Final Results

30 June 2015

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

Audited final results for the year ended 31 March 2015

Sweett Group plc (AIM: CSG.L), the global provider of professional services for the construction and management of building and infrastructure projects announces its audited final results for the year ended 31 March 2015.

Financial

▲Prior year net debt has been restated to reflect a change in the classification of monies held on behalf of certain customers from 'cash and cash equivalents'.

In presenting the Group's non GAAP measures, the following adjustments have been made:

* Adjusted revenue and operating profit exclude:

1. Items relating to the financial close of the Leeds Social Housing PFI project and the exiting of the Group's interest in the Hub North PFI project; revenue of £nil (2014: £1.6m); profit of £nil (2014: £1.2m). These activities no longer form part of the core activities of the Group;

2. Exceptional administrative expenses of £1.7m (2014: £1.5m);

3. Amortisation of acquired intangible assets of £0.4m (2014: £0.5m);

4. Performance Share Plan credit of £0.3m (2014: charge of £0.6m);

5. Impairment of Australian and MENA goodwill of £2.4m (2014: £nil);

** In addition to the adjustments made to operating profit, adjusted profit before tax and adjusted earnings per share exclude:

6. Change in fair value of derivative financial instrument of £nil (2014: profit of £1.0m).

In 2014 both items 1 and 6 above were included within the Group's adjusted profit before tax and adjusted earnings per share figures but the Directors believe that excluding them assists with understanding the underlying, comparable performance of the Group.

***Lockup is measured as the aggregate days' activity represented by debtors and work in progress - see Financial Review for further details.

Ø Strategic review announced in April 2015, sale of APAC and India businesses ongoing

Ø Strong core UK business with improving profitability and increased cash generation

Ø Significant Board changes during the year including a new Chairman, CEO and Senior Independent Director

Ø The SFO investigation into matters in the Middle East is ongoing

Ø No recommended final dividend due to the focus on reducing debt

Ø Group's order book currently stands at £109m (2014: £109m)

Douglas McCormick, CEO of Sweett Group, commented:

"I joined Sweett Group in March 2015 and have spent the last four months meeting, listening to and engaging with many of our clients and colleagues. It is clear to me that Sweett Group is an excellent business, which has had a difficult time recently. The strengths of the Group are its loyal, highly skilled people, its brand, and strong market positions, all of which provide a very sound platform for growth.

"The strategic review, which completed in April 2015, concluded that we have solid UK and European businesses which generate cash, with positive working capital dynamics, strong market positions and these geographies will be central to our growth going forward. The sale of our APAC and Indian businesses is progressing well. Once the sale has completed, the Board intends to invest further in the UK and European businesses and explore emerging opportunities in the USA and Canada.

"Trading in the UK and Europe, the central pillars to our ongoing strategy is positive and we continue to build on our strong position with a number of high profile contracts recently won. I would like to thank our highly talented team and I very much look forward to working with them as we continue to grow the business with a focus on profitability, cash generation and margins."

ENDS

For further information, call:

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.

Chairman' Statement

Summary

It has been an eventful year for Sweett Group. I joined in July 2014 and I am encouraged by what I have found. Sweett Group has good people and clients and despite facing a number of challenges has made significant progress in the year while gaining market share in key industries and geographies.

The results demonstrate good progress with our largest and most established businesses in the UK and Europe continuing to perform strongly. APAC and India were stable and as previously highlighted trading in MENA was challenging.

Financial performance

Revenue for the year was £88.3m (2014: £89.4m) and loss before tax was £1.1m (2014: profit of £2.8m). The Group's operating loss was £0.7m (2014: profit of £2.3m) and basic loss per share was 2.7p (2014: earnings of 2.8p).

Net debt at the year-end was slightly better than expected at £9.7m, an improvement on the £10.1m at 30 September 2014 but higher than the prior year position of £8.2m.

The Directors will not be recommending the payment of a final dividend for the year due to the focus on reducing debt.

SFO investigation

The SFO's investigation into matters in the Middle East is ongoing.

Strategy

In late 2014, the Board initiated a strategic review which was largely completed post year end in April 2015. As previously announced, the key output of the review was to focus on improving profitability and cash flow, and thereby reduce the Group's debt through the sale of our APAC and India businesses, a process which is ongoing. Further details on our strategy can be found in the CEO's Review.

Board

During the year there were a number of changes to the Board, reflective of the Group's new approach, and to help drive forward the new strategy. In July 2014, I joined the Board and was subsequently appointed Chairman. In August, Alan Lovell joined the Board as Senior Independent Director and in March 2015 we were delighted to appoint Douglas McCormick to the Board as CEO replacing Dean Webster who retired in October 2014.

Order book

The June order book stands at £109m, with £53m being UK and Europe, £49m APAC, £5m MENA and £2m India. This is in line with the total of £109m in June 2014.

Outlook

Trading in Europe remains buoyant and we continue to build on our strong position with a number of high profile contracts recently won.

We have excellent and committed staff, a high quality client base and a clear focus on profitability, cash generation and margins and as such, the Board looks to the future with confidence.

John, Dodds, Chairman

Chief Executive's Review

Summary

I joined Sweett Group in March 2015 and have spent the last four months meeting, listening to and engaging with many of our clients and colleagues. It is clear to me that Sweett Group is an excellent business, which has had a difficult time recently. The strengths of the Group are its loyal, highly skilled people, its brand, and strong market positions, all of which provide a very sound platform for growth.

Strategy

The review, which completed in April 2015, concluded that we have strong UK and European businesses, which generate cash, with positive working capital dynamics and strong market positions and these geographies will be central to Sweett Group's growth going forward. In regards to the APAC and Indian businesses, it has been decided that, in order both to reduce the Group's indebtedness, and to continue to grow these businesses, a new owner be sought, capable of investing in the working capital to expand and develop the businesses and take advantage of the clear growth opportunities available. We are pleased with the progress made to date on the sale.

Once the sale has completed, the Board intends to invest further in the UK and European businesses and explore emerging opportunities in the USA and Canada.

People

In my few months with the Group I have found highly skilled and motivated people and we are focussed on developing their talent and expertise to ensure they achieve their professional goals. We continue to attract, recruit and retain the best people.

To this end, we have increased our employee engagement programmes replacing the Executive Committee with a Senior Leadership Team, meeting five times a year, with attendees from the Senior Executive Team, Group Marketing and Communications, Human Resources, Group Business Systems and, Risk and Compliance to discuss the strategic direction of the business. A further new initiative includes the introduction of Staff Voice (a staff board), which allows greater engagement with our staff in the running of the business.

Since the launch of our own Quantity Surveying Apprenticeship Programme in April 2014, in partnership with CITB and Havering College, we recruited 10 apprentices in 2014 for a two year scheme. We are in the process of recruiting a further 10 apprentices in 2015. In addition we were delighted to welcome 25 graduates in September 2014.

Market Overview

The UK's gross domestic product is calculated to have grown 2.8% in 2014 (according to the Office for National Statistics), the strongest expansion per year since 2006. Output in the construction sector also expanded, by over 7% in real terms in 2014, before dampening in Q1 of 2015. With the continuation of relatively low interest rates and extremely low consumer price inflation, the flow of investment into the property and construction sectors should be maintained.

This upturn in demand is producing a supply side re-balancing, forecast to generate construction tender price rises surpassing pre-recession peaks; reaching 6.5 % per annum in Greater London and 4% per annum average across the UK as a whole in 2015.

The conclusive outcome from the general election in returning a majority government has given greater certainty to a number of investment decisions. The immediate future will undoubtedly be a continuation in the programme of austerity measures with the mid-term forecasts indicating a more confident outlook, matched by a significant investment programme notably expected to include High Speed 2, Hinkley Point C and potentially, London's third runway.

Across the MENA region, the wake of the oil price fall in H2 2014 has softened investor sentiment to varying degrees. The UAE remains well positioned as the region's retail and leisure hub with major landmarks and anchor events continuing to drive large tourist numbers all year round. Airport expansion projects such as Dubai's $32bn Al Maktoum International Airport and the Midfield Terminal Complex in Abu Dhabi will further serve to accommodate the large tourist influx leading up to the World Expo 2020 to be held in Dubai.

In India, the GDP growth over the last two years has reduced to sub 5% levels. However, in the last two quarters, it has increased in excess of 5% and the World Bank projections for next year expect it to rise to 8% by 2017.

In 2014, the Chinese Government's continuing focus on anti-speculation and anti-corruption measures resulted in a reduction in new project starts and a continued weakening of China's gross construction output. This year, the Government's package of stimulus measures has led to a drop in interest rates and an increase in the ownership of second homes. The resulting enhanced demand has begun to push property prices up. In addition, the Central Bank's move to cut bank reserve ratios is likely to improve liquidity, which we believe will encourage developers to commence new construction projects.

Beijing 'One Belt, One Road' development strategy is an example of China taking a bigger role in global affairs. The 'belt' includes countries situated along the original Silk Road and the initiative calls for the integration of the region through shared investments in major infrastructure, transportation, oil and gas, power, internet networks and aviation projects. Our China capability and network places us in a strong position to participate in this major initiative.

The Hong Kong Government continues to support mega infrastructure projects as it looks to maintain a strong economy and establish itself as a "main hub" for contractors and construction companies in Greater China. Hong Kong's private sector residential projects remain strong in 2015 as property prices continue to rise. Public housing and Government subsidised private housing will become a focus for the Group following the roll out of the Government's Home Programme later in the year.

In Australia, growth in total turnover from construction work was forecast to decline by 3.9% in 2014/15, after more than a decade of sustained growth. Looking forward, the total value of construction turnover is forecast to decline at a slower rate of 1.2% in 2015/16. The value of infrastructure work, however, is expected to record overall growth of 5.0% this year with extensive road and rail construction and investment in other civil projects of 5.2%.

Review of operations

Europe

Revenue in the year from Europe, which comprises the Group's operations in the UK, Ireland and Continental Europe, was up 4.4% to £51.5m (2014: £49.3m), which accounted for 58.3% of the Group's total revenue. Segment profits before non-core PFI/PPP operating profit, exceptional administrative expenses and amortisation of acquired intangibles was £5.9m (2014: £4.5m) representing an improvement in margin on this basis from 9.4% to 11.4%. The order book in June stands at £53m (June 2014: £53m), representing 49.1% of the Group order book. Clients are now committing to long-term spending plans and giving approval to major construction projects rather than the phased commitments of recent years. The order book is reinforced by an extremely robust pipeline of potential projects and framework income yet to be formally committed.

The business operates across a diversified range of private, public and infrastructure sectors and our investment into the infrastructure sectors has been rewarded with our reappointment to the £6 billion Thameslink Programme and our appointment on the Wales & West Commission for Network Rail. Other notable clients within this sector include Transport for London, Merseylink Limited, NNB Generation and United Utilities.

The retail sector, in which the Group is a recognised market leader, has seen a further improvement in activity over the year. The Group has secured substantial retail mixed-use developments at the Whitgift Centre, Croydon; Westfield, London and Brent Cross Redevelopment projects. We currently have an involvement in over 30 mixed-use retail developments. Our retail portfolio is balanced with a number of projects directly with retailers such as Selfridges, working on their flagship stores in Manchester, Birmingham and London, and the roll-out of Primark stores in Spain, Portugal, France, UK and more recently the USA.

The offices sector, both for developers, investors and corporate end users, has seen an upswing in activity, extending from London into most regional cities. Significant clients in this sector include Bruntwood, M&G, Barclays, Royal Bank of Scotland and the BBC. The Group has seen an increase in the private residential sector which we are well positioned to take advantage of, due to our expertise and capabilities within our London and regional offices. We are currently working on Thames Wharf for London & Regional, The Hurlingham Estate for Royal London and the large St. John's scheme in Manchester for Allied London.

In the hotel and resorts sector, the Group has been very active in mainland Europe with clients Hilton and Starwood Capital and these relationships have recently extended to the UK. The prospect for this sector remains strong with growth in tourism and foreign investment being the main drivers.

The Group maintains a strong market position in health, education, life sciences and other public sectors with all areas seeing continued investment over the last 12 months. We are currently positioned on over 100 frameworks providing a number of services over a defined period of time to public sector clients. We continue to develop our relationships with the Ministry of Justice, London Fire Brigade, Parliamentary Estates Directorate and Crown Commercial Services.

We are one of the leading consultancies in the health sector supporting NHS Trusts, GPs, Clinical Commissioning Groups, SPVs, private healthcare companies and contractors, and are delighted to have won Property Consultants of the Year at the recent HealthInvestor Awards. We have now worked with 45% of Trusts and NHS Boards in the UK. Amongst others, we are currently undertaking projects with the Royal Free London NHS Foundation Trust, King's College London, York Teaching Hospital NHS Foundation Trust, University Hospital of South Manchester NHS Foundation Trust, Nottingham University Hospitals NHS Trust and Royal Devon and Exeter NHS Foundation Trust.

The education sector continues to present a large range of opportunities and we are currently working for 75% of the leading UK universities, with schemes at Cambridge, University College London, Warwick, Manchester and Edinburgh universities. We continue to increase our market share in schools winning several commissions with North hub, London Construction Programme framework, Cheshire East Council and East Sussex Council.

The working capital dynamics of our European operations are positive and we look forward to another year of growth.

Middle East, North Africa

Revenue in the year in MENA was £6.6m (2014: £10.0m), which accounted for 7.4% of the Group's total revenue. Segmental loss before amortisation of acquired intangibles, goodwill impairment losses and exceptional administrative expenses was £1.2m (2014: £0.1m).

Trading was difficult in the year in the Middle East. We are looking to stabilise the business, reduce our cost base and move to trading profitably. Due to the performance of the region we have fully impaired the goodwill during the year by £0.5m.

The MENA order book in June stands at £5.0m (June 2014: £6m), representing 4.6% of the Group order book.

India

The Group's performance in India has been satisfactory with revenue in the year of £1.9m (2014: £1.8m), which accounted for 2.1% of the Group's total revenue. Segmental profit was £0.1m (2014: £0.2m).

Our business in India, headquartered in Chennai with regional offices in Bangalore, Mumbai, Delhi and Kolkata, now employs over 150 people across the region. We have strengthened our position as a leading provider of Quantity Surveying services with a pan-India presence and platform to grow in the long term. Despite the recent market slow down, our business in Delhi and Chennai performed well, particularly in the commercial and IT sectors. Due to the close links of our India operations with the rest of Asia, it is likely to form part of the sale with our APAC business.

We continue to focus on opportunities for off-shoring measurement services from our European and Middle East businesses, taking advantage of the technical skill-set and cost effectiveness of our India business.

The India order book in June stands at £2m (June 2014: £3m), representing 1.5% of the Group order book.

Asia Pacific

It has been a stable year in APAC, with revenue of £28.4m (2014: £28.6m), which accounted for 32.2% of the Group's total revenue. Segmental profit before amortisation of acquired intangibles, goodwill impairment losses and exceptional administrative expenses was £1.1m (2014: £1.3m).

During the year, the Hong Kong business reported progress on several commissions including the MTRC express railway link's West Kowloon Terminus, which is as an example of the cross-border work we have been able to secure, whilst the major MTR (subway railway) extensions in Kowloon and Hong Kong Island continue to provide considerable opportunities for the Group both now and in the future.

The Group's business in China, which comprises 511 staff in 12 offices, has held steady over the last 12 months and achieved the majority of its goals. Major wins in 2015 include Alibaba's new headquarters in Shanghai and New World Group's Wuhan Optics Valley Complex

In Singapore in the last year, we secured considerable, ongoing project management work with Marina Bay Sands, billed as the world's most expensive standalone casino property.

In addition to its project and cost management work, the Australian business has secured a number of major wins through its alternative service offerings. These include property consultancy services to the Australian Department of Finance in respect of a large portfolio of properties and working with the Department of Defence to build a state-of-art training facility for Tiger helicopter pilots in New South Wales. Despite these recent wins, we have impaired the Australian goodwill by £1.9m during the year.

The outlook for the APAC business remains positive, but the Board believes that it will be better placed if it was owned by a group which is able to invest in that growth, particularly in China, to enable it to deliver the considerable potential that exists.

The APAC order book in June stands at £49m (June 2014: £47m), representing 44.8% of the Group order book.

North America / Canada

The VVA Sweett joint venture in the USA made its first positive contribution to results in the year ended 31 March 2015. Work with Primark in the USA has continued, and Sweett Group has just won the contract on the new Nike store in New York.

Our more recent strategic alliance with Pelican Woodcliff, a Toronto based construction consulting firm, is performing well as we jointly market and deliver combined cost planning and cost management, loan monitoring and related consultancy services on select projects across Canada. Both companies continue to capitalise on cross-selling opportunities throughout both our combined global network of offices.

Conclusion

I would like to thank our highly talented team for their hard work and contribution and I very much look forward to working with them as we continue to build on their skills and Sweett Group's strong brand and market position.

Douglas McCormick, Chief Executive

Forward-looking statements

Certain statements in this audited final results statement 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.

Group revenue in the year was down 1.2% to £88.3m (2014: £89.4m). Within this decrease of £1.1m, Europe increased by £2.2m, MENA decreased by £3.2m, India increased by £0.1m and APAC decreased by £0.2m. Loss before taxation amounted to £1.1m (2014: profit of £2.8m). In 2014 this profit included the profit from non-core PFI/PPP activities of £1.2m and the credit relating to the change in fair value of the Australian derivative financial instrument of £1.0m. As outlined above, the 2015 results include a total goodwill impairment charge of £2.4m.

In presenting the Group's adjusted profit below, the following have been excluded in line with prior year methodology:

- exceptional administrative expenses;

- amortisation of acquired intangible assets;

- Performance Share Plan (PSP) credits or charges; and

- goodwill impairment losses.

In addition, in presenting the prior year adjusted numbers, the following have been excluded in order to assist understanding of the underlying performance of the Group:

- the change in fair value of the Australian dollar derivative financial instrument as this is a non-cash and non-recurring item; and

- net fee income on the financial close of Leeds Social Housing and exiting our position on hub North (non-core PFI/PPP activities) as this no longer forms part of our operations.

* In 2014, "adjusted profit before taxation" included the change in fair value of the Australian dollar derivative financial instrument as well as the profit from non-core PFI/PPP activities being the net fee income on financial close of Leeds Social Housing and exiting our position on hub North. Due to the one-off and material nature of these items these have been excluded to assist with the understanding of the underlying comparable performance of the business.

On an adjusted basis, Group revenue increased by 0.3% to £88.3m (2014: £88.1m). Adjusted profit before tax on this basis was £3.1m (2014: £3.2m).

The gross profit margin was 29.8% (2014: 30.7%) and excluding the effect of the adjusting items was 29.8% (2014: 29.8%) and the operating loss margin was 0.8% (2014: profit margin of 2.6%). The adjusted operating profit margin was 3.8% (2014: 4.2%).

The order book in June 2015 stands at £109m, no change from last year's reporting date (June 2014: £109m).

The primary segmental analysis in Note 3 to the financial statements details the segmental revenue and results. At the start of the year the Group made the decision to report India as a separate segment for management information purposes and as a result has reported it separately in the segmental analysis.

Details of exceptional administrative expenses are provided in Note 5 to the financial statements. Exceptional administrative expenses of £1.7m (2014: £1.5m) comprised mainly costs associated with the investigation regarding allegations made in the Wall Street Journal in June 2013 and the SFO investigation of in aggregate £1.6m (2014: £0.5m) and restructuring costs of £0.1m (2014: £1.0m).

The Group's major currencies are the Euro, Hong Kong Dollar, Chinese Renminbi, UAE Dirham, Indian Rupee and Australian Dollar. Sterling appreciated slightly during the year against the Euro and the Australian Dollar and weakened slightly against all the other currencies, resulting in a net positive impact of approximately £0.7m on revenue. The impact of this on operating profit was negligible.

Cash performance

Cash generated from operations in the year was £3.5m (2014: £5.9m). This arises largely through operating profit and working capital movements. The Group's work in progress net of fees in advance increased to £12.6m (2014: £7.8m) and net trade receivables decreased to £20.3m (2014: £21.5m) giving a total value of lockup of £32.9m (2014: £29.3m). Overdue amounts increased to £9.3m (2014: £7.8m) and there was a slight reduction in the amount of debt impaired to £1.3m (2014: £1.6m). The lockup calculation measures the number of days' activity included within work in progress and trade receivables and incorporates an annualisation of revenues based on the last three months' revenues: lockup days at year-end increased to 110 days (2014: 106 days). Management of working capital remains a key priority, particularly in the APAC region, and further steps are being taken to improve its management and reduce unnecessary utilisation of the Group's cash resources.

Goodwill impairment

Our Australia business has faced difficult trading conditions in recent years and despite last year's management changes failed to meet expectations during the year. The current order book is holding up and there have been a number of recent project wins but we have taken a prudent approach, as previously communicated, to impair the goodwill during the year. This impairment of £1.9m leaves goodwill relating to Australia of £0.6m. In addition due to the performance of our MENA business, we have fully impaired the goodwill during the year by £0.5m.

Finance income

The Group's net finance income / cost, is disclosed in Note 4 to the financial statements. This changed from a net income of £0.5m in 2014 to a net cost of £0.4m in 2015 largely due to the £1.0m credit arising on the termination of AUD11.1m derivative-based currency contract in 2014. Finance costs remained the same at £0.5m (2014: £0.5m).

Tax

The charge for the year was £0.8m, on a Group loss before tax of £1.1m (2014: tax charge of £0.9m, being 33.0% of profit before tax of £2.8m). The reasons behind this movement are analysed further in Note 6.

Earnings per share

Basic loss per share amounted to 2.7p (2014: earnings of 2.8p) and fully diluted loss per share was 2.7p (2014: earnings of 2.7p). Adjusted basic earnings per share were 2.8p (2014: 3.3p) and fully diluted adjusted earnings per share were 2.8p (2014: 3.3p), for further details refer to Note 8.

Balance sheet

The Group ended the year with:

• Net borrowings of £9.7m, compared with £8.2m at 31 March 2014; the prior year £8.2m has been restated to exclude client deposits and tender deposits - see the balance sheet for further information;

• Net current assets of £15.8m compared with £15.3m at 31 March 2014; and

• Net assets of £25.4m, compared with £27.4m at 31 March 2014.

Banking facilities

The Group funds its activities through cash generated from operations and supplemented, where necessary and appropriate, with bank borrowings.

The Group's principal banker is Bank of Scotland plc, part of the Lloyds Banking Group, which provides Sweett Group with overdraft, term loan and guarantee facilities.

At 31 March 2015, the amount undrawn under the Group's credit lines was £1.9m (2014: £2.3m). Amounts drawn under the term loan are shown as non-current liabilities to the extent that repayments are due after 31 March 2016. All other liabilities to Bank of Scotland plc and overseas banks are shown as current liabilities. Under the terms of its principal banking facilities the Group is required to operate within certain financial covenants. In line with market practice these are related to net assets, net debt, EBITDA, cash flow cover and interest cover. All banking covenants were met during the financial year and at 31 March 2015.

Since the period end, the Group has renewed its banking facilities which include the existing term loan and a £6.5m working capital facility with Bank of Scotland. The renewed facilities run to 30 June 2016.

During the previous year facilities were negotiated with HSBC in China and Hong Kong. These comprise a receivables facility in Hong Kong of £1.4m and a loan facility in Hong Kong secured against Renminbi deposits in China of £0.8m.

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 has recently signed up to revised facilities to 30 June 2016.

The material considerations in a forward look at covenant compliance primarily revolve around revenue, profitability and working capital sensitivities and the covenants forecasts have been stress tested around these metrics. Other items that have been considered in looking at compliance with the terms of our banking facilities are the timely sale of our APAC and India businesses and the current SFO investigation.

Internal controls

There has been significant emphasis on our internal control environment during the financial year with the creation of a Risk and Compliance Director role and the roll-out of new financial policies and procedures across the Group. In addition we introduced Agresso, our Group ERP into our China business during the year meaning the whole Group now operates under one system. The corporate governance section of this report outlines further aspects of internal control within the Group.

Treasury

Treasury matters and banking arrangements are overseen by a treasury committee, which is chaired by Alan Lovell, Senior Independent Director.

Dividends

No interim dividend for the year to 31 March 2015 was paid (2014: 0.5p per share at a cost of £342,000). The Directors are not recommending the payment of a final dividend (2014: 0.8p at a cost of £549,000).

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 lockup.

Summary

The year to 31 March 2015 was challenging for Sweett Group with difficult trading conditions in the Middle East as well as a high level of exceptional administrative expenses mainly as a result of the SFO investigation. The European business remains strong and the sale of our APAC and Indian businesses, when completed, will strengthen the balance sheet and leave the Group in a stronger position for the future.

Patrick Sinclair, Chief Financial Officer

Consolidated Income Statement for the year ended 31 March 2015

Consolidated Statement of Comprehensive Income for the year ended 31 March 2015

Consolidated Balance Sheet as at 31 March 2015

* The 2014 and 2013 comparative amounts have been restated to reflect a change in the classification of monies held on behalf of certain customers from 'Cash and cash equivalents', with no effect on net assets. Further details are provided at Note 10 and Note 17. Additionally 'Provisions' which were previously classified within 'Other payables' have been separately identified; further details are provided at Notes 13 and 14.

Consolidated statement of changes in equity for the year ended 31 March 2015

Consolidated Statement of Cash Flows for the year ended 31 March 2015

* The 2014 comparative amounts have been restated to reflect a change in the classification of monies held on behalf of certain customers from 'Cash and cash equivalents', further details are provided at Note 10 and Note 17. In addition, in order to assist the understanding of the statement of cash flows, payments in respect of the Performance Share Plan and payments in respect of exceptional administrative expenses have been separately identified from cash flows from operations.

1. General information

This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 March 2015. The financial information for the year ended 31 March 2015, 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 2015. Statutory accounts for the year ended 31 March 2014 have been delivered to the Registrar of Companies and those for the year ended 31 March 2015 will be available to shareholders by 17 August 2015 for approval at the Annual General Meeting to be held on 11 September 2015. 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, Middle East and North Africa (MENA), India 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 2014, which is available on the Group's website atwww.sweettgroup.com, and they will also be included in the Annual Report and Financial Statements for the year ended 31 March 2015. 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 and overdraft facilities from the principal banker, Bank of Scotland plc, and other 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 and loan repayments.

The Board has modelled a 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 and any other contractual events of default.

The Directors believe that the principal sensitivities and actions which can have the greatest impact on the headroom and covenant compliance include trading performance and managing working capital requirements across the Group. Other items that have been considered in looking at compliance with the terms of our banking facilities are the timely completion of the sale of the APAC and India businesses and the current SFO investigation.

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 principal accounting policies in the preparation of this financial information are set out below. These policies have been consistently applied to financial statements for the years ended 31 March 2015 and 31 March 2014, unless otherwise stated.

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, the Middle East and Africa, India and Asia Pacific. All four categories generate revenues from the provision of quantity surveying, project management and specialist services/management consultancy with the exception of India which generates revenue from the provision of quantity surveying and project management consultancy only.

The Board assesses performance based on a measure of earnings before interest, tax depreciation and amortisation (EBITDA). 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 results for each operating segment that is reviewed by the Board.

* Unallocated corporate costs comprise Directors' remuneration, advertising, public relations, corporate financing costs, legal and professional fees incurred by Sweett Group plc. The unallocated exceptional administrative expenses and Performance Share Plan credit are those relating specifically to Sweett Group plc.

3. Segmental analysis continued

The Group is domiciled in the UK. Its revenue from external customers in the UK is £48.4m (2014: £47.4m) and from external customers from other countries is £39.9m (2014: £42.0m).

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 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 £13.7m (2014: £13.5m) and the total of such non-current assets in other countries is £3.0m (2014: £5.9m).

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.

* Unallocated corporate costs comprise Directors' remuneration, advertising, public relations, corporate financing costs, legal and professional fees incurred by Sweett Group plc. The unallocated exceptional administrative expenses and Performance Share Plan charge are those relating specifically to Sweett Group plc.

4. Net finance income/(costs)

The 2014 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. In September 2013 the contract was fully exited, resulting in the positive fair value adjustment of £970,000 in finance income above.

5. (Loss)/profit before taxation

(Loss)/profit before taxation is stated after charging/(crediting):

5. (Loss)/profit before taxation continued

In presenting the Group's results the income statement separately identifies the following items within administrative expenses:

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.

Restructuring costs comprise redundancy costs of £nil (2014: £0.3m) and other restructuring costs of £0.1m (2014: £0.7m). Interest on vendor liabilities comprises interest on late-paid sums to the vendors of Widnell Limited, now fully settled.

The Performance Share Plan credit of £0.3m (2014: charge of £0.6m) represents management's best estimate of the accrued cost of the live schemes at the balance sheet date.

6. Income tax expense

(a) Analysis of charge in the year

6. Income tax expense (continued)

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

The tax on the Group's (loss)/profit before taxation differs from the UK statutory rate as follows:

Since the Group is reporting a loss before taxation with a charge to taxation, there is no weighted average applicable tax rate (2014: 33.0%).

Changes to the UK Corporation tax rates were enacted as part of the Finance Act 2013 on 2 July 2013. These include reductions to the main rate to reduce the rate to 21% from 1 April 2014 and to 20% from 1 April 2015. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

The income tax credited/(charged) to equity during the year was as follows:

7. Dividends

The Board has not declared a final dividend in respect of the year ended 31 March 2015 (2014: 0.8p per share) amounting to nil p for the year (2014: 1.3p for the year).

8. Earnings per share

Performance Share Plan (PSP) earnings per share

The calculation of PSP earnings per share, being one of the performance criteria of the PSP, is set out below in accordance with the PSP rules. The PSP rules do not require the calculation of diluted earnings per share.

8. Earnings per share continued

Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares. The weighted number of shares also excludes shares held by employee trusts.

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company's dilutive potential ordinary shares are share options. A calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

There were no acquisitions during the years to 31 March 2015 or 2014.

The Group's goodwill arose predominantly on the acquisitions of Cyril Sweett Limited, Nisbet LLP, BurnsBridge Holdings Pty Limited and Widnell Limited and the Company's goodwill arose on the acquisitions of Cyril Sweett Limited

Goodwill is allocated to the Group's cash-generating units ("CGUs"), which are generally the smallest operating level at which the Directors believe that they can prepare appropriate cash flow forecasts, these are UK, Ireland, MENA, India, China and Hong Kong combined, Singapore and Australia. The recoverable amount, which approximates to the Net Book Value, of all CGUs was determined based on value in use calculations. The calculations used were based on short-term financial projections approved by management. The short-term projections indicated that the value in use of each CGU exceeded the goodwill carrying values, with the exception of Australia where the value in use was £1.9m in excess carrying value and MENA where the value in use did not support the £0.5m goodwill. As a consequence, the goodwill has been impaired by these values.

The financial projections used in these calculations were based on the following key data and assumptions with the exception of Australia:

1. Budgeted revenue and profit after taxation for 2016, as agreed by the Board, is used for the basis of determining projected net profit margins and hence anticipated future cash flows. The Group budget is based on a combination of past performance, the order book and an assessment of future market conditions.

2. Net profit margins were projected forward for each CGU having regard to their relative markets and risk profiles. A growth factor of 2.5% was applied for each CGU. These cash flows were projected forward for a total of five years plus a discounted terminal value at five years, with 0% growth rate.

3. Maintaining gross profit margins and net profit margins at 2016 budgeted levels.

4. Applying the pre-tax discount rate of 12% (the Group's pre-tax weighted average cost of capital (WACC)). The WACC is calculated using the capital asset pricing model according to market data and the level of debt to equity in existence.

5. Sensitivity analysis on the pre-tax discount rate and growth rates was performed to identify the level of headroom in the calculation for each CGU. A range of changes to assumptions was tested including: an increase of two percentage-points being applied to the pre-tax discount rate; reducing growth rates by one percentage-point; and assuming zero growth. Previous operating performance was also considered in the context of determining the forecast profits used in the calculations.

In Australia, due to historical budget shortfalls, an assumption has been made to reduce the budget revenue in the impairment calculation by 12.5%. With these exceptions the assumptions outlined above have been applied.

With the exception of Australia, where an impairment of £1.9m has been made, and MENA where an impairment of £0.5m has been made, the impairment tests showed a high degree of tolerance to increases in the pre-tax discount rates being used. If these discount rates had been increased by 2% or the growth rate reduced to zero, there would still have been no impairment in any of the CGUs. In addition, a decrease of at least 71% in profit before tax in any of the individual CGUs would be necessary for any further goodwill impairment to become a consideration.

9. Goodwill continued

The adjustment to goodwill in the year to 31 March 2014 represents an adjustment in respect of deferred consideration relating to the acquisition of Padgham & Partners Pty Limited on 4 March 2010. On 28 February 2014 the Company issued 314,387 ordinary shares of 10p each at a premium of 16.15p per share, in part satisfaction of the acquisition of Padgham & Partners Pty Limited and its subsidiary company, Padgham Cost Management Private Limited. These shares were issued on behalf of the Company's wholly owned subsidiary Sweett Group (Australia) Pty Limited which acquired Padgham & Partners Pty Limited. In addition, Sweett Group (Australia) Pty Limited paid cash of £144,000 against which there were accrued liabilities of £47,000.

The carrying value of goodwill by segment is as follows:

10. Other current assets (restated)

Tender deposits consist of amounts from contractors tendering for construction contracts, collected on behalf of developer clients which are normally returned to the contractor within 6 months.

In the 2014 and 2013 balance sheets the above assets were classified as cash and cash equivalents and these have been reclassified as other current assets based on these assets not being readily available for use.

In the unaudited interim results for the 6 months ended 30 September 2014, the above assets were set against the respective other payables balance.

11. Cash and cash equivalents (restated)

See Notes 10 and 17 for details of the restatement.

Cash and cash equivalents include the following for the purpose of the Statement of Cash Flows:

As a result of the Group's cash cycles and low market interest rates, the effective interest rate on cash balances was minimal (2014: minimal).

12. Trade and other payables (restated)

Amounts due to Group undertakings are unsecured, interest free and repayable on demand.

Certain categories of 'Other payables' and 'Accruals and deferred income' have been reclassified as 'Provisions'. Additionally, as explained at Note 17, client monies of £0.3m have been reclassified from 'Other payables'.

13. Other payables (restated)

The carrying amount of trade and other payables approximates to their fair value.

See Note 12 for details of the restatement. 

14. Provisions (restated)

The provision for long service payment is based on the best estimate of the probable future payments which have been earned by the Group's employees from their service to the Group. No discounting has been carried out as, in the opinion of the directors, the effect is unlikely to be material given current low interest rates.

The carrying amount of provisions approximates to their fair value.

Previously 'Provisions' were included within 'Trade and other payables'.

15. Cash flows from operations

16. Reconciliation of movement in net debt