30 Apr 2009 18:00
30 April 2009
STYLES & WOOD GROUP PLC
("Styles&Wood" or the "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
Styles & Wood Group plc, a leading provider of retail property services to premier UK retailers, announces its Preliminary Results for the year ended 31 December 2008.
CHAIRMAN'S STATEMENT
Introduction
In the past year we have experienced an extremely difficult market environment for our customers. Our revenue for the year ended 31 December 2008 was down by 23% from £315.5m in 2007 to £243.1m. As a consequence of this substantial reduction in revenue our profit before tax (before material contract losses and non-recurring items) of £11.8m in 2007 fell to £3.8m this year. Material contract losses and non-recurring items of £4.7m (2007: £nil) reduced the result to a loss before tax of £0.9m (2007: profit before tax of £11.8m).
Board changes
In June 2008 Ivan McKeever was appointed Chief Executive Officer following a decision by Neil Davies to stand down and become a non executive director. Gerard Quiligotti, who for many years has been Executive Chairman, also resigned from his position at the same time as Neil and became non executive Chairman. Gerard and Neil remained in those positions until they both retired in December 2008. No compensation payments were made.
Ivan McKeever has been with the Group for over six years holding a number of executive positions before becoming Managing Director of Styles&Wood Limited in 2007. Ivan reorganised his management team shortly after becoming Chief Executive Officer on 2 June 2008 with Graham Clark continuing in the role of Group Finance Director.
I accepted the Board's invitation to be Chairman in January 2009 having been a non executive director since October 2006 when the Company floated. As a result Robert Hough became senior independent non executive director and continued as Chairman of the Remuneration and Nomination Committees. Paul Mitchell, non executive director, takes over as Chairman of the Audit Committee
Trading
In response to the negative economic outlook and intense financial pressure, our customers have reduced capital expenditure budgets which has resulted in orders being cancelled, delayed or deferred. This significantly reduced our revenues in 2008 which, combined with gross margins being under pressure in many of the framework arrangements, accounts for the major fall in profits.
Despite these difficulties we have retained all of our framework customers and overall there has been an increase in our customer base. Whilst general retailers have been most affected by the financial turbulence, we have seen relative strength from customers in food retail as well as office and banking.
Management has taken early and positive action to align overheads with the reduced size of the business. Measures have been taken to improve cash and margin controls for each contract and where necessary commercial and financial management has been strengthened.
Results for the year include charges which in aggregate amount to £4.7million and relate to material contract losses and other non-recurring items. Losses amounting to £3.5m relate to a small number of contracts generally from 2007 where further costs were identified in the current year. This has been a major concern for management and the matter has been rigorously reviewed using both internal and independent external resources. We are satisfied that controls in this area have now been strengthened. In addition, there are non-recurring costs of £1.2m which relate mainly to redundancies (£0.8m) and to expenses connected with an aborted public to private approach made by the former Chairman and Chief Executive in April 2008 (£0.3m).
Dividend
The Board does not consider it appropriate to pay a final dividend in respect of the year ended 31 December 2008 (2007: 2.5p per ordinary share). An interim dividend of 0.25p (2007:1.25p) was paid in October 2008.
Strategy
The Board has undertaken a fundamental review of its strategy led by its Ivan McKeever under the banner of Expand Our Horizons. The core business of Construction Services (StoreFit) will continue to service major retailers and banks but will also target new market sectors including the public sector, office and leisure markets.
Our Support Services businesses, StoreCare, StorePlanning and StoreData have seen outstanding levels of growth in recent years and together contributed £2.5m of Group operating profit in the year (2007: £4.2m). These business divisions are complementary to Construction Services (StoreFit) and offer customers an integrated service from planning through construction to after care which addresses their comprehensive property related requirements.
We have made our first cautious steps to create an International division focusing initially on the Gulf nations and offering both Construction and Support Services. Customers in that region will be made up of local retailers and some of our existing UK customers as we support them with their international expansion plans. We intend to develop this business prudently through partnerships with respected local companies.
Fundraising
In March this year the Company announced that following a period of increased investment in working capital it was exploring a number of potential options to strengthen its balance sheet including equity fundraising and the involvement of private equity.
The Company has today announced a fundraising to raise £10.0m (before related expenses) by way of a firm placing which will be supplemented by an open offer to raise up to £2.25m (before related expenses).
Subject to the firm placing, the Group's bankers will in turn exchange approximately £2.7m of existing debt for new ordinary share capital, £5.0m of existing debt for deferred ordinary shares and £15.0m of existing debt for convertible preference shares. The bank has committed to then advance a further £5.1m of funding which will leave the Group with a sound capital base to support the long term strategy of the business.
The fundraising, which is expected to be completed by 2 July 2009 remains subject to a number of conditions including shareholder approval. Whilst the Board has £10.0m of commitments from placees, should any of the conditions not be met the Group would be required to re-enter negotiations with its bankers.
Further details, including the uncertainties surrounding the refinancing can be found in the separate announcement made today in connection with the refinancing proposals and in note 1 to this announcement.
People
In this particularly challenging year, the Board would like to thank all colleagues for their dedication, creativity and hard work. People continue to be our most important and valued asset and the pursuit of excellence through our colleagues remains the cornerstone of our business.
Outlook
I am pleased to report that revenue and profits for the first quarter of the year are in line with our revised expectations and the level of our current forward order book supports our half year revenue projections. However, difficult market conditions prevail in our marketplace and it is too early to predict a full year outturn.
Over the past few months, we believe that some of our framework customers have been reluctant to place new business with us owing to the uncertainty surrounding our ownership and the strength of our balance sheet. The substantial refinancing proposals announced today are designed to address those customer concerns, alleviate some of the pressure recently placed upon us by our suppliers and to provide us with the requisite cash and debt resources to trade through the current economic cycle.
Jim Martin
Chairman
30 April 2009
OPERATING REVIEW
Introduction
In its first six months the new leadership team at Styles&Wood has made good progress in preparing the business to meet the challenges of the current economic cycle. Our immediate objectives have been to create a lean business, retain all of our customers, control cash and prepare the business for a tough year ahead. I am pleased to say that we are making good progress against these objectives. On 30 April 2009 we announced a proposed refinancing of the Company designed to put it on a firm financial footing and provide Styles&Wood with the requisite resources to trade through the current difficult economic conditions.
Summary of results
The retail sector was an early casualty of the economic slowdown. Many of our customers chose to delay or reassess their store investment programmes. Revenue for the year was £243.1m which was ahead of market expectations but down on 2007 (£315.5m). We increased our share in the food retail sector with revenue growing from £72.7m to £99.2m (36%). This success demonstrates our strategy to focus on the food retail sector through this economic cycle. Our food sector customers now include Tesco, Asda, Morrisons, the Co-operative Group, Waitrose and Sainsbury's and, as we entered 2009, Lidl became our latest "Customer for Life".
Our Support Services businesses (StorePlanning, StoreCare and StoreData) performed well in 2008 with revenue at £31.0m (2007: £31.5m) generating an operating profit of £2.5m (2007: £4.2m). Customers continue to outsource non core property functions benefiting our Support Services business model. Our Construction Services business (StoreFit) had a challenging year in 2008. Our retail customers reacted to continued uncertainty in the general economy and the slowdown in consumer spending by deferring scheduled property spend and demanding greater value from their supply chain. In addition, by February 2008 the business had completed the £60m refurbishment of the John Lewis Oxford Street project, a significant proportion of this revenue being earned in 2007. Despite this the business retained a market leading position with revenue at £212.2m (2007: £283.9m) and made an operating loss of £1.0m (2007: operating profit of £9.8m) having incurred material contract losses and non-recurring items totalling £4.2m (2007: £nil).
Non-recurring items and material contract losses
The Group's loss before tax was £0.9m (2007: profit £11.8m). The business had non-recurring costs to the value of £4.7m largely relating to redundancy costs, costs of the aborted public to private approach and the write-down against a small number of projects largely completed in 2007. Further details can be found in note 3 to this announcement.
The Market
The UK market for fit-out, refurbishment and related services was estimated to be worth £8bn in 2008 of which retail makes up £2bn. The retail market can further be divided between food sector (49%) and general retail (51%). During 2008 we witnessed resilient investment by food sector retailers and reduced investment in the general retail sector and expect this trend to continue into 2009. Styles&Wood is now well positioned to take advantage of food retail sector growth plans and expects some growth to return in the general retail sector in 2010.
The UK market for office fit out, refurbishment and related services is estimated to be worth £2.8bn in 2008 and whilst this sector is unlikely to grow in the short-term its scale is such that it represents a significant opportunity for Styles&Wood. Public sector spending on theses services is estimated at £2.1bn and likewise this is a largely untapped market for the Group.
Opportunity from adversity
In recent months we have witnessed the demise of some high street brands and in some cases the closure of unprofitable stores. These factors have freed up prime retail space which will inevitably lead to property related activity. Retailers are making strategic space acquisitions to strengthen their market position and using current market conditions to renegotiate new space rentals on more favourable terms. This activity will lead to the fit out and rebrand of newly acquired space.
In addition, certain banks and retailers are merging or making strategic acquisitions in order to strengthen their businesses. We have yet to witness the full impact that this may have on their property portfolio and the associated opportunities for our business. However, we expect these moves to drive material activity in this sector.
Strategy
We have successfully pursued a strategy based on providing a range of property services exclusively targeted at major UK retailers and the banking sector. We will continue to follow this strategy but in addition pursue new market sectors including public sector, office and leisure markets. In addition, we will look to strengthen our Support Services business by growing customer uptake of our existing offers and adding new services.
Our strategic focus on the Food sector continued to deliver growth in 2008 as these retailers thrive in the current challenging consumer conditions. In the year we delivered more than 400 projects for all of our food retail customers including the rebrand of the entire Morrisons estate. We also began the rebrand of the integrated Co-operative business and look forward to future workload following their acquisition of the Somerfield business. Finally, as we entered 2009 we learned that we have secured our first project with the Lidl group.
We remain committed to the general retail sector and despite the current economic conditions our retail customers continue to invest in their property portfolio. During the year we opened over 40 new stores and refurbished more than 1.5m sq ft of retail space.
The banking and office sector endured much turmoil during 2008 yet it continued to invest in its network. Our strategic focus in this market has yielded solid results with strong performances from both Barclays and Lloyds TSB as they each roll out their new store design.
Finally we continue to move our business closer to a Support Services business model by providing professional services that can be easily outsourced and integrated into our core offer. Our Support Services businesses include StorePlanning, StoreCare and StoreData and together they contributed £2.5m of operating profit (2007: £4.2m). Turning our business into a fully integrated support service offer continues to be a central theme of our Group strategy.
Financial performance
In the year ended 31 December 2008 revenue fell to £243.1m (2007: £315.5m) reflecting the ongoing economic slowdown. Revenues in the StoreFit division were most significantly affected, falling to £212.2m (2007: £283.9m) whilst our Support Services divisions of StorePlanning, StoreCare and StoreData were more resilient and delivered combined revenue of £31.0m, in line with the previous year (2007: £31.5m).
Gross profit decreased to £13.9m (2007: £28.8m) having recognised material contract losses of £3.5m and other non-recurring items of £1.2m (2007: £nil).
Operating profit was £0.7m (2007: £13.5m) having recognised material contract losses of £3.5m and other non-recurring items of £1.2m (2007: £nil). Adding back these items gives an adjusted operating profit of £5.4m (2007: £13.5m).
The Support Service divisions of StorePlanning, StoreCare and StoreData contributed £2.5m to Group operating profit in the year (2007: £4.2m). Net finance costs were £1.7m (2007: £1.7m). Reductions in LIBOR reduced the interest rate paid on the Group's borrowings with the effect being offset by an increase in the overall net debt position during the year.
The loss before tax was £0.9m (2007: profit before tax £11.8m). Adding back non-recurring items of £4.7m (2007: £nil) gives an adjusted profit before tax of £3.8m (2007: £11.8m).
Taxation
The tax credit in the year amounted to £0.5m (2007: charge £3.7m). This represents an effective tax rate of 58.7% (2007: 31.2%). The 2008 effective rate of tax differs from the standard rate due to the relative magnitude of adjustments in respect of previous years, non deductible expenses and trading losses that could not be recognised. In future years the effective tax rate is expected to be consistent with the 2007 rate save for the overall reduction in the standard rate by 2% to 28%.
Loss per share
The loss per share was 0.6p (2007: earnings per share 12.6p).
Cash flow
Cash generated from operations was £3.4m (2006: £14.3m).
Significant cash outflows comprised term loan repayments of £3.0m (2007: £3.0m), tax paid of £1.9m (2007: £3.4m), net interest payments of £1.5m (2007: £1.6m) and dividend payments of £1.8m (2007: £0.8m).
Capital expenditure in the year was £0.2m (2007: £0.7m).
Funding and post balance sheet events
Falling revenue and margins together with the cost of material contract losses and non-recurring items referred to above combined with external pressure from the supply chain led to a significant investment in working capital during the year ended 31 December 2008. Having made scheduled loan repayments of £3.0m during the year (2007: £3.0m), the Group's net debt at 31 December 2008 was £16.9m (2007: £14.9m). In September 2008 the Group paid a fee of £375,000 to its bank in order to reset financial covenants within its facilities, whilst commissioning an independent report on the financial health of the business at a cost of £135,000. At the same time the margin paid on the Group's banking facility rose to 2%.
In March 2009 the Board announced that it was looking at a number of options to strengthen the Group's balance sheet. That review is now complete and as announced today the Board is proposing to raise £10.0m (before related expenses) through a firm placing and up to £2.25m (before related expenses) through an open offer. Combined with a new facility that will in turn be provided by the Group's bankers, the fund-raising will provide a more appropriate capital structure for the future development of the business.
Risks and uncertainties
The Group has in place a business risk register which it continues to review and manage. The key risks and uncertainties are as follows:
Working capital and refinancing - Cash flow is key to any business and as a business we focus on the cash profile of our projects. The Group is debt funded and the proposed refinancing of the Group, which is subject to the conditions set out in note 1 to this announcement, will reduce debt levels and support the working capital requirements of the business for the foreseeable future.
Marketplace - Ongoing uncertainty within the retail and property markets remains the key challenge for the board and the management team. Our customers will seek to weather the economic downturn by reducing capital expenditure plans and driving value by working with their supply chain. The Group must respond accordingly. Securing future revenues by focusing on our existing customer relationships and targeting sectors outside of retail is critical in the current economic climate.
Profitability - During the year ended 31 December 2008 the Group took a number of steps to reduce its overheads and to restructure the management team in preparation for a challenging 2009. A continued focus on the cost base of the business is critical within the current economic climate.
Supply chain - As customers place greater demands on Styles&Wood both in respect of quality, price and payment terms, we must look in turn to the supply chain which has a significant role to play in supporting our business. We manage this risk by working closely with our supply chain to find improvements that increase the value and quality we deliver.
Colleagues - Retaining and motivating our colleagues is key to the delivery of our business objectives. At the end of 2008 we put in place a new leadership team and focused on colleague reward, recognition, development and training linked to the Group's strategic objectives.
Health, safety and environment - Styles&Wood works in potentially hazardous environments from large-scale fit out projects to minor works projects. We face the risk of human loss, injury, litigation and damage to reputation arising from incidents. Safety is our first priority and we continue to strengthen our organisation through the OHSAS 18001 Safety Management System and the Group's written Health & Safety Policy. In addition, the business has launched a new Think Safety campaign designed to raise awareness of site safety.
Ivan P McKeever
Chief Executive Officer
| Consolidated income statement | ||||
| For the year ended 31 December 2008 | ||||
| Notes | 2008 | 2007 | ||
| £'000 | £'000 | |||
| Continuing operations | ||||
| Revenue | 2 | 243,148 | 315,489 | |
| Cost of sales | (229,237) | (286,725) | ||
|
| ||||
| Gross profit | 13,911 | 28,764 | ||
| Administrative expenses | (13,178) | (15,236) | ||
|
| ||||
| Operating profit | 3 | 733 | 13,528 | |
| Interest payable and similar charges | (1,786) | (1,859) | ||
| Interest receivable | 104 | 157 | ||
|
| ||||
| (Loss)/profit before taxation | (949) | 11,826 | ||
| Taxation | 4 | 548 | (3,687) | |
|
| ||||
| (Loss)/profit for the year attributable to equity shareholders | (401) | 8,139 | ||
| Basic and diluted (loss)/earnings per share expressed in pence per share | 5 | (0.6)p | 12.6p | |
| Dividends in respect of the year expressed in pence per share | 6 | |||
| - Interim dividend paid | 0.25p | 1.25p | ||
| - Final dividend proposed | - | 2.50p |
| Consolidated balance sheet | ||||
| As at 31 December 2008 | ||||
| 2008 | 2007 | |||
| £'000 | £'000 | |||
| Non current assets | ||||
| Intangible assets - software | 266 | 387 | ||
| Property, plant and equipment | 649 | 902 | ||
| Deferred tax asset | 243 | 122 | ||
| 1,158 | 1,411 | |||
| Current assets | ||||
| Trade and other receivables | 36,392 | 36,907 | ||
| Cash and cash equivalents | 9,536 | 15,853 | ||
| Current tax asset | 62 | - | ||
| 45,990 | 52,760 | |||
| Current liabilities | ||||
| Trade and other payables | (51,619) | (49,935) | ||
| Financial liabilities: borrowings | (4,758) | (4,887) | ||
| Current tax liabilities | - | (2,236) | ||
| (56,377) | (57,058) | |||
| Net current liabilities | (10,387) | (4,298) | ||
| Total assets less current liabilities | (9,229) | (2,887) | ||
| Non current liabilities | ||||
| Financial liabilities: borrowings | (21,705) | (25,824) | ||
| Net liabilities | (30,934) | (28,711) | ||
| Shareholders' equity | ||||
| Ordinary share capital | 645 | 645 | ||
| Share premium | 17,339 | 17,339 | ||
| Reverse acquisition reserve | (66,665) | (66,665) | ||
| Retained earnings | 17,747 | 19,970 | ||
| Total shareholders' deficit | (30,934) | (28,711) | ||
| Consolidated cash flow statement | ||||
| For the year ended 31 December 2008 | ||||
| Notes | 2008 | 2007 | ||
| £'000 | £'000 | |||
| Cash generated from operations | 7 | 3,422 | 14,323 | |
| Income taxes paid | (1,871) | (3,409) | ||
| Net cash generated from operating activities | 1,551 | 10,914 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant and equipment | (92) | (358) | ||
| Purchase of intangible assets - software | (79) | (302) | ||
| Net cash used in investing activities | (171) | (660) | ||
| Cash flows from financing activities | ||||
| Interest received | 107 | 145 | ||
| Interest paid | (1,611) | (1,730) | ||
| Repayment of borrowings | (3,000) | (3,000) | ||
| Capitalised bank fees | (375) | - | ||
| Dividends paid to equity shareholders | 6 | (1,774) | (806) | |
| Net cash used in financing activities | (6,653) | (5,391) | ||
| Net (decrease)/increase in cash and cash equivalents | (5,273) | 4,863 | ||
| Cash and cash equivalents at beginning of year | 13,835 | 8,972 | ||
| Cash and cash equivalents at end year | 8,562 | 13,835 | ||
Notes to the preliminary results
1. Basis of preparation
The financial information set out in this announcement does not constitute the Group's statutory accounts for the year ended 31 December 2008 or 2007. The preliminary results of Styles&Wood Group plc ("the Group") for the year ended 31 December 2008 have been extracted from audited consolidated financial statements which have not yet been delivered to the Registrar of Companies. The auditors have reported on the Group's statutory accounts for the year ended 31 December 2008. The audit report was unqualified but included a matter of emphasis in respect of going concern, details of which can be found below. The report does not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year.
The consolidated financial statements for the year ended 31 December 2008 have been prepared on the basis of the IFRS accounting policies set out in the Group's Annual Report and Financial Statements for the year ended 31 December 2007.
In March this year the Company announced that following a period of increased investment in working capital it was exploring a number of potential options to strengthen its balance sheet including equity fundraising and the involvement of private equity.
On 30 April 2009 after discussions with the Group's bankers and advisers and consideration of the Group's projections for the foreseeable future, the Board announced a substantial refinancing.
The proposed refinancing comprises:
A consolidation of the Group's ordinary share capital whereby each 25 existing ordinary shares of 1p each will be consolidated into one new ordinary share of 25p
A firm placing of 40 million new ordinary shares at 25p per share to raise £10.0m before expenses. The group has commitments from subscribers in respect of all of this £10.0m of this placing
An open offer to existing shareholders in respect of new ordinary shares at 25p per share which would raise up to £2.25m before expenses
A renegotiation of the current £28.5m banking facility with the the Groups' bankers which will see:
£2.7m of the debt exchanged for 10,644,935 new 25p ordinary shares
£5.0m of the debt exchanged for new deferred ordinary shares, which will carry no voting rights and will be repayable only upon the winding up of the Company
£15.0m of the debt exchanged for new convertible preference shares, convertible into new ordinary shares at a conversion price of 93.75p per new ordinary share in annual tranches from December 2013 as follows:
2013 £1.0m;
2014 £1.0m;
2015 £2.0m;
2016 £2.0m;
2017 £3.0m;
2018 £3.0m; and
2018 £3.0m.
These shares will not carry voting rights but will carry a coupon of 3% from September 2012 to the extent they have not been redeemed. The Company may choose to redeem some or all of the preference share at par both prior to and after 31 December 2013.
A further £5.1m of funding being provided by the bank to add to the remaining £5.8m of debt which will then comprise a £6.9m term loan and a revolving credit facility of £4.0m
Both the term loan and the revolving credit facility carry an interest charge at a margin of 5% over LIBOR
The term loan repayments will be as follows:
2010 £1.0;
2011 £1.0m;
2012 £2.0m; and
2013 £2.9m.
The revolving credit facility will cease to be available in 2013.
As part of the new banking facility the Group will be required to meet certain financial covenant tests in relation to the profitability of the business which will be tested at quarterly intervals over the term of the facility. The Board has considered these covenants in light of the latest forecasts of the Group which reflect an anticipated restoration of customer and supplier confidence and is satisfied that they provide an appropriate level of working capital headroom.
The renegotiated bank facility is conditional on the production of a prospectus in relation to the issue of new shares and the completion of the firm placing which will require shareholder approval at an Extraordinary General Meeting and admission of those shares by Thursday 2 July (or a later date as agreed which would be no later than Friday 31 July 2009). In addition should there be a material breach of warranties contained in the placing agreement or if there occurs a material adverse change in the financial position of the Group or a force majeure event, subscribers to the placing agreement would be able to terminate their obligations under the agreement.
The Group's bankers have confirmed that they will undertake to continue to provide the Group with its existing facilities until the completion of the placing and will not withdraw those facilities should any default of the related conditions, including covenants and scheduled repayments take place prior to the completion of the refinancing. In the event that the conditions relating to the placing are not met the Group would be required to re-enter negotiations with its bankers. Should any such further negotiations prove unsuccessful then the Group may have insufficient liquidity shortly thereafter and will be unable to meet its financial covenants and/or service its debt.
The Board has concluded that the conditions relating to the placing, upon completion of which the renegotiated banking facility will subsequently be made available and the required restoration of customer and supplier confidence, represents a material uncertainty that casts significant doubt on the Group's ability to continue as a going concern. However, after considering these uncertainties, the Board has a reasonable expectation that the Group will be successful in completing the placing and for this reason considers it to be appropriate to continue to adopt the going concern basis in preparing the financial statements. The financial statements do not include adjustments that would result if the Group was unable to continue as a going concern.
2. Segmental reporting
Year ending 31 December 2008
| StoreFit | Store Planning | StoreCare | Store Data | Unallocated | Group | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 212,185 | 5,471 | 24,142 | 1,350 | - | 243,148 |
| Adjusted segment result | 3,214 | 1,003 | 1,371 | 231 | (364) | 5,455 |
| Adjusting items | (4,209) | (33) | (76) | (2) | (402) | (4,722) |
| Segment result | (995) | 970 | 1,295 | 229 | (766) | 733 |
| Interest expense | (1,786) | |||||
| Interest income | 104 | |||||
| Loss before taxation | (949) | |||||
| Taxation | 548 | |||||
| Loss for the year from continuing operations | (401) | |||||
| Net loss attributable to equity shareholders | (401) | |||||
| Segment assets | 28,380 | 2,351 | 3,695 | 347 | - | 34,773 |
| Unallocated assets | - | - | - | - | 12,375 | 12,375 |
| Total assets | 28,380 | 2,351 | 3,695 | 347 | 12,375 | 47,148 |
| Segment liabilities | (42,410) | (148) | (5,398) | (647) | - | (48,603) |
| Unallocated liabilities | - | - | - | - | (29,479) | (29,479) |
| Total liabilities | (42,410) | (148) | (5,398) | (647) | (29,479) | (78,082) |
Year ending 31 December 2007
| StoreFit | Store Planning | StoreCare | Store Data | Unallocated | Group | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 283,949 | 6,057 | 23,977 | 1,506 | - | 315,489 |
| Segment result | 9,796 | 1,001 | 3,012 | 194 | (475) | 13,528 |
| Interest expense | (1,859) | |||||
| Interest income | 157 | |||||
| Profit before taxation | 11,826 | |||||
| Taxation | (3,687) | |||||
| Profit for the year from continuing operations | 8,139 | |||||
| Net profit attributable to equity shareholders | 8,139 | |||||
| Segment assets | 26,133 | 2,043 | 6,666 | 596 | - | 35,438 |
| Unallocated assets | - | - | - | - | 18,733 | 18,733 |
| Total assets | 26,133 | 2,043 | 6,666 | 596 | 18,733 | 54,171 |
| Segment liabilities | (39,769) | (99) | (5,270) | (614) | - | (45,752) |
| Unallocated liabilities | - | - | - | - | (37,130) | (37,130) |
| Total liabilities | (39,769) | (99) | (5,270) | (614) | (37,130) | (82,882) |
Unallocated assets and liabilities include property, plant and equipment, software, cash and cash equivalents, interest payable, current and deferred tax liabilities and borrowings.
Unallocated segment result reflects expenses relating to the Company rather than the ongoing trade of the Group and includes share scheme expenses, fees for professional advisers and non-executive directors' remuneration.
Adjusting items are the material contract losses and non-recurring items disclosed in note 3. There were no adjusting items in 2007.
3. Material contract losses and non-recurring items
| Notes | Charged to Cost of Sales £'000 | Charged to Administrative Expenses £'000 | Total £'000 | |
| Material losses on contracts | (a) | (3,545) | - | (3,545) |
| Non-recurring items | ||||
| Redundancy and related costs | (b) | (281) | (494) | (775) |
| Expenses relating to abortive indicative offer for Group | (c) | - | (262) | (262) |
| Professional fees | (d) | - | (140) | (140) |
| (281) | (896) | (1,177) | ||
| Total | (3,826) | (896) | (4,722) |
(a) Management estimates in respect of the final outcome of a small number of contracts that were substantially completed during 2007 changed materially during the year ended 31 December 2008 and in accordance with IAS 11 "Construction Contracts" a loss of £3,545,000 was recognised in the financial statements.
(b) Redundancy and notice payments made to employees together with related legal fees totalled £775,000. Of this amount, £281,000 was charged to Cost of Sales and £494,000 to Administrative Expenses.
(c) Costs of £262,000 in respect of the indicative offer for the Group which was withdrawn on 23 May 2008.
(d) Professional fees including £135,000 in respect of a business review performed by Ernst & Young on behalf of the Group's Bankers Royal Bank of Scotland plc and £5,000 of related legal fees.
4. Taxation
The effective tax rates tax for the years ended 31 December 2008 (57.8%) and 31 December 2007 (31.2%) are different from the standard rate of corporation tax in the UK of 28.5% (blended for the year ended 31 December 2008, 2007: 30%). The differences are explained below.
| 2008 | 2007 | |||
| £'000 | £'000 | |||
| (Loss)/profit on ordinary activities before tax | (949) | 11,826 | ||
| Profit on ordinary activities multiplied by rate of corporation tax in the UK (28.5%) | (270) | 3,548 | ||
| Effects of: | ||||
| Expenses not deductible for tax purposes | 88 | 163 | ||
| Losses not recognised | 57 | - | ||
| Adjustments in respect of prior periods | (423) | (24) | ||
| Total taxation (credit)/charge | (548) | 3,687 |
5. Earnings per share
Reconciliations of the earnings and the number of shares used in the calculation are set out below:
| 2008 | 2007 | |||
| (Loss)/earnings attributable to equity holders of the Group (£'000) | (401) | 8,139 | ||
| Weighted average number of shares in issue | 64,493,641 | 54,408,234 | ||
| Basic and diluted (loss)/earnings per share (pence per share) | (0.6) | 12.6 | ||
There is no difference between basic and diluted earnings per share (2007: no difference) as the options in issue within the Group are not considered to be dilutive.
6. Dividends
An interim dividend of £161,000 (0.25p per share) was paid during the year (2007: £806,000, 1.25p per share). No final dividend is proposed (2007: £1,612,000, 2.50p per share paid in May 2008).
7. Note to the cash flow statement
| Group | 2008 | 2007 | ||
| £'000 | £'000 | |||
| (Loss)/profit for the year | (401) | 8,139 | ||
| Adjustments for: | ||||
| Interest payable and similar charges | 1,786 | 1,859 | ||
| Taxation | (548) | 3,687 | ||
| Interest receivable | (104) | (157) | ||
| Depreciation and amortisation | 545 | 492 | ||
| Share option charge | (48) | 69 | ||
| Operating cash flows before movement in working capital | 1,230 | 14,089 | ||
| Changes in working capital: | ||||
| Decrease/(Increase) in trade and other receivables | 502 | (101) | ||
| Increase in trade and other payables | 1,690 | 335 | ||
| Cash generated from operations | 3,422 | 14,323 | ||
8. Post balance sheet events
On 24 March 2009 the Group announced it was exploring options to strengthen its balance sheet. On 30 April 2009 the Group announced a proposed refinancing of the Group which comprises a £10.0m placing, an open offer of up to £2.25m, a debt for equity swap and debt restructuring and a share capital consolidation whereby each holding of 25 existing Ordinary Shares of 1p each will be consolidated into 1 New Ordinary Share of 25p. Further details can be found in note 1 to this announcement.
9. Related party transactions
In the year ended 31 December 2008 the Company paid fees of £35,000 (2007: £35,000) to Rickitt Mitchell & Partners Limited in respect of Paul Mitchell's services as a non executive director. The Company paid no fees to Rickitt Mitchell in respect of corporate finance advice (2007: £20,000).
Details of the directors' remuneration and their interests in the share capital of Styles&Wood Group plc may be found in the remuneration report within the annual report and financial statements for the year ended 31 December 2008 which has been published on the website www.stylesandwood.co.uk today.
Additional disclosures
Risks and uncertainties
As with any business, risk assessment and the implementation of mitigating actions and controls are vital to the achievement of the Group's strategy. Information on the key risks and mitigating factors can be found in the 2008 annual report and financial statements that has been published on the website www.stylesandwood.co.uk today.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge the information set out in this announcement has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority, International Financial Reporting Standards (IFRS) and the International Financial Reporting Interpretation Committee (IFRIC) Interpretations, as endorsed by the European Union (EU). The accounting policies applied are consistent with those set out in the annual report and financial statements for the year ended 31 December 2007. In preparing this announcement the Directors have also made reasonable and prudent judgements and estimates and, having taken into consideration the material uncertainties set out in note 1 to this announcement, on a going concern basis. The financial information, Chairman's statement and Operating Review contained herein give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.
The Directors of Styles & Wood Group plc at the date of this announcement are as set out below:
Jim Martin Chairman
Ivan McKeever Chief Executive Office
Graham Clark Group Finance Director
Robert Hough Non-Executive Director
Paul Mitchell Non-Executive Director