Cyril Sweett (LON:CSG), the construction and property consultant, saw its shares plummet 16 per cent after it warned on full year profits. The company says the underperformance is due mainly to ongoing conflicts in some Arab countries forcing a number of projects being scrapped.
In an AGM statement, Cyril Sweett’s chairman Michael Henderson, says “trading conditions have been tough in the year to date”, with the ‘Arab Spring’ - a reference of conflict in countries like Syria and Libya – resulting in project cancellations and lower levels of client investment being anticipated going forward versus previous expectations.
The tough trading has been compounded by reduced number of trading days in April in the UK with, moreover, competitive pressures at home continuing to impact margins negatively. “While the first quarter of the financial year tends to be subdued, this trend has continued into the second quarter," says Henderson.
On a more positive note, in Asia Pacific the group continues to perform strongly, with China continuing to deliver growth and operations commencing in in both Vietnam and Thailand.
“Given the continued strong performance from our Asia Pacific operations, we will continue to invest in the region in the second half.”
In the UK its public-private partnership (PPP) management and investment vehicle has also been performing well.
In view of lower operating margins, the group is taking action to reduce its UK and Middle East direct costs and administrative functions so that it can service the business with a more appropriate cost base.
The costs of this restructuring will be recognised in the first half year as an exceptional item.
Henderson notes that the group is now seeing an improved level of bidding activity across the group and the order book has grown by £5m since the last year-end to stand at £83.4m.
The company also expects further sales from its investment business in the second half of the year, although the precise timing of these transactions will be subject to market conditions.
He concludes: “Although we anticipate an improved performance in the second half, as a result of these trends, the full year results are likely to be lower than previously expected."
In morning trade Cyril Sweett shares were down 16 per cent to 28.5 pence.