Preliminary Results

3 September 2012

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

Audited preliminary results for the year ended 31 March 2012

Sweett Group is a global business with expertise in property and infrastructure professional services. The Company's services include cost management, programme and project management, strategic advisory and PPP/PFI investment and consultancy services.

The Group is pleased to announce its audited preliminary results for the year ended 31 March 2012.

Financial highlights

GAAP measures

♦ After the impact of exceptional administrative expenses of £1.2m (2011: £1.0m) and amortisation of acquired intangible assets of £0.5m (2011: £0.4m).

Non GAAP measures

Operational highlights

·; Record order book demonstrating a healthy split between the Group's main sectors and geographies

·; Continued growth in Asia Pacific with staff numbers in the region increased by almost 30% to 680

·; Group rebranding strengthened Sweett Group's global offering and cross selling opportunities to international client base

·; Successful entry into energy sector in the UK

·; Launch of three year strategy focused on improved margins and cash generation

Outlook highlights

·; Trading in first four months of current financial year showing significant year-on-year improvement, with each reporting region operating profitably

·; Order book currently stands at £90m, a £6m increase from last year

·; Full effect of £2m in annualised cost savings being realised in the current financial year

Chief Executive Officer Dean Webster said:

"Our results were severely affected by first half losses in Australia and the Middle East and, during the second half, delays in reaching financial close on a major PFI project, the deferral of asset disposals and finance costs relating to a foreign exchange exposure in Australian Dollars.

The cost cutting actions implemented during the second half of last year have given us a strong platform from which to deliver on our strategy to grow our already diverse business across growth sectors in the UK and growth markets abroad, in particular in Asia Pacific.

The Group's trading during the first four months of the current financial year has been in-line with the Board's expectations, with each reporting region seeing significant increases in profits compared to the same period last year. Our order book currently stands at £90m, with a healthy split across Europe, where we have secured major framework appointments in the energy sector, and Asia Pacific, where we are capitalising on vibrant construction markets. Our order book in the Middle East is also recovering, following the Arab Spring."

-Ends-

For further information:

Chairman's Statement

 "I remain heartened by the continued support, collaboration and professionalism exhibited on a daily basis by our colleagues across the world, which will continue to set us apart from our peers as we build a stronger Sweett Group."

It is my pleasure to present Sweett Group plc's annual report and accounts for 2012. The last twelve months have seen the shape and size of our business evolve as we have continued to deliver on our strategy of creating a more diversified, global Group.

We entered 2012 having already been through a significant period of difficult market conditions in our traditional home markets. In the UK and UAE, these conditions continued throughout the year, impacting both revenues and margins. Our Asia Pacific business, buoyed by increasing revenues in China, was negatively impacted by losses in Australia during the first half of the year. The need to defer revenue recognition from two PFI asset divestments and the accounting treatment for a forward foreign exchange contract contributed to the Group missing its internal profit target for the year by over £2m, which was disappointing. However, we are confident, following the completion of the Inverclyde divestment in July of this year, that we have moved into the next year in a stronger position, having built a solid platform for the future,

The Board believes it is appropriate to prepare the financial statements on a going concern basis and is confident that it has the right strategy and action plan to operate within the requirements of the Group's bank covenants (see Note 1). Our net debt levels at March 2011 were £5m and having reached nearly £11m at September 2011 were reduced to just over £8m at March 2012.

Construction markets in Europe continue to be affected by low levels of economic activity and the impact of the Eurozone crisis and related austerity measures. Although our European order book has fallen by some 47% since 2008, it has remained at a consistent level for the last 15 months, a sign that we are competing well and gaining market share, despite challenging conditions.

Our operations in the Middle East, Africa and India (MEAI) were drastically impacted by the Arab Spring. By adjusting our cost base and focusing on winning work in new markets such as Saudi Arabia and Oman we are seeing a pick-up in activity in the region.

Expanding our presence in Asia Pacific has been one of our key focus areas in the last 12 months, resulting in staff numbers growing by almost 30% to approximately 680. Our global capability, built on successfully developing a critical mass in key trade and industrial hubs around the world, has and will continue to benefit the Group greatly.

Our outstanding reputation has been strengthened further during the year through the launch of a global brand, with all of our entities now operating under the Sweett Group identity. Having a brand that reflects the integrated, independent service offering that our global, corporate clients expect is one of our key strengths.

During the year Eamonn Kerr resigned from the Group and I would like to thank Eamonn on behalf of the Board of Directors for his work in pioneering Sweett Group's international expansion. In November 2011 the Board of Directors invited Kim Berry, Managing Director, Asia Pacific, to join the Board as an Executive Director and in only a short space of time his presence within our senior management team has been a great help in accelerating our global expansion and integration strategies.

We remain cautious of construction markets generally but our strong geographical spread gives confidence in our successfully providing high quality services to our clients around the world to maintain our position as a leading independent provider. I also remain heartened by the continued support, collaboration and professionalism exhibited on a daily basis by our colleagues across the world, which will continue to set us apart from our peers as we build a stronger Sweett Group.

Michael Henderson, Chairman

Chief Executive's Review

Business Review

"Despite challenging market conditions across Europe and the Middle East our staff have worked relentlessly to ensure we continue to gain market share in our traditional home markets, whilst growing our presence in the Asia Pacific region, a testament to our ability to provide our clients with exceptional levels of service."

After a difficult start to the financial year, as a result of well documented challenging trading conditions in Europe and operational losses in the Middle East, we took action to de-centralise our administrative functions, reducing costs in both regions. The second half of the year saw an improvement in the Group's trading activities, as well as a reduction in our debt levels.

We had planned for earnings to be realised from the divestment of two PFI assets during the year. Due to prolonged negotiations, together with the deferral of the profit attribution from these, our overall profit for the current year has fallen below expectations. The requirement to defer profits was a large setback as was the crystallisation under IAS39 of exchange rate losses which are shown as finance costs. The result of these adjustments meant that our performance in the year was a reversal in fortune as we report a loss before tax of £1.0m after the impact of £1.7m of exceptional and amortisation of acquired intangibles. This is clearly a disappointment; however our cost-cutting actions mean that we have started the current financial year in a much stronger position.

During the year, the vision and expertise of our staff have made our investments in international expansion and diversification across new sectors and services a success, building a stronger, more diversified Sweett Group. Our order book now shows a healthy split between our main sectors, as does our revenue generation, which stands at 55% in Europe and 45% in the rest of the world.

The growth of our Asia Pacific business, driven largely by the successful integration of our operations in China, and our ability to capitalise on a seamless regional presence, has continued at a substantial pace during the year. We have now almost doubled our staff numbers in China from around 300 in 2010, with revenues increasing by approximately 21% during the same period.

Whilst our growth in Asia Pacific has been a key component of our improved performance, it has been very encouraging to see momentum returning to some of our core UK markets as well as the success the Group has had in entering new sectors such as energy and utilities, as a result of the significant investment over the last two years.

Our ability to combine our global presence with local knowhow is what sets us apart from many of our competitors. Our clients come back to us as a result of the independent advice we provide them with, which is reflected in the success of their projects. Across the Group we are driving greater collaboration, which combined with our greater global footprint, is attracting a wider range of clients. The commitment exhibited by our staff, both towards our clients and in support of each other is something I am very proud of.

Three year strategy

Having successfully built a globally diversified business operating under a single, unified brand, the Group's strategy moving forward will focus on a three year programme of organic growth, aimed at consolidating the global footprint we have developed whilst at the same time improving our margins and cash generation.

The strategy plans to grow the business largely through organic means, with recruitment of key personnel in sectors or locations where our plan has identified additional expertise is required to fully develop the opportunity. We will focus on extending our sector expertise in Europe, diversifying our presence and service offering in Asia Pacific and further developing our presence in North America. We will carefully target any investment in the Middle East, North Africa and India, but will aim to be flexible by operating in new territories as and when our clients need support. As much of our strategy relies on using existing systems and resources, we aim to adopt a flexible approach to the pace of our expansion, should the economic environment deteriorate.

The Group's increased revenue is predominantly expected to come from continued investment in Asia Pacific, where our progress in geographic expansion across mainland China and Southeast Asia, as well as diversifying our service offering by building a project management and strategic advisory expertise, is expected to deliver encouraging levels of growth over the next three years.

In Europe, the Group has invested in growth sectors such as energy and infrastructure and has secured framework appointments in both. Continuing to win work in these new sectors, combined with increasing market share in our existing areas of expertise, downsizing our PPP/PFI investment exposure and keeping overhead costs under tight control, are expected to result in improved cash generation and operating profit over the period. Growth in our international operations will also bring inward investment into our European operations, as we capitalise on opportunities to cross-sell our services to an increasingly large base of corporate clients, hoteliers and retailers.

Improvements in the Group's margins will be driven by the reductions in the Group's cost base achieved during 2011/2012, which will result in cost savings of some £2m being realised in the current year. As the Group's operations in China mature, this will also contribute improved operating margins. In terms of cash flow, we have made some good progress in reducing our lock up (debtors and work in progress). However we have also been financing growth and additional working capital in developing our global footprint. With this footprint now in place we see that the next phase of our development can be focused more sharply on delivering improved margins and cash generation.

Review of operations

Group financial performance

Revenue for the year was £72.8m (2011: £72.8m). The pre-tax loss (2011: profit of £2.3m) was £1.0m after exceptional expenses, amortisation of acquired intangibles and net finance costs.

The results were severely affected by first half losses in Australia and the Middle East and during the second half, delays in reaching financial close on a major PFI project, the deferral of asset disposals and finance costs relating to Australia. Basic (loss) / earnings per share were (2.1) pence (2011: 2.6 pence) and operating margins were (0.2)% (2011: 3.3%). Our current order book is approximately £90m, an increase from last year's reporting date of 6% (2011: £84m).

The Board has proposed a final dividend in respect of the year of 0.3p per share which, together with the interim dividend, totals 0.5p per share for the year. The final dividend will be paid on 12 October 2012 to shareholders on the register on 14 September 2012.

Europe (excluding Investments)

Revenue from Europe, which includes the Group's operations in the UK, Ireland and Continental Europe was down to £39.8m (2011: £43.2m), accounting for 55% of the Group's revenue. In overall terms Europe profits were £2.4m (2011: £2.9m). The order book stands at £33m (2011: £37m).

Performance of our core activities was weak in the first half of the year with profit after exceptional items of £0.3m (2011:£1.5m). Following the restructuring actions announced in the first half of the year, the second half was a significant improvement and delivered £1.6m in operating profit. The operating margin on a pre-exceptional basis was 7.6% (2011:7.9%) as a result of the stronger second half performance.

The full effect of the restructuring actions will be realised increasingly during the current year.

Our European order book continues to reflect the short-term nature of contracts across the region. An increasing proportion of UK turnover is being achieved from frameworks which, with the exception of contracted projects, are not included in our order book projections.

Our investment in the energy sector has been rewarded with our appointment on the NNB Genco (part of EDF Energy) framework for their new build nuclear programme, initially for the reactors at Hinkley C, Somerset. Further framework appointments in the energy and utilities sectors for Babcock, Dounreay Site decommissioning, Northern Gas Networks and United Utilities will provide the group with long term opportunities in the infrastructure market.

Despite cuts in UK public sector spending, we continue to win work across the central government and local authority sectors around the country. During the past 12 months we have secured over 15 major framework appointments, including the North London Strategic Alliance and North West Construction Hub. In the health sector, we have secured framework appointments with a number of NHS Trusts, including Imperial Healthcare, Central & Northwest London and NHS Shared Business Services across England. Our sustainability team was recently appointed on the new pan-government three-year environmental and sustainability consultancy framework agreement by the Government Procurement Service (GPS), a significant win for the Group and evidence of our strength in the environmental arena.

Although activity levels across Europe continue to be suppressed by uncertainty surrounding the Euro zone crisis, we are capitalising on pockets of activity across the private sector, both in the UK and across Continental Europe. We continue to maintain our strong market position in the retail sector with appointments from Land Securities, Hammerson and Stanhope on major retail schemes in addition to working with blue chip retail clients such as Primark and Tesco and a predominance of high end retailers such as Selfridges, Jimmy Choo, Louis Vuitton and Shanghai Tang. Our commercial sector team has also won a number of commissions across the UK, including a regional programme and fit-out framework with Royal Bank of Scotland across northern England and Scotland and a framework appointment with Jaguar Land Rover. In Southern Europe, the Group has secured a commission for the Milan Hilton, further strengthening our hospitality sector portfolio.

Investment activities

Revenue from the Group's PFI/PPP business totalled £0.4m (2011: £1.4m). Segment losses were £0.7m (2011: £0.3m) and were offset by a gain of £0.44m on the sale of our interest in the South Ayrshire Schools PFI project.

This activity has continued to develop new opportunities, despite a delay in reaching financial close on the Leeds Social Housing PFI project. The process of recycling existing investments has also taken longer than expected, though our investment in the South Ayrshire Schools PFI project for a total consideration of £787,500 was completed in the first half-year. In January 2012, we announced an agreement to dispose of our investment in the Inverclyde Schools PFI project for a total consideration of £2,192,860. The latter completed in July 2012 and therefore the profits were deferred into the current year. In April 2012, we announced the conditional sale of our investment in the Dumfries & Galloway Schools PFI project. However the Group has since withdrawn from this sale and will seek alternative divestment routes during the current financial year.

Middle East, Africa, India (MEAI)

Revenue from MEAI accounted for 13.4% of Group revenues at £9.8m (2011: £10.6m). Segment losses were £1.2m (2011: break even) and the order book is £6m (2011: £7m).

Our performance in the Middle East was lower than expected, as a result of project postponements and cancellations resulting from the Arab Spring and continued depressed market conditions and investor sentiment across the region. Losses in the first half of the year were £0.7m. Whilst losses in the second half were £0.5m this included a £0.3m charge for exceptional costs.

Conditions in the region are reflected in our order book, which stood at £13m 24 months ago and fell to as low as £4m, before rising to its current level. Following a reorganisation of our management team in the region and a reduction in both operational and overhead costs, we are now experiencing a pick-up in bidding activity across the region.

The increased bidding activity has resulted in a number of recent project commissions and extensions, including the 90-storey Capital Market Authority Tower in Riyadh. In the health sector we have secured a high-profile commission from the Khalifa bin Zayed Foundation to provide cost and project management services on a new-build hospital in Sharjah and in the aviation sector we have secured commissions with Etihad Airways and the Dubai Aviation City Corporation. The hospitality sector remains one of our strongest in the Middle East, with current commissions with Raffles Hotel, Le Meridien, Grand Hyatt and developers such as Kingdom Hotel Investments. Following our cost reduction actions the region has returned to profitability during the first quarter of the current year.

In India, the Group is benefiting from buoyant markets in Delhi and Bangalore, whilst conditions in Chennai and Mumbai remain challenging. With a regional management team across its four offices now in place, the Group aims to continue to grow its presence across India.

Asia Pacific

Revenue from Asia Pacific accounted for 32% of Group revenues at £22.9m (2011: £17.6m). Segment profits were £1.3m (2011: £1.8m) and the order book stands at £51m (2011: £40m). The Group's operations in China and Hong Kong (previously Widnell Limited) continue to perform better than expected at the time of its acquisition both in terms of revenues and profits, contributing approximately £15m of revenues and £1.5m of net profit. The segment's operating margin on a pre exceptional basis for the entire region was 8.1% (2011:13.0%) weighed down by our performance in Australia.

Our performance in North Asia was very strong with first half profits of £1.2m (2011; £0.4m). Second half performance was still satisfactory at £0.7 (2011:£1.2m) although the results were beginning to reflect a slow-down in the China construction markets. Nevertheless, the operating margin for the year on a pre-exceptional basis was 13.7% (2011:20.0%), encouraging given the levels of investment in new resources that are being dedicated to the region.

The performance of the Australian business was particularly disappointing with £0.6m of operational losses in the year, which was sustained substantially in the first half of the year as the result of weak trading, issues with two contracts and re-assessment of long service and annual leave provisions.

The growth of our presence in China and Hong Kong is one of the main contributors to the Group's increased diversification during the year. We now employ over 600 staff across China, with a further 80 staff across Southeast Asia and Australia. With an experienced Asia Pacific management team now in place, we are focusing considerable efforts on cross-selling services and sector expertise throughout North Asia, Southeast Asia and Australia, including the development of full project management dispute resolution and programme management services to complement our well established cost management offering in China.

In China, the Group enjoys a large blue-chip client base which includes numerous listed Hong Kong and Chinese developers, international businesses investing in the country and multi-national corporates and retailers. The Group has mature and sizeable offices in the first tier cities of Shanghai, Beijing and Guangzhou and established and expanding offices in the fast-growing second tier cities of Shenzhen, Chengdu, Chongqing, Tianjin, Wuhan, Changsha and Shenyang.

While we anticipate some fluctuations in the Chinese economy, we believe that it will continue to grow significantly over the long term and will enable the Group to benefit from cross-selling opportunities with existing international clients as they invest in the country's growing domestic market, as has already been the case with clients such as Nike, Merlin Entertainments, Tesco and Blackrock. Similarly, we are able to capitalise on the flow of outward investment from China by supporting existing clients such as Shanghai Tang, Shangri-la Hotels and Huawei as they develop their global presence.

In Southeast Asia our expansion is being led out of our established offices in Singapore and Hong Kong together with the investment we have made in our office in Thailand, recent registration in Vietnam and joint ventures established in Malaysia and Japan. Operations in the region are now benefitting from the adoption of the single brand and the integrated approach of the Asia Pacific management team resulting in new commissions in the corporate real estate, hospitality and leisure sectors.

As indicated, the Group's progress in the Asia Pacific region as a whole was held back by losses in Australia during the first half of the year. However, our Australian business is benefiting from growth across other parts of Asia Pacific, as a result of cross-selling opportunities and returned to profitability during the second half of the year. This recovery was complemented with a number of significant wins including a framework appointment with the Australian Department of Defence and successful investments in developing our cost management service offering.

Developments in North America

The successful progression of the Group's alliance partnership with VVA LCC, a New York based project management consultancy, has resulted in the signing of a joint venture agreement in May, 2012. The joint venture company, VVA Sweett, is incorporated in the State of New York, with each party owning 50% of the joint venture company's shares. Through the joint venture, the Group will market its cost management services to North American corporate clients, as well as offer existing clients project management and cost management services across North America.

Rebrand

In order to further strengthen its leading position and help integrate its acquisitions, the Group embarked on a global rebrand during the year at a cost of approximately £100,000. The process, which saw the consolidation of four brands into one, was completed in April 2012. All wholly-owned businesses in the Group are now operating under the Sweett Group brand with most of the entities renamed. Cyril Sweett Group plc was renamed Sweett Group plc on 23 January 2012.

Outlook

The last four years, during which time the global economy and construction industry in particular has experienced significant challenges, have been transformational for Sweett Group. The impact of the global economic recession, financial turmoil in the euro-zone and political instability in parts of the Middle East have necessitated difficult decisions to adjust the size and structure of our business, resulting in annualised savings of £2m being realised in the current year. Having implemented these, whilst diversifying our presence and expertise, the Group now has a solid platform from which to deal with lower levels of activity in the developed world, whilst having the ability to expand in growth markets.

The outlook for the construction sector across the regions in which we operate varies considerably. In Asia Pacific, the Group's main growth market, we will benefit from an encouraging order book but are also mindful of the slowing growth currently being experienced in the region.

In Europe, the economic recession and instability across the euro-zone, together with further planned reductions to UK spending, will continue to have a negative impact on public sector spending and construction activity as a whole. We do not anticipate this gap will be filled by the private sector in the short term and we expect market volumes and pricing levels to continue to be challenging. However, the Group's entry into new markets such as energy and infrastructure and our success in securing framework appointments across a variety of sectors does provide encouragement.

We remain cautious about construction markets in the Middle East, Africa and India. We are encouraged by increased levels of bidding, in particular in the UAE and are focusing on developing new business opportunities in growth markets such as Saudi Arabia, Oman and Qatar. Our business in India continues to benefit from private sector investments across the country's main business and trade hubs.

In North America, where we now have a joint venture company with VVA, a leading New York based project management firm, we are seeing some initial cross-selling opportunities, as well as opportunities to provide cost management services to our JV partner's existing clients.

Trading during the first four months of the current financial year has been in line with Management's expectation, with each reporting region seeing significant increases in profits compared to the same period last year. Our order book currently stands at £90m, with a healthy split across Europe, MEAI and Asia Pacific.

I am confident that the dedication of our staff and quality of service that they provide to our clients will continue to contribute to building a stronger Sweett Group.

Dean Webster, Chief Executive

Independent Auditors' Report

The auditors have reported on the Group's financial statements for the year ended 31 March 2012. Their report includes an emphasis of matter in respect of going concern along with an unmodified audit opinion.

Forward-looking statements

 Certain statements in this preliminary announcement 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.

Financial Review

Trading performance

The year to 31 March 2012 was a further year of consolidation for Sweett Group in the UK, where revenues decreased, whilst activity levels overseas increased overall following the acquisition of Widnell Limited in the previous year.

Group revenue was £72.8m (2011: £72.8m). There was a loss before taxation, after the impact of £1.2m of exceptional expenses and £0.5m of amortisation of acquired intangibles as described in Note 5, of £1.0m (2011: profit of £2.3m). This loss was exacerbated by profit recognition on two non-concluded PFI asset sales being deferred. The Inverclyde Schools disposal completed in July 2012 such that the gain has already been recognised in the current year. The Dumfries & Galloway Schools disposal is being pursued under a revised structure with the intention of concluding a transaction in the current year also. Furthermore, there was a charge to finance costs of £0.6m relating to the change in fair value of a derivative financial instrument under IAS39. This is covered in more detail below.

The primary segmental analysis in Note 3 details the segmental revenue and result. In aggregate the Group's gross margin decreased from 35.9% to 29.5%, with segmental margins affected mainly by continued competitive pressure in the UK, losses arising in France, contract issues in the Middle East and Australia and staff retention issues in Hong Kong and China. Despite reductions in administrative expenses, the segment results are each affected by these issues.

An increase at the half year in work in progress on achievement of preferred bidder status on the Leeds Social Housing project of £362,000 has been de-recognised in the full year operating loss, due to the continued delay in financial close of the project.

Details of exceptional costs and other items affecting the result for the year are provided at Note 5. Exceptional costs of £1,263,000 (2011: £956,000) comprised in the main restructuring costs of £1,193,000 (2011: £694,000). Other items which are material to an understanding of the results, also detailed in Note 5, totalled £500,000 (2011: a credit of £400,000) of which £602,000 related to the change in fair value of a derivative financial instrument under IAS39. There was little change in the exchange rates to sterling of our major trading currencies and little impact on either revenues or profits at the pre-interest level.

Cash performance

Cash (used by) / generated from operations was £(2.8m) (2011: £1.5m). Note 11 analyses this usage, which arises largely through working capital outflows. In particular, the Group's work in progress net of fees in advance increased to £5,766,000 (2011: £4,149,000) and gross receivables to £20,510,000 (2011: £19,272,000), though overdue amounts reduced to £6,486,000 (2011: £9,272,000) and there was a reduction in the impairment provision to £1,787,000 (2011: £2,370,000). The lock-up calculation, which measures the number of days' activity included within work in progress and debtors, incorporates an annualisation of revenues based on the last three months' revenues. Management of working capital is a key issue as the Group expands, particularly in the Asia Pacific region, and steps are being taken to improve its management such that operating cash flows are expected to improve.

Key Performance Indicators

A number of metrics are used to monitor financial performance. These include turnover, operating profit, cash collection, pre-exceptional administration costs earnings per share and lock-up. Most of these Key Performance Indicators remained stable in the last year. The pre-exceptional administration expenses (loss) / earnings per share were (0.5)p (2011: 3.7p) and the average number of lock-up days for the final quarter was 87 (2011: 94). These have been covered in more detail in the business review. The financial performance by segment is reported in Note 3.

Underlying profit margins

The gross profit margin was 29.5% (2011: 35.9%) and the operating profit margin was 0% (2011: 3.3%). The operating profit margin before exceptional administrative expenses was 1.5% (2011: 4.7%). Internal forecasts for the current year indicate a recovery in the gross margin, in part through the full-year impact of cost savings made in late 2011 and better trading profiles in Australia and the Middle East, Africa and India region.

Finance costs

Note 4 discloses a cost of £0.6m relating to the change in fair value of a derivative financial instrument under IAS39. The circumstances were that a forward foreign exchange contract valued at AUD11.1m to hedge advances in Australian dollars to a subsidiary company, the bulk of which were capitalised in September 2011, was rolled into a replacement instrument on maturity in March 2012 and is being accounted for as a derivative rather than a hedge. The hedge is effective for AUD8.5m, being the Group's net asset exposure to Australia, from 1 April 2012 having failed the stringent IAS39 documentation requirements for the year ended 31 March 2012. The balance of the contract is hedging advances to Australia.

Tax

The charge for the year of £391,000 on a reported loss of £1,021,000 arises predominantly through the impact of expenses not deductible for tax purposes and deferred tax relief not recognised. The 2011 charge of £680,000 was affected by lower tax rates on overseas earnings and the reversal of expenditure disallowed in previous periods, net of the determination of prior year liabilities.

Earnings per share

Basic (loss) / earnings per share decreased to (2.1) p (2011: 2.6 p) and fully diluted (loss) / earnings per share decreased to (2.1) p (2011: 2.6 p). Tax-adjusted (loss) / earnings per share prior to exceptional administrative expenses was (0.5) p (2011: 3.7 p).

Balance sheet

The Group ended the year with:

- Net borrowings of £8.2m, compared with £4.9m at 31 March 2011;

- Net assets of £28.8m, which compared with net assets of £30.9m at 31 March 2011;

- Work in progress (net of fees in advance) of £5.8m compared with £4.1m at 31 March 2011; and

- Trade receivables of £19.3m compared with £17.8m at 31 March 2011.

We continue to invest in property, plant and equipment and computer software to ensure that, as the business environment becomes more complex and technology evolves, the Group's IT systems and equipment are kept up-to-date and properly serve the business.

Banking facilities

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

The Group's principal banker is Bank of Scotland plc, part of the Lloyds Bank group, which provides Sweett Group with overdraft, revolving credit, loan and contract guarantee facilities as well as a letter of credit facility in relation to the ongoing equity and debt obligations of the Group's PPP investment projects.

At 31 March 2012, the amount undrawn under the Group's credit lines was £7m (2011: £7m). All of the borrowings under the Group's credit lines are shown in the financial statements as current liabilities. The reason for this is that two of the financial covenants, being the cash flow cover and gearing covenants, were infringed at 31 March 2012. Bank of Scotland plc has subsequently granted a waiver.

The Bank of Scotland plc facility agreements contain five separate financial covenants being:

·; Net worth shall not at any time be less than £25m

·; The ratio of EBITDA to Total Interest shall not at any time be less than 4:1

·; The ratio of Net Operating Cash flow to Bank Debt Service on each test date shall not be less than 1.1:1

·; The ratio of Total Net Debt to EBITDA shall not at any time exceed 3:1

·; The value of CS Investments PPP investment portfolio as detailed in the annual audited accounts shall be no greater than 25% of the consolidated net assets

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. Further information on going concern appears within Note 1.

Internal Controls

In the established parts of the Group there are well developed policies and procedures to support a sound internal control environment. These policies are being rolled out across the enlarged Group but this standardisation is not yet complete. Systems enhancements over the next two years, based on the roll-out of the UK's Agresso ERP system across the group's overseas businesses, will further strengthen internal controls. Meanwhile more intense management review processes are in operation and it is intended to form a treasury committee to oversee matters of treasury control in an international environment. The corporate governance section of this Report outlines further issues of internal control within the Group.

Dividends

An interim dividend for the year to 31 March 2012 of 0.2 pence per share at a cost of £133,000 (2011: 0.5 pence per share at a cost of £325,000) was paid on 16 January 2012 to all shareholders on the register on 16 December 2011. The directors are recommending a final dividend of 0.3p per share at a cost, assuming no issues of shares in the intervening period, of £200,000 (2011: 0.8 pence at a cost of £530,000) which, if approved by the shareholders at the AGM, will be paid on 12 October 2012 to all shareholders on the register on 14 September 2012. A dividend reinvestment service is available through the Registrar.

Employee Benefit Trust

The Group's Employee Benefit Trust (EBT) is a separately administered discretionary trust in Jersey for the benefit of employees. Shares owned by the EBT are shown as a reduction in capital and reserves as Treasury shares. Periodically, payments are made by Sweett Group to the EBT to reimburse the EBT for awarding shares or transferring shares to employees on the exercise of options.

Share Incentive Plan

The Share Incentive Plan (SIP), originally launched in February 2001, enables UK resident employees to acquire shares in the Group out of untaxed income and provides a tax-efficient means of awarding shares to employees. Dividends received by the plan in cash are used to purchase additional shares on behalf of employees. Free shares may be awarded to qualifying employees based on remuneration. Shares held in the plan which have not been allocated to individual employees are shown as a reduction in capital and reserves as Treasury shares. The granting of matching shares whereby individuals' purchases of SIP shares were matched on a 4 for 5 basis was withdrawn with effect from 31 December 2010.

Summary

Sweett Group's underlying trading performance is expected to improve as the result of past cost reduction programmes and attention to consolidating its present global operations.

Chris Goscomb

Chief Financial Officer

Sweett Group plc

Consolidated Income Statement for the year ended 31 March 2012

Sweett Group plc

Consolidated Statement of Comprehensive Income for the year ended 31 March 2012

Sweett Group plc

Consolidated Balance Sheet as at 31 March 2012

Sweett Group plc

Consolidated statement of changes in equity for the year ended 31 March 2012

Sweett Group plc

Consolidated Statement of Cash Flow for the year ended 31 March 2012

Sweett Group plc

Notes to the Preliminary Announcement

1. General information

This preliminary announcement does not constitute the Group's full financial statements for the year ended 31 March 2012. The financial information for the year ended 31 March 2011, 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 for the year ended 31 March 2011. Statutory accounts for the year ended 31 March 2011 have been delivered to the Registrar of Companies and those for the year ended 31 March 2012 are now available to shareholders for approval at the Annual General Meeting to be held on 26 September 2012. Those accounts have not yet been delivered to the Registrar. The auditors have reported on these accounts; their report (i) was unqualified, (ii) included a reference to a matter to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

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, with a separate Investments business, Middle East, Africa and India (MEAI) 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 Accounts for the year ended 31 March 2011, which is available on the group's website at www.sweettgroup.com, and they will also be included in the Annual Report and Accounts for the year ended 31 March 2012. 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, revolving credit and overdraft facilities from the principal banker, Bank of Scotland plc, and smaller overdraft 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 and working capital emanating from the continuing economic climate, the level of overheads and interest to be funded, loan repayments and payments in respect of past and future acquisitions. It has also considered the impact of the disposal of available for sale financial assets.

The Board has modelled a wide 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 listed in the preceding financial review.

The Directors' believe that the principal sensitivities and actions taken in order to maintain covenant compliance include: 

·; The timely disposal of our PFI/PPP investments including Plymouth Lift and Dumfries & Galloway for approximately £700,000 and £2.2m respectively. However, the timing of these transactions remains uncertain; 

·; The cessation of future commitments to PPP investments by entering into joint venture arrangements with external funders;

·; The inability of all parties to secure funding for the Leeds Social Housing project. Whilst all parties are working towards financial close and we have tested the sensitivity of continuing delays, should it not close we have a material risk in terms of unrecoverable work in progress and bid costs amounting to some £800,000;

·; Maintaining trading volumes and enhanced gross margins (forecast at 34% compared with the 29.5% achieved in the year to 31 March 2012), deriving principally through operating efficiencies resulting from the restructuring in 2012 and a return to profitability in Australia and the Middle East. Also, the directors believe they have a strong order pipeline to support forecast sales levels in 2012 and 2013; 

·; Extending the terms for the payment of deferred consideration of £3.1m to the former shareholders of Widnell Limited, all of which is now due under the terms of the July 2010 share purchase agreement. The vendors, all of whom continue to work within the Sweett Group, have represented that they will accept future payments such that there is no detrimental impact on the funding of the Group or its covenant compliance. Whilst there is no legally binding agreement in place to extend the terms, the directors believe it is reasonable to assume this deferral within their assessment of going concern;

·; Improving working capital management. The directors are implementing enhanced working capital processes and undertaking a training programme for all operational directors which they forecast will result in cash flow improvements in excess of £3m. However, there remains some uncertainty as to how long it will take for the benefits of these processes to result in cash flow improvements; 

·; The Directors' believe that they will be successful in maintaining the level of the existing overdraft facility and in rolling over the revolving credit facility due for renewal in September 2013. Whilst these matters are still to be formally approved by the bank, the directors believe that they have a good relationship with their lender and have received informal assurances that the facilities will remain in place. However, this does remain subject to the bank's full acceptance procedures.

The Board notes that the matters set out above, were their impact aggregated, indicate the existence of a material uncertainty which may cast doubt about the Group's ability to continue as a going concern. Nevertheless, 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. The financial statements do not include the adjustments that would result if the Group or the Parent Company were unable to continue as a going concern. 

2. Significant accounting policies

The accounting policies adopted for the year ended 31 March 2012 are consistent with the policies included in the annual report for the year ended 31 March 2011.

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 (excluding the Investments business), Investments, the Middle East, North Africa & India and Asia Pacific. All four categories generate revenues from the provision of quantity surveying, project management and specialist services / management consultancy and the Investments business generates profits on the disposal of its PPP/PFI financial assets available for sale.

The Investments business has been identified as a separate segment due to its size and the nature of its business. Its activities have therefore been dis-aggregated in the segmental analysis. This represents a change to previous reporting and the comparative amounts have been restated. Its reported revenue comprises fees generated from bid management activity within the PPP/PFI arena. Proceeds from assets sold are dealt with as part of the profit on disposal of available for sale financial assets computation.

The Board assesses performance based on a measure of earnings before interest and tax (EBIT). 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 result 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 and exceptional administrative expenses incurred by Sweett Group plc (formerly Cyril Sweett Group plc). They include for the year ended 31 March 2012 £156,000 of exceptional administrative expenses.

The Group is domiciled in the UK. Its revenue from external customers in the UK is £38.2m (2011: £42.6m) and from external customers from other countries is £34.6m (2011: £30.2m).

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 receivables 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 £14.1m (2011: £14.0m) and the total of such non-current assets in other countries is £7.0m (2011: £7.3m).

Sales between segments are transacted at arms' length. External revenue reported to the Board is measured in a manner consistent with that in the income statement.

4. Net finance costs

The change in fair value of derivative financial instrument relates to a forward foreign exchange contract to hedge advances in Australia 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 has been accounted for as a derivative rather than a hedge.

Interest expense on unwinding of discount relates to the notional interest on deferred acquisition consideration.

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

Exceptional items 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. These are shown on the face of the income statement as exceptional administrative expenses.

Exceptional items do not include adjustments to amounts payable in respect of acquisitions in previous years, which are required to be charged or credited to the income statement under IFRS 3 (revised).

Restructuring costs comprise redundancy costs of £0.8m (2011: £0.5m) and other restructuring costs of £0.4m (2011: £0.2m).

The impairment loss recognised on trade and other receivables relates to losses incurred as a result of the political unrest in the Middle East.

6. Income tax expense

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

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows:

Since the Group is reporting a loss before taxation with a charge to taxation, there is no weighted average applicable tax rate (2011: 29.0%). The charge, as shown above, arises predominantly through the impact of expenses not deductible for tax purposes, and deferred tax not recognised. The 2011 charge was affected bylower tax rates on overseas earnings and the reversal of expenditure disallowed in previous periods, net of the determination of prior year liabilities that were different from the estimates reflected in the financial statements.

In the 2012 Budget statement, the UK Government announced a reduction of 2% in the UK Corporate Tax rate reducing it to 24% effective from 1 April 2012. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 22% by 1 April 2014. None of these expected rate reductions other than the near-term rate of 24% has been substantively enacted at the balance sheet date and therefore UK deferred tax has been calculated at 24%.

The Board has declared a final dividend in respect of the year ended 31 March 2012 of 0.3p per share (2011: 0.8p per share) amounting to 0.5p for the year (2011: 1.3p for the year). These financial statements do not reflect the final dividend for 2012.

Basic

Basic (loss) / earnings per share is calculated by dividing the profit attributable to equity shareholders 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 excludes shares held by employee trusts.

Diluted

Diluted (loss) / 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.

Before exceptional administrative expenses

Tax-adjusted earnings per share before exceptional administrative expenses are calculated after amortisation of acquired intangibles using the weighted average number of shares.

9. Goodwill