Interim Results

9th Dec 2008 07:00



9 December 2008

Cyril Sweett Group plc

Unaudited Interim Results for the six months ended 30 September 2008

Cyril Sweett, the leading international construction and property consultancy, is pleased to announce its unaudited interim results for the six months ended 30 September 2008.

Financial Highlights:

Performance significantly ahead of last period;

Revenue for the period up 39.9% to £41.0m (2007: £29.3m);

Revenue from existing business up 9.9% to £32.2m;

Revenue from acquisitions of £8.8m representing 21.5% of total revenue;

Operating profit up 30% to £3.4m (2007: £2.6m); 

Pre-tax profit up 31.7% to £3.3m (2007: £2.5m);

Operating margin of 8.3% (2007: 8.9%);

We spent £6.5m on acquisitions: 53% cash and 47% shares;

Net debt of £0.2m (2007 £1.9m);

Basic earnings per share up 13.5% to 4.2p (2007: 3.7p);

Fully diluted earnings per share up 11.1% to 4.0p (2007: 3.6p);

Interim dividend 0.90p per share (2007: 0.80p per share); and

Contracted order book stands at £92m to 2013;

Commenting on the results, Chief Executive Dean Webster said:

 

"Whilst the dominant theme in the market place has been the increasing fragility of the commercial property sector, we have made excellent progress with our strategy to increase our activity in the public sector and to extend our revenues overseas.  As a result I am pleased to say that our trading for the period has been satisfactory.

 

We will continue to manage our business prudently in this difficult market and we will remain cautious regarding the future outlook. We believe that our diversified business model provides some shelter from the current adverse conditions in the commercial market, which we expect to persist for the foreseeable future. Our focus is to continue to implement operational measures designed to align our resources with anticipated workload levels whilst maintaining margins, profitability and cash generation."

For further information, call:

Cyril Sweett Group plc Dean Webster, Chief Executive Officer Mike Kemsley, Chief Financial Officer Caroline Covill, Head of Communications	020 7061-9303 020 7061-9092 020 7061-9102
Brewin Dolphin Investment Banking Andrew Kitchingman Sean Wyndham-Quin	0845 270-8613 0845 270-9518
Financial Dynamics Jonathon Brill Billy Clegg Georgina Bonham	020 7831-3113

  

CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT

We are pleased to report that, despite the challenging macro-economic environment, the Group has delivered good interim results.

The Group has made strong progress since listing on AIM in October 2007, delivering significant organic and acquisitive growth. The four businesses acquired by the Group during the last twelve months are performing well and have been fully integrated into the Group. 

Cyril Sweett has benefited and will continue to benefit from its broad range of expertise across a wide range of sectors and geographies. 

 

 

Results

Revenues for the period increased by 39.9% to £41.0m (2007: £29.3m) reflecting strong market conditions across the majority of our market sectors.

The Group order book stands at a healthy £92m demonstrating the strength of our client base with over 90% of new orders coming from our existing frameworks and repeat customers.

Operating profit increased by 30.2% to £3.4m (2007: £2.6m), with an operating profit margin of 8.3% (2007: 8.9%). In terms of our debtor provisions the Interim Results reflect the additional risk factors associated with the current economic environment.

Profit before tax increased by 31.7% to £3.3m (2007: £2.5m).

Basic earnings per share increased to 4.2p (2007: 3.7p) and fully diluted earnings per share increased to 4.0p (2007: 3.6p);

The Group's balance sheet remains strong. Cash absorbed from operations during the period was £0.1m and cash at bank less bank overdraft at 30 September 2008 was £2.4m. Net debt amounted to £0.2m at 30 September 2008 compared with £1.9m at 30 September 2007. Whilst we had net funds of £5.8m at 31 March 2008, the movement to 30 September 2008 is mainly as a result of the three acquisitions we made during April 2008. Furthermore our cash collections have slowed and there have been increases in our work in progress related to anticipated delays in the funding of certain PFI projects. We have unused bank facilities, at the date of reporting, of approximately £7m.

 

Dividends

The Board has declared an interim dividend of 0.90 pence per share (2007: 0.80 pence) payable on 16 January 2009 to shareholders on the register at 19 December 2008.

Business Review - Overview

We are confident that the current shape of the Group is at its most defensive since inception, placing the Group in a strong position amongst its competitors in the current economic environment. The key defensive qualities include a large public sector business in the UK, an increasing number of international projects as demand continues for our overseas businesses and the value embedded in our PFI/PPP investments.

We proceed into the second half of the year with a strong order book of £92m. The UK order book includes over 65% public sector and we were pleased to see the UK Government confirm the capital expenditure programme that reflects our key sub-sectors. We will continue with a sharp focus on cost control in order to maintain our margins and profitability. Cash management will be central to our strategy going forward and we will increase our emphasis on cash collection.

In view of the changing environment in the private sector we have taken precautionary action, including a cost reduction programme and transferring UK employees either into the public sector teams, or redeploying them on projects overseas.

We will continue our strategy of securing high profile framework agreements so that our public sector clients can procure our services more cost effectively. We anticipate that we will be awarded £33m of potential orders resulting from our framework agreements, over the next three years.

Business Review - UK 

In the UK, the balance between the public and private sector now stands at 52%/48% respectively (H1 2007: 42%/58%). Within the public sector, the Group has particular strength in education, health, transport and infrastructure. The Group's involvement in the health and education sectors has been strengthened significantly through the acquisition of Nisbet in April 2008.

Public sector

 

Education

Education represents 12.3% of Group revenue (H1 2007: 5.7%).

Cyril Sweett continues to cite education as a key growth area for the Group. We have continued to be extremely active in providing a broad range of services to this sector, including some of the largest Building Schools for the Future projects in Birmingham, Greenwich, Hackney, Kent and Leeds.

The Group's expertise in PFI/PPP has enabled us to further develop our investment in this area. Since the six month period end, the Group announced the financial close on the Inverclyde Council Schools PPP project, thereby demonstrating our commitment to our plan to build investment value for the future. 

The acquisition of Nisbet in April 2008 has been fundamental to our growth in this sector. Nisbet has significantly strengthened the 'purchaser side' of our public sector client base which complements our existing depth of 'provider side' clients.  This combination enables us to cross sell a wider range of services to a wider range of clients.

Key projects secured during the period include:- Middlesex University, Warwick University, North Devon College, Salford & Wigan BSF, Hull BSF, Kent BSF, The Robert Gordon University and Luton BSF.

 

 

Health

Health represents 14.6% of Group revenue (H1 2007: 10.5%).

Cyril Sweett is a market leader in the public health sector and is working across a spectrum of projects for NHS Acute and Primary Care Trusts, private healthcare companies, private finance vehicles and major contractors. The acquisition of Nisbet further strengthened the Group's health sector client base, and has been beneficial in enhancing relationships with NHS Trusts, SPVs, contractors and banks.

Our improved performance across the health sector demonstrates that a combination of our services is powerful in delivering successful healthcare projects and we envisage this sector becoming more active over the coming years through LIFT, Procure 21, Welsh Health Estates, Designed for Life and The Common Service Agency in Scotland.

Key projects secured during the period include:- King's College Hospital, Addenbrooke's Hospital, Enniskillen Hospital, Ysbyty Gwynedd Hospital, Brighton and Sussex Hospitals, Brighton PFI, North Tees & Hartlepool, The London Clinic, Cambridge University Hospital, Broadway Park, United Bristol Healthcare Trust and Bedfordshire PCT.

 

 

Transport and infrastructure

Transport and infrastructure represents 7.1% of Group revenue (H1 2007: 6.2%).

We continue to generate additional revenue in our rail sector from our framework agreements with Network Rail, Tubelines, Metronet, BAA and Scottish Executive.

In response to the weakening commercial and retail sectors, we are transferring staff from these sectors into transport and infrastructure, as this is an area of sustainable workload.

Key projects secured during the period in this sub-sector include:- Luton Station Redevelopment, Thameslink, Airtrack Terminal 5, Stratford City Centre infrastructure and Waterloo Station.

Other public sector

Other public sector work represents 17.7% of Group revenue (H1 2007: 12.6%).

Prisons represents 3.0% of Group revenue (H1 2007: 3.4%). Our work in prisons is continuing apace. As part of our framework agreements with HOCP and Scottish Prison Service, we have secured further projects in this sector;

Residential (social housing) represents 4.8% of Group revenue (H1 2007: 4.4%);

All other public sector work including defence; waste, energy and utilities and life sciences make up the remaining 9.9% (H1 2007: 4.8%);

Key projects secured during the period in this sub-sector include: Bullingdon IRC, RAF Coltishall, Featherstone Prison, Brunswick Housing PFI, Lambeth Housing PFI and Contract Research Organisation.

Framework agreements

14% of our Group revenue is derived from framework agreements. These are becoming an increasingly important mechanism to lock in future work and are proving more popular with large repeat customers as supplier bases are focused - a trend from which we are increasingly benefiting.

Focusing on existing and potential framework agreements is core to the Group's strategy. The Group over the last six months has secured framework agreements including: - English Partnerships, NHS frameworks for Scotland, The British Library, London Development Agency and Partnerships for Schools. Many of these frameworks include appointments for project management, cost consulting, CDM coordinator and specialist services. We have also seen a rise in local authority and education establishment framework opportunities and have been successful in being awarded framework agreements recently for Warwick District Council, University of Edinburgh, Cornwall College and Milton Keynes Council.

We are confident that framework arrangements will continue to deliver business in the next two to three years and therefore continue to provide the Group with long term potential income. We have invested in management strategies to ensure we capitalise on framework opportunities and ensure we are well placed to be retained on existing frameworks when they are re-bid. 

Private sector 

Retail

Retail represents 16.6% of Group revenue (H1 2007: 27.0%).

The retail business in the UK had a strong start to the financial year, but has been significantly impacted by the credit crunch in recent months. Whilst the management of existing shopping centre assets will continue to require our services, as will ongoing programmes with food retailing clients, the number of new shopping centre starts is expected to slow significantly in the UK. Overseas, in the Middle East region, we have seen an acceleration in retail based schemes.

Key projects secured during the period include: - Retail developments for Tesco, Primark and Selfridges; town centre regeneration projects in Swansea,  Margate and Maidenhead. 

Commercial

Commercial represents 18.7% of Group revenue (H1 2007: 25.8%).

The commercial business in the UK has slowed down significantly, however the refurbishment work amongst financial institutions remains steady. We have transferred employees from the commercial sector teams to our public sector teams and internationally, where the growth continues.

Key project activity during the period included work for The BBC, Crown Estate, RBS, JP Morgan and London and Newcastle.

Hotels and leisure

Hotels and leisure represents 13.0% of Group revenue (H1 2007: 12.2%).

Key projects secured during the period include:- Holiday Inn Express at King's Cross, Metropole Hotel, and Southwark Leisure Centre.

Business Review - International

Introduction

In total, international represents 21.1% of Group revenue (H1 2007: 9.0%).

The Group has exciting growth plans for its international businesses. We have established a strong international presence through both organic and acquisitive growth. Our strategy is to expand organically on a global scale to ensure we are well positioned to benefit from the increasing demand for best in class quantity surveying and project management services, particularly in growth markets. Over the next year we plan to expand throughout the Middle East and strengthen our capabilities across India, North and South Asia and Australia.

During the period a number of employees were transferred from the UK to the Middle East to meet the demand for the Group's projects overseas. During the second half of the financial year and beyond we will continue to address the Group's resource availability and flexibility so that we are well positioned to increase our market share overseas. 

 

 

Australia

Australia represents 7.7% of Group revenue (H1 2007: 0%).

The acquisition of Burns Bridge, rebranded Burns Bridge Sweett, has been successful and is delivering in line with our Board's expectations and is fully integrated into the Group at an operational level. Burns Bridge Sweett provides the Group with a strategic base to grow its Asia-Pacific business to ensure that we fully realise the growth potential that the acquisition offers.

Key projects secured in the region include: - Royal Northshore Hospital, St Francis Xavier College, Wauchape IGA, City of Frankston and Rural city of Ararat projects.

Asia

Our operations in Asia are performing well and we have identified strong opportunities for growth in the market. Singapore will form the bridgehead to developing a South Asia business. We are also currently in the process of registering a business in Hong Kong to give us access to the North Asia markets.  In India we have transferred in a team which has established our office in Mumbai and is now focused on overseeing projects and bringing the business in line with the Group's international operations.

India currently represents just 1.9% of Group revenue (H1 2007: 1.5%).

Singapore represents 0.7% of Group revenue (H1 2007: 0%).

Key projects secured in the region include: - Commercial activity for Barclays, RBS and Deutsche Bank in Singapore, India and Bangkok. 

Europe

Europe represents 1.5% of Group revenue (H1 2007: 1.5%).

Market conditions affecting our European operations in France and Spain will remain tough during the economic downturn. However, we believe there are significant opportunities in the PFI/PPP market and we are actively developing opportunities in France, Spain, Portugal and Greece.

Key projects secured by our Spanish operations during the period include:- Lisbon Airport PPP programme, Xanadu Shopping Centre, New Terceira Hospital and Primark developments.

Key projects secured by our French operations during the period include projects for AIG Europe, Pitney Bowes, Bouygues, Carlyle and Lasalle Investments.

Ireland 

Operationally we manage Northern Ireland and the Republic as one business unit. Between them they represent 6.3% of Group revenue (H1 2007: 8.1%).

Whilst the economy in the Republic of Ireland is slowing demand for our services has held up well. In Northern Ireland public expenditure is expected to support future demand levels.

Key projects secured during the period include: - Enniskillen Hospital, University College Dublin, Dublin Docklands and Dublin National Concert Hall.

Middle East / North Africa 

The region represents 4.9% of Group revenue, (H1 2007: 0%).

The Group's operations in the Middle East are performing well and the Group is benefiting from major infrastructure investment in the region. We are working on large projects in Dubai and Abu Dhabi and we have identified a strong pipeline of further opportunities in the Middle East, North Africa region.

We are well positioned in the Middle East, particularly in the commercial sector and we are pleased to report that following the acquisition of the remaining 50% of our Joint Venture, Jones Sweett International Limited, earlier in the year, this company is now fully integrated into the Group. 

We are working on a number of very large projects which, if successful, will lead to many other opportunities in the region. Resource is the main issue in the region and one which management is working hard to deliver as we re-deploy resources from the commercial and retail sectors in the UK into this region.

Key projects secured during the period include: - Al Raha Gardens Town Centre, Circle & Venito Shopping Malls, further projects secured at Yas Island.

Acquisitions

As reflected above, the four acquisitions completed since flotation have been successfully integrated into the Group and are performing well. It is increasingly clear that there will be a number of opportunities arising during the current economic climate and as such the Board continues to look selectively at realistically priced acquisition opportunities. At present, vendor expectations remain too high, so the Board is taking a very stringent view on potential acquisitions.

PFI/ PPP strategy

The Group's strategy is to acquire minority stakes in investment vehicles which specialise in niche projects, to complement the Group's existing expertise and to enable it to identify and manage the risks. The Group plans to fund future PFI/PPP investments through a blend of retained earnings, realised funds from historic investments and bank debt. There is significant value within our portfolio and the Board is looking at options to start to realise some of this embedded value.

Strategy update

The Board has invested fifteen years diversifying the Group, both geographically and across a broad range of sectors, to create a growth yet defensive business model. The Group's international strength and involvement in the public sector has been core to its solid performance in this challenging macro-economic environment.

We have a clear strategy to strengthen our business in the period ahead as we focus on maintaining strong relationships with our client base; concentrating on both existing and potential new frameworks; and, finally, delivering organic growth overseas. We will look selectively at acquisition opportunities which will no doubt be forthcoming in the current environment but they will have to meet stringent strategic criteria. However over the next two years, the Group will be delivering a defensive strategy rather than the previous buy and build strategy which was more focused on acquisitive growth. The Board's experience dictates that in a period of such financial uncertainty it is fundamental to tightly manage our costs and maximise cash in the business.

We will continue to develop our objective of becoming a global provider. We have a strong infrastructure in place to manage international growth and we are confident of achieving our exciting international expansion plans. We will continue to pursue international markets offering growth potential thereby creating greater geographical diversification.

 

 

Management

Cyril Sweett has a strong Executive management team, to steer the Group through the downturn, as it did during the recession of the early 1990's. Additionally, Francis Ives has committed to continue with the Group and will become Non-Executive Chairman following the AGM in September 2009.

Outlook

Our order book stands at a record level and provides visibility out as far as 2013. Over 65% of the current order book is with the public sector and in international locations where demand remains strong. We are a market leader in many of the sectors in which we operate and our diverse business model, public sector exposure and rapidly growing international business positions us well to manage the current difficult trading conditions.

We will continue to realign our resources across all parts of the Group to respond to the conditions we are experiencing. The difficult environment is already beginning to throw up opportunities which our strong balance sheet will enable us to consider, although clearly we will be very selective in taking advantage of these.

As reported by others in the sector, the private sector market environment has deteriorated materially over the last two months. We are not immune from the current challenges. At present we believe we are on target to deliver a small improvement in profit in the second half of the year. However if the global recession becomes deeper, this will become challenging, although we remain confident about the long term prospects for the Group.

  Consolidated Income Statement

For the six months ended 30 September 2008

	Notes		6 months to  30 September 2008 (unaudited)		6 months to  30 September 2007 (unaudited)		Year ended  31 March 2008 (audited)
			£'000		£'000		£'000
Revenue	2		41,006		29,302		62,705
Cost of sales			(27,776)		(19,345)		(40,394)
Gross profit			13,230		9,957		22,311
Administrative expenses			(9,838)		(7,352)		(16,501)
Operating profit	2		3,392		2,605		5,810
Finance income			207		29		222
Finance costs			(282)		(115)		(173)
Net finance (cost) / income			(75)		(86)		49
Profit before taxation			3,317		2,519		5,859
Taxation	3		(895)		(840)		(1,809)
Profit for the period			2,422		1,679		4,050
Profit attributable to:
Equity shareholders of the parent company			2,422		1,679		4,050
Basic earnings per share (pence)	5		4.2		3.7		8.3
Diluted earnings per share (pence)	5		4.0		3.6		7.8

  

Consolidated statement of recognised income and expense

For the six months ended 30 September 2008

	Notes		6 months to 30 September 2008  (unaudited)		6 months to  30 September  2007  (unaudited)		Year ended  31 March 2008 (audited)
			£'000		£'000		£'000
Foreign exchange translation difference	8		78		(3)		280
Available for sale investments:
- Adjustment to change in tax rates			-		-		12
Actuarial (loss)/gain on pension scheme			(872)		542		651
Deferred tax on actuarial (loss)/gain			244		(163)		(182)
Net (expense) / income recognised directly in equity			(550)		376		761
Profit for the period			2,422		1,679		4,050
Total recognised income for the period			1,872		2,055		4,811
Attributable to:
Equity shareholders			1,872		2,055		4,811

 

 

Consolidated Balance Sheet

For the six months ended 30 September 2008

	Notes		30 September 2008  (unaudited)		30 September  2007 (unaudited)		31 March  2008  (audited)
			£'000		£'000		£'000
Non-current assets
Intangible assets			13,503		3,264		3,674
Plant and equipment			1,911		1,229		1,279
Financial assets			947		905		941
Investment accounted for using the equity method			-		220		-
Deferred income tax asset			950		190		769
Total non-current assets			17,311		5,808		6,663
Current assets
Trade and other receivables			31,688		24,060		24,438
Cash and cash equivalents			2,406		1,140		6,730
			34,094		25,200		31,168
Current liabilities
Financial liabilities			(249)		(2,847)		(793)
Trade and other payables			(14,957)		(10,982)		(9,368)
Current income tax  l liabilities	3		(639)		(614)		(805)
Total current liabilities			(15,845)		(14,443)		(10,966)
Net current assets			18,249		10,757		20,202
Total assets less current   liabilities			35,560		16,565		26,865
Non-current liabilities
Financial liabilities			(2,333)		(201)		(96)
Deferred consideration			(3,155)		-		-
Deferred income tax liability			(168)		-		(168)
Retirement benefit  obligations			(646)		(394)		-
Total non-current liabilities			(6,302)		(595)		(264)
Net assets			29,258		15,970		26,601
Equity
Share capital	8		5,754		4,584		5,534
Share premium	8		11,971		2,196		9,987
Treasury shares	8		(1,340)		-		(341)
Share option reserve	8		657		187		615
Retained earnings	8		12,216		9,003		10,806
Total equity shareholders' funds	8		29,258		15,970		26,601

 

 

 

Consolidated Cash Flow Statement

For the six months ended 30 September 2008

	Notes		6 months to 30 September 2008  (unaudited)		6 months to 30 September 2007 (unaudited)		Year ended 31 March 2008 (audited)
			£'000		£'000		£'000
Cash flows from operating activities
Cash flows from operations			815		2,699		3,993
Interest paid			(113)		(116)		(178)
Interest received			207		29		210
Income taxes paid			(998)		(686)		(1,341)
Net cash (absorbed by) / generated from operating activities			(89)		1,926		2,684
Cash flows from investing activities
Proceeds on disposal of plant, equipment, fixtures and fittings			-		-		3
Purchase of plant, equipment, fixtures and fittings			(710)		(307)		(628)
Purchase of computer software			(209)		(109)		(203)
Purchases of financial assets			(6)		(1)		(37)
(Purchase) / disposal of treasury shares			(272)		354		13
Acquisition of subsidiary, net of cash acquired	6		(3,439)		-		68
Net cash used in investing activities			(4,636)		(63)		(784)
Cash flows from financing activities
Dividends paid	4		(920)		(957)		(1,390)
Repayments of borrowings			(555)		(585)		(1,772)
Repayments of obligations under finance leases			(86)		(155)		(262)
Proceeds on issue of ordinary shares			-		406		10,715
Issue costs			-		-		(1,568)
Purchase of own shares in satisfaction of share options			(371)		-		(595)
New bank loans raised			2,333		786		786
Net cash generated from/(used) in financing activities			401		(505)		5,914
Net (decrease) / increase in cash, cash equivalents and (bank overdraft)			(4,324)		1,358		7,814
Cash, cash equivalents and (bank overdraft) at beginning of period			6,730		(1,084)		(1,084)
Cash, cash equivalents and (bank overdraft) at end of period			2,406		274		6,730

  Consolidated Cash Flow Statement

For the six months ended 30 September 2008

Reconciliation of net cash flow to movement in net debt
	6 months to 30 September 2008 (unaudited)		6 months to 30 September 2007 (unaudited)		Year ended 31 March 2008 (audited)
	£'000		£'000		£'000
Net (decrease) / increase in cash, cash equivalents and bank overdraft	(4,324)		1,358		7,814
New bank loans raised	(2,333)		(786)		(786)
Repayment of bank loans	555		585		1,772
Redemption of finance leases	86		155		262
Change in net (debt) / funds	(6,016)		1,312		9,062
Net funds / (debt) at the beginning of the period	5,840		(3,220)		(3,220)
Net (debt) / funds at the end of the period	(176)		(1,908)		5,840

  

Notes to the Financial Information

1. Basis of preparation

General information

Cyril Sweett Group plc is a company 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. 

This financial information is presented in pounds sterling, the currency of the primary economic environment in which the group operates. The group comprises the company and entities controlled by the company (its subsidiaries).

Basis of preparation

The condensed consolidated financial information presented is for the six month periods to 30 September 2008 and 2007 and the full year to 31 March 2008.

 

The most recent statutory accounts of the Group, prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, are for the year ended 31 March 2008 which have been delivered to the Registrar of Companies and on which the auditors gave an unqualified opinion.

This condensed interim consolidated financial information has been prepared in accordance with the requirements of the AIM Rules and in accordance with IAS 34, 'Interim Financial Reporting' and is presented on a basis consistent with the accounting policies to be adopted in the consolidated financial information of Cyril Sweett Group plc for its next financial year, ending on 31 March 2009. It does not constitute accounts as defined by section 240 of the Companies Act 1985. This condensed interim consolidated financial information has not been reviewed or audited.

Estimates and judgements

The preparation of accounts in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reported period. These estimates are based on historical experience and various other assumptions that management and directors believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.

Areas comprising critical judgements that may significantly affect the Group's earnings and financial position are revenue recognition, valuation of intangibles including goodwill, restructuring activities, provisions for pensions, income taxes, and share-based payments.

Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2008, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The standard IFRIC 12, 'Service concession arrangements' is mandatory for the first time for the financial year beginning 1 January 2008, but is not currently relevant to the group.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2008 and have not been early adopted:

IFRS 8, "Operating Segments" (effective for annual periods beginning on or after 1 January 2009) introduces disclosures to enable the user to evaluate the nature and financial effect of the business activities in which it engages and the economic environment in which it operates. This standard is not expected to have a material impact on the Group.

IFRS 3 (Revised), "Business Combinations - Comprehensive revision on applying the acquisition method" (effective from 1 July 2009), which will impact the way future acquisitions are reported. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation, joint ventures and associates on the group.

IAS 23(revised), "Borrowing Costs" (applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009). This standard is not expected to have a material impact on the Group.

IAS 1 (Revised), "Presentation of financial statements - Comprehensive revision including a statement of comprehensive income" (effective from 1 January 2009), impacting the presentational disclosure of the financial statements, but will have no impact on the carrying values of items. This standard is not expected to have a material impact on the Group.

IAS 32 (amendment), "Financial instruments: presentation', and consequential amendments to IAS 1, 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009.

IFRIC 13, "Customer Loyalty Programmes" (effective for annual periods beginning on or after 1 July 2007). The Group will apply IFRIC 13 from 1 April 2008, but it is not expected to have a material impact on the Group's consolidated financial information.

2. Segmental analysis

For management purposes, the Group manages its operations through three geographical regions, which are viewed as the primary segments. There are no material sales to other geographical segments. There was no material inter segment trading.

Primary segments

 

				6 months to				6 months to				Year to
				30 September				30 September				31 March
				2008				2007				2008
				(unaudited)				(unaudited)				(audited)
	UK	Ireland	Other overseas	Total	UK	Ireland	Other overseas	Total	UK	Ireland	Other overseas	Total
	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s	£’000s
Revenue by geographical regions
External sales	32,337	1,813	6,856	41,006	27,818	1,484	-	29,302	56,564	3,245	2,896	62,705
Gross profit	10,419	631	2,180	13,230	9,332	625	-	9,957	20,347	1,158	806	22,311
Administrative expenses	(7,857)	(290)	(1,186)	(9,333)	(6,548)	(295)	-	(6,843)	(13,956)	(616)	(912)	(15,484)
Segment results	2,562	341	994	3,897	2,784	330	-	3,114	6,391	542	(106)	6,827
Unallocated corporate costs				(505)				(509)				(1,017)
Finance income				207				29				222
Finance costs				(282)				(115)				(173)
Profit before tax				3,317				2,519				5,859
Taxation				(895)				(840)				(1,809)
Profit for the period				2,422				1,679				4,050
Other information
Capital additions	731	-	162	893	397	19	-	416	884	41	74	999
Depreciation and amortisation	489	16	33	538	411	11	-	422	804	31	13	848

2. Segmental analysis (continued)

				6 months					6 months
				to 30					to 30					Year ended
				September					September					31 March
				2008					2007					2008
	UK	Ireland	Other overseas	Total		UK	Ireland	Other overseas	Total		UK	Ireland	Other overseas	Total
	£’000s	£’000s	£’000s	£’000s		£’000s	£’000s	£’000s	£’000s		£’000s	£’000s	£’000s	£’000s
Balance sheet
Assets
Segmental assets	39,303	2,486	8,666	50,455		23,363	1,647	-	25,010		32,106	2,652	2,304	37,062
Unallocated corporate assets				950					190					769
Consolidated total assets				51,405					25,200					37,831
Liabilities
Segmental liabilities	11,911	433	6,338	18,682		10,672	704	-	11,376		8,847	403	286	9,536
Unallocated corporate liabilities				3,465					3,662					1,694
Consolidated total liabilities				22,147					15,038					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.

 

2. Segmental analysis (continued)

Secondary format

 

		6 months to 30 September  2008  (unaudited) £’000		6 months to  30 September  2007  (unaudited) £’000		Year ended  31 March 2008  (audited) £’000
Revenue by Business activity
Quantity Surveying		18,767		15,540		32,986
Project Management		17,328		9,396		20,576
Specialist Services / Management Consultancy		4,911		4,366		9,143
		41,006		29,302		62,705

 

The group manages its business through segments based on geographical region. All revenue is generated from the rendering of services.

		6 months to 30 September  2008  (unaudited) £’000		6 months to  30 September  2007  (unaudited) £’000		Year ended  31 March 2008  (audited) £’000
Revenue by geographical destination
United Kingdom		29,505		25,688		53,265
Republic of Ireland		2,135		1,628		3,243
Other overseas		9,366		1,986		6,197
		41,006		29,302		62,705

 

3. Income taxes

Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The effective normalised tax rate on continuing operations was 26.9% (2007 33.3%) representing the benefit of the reduction in the UK corporation tax rate and the increased proportion of the Group's profits earned in lower tax jurisdictions.

4. Dividends

		6 months to 30 September  2008 (unaudited)		6 months to 30 September 2007 (unaudited)		Year ended 31 March 2008 (audited)
		£'000		£'000		£'000
Interim dividend paid		-		-		443
Final dividend paid		920		957		947
		920		957		1,390

The board has declared an interim dividend in respect of the half year of 0.9p per share (2007: 0.8p), which is not reflected in this financial information. During the period the final dividend of 1.6p per share (2007: 2.15p per share) in respect of the year ended 31 March 2008 was paid. This amounted to £920,637 (2007: £957,026).

  

5. Earnings per share

		6 months to 30 September 2008 (unaudited)		6 months to 30 September 2007 (unaudited)		Year ended  31 March  2008 (audited)
		£'000		£'000		£'000
Profit for the financial period attributable to equity shareholders		2,422		1,679		4,050
		Number		Number		Number
Weighted average number of shares in issue		57,164,795		45,457,736		49,098,651
Basic earnings per share (pence)		4.2		3.7		8.3
Weighted average number of shares in issue		57,164,795		45,457,736		49,098,651
Diluted effect of share options		3,068,383		1,810,830		2,877,532
		60,233,178		47,268,597		51,976,183
Diluted earnings per share (pence)		4.0		3.6		7.8

6. Business combinations

In April 2008 the Group acquired the trade, certain assets and goodwill of Nisbet LLP, together with 100% of the share capital of Nisbet Project Safety Limited, 100% of the share capital of Burns Bridge Holdings Pty Limited and the trade, certain assets and goodwill of Roger Richards Partnership, for a combined consideration of £11.1m.

The book value of assets and liabilities acquired amounted to £1.5m. A fair value exercise has not yet been undertaken but will be concluded for incorporation in the accounts for the year to 31 March 2009.

The combined consideration is to be satisfied as follows:

	£'000
Shares issued	2,203
Treasury shares used	843
Initial cash consideration	3,430
Deferred consideration - cash	3,150
Deferred consideration - shares	1,513
	11,139

Elements of the deferred consideration are contingent upon the satisfactory outcome of certain financial performance criteria.

7. Share capital

	Number of shares (thousands)	Ordinary shares £'000	Share premium £'000	Total £'000
Opening balance as at 1 April 2007	44,513	4,451	1,923	6,374
New shares issued during the period	1,332	133	273	406
At 30 September 2007	45,845	4,584	2,196	6,780
Opening balance as at 1 April 2008	55,336	5,534	9,987	15,521
New shares issued during the period	2,204	220	1,984	2,204
At 30 September 2008	57,540	5,754	11,971	17,725

On 1 April 2008 Cyril Sweett Group plc allotted 2,203,928 ordinary shares of 10 pence at a premium of £0.9 per share, as part consideration for the acquisition of the trade, certain assets and goodwill of Nisbet LLP together with 100% of the share capital of Nisbet Project Safety Limited. 

	Number of shares (thousands)	Treasury shares £'000
Opening balance as at 1 April 2007	785	354
Disposal of shares during the year	(785)	(354)
At 30 September 2007	-	-
Opening balance as at 1 April 2008	353	341
Treasury shares purchased	1,846	1,346
Disposal of shares during the year	(341)	(347)
At 30 September 2008	1,858	1,340

The Group acquired 696,300 of its own shares on the market through purchases by the Group's EBT. The total amount paid to acquire these shares was £0.4m. The Group also acquired 1,150,000 of its own shares on the market for £0.9m. During the period the Group's disposed of 341,000 of these shares in satisfaction of its share schemes. These shares are held as 'Treasury shares' and are shown as a deduction from shareholders' equity.

Employee share option scheme: options were exercised over 200,000 shares during the period to 30 September 2008 (30 September 2007: 772,115 shares). In respect of the period to 30 September 2008, these shares were transferred from the Group's EBT to the option holders and the exercise proceeds amounted to £38,000. In respect of the period to 30 September 2007, the shares were issued, with exercise proceeds of £155,200. The related weighted average price at the time of exercise was 19.0 pence (30 September 2007: 20.1 pence) per share.

 

8. Statement of changes in equity

	Share capital		Share premium		Treasury shares		Retainedearnings		Share option reserves		Total Equity
	£’000		£’000		£’000		£’000		£’000		£’000
At 1 April 2007	4,451		1,923		(354)		7,905		154		14,079
Exchange differences	-		-		-		(3)		-		(3)
Profit for the period	-		-		-		1,679		-		1,679
Dividends	-		-		-		(957)		-		(957)
Actuarial gain	-		-		-		542		-		542
Deferred tax on actuarial gain	-		-		-		(163)		-		(163)
Employee share option schemes - value of service provided	-		-		-		-		33		33
New shares issued during the period	133		273		-		-		-		406
Disposals during the period	-		-		354		-		-		354
At 30 September 2007	4,584		2,196		-		9,003		187		15,970
Exchange differences	-		-		-		283		-		283
Profit for the period	-		-		-		2,371		-		2,371
Dividends	-		-		-		(433)		-		(433)
Actuarial gain	-		-		-		109		-		109
Deferred tax on actuarial gain	-		-		-		(19)		-		(19)
Deferred tax on available-for-sale Investments	-		-		-		12		-		12
Employee share option schemes
- value of services provided	-		-		-		-		44		44
- 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)
New shares issued during the period	950		9,359		-		-		-		10,309
Issue costs	-		(1,568)		-		-		-		(1,568)
Acquisitions during the period	-		-		(341)		-		-		(341)
At 31 March 2008	5,534		9,987		(341)		10,806		615		26,601
Exchange differences	-		-		-		78		-		78
Profit for the period	-		-		-		2,422		-		2,422
Dividends	-		-		-		(920)		-		(920)
Actuarial loss	-		-		-		(872)		-		(872)
Deferred tax on actuarial loss	-		-		-		244		-		244
Purchase of shares by the EBT less exercise price of options exercised over these shares	-		-		-		(192)		-		(192)
Employee share option schemes
- value of services provided	-		-		-		-		50		50
- exercise of awards							8		(8)		-
New shares issued during the year	220		1,984		-		-		-		2,204
Acquisitions during the period	-		-		(999)		-		-		(999)
Revaluation of shares held in treasury	-		-		-		642		-		642
At 30 September 2008	5,754		11,971		(1,340)		12,216		657		29,258

ENDIR FSSFAASASEIE

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CSG.L