CSG.L Regulatory News (CSG)

23 April 2015

Sweett Group plc

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

Update 

Sweett Group (AIM: CSG), the global provider of professional services for the construction and management of building and infrastructure projects, provides the following update on trading, its strategic review and the Wall Street Journal allegations in advance of publication of its results for the year ended 31 March 2015.

Trading update

Trading in the financial year to 31 March 2015 was in line with market expectations. Trading was strong in the UK and Europe, steady in APAC and, as anticipated, challenging in MEAI.

Trading in the UK and Europe, which accounts for approximately 55% of Group revenues and 46% of the Group order book, has continued to be strong, with growth across a number of sectors including infrastructure, retail and residential, whilst in the public sector both health and education have been particularly robust. Sweett Group continues to invest in attracting and retaining high quality staff across Europe, supported by active Investors in People, graduate and apprenticeship programmes.

Trading in APAC, which accounts for approximately 35% of Group revenues and 46% of the Group order book, was steady with our businesses in Asia growing, but the growth has been restricted due to working capital controls. Sweett Group has won some important defence projects in Australia following investment made in recent years, but as previously announced, it remains likely that a material impairment will need to be made in the Group's financial statements against the carrying value of approximately £3.0m of Australian goodwill.

Trading conditions in MEAI, which accounts for approximately 10% of Group revenues and 8% of the Group order book, have been challenging, with bidding activity being robust, but contract awards being delayed due to uncertainty in the region across the construction sector. Sweett Group is focusing the Middle East business on its operation in the UAE and will continue to manage the size of its operation and its exposure to the region in relation to the overall Group risk.

The US JV is performing well and, from a very low capital base for the first time has contributed to the Group's profitability in the year ended 31 March 2015. There has also been a noticeable increase in transatlantic client referrals particularly in the corporate sector.

Net debt at 31 March 2015 was better than market expectations at £9.5m, an improvement on the £10.1m at 30 September 2014.

The Group's order book at 31 March 2015 stood at £112m (31 March 2014: £105m).

Strategic review update

Following the appointment of John Dodds as Chairman in August 2014 and of Douglas McCormick as CEO in March 2015, the Group's strategic review is now complete. The key aim of the review, as previously announced, was to improve profitability and cash flow, and thereby reduce the Group's debt.

The review concluded that the UK and European businesses, which have strong market positions and financial dynamics, should be the central pillars of the Group's growth strategy. It has also been decided that a buyer should be sought for the Group's APAC business who is better able to maximise the significant opportunities for growth available to the business. This remains at an early stage but we have commenced discussions with a number of interested parties. Proceeds of the sale would be used to pay down Group debt and provide capital to expand our core profit centres in the UK and Europe and sustainable growth in North America. A further update on the sale will be made as appropriate.

Update on the Wall Street Journal allegations

The independent investigation commissioned by the Board into the Wall Street Journal allegations is concluded and a summary of facts has been passed to the SFO. The final results for the year ended 31 March 2015 will include a material charge relating to this matter of approximately £1.6m within exceptional administrative expenses. The SFO's investigation continues.

Douglas McCormick, CEO of Sweett Group, commented:

"I have been in post for seven weeks and have visited many of our operations and met a large number of colleagues. I have found a great business which has had a difficult time. These difficulties are very clearly surmountable and we have outlined today a broad strategy, focusing on improving Group profitability and cash flow, addressing a number of the key issues facing this business. Sweett Group has a strong brand and market positions, valuable businesses with high quality clients and excellent, dedicated colleagues and I very much look forward to delivering the new strategy with them."

ENDS

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About Sweett Group

Sweett Group is a global provider of professional services for the construction and management of building and infrastructure projects.

We have an integrated network of 58 offices in 18 countries across five continents offering cost consulting and project management. Our service supports clients through every stage of the project life cycle based upon our international expertise and local knowledge. Our strength is our people's world-class talent and expertise through which, we have time and again delivered exceptional results. The strategy builds on these key strengths.

A modern, progressive company, Sweett Group sets itself apart through people, culture and aptitude to change. By collaborative practices and innovative thinking - supported at all levels - our clients receive an offering that is constantly evolving and improving in response to project needs.