Construction and property consultancy Cyril Sweett offers investors growth through the consolidation of a highly fragmented UK market, as well as access to emerging markets overseas. Despite a record £86 million order book giving the group high revenue visibility and robust recent annual results, the shares curiously languish at a 52.5p low.

Founded back in 1928, Cyril Sweett debuted on AIM in October, raising a net £8.4 million at 110p in a float providing currency for acquisitions both at home and abroad, in order to augment strong organic growth rates. The company is an expert in cost consultancy, project management and management consultancy, as well as a slew of other specialist services.

Advising on projects across an array of sectors, both public and private, its operations now span the UK, Europe, Middle East, India and Australasia, while its broad sweep of clients range from government agencies to private sector developers and construction companies.

Unveiled in June by CEO Dean Webster, maiden full-year results as a public company were impressively robust, showing pre-tax profits increased by 28 per cent to almost £5.9 million for the year to March. Revenues were lifted 20 per cent to £62.7 million, with growth delivered largely organically and following a year of strong cash generation, leaving year-end net cash of £6.7 million. Shareholders were treated to a 1.6p final dividend, taking the annual total to 2.4p. A further highlight was an expansion of operating margins to 9.3 per cent (2007:

9.1 per cent), demonstrating management’s ability to deliver enhanced returns during a period of high growth.

With parts of the UK market slowing in current worrying economic climes, investors were encouraged by a stellar performance from the international businesses, with overseas sales growing by 80 per cent. International diversification forms a key part of Webster’s strategy, with bolt-on deals delivering geographic penetration or new market sectors keenly sought. Transactions completed since the IPO include Burns Bridge, a specialist project management business operating in Australia, Singapore and the United Arab Emirates, as well as the acquisition of the remaining 50 per cent of erstwhile joint venture Cyril Sweett International in the buoyant Middle East. Overseas earnings look set to increase in importance, with Webster targeting the delivery of at least a quarter of sales collectively from the Middle East, Australasia and the emerging construction market in India by 2010.

Alongside the numbers, Cyril Sweett delighted investors with news of an all-time high order book of £86 million (2007: £61 million), of which international work represented 28 per cent. As well as demonstrating the rapid growth Cyril Sweett is enjoying internationally (non-UK work represented only 15 per cent of last year’s revenue), these burgeoning order levels ensure that 74 per cent of the City’s 2009 sales forecast is already in the bag.

House broker Brewin Dolphin forecasts a rise in profits to £8.5 million from £86.5 million turnover this year, producing earnings of 9.7p. For 2010, £9.1 million of profit and 10.5p of earnings are envisaged as sales move to £93.4 million, while further acquisitions should take turnover past the targeted £100 million mark. Given the group’s diverse earnings appeal and growth prospects underpinned by its increasing international reach, prospective multiples of 5.4 and five do not do the business justice. A rerating of shares in this resilient, dividend-paying business is only a matter of time.

Cyril Sweett	AIM	£32.09m	57.00p	0.00p
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