City takes fright at Sweett group profit warning

Sweett Group, one of the UK oldest independent cost consultants, saw its shares fall steeply today after warning the City that its second half results will be hit by problem contracts in Asia and Australia. 

The firm said its UK operations, which account for half of its turnover, had performed well in the first half of the financial year, but that trading in Hong Kong had been disappointing. 

Unless there was an improvement in trading at its Australian business, it would write down its value in its full-year results.  

The statement said: "In APAC, the Group has seen a mixed performance in the first half with continued growth in China where we were pleased to secure Alibaba’s 110,000 square metre commercial development, however, trading in Hong Kong has been disappointing. The board continues to monitor closely our Australia business where, without a significant improvement in trading over the second half of the year, it is likely that an impairment will have to be made in the Group’s results for the year ending 31 March 2015 against the carrying value of £3m of goodwill." 

It also said that its Middle Eastern operations were facing challenges, and that it would aim to reduce its exposure to that market in the future.  

In addition to these problems, the firm faces costs associated with its investigation into allegations of fraud, which were reported last year by The Wall Street Journal.   

The paper alleged that Richard Kingston, formerly Cyril Sweett’s Middle East and India managing director, had offered to award the design contract for a $100m Moroccan hospital (pictured) to architect HLW International if the architect paid 3.5% of the contract value to an official at the UAE charity which was funding it. 

The company is co-operating with an investigation by the UK Serious Fraud Office, and has conducted its own investigation, which it has said is nearing completion.  

John Dodds, the chairman of the company, said today: "Since becoming chairman in August, I have conducted a thorough review of the group’s business, the outcome of which is set out in today’s announcement. I am looking forward to taking the business forward with a greater focus on profitability and cash flow." 

The company said its order book stood at about $170m. It is presently working on the upgrade to London Underground, and has recently completed a project management contract for the second phase of work on the National Composites Centre in the Bristol and Bath Science Park.  

It has recently won contracts at Jaguar Land Rover, the BBC and schemes for Manchester and Liverpool universities. It has also been appointed to the HS2 high-speed rail project and Battersea Power Station.

The company expects to report its full interim results on 2 December. 

Sweett shares, which floated on the Alternative Investment Market in 2007,  were down 29.1% at from 34p to 24.10p in today’s trading. The firm’s share price spent most of 2012 and 2013 oscillating around the 20p mark, before climbing to a peak of almost 70p at the end of 2013.