CSG.L Regulatory News (CSG)

30 Jun 2008 07:00



30 June 2008

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

Unaudited preliminary results for the year ended 31 March 2008

Cyril Sweett, the 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, is pleased to announce its first full year results as a publicly quoted group on AiM.

The Group works with and advises government agencies, private sector developers, occupiers, investors and construction companies, undertaking infrastructure and property projects across a wide range of market sectors.

Highlights

Revenue for the year up 20% to £62.7m (2007: £52.1m)

Profit before tax up 28% to £5.86m (2007: £4.56m)

Basic earnings per share up 12% to 8.3p (2007: 7.4p)

Final dividend 1.6p per share; 2.4p per share for the year

AiM flotation on 31 October 2007 issuing 9 million shares and raising £8.4m net

Chairman Francis Ives said:

"I am pleased to report another successful year for Cyril Sweett. We have achieved the goals that we set ourselves at the start of last year and remain firmly on course to meet our strategic objective to deliver £100m of revenue in 2010.

Cyril Sweett is a diversified business operating in both the public and private sectors, and is well positioned to capitalise on new growth sectors in both the UK and international markets.

We will continue focus on operational measures designed to improve our margins and profitability, while converting the current pipeline of opportunities into top-line growth.

We believe that the Group is well positioned to continue to develop as a global service provider, accelerating growth overseas, whilst at the same time improving its position in the UK market, delivering double digit growth in revenues in the years ahead. Our ability to deploy resources flexibly across new markets and locations, together with our acquisition strategy, all underpin our confidence in the future."

Enquiries

Cyril Sweett Group plc

Francis Ives, Chairman - 020 7061 9001

Dean Webster, Chief Executive Officer - 020 7061 9303

Mike Kemsley, Chief Financial Officer - 020 7061 9092

Financial Dynamics - 020 7831 3113

Jonathon Brill

Billy Clegg

Brewin Dolphin Investment Banking

Andrew Kitchingman - 0845 270 8613

Sean Wyndham-Quin - 0845 270 9518

Chairman's Statement

I have great pleasure in introducing the first full year preliminary results since Cyril Sweett floated on the London Stock Exchange's AiM market in October 2007. The flotation has given us the resources to supplement our strong organic growth with acquisitions.

I am pleased to report a very successful year for the Group. We have achieved the goals that we set ourselves at the start of last year and remain on course to deliver the strategic objective of £100m of revenue in 2010, a target we stated at the time of flotation. 

Cyril Sweett had another outstanding year of growth and development in 2007/08, outstripping its past performance in revenue, profitability and therefore meeting market expectations. We began the year with a strong order book and have built on this by focusing on those actions that will secure the long term success of our business.

Our success has been based on strong organic growth and we have maintained our position as a top 10 provider in the UK market. We have extended our offer in existing and new areas of work; revenue increased by 20% to £62.7m, operating profit increased by 23% to £5.8m and basic earnings per share increased 12% to 8.3p. At the same time, operating margins increased from 9.1% to 9.3%. Our activities were cash generative and we ended the year with net cash of £6.7m. The international businesses have made excellent progress and the total order book has reached record levels, currently standing at around £86 million. The board has proposed a final dividend in respect of the year ended of 1.6p per share, which together with the interim dividend totals 2.4p. The final dividend will be paid to shareholders on the register at 11 July 2008, payable on 18 August 2008. 

The dynamics of the environment in which we operate are changing rapidly through a combination of rationalisation and evolution in the consultancy markets and new opportunities are opening up overseas. Our challenge now is to propel the group into the top five among our UK competitors operating globally.

We have made further significant progress towards our objective of becoming an international consultancy generating revenues of £100 million, completing four earnings-enhancing acquisitions by the end of April 2008. These comprise the UK quantity surveying and project management consultancy, Nisbet LLP; Burns Bridge, which specialises in project management in Australia, Singapore and the United Arab Emirates; Cyril Sweett International, formerly a joint venture with DG Jones and Partners, providing project management services in the Middle East and Roger Richards Partnership, quantity surveyors operating in Wales.

In order to maintain our performance we have also strengthened our management with new senior appointments across the Group. In the coming year we will continue with our strategy to acquire small and medium-sized businesses, both in the UK and overseas, to add geographic penetration and access to new market sectors. In addition, we aim to consolidate our delivery systems by tightening further the management of costs to ensure that we operate as efficiently and effectively as possible. This will be particularly important in the UK, where we will respond to changing market conditions, addressing markets that are slowing, and developing those that continue to generate increased opportunities.

The progress we have made this year has continued to raise the profile of Cyril Sweett as a Group that is recognised as a key player in the construction and property markets. We are very excited by our progress and see significant opportunities ahead to build the business beyond current expectations.

We now have 950 people working for Cyril Sweett and they are motivated to do their very best to deliver high quality advice and services to our existing and future clients. This is central to our success and without the diligence and spirit shown by our staff, working as a team, we would not have delivered such an excellent performance. On behalf of the Group board I would like to thank them sincerely for all their hard work.

Outlook

Cyril Sweett is a diversified business, operating in both the public and private sectors, with negligible exposure to the private housing market and our public sector order book has grown significantly. The international order book is ahead of target and currently represents 28% of the Group order book.

We believe that the Group is well positioned to continue to develop as a global service provider, accelerating growth overseas, whilst at the same time improving its position in the UK market, delivering double digit growth in revenues in the years ahead. Our ability to deploy resources flexibly across new markets and locations, together with our acquisition strategy, all underpin our confidence in the future.

Francis Ives - Chairman

Chief Executive's Review

Introduction

Cyril Sweett, as a top 10 international construction and property consultancy, offers expert advice in cost consultancy, project management, management consultancy and a comprehensive range of specialist services. 

The Group services a range of construction and property related projects across public and private sectors including offices, retail and mixed use, health, education, prisons, residential, life sciences, transport and infrastructure. The strength and resilience of Cyril Sweett continues to be based on the Group's diverse and balanced sector penetration, combined with wide UK and international geographical coverage. This enables the Group to manage the cycles of both public and private sector investment by being equally responsive to opportunities and threats in each. At the same time, the skills, mobility and working practices of our people enable them to operate flexibly across sectors and project locations. 

The Group is structured geographically to ensure effective regional management and local service delivery. The Group has nineteen branch offices in the UK, three more in Europe, two in the Middle East, one in India, three in Australia and one in Singapore. These are further supported by an alliance network offering services in over 20 other locations throughout the remainder of Europe, the Middle East and Asia Pacific regions. 

The Group has a number of differentiators; a strong position in its key markets, which are well balanced between the public and private sectors; the Cyril Sweett brand, which has a strong reputation and is recognised as a consultant to large projects and a strong ethos of employee ownership, which sets us apart from our competitors.

We aim to develop each employee to maximise their full potential. Employee ownership clearly drives cross-selling throughout the Group, encourages new people to join and supports retention of the best people. We benefit from having clear visibility of future earnings. Our order book, which stands at £86m, is the strongest it has ever been as a result of our drive to diversify. We adopt a conservative approach to valuing our order book and exclude anticipated contracts under framework agreements. The increasing rationalisation of supply chains and moves towards framework agreements, combined with our ability to deliver on major, long-term projects, means we are a position to accurately predict future revenues and adapt to changing circumstances. 

The flotation raised £8.4 million net of expenses. With first mover advantage, by being the only quoted consultancy amongst our major UK competitors, we are in a strong position to be a leading player in the consolidation of what is currently a highly fragmented construction consultancy market. With cash on the balance sheet, strong banking support, and a proven acquisition model, we are able to continue to make further significant acquisitions both in the UK and overseas.

Group strategy

We operate in markets where there are two main opportunities for growth. In the UK, consolidation of a highly fragmented market has begun and is expected to accelerate over the short to medium term. Internationally the growth in construction activity in developing markets, coupled with high demand for UK-style quantity surveying and project management expertise, creates a significant opportunity. Success in implementing our international diversification strategy is evidenced by the growth in our overseas order book.

Review of operations

Cyril Sweett has achieved outstanding organic growth since its employee buy out in 1998. A main focus for the Group is to continue on this course through further strengthening its market share in identified growth sectors; education, health, transport and infrastructure, industrial, prisons, retail and PFI/PPP and to develop services in new growth markets such as waste, utilities and energy in both the UK and overseas.

During 2007/2008, we made significant progress towards achieving this strategic priority; Organic revenue growth in the UK market was 14% and overseas revenues grew by 79%. We successfully managed to cross-sell specialist and management consultancy services to existing clients and have seen a 33% uplift over 2006/2007 in this area. 19% of UK income was generated through frameworks and we secured further agreements with several clients including The Office of Government Commerce, Home Office Estate, Société Générale and Network Rail. We also secured projects in two new market areas; waste, where we are part of a consortium to build and operate one of the most advanced waste treatment projects in Europe, and nuclear, where we are supporting a client delivering a power station project in France.

Growth in our established locations and increasing market share has enabled us to move into larger premises in Birmingham, Bristol, Edinburgh and Glasgow and we have opened new offices in Abu Dhabi, Dubai and Mumbai. We have secured major projects including Yas Island and Jumeirah Village in the UAE and have an enviable pipeline of future work.

Cyril Sweett has been extremely active in providing a broad range of services to the education and health sectors including Procure 21 and Building Schools for the Future. We have also been selected as preferred bidder as part of the Education for Inverclyde consortium, and reached financial close on the Dumfries and Galloway Council Smarter Schools PPP Project.

Since the IPO, we have made significant progress in our strategy of growth through acquisition, acquiring the remaining 50% of the shares of Cyril Sweett International (formerly Jones Sweett International) in the Middle East. This business expanded to 35 people during its first year of operations and has established a healthy order book. In the UK we acquired Nisbet LLP, which has provided new clients in the public sector, especially in education, together with further branch offices in the South West of England. In South Wales we acquired Roger Richards and finally, we acquired Burns Bridge, headquartered in Australia with branch offices in three cities, together with branches in Singapore and Abu Dhabi. We expect each acquisition to be earnings enhancing and to provide a platform for further growth, not just locally, but throughout their wider regions. I am pleased to be able to report that integration of these businesses is on plan.

Our strategy sees us increasing overseas activity five-fold by 2010, by which time we expect to be delivering at least 25% of Group revenues from the Middle East, India and Australasia. Overseas revenue by geographical destination during 2007/2008 reached £9.4m million and was 79% higher than 2006/2007 and represented 15% of Group revenues.

We set up a dedicated office in Mumbai in order to capitalise on the emerging construction market in India and have aligned our structure internally and created a separately managed international business with dedicated resources, infrastructure and processes in order to support the focus on international growth. Significant international projects include Masdar and Zabeel Corporate Park in the Middle East, Raffles Hotel in Singapore, FreeStyle Park in Moscow and Hospital San Dureta in Spain. 

During 2007/2008, the board made progress in improving operating profit margins, reducing lock-up (debtor and work in progress days) and monitoring the pricing and risks associated with all major projects. Efficiency initiatives throughout the business have proportionally reduced indirect costs and a new package of efficiency measures will not only improve our processes and delivery systems but also benefit bottom line performance to address a tightening UK marketplace. 

Recruiting and retaining the right people is one of the key issues this business faces. We seek to recruit and retain high performing people to ensure that our reputation for excellence is maintained. During 2007/2008, we appointed a Group HR Director to drive the strategy.

Over 58% of our colleagues are shareholders, which we believe aligns the interests of both our internal and external shareholders to deliver a common goal. Following the flotation, 200 new employees joined the group and the percentage of employee shareholders is targeted to grow markedly. We achieved recognition when we won the 2007 Award for Best Share Ownership Plan (in the category of company with fewer than 1,500 employees) from the European Centre for Employee Ownership.

We continue to prioritise the delivery of top quality service to our clients and have established a dedicated service delivery team to co-ordinate service quality levels across the Group. The service delivery team is responsible for deploying quality management systems and project tool kits, ensuring that all parts of the business operate on a common platform, continually improve and innovate and thereby add value to our clients. We have introduced a new structure for operational delivery. Each team leader has responsibility and authority for project success, resource management and client satisfaction and we are training all key account management teams to deliver new techniques and approaches to maximise cross-selling, client satisfaction and client retention.

The future

We are confident that we can achieve our strategic goal of delivering £100m of revenue by 2010. The year ahead will see us continue to build a competitive position in growth sectors where we are strong and extend our public sector exposure, adapting our existing resources to support the new growth areas that our market led research dictates. We will continue with the development of our UK regional businesses in order to develop top three status in each location, maximising cross selling, and will apply the same principles to build our businesses in Europe and the Middle East and further develop our presence in the Gulf States, India. Southern Asia and Australia.

We are evaluating a number of earnings enhancing acquisition opportunities to accelerate growth in our UK and international branch network. Acquisitions will come with rigorous, risk-based due diligence and will be accompanied by robust integration planning and execution.

Our strategy of combining acquisition and organic growth to build a global business is on track.

Dean Webster - Chief Executive Officer

Consolidated Income Statement (unaudited)

for the year ended 31 March 

Consolidated statement of recognised income and expense (unaudited)

for the year ended 31 March

Consolidated Balance Sheet (unaudited)

As at 31 March

  Consolidated Cash Flow Statement (unaudited)

For the year ended 31 March

 Notes to the unaudited preliminary results

1. Financial information

The preliminary financial information is unaudited. This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 March 2008. The financial information for the year ended 31 March 2007, 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 AIM Admission document issued on 26 October 2007. Statutory accounts for the year ended 31 March 2008 will be available to shareholders by 18 July 2008 for approval at the Annual General Meeting to be held on 11 August 2008. Those accounts have not yet been delivered to the Registrar, nor have the auditors reported on them

2. Accounting policies

Basis of preparation

In connection with the Company's application for AIM Admission, the Company has prepared and presented in its Admission document the last three years historical financial information in a form consistent with the accounting policies to be adopted in the Company's 2008 financial statements. Accordingly, the directors of the Company prepared information for the Group at the transition date of 1 April 2004 and for each of the years ended 31 March 2005, 2006 and 2007, on the basis expected to be applicable, in so far as was then currently known, for the financial statements to be prepared for the year ended 31 March 2008, except where otherwise required or permitted by IFRS 1 First-time adoption of International Financial Reporting Standards.

3. Segmental analysis

For management purpose, the company manages its operations through three geographical regions, which are viewed as the primary segments.

Primary segments (unaudited)

The assets of the segments includes intangible assets, 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.

Secondary formats (unaudited)

4. Taxation (unaudited)

5. Earnings per share (unaudited)

6. Statement of changes in shareholders' equity (unaudited) 

7. Cash flows from operations (unaudited)

8. Post balance sheet events (unaudited)

On 1 April 2008 the company re-organised its corporate structure, transferring its main UK trading activity to Cyril Sweett Limited and transferring its non - UK subsidiaries to Cyril Sweett International (Holdings) Limited, both of which are wholly owned subsidiary undertakings.

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. Burns Bridge is an Australian based project management business with operations in Australia, Singapore and Abu Dhabi. The initial consideration was satisfied by a cash payment of AUD 2.25 million and the balance by the transfer of 493,534 ordinary shares of 10 pence each in Cyril Sweett Group plc. Deferred consideration will be payable contingent upon the financial performance of Burns Bridge during the 12 months to 30 June 2008 and the 12 months to 30 June 2009 and in any event, will not exceed AUD 11.8 million. The total consideration in any event, will not exceed AUD 15.0 million.

On 3 April 2008, Cyril Sweett Limited the company's wholly owned subsidiary completed the acquisition of the trade, certain assets and goodwill of Nisbet LLP together with the entire share capital of Nisbet Project Safety Limited, for a total consideration of £5.9m. Nisbet provides quantity surveying, project management and health and safety services from offices located in the Midlands, London, the South and South-West of England, hence the acquisition will further strengthen Cyril Sweett's existing diverse regional office network in the UK. The initial consideration payable on completion was £1.8m payable in cash and the allotment of 2,203,928 Cyril Sweett Group plc ordinary shares of 10 pence each. Deferred consideration of £648,000 is payable in cash during the six months following completion and £1.3m will be paid over the next two years.

On 4 April 2008, Cyril Sweett Limited the company's wholly owned subsidiary completed the acquisition of the trade, certain assets and goodwill of Roger Richards Partnership for a total consideration of £250,000. This business provides quantity surveying and project management services from its base in Cardiff, again strengthening our existing diverse regional office network in the UK.