Increased competition in UK and effect of Arab Spring leads to lower operating margins

Shares in construction and property consultancy Cyril Sweett plunged by up to 20% this morning after the company announced a profit warning.

The company announced that “full year results were likely to be lower than expected” due to lower operating margins in the UK and tough trading conditions in the second quarter.

Sweett said that profits was hampered by the extra bank holiday in April and the effect of the Arab Spring - which caused a number of projects to be cancelled.

Speaking today at Cyril Sweett’s AGM chairman Michael Henderson said: “Trading conditions have been tough in the year to date.

“In the UK competitive pressures have continued to impact margins negatively throughout the period. While the first quarter of the financial year tends to be subdued, this trend has continued into the second quarter.

“In view of lower operating margins, we are taking action to reduce our UK and Middle East direct costs and administrative functions so that we 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.”

Cyril Sweett’s share price dropped by 20.59% in early trading to 27p before recovering to -16.15%.

The company did announce that it continued to perform strongly in the Asia Pacific region, delivering strong growth in China and expanding operations into Vietnam and Thailand.