Styles & Wood Group Regulatory News (STY)

4 April 2012

STYLES & WOOD GROUP PLC

("Styles & Wood" or the "Group")

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

Styles & Wood Group plc, a leading UK provider of property support services to major retailers, banks and commercial organisations, announces its preliminary results for the year ended 31 December 2011.

Tony Lenehan, CEO of Styles & Wood Group plc, said:

"I am delighted with the progress the Group has made over the past 12 months. Our ability to grow revenue and margin despite the challenging market conditions endorses the Group's focus on engagement with customers, our diversified offering, as well as improved operational efficiencies.

We have continued to deliver strongly in our core sectors, especially within banking and high end retail while at the same time securing new revenue streams including a number of contract wins in the public sector. While conditions in the property support services arena are expected to remain challenging in the short term, the Group's proven ability to win contracts across new sectors gives us confidence in our business model and our ability to increase market share."

-Ends -

ENQUIRIES:

CHAIRMAN'S STATEMENT

I am pleased to report a significant improvement in the underlying1 profit before tax of the Group from £0.5m in 2010 to £1.8m in 2011 on revenue that is marginally ahead of the previous year. We have made considerable progress during the year in re-aligning the business to our customers' needs and I would like to acknowledge the hard work, creativity and dedication of the Styles&Wood team in developing and strengthening our business against a backdrop of challenging market conditions.

Insight and Solutions

In these uncertain times it is critical that we continue to examine and improve every step in our business processes, at all times being aware of the needs of our customers. We endeavour to understand how these needs will change as customers respond to their own commercial pressures and, by working together, we can create value added services which benefit both our customers and Styles&Wood.

During the course of the year we changed our organisational structure to focus on greater engagement with our customers, allowing us to build on the 57% of our revenue that was generated from existing relationships in 2011. In parallel whilst we have sought to diversify into new markets we have taken a careful approach to new work opportunities to deliver further improvement in underlying profitability.

Agility

The outlook for the market remains volatile. However our view is that these conditions can provide opportunities for growth. The market shift to the remodelling and refurbishment of existing buildings plays to our core strengths. Our capabilities in property support services, which were initially established in retail, now have relevance across a number of sectors. We have established sustainable business interest in the banking sector and recent achievements in both the public sector and renewables arenas demonstrate the transferable nature of our skills set.

Creating Environments and Designing Futures

We continue to recognise the values which have served us well throughout our history. Our invitation from Business in the Community to join their Marketplace Leadership Team and the contribution we have made to the development of new sustainability standards in refurbishment for our industry with the Building Research Establishment reinforce our commitment to the corporate responsibility agenda.

Focused on the Future

The Board recognises that any real growth in our key markets is likely to be medium term. In the meantime we are focused on making gains in our market share and improving financial performance through innovation and operational excellence. To achieve this we will continue to invest in the best people and to listen to our customers. We are encouraged by our more diverse order book and I feel confident that, despite a slower than expected start to 2012, we are establishing a platform for future growth and to manage challenges that lie ahead.

Jim Martin, Non Executive Chairman

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

Whilst 2011 was a hugely challenging period for businesses in the property support services arena it was particularly pleasing to deliver improved results. The focus for Styles&Wood has been one of reinforcing alignment of our interests with our customers and approaching new opportunities strategically. The increase in underlying1 profit before tax from £0.5m in 2010 to £1.8m in 2011 and the incremental growth in revenue from £99.1m to £101.0m, with improving margins, endorses this strategy.

People are our principal asset and we successfully implemented a major business repositioning exercise during the course of the year. This entailed a comprehensive consultation with the management team and a redefinition of our operating structure to provide a clear focus for engagement with customers. The resulting organisational model is scalable, providing a robust platform for growth. Our commitment to investment in our people and the launch of an extensive new training and development programme to promote best practice will provide the capability to sustain our growth strategy.

Construct

The works carried out in our construct reporting segment include:

·; Fit Out

·; Refurbishment

·; Design & Build

·; Construction

·; Programme management

A major source of revenue in 2011 was our framework arrangements in the banking sector which generated revenue of £47.9m. Additionally, repeat business in retail through high end department store operators and food retailers provided a significant contribution to revenue of £33.7m.

Drawing on the transferable skill sets across the Group, we were able to drive project growth across the business, with notable success in the commercial office fit out market, in high technology space refurbishment and in public sector space remodelling.

Growth opportunities have been realised through leveraging our framework arrangements to create a broader scope of work. The promotion of cross selling of other service lines such as Design and iSite has proved a notable success. Frameworks typically have a two year tenure with opportunity for extension and/or retender.

The improved level of margin demonstrates the success of a more selective approach to new business opportunities, an ability to create value for our customers and improved operational efficiency.

Care

Our Care offering has traditionally centred on small project works linked to reactive and planned maintenance programmes. In a retail context this has involved the creation of smart, discrete spaces to enhance sales. The characteristics of the associated work programmes align well with those for facility management.

Through Care we have successfully delivered several hundred projects with values typically ranging from £5,000 to £100,000 and in some instances in excess of £250,000. Whilst the revenue for the period is less than that for 2011, in reality, a significant volume of Care type work has also been delivered through framework arrangements within our Construct service line.

Design

Styles&Wood has a smart approach to design which differentiates by fully integrating architectural services with space planning expertise and design management excellence. Our skills are honed through a practical and deliverable context provided through close association with our Construct and Care offers.

Revenue for 2011 was broadly in line with the previous year but, with a markedly stronger performance in the second half of the year following a major restructuring exercise, the indicators for 2012 are positive.

iSite

Information continues to be pivotal to the effective management of property portfolios. Our iSite business provides property management systems, business process engineering and life cycle solutions.

We are developing our product range and, through collaborative working arrangements with key customers such as Tesco and Nationwide, we are establishing a sound platform for growth. Profit contribution in the period is in line with the prior year and reflects in-year investment for future business opportunities.

Developing business interest

Public Sector

Our skills set has proved to be eminently transferrable to the Public Sector where over the last 12 months we have delivered a number of projects in new areas:

·; Kirklees Schools - refurbishment works

·; Chesterfield NHS Trust - entrance remodelling

·; Knowsley 20/20 - accommodation change of use

·; Sport England - national framework appointment for facilities extension and renewal

Nationwide Building Society Collaboration

A formal agreement has been ratified with Nationwide Building Society to jointly promote the suite of management systems, termed "the Hub", which we have developed for their property portfolio. This collaborative arrangement provides a robust platform to selectively target sales growth in this area.

Design

Significant market shift to design and build procurement models aligns well with our core capabilities. Estate rationalisation and an absolute requirement for more efficient use of space are recurrent themes with existing customers and emerging opportunities in property services. An ability to lead the process with an informed, differentiated approach to Design creates genuine synergies across our service lines.

DutcoS&W - International

The secondary property market in Dubai is showing an increase in demand for the refurbishment and refit of existing space. Our opening order book position for 2012 is greater than the out turn position for 2011. Opportunity exists to leverage business opportunity from our UK customer base.

Banking Frameworks

We have an improved sightline of future allocation under our existing frameworks. Two year extensions have been secured for two of our three major customers and several new opportunities are scheduled to come to market during the course of the second half of the year.

Renewable Energy

We have successfully completed a range of discrete photovoltaic projects for both domestic and commercial customers. In securing an appointment to the two year installation framework for Shropshire Council, real growth opportunities now exist in this sector for Styles&Wood through our Gatehouse Renewables brand.

iSite

A property market continuously striving for efficiencies requires management information in real time to inform the decision making process for investment and operational control. We have now established a suite of intelligent applications which promote strategic asset management, life cycle management and estate rationalisation.

Market outlook

As has been widely flagged there remains a significant degree of uncertainty within the UK economy for 2012 and in turn the construction sector. However, forecasts beyond 2012 suggest a return to marginal growth in construction output for 2013 followed by a healthier level of growth in 2014.

Against this backdrop, we are confident that the Group is well placed, with its broad platform, to selectively capitalise on opportunities across a number of sectors, including: Banking, Retail and Leisure, Commercial and Public and Community.

An overview of the key markets that we operate in and how the Group's business model aligns with these opportunities is set out below:

Banking: The major banking institutions in the UK have a renewed focus of attention on retail and the high street. Their investment plans for brand repositioning and refresh in their retail outlets are extensive and far reaching. The market has a five year outlook with the potential for spending plans to adopt a more predictable characteristic for next generation formats.

Retail & Leisure: There is clear evidence of major sustainable spending programmes in specific segments within the retail sector. In particular the market leaders in food retail are committed to a multi billion pound investment programme over the next 3-5 years to refresh existing formats.

Major leading department store operators have declared improved trading positions in recent years notwithstanding a difficult macroeconomic backdrop. Core to their business need is a requirement to continually improve the customer experience and in-store environment. This has to be delivered to exacting programme constraints with minimal business interruption.

Food retail continues to be characterised by sustainable, substantial levels of investment in property. Whilst the challenge to secure new sites continues to become progressively more demanding, the business imperative to improve and remodel existing space presents solid, predictable business opportunity for Styles&Wood.

Commercial:There is a shortage of Grade A stock office space in the capital and regional city centres. This constraint is exacerbated by restraints on funding for investment in new buildings. Retrofit, refurbishment and remodelling of existing space will form the principle focus for occupiers requiring upgrade over the short to medium term.

There have been progressive reductions in the amount of new build office space coming to market over the last three years. However the projected shortage looks likely to create sustainable opportunity over the next three years for high quality refurbishment projects

Public and Community: Constraints on capital investment and dramatic reductions in revenue spend will entail extensive rationalisation and consolidation of property assets across the public sector. The associated projects and programmes for property support service providers are highly geared to framework arrangements and will centre on an efficiency drive, innovation and a responsible approach to the environment.

Major reductions in both central and local government capital spending programmes, integral to the Government's austerity measures, have entailed a significant shift in requirement for new build to refresh, remodel and refurbish existing buildings

Order Book

The weighted sightline for 2012, comprising secured orders and a measured view of formalised framework allocations and tenders in progress, is tracking more than 10% ahead of the comparative period for 2011.

Diversification into new markets is providing an increased level of new opportunities for the business to pursue compared to this time last year. This strengthening is reflective of a more strategic approach to the sourcing and conversion of new work.

Tony Lenehan

Chief Executive Officer

GROUP FINANCE DIRECTOR'S REVIEW

Financial performance

Revenue for the year ended 31 December 2011 grew to £101.0m (2010: £99.1m). The results reflect the initial positive impact of the Group's strategy to diversify into new sectors in what remain challenging trading conditions. Banking, Commercial and the Public Sector accounted for 59% of the Group's revenues in the year ended 31 December 2011 (2010: 51%).

Continued efforts to control costs and improve process have enabled the Group to deliver an increase in gross margin to 8.2% (2010: 7.8%).

Underlying1 administrative expenses reduced by 3.2% to £6.1m (2010: £6.3m) as management maintained vigilance on costs. The improved gross margin combined with this continued control over overheads resulted in the underlying1 operating profit increasing by £0.8m to £2.2m (2010: £1.4m) on revenues up £1.9m.

The investment made in 2009 in our international joint venture in Dubai delivered its first profit in 2011 with the Group's share of its joint venture's profits being £0.1m (2010: loss £0.2m).

The improved financial performance of the Group and the refinancing of the bank facilities including repayment of senior term loan in full helped to reduce underlying net financing costs to £0.5m (2010: £0.6m).

The underlying profit before tax1 increased by 257% to £1.8m (2010: £0.5m).

Non-recurring expenditure on restructuring of £0.3m (2010: £0.3m) and accounting for notional interest on preference shares of £1.0m (2010: £0.9m) reduced the result to a profit before taxation of £0.5m (2010: loss £0.7m).

The Group incurred non-recurring expenditure of £0.3m (2010: £0.3.m) in the year which related to restructuring costs from a strategic review initiated by Tony Lenehan following his appointment in January 2011. Non-recurring expenditure in 2010 was related to the departure of the previous Chief Executive Officer and the subsequent appointment of Tony Lenehan.

Financing costs

Net financing costs for the year were £1.5m (2010: £1.6m) and included £1.0m (2010: £0.9m) of notional interest on preference shares.

Net interest and fees on bank borrowings reduced to £0.2m (2010: £0.4m) following the reduction in the level of bank debt as part of the 2009 refinancing. The interest rate payable on term loans in 2011 averaged 395bps above LIBOR (2010: 500bps). The margin over LIBOR under the banking facility is linked to the Group's profitability.

Accounting for preference share capital

The 15,000,000 convertible redeemable preference shares of £1 each carry a cash coupon of 3% from 1 September 2012, are redeemable in tranches from December 2013 through to December 2019 or convertible into ordinary shares at a price of 93.75p at any time between August 2012 andJuly 2019.

As the preference shares have a conversion option, the Group has to account for them in accordance with IAS 39 with the result that a proportion of the preference share capital is classed as debt with the remainder treated as equity. At 31 December 2011 £9,369,000 (2010: £8,338,000) of the preference share capital was classified as non-current liabilities with the balance of £5,631,000 (2010: £6,662,000) shown as shareholders' equity.

In addition, IAS 32 requires that notional interest payable on the debt component is calculated based on a notional interest rate, which is significantly higher than the actual coupon rate, on the preference shares. The notional interest is charged through the Income Statement. The notional interest charge on the preference shares in 2011 was £1,031,000 (2010: £918,000), with the cash dividend paid on the preference shares being £nil (2010: £nil). An amount corresponding to the notional interest charge, to the extent it exceeds the cash coupon, is credited to reserves, ensuring that the distributable reserves and net assets of the Group are unaffected by the accounting treatment.

Taxation

The tax charge for the year amounted to £0.4m (2010: £0.2m). This results in an effective tax charge on the profit before tax of 82.5% (2010: loss before tax -22.5%). The largest factor affecting the effective tax rate compared to the UK corporation tax rate of 26.5% (2010: 28.0%) is the preference share interest charge of £1.0m (2010: £0.9m) which being a notional charge does not qualify for tax relief. Other factors impacting the effective rate are non-deductible expenses and the tax treatment of profits (2010: losses) generated by the joint venture.

Dividend

No dividends have been proposed in respect of the year ended 31 December 2011 (2010: £nil) and it is not currently envisaged that a dividend will be proposed on ordinary shares in the new financial year.

Earnings per share

Earnings per share was 0.1p (2010: loss 1.4p). Underlying1 earnings per share was 2.1p (2010: 0.4p).

Net cash and cash flow

The Group reviewed its banking arrangements during 2011 to provide a more efficient and flexible banking facility for the future. The revised facility arrangements resulted in the Group repaying bank borrowings of £5.9m in full (2010: repayment of £1.0m) from cash resources.

The cash costs of the renegotiation of £0.1m (2010: £nil) have been more than compensated for in the reduction in net interest and fees paid on bank borrowings to £0.2m (2010: £0.4m). The revised facility arrangements include the provision of a guarantee facility. This has enabled the Group to issue performance bonds without a requirement to provide cash collateral resulting in a net cash inflow from cash collateral deposits of £0.3m (2010: outflow £1.0m). The maturity of the performance bonds is shown in Note 15 to the financial statements.

The business generated net cash of £0.1m in operations (2010: £2.7m) as the Group used the flexibility of the new banking arrangements to support its diversification into new markets where the payment profiles differ from the Group's traditional sectors. The increased profitability has resulted in the Group returning to a tax paying position with a cash outflow of £0.2m (2010: £nil). £0.4m (2010: £0.2m) was used to invest in fixed assets with the major areas of expenditure being an enhanced Management Information System and new larger office accommodation in London. The improved performance of the joint venture in Dubai enabled that business to return cash of £0.3m (2010: £1.7m outflow) to the Group.

The Group closed the year with net cash at 31 December 2011 of £6.7m (2010: £6.9m) with the net cash having increased by £4.7m (2010: £2.2m) in the second half of the financial year.

International

The Group's joint venture operation in the UAE was established in May 2009. The business has now established credentials providing interior fit out services to a range of markets including commercial premises, leisure and hospitality and education. The share of profits included within the consolidated results is £0.1m (2010: loss £0.2m).

Philip Lanigan

Group Finance DirectorConsolidated income statement

For the year ended 31 December 2011

Consolidated balance sheet

As at 31 December 2011

Consolidated cash flow statement

For the year ended 31 December 2011

Cash and cash equivalents exclude restricted cash of £nil (2010: £97,000).

Notes to the preliminary results

1. Basis of preparation

The financial information included in this preliminary announcement does not constitute statutory accounts of the Group for the years ended 31 December 2011 and 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies and those for 2011, which are available on the Group's website www.stylesandwood.co.uk, will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Segmental reporting

Year ended 31 December 2011

Year ended 31 December 2010

All revenues arises from external customers for the provision of property related services in the UK. All assets are domiciled in the UK. Operating segments are reported in a manner consistent with the internal reporting to the Board of Directors (the chief operating decision maker) which is used to assess performance and make strategic decisions.

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 option expenses, fees for professional advisers and non-executive director remuneration.

No one customer represents a significant proportion of the Group's revenue. Transactions between segments are eliminated on consolidation.

3. Non-recurring items and preference share accounting

The Group's results include the following items:

(a) Restructuring costs in 2011 relate to an exercise to flatten the management structure of the business and integrate the Group's business development team into the operational teams. Restructuring costs in 2010 related to the departure of the Chief Executive Officer, Ivan McKeever and to the appointment of his replacement, Anthony Lenehan. Costs include severance payment, legal expenses and consultant's fees.

(b) Due to the conversion rights attached to the preference shares International Accounting Standards require them to be accounted for by separating the debt and equity components based on their respective fair value on issue. Subsequent to issue the liability component is measured at amortised cost and a notional interest charge, which is greater than the cash coupon payable on the shares, is made to the income statement. The difference between the imputed notional interest rate and actual cash coupon is credited to retained earnings, reducing the equity component.

As no cash coupon is payable in respect of the year ended 31 December 2011 (2010: £nil) the full £1,031,000 of notional interest (2010: £918,000) has been credited back to the profit and loss reserve.

(c) Tax on non-recurring items reflects the non-deductibility of the notional interest on preference shares.

4. Taxation

The standard rate of Corporation Tax in the UK changed from 28% to 26% with effect from 1 April 2011. Accordingly the standard rate of tax applied for the year ended 31 December 2011 is 26.5% (2010: 28%). The effective tax rates tax for the years ended 31 December 2011 (82.5%) and 31 December 2010 (-22.5%) are different from the standard rate of corporation tax. The differences are explained below.

5. Earnings per share

Reconciliations of the earnings and the number of shares used in the calculation are set out below:

On 29 June 2009 the Company issued 15,000,000 convertible preference shares which are convertible into 16,000,000 ordinary shares. These shares are not currently dilutive and neither are share options that are currently in issue in the Group. Hence there is no difference between basic and diluted earnings per share (2010: no difference).

6. Dividends

No interim dividend was paid during the year (2010: nil) and no final dividend is proposed (2010: nil).

7. Cash flow from operating activities

8. Net cash

Note: Net cash excludes preference share capital of £9.4m (2010: £8.3m) that is accounted for as debt and included in non current liabilities due to the conversion rights attached to those shares.

Included within net cash in the prior year was unamortised debt issue costs of £239,000, amounts have been restated to exclude these costs which are now included in prepayments.

9. Related party transactions

In the year ended 31 December 2011 the Company paid fees of £37,500 (2010: £37,500) to Rickitt Mitchell & Partners Limited in respect of Paul Mitchell's services as a non executive director.

The following transactions have taken place between the Group and entities over which Paul Bell, who has a 35% shareholding in the Company and who is a director of the Group's trading subsidiary Styles & Wood Limited, has significant influence and are therefore considered to be related parties. All transactions were undertaken in the ordinary course of business with normal commercial terms and with no security given.

Details of the directors' 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 2011 which will be 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 2011 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). Except as described in the basis of preparation, the accounting policies applied are consistent with those set out in the annual report and financial statements for the year ended 31 December 2010. In preparing this announcement the Directors have also made reasonable and prudent judgements and estimates. The financial information, Chairman's statement, Chief Executive's statement and the Financial 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 Non-Executive Chairman

Tony Lenehan Chief Executive Officer

Philip Lanigan Group Finance Director

Robert Hough Non-Executive Director

Paul Mitchell Non-Executive Director