Sweett Group plc (“Sweett Group” or "the Group") Audited final results for the year ended 31 March 2014
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- Asia Pacific
- Values and business model
- Review of operations Group financial performance
- Middle East, Africa India
- North America
- Forward-looking statements
- Financial review Trading performance
Middle East, Africa and India Middle East: The Gulf Cooperation Council (GCC) governments are expected to maintain relatively high levels of spending, underpinning growth in the non-oil sectors of their economies, while continuing to post substantial budget and current account surpluses. This is yielding a healthy economic growth averaging 4.3% and which is most evident in the construction and infrastructure arena, having always been the largest sector in the GCC. With building projects collectively amounting to $62bn awarded and $67bn completed in 2013, both figures are estimated to rise to nearly $75bn and $128bn respectively. This investment, particularly in the areas of housing, education and healthcare, is being driven by substantial population growth. At the same time, private sector real estate is showing signs of a comeback after the Dubai real estate crash in 2009. This improved economic scenario, coupled with a surge in travel, has led to a strong growth in the hospitality sector with hotels witnessing record highs in the revenue per available room. In anticipation of major global events being hosted in the region, an estimated 45,000 additional hotel rooms are required in Qatar and an estimated need for 140,000 – 160,000 new rooms by 2020 to host the World Expo in Dubai. India: In 2013 the overall GDP growth was less than 5% as against the expected level of about 8 to 9% and there was a slowdown in the construction industry. However with a stable government being formed in May 2014 there is positive market sentiment overall and there are indications of better growth prospects in the construction industry. The projected GDP growth for 2014 is 5.5% and the expectation is that real estate market activity will pick up in the second half of this financial year when the policy reforms such as relaxing Foreign Direct Investment (FDI) norms and the introduction of REITs are implemented. The housing sector which is a significant contributor to overall economic growth is expected to grow by about 15% this year. Other than the housing sector the commercial and retail sectors are also expected to witness reasonable growth in 2014. Asia Pacific
Prior to 2013, China’s construction market, which is the world’s largest at US$1.8 trillion and with an 18% global share, grew at over 20% p.a., but slowed considerably during the year as a result of Central Government policies aimed at dampening property prices and a general tightening of credit. Medium to long term industry growth is forecast to sustain at around 7 - 8% per annum, with immediate prospects for the first half of 2014 remaining uncertain as the economy transitions through the changes noted above. The slowdown in China has, to a lesser extent, affected our regional markets. Hong Kong’s private sector workload has eased over the period but public sector and infrastructure work, areas in which the Group is particularly strong, are in a period of high activity. In Singapore, our established sectors of corporate real estate and hospitality have seen a relatively flat year, but were bolstered by the addition of new local and regional work in hi-tech and data centres. Our business in Thailand has been impacted by the recent political problems, particularly with regard to foreign investor sentiment, but long term prospects for growth of the US$33 billion Thai economy remain encouraging at around 5% per annum. Australia’s US$220 billion construction market grew by 10% during the year but is forecast to drop by 4% in 2014 principally as a result of reduced demand for resources. The contraction is partly offset by increased domestic demand particularly in the residential sector. Our established sectors in healthcare, local government and aged care were subdued in 2013, partly due to local and national elections, but are expected to resume normal activity levels. Regional investment in infrastructure and built assets, particularly from China, present opportunities for the Group in the short to medium term, while defense spending, a sector in which we continue to be active, has increased under the recent federal budget. The region’s second largest construction market, at US$742 billion, is in Japan, where the Group is in a joint venture. International interest in our principal sectors of corporate real estate and hospitality has recently increased, partly in anticipation of the forthcoming Olympic Games in 2020. In the medium term we anticipate higher levels of activity for the Group in-country and also with Japanese businesses operating outside Japan. The Group is examining new regional markets in Vietnam, Indonesia, Malaysia and Myanmar, all of which have construction sectors growing in excess of 4% p.a. and attracting significant international interest. However, in line with our current strategy of organic growth, any investments will be of a limited nature and structured to become quickly financially self-sustaining. Values and business model We have a common set of values across the business and are putting in place systems to ensure these values come to life. Group values which are being rolled out in each of our 58 offices are: Integrity: We believe in honesty, transparency and fairness and expect the same from those with whom we do business. We deliver on our promises. Professionalism: We take pride in our work, striving to surpass the highest standards. We invest in the continual development of our people. Our success is achieved by their inspiration, commitment and dedication. Collaboration: We believe in working constructively as a team with our clients, colleagues and industry partners creating a platform for innovation and added value. Clarity: We believe in clear communication, providing trusted independent advice whilst maintaining openness throughout our business. Respect: We believe in treating the people, communities and environment around us with respect and care. Success: Guided by these values, we believe our clients, staff and investors will share in our success. Our business model is at the heart of everything we do. Our services are aimed at helping to maximise the value of our clients’ investment, through the efficient management of time and resources. To achieve this, our approach is always the same – to become a partner with our clients and deliver cost-efficient, timely solutions. Sweett Group is one of the few players in our markets able to deliver an independent service. Long term relationships - we optimise our clients’ investment through a deep understanding of their business, built over many years. This means that we can ensure projects are delivered on time and on budget. Global knowhow – many of our clients are global – and so is our business. Our network of offices covers the world’s main trade and business hubs. Our geographic reach enables us to provide clients with a full range of integrated services, wherever they need them. Local delivery - we use our global knowhow to deliver local, sustainable solutions. Our geographic presence allows us to recognise local constraints and challenges, gearing our services to each client, bringing in resources from across the Group, as necessary. More can be learned about our values and business model by visiting our refreshed website at www.sweettgroup.com. Review of operations Group financial performance Revenue for the year was up 10.9% to £89.4m (2013: £80.6m) and profit before tax was up 59% to £2.8m (2013: £1.8m) after exceptionals, PSP charges, amortisation of acquired intangibles and net finance costs. Stripping out the one off benefit of £1.0m from the unwinding of the Australian hedge and the £1.2m profit on the financial close of Leeds Social Housing and Hub North, underlying profits were £3.2m, up 23% (2013: £2.6m). For the first time shareholders will note there is a full year charge of £0.6m for the Performance Share Plan which has been disclosed separately in the consolidated Income Statement. Basic earnings per share were up 47% to 2.8p (2013: 1.9p) and pre-exceptional operating margins at 5.5% were up 2% (2013: 5.3%). This remains considerably below peak operating margins of 9.3% achieved in 2008. Our current order book stands at a record £109m (2013: £100m), despite a negative foreign exchange impact of 5% over the period. Non GAAP adjusted profit before tax was £5.4m (2013: £3.7m) and adjusted earnings for the year were 5.0p per share (2013: 3.7p). Net debt at the year-end was further reduced to £6.3m (2013: £7.1m) and well below the peak of £11m in 2012. Much focus has been put on improving our working capital requirements, particularly in APAC. Working capital remains a principal focus for the executive team. The Directors are recommending a final dividend of 0.8p per share (2013: 0.7p) which will make a total dividend of 1.3p for the year, an increase of 30% (2013: 1.0p), illustrating the Board’s confidence in the Group’s future prospects. Europe Revenue from Europe, which comprises the Group’s operations in the UK, Ireland and Continental Europe was up to £49.3m (2013: £42.7m), accounting for 55% of the Group’s total revenue. Segment profits pre-exceptional administrative expenses and amortisation were £5.7m (2013: £3.7m). The European business has improved with net operating margins advancing from 7.1% to 10.9%. This remains below peak margins of 11.6% in 2008. The order book stands at £53m (2013: £39m) an increase of some 36% year on year. Clients are now committing to long term spending plans and giving approval to major construction projects rather than the phased commitments of recent years. The order book is reinforced by an extremely robust pipeline of potential projects and Framework income yet to be formally committed. The business operates across a diversified range of private and public sectors. Our investment into the Energy and Infrastructure sectors has been rewarded with appointments on the NNB Genco Ltd Nuclear Framework, Network Rail Frameworks for both England & Wales and Scotland, and the Transport for London Framework. Our exposure to the sector increased fivefold in the year as we continue to build market share. The retail sector, in which the Group is a recognised leader, has seen a further improvement in activity over the period. The Group has secured commissions at the major developments at the Whitgift Centre, Croydon and Brent Cross Shopping Centre, together with other schemes including the Hereford Shopping Centre on behalf of Stanhope. We currently have an involvement in over 40 mixed use retail developments. Our retail portfolio is balanced with a number of projects directly with retailers such as Selfridges working on their flagship stores in Manchester, Birmingham and London, the rollout of Primark stores in Spain, Portugal, France, the UK and most recently supporting them on their push into the USA. Another success is our recent appointment to the John Lewis and Waitrose Consultant panel. The offices sector, both for developers and corporate end users has seen an upswing in activity, extending from London into most regional cities. Significant clients in this sector include BNP Paribas, Barclays, RBS and the BBC. In the Hotel and Leisure sector, the Group has been very active via global frameworks with Hilton and Marriott and as client representative for the landmark Shangri-La Hotel in the Shard. The prospects for the leisure sector remain strong with a number of museums, gallery and stadia projects in the pipeline. Significant schemes worked on include the Tate St Ives Gallery Extension and a project for Merlin Entertainment in Istanbul. The Group maintains a strong market position in the Health, Education and Life Sciences sectors, all areas which have seen continued investment over the last 12 months. New health schemes have included the Royal Hospital Chelsea, University College London, Moorfields Eye Hospital and King’s College, London. The Higher Education sector continues to present a large range of opportunities and we are currently working with more than 20 universities with notable schemes at Cambridge, Imperial, Robert Gordon and Manchester universities. As a result of collaboration between private sector companies and research facilities attached to universities, we have seen a range of new commissions including GlaxoSmithKline, Medical Research Centre and Bio Med Business Park. The Group operates from a wide range of offices throughout the UK, giving us the advantage of local knowledge and delivery capability. This plays a particularly important role when being considered for projects procured under national framework arrangements. Sweett Group has a wide range of experience to draw from providing services on over 200 current public sector frameworks on a national, regional or local basis including the Ministry of Justice, London Construction Programme NHS Shared Business Services and Waste and Resources Action Programme. The culture of the organisation is based on maximising value for our clients by putting their needs first. Much of this culture is driven by the people we employ and the training we provide. In addition, we continue to innovate our delivery processes which this year has included the development of a Building Information Modelling (BIM) programme and through our participation in the Rapiere embedded Energy Modelling tool, we are developing a valuable measure of the sustainability of entire property portfolios. Middle East, Africa & India Revenue from the Middle East and India (MEAI) accounted for 13% of Group revenues at £11.6m (2013: £11.9m). Segment profits pre-exceptional administrative expenses and amortisation were £0.1m (2013 £1.3m) and the order book is £9.2m (2013: £6.0m). In MEAI, we have seen a pick-up in bidding activity as market conditions continue to improve. This trend is anticipated to be maintained over the medium term. Nevertheless, as part of our risk management and margin improvement strategies, the Middle East operations have been through a year of transition to de-risk the business in the longer term. We aim to be more selective in the work we undertake. We will concentrate on our levels of service delivery, repeat clients and local market reputation as part of the plan to limit our turnover to no more than 10% of total Group turnover. The focus of attention is on the UAE, and the new office which has recently been opened in Oman. Our position in Qatar is being developed but on a low risk low cost strategy. Profits were impacted by reducing our dependence on very large projects together with certain legacy issues, but these are now close to being worked through and any future effects minimised. Our repeat work with clients such as Dubai Airports, Etihad Airways, Saudi Aramco and Jumeirah continues to grow and we are delighted to be working for major developers such as Mubadala and Emaar. The Group’s performance in India continued to be encouraging with growth in the year faster than anticipated. India now employs over 150 people across the region headquartered in Chennai with regional offices in Bangalore, Mumbai, Delhi and Hyderabad. We have strengthened our position to be a leading provider of QS services with a pan-India presence and have an extremely strong platform to continue to grow long term. Whilst there has been some recent market slowdown, Delhi and Bangalore were the strongest performers particularly in the commercial and IT sectors. Elsewhere, the residential market did experience a short dip, but this is now expected to recover once the new government implements its plans to grow the economy at a faster pace again. Asia Pacific Revenue from Asia Pacific accounted for 32.0% of Group revenues at £28.6m (2013: £26.0m). Segment profit before exceptional administrative expenses and amortisation of intangibles were £1.3m (2013: £0.6m) and the order book stands at £47m (2013: £55m) primarily due to a foreign exchange impact of £5m. Of these numbers, the Group’s operations in China and Hong Kong contributed approximately £20.8m of revenues and £1.0m of net profit. The segment’s operating margin of 4.5% remains satisfactory given the continued levels of investment in new resources dedicated to the region. During the year, the APAC business reported several significant new commissions including cost management of the £400m Huawei Dongguan R&D Centre in China, around £1,800m of hotel and casino development work in Macau, a series of commissions related to the early stages of the £11,330m major expansion to the airport in Hong Kong, project management of the Helicopter Aircrew Training System for the Department of Defence in Australia, and programming services for the £700m highways link to the HK-Zhuhai-Macau Boundary Crossing in Hong Kong. Looking ahead, we anticipate continued growth for our PM and Programming services in Asia and China, and a sustained level of demand for our cost management work. After several years of exceptionally high growth, our short to medium term Asia Pacific regional strategy is to restrain further expansion to levels that are financially sustainable, and to upgrade and consolidate our management systems across the region. Over the year we have strengthened our processes for reducing lockup, established a process for cross-border invoicing with our China offices, implemented the Group’s ERP system across Australia, South Asia and Hong Kong, with China to follow in mid-2014, enhanced our management team by adding new directors in Project Management, Programming and HR, and centralised the region’s IT and marketing support services. The Australian business was restructured during the year and a closer regional integration is in place to address the increasing demand for regionally integrated services.
North America Our 50 / 50 Joint Venture Company VVA Sweett Inc continues to make headway. We now have five joint venture offices in New York, Boston, New Jersey, Washington DC and Los Angeles. The business is trading profitably and income and margins are growing steadily. In the US, there is an increased awareness of the value that an independent Quantity Surveyor can add to a project. Clients are now requesting additional services not typically provided in the US where Quantity Surveying is now being recognised. The construction market in the US is growing again and this is reflected in the increased activity and number of bids VVA & VVA Sweett have made and been awarded during the past year. Of particular note are projects for Condé Nast, Time Inc and Weil Gotshal in New York and Cooley and Viacom in Los Angeles. Following our work for Primark in the UK and continental Europe, we are assisting them with their rollout of their stores within the USA. There have been a number of cross referrals of Trans-Atlantic projects with two pharmaceutical schemes for Biomed in the United Kingdom and schemes in Los Angeles, London and Tokyo for Jefferies. Outlook During the year the Group continued to perform strongly. Whilst it benefitted from one off gains from the unwinding of the Australian hedge contract and the financial close of Leeds Social Housing, the underlying performance was considerably better than the previous year. Trading in the first few months of the year has been encouraging and this momentum is expected to be maintained as the Group benefits from its wider geographical platform, the diversified nature of our sector coverage and the improving trading conditions in its home markets. Based on an improving order book and pipeline, the prospects for turnover growth and margin improvement remain on track. I would like to take this opportunity on behalf of the entire Sweett Group team of thanking Mike Henderson and Nick Woollacott, who both leave at the AGM. Mike has been with the Group for the last 16 years both as a Non-Executive Director and more latterly as Chairman. During his four years as Chairman of the Board, his leadership, guidance and support has been exceptional. Nick has been with the Group since our IPO and he has added considerable expertise and wise counsel during his time as Non-Executive Director. We wish them all the best for the future. Dean Webster, Chief Executive Forward-looking statements Certain statements in this audited final results statement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements involve risk and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Financial review Trading performance The Group’s financial performance was further improved during the year ended 31 March 2014 in comparison with the previous year in terms of revenue, operating profit, profit before taxation and net debt. It was also marked by the completion of the Hub North disposal, the financial close of the Leeds Social Housing PFI project and the renegotiating of our banking facilities. Group revenue was £89.4m (2013: £80.6m). Profit before taxation, after the impact of £1.5m of exceptional administrative expenses, £0.6m charge for the performance share plan and £0.5m of amortisation of acquired intangibles as described in Note 5, amounted to £2.8m (2013: £1.8m). This profit includes the income on sale of the Group’s interests in the Hub North PFI project and profit generated at financial close of the Leeds Social Housing PFI project. The Group’s derivative-based currency cover in respect of Australian dollar exposures was cash settled for £0.4m resulting in a credit of £1.0m to the income statement. Revenue for the year increased by 10.9% to £89.4m (2013: £80.6m). Net revenue, after deduction of sub-consultant costs, was £77.9m (2013: £72.4m). Adjusted profit before tax increased by 46% to £5.4m (2013: £3.7m). Pre-tax profit was £2.8m (2013: £1.8m) after exceptional administrative expenses, performance share plan charges and amortisation of acquired intangibles and net finance income. Adjusted operating profit was £4.9m (2013: £4.3m) and the adjusted operating profit margin was 6.2% (2013: 5.3%). Operating profit amounted to £2.3m (2013: £2.3m) and operating margins were 2.6% (2013: 2.9%). Adjusted earnings per share were 5.0p (2013: 3.7p). Basic earnings per share were 2.8p (2013: 1.9p) and diluted earnings per share were 2.7p (2013: 1.9p). Our current order book is approximately £109m, an increase from last year’s reporting date of 9% (2013: £100m), despite a negative impact of exchange rates of £5m. In presenting the Group's adjusted profit below, amortisation of acquired intangible assets, performance share plan costs and exceptional administrative expenses have been excluded so as to assist understanding of the underlying performance of the Group:
Core trading profit, which excludes the change in fair value of the derivative and the profit on investment activities, increased by 24.7% to £3.2m (2013: £2.6m). The primary segmental analysis in Note 3 details the segmental revenue and result. In aggregate the Group’s gross margin increased from 28.8% to 30.7% which is encouraging. Details of exceptional administrative expenses are provided in Note 5. Exceptional administrative expenses of £1,523,000 (2013: £1,455,000) comprised in the main costs associated with the investigation regarding allegations made in the Wall Street Journal in June 2013 of £490,000, restructuring costs of £978,000 (2013: £812,000)and interest payable to the vendors of Widnell Limited of £55,000 (2013: £356,000). Sterling appreciated during the year against all the Group’s major currencies being the Hong Kong Dollar, Chinese Renminbi, UAE Dirham, Indian Rupee and Australian Dollar. The negative impact of this strengthening was approximately £2.9m on revenue and negligible on operating profit. Directory: wp-content -> uploads -> 2014 2014 -> For want of a nail 2014 -> Stop Militarizing Law Enforcement Act of 2014 2014 -> Ihbb asian Championships 2014 middle school bowl Round 4 First Quarter 2014 -> Ihbb european Championships 2014 Bowl Round 4 First Quarter 2014 -> International History Bee and Bowl 2013-14 Asian Division Question Set Bowl Round Six 2014 -> United states patent and trademark office 2014 -> Coffs harbour eisteddfod vocal syllabus 2014 -> Listen News Programs Schedule pledge now 2014 -> Slow club announce third album complete surrender Download 0.51 Mb. Share with your friends:
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