Styles & Wood Group Regulatory News (STY)

RNS Number : 6533R

Styles & Wood Group PLC

26 August 2010

 

26 August 2010

 

 

STYLES & WOOD GROUP PLC

 

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

 

 

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

Styles & Wood Group plc, a leading provider of property services to premier UK retailers and office occupiers, announces its interim results for the six months ended 30 June 2010.

 

Financial results

 

·; Revenue £40.2m (H1 2009: £74.8m)

·; Gross margin 7.4% (H1 2009: 6.1%)

·; Operating loss £0.1m (H1 2009: loss of £0.2m)

·; Underlying* loss before tax £0.5m (H1 2009: profit £0.4m)

·; Loss before tax £0.9m (H1 2009: loss of £1.1m)

·; Net cash** position £5.3m (H1 2009: £8.7m)

·; Cash outflow from operations £1.1m (H1 2009: £7.9m)

·; Loss per share 1.3p (H1 2009: loss per share 9.6p)

 

 

Operational highlights

·; Order book at 30 June 2010 more than 10% ahead of prior year

·; Successful wins during H1 2010 include: Lloyds Banking Group Framework, Harrods,

Selfridges, Merlin Entertainments, Makro and Bruntwood

·; Effect of cost reductions in 2009 feeding through to business performance

·; Strengthened team with Neal Handforth, Service and Development Director

·; Continued strategic drive into the Office and Banking sector which now represents 38% of

Group revenues

·; Board anticipates significant H2 weighting and a return to profitability in this financial year

 

* excluding non-recurring items and notional interest on preference shares

** net cash excludes preference share capital accounted for as debt

 

Ivan McKeever, CEO commented:

 

"Trading conditions in our major markets remained difficult in the first half of this year. However I am pleased with the progress we have made against our turnaround strategy and despite the extremely challenging market conditions we expect to return the business to profitability in this financial year.

 

The Group continues to have a strong balance sheet, and a sustained focus on cost control and cash management. Margins continue to improve in line with our strategy to focus on profitable projects rather than market share. Importantly we have started to see a return in market confidence in the business, as customers take comfort from the financial strength of the Company.

 

Our drive into the Office and Banking sector has helped to offset the continued weakening of the Retail sector. Approximately 38% of Group revenue for the first half came from Office and Banking.

After a difficult first few months in 2010 there are encouraging signs that the turnaround plan is beginning to take effect. Our order book has strengthened over the last quarter and at 30 June stood more than 10% above the position 12 months earlier. We therefore anticipate a significant weighting towards the second half of the year in both revenue and profitability.

Having successfully refinanced the Group in 2009 our objective is to return the business to profitability in 2010 before growing market share in 2011. As the business continues to strengthen the Board is confident that it can deliver on this strategy."

 

 

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 / Latika Shah
Shore Capital and Corporate Limited	Tel: 020 7408 4090
Pascal Keane/Edward Mansfield

 

 

 

Overview

The Group has delivered results in the first six months of 2010 that reflect the tough market backdrop with revenue down from prior years.

In response to the recession, customers continued to reduce their store investment programmes and remained intent on applying pressure to their supply chains in the competitive market environment. The Group's performance was also affected by reduced order intake in the second half of 2009 as customer confidence took time to recover following the refinancing and restructuring.

Despite this, we were pleased to have won a number of new customers and framework renewals in the first six months across Retail, Office and Banking. These include Lloyds Banking Group, Harrods, Selfridges, Merlin, Makro and Bruntwood. The new client wins in H1 2010 will translate into revenue in the second half of the year and into 2011.

In recent weeks, we have witnessed an improvement in customer orders and are beginning to see momentum build in the business. The June order intake was the largest monthly order take for more than two years and at 30 June 2010 the H2 2010 order book was more than 10% higher than at the same point in 2009. We are pleased that confidence continues to be restored across our customer base and we therefore anticipate that there will be a heavy second half weighting to the full year results as the Group moves back into profitability in line with its strategy.

Group results

The Group's revenues for the six months to 30 June 2010 were £40.2m (H1 2009: £74.8m). The total loss before tax, after charging notional preference share interest of £0.4m (H1 2009: £nil), was £0.9m (H1 2009: loss before tax £1.1m).

The underlying operating loss was £0.1m (H1 2009: profit of £0.9m) and underlying net finance costs were £0.3m (H1 2009: £0.5m).

Our focus on profitable projects and business efficiency has helped strengthen gross margins, which have improved to 7.4% (H1 2009: 6.1%) and continued cost control has seen underlying administrative expenses fall to £3.1m (H1 2009: £3.7m).

The Group's restructuring was largely completed in 2009 and there have been no non-recurring costs during the first half of this year (2009: £1.5m).

Since the refinancing, the Group has remained in a robust financial position, with net cash at the half year of £5.3m (H1 2009: £8.7m). The strong cash position following the successful refinancing in 2009 has been maintained. In addition to these cash balances the Group has additional undrawn committed facilities of £4.0m.

The loss per share of 1.3p (H1 2009: loss per share of 9.6p) reflects the open offer and share consolidation which took place in June 2009, Like for like, the loss per share would be 9.7p, broadly in line with the loss per share for the first half of 2009.

Results by division

Our Construction Services business (StoreFit), our core business, provides fit out services to major retailers and banking customers. The division generated revenues of £32.6m (H1 2009: £64.5m) and operating profit of £1.1m (H1 2009: £1.8m).

Our Support Services businesses (StorePlanning, StoreCare and iSite) generated revenues of £7.6m (H1 2009: £10.3m), and operating profit of £0.5m (H1 2009: £1.3m), contributing 32% (H1 2008: 42%) to the Group's earnings before central costs. We continue to expect this to be a solid business, as customers continue to demand a broad service offer.

Results by vertical market

Retail

Revenue from the retail sector represented 62% of the Group's revenues in the six months ended 30 June 2010 (H1 2009: 77%).

The retail market continues to decline as customers limit capital expenditure and apply pressure on suppliers in terms of pricing. However, the Company has successfully followed a strategy of focusing on profitable projects and winning new customers which will deliver results in the second half of 2010.

During the period, the Group secured premium retail brands such as Harrods, Selfridges and Merlin Entertainments. The Group worked on the Legoland Discovery Centre for Merlin Entertainments in The Trafford Centre in Manchester and will be conducting engineering, cosmetic and electrical upgrades for Harrods as well as installing an atrium and light-well in Selfridges' Manchester store.

In addition, the Group completed design, refurbishment and fit out work for existing customers Argos, Boots and Primark during the period. In the second half, the business will deliver two new Primark stores and refurbish more than 30 Argos stores.

The business continues to trade with major food retail brands, including Tesco, ASDA, Morrisons, The Co-Operative Group and Lidl.

Key highlights in this sector for the first six months include the Group's first major refurbishment of a Morrisons store in Bradford, the completion of work on two Lidl stores, the rebranding of 10 Co-operative stores and securing new customer Makro. Our StoreCare business continues to manage a store maintenance programme for Asda and our iSite business provides a Property Information System to Tesco.

Office and Banking

The Group has continued its strategic drive into the Office and Banking sector, Management anticipate that nearly half of the Group's full year revenue will be generated from this sector alone. Revenue from Office and Banking represents 38% of the Company's total revenue in the six month ended 30 June 2010 (H1 2009: 23%).

The Group responded to the decline in Retail by focusing on the Office and Banking sector. Market share has grown quickly with key customers now including Lloyds Banking Group, Barclays, Nationwide, RBS, Trillium, Mapeley and more recently Bruntwood.

Highlights in the first six months include winning a position on the Lloyds Banking Group framework and winning our first refurbishment project for Bruntwood. In addition, this year, we will have refreshed circa 100 stores for Barclays. The outlook for the second half of the year continues to look positive for this sector. We have a strong order book, including the refurbishment of around 40 branches for RBS.

As widely reported, the Office sector has experienced a strong downturn during the recession, mainly as a result of the slowdown in new office construction projects. Independent research indicates that the market will continue to decline until 2012. However, the demand for high quality office space in London is showing signs of improvement. Styles&Wood is cautiously confident that the business will outperform the market turnaround and continue to identify opportunities within this sector.

We therefore see the Office and Banking sector as a key growth area for the Group. We have a dedicated office in London and are investing in new talent to help us drive this forward. We are pleased to have appointed Neal Handforth from Balfour Beatty as Service and Development Director and will look to further strengthen the team as the Group expands its foothold in the sector.

Cash flow

As at 30 June 2010 the Group had net cash of £5.3m (H1 2009: net cash £8.7m) and had undrawn facilities of £4.0m (H1 2009: £4.0m).

 

In the first half of the year the Group used £1.1m of cash in operations (H1 2009: £7.9m), reflecting the reduction in revenue from the second half of 2009. Other material cash flows included an advance of £1.5m to the Group's joint venture in Dubai and a term loan repayment of £1.0m.

Taxation

The Group's effective tax rate of 15% (H1 2009: 8%) is affected by the non deductibility of notional preference share interest. Excluding this notional interest gives an effective rate of 28%. Tax losses generated in the first half of the year are expected to be recovered as the Group returns to profitability in the second half of the year.

Dividend

The Board is not declaring an interim dividend for the period (H1 2009: nil).

Strategy

The Board is focused on delivery of its three year turnaround strategy under the banner of "Expand our Horizons". Having successfully stabilised the business's finances in 2009, the objective for 2010 is to return the business to profitability through improving margins and quality and by focusing on new market opportunities. During 2011 we will invest for growth in order to improve market share and outperform the wider market.

Our Retail pedigree will remain core to our business and as the economy improves we are confident that retailers will increase their store investment plans. We will continue our strategy of maintaining our position within the Retail sector and seek to grow existing and new customers.

The expansion of the Group's Office and Banking sector has served us well. We have made good progress in this sector, and with our new focus on the London market, we expect to capitalise on this position in 2010 and into 2011. In addition, we will continue to assess opportunities to enter new sectors based on their strategic fit with our business.

Risks and uncertainties

 

The Group continues to review and manage the risks it faces. The key risks and uncertainties, which are unchanged from those set out in the Annual Report & Financial Statements for the year ended 31 December 2009, are as follows:

 

·; Operating safely -Ensuring we work safely is a core value of the business and the health and safety of everyone engaged or involved in our projects is of absolute priority. It is critical to the sustainability of our business and we are committed to the on-going development of our people, suppliers and processes to ensure our overarching strategy of creating injury free sites is achieved. Our focus this year primarily is in three areas: accident and incident investigation; near miss reporting; and 'business aligned' training.

·; Marketplace - the Group remains focused on its key markets of Retail, Office and Banking and our work continues to have the potential to be impacted by reductions in customer spending. We continue to pursue framework arrangements with existing and new clients and aim to grow our market share whilst continuing to assess opportunities to enter new sectors.

·; Profitability - the Group continues to focus on delivering profitable work and ensuring its cost base is aligned to the level of business available in the current economic climate.

 

·; Colleagues - retention and motivation of colleagues is a key challenge for the business. In 2010 we have introduced a flexible benefits scheme for all colleagues and are reviewing our training programme to further align it with annual performance appraisals. In the first half of the year we have continued to communicate with colleagues through our Employee Focus Group and held an internal conference for our Construction Services business (StoreFit).

 

·; Delivery and procurement - delivering projects to customer expectations on time, cost, quality and with innovation determines the level of work that is allocated by our customers. In 2010 we continue to focus on improving delivery and driving consistent best practice through our business. Our supply chain is critical to improving the value and quality of the work we deliver.

 

All the above risks apply to the second half of the year. There are encouraging indicators within the business for an improvement in the second half of the year. Performance in the second half of the year will be influenced by our continued focus on and ability to manage these risks.

Outlook

Following the refinancing, the Group remains in a strong financial position to weather the economic downturn. The Group's performance in the first half reflects the extremely challenging market conditions. It is expected that the full year results for 2010 will be heavily second half weighted.

Importantly, we have minimal exposure to the public sector. However Government cutbacks may prove to be an opportunity for the Group as the public sector procurement strategy is likely to move towards refurbishment of buildings rather than constructing new schools, prisons and other public buildings.

The Group continues to have a strong balance sheet and margins and operational performance have improved. Following the largest order intake for a one month period for more than two years, the Group's Order Book at 30 June 2010 was more than 10% ahead of the same point in 2009 which strengthens our confidence that our business turnaround strategy is beginning to take effect.

We currently have 90% visibility of expected revenue for the year. With our order book expanding, we expect to return to profitability in 2010, as the turnaround strategy builds momentum.

The Board remains confident that the Group is well positioned to maintain a market leading position both during this challenging period and in the upturn.

 

 

 

Consolidated Income Statement		Unaudited				Unaudited				Audited
For the six months ended 30 June 2010		6 months ended				6 months ended				Year ended
		30 June 2010				30 June 2009				31 December 2009
	Notes	Underlying	Preference share accounting   (note 3)	Total		Underlying	Non-recurring items   (note 3)	Total		Underlying	Non-recurring items and preference share accounting (note 3)	Total
		£'000	£'000	£'000		£'000	£'000	£'000		£'000	£'000	£'000
Continuing operations
Revenue	2	40,151	-	40,151		74,800	-	74,800		139,290	-	139,290
Cost of sales		(37,158)	-	(37,158)		(70,237)	-	(70,237)		(130,334)	-	(130,334)
Gross profit		2,993	-	2,993		4,563	-	4,563		8,956	-	8,956
Administrative expenses		(3,127)	-	(3,127)		(3,675)	(1,046)	(4,721)		(7,108)	(1,676)	(8,784)
Operating (loss)/profit	2,3	(134)	-	(134)		888	(1,046)	(158)		1,848	(1,676)	172
Finance expense	4	(360)	(446)	(806)		(523)	(454)	(977)		(886)	(874)	(1,760)
Finance income	4	32	-	32		20	-	20		74	-	74
Share of results of joint venture	14	(26)	-	(26)		-	-	-		(299)	-	(299)
(Loss)/profit before tax		(488)	(446)	(934)		385	(1,500)	(1,115)		737	(2,550)	(1,813)
Tax credit/(charge)	5	139	-	139		42	293	335		(162)	310	148
(Loss)/profit for the period attributable to equity shareholders		(349)	(446)	(795)		427	(1,207)	(780)		575	(2,240)	(1,665)
Basic and diluted (loss)/earnings per share, expressed in pence per share	6	(0.6)p	(0.7)p	(1.3)p		5.2p	(14.8)p	(9.6)p		1.6p	(6.4)p	(4.7)p

 

There is no difference between the loss for the period and the total comprehensive income for the period. Accordingly no separate statement of comprehensive income has been presented.

 

Underlying results are shown before charging non-recurring expenses (note 3) and accounting for notional interest on preference shares (note 10).

 

 

Consolidated Statement of Changes in Equity
For the six months ended 30 June 2010
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 2009		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)
Loss for the period		-		-		-		-		(885)		(885)
Share option scheme		-		-		-		-		23		23
Preference share notional interest	10	-		(420)		-		-		420		-
At 31 December 2009		20,456		7,580		16,300		(66,665)		16,557		(5,772)
Loss for the period		-		-		-		-		(795)		(795)
Share option scheme		-		-		-		-		81		81
Preference share notional interest	10	-		(446)		-		-		446		-
At 30 June 2010		20,456		7,134		16,300		(66,665)		16,289		(6,486)

 

 

 

Consolidated Balance Sheet
As at 30 June 2010		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
	Notes	2010		2009		2009
		£'000		£'000		£'000
Non current assets
Intangible assets - software		66		175		111
Property, plant and equipment		422		508		408
Deferred tax asset	5	510		558		371
		998		1,241		890
Current assets
Trade and other receivables		19,334		28,590		19,838
Amounts owed by joint venture		1,461		-		-
Cash and cash equivalents		10,613		15,752		14,646
		31,408		44,342		34,484
Current liabilities
Trade and other payables		(25,371)		(36,177)		(27,096)
Share of net liabilities of joint venture	14	(98)		-		(72)
Financial liabilities: bank borrowings	8	(761)		(656)		(761)
Financial liabilities: guaranteed unsecured loan notes		(97)		(944)		(218)
Current tax liabilities		(277)		(278)		(277)
		(26,604)		(38,055)		(28,424)
Net current assets		4,804		6,287		6,060
Total assets less current liabilities		5,802		7,528		6,950
Non current liabilities
Financial liabilities: bank borrowings	8	(4,422)		(5,438)		(5,302)
Financial liabilities: preference shares	10	(7,866)		(7,000)		(7,420)
		(12,288)		(12,438)		(12,722)
Net liabilities		(6,486)		(4,910)		(5,772)
Shareholders' equity
Ordinary share capital		20,456		20,456		20,456
Preference share capital	10	7,134		8,000		7,580
Share premium		16,300		16,300		16,300
Reverse acquisition reserve		(66,665)		(66,665)		(66,665)
Retained earnings		16,289		16,999		16,557
Total shareholders' deficit		(6,486)		(4,910)		(5,772)

 

 

 

 

 

 

Consolidated Statement of Cash Flows
For the six months ended 30 June 2010
		Unaudited		Unaudited		Audited
		6 months Ended		6 months ended		Year ended
		30 June		30 June		31 December
	Notes	2010		2009		2009
		£'000		£'000		£'000
Cash used in operations	11	(1,093)		(7,915)		(7,382)
Income taxes repaid		-		361		361
Net cash used in operating activities		(1,093)		(7,554)		(7,021)
Cash flows used in investing activities
Purchase of property, plant and equipment		(126)		(12)		(29)
Purchase of intangible assets - software		(13)		(4)		(79)
Investment in joint venture		-		-		(227)
Amounts advanced to joint ventures		(1,461)		-		(72)
Net cash used in investing activities		(1,600)		(16)		(341)
Cash flows used in financing activities
Interest received		49		20		66
Interest paid		(268)		(400)		(628)
Drawdown of borrowings		-		6,900		6,900
Repayment of borrowings		(1,000)		(3,339)		(3,339)
Capitalised debt issue costs		-		(683)		(807)
Other bank charges		-		-		(75)
Issue of share capital		-		12,150		12,150
Share issue costs		-		(832)		(1,039)
Net cash (used in)/generated from financing activities		(1,219)		13,816		13,228
Net (decrease)/increase in cash and cash equivalents		(3,912)		6,246		5,866
Cash and cash equivalents at beginning of period		14,428		8,562		8,562
Cash and cash equivalents at end of period		10,516		14,808		14,428

 

For the purposes of the cash flow statement, cash and cash equivalents excludes restricted cash of £97,000 (30 June 2009: £944,000, 31 December 2009: £218,000).

 

 

 

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 2010 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 2009 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 as described below:

·; Taxes on income in the interim periods are accrued using the tax rate that would be applicable to total expected annual earnings.

 

This condensed consolidated interim financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The interim results to 30 June 2010 and comparative results to 30 June 2009 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 2009 which have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph nor any statement under section 498 of the Companies Act 2006.

 

These condensed consolidated interim results were approved for issue on 26 August 2010.

 

The following new standards and amendments to standards are mandatory for the first time for the year beginning 1 January 2010:

·; Amendments to IFRS2 "Share based payments" on group cash-settled transactions. These amendments have no impact on the Group.

·; IFRS 1 (revised) "First time adoption. This does not contain any technical changes and so has no impact on the Group.

·; IFRS3 "Business combinations" and consequential amendments to IAS27, IAS 28 and IAS 31. This has no current impact on the Group and would only impact any future business combinations.

·; IAS27 "Consolidated and separate financial statements". This currently has no impact on the Group as it deals with non-controlling (minority) interests.

 

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2010, but are not currently relevant to the Group:

·; Amendment to IAS39 "Financial Instruments: Recognition and measurement" on "Eligible hedged items".

·; IFRIC17 "Distributions of non-cash assets to owners"

·; IFRIC18 "Transfer of assets from customers"

·; Additional exemptions for first time adopters (amendment to IFRS 1). This is not relevant as the Group is not a first time adopter.

 

The following new standards, amendments to standards or interpretations have been published, but are not effective for the financial year beginning 1 January 2010 and have not been adopted early:

·; IFRS 9 "Financial Instruments"

·; IAS24 Revised "Related Party Transactions"

·; Amendment to IAS32 "Financial Instruments: Presentation" on classification or rights issues

·; IFRIC19 "Extinguishing financial liabilities with equity instruments

2. Revenue and profit from business segments

 

6 months ended 30 June 2010
Unaudited	StoreFit	Store Planning	StoreCare	iSite (formerly StoreData)	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	32,636	1,287	5,646	582	-	40,151
Segment result	1,137	58	377	105	(1,811)	(134)
Finance expense						(806)
Finance income						32
Share of results of joint venture						(26)
Loss before taxation						(934)
Taxation						139
Loss for the period from continuing operations						(795)

 

6 months ended 30 June 2009
Unaudited	StoreFit	Store Planning	StoreCare	iSite (formerly StoreData)	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	64,465	1,994	7,752	589	-	74,800
Underlying segment result	1,858	419	796	103	(2,288)	888
Non recurring items (note 3)	(108)	(22)	(38)	-	(878)	(1,046)
Segment result	1,750	397	758	103	(3,166)	(158)
Finance expense						(977)
Finance income						20
Share of results of joint venture						-
Loss before taxation						(1,115)
Taxation						335
Loss for the period from continuing operations						(780)

2. Revenue and profit from business segments (continued)

 

Year ended 31 December 2009
Audited	StoreFit	Store Planning	StoreCare	iSite (formerly StoreData)	Unallocated	Group
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	119,221	3,483	15,364	1,222	-	139,290
Underlying segment result	4,040	526	1,113	257	(4,088)	1,848
Non-recurring items (note 3)	-	-	-	-	(1,676)	(1,676)
Segment result	4,040	526	1,113	257	(5,764)	172
Finance expense						(1,760)
Finance income						74
Share of results of joint venture						(299)
Loss before tax						(1,813)
Taxation						148
Loss for the period from continuing operations						(1,665)

 

Operating segments are reported in a manner consistent with the internal reporting to the Board of Directors 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 administrative overheads, share option expenses, fees for professional advisers and senior management and director's remuneration.

3. Non-recurring items and preference share accounting

 

The Group's results include the following items:

 

		Unaudited		Unaudited		Audited
		6 months ended		6 months Ended		Year ended
		30 June		30 June		31 December
	Note	2010		2009		2009
		£'000		£'000		£'000
Charged to administrative items:
Restructuring, redundancy and related costs	(a)	-		(269)		(850)
Professional fees - in advance of refinancing	(b)	-		(756)		(756)
Professional fees - refinancing	(b)	-		(21)		(70)
Total charged to operating (loss)/profit		-		(1,046)		(1,676)
Charges to finance expense:
Debt issue costs written off on refinancing	(c)	-		(379)		(379)
Other bank charges	(c)	-		(75)		(75)
Notional interest on preference shares	Note 10	(446)		-		(420)
Total charged to finance expense		(446)		(454)		(874)
Total non-recurring items before tax		(446)		(1,500)		(2,550)
Tax on non-recurring items	(d)	-		293		310
Total non-recurring items after tax		(446)		(1,207)		(2,240)

 

 

(a) During 2009 the Group undertook programmes of redundancy. Related costs include redundancy and notice payments made to employees together with related legal fees. There were no significant similar costs during 2010.

 

(b) Professional fees incurred in the year ended 31 December 2009 in advance of the refinancing, which took place on 29 June 2009, included fees paid to advisers as the Company explored a numbers of options to strengthen its balance sheet. Fees incurred as part of the refinancing reflect fees and expenses relating to the refinancing that could not be directly attributed to the cost of debt or equity.

 

(c) Upon refinancing the Group wrote off £379,000 in respect of capitalised debt issue costs relating to a previous bank facility. Other bank charges of £75,000 were paid to the Group's bankers in respect of a covenant reset prior to the arrangement of the new facility.

 

(d) Tax on non-recurring items reflects the non-deductibility of certain non-recurring costs, primarily those relating to the refinancing, including the notional preference share interest (note 10) and also the non-recovery of tax losses which are not expected to be recovered in future years.

 

4. Finance costs

 

		Unaudited		Unaudited		Audited
		6 months Ended		6 months ended		Year ended
		30 June		30 June		31 December
		2010		2009		2009
		£'000		£'000		£'000
Interest expense:
Interest on bank borrowings		239		371		610
Interest payable on other borrowings		1		20		25
Amortisation of debt issue costs:
·; Costs relating to previous facility amortised prior to refinancing		-		132		132
·; Costs relating to existing facility - written off on refinancing		-		379		379
·; Costs relating to new facility amortised following refinancing		120		-		119
Other bank charges		-		75		75
Notional interest on preference shares (note 10)		446		-		420
Total interest payable and similar charges		806		977		1,760
Interest income:
Interest receivable		(32)		(20)		(74)
Total interest receivable		(32)		(20)		(74)

 

5. 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.

 

		Unaudited		Unaudited		Audited
		6 months ended		6 months ended		Year ended
		30 June		30 June		31 December
		2010		2009		2009
		£'000		£'000		£'000
Taxation comprises:
Current tax		-		(20)		(20)
Deferred tax		(139)		(315)		(128)
		(139)		(335)		(148)

 

Deferred tax is calculated based on the current statutory rate if 28%. Proposed changes to reduce the corporation tax rate by 1% per annum from 28% to 24% have not been reflected as they have not yet been enacted, but are not expected to have a material impact on the deferred tax asset.

6. Earnings per share

 

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

 

Six months ended 30 June 2010		Underlying		Preference Share Accounting		Total
Loss attributable to equity holders of the Group (£'000)		(349)		(446)		(795)
Weighted average number of shares in issue		61,823,831		61,823,831		61,823,831
Basic and diluted loss per share (pence per share)		(0.6)		(0.7)		(1.3)

 

 

Six months ended 30 June 2009		Underlying		Non-recurring Items		Total
Profit/(loss) attributable to equity holders of the Group (£'000)		427		(1,207)		(780)
Weighted average number of shares in issue		8,160,666		8,160,666		8,160,666
Basic and diluted earnings/(loss) per share (pence per share)		5.2		(14.8)		(9.6)

 

Year ended 31 December 2009		Underlying		Non-recurring items and preference  share accounting		Total
Profit/(loss) attributable to equity holders of the Group (£'000)		575		(2,240)		(1,665)
Weighted average number of shares in issue		35,212,782		35,212,782		35,212,782
Basic and diluted (loss)/earnings per share (pence per share)		1.6		(6.4)		(4.7)

 

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 that refinancing. The Company has in issue 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.

 

7. Dividend

 

The Board does not consider it appropriate to pay an interim dividend (2009: nil).

 

 

8. Financial liabilities: bank borrowings

 

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2009		2009		2009
		£'000		£'000		£'000
Current		1,000		1,000		1,000
Less: unamortised issue costs		(239)		(344)		(239)
		761		656		761
Non current		4,900		5,900		5,900
Less: unamortised issue costs		(478)		(462)		(598)
		4,422		5,438		5,302
Total bank borrowings		5,183		6,094		6,063

 

The Group's borrowing facilities comprise a £5.9m term loan and a £4.0m revolving credit facility (30 June 2009 and 31 December 2009: £6.9m term loan and £4.0m revolving credit facility). The term loan was fully drawn down at 30 June 2010 and is repayable in annual instalments ending in 2013. The revolving credit facility has not been drawn down since it was put in place on 29 June 2009.  

 

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
		2010		2009		2009
		£'000		£'000		£'000
Opening amount at 1 January		6,063		25,489		25,489
Capitalisation of debt issue costs		-		(806)		(956)
Amortisation of debt issue costs (note 4)		120		511		630
Repayment of bank loans		(1,000)		(3,339)		(3,339)
Debt for equity swap - ordinary shares		-		(2,661)		(2,661)
Debt for equity swap - deferred ordinary shares		-		(5,000)		(5,000)
Debt for equity swap - convertible preference shares		-		(15,000)		(15,000)
Draw down of new bank loans		-		6,900		6,900
Closing amount at 30 June/31 December		5,183		6,094		6,063

 

Other borrowings comprise bank guaranteed unsecured loan notes. The loan notes redeemed in the period were redeemed out of the restricted cash balance.

 

9. Net cash

 

Net cash/(debt) excludes preference share capital of £7.9m included within non-current liabilities due to the nature of the conversion rights attached to those shares.

 

		Unaudited		Unaudited		Audited
		6 months ended 30 June		6 months ended 30 June		Year ended 31 December
		2010		2009		2009
Net cash comprises:		£'000		£'000		£'000
Term loan		(5,900)		(6,900)		(6,900)
Loan notes		(97)		(944)		(218)
Add:
Unamortised issue costs		717		806		837
Cash at bank and in hand		10,516		14,808		14,428
Restricted cash		97		944		218
Net cash		5,333		8,714		8,365

 

 

10. Preference share capital

 

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2010		2009		2009
		£		£		£
Preference share capital
15,000,000 convertible preference shares of £1 each (2008: 15,000,000)		15,000,000		15,000,000		15,000,000
Less: amounts classified as liabilities		(7,866,000)		(7,000,000)		(7,420,000)
Total issued and fully paid share capital		7,134,000		8,000,000		7,580,000

 

The 15,000,000 convertible, redeemable preference shares are held by the Group's bankers, Royal Bank of Scotland plc. The conversion rights allow the holder to convert the 15,000,000 preference shares into 16,000,000 ordinary shares at a price of 19.75p per share, in increasing tranches from 31 December 2013 to 31 December 2019. The shares carry a cash coupon of 3% from 1 September 2012 and, unless converted by the holder, are redeemable in increasing tranches from 31 December 2010.

 

Due to the conversion rights attached to the preference shares International Accounting Standards require them to be accounted for by separating the liability and equity components based on their respective fair value on issues. 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 charge and the actual cash coupon is then credited to the profit and loss reserve, reducing the equity component.

 

As no cash coupon is payable in respect of the six months ended 30 June 2010 (year ended 31 December 2009: nil) the full £446,000 of notional interest has been credited back to reserves (year ended 31 December 2009: full £420,000, six months ended 30 June 2009: not applicable as preference shares were issued on 29 June 2009 and interest charge was immaterial).

 

 

11. Notes to the cash flow statement

 

 

		Unaudited		Audited		Audited
		6 months ended		6 months ended		Year ended
		30 June		30 June		31 December
		2010		2009		2009
		£'000		£'000		£'000
Loss for the period		(795)		(780)		(1,665)
Adjustments for:
Interest payable and similar charges		806		977		1,760
Taxation		(139)		(335)		(148)
Interest receivable		(32)		(20)		(74)
Depreciation and amortisation		171		245		438
Share option scheme		81		32		55
Share of loss of joint ventures		26		-		299
Operating cash flows before movement in working capital		118		119		665
Changes in working capital:
Decrease in trade and other receivables		488		7,802		16,333
Decrease in trade and other payables		(1,699)		(15,836)		(24,380)
Cash used in operations		(1,093)		(7,915)		(7,382)

 

 

12. Contingencies

 

The Group takes out performance bonds in the ordinary course of business.

 

The aggregate amount of such bonds outstanding at 30 June 2010 was £447,000 (30 June 2009: £171,800, 31 December 2009: £349,000). The aggregate amount of bonds outstanding at 30 June 2010 on projects where practical completion has been achieved was £nil (30 June 2009: £nil, 31 December 2009: £nil).

 

At 30 June 2010 Styles & Wood Limited had provided counter guarantees in respect of bonds taken out by its joint venture Dutco Styles & Wood LLC, to a value of £47,000 (30 June 2009: £nil, 31 December 2009 £972,000).

 

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
		2010		2009		2009
		£'000		£'000		£'000
Salaries, fees and short term benefits		293		301		612
Pension contributions		38		39		79
Payments in lieu of notice		-		-		199
		331		340		890

 

 

In the six months ended 30 June 2010 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 2009: £18,750, year ended 31 December 2009: £37,500) and paid fees of £nil in respect of corporate finance advice (six months ended 30 June 2009: £5,000, year ended 31 December 2009: £10,000).

 

14. Joint ventures

 

The Group has a 49% investment in Dutco Styles & Wood LLC, a company registered in Dubai. The investment is held by Styles & Wood Limited and the terms of the joint venture agreement entitle Styles & Wood Ltd to jointly control the entity and to a 50% share of the profits of the joint venture.

 

		Unaudited		Unaudited		Audited
		6 months ended		6 months ended		Year ended
		30 June		30 June		31 December
		2010		2009		2009
		£'000		£'000		£'000
Share of net liabilities
At 1 January		(72)		-		-
Investment in the period		-		-		227
Share of losses in the period		(26)		-		(299)
At 30 June/31 December		(98)		-		(72)