CSG.L Regulatory News (CSG)

26 April 2016

Sweett Group plc

("Sweett Group", the "Group" or the "Company")

Trading update

Sweett Group (AIM: CSG), the provider of professional services for the construction and management of building and infrastructure projects, is pleased to provide this trading update following the completion of its financial year ended 31 March 2016.

Core operations

Trading in the year to 31 March 2016 in the Group's ongoing business (excluding MENA) which now predominantly comprises the UK has been strong with anticipated revenue of £54.9 million representing growth of approximately 6.6 per cent (2015: £51.5 million).

Profit before tax, adjusted for exceptional administrative expenses and amortisation of acquired intangibles for the ongoing business decreased in the year to approximately £2.2 million (2015: £2.9 million). This is due principally to one-off property costs of £0.3 million, legal costs resulting from a historical arbitration claim in Ireland of £0.2 million and costs associated with the refinancing of the Group's banking facilities of £0.3 million, all of which have been charged against the profit figure referred to above.

Significant client wins during the year include the Group's re-appointment to the £6.5 billion Thameslink Programme, the Western & Wales commission for Network Rail, Gilmorehill Campus expansion for the University of Glasgow, the redevelopment of Chase Farm Hospital in North London and two major office developments with Commercial Estates Group.

In addition, the Group has secured places on over 20 Framework Agreements across public, private and infrastructure sectors; most notably Highways England, Infrastructure Ontario, Deutsche Bank and The Crown Estate.

In line with our strategic plan developed during 2015, following the sale of the APAC and India businesses in October 2015 and the decision to close MENA announced in December 2015, we successfully reorganised the business into five regions; London and the South East, England and Wales, Scotland and Ireland, Mainland Europe and North America. We believe this has significantly improved accountability and re-energised the business. As we look to improve the core business further, the Board has redefined the Group's three year strategy to focus on four key areas; cash and profit, clients, people, and technology.

Adjusted and exceptional items

In October 2015 the Group disposed of the APAC and India businesses to Currie & Brown for £9.3 million in cash (before transaction and separation costs) (the "Sale"). As announced on 8 March 2016, Currie & Brown has notified Sweett Group that it believes an adjustment of £1.8 million (since amended to £1.7 million) falls to be made in its favour under the terms of the Sale. The Group continues to believe and is advised that the adjustment should be £0.5 million. The matter is currently the subject of expert determination with a binding resolution expected in early June 2016 and payment due shortly thereafter. The financial results for the year to 31 March 2016 will show a provision for the full amount claimed of £1.7 million in determining the overall loss on disposal within adjusted items.

In December 2015, the Group announced its intention to withdraw from MENA, a process which is progressing well and at a cost lower than originally anticipated. This is expected to be largely complete by 31 March 2017 resulting in a further cash outflow of approximately £1.0 million during the current financial year.

Earlier this year, the Group announced the resolution of the SFO investigation. This resulted in an order to pay a confiscation of £851,152 in May 2016 and a fine of £1.4 million, 50 per cent of which is to be paid by February 2017, with the remaining sum to be paid by February 2018.

As a result of the withdrawal from MENA and the SFO investigation, the Group's audited final results for the year ended 31 March 2016 will include an exceptional charge of in aggregate approximately £5.1 million (2015: £1.7 million).

Financing

Net debt as at 31 March 2016 was significantly lower than expected at £2.6 million (31 March 2015: £9.5 million) although a number of identified and significant cash outflows relating to the items referred to above fall due shortly. The Board is currently in discussions regarding the renewal of its banking facilities which expire on 30 June 2016.

Outlook

As at 31 March 2016, the ongoing Group's order book was £50.4 million, which was slightly down on the preceding year (31 March 2015: £52.1m), but affords the Group good visibility over the coming year.

In addition, the Group has a healthy pipeline of new opportunities across a number of sectors including infrastructure, education, health, retail, and residential. The Board is optimistic for the current year to 31 March 2017 and expects the Group's ongoing business to have another year of strong revenue growth across all of its regions.

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Douglas McCormick, CEO of Sweett Group, commented:

"We have made very significant progress during the year to meet our key strategic objectives, which will inevitably lead to improved cash flows and provide us with a platform to grow profits sustainably.

"I have been particularly appreciative of the considerable client and colleague loyalty we have seen as we have worked through and resolved the Group's legacy issues. The reorganisation of the remaining business into five regions has rejuvenated energy levels within the Group and I believe we are well positioned for the future."

ENDS

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