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and has been extracted from the Annual Report for the year ended 31 March 2008. Statutory accounts for the year ended 31 March 2009 will be available to shareholders by 17 August 2009 for approval at the Annual General Meeting to be held on 11 September 2009. Those accounts have not yet been delivered to the Registrar, nor have the auditors reported on them.
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 2009 are consistent with the policies included in the annual report for the year ended 31 March 2008.
Basis of preparation
The consolidated financial statements of Cyril Sweett Group plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared 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
For management purposes, the Group managed its operations in 2009 through two geographical regions, which
are viewed as the primary segments. Allocations have been made on the basis of the location of assets,
with the exception of certain corporate costs which have remained unallocated.
Primary segments (unaudited)
|
| UK and Ireland | Other overseas | 2009 Total | UK and Ireland | Other overseas | 2008 Total | |
|
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | |
| Revenue by |
| ||||||
| geographical regions |
| ||||||
| External sales | 66,635 | 12,277 | 78,912 | 59,809 | 2,896 | 62,705 | |
| Gross profit | 20,598 | 4,271 | 24,869 | 21,505 | 806 | 22,311 | |
| Administrative expenses before exceptional expenses | (14,325) | (3,798) | (18,123) | (14,572) | (912) | (15,484) | |
| Exceptional administrative expenses | (3,553) | (208) | (3,761) | - | - | - | |
| Total administrative expenses | (17,878) | (4,006) | (21,634) | (14,572) | (912) | (15,484) | |
| Segment results | 2,720 | 265 | 2,985 | 6,933 | (106) | 6,827 | |
| Unallocated corporate costs | (580) | (1,017) | |||||
| Finance income | 249 | 222 | |||||
| Finance expense | (452) | (173) | |||||
| Profit before tax | 2,202 | 5,859 | |||||
| Taxation | (568) | (1,809) | |||||
| Profit for the year | 1,634 | 4,050 |
* Unallocated corporate costs comprise directors' remuneration, advertising, public relations, corporate financing costs and legal and professional fees.
| Other information | UK and Ireland | Other overseas | 2009 Total | UK and Ireland | Other overseas | 2008 Total | |
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | ||
| Capital additions | 2,145 | 1,377 | 3,522 | 925 | 74 | 999 | |
| Depreciation and amortisation | 1,111 | 243 | 1,354 | 835 | 13 | 848 |
Capital additions comprise the acquisition of property, plant and equipment and computer software.
Primary segments (unaudited)
| UK and Ireland | Other overseas | 2009 Total | UK and Ireland | Other overseas | 2008 Total | ||
| £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | ||
| BALANCE SHEET | |||||||
| Assets |
| ||||||
| Segmental assets | 32,222 | 14,321 | 46,543 | 34,758 | 2,304 | 37,062 | |
| Unallocated corporate assets | 817 | 769 | |||||
| Consolidated total assets | 47,360 | 37,831 | |||||
| Liabilities | |||||||
| Segmental liabilities | 11,511 | 3,799 | 15,310 | 9,250 | 286 | 9,536 | |
| Unallocated corporate liabilities | 3,708 | 1,694 | |||||
| Consolidated total liabilities | 19,018 |
|
|
| 11,230 |
The assets of the segments include intangible assets, property, plant and equipment, assets from finance leases, financial assets, investments accounted for using the equity method, trade receivables and other receivable and cash and cash equivalents. The liabilities comprise trade and other payables and retirement benefit obligations. Unallocated corporate assets comprise deferred tax assets and unallocated corporate liabilities comprise financial liabilities and current income tax liabilities.
Segment assets and liabilities are reconciled to entity assets and liabilities as follows:
| | | 2009 | | | 2008 |
| | Assets | Liabilities | | Assets | Liabilities |
| | £’000 | £’000 | | £’000 | £’000 |
| | | | | | |
| Segment assets/liabilities | 46,543 | 15,310 | | 37,062 | 9,536 |
| Unallocated: | | | | | |
| Deferred tax asset | 817 | - | | 769 | - |
| Current tax | - | - | | - | 805 |
| Current borrowings | - | 270 | | - | 674 |
| Non-current borrowings | - | 3,424 | | - | 86 |
| Current obligations under finance leases | - | 7 | | - | 119 |
| Non-current obligations under finance leases | - | 7 | | - | 10 |
| Total | 47,360 | 19,018 | | 37,831 | 11,230 |
Secondary formats (continued) (unaudited)
| 2009 | 2008 | |||
| £'000 | £'000 | |||
| Revenue by business activity | ||||
| Quantity Surveying | 39,172 | 32,986 | ||
| Project Management | 31,118 | 20,576 | ||
| Specialist Services / Management Consultancy | 8,622 | 9,143 | ||
| 78,912 | 62,705 | |||
The Group's three business segments operate in three main geographical regions, even though they are managed on a world wide basis.
Additional information
| Revenue by geographical destination | 2009 | 2008 | ||
| £'000 | £'000 | |||
| United Kingdom | 58,977 | 53,265 | ||
| Republic of Ireland | 2,853 | 3,243 | ||
| Other overseas | 17,082 | 6,197 | ||
| 78,912 | 62,705 | |||
The Group manages its business through segments based on geographical region. Business activities are not controlled independently and separate information for segmental assets and capital expenditure is not available. All revenue is generated from the rendering of services.
4. Exceptional administrative expenses (unaudited)
| 2009 | 2008 | |||
| £'000 | £'000 | |||
| Exceptional administrative expenses: | ||||
| Restructuring costs | 1,459 | - | ||
| Bad and doubtful debt provisions | 1,788 | - | ||
| Vacant property costs | 514 | - | ||
| 3,761 | - |
5. Taxation (unaudited)
Analysis of charge in the year
| 2009 | 2008 | |||
| £'000 | £'000 | |||
| Current tax: | ||||
| UK corporation tax | 430 | 1,577 | ||
| Overseas tax | 68 | 106 | ||
| Double tax relief | - | (41) | ||
| Adjustments in respect of previous years | 5 | 44 | ||
| 503 | 1,686 | |||
| Deferred taxation: | ||||
| Origination and reversal of timing differences | 65 | 123 | ||
| Income tax expense | 568 | 1,809 | ||
6. Earnings per share (unaudited)
| 2009 | 2008 | |||
| £'000 | £'000 | |||
| Profit for the financial year attributable to equity shareholders | 1,634 | 4,050 | ||
| Number | Number | |||
| Weighted average number of | ||||
| shares in issue | 57,184,008 | 49,098,651 | ||
| Basic earnings per share (pence) | 2.9 | 8.3 | ||
| Weighted average number of | ||||
| shares in issue | 57,184,008 | 49,098,651 | ||
| Adjustment for: | ||||
| Diluted effect of share options | 1,345,095 | 2,877,532 | ||
| Weighted average number of ordinary shares for diluted earnings per share | 58,529,103 | 51,976,183 | ||
| Diluted earnings per share (pence) | 2.8 | 7.8 |
7. Goodwill (unaudited)
| Goodwill | |
| £'000 | |
| Cost | |
| At 1 April 2008 | 3,615 |
| Additions | 7,252 |
| At 31 March 2009 | 10,867 |
| Impairment | |
| At 1 April 2008 and at 31 March 2009 | 295 |
| Net book amount | |
| At 31 March 2009 | 10,572 |
| At 31 March 2008 | 3,320 |
On 1 April 2008 Cyril Sweett Australia Pty Limited, the company's wholly owned subsidiary undertaking in Australia, completed the acquisition of the entire share capital of Burns Bridge Holdings Pty Limited and its subsidiary companies. Goodwill arising on this acquisition amounted to £3.0m.
On 3 April 2008, Cyril Sweett Limited, a wholly owned subsidiary, completed the acquisition of the trade, certain assets and goodwill of Nisbet LLP together with 100% of the share capital of Nisbet Project Safety Limited. Goodwill arising on these acquisitions amounted to £3.8m and £0.2m respectively.
On 4 April 2008, Cyril Sweett Limited, a wholly owned subsidiary, completed the acquisition of the trade, certain assets and goodwill of Roger Richards Partnership. Goodwill arising on this acquisition amounted to £0.2m.
8. Other intangible assets (unaudited)
| Order book and customer relationships | Computer software | Total | |
| £'000 | £'000 | £'000 | |
| Cost | |||
| At 1 April 2008 | - | 922 | 922 |
| Exchange differences | - | 1 | 1 |
| Additions | - | 347 | 347 |
| Acquired on business combinations (note 10) | 1,692 | 7 | 1,699 |
| Disposals | - | (120) | (120) |
| At 31 March 2009 | 1,692 | 1,157 | 2,849 |
| Accumulated amortisation and impairment | |||
| At 1 April 2008 | - | 568 | 568 |
| Exchange differences | - | 1 | 1 |
| Charge for the year | 201 | 279 | 480 |
| Disposals | - | (120) | (120) |
| At 31 March 2009 | 201 | 728 | 929 |
| Net book amount | |||
| At 31 March 2009 | 1,491 | 429 | 1,920 |
| At 31 March 2008 | - | 354 | 354 |
On 1 April 2008 Cyril Sweett Australia Pty Limited, the company's wholly owned subsidiary undertaking in Australia, completed the acquisition of the entire share capital of Burns Bridge Holdings Pty Limited and its subsidiary companies. The fair value of the "order book and customer relationships" included in the purchase consideration amounted to £0.7m.
On 3 April 2008, Cyril Sweett Limited, a wholly owned subsidiary, completed the acquisition of the trade, certain assets and goodwill of Nisbet LLP. The fair value of the "order book and customer relationships" included in the purchase consideration amounted to £1.0m.
9. Statement of changes in shareholders' equity (unaudited)
| Share capital | Share premium | Treasury shares | Share option reserves | Retained earnings | Total equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 April 2007 | 4,451 | 1,923 | (354) | 154 | 7,905 | 14,079 |
| Exchange differences | - | - | - | - | 280 | 280 |
| Profit for the year | - | - | - | - | 4,050 | 4,050 |
| Dividends | - | - | - | - | (1,390) | (1,390) |
| Actuarial gain | - | - | - | - | 651 | 651 |
| Deferred tax on actuarial gain | - | - | - | - | (182) | (182) |
| Deferred tax on available for | ||||||
| sale investments | - | - | - | - | 12 | 12 |
| Employee share option scheme | ||||||
| - value of services provided | - | - | - | 77 | - | 77 |
| - exercise of awards | - | - | - | (75) | 75 | - |
| - deferred tax on unexercised options | - | - | - | 459 | - | 459 |
| Purchase of shares by the EBT less exercise price of options exercised over these shares | - | - | - | - | (595) | (595) |
| Disposal of shares during the year | - | - | 13 | - | - | 13 |
| New shares issued during the year | 1,083 | 9,632 | - | - | - | 10,715 |
| Issue costs | - | (1,568) | - | - | - | (1,568) |
| At 31 March 2008 | 5,534 | 9,987 | (341) | 615 | 10,806 | 26,601 |
| Exchange differences | - | - | - | - | 690 | 690 |
| Profit for the year | - | - | - | - | 1,634 | 1,634 |
| Dividends | - | - | - | - | (1,430) | (1,430) |
| Actuarial loss | - | - | - | - | (1,727) | (1,727) |
| Deferred tax on actuarial loss | - | - | - | - | 484 | 484 |
| Financial assets available for sale | ||||||
| - Fair value adjustment | - | - | - | - | (325) | (325) |
| - Deferred tax adjustment | - | - | - | - | 91 | 91 |
| Employee share option scheme | ||||||
| - value of services provided | - | - | - | 105 | - | 105 |
| - exercise of awards | - | - | - | (12) | 12 | - |
| - deferred tax on unexercised options | - | - | - | (459) | - | (459) |
| Purchase of shares by the EBT less exercise price of options exercised over these shares | - | - | - | - | (184) | (184) |
| Cost of treasury shares less value transferred in settlement of deferred acquisition consideration | - | - | - | - | (280) | (280) |
| Revaluation of shares held in treasury | - | - | - | - | 726 | 726 |
| Disposals during the year | - | - | 223 | - | - | 223 |
| New shares issued during the year | 225 | 1,998 | - | - | - | 2,223 |
| Issue costs | - | (30) | - | - | - | (30) |
| At 31 March 2009 | 5,759 | 11,955 | (118) | 249 | 10,497 | 28,342 |
10. Acquisitions (unaudited)
With effect from 1 April 2008 the Group acquired the business, goodwill and certain assets of Nisbet LLP and Roger Richards Partnership, together with 100% of the share capital of Nisbet Project Safety Limited and BurnsBridge Sweett Holdings Pty Limited and its subsidiaries.
BurnsBridge Sweett Holdings Pty Limited contributed revenues of approximately £7,143,000 during the year and a net profit of £474,000.
The businesses of Nisbet LLP, Nisbet Project Safety Limited and Roger Richards Partnership have been fully integrated into the business of Cyril Sweett Limited in the UK and accordingly it is not possible to quantify accurately the revenues, profits or losses contributed by these businesses.
Details of net assets and goodwill are as follows:
Purchase consideration:
| | Burns Bridge | Nisbet LLP | Nisbet Project Safety | Roger Richards Partnership | 2009 £’000 | 2008 £’000 |
| Cash paid | 1,856 | 1,727 | 250 | 120 | 3,953 | 104 |
| Direct costs relating to the acquisitions | 248 | 90 | 1 | 32 | 371 | - |
| Fair value of shares issued | - | 2,204 | - | - | 2,204 | - |
| Fair value of treasury shares | 991 | 375 | - | 40 | 1,406 | - |
| Transfer from shares in joint venture | - | - | - | - | - | 220 |
| Deferred consideration payable | 1,202 | 1,238 | - | 20 | 2,460 | - |
| Total purchase consideration | 4,297 | 5,634 | 251 | 212 | 10,394 | 324 |
The fair value of assets and liabilities was the same as the carrying, with the exception of identified customer relationships and order book. The fair value of assets and liabilities as of 1 April 2008 arising from acquisitions was as follows:
| | Burns Bridge | Nisbet LLP | Nisbet Project Safety | Roger Richards Partnership | 2009 £’000 | 2008 £’000 |
| Cash and cash equivalents | 80 | - | 16 | - | 96 | 172 |
| Property, plant and equipment | 189 | 205 | 6 | - | 400 | 22 |
| Customer relationships and order book (included in intangibles – note 8) | 735 | 957 | - | - | 1,692 | - |
| Deferred tax assets | 88 | - | - | - | 88 | - |
| Trade and other receivables | 1,545 | 640 | 141 | - | 2,326 | 628 |
| Trade and other payables | (1,256) | - | (83) | - | (1,339) | (822) |
| Current tax liabilities | (121) | - | - | - | (121) | - |
| | | | | | | |
| Net assets acquired | 1,260 | 1,802 | 80 | - | 3,142 | - |
| Goodwill | 3,037 | 3,832 | 171 | 212 | 7,252 | 324 |
| Total purchase consideration | 4,297 | 5,634 | 251 | 212 | 10,394 | 324 |
| | Burns Bridge | Nisbet LLP | Nisbet Project Safety | Roger Richards Partnership | 2009 £’000 | 2008 £’000 |
| Purchase consideration settled in cash | 2,104 | 1,817 | 251 | 152 | 4,324 | 104 |
| Cash and cash equivalents | (80) | - | (16) | - | (96) | (172) |
| | | | | | | |
| Cash outflow / (inflow) on acquisitions | 2,024 | 1,817 | 235 | 152 | 4,228 | (68) |
11. Cash flows from operations (unaudited)
| 2009 | 2008 | ||
| Group | Group | ||
| £'000 | £'000 | ||
| Operating profit | 2,405 | 5,810 | |
| Adjustment for: | |||
| Depreciation of property, plant and equipment | 874 | 625 | |
| Amortisation of intangible assets | 480 | 223 | |
| Loss on disposal of plant and equipment | 21 | 28 | |
| Share based payments | 105 | 77 | |
| Operating cash flows before movements in working capital | 3,885 | 6,763 | |
| Increase in receivables | (328) | (2,434) | |
| Increase / (decrease) in payables | 355 | (390) | |
| 3,912 | 3,939 |
Company information
Company registration number 03452251
| Directors | F R Ives FRICS Dip.Proj.Man (Chairman) D L Webster MBA, BSc, MRICS, MAPM (Chief Executive Officer) C R J Goscomb FCA (Chief Financial Officer) D R Pitcher BSc, FRICS Dip.Proj.Man (Chief Operating Officer) M J G HendersonFCA, FRSA, KHS(Non-executive) R S Mabey CMG, FCIOB, FRSA(Non-executive) P N Woollacott BSc CIGEM (Non-executive) |
| Secretary | F J Wilson ACIS BSc |
| Registered office | 60 Gray’s Inn Road London WC1X 8AQ |
| Nominated Adviser and broker | Brewin Dolphin Limited 12 Smithfield Street London E1A 9BD |
| Auditors | PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH |
| Bankers | Bank of Scotland plc The Mound Edinburgh EH1 1YZ |
| Registrars | Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0LA |
| Head office | 60 Gray’s Inn Road London WC1X 8AQ Telephone number (0)20 7061 9000 Fax number (0)20 7430 0603 www.cyrilsweett.com |