27 Aug 2009 07:00
27 August 2009
STYLES & WOOD GROUP PLC
("Styles&Wood" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
Styles & Wood Group plc, a leading provider of retail property services to premier UK retailers, announces its interim results for the six months ended 30 June 2009.
Principal events
Successful completion of refinancing puts Group in net cash position and brings renewed customer confidence
Cost base of Group aligned to reduced size of business as retailers property investment plans continued to be curtailed due to challenging economic conditions
Margin decline easing following reduced cost base and improved processes
Strong relationships continue to be maintained with all customers
Financial results
Revenue £74.8m
Gross profit £4.6m
Underlying operating profit £0.9m (1)
Non-recurring costs £1.0m
Cash from refinancing £13.8m
Net cash position £8.7m
Operational highlights
Framework renewals with Home Retail Group, Waitrose, Barclays and the Co-Operative Group
Food sector remains resilient and contributed 53% of first half revenues with Lidl joining our blue chip customer base in this sector
Support Services contributed 42% to divisional operating profit
Early success in Group's move into office sector through Mapeley Group and ARM
(i) Underlying operating profit excludes non-recurring items of £1.0m (H1 2008: £0.3m).
Ivan McKeever, CEO commented:
"The achievements of the first half have transformed the prospects for the Group. We have successfully completed a major refinancing to ensure that the Group is on a solid financial footing to weather the economic downturn. As a result, the Group now has a strong balance sheet, and is in a cash positive position for the first time in many years.
"Whilst we are aware that the recovery will be slow, we are confident that the Group's strong balance sheet, coupled with our continued focus on cost controls, cash generation and strong customer relations, means that we are well placed to take advantage of the market upturn and maintain our market leading position."
Enquiries:
| Styles & Wood Group plc | Tel: 0161 926 6000 |
| Ivan McKeever, CEO | |
| Philip Lanigan, FD | |
| Financial Dynamics | Tel: 020 7831 3113 |
| Billy Clegg / Georgina Bonham / Alex Beagley | |
| Shore Capital and Corporate Limited | Tel: 020 7408 4090 |
| Guy Peters/Edward Mansfield |
In the first six months of 2009, we witnessed a continuation of challenging market conditions. Retailers reacted to the negative economic outlook and margin pressure by reducing their store investment programmes and seeking better value from their suppliers. In addition, we believe that our framework customers chose to reduce allocation to Styles&Wood due to the then concerns over the Group's financial strength.
On 29 June 2009, the Group successfully completed a significant refinancing which has put the Group on a solid financial footing and provides the business with the requisite cash and debt resources to trade through the current economic cycle. We believe that customer confidence is returning following the refinancing, but, given usual project lead times this will take time to feed through to our financial results.
As the market conditions deteriorated, management took early and decisive action to align the Group's cost base with reduced revenues. These actions have already delivered in excess of £8.0m of annualised cost savings which we expect will help to preserve margins in the longer term. The Group is also continuing to work with its supply chain to address margin pressure.
We continue to focus on our core retail market. Whilst this market has suffered due to the current economic downturn, a number of recent indicators, including government statistics and results published by retailers, point to signs of a bottoming in retail sales suggesting that a recovery in retail may be likely to begin in 2010.
In line with the Group's strategy, we continue to build on our core strengths and our strong customer relationships which we have developed under our "Customer for Life" programme. We are concentrating on those retail sectors, such as food retail, which are most resilient to the economic downturn and are examining opportunities to enter new markets and to further strengthen and grow our Support Services offerings.
Refinancing
On 30 April 2009, the Board announced a substantial refinancing of the Group, designed to put it on a solid financial footing. The refinancing comprised a £10.0m placing, an open offer of £2.15m, a debt for equity restructure and a share consolidation. The refinancing was successfully completed on 29 June moving the Group from a net debt to a net cash position for the first time in many years.
Group results
The Group's revenue for the six months to 30 June 2009 was £74.8m (H1 2008: £123.1m). Underlying operating profit was £0.9m (H1 2008: £3.6m). Net finance costs of £1.0m (H1 2008: £0.8m) included a one-off charge of £0.5m (H1 2008: £nil) as the group wrote off costs associated with its then existing banking facility.
Excluding both the non-recurring costs of £1.0m together with the one-off financing charge of £0.5m the Group's profit before tax was £0.4m (H1 2008: £2.7m). After charging these items, the loss before tax was £1.1m (H1 2008: profit before tax £2.4m).
Whilst performance is down on 2008, this is a reflection of challenging market conditions combined with the impact of customer concerns over the financial strength of the business. Those customer concerns have now been allayed by the Group's refinancing.
The effective rate of tax of 30% (H1 2008: 29.5%) reflects the level of non-recurring costs in the period and reflects the likely effective rate for the full financial year.
The loss per share of 9.6p (H1 2008: earnings per share of 22.6p) reflects the share consolidation and open offer that took place as part of the refinancing on 29 June 2009 with 2008 figures restated to reflect the transaction. The placing shares issued as part of the refinancing will have a dilutive impact on earnings per share from 29 June 2009.
Divisional results
StoreFit
StoreFit, our core business, provides fit-out services to major retailers and banking customers across three sectors, food retail, general retail and office and banking. During the first half, this division experienced significant revenue and margin pressure due to market conditions and customer concerns over the financial strength of the Group. Nevertheless the business maintained strong relationships with all of its customers, placing the Group in a sound competitive market position which should help to accelerate growth once the recovery begins.
The division generated revenues of £64.5m (H1 2008: £107.7m) and operating profit of £1.8m (H1 2008: £4.8m).
Food retail
The food retail sector remains resilient to the current economic climate. The business trades with most of the major food retail brands including Tesco, ASDA, Morrisons, Waitrose, The Co-Operative Group and Lidl. Revenue from the food sector represented 52.1% of StoreFit revenues in the six month ended 30 June 2009 (H1 2008: 39.1%).
Highlights in the first six months include the completion of the rebrand of the Morrisons store portfolio, where StoreFit acted as sole supplier designing and project managing this major brand roll out. The division opened two new stores for Tesco, converted three former Somerfield stores to the Waitrose brand and also began the fit-out of a developer shell for Waitrose.
The Co-Operative Group became a major customer of the business during 2008 and this relationship continued into 2009 with the rebrand of 69 stores and a further 36 stores currently in the planning stage and due to be rebranded in the second half of 2009.
Lidl became a new customer in 2009 and after the successful completion of our first new store opening for this growing retailer, the business secured a further new build store at Alnwick in Northumberland.
General retail
Despite the current economic climate, high street and department store retailers continue to invest in their store portfolio albeit at lower volumes. We believe that the combination of lower fit-out cost and falling high street retail rents will make projects more viable for our key customers.
During the six months, StoreFit opened a 75,000 sq ft store for Marks & Spencer at Swindon. It also opened new Boots stores at Wrexham and Glasgow, as well as refurbishing 25 stores for the market leader in Health, Beauty and Pharmacy products. Additionally, as the Home Retail Group continues to consolidate its position on the high street we have worked on new stores for Argos at Upton (Wirral) and Glasgow and Homebase at Burnley and Clitheroe.
Office and banking
In the commercial office and retail banking sector, we are beginning to see early signs of rebranding strategies and office consolidation activity. For Barclays we have begun a programme of work which will see us open four flagship stores and refurbish 35 of their smaller branches.
The recent acquisition of HBOS by Lloyds TSB stimulated early activity for the business with a commission to rebrand a number of their branches. In the office sector we also began to work with our new customer Mapeley Plc with 10 projects across its substantial HMRC estate and received allocation from Telereal Trillium to undertake expansion work across the DWP estate.
Support Services
Our Support Services businesses (StorePlanning, StoreCare and StoreData) generated revenues of £10.3m (2008: £15.4m), and operating profit of £1.3m (2008: £1.7m), contributing 42% (H1 2008: 26%) to the Groups earnings before central costs. Despite the environment, customers continue to outsource non core property related activities, therefore benefiting our Support Services business model. Whilst the division has experienced revenue and margin pressure, we expect this to be a solid future stream of revenue as retailers increasingly commit to further store portfolio investment.
StorePlanning
Our StorePlanning business delivered revenues of £2.0m (H1 2008: £3.0m) during the period and operating profit of £0.4m (H1 2008: £0.5m).
StorePlanning was engaged by a wide range of our customers to help them design and plan their stores during the first half of 2009. Boots engaged StorePlanning to help design the early trial rebrand of the Dollond & Aitchison stores which if successful, could be rolled out across the rest of the chain. StorePlanning worked closely with our StoreFit division to deliver the Morrisons rebrand and is part of a small team of design practices commissioned by Barclays to help deliver their rebrand programme.
StoreCare
StoreCare delivered revenue of £7.8m in the first half of 2009 (H1 2008: £11.7m) and an operating profit of £0.8m (H1 2008: £1.0m) and like our StoreFit business is experiencing the effects of a downturn in retail spend and margin pressure.
StoreCare continues its close working relationship with Asda as part of its framework for the delivery of planned capital expenditure across 150 stores and the execution of upgrades to maintain store standards.
StoreCare made progress in the office and banking sector as part of its strategy to move into new areas. ARM, a major designer of digital technology, engaged our StoreCare business to maintain its office complex in Cambridge and HBOS hired our StoreCare business to deliver 35 office upgrades.
StoreData
StoreData delivered revenues of £0.6m in the first half of 2009 (H1 2008: £0.7m) and operating profit of £0.1m (H1 2008: £0.1m).
StoreData extended its five year relationship with Tesco helping the market leading food retailer develop its property information system. The solution now helps the Tesco property team capture, store and manage property related information accelerating the property development process.
The business was also engaged by Nationwide Building Society and the Co-Operative to develop property solutions to help manage their portfolio and their development programmes.
Cash flow
At 30 June 2009, following the completion of the refinancing which generated net cash of £13.8m, the Group was in a net cash position of £8.7m (2008: net debt £22.4m), excluding the £7.0m element of the Group's preference share capital that is treated as a long term liability. Total bank borrowings at 30 June 2009 were £7.0m (2008: £28.2m).
The business invested £7.9m of cash in its operating activities in the six months ended 30 June 2009 having generated £3.4m from operating activities in the year ended 31 December 2008 (2008: £3.2m). This investment reflects usual seasonal movements and an investment in the Group's working capital.
Dividend
The Board is not declaring an interim dividend for the period (H1 2008: 6.25p per share, reflecting the share consolidation).
Board changes
The Board welcomes Philip Lanigan who joined the Company as Group Finance Director and Company Secretary with effect from 1 August 2009, succeeding Graham Clark who stands down from his position as part of a planned retirement following the successful refinancing of the Group.
Philip, a Chartered Accountant, has extensive commercial experience and joins the Company from Ashtead Technology Limited, a private equity owned international specialist equipment rental business, where he was Group Finance Director from November 2008 until July 2009.
Directors' interests
During the period, as a result of the refinancing and share consolidation, the shareholdings of Directors changed as follows:
| Prior to the Refinancing | Following the Refinancing | |||||
| Director | Number of Ordinary Shares | Percentage of Issued Share Capital | Number of New Ordinary Shares | Shares taken up under the Open Offer | New holding in New Ordinary Shares | Percentage of issued share capital |
| Jim Martin | 193,333 | 0.30 | 7,733 | 25,776 | 33,509 | 0.05 |
| Ivan McKeever | 2,018,500 | 3.13 | 80,740 | 32,006 | 112,746 | 0.18 |
| Graham Clark | 2,548,042 | 3.95 | 101,921 | - | 101,921 | 0.16 |
| Robert Hough | 115,000 | 0.18 | 4,599 | 40,000 | 44,599 | 0.07 |
| Paul Mitchell | 232,543 | 0.36 | 9,301 | 62,020 | 71,321 | 0.12 |
There were no other changes in Directors' shareholdings in the Company during the period. Philip Lanigan, who was appointed Group Finance Director with effect from 1 August 2009, replacing Graham Clark, does not have any shareholding in the Company.
Risks and uncertainties
The business continues to review and manage the risks it faces. In the six months to 30 June 2009, the key risk facing the business lay in its ability to have sufficient cash and debt resources to deal with the challenging economic conditions. The business successfully addressed this risk through a significant refinancing designed to put the Group on a solid financial footing.
The second key risk facing the business relates to the challenging market conditions being faced by retailers. The Group's customers have reduced their store investment programmes and are seeking better value from their suppliers. In response, the business took early and decisive action to more appropriately align its cost base to forecasted revenues.
Our supply chain remains a vital part of our delivery process and whilst the economy shrinks and access to credit is limited, our refinancing has allowed us to carefully manage and support our suppliers through these challenging times. We believe that key suppliers are aligning themselves with financially strong businesses during this economic downturn.
Strategy
A key strength of our business lies in its ability to maintain a leading market position by following its clearly defined strategy. In January 2009, we launched a new strategic plan entitled "Expand Our Horizons" which aims to guide the Group through the next three to five years.
Central to this plan will be our ability to retain, and also grow, our "Customers for Life". In the first six months of 2009, despite challenging market conditions, we are pleased to report that the Group has maintained relationships with all of its key customers. The business has made it a deliberate strategy to focus on major UK retailers and we expect these businesses to consolidate their positions through the current recession and to continue to invest in their store portfolios both during the downturn and particularly as the market recovers.
We aim to strengthen our Support Services businesses by increasing uptake of our existing suite of services as well as launching new services over the coming years. Our Support Services businesses now contribute 42% to divisional earnings.
We will look to enter new sectors including office, leisure and public sector and are pleased to report a major new customer in the office sector in Mapeley and a new customer in the leisure sector in DW Sports Fitness, the health club business acquired out of JJB Sports. We will continue to assess opportunities to enter new sectors based on their strategic fit with our business.
Outlook
Following the completion of the refinancing exercise we are confident that the Group is now in a strong position to weather the economic downturn. The refinancing is designed to provide the Group with sufficient cash and debt facilities to trade through the current economic cycle.
Our customers have strong retail brands and although they are experiencing revenue and margin pressures they have strategies in place to deal with the current market conditions that will see them continue to dominate the high street. We expect retailers to continue to control capital expenditure for the remainder of 2009 before beginning to increase investment as the market recovers and importantly as unemployment peaks, which it is forecast to do in the first half of 2010.
With a strong balance sheet and a continued focus on cost controls and cash generation, coupled with strong relationships with all of our customers, we are confident that the Group is well positioned to take advantage of the market upturn and maintain a market leading position.
| Consolidated Income Statement | ||||||
| For the six months ended 30 June 2009 | ||||||
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| Notes | 2009 | 2008 | 2008 | |||
| £'000 | £'000 | £'000 | ||||
| (restated^) | (restated^) | |||||
| Continuing operations | ||||||
| Revenue | 3 | 74,800 | 123,144 | 243,148 | ||
| Cost of sales | 1 | (70,237) | (115,161) | (232,674) | ||
| Gross profit | 4,563 | 7,983 | 10,474 | |||
| Administrative expenses | 1,4 | (4,721) | (4,759) | (9,741) | ||
| Operating (loss)/profit | 3,4 | (158) | 3,224 | 733 | ||
| Material contract losses | 4 | - | - | 3,545 | ||
| Non-recurring items | 4 | 1,046 | 334 | 1,177 | ||
| Operating profit before material contract losses and non-recurring items | 3 | 888 | 3,558 | 5,455 | ||
| Interest payable and similar charges | 5 | (977) | (867) | (1,786) | ||
| Interest receivable | 5 | 20 | 67 | 104 | ||
| (Loss)/profit before tax | (1,115) | 2,424 | (949) | |||
| Tax credit/(charge) | 6 | 335 | (715) | 548 | ||
| (Loss)/profit for the period attributable to equity shareholders | (780) | 1,709 | (401) | |||
| Basic and diluted (loss)/earnings per share, expressed in pence per share | 7 | (9.6)p | 22.6p | (5.3)p | ||
| Dividend proposed in respect of the period, expressed in pence per share | 8 | |||||
| - interim dividend | - | 6.25p | 6.25p | |||
| - final dividend | - | - | - | |||
There is no difference between the (loss)/profit for the period and the total comprehensive income for the period. Accordingly no separate statement of comprehensive income has been presented.
^ Refer to note 1 for details of the reallocation of costs between cost of sales and administrative expenses. The restatement has no impact on operating profit.
| Consolidated Statement of Changes in Equity | ||||||||||||
| For the six months ended 30 June 2009 | ||||||||||||
| Unaudited | ||||||||||||
| Notes | Ordinary share capital | Preference share capital | Share premium | Reverse acquisition reserve | Retained earnings | Total | ||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||
| At 1 January 2008 | 645 | - | 17,339 | (66,665) | 19,970 | (28,711) | ||||||
| Profit for the period | - | - | - | - | 1,709 | 1,709 | ||||||
| Dividends paid | - | - | - | - | (1,612) | (1,612) | ||||||
| Share option scheme | - | - | - | - | (67) | (67) | ||||||
| At 30 June 2008 | 645 | - | 17,339 | (66,665) | 20,000 | (28,681) | ||||||
| Loss for the period | - | - | - | - | (2,110) | (2,110) | ||||||
| Dividends paid | - | - | - | - | (162) | (162) | ||||||
| Share option scheme | - | - | - | - | 19 | 19 | ||||||
| At 31 December 2008 | 645 | - | 17,339 | (66,665) | 17,747 | (30,934) | ||||||
| Loss for the period | - | - | - | - | (780) | (780) | ||||||
| Share option scheme | - | - | - | - | 32 | 32 | ||||||
| Issue of share capital | 19,811 | 8,000 | - | - | - | 27,811 | ||||||
| Share issue costs | - | - | (1,039) | - | - | (1,039) | ||||||
| At 30 June 2009 | 20,456 | 8,000 | 16,300 | (66,665) | 16,999 | (4,910) | ||||||
| Consolidated Balance Sheet | ||||||
| As at 30 June 2009 | Unaudited | Unaudited | Audited | |||
| 30 June | 30 June | 31 December | ||||
| Notes | 2009 | 2008 | 2008 | |||
| £'000 | £'000 | £'000 | ||||
| Non current assets | ||||||
| Intangible assets - software | 175 | 341 | 266 | |||
| Property, plant and equipment | 508 | 812 | 649 | |||
| Deferred tax asset | 558 | 95 | 243 | |||
| 1,241 | 1,248 | 1,158 | ||||
| Current assets | ||||||
| Trade and other receivables | 28,590 | 50,287 | 36,392 | |||
| Cash and cash equivalents | 15,752 | 5,790 | 9,536 | |||
| Current tax asset | - | - | 62 | |||
| 44,342 | 56,077 | 45,990 | ||||
| Current liabilities | ||||||
| Trade and other payables | (36,177) | (56,650) | (51,619) | |||
| Financial liabilities: bank borrowings | 9 | (656) | (3,387) | (3,784) | ||
| Financial liabilities: guaranteed unsecured loan notes | (944) | (974) | (974) | |||
| Current tax liabilities | (278) | (1,119) | - | |||
| (38,055) | (62,130) | (56,377) | ||||
| Net current assets/(liabilities) | 6,287 | (6,053) | (10,387) | |||
| Total assets less current liabilities | 7,528 | (4,805) | (9,229) | |||
| Non current liabilities | ||||||
| Financial liabilities: bank borrowings | 9 | (5,438) | (23,876) | (21,705) | ||
| Financial liabilities: preference shares | 10 | (7,000) | - | - | ||
| (12,438) | (23,876) | (21,705) | ||||
| Net liabilities | (4,910) | (28,681) | (30,934) | |||
| Shareholders' equity | ||||||
| Ordinary share capital | 10 | 20,456 | 645 | 645 | ||
| Preference share capital | 10 | 8,000 | - | - | ||
| Share premium | 16,300 | 17,339 | 17,339 | |||
| Reverse acquisition reserve | (66,665) | (66,665) | (66,665) | |||
| Retained earnings | 16,999 | 20,000 | 17,747 | |||
| Total shareholders' deficit | (4,910) | (28,681) | (30,934) | |||
| Consolidated Statement of Cash Flows | ||||||
| For the six months ended 30 June 2009 | ||||||
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| Notes | 2009 | 2008 | 2008 | |||
| £'000 | £'000 | £'000 | ||||
| Cash (used in)/generated from operations | 11 | (7,915) | (3,231) | 3,422 | ||
| Income taxes repaid/(paid) | 361 | (1,803) | (1,871) | |||
| Net cash (used in)/generated from operating activities | (7,554) | (5,034) | 1,551 | |||
| Cash flows used in investing activities | ||||||
| Purchase of property, plant and equipment | (12) | (89) | (92) | |||
| Purchase of intangible assets - software | (4) | (54) | (79) | |||
| Net cash used in investing activities | (16) | (143) | (171) | |||
| Cash flows used in financing activities | ||||||
| Interest received | 20 | 33 | 107 | |||
| Interest paid | (400) | (763) | (1,611) | |||
| Drawdown of borrowings | 6,900 | - | - | |||
| Repayment of borrowings | (3,339) | (1,500) | (3,000) | |||
| Capitalised debt issue costs | (683) | - | (375) | |||
| Issue of share capital | 12,150 | - | - | |||
| Share issue costs | (832) | - | - | |||
| Dividends paid to equity shareholders | - | (1,612) | (1,774) | |||
| Net cash generated from/(used in) financing activities | 13,816 | (3,842) | (6,653) | |||
| Net increase/(decrease) in cash and cash equivalents | 6,246 | (9,019) | (5,273) | |||
| Cash and cash equivalents at beginning of period | 8,562 | 13,835 | 13,835 | |||
| Cash and cash equivalents at end of period | 14,808 | 4,816 | 8,562 | |||
For the purposes of the cash flow statement, cash and cash equivalents excludes restricted cash of £944,000 (30 June 2008: £974,000, 31 December 2008: £974,000).
Notes to the interim financial information
1. Basis of preparation
Styles & Wood Group plc ("the Company") is a public limited company incorporated and domiciled in the United Kingdom and listed on the London Stock Exchange. Styles & Wood Group plc and its subsidiaries (together "the Group") provide retail property services within the UK. The address of Styles & Wood Group plc's registered office is Aspect House, Manchester Road, Altrincham, Cheshire WA14 5PG.
This condensed consolidated interim financial information for the six months ended 30 June 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS34 "Interim financial reporting" as adopted by the European Union. The interim results should be read in conjunction with the annual report and financial statements for the year ended 31 December 2008 which are available from the group's website www.stylesandwood.co.uk. The accounting policies, methods of computation and presentation followed are consistent with those applied in the annual report and financial statements which are prepared in accordance with IFRS as adopted by the European Union, except for the reclassification of certain administrative expenses as set out below.
These condensed consolidated interim results do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The interim results to 30 June 2009 and comparative results to 30 June 2008 are neither audited nor reviewed by the auditors. The financial information for the full preceding year is based on the statutory accounts for the year ended 31 December 2008 which have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, but included a matter of emphasis in respect of going concern having regard to uncertainties in relation to the refinancing which was subsequently completed on 29 June 2009. Further details can be found in note 2 below. The accounts did not contain any statement under section 237 of the Companies Act 1985.
These condensed consolidated interim results were approved for issue on 27 August 2009.
The following new standards and amendments to standards are mandatory for the first time for the year beginning 1 January 2009:
IAS1 (revised) "Presentation of financial statements". The standard requires the Group to present a statement of comprehensive income showing all non-owner changes in equity. There is no difference between the Group's (loss)/profit for the period and its comprehensive income. Accordingly no separate statement of comprehensive income has been presented.
IFRS 8 "Operating segments" which replaces IAS 14 "Segment reporting". As the segmental information previously reported is on the same basis as is used for internal reporting purposes there has been no change to the operating segments reported.
Amendment to IFRS 2 "Share based payments". The amendment clarifies the treatment of vesting conditions and cancellations and has an impact on the accounting for SAYE schemes. As the Group's current SAYE scheme is immaterial the changes are not expected to have a material effect on the group.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently relevant to the Group:
IFRIC 13 - Customer loyalty programmes
IFRIC 15 - Agreements for the construction of real estates
IFRIC 16 - Hedges of a net investment in a foreign operation
IAS 23 (revised) - Borrowing costs
IAS 39 (amendment) - Financial instruments: Recognition and measurement
The following new standards, amendments to standards or interpretations have been published, but are not effective for the financial year beginning 1 January 2009 and have not been adopted early:
IFRS 3 (revised) - Business combinations
Amendment of IFRS1 - First time adoption and IAS 27 (revised) - Consolidated and separate financial statements
IFRIC 17 - Distribution of non cash assets to owners
IFRIC 18 - Transfer of assets from customers
1. Basis of preparation (continued)
From 1 January 2009 the Group changed the way it reported the employment costs of certain employees within the StoreFit and StoreCare business divisions and now records the cost of those employees within cost of sales rather than administration expenses. As a result, comparative figures for the six months ended 30 June 2008 and the year ended 31 December 2008 have been restated accordingly, resulting in an increase in cost of sales and a corresponding decrease in administrative expenses. There is no impact on operating profit. The adjustments are as follows:
| 6 months ended | Year ended | ||||||
| 30 June | 31 December | ||||||
| 2008 | 2008 | ||||||
| £'000 | £'000 | ||||||
| StoreFit | StoreCare | Total | StoreFit | StoreCare | Total | ||
| Increase in cost of sales and corresponding reduction in administrative expenses | 1,577 | 198 | 1,775 | 3,070 | 367 | 3,437 | |
In addition, from 1 January 2009, the Group has reported a number of administrative expenses that had previously been allocated to the StoreFit and StoreCare business divisions on an arbitrary basis, as central unallocated expenses. These expenses include the cost of the senior management and central support functions. As a result, comparative figures for the six months ended 30 June 2008 and the year ended 31 December 2008 have been restated accordingly, resulting in an increase in unallocated administrative expenses and a decrease in administrative expenses allocated to business divisions. There is no impact on operating profit. The adjustments are as follows:
| 6 months ended | Year ended | ||||||||
| 30 June | 31 December | ||||||||
| 2008 | 2008 | ||||||||
| £'000 | £'000 | ||||||||
| Store Fit | Store Care | Unallocated | Total | Store Fit | Store Care | Unallocated | Total | ||
| Decrease in divisional administrative expenses | (2,748) | (270) | - | (3,018) | (4,545) | (577) | - | 5,121 | |
| Increase in unallocated administrative expenses | - | - | 3,018 | 3,018 | - | - | 5,121 | 5,121 | |
2. Refinancing
On 30 April 2009 the Group announced substantial refinancing which was completed on 29 June 2009. The refinancing comprised the following steps:
A consolidation of the Group's ordinary share capital whereby each 25 existing ordinary shares of 1p each in the share capital of the Company were consolidated into 1 new ordinary share of 25p each.
An increase in the authorised share capital of the Company by £39,900,000 from £1,050,000 to £40,950,000 by the creation of:
79,800,000 new ordinary shares, such shares ranking pari passu in all respects with the existing new ordinary shares
20,000,000 non voting deferred ordinary shares of 25 pence each in the capital of the Company
14,950,000 convertible preference shares of £1 each in the capital
A debt for equity swap whereby the Group's bankers swapped £22.7m of debt for
10,644,935 new ordinary shares with a nominal value of £2.7m
20,000,000 non voting deferred ordinary shares with a nominal value of £5.0m
15,000,000 convertible preference share with a nominal value of £15.0m
The issue of 40,000,000 new ordinary shares with a nominal value of £10.0m as part of a firm placing
The issue of 8,599,150 new ordinary shares with a nominal value of £2.15m as part of an open offer
The provision of a further £5.1m of funding by the Group's bankers, leaving the Group with a facility comprising a £6.9m term loan which is drawn in full and a £4.0m revolving credit facility which has not been drawn.
Details of the Company's share capital subsequent to the refinancing can be found in note 10, with details of the Group's borrowings in note 9.
Total fees relating to the refinancing were £1.87m of which £1.04m have been charged to the share premium account, £0.81m has been capitalised as debt issue costs and £0.02m has been charged within operating profit.
Due to the nature of the conversion rights attached to the preference shares issued as part of the refinancing, these instruments have been accounted for through the bifurcation of their liability and equity components based on their respective fair values, with the liability component being valued at £7.0m and the equity component valued at £8.0m.
Further information on the refinancing, including the shareholder circular and prospectus can be found in the Investors Centre section of the Group's website www.stylesandwood.co.uk.
3. Revenue and profit from business segments
| 6 months ended 30 June 2009 | ||||||
| Unaudited | StoreFit | Store Planning | StoreCare | StoreData | Unallocated | Group |
| £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Revenue | 64,465 | 1,994 | 7,752 | 589 | - | 74,800 |
| Adjusted segment result | 1,858 | 419 | 796 | 103 | (2,288) | 888 |
| Adjusting items (note 4) | (108) | (22) | (38) | - | (878) | (1,046) |
| Segment result | 1,750 | 397 | 758 | 103 | (3,166) | (158) |
| Interest expense | (977) | |||||
| Interest income | 20 | |||||
| Profit before tax | (1,115) | |||||
| Taxation | 335 | |||||
| Net profit attributable to equity shareholders | (780) | |||||
| 6 months ended 30 June 2008 | ||||||
| Unaudited | StoreFit | Store Planning | StoreCare | StoreData | Unallocated | Group |
| £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Revenue | 107,734 | 3,011 | 11,736 | 663 | - | 123,144 |
| Adjusted segment result | 4,932 | 589 | 1,042 | 107 | (3,112) | 3,558 |
| Adjusting items (note 4) | (111) | (48) | (19) | - | (156) | (334) |
| Segment result | 4,821 | 541 | 1,023 | 107 | (3,268) | 3,224 |
| Interest expense | (867) | |||||
| Interest income | 67 | |||||
| Profit before tax | 2,424 | |||||
| Taxation | (715) | |||||
| Net profit attributable to equity shareholders | 1,709 | |||||
3. Revenue and profit from business segments (continued)
| Year ended 31 December 2008 | ||||||
| Audited | StoreFit | Store Planning | StoreCare | StoreData | Unallocated | Group |
| £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Revenue | 212,185 | 5,471 | 24,142 | 1,350 | - | 243,148 |
| Adjusted segment result | 7,759 | 1,003 | 1,948 | 231 | (5,486) | 5,455 |
| Adjusting items (note 4) | (4,209) | (33) | (76) | (2) | (402) | (4,722) |
| Segment result | 3,550 | 970 | 1,872 | 229 | (5,888) | 733 |
| Interest expense | (1,786) | |||||
| Interest income | 104 | |||||
| Profit before tax | (949) | |||||
| Taxation | 548 | |||||
| Net loss attributable to equity shareholders | (401) | |||||
Unallocated assets and liabilities include property, plant and equipment, software, cash and cash equivalents, accrued interest payable, current and deferred tax liabilities and borrowings.
Unallocated segment result reflects expenses relating to the Company, including share option expenses, fees for professional advisors and plc Board remuneration, together with those expenses of the group that are not allocated to a business division such as the costs of senior management, central support functions such as finance and certain professional costs.
Adjusting items are the non-recurring items and material contract losses disclosed in note 4. 4. Operating profit
The following items have been included in operating profit for the period:
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| Note | 2009 | 2008 | 2008 | |||
| £'000 | £'000 | £'000 | ||||
| Material losses on contracts | (a) | - | - | (3,545) | ||
| Non-recurring items | ||||||
| Redundancy and related costs | (b) | (269) | (220) | (775) | ||
| Expenses relating to abortive indicative offer for Group | (c) | - | (114) | (262) | ||
| Professional fees - in advance of refinancing | (d) | (756) | - | (140) | ||
| Professional fees - refinancing | (d) | (21) | - | |||
| (1,046) | (334) | (1,177) | ||||
| Total | (1,046) | (114) | (4,722) |
(a) Material losses on contracts
Management estimates in respect of the final outcome of a small number of contracts that were substantially completed during 2007 changed materially during the second half of 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. There were no similar items in the six months ended 30 June 2008 or 2009.
(b) Redundancy and related costs
During both 2008 and 2009 the Group has undertaken programmes of redundancy. Related costs include redundancy and notice payments made to employees together with related legal fees.
(c) Expenses relating to the abortive indicative offer for the Group
During the year ended 31 December 2008 the Group incurred non-recurring expenses of £262,000 in respect of the aborted indicative offer for the Group which was withdrawn on 23 May 2008.
(d) Professional fees
Professional fees in the year ended 31 December 2008 include £135,000 paid in respect of a business review performed on behalf of the Group's Bankers Royal Bank of Scotland and related legal fees.
Professional fees incurred in the six months ended 30 June 2009 in advance of refinancing include fees paid to advisors as the Company explored a number of options to strengthen its balance sheet. Fees incurred as part of the refinancing reflect fees and expenses relating to the refinancing which could not be directly attributed to the cost of debt or equity. Further details can be found in note 2.
5. Finance costs
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £'000 | £'000 | £'000 | ||||
| Interest expense: | ||||||
| Interest on bank borrowings | 372 | 740 | 1,545 | |||
| Interest payable on other borrowings | 20 | 57 | 70 | |||
| Amortisation of debt issue costs: | ||||||
| Costs relating to existing facility - amortised prior to refinancing | 132 | 70 | 171 | |||
| Costs relating to existing facility - written off on refinancing | 379 | - | - | |||
| Other bank charges | 74 | - | - | |||
| Total interest payable and similar charges | 977 | 867 | 1,786 | |||
| Interest income: | ||||||
| Interest receivable | (20) | (67) | (104) | |||
| Total interest receivable | (20) | (67) | (104) |
Amortisation of debt issue costs in the six months ended 30 June 2009 reflects the full write-off of issue costs, relating to the Group's banking facilities which were replaced as part of the refinancing completed on 29 June 2009. Costs of £807,000 relating to the new facility were capitalised on 29 June 2009 and will be amortised over the life of the facility.
6. Taxation
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate for the full financial year and reflects the reduction in the statutory rate of corporation tax in April 2008 from 30% to 28%.
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £'000 | £'000 | £'000 | ||||
| Taxation comprises: | ||||||
| Current tax | (20) | 688 | (427) | |||
| Deferred tax | (315) | 27 | (121) | |||
| (335) | 715 | (548) | ||||
7. Earnings per share
Details of the earnings and the number of shares used in the calculation are set out below:
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| (restated) | (restated) | |||||
| (Loss)/profit attributable to equity holders of the Group (£'000) | (780) | 1,709 | (401) | |||
| Weighted average number of shares in issue | 8,160,666 | 7,561,078 | 7,561,078 | |||
| Basic and diluted (loss)/earnings per share (pence per share) | (9.6) | 22.6 | (5.3) | |||
The weighted average number of shares in issue for all periods presented reflects the share consolidation that took place on 29 June 2009, together with the impact of the open offer made to existing shareholders as part of the refinancing.
On 29 June 2009 the Company issued 15,000,000 convertible preference shares which are convertible into 16,0000,000 ordinary shares. These shares are not currently dilutive.
Share options in issue within the Group are not considered to be dilutive.
8. Dividend
The Board does not consider it appropriate to pay an interim dividend (2008: 0.25p per 1p ordinary share or 6.25p per 25p ordinary share post share consolidation).
9. Financial liabilities: bank borrowings
| Unaudited | Unaudited | Audited | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £'000 | £'000 | £'000 | ||||
| Current | 1,000 | 3,500 | 4,000 | |||
| Less: unamortised issue costs | (344) | (113) | (216) | |||
| 656 | 3,387 | 3,784 | ||||
| Non current | 5,900 | 24,000 | 22,000 | |||
| Less: unamortised issue costs | (462) | (124) | (295) | |||
| 5,438 | 23,876 | 21,705 | ||||
| Total bank borrowings | 6,094 | 27,263 | 25,489 |
Following the refinancing which took place on 29 June 2009 the Group's borrowing facilities comprise a £6.9m term loan and a £4.0m revolving credit facility. The term loan was fully drawn down at 30 June 2009 and is repayable in instalments between 2010 and 2013. The revolving credit facility was not drawn down at 30 June 2009. Further details can be found in note 2.
The movement in bank borrowings can be analysed as follows:
| Unaudited | Unaudited | Audited | ||||
| 6 months ended 30 June | 6 months ended 30 June | Year ended 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £'000 | £'000 | £'000 | ||||
| Opening amount at 1 January | 25,489 | 28,693 | 28,693 | |||
| Capitalisation of debt issue costs | (806) | - | (375) | |||
| Amortisation of debt issue costs (note 5) | 511 | 70 | 171 | |||
| Repayment of bank loans | (3,339) | (1,500) | (3,000) | |||
| Debt for equity swap - ordinary shares | (2,661) | - | - | |||
| Debt for equity swap - deferred ordinary shares | (5,000) | - | - | |||
| Debt for equity swap - convertible preference shares | (15,000) | - | - | |||
| Draw down of new bank loans | 6,900 | - | - | |||
| Closing amount at 30 June/31 December | 6,094 | 27,263 | 25,489 |
Other borrowings comprise bank guaranteed unsecured loan notes. The loan notes redeemed in the period were redeemed out of the restricted cash balance.
10. Called up share capital
| Unaudited | Unaudited | Audited | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £ | £ | £ | ||||
| (restated (a)) | (restated (a)) | |||||
| Authorised | ||||||
| Ordinary share capital | ||||||
| 83,800,000 ordinary shares of 25p each (2008: 4,000,000) | (a) | 20,950,000 | 1,000,000 | 1,000,000 | ||
| 20,000,000 non voting deferred ordinary shares of 25p each (2008: nil) | (b) | 5,000,000 | - | - | ||
| 25,950,000 | 1,000,000 | 1,000,000 | ||||
| Preference share capital | ||||||
| 15,000,000 convertible preference shares of £1 each (2008: 50,000) | (c) | 15,000,000 | 50,000 | 50,000 | ||
| Total authorised share capital | 40,950,000 | 1,050,000 | 1,050,000 | |||
| Issued and fully paid | ||||||
| Ordinary share capital | ||||||
| 61,823,831 ordinary shares of 25p each (2008: 2,579,746) | (a) | 15,455,958 | 644,936 | 644,936 | ||
| 20,000,000 non voting deferred ordinary shares of 25p each (2008: nil) | (b) | 5,000,000 | - | - | ||
| 20,455,958 | 644,936 | 644,936 | ||||
| Preference share capital | ||||||
| 15,000,000 convertible preference shares of £1 each (2008: nil) | (c) | 15,000,000 | - | - | ||
| Less: amounts classified as liabilities | (c) | (7,000,000) | - | - | ||
| Total issued and fully paid share capital | 28,455,958 | 644,936 | 644,936 |
At 30 June 2008 and 31 December 2008 the Group had in issue 64,493,641 Ordinary Shares of 1p each. As part of the refinancing the Group consolidated its ordinary share capital whereby each 25 existing ordinary shares of 1p each were consolidated into 1 new ordinary share of 25p each. The 64,493,641 1p ordinary shares were therefore consolidated into 2,579,476 new 25p ordinary shares.
The 20,000,000 non voting deferred ordinary shares were issued to the Group's bankers, Royal Bank of Scotland plc as part of the debt equity swap that took place on 29 June 2009.
The 15,000,000 convertible preference shares were issued to the Group's bankers, Royal Bank of Scotland plc as part of the debt equity swap that took place on 29 June 2009. Due to the nature of the conversion rights attached to the preference shares issued as part of the refinancing, these instruments have been accounted for through the bifurcation of their liability and equity components based on their respective fair values, with the liability component being valued at £7.0m and the equity component valued at £8.0m.
Further information on the refinancing, including the shareholder circular and prospectus can be found in the Investors centre section of the Group's website www.stylesandwood.co.uk.
11. Notes to the cash flow statement
| Unaudited | Audited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £'000 | £'000 | £'000 | ||||
| (Loss)/profit for the period | (780) | 1,709 | (401) | |||
| Adjustments for: | ||||||
| Interest payable and similar charges | 977 | 867 | 1,786 | |||
| Taxation | (335) | 715 | (548) | |||
| Interest receivable | (20) | (67) | (104) | |||
| Depreciation and amortisation | 245 | 278 | 545 | |||
| Share option scheme | 32 | (67) | (48) | |||
| Operating cash flows before movement in working capital | 119 | 3,435 | 1,230 | |||
| Changes in working capital: | ||||||
| Decrease/(increase) in trade and other receivables | 7,802 | (13,381) | 502 | |||
| (Decrease)/increase in trade and other payables | (15,836) | 6,715 | 1,690 | |||
| Cash (used in)/generated from operations | (7,915) | (3,231) | 3,422 | |||
12. Contingencies
The Group takes out performance bonds in the ordinary course of business.
The aggregate amount of such bonds outstanding at 30 June 2009 was £171,800 (30 June 2008: £195,000, 31 December 2008: £195,000). The aggregate amount of bonds outstanding at 30 June 2009 on projects where practical completion has been achieved was £nil (30 June 2008: £195,000, 31 December 2008: £195,000).
In addition the Group had taken out Advanced Payment Guarantees and Tender Bonds to the value of £760,951 at 30 June 2008 (30 June 2008: £nil, 31 December 2008: £482,243)
It is not anticipated that any material liabilities will arise from the contingencies. The Group has no capital commitments.
13. Related party transactions
The directors are considered to be the key management personnel of the Group. Their aggregate remuneration for the period was as follows:
| Unaudited | Unaudited | Audited | ||||
| 6 months ended | 6 months ended | Year ended | ||||
| 30 June | 30 June | 31 December | ||||
| 2009 | 2008 | 2008 | ||||
| £'000 | £'000 | £'000 | ||||
| Salaries, fees and short term benefits | 301 | 371 | 886 | |||
| Pension contributions | 39 | 63 | 111 | |||
| 340 | 434 | 997 | ||||
In the six months ended 30 June 2009 the Group paid fees of £18,750 to Rickitt Mitchell & Partners Limited, corporate finance advisers to the Group, in respect of Paul Mitchell's services as a non-executive director (six months ended 30 June 2008: £17,500, year ended 31 December 2008: £35,000).
In addition the Group paid fees of £5,000 to Rickitt Mitchell & Partners Limited in respect of corporate finance advice (six months ended 30 June 2008: £nil, year ended 31 December 2008: £nil).