Styles & Wood Group Regulatory News (STY)

25 April 2013

STYLES & WOOD GROUP PLC

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

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012

Styles & Wood Group plc, a leading UK provider of integrated property support services including design, building intelligence carbon abatement, programmes and project delivery, announces its preliminary results for the year ended 31 December 2012.

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

"I am pleased to report another year of strategic development as we focus on creating a sustainable platform for continued growth. The improvement in both underlying profit and EPS reflects our success in maintaining a selective approach to new opportunities, whilst simultaneously investing in the future. We have seen the impact of the Group's diversification strategy being realised with a significant level of business being delivered from new strategic sectors.

Although our order book is ahead of last year, market conditions in the first quarter of 2013 have been challenging and competitive pressure remains strong. We are confident that the Group's portfolio of property support services across a number of sectors will provide a solid foundation for sustainable profitable growth as and when the market recovers."

-Ends -

ENQUIRIES:

CHAIRMAN'S STATEMENT

I am pleased to report another good year of strategic development as we focus on creating a sustainable platform for continued growth. There was further improvement in profit, from an underlying profit before tax of £1.8m in 2011 to £2.0m in 2012 on relatively stable revenue. We have seen the benefits of the Group's diversification strategy being realised with 21% of business delivered from

new strategic sectors. This has created genuine resilience and has been a contributory factor in a strengthening order book which is currently 10% ahead of prior year.

Responding to our customers' needs

Key to establishing the right platform for growth has been a clear focus on the needs and requirements of our customers and an ability to offer an holistic property support services solution. This has enabled the business to remain relevant, under particularly challenging market conditions, and has also ensured that we have been able to align our business interests with those of our customers.

Focus and selectivity

It has been important over the course of the year to maintain a selective approach to new opportunities in order to maintain growth in profits whilst, in a strategic sense, investing in the future.

During the year we have had significant successes in sectors with real opportunities for potential growth including Commercial, Education & Healthcare and Carbon Abatement. This diversification, in areas where our historic retail credentials are particularly relevant, provides a sound basis for future sustainable profitable growth.

Recognising our responsibilities

Recognising our corporate responsibilities is not only good business practice but also a necessary

requirement for engagement with all of the Group's stakeholders. Our appointment at national level to the Business in the Community's Market Place Leadership Team and our direct contribution to the development of new industry standards for the sustainable refurbishment of buildings provides

some positive differentiation in this respect. It is also particularly reassuring to note that our commitment to target zero significant accidents on our programmes and projects is now evidenced by an Accident Frequency Rate of 0.07* for 2012.

Organisational development

The year has seen fundamental change on a number of fronts including realignment and strengthening of the Executive Leadership Team. Operational excellence is at the heart of the Group's

ethos. The installation and adoption of a new fully integrated operating platform together with a suite of management systems has delivered improved business performance as well as a broader external expert accreditation of our skills and capabilities. This approach drives confidence which together with our core skills in technical services and business systems' applications helps to provide differentiation in the market place.

Outlook

Market conditions remain extremely challenging and show few signs of an imminent recovery. In such uncertain times it is difficult to predict the outcome for 2013 particularly this early in the year, and whilst we are encouraged by a 10% improvement in our order book, there has been a reduction in order intake in recent weeks. The banking sector continues to be a significant part of our business and has a strong weighting towards the second half of the year. We continue to invest in new markets for long term growth and are pleased with our early progress. This mix of work, combined with increased competition in our market, is however putting significant pressure on margins in the short term.

Our future success relies on the quality and professionalism of our people and we are selectively adding to the team whilst at the same time reducing our numbers where skills do not correspond with the needs of a changing market. On behalf of the Board I would like to thank our colleagues for their hard work, commitment and creativity which should help us this year to maximise our performance in such tough market conditions.

Jim Martin, Non Executive Chairman

*AFR reflects the number of RIDDOR Reportable accidents in period

CHIEF EXECUTIVE OFFICER'S REVIEW

2012 Summary

2012 was an encouraging year in terms of both profit and earnings per share. The Group successfully delivered a 20% increase in operating profit and a fivefold rise in EPS. Importantly, these results

were accompanied by an increase in gross margin to 8.7%, a positive endorsement of the Group's strategy for profitable growth.

A selective approach to new business opportunities has helped establish successful relationships and reference projects in our new strategic sectors. Consolidation of our position as a top performer on frameworks in the banking sector supports sustainable revenue streams, where we have provisionally

been allocated £50m of work for 2013. Our organisational structure, operating platform and management systems have been developed to better support enhanced business performance and

create a more efficient overhead base. Whilst revenue is slightly below the prior year, we successfully secured and delivered £35m of project work for new customers during 2012 and built a carry through project workload of another £15m for 2013.

Challenges and Opportunities for 2013

There is substantive opportunity to pursue growth in our selected strategic sectors. More importantly, the opportunity also exists to leverage our integrated approach to the provision of property support

services to provide a point of difference within our peer group. It is important to ensure that we continue to perform not only to the best of our abilities, but also perform competitively against our peers in order to provide a sound basis for tender success and framework allocation.

We will give consideration to further diversification within 2013, including developing our renewable energy offer. This will continue to alleviate some of the volatility associated with the retail

sector and negative shifts in the overarching economy.

New Reporting Segments

The strategy to expand into new sectors where our skills sets are relevant has also promoted a shift in the nature of our workload. Over 70% of our revenue in 2012 was associated with repeat order customers, down from over 80% in 2011. In excess of 57% of 2012 revenue was allocated through longer-term framework arrangements (2011: 64%). Our reporting segments reflect this changing business landscape with a clear focus on, for the main part, the provision of property support services. This includes professional, refit, refurbish and remodel together, with an associated element of contracting services.

Key Sectors for Growth

The market dynamics created by recession, constrained capital investment and little or no economic growth, establishes a prerequisite for property owners and occupiers to reconsider their options and requirements. The associated changes to property estates and buildings, coupled with other influences such as a necessity for business performance improvement, a challenging cost base, carbon emissions and energy related constraints drive change programmes on a broad front. As a consequence, a significant challenge is created for property support services providers to achieve more with less and to assist in the redefinition of property infrastructure fit for a new purpose.

Growth opportunity has been identified in each of our strategic sectors and associated segments within which we have successfully established reference points which will reinforce our ambitions

for sustainable profitable growth.

Outlook

The order book position for 2013 was in excess of 10% ahead of prior year at week 15. Stronger revenue in the first quarter of 2013 relative to 2012 builds confidence for the future notwithstanding challenging market conditions which have put pressure on margins and have reduced recent order intake. The Group's successful diversification strategy has provided a more resilient platform with 21% of revenue in 2012 coming from new strategic sectors. Growth opportunity is now clearly defined in all of our primary areas of focus:

·; Public & Community - lack of new capital spend and revenue constraints drives rationalisation and refurbishment of existing estates including requirement for green energy solutions

·; Retail & Leisure - niche brands outperforming and food retailers investing in refresh and refit of existing premises and expanding interests in smaller formats

·; Commercial - lack of new space programmed to be released to market drives investment in existing buildings and refurbishment opportunities in particular in London.

·; Banking & Finance - committed capital investment programmes for property portfolios, in the short to medium term, defined by all three of the major high street banks with which we have strategic relationships.

Our ability to deliver a full service line offer to a number of customers, in particular Barclays and Lloyds Banking Group, underscores the relevance of our business model and an ability to differentiate ourselves. We are now in a position where we have a strategically relevant portfolio of business opportunity across a number of sectors and segments which provides a solid foundation for sustainable profitable growth.

Tony Lenehan

Chief Executive Officer

GROUP FINANCE DIRECTOR'S REVIEW

Financial performance

Revenue for the year ended 31 December 2012 reduced by 3.0% to £97.9m (2011: £101.0m). 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

75% of the Group's revenues in the year ended 31 December 2012 (2011: 58%) with the balance coming from the Retail sector where our historic credentials lie.

However, the combination of a changing work mix with continued investment in improving process and maintaining control over costs enabled the Group to deliver an increase in gross margin to 8.7% (2011: 8.2%).

Underlying1 administrative expenses were stable at £6.1m (2011: £6.1m) and included investment in a new larger London office and IT systems. This control of overhead expenditure,

in conjunction with improved gross margin, enabled the business to increase underlying1 operating profit by £0.3m to £2.5m (2011: £2.2m) despite reduced revenues.

Our international joint venture in Dubai delivered a profit to the Group of £0.03m (2011: £0.09m) being our share of the joint venture's profits.

Underlying profit before tax1 increased 11% to £2.0m (2011: £1.8m). Non-recurring expenditure on restructuring of £0.2m (2011: £0.3m) and accounting for notional interest on preference shares of £1.0m (2011:£1.0m) reduced the result to a profit before taxation of £0.8m, up £0.3m on (2011: £0.5m).

Financing costs

Net financing costs for the year were £1.5m (2011: £1.5m) and included £1.0m (2011: £1.0m) of notional interest on preference shares.

Net interest and fees on bank borrowings reduced to £0.1m (2011: £0.2m) following the early repayment of the bank term loan in August 2011. Finance costs include an accrual for the first payment of interest on the preference shares of £0.15m (2011: £Nil), being the 3% cash coupon on

outstanding preference shares which became payable from 1 September 2012.

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 and July 2019.

As the preference shares have a conversion option, the Group has to account for them in accordance with IAS39 with the result that a proportion of the preference share capital is classed as debt with the remainder treated as equity. At 31 December 2012 £1,000,000 (2011: £nil) of the preference share capital was classified as a current liability, being repayable on 31 December 2013 and £9,377,000 (2011: £9,369,000) of the preference share capital was classified as non-current liabilities with the balance of £4,623,000 (2011: £5,631,000) shown as shareholders' equity.

In addition, IAS32 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 2012 was £1,008,000 (2011: £1,031,000), with the cash dividend payable

on the preference shares being £150,000 (2011: £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 £0.5m (2011: £0.4m). This results in an effective tax charge on the profit before tax of 63.0% (2011: 82.5%). The largest factor affecting the effective tax rate

compared to the UK corporation tax rate of 24.5% (2010: 26.5%) is the preference share interest charge of £1.1m (2011: £1.0m) which being part notional charge and part preference share coupon does not qualify for tax relief. Other factors impacting the effective rate are non-deductible expenses and the tax treatment of profits generated by the joint venture.

Dividend

No dividends on ordinary shares have been proposed in respect of the year ended 31 December 2012 (2011: £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 were 0.5p (2011: 0.1p). Underlying1 earnings per share were 2.4p (2011: 2.1p).

Net cash and cash flow

The Group closed the year with net cash at 31 December 2012 of £3.6m (2011: £6.7m) with the net cash having increased by £0.4m (2011: £4.7m) in the second half of the financial year.

The business used net cash of £3.3m in operations (2011: £0.1m) as investment increased in the Group's framework arrangements, particularly in the Banking sector, where the cash flow profile sees the bulk of payments from our customers at the conclusion of projects. Combined with increased

funding to our supply chain, who continue to struggle to secure credit insurance in our market, this drew on the Group's cash reserves.

The Group's continued improvement in profitability saw it pay tax of £0.65m (2011: £0.15m). £0.5m (2011: £0.4m) was used to invest in fixed assets and IT software with the major areas of expenditure being new larger office accommodation in London and a new HR and payroll system. We advanced

£0.3m of cash to our joint venture in Dubai (2011: £0.3m was repaid) as ongoing working capital funding.

The final £1.1m of cash collateral which had been advanced to a surety providing performance bonds to the Group was returned during 2012 (2011: £0.3m). All performance bonds are now placed under the Group's banking facility. The facility, with The Royal Bank of Scotland, was due to expire on 30 June 2013 and was reviewed with the bank following the 2012 year end. A new facility of £4.0m

reducing to £3.5m by 30 June 2014 has now been agreed and will be in place until 30 June 2014.

International

The Group's joint venture operation in the United Arab Emirates was established in May 2009. The business now has 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

£0.03m (2011: £0.09m).

Philip Lanigan

Group Finance Director

1 Before non-recurring expenditure on restructuring.Consolidated income statement

For the year ended 31 December 2012

Consolidated balance sheet

As at 31 December 2012

Consolidated cash flow statement

For the year ended 31 December 2012

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 2012 and 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies and those for 2012, 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.

The financial information has been prepared on the same basis as the statutory accounts for 2011 except for in respect of segmental reporting disclosures which have been amended to fall in line with the Group's new management reporting and are results are now disclosed for the following operating segments. Comparative disclosures have been restated accordingly.

Contracting Services

·; Projects: Styles & Wood fulfils the role of Principal Contractor for projects with typical project values ranging from less than £100,000 to over £10m. Projects range from minor refresh to comprehensive refurbishment, shell fit-out, acquisition conversion, or complex structural re-configuration and renewable solutions.

Professional Services

·; Frameworks: Formal framework agreements with contractors and suppliers create the ideal forum for sharing best practice in planning, procurement and delivery. Styles & Wood delivers major roll-out programmes for its framework customers and has been actively providing collaborative services to many of these customers through systems developed and refined in over a decade of Partnering and formal Framework Agreements.

·; Design: Design provides outsourced design and development services including architectural services, space planning, retail initiative design and models & standards work.

·; iSite: iSite provides clients with technology based property information solutions that store, manage and communicate critical data relating to their property portfolio and associated property activities. This data can include design models, supplier allocations as well as project specific data.

2. Segmental reporting

Year ended 31 December 2012

Year ended 31 December 2011

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 overall operation of the Group rather than a particular segment and includes central people costs, professional fees, share option expenses. Transactions between segments are eliminated on consolidation.

In 2012 revenue of £44,569,000 was generated from two external customers, each of which contributed more than 10% of Group revenue. The most significant contributed revenue of £27,580,000 and the other £16,980,000. In 2011 three external customers each contributed more than 10% of Group revenue; the total revenue from these three customers was £49,230,000.

3. Non-recurring items and preference share accounting

The Group's results include the following items:

(a) Restructuring costs in 2012 relate to an exercise to restructure the management within the Group's trading subsidiary, Styles & Wood Limited. In 2011 restructuring costs relate to an exercise to flatten the management structure of the business and integrate the Group's business development team into the operational teams.

(b) 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 26% to 24% with effect from 1 April 2012. Accordingly the standard rate of tax applied for the year ended 31 December 2012 is 24.5% (2011: 26.5%). The effective tax rates tax for the years ended 31 December 2012 (63.0%) and 31 December 2011 (82.5%) 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 (2011: no difference).

6. Dividends

No interim dividend on ordinary shares was paid during the year (2011: nil) and no final ordinary dividend is proposed (2011: nil). A dividend on the preference shares accrued from 1 September 2012 at a rate of 3%. The charge for the year ended 31 December 2012 was £150,000 (2011: £nil).

7. Cash flow from operating activities

8. Net cash

Note: Net cash excludes preference share capital of £10.4m (2011: £9.4m) 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 2012 the Company paid fees of £34,688 (2011: £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 2012 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 2012 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 2011. 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: