Interim Results

Styles&Wood Group PLC

Interim Results for the Six Month Period Ended 30th June 2014

Styles & Wood Group plc, the integrated property services and project delivery specialist, announces its interim results for the six months ended 30 June 2014.

Financial Results

Note: *underlying loss excludes non-recurring items and notional interest on preference shares

Operational Highlights

§ Banking Frameworks: Secured position as Programme and Delivery Manager for ATM/Rebrand national roll out for a blue chip high street banking client

§ Public sector: The strengthening resulting from the diversification strategy is demonstrated by a number of significant contract wins including the £5m refit of the Royal Northern College of Music and £9m refurbishment of Lancaster University Library

§ Energy:Successful completion of first phase solar photovoltaic panel installations on residential schemes in the North East and South of England.

§ Business Systems: Building Intelligence Hub now live for the largest banking group in South Africa

§ Design: Secured position as a preferred structural engineering partner with Space Engineering on a major initiative for a high street retailer; the continuation of a 15 year relationship

§ Retail:Increasing demand from food retailers with seven new build projects secured for Lidl supporting their UK growth plans alongside re-engagement with Waitrose and Tesco through appointments to main contractor frameworks

§ International:£14m new project conversions in Dubai through our joint venture with Dutco

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

"There are increasing levels of activity and confidence in the sectors in which we operate which have begun to translate into a number of significant contract wins, as well as a growing order book as we move into the second half.

Our improved performance endorses management's strategy of diversifying the Group's product mix to focus on the needs of our clients. We now have an improving pipeline of new business opportunities and are able to differentiate our refurbishment and fit out offers through the integration of other service lines including space planning and management systems.

We have identified a number of growth opportunities across key sectors and believe the Group is now right sized and well positioned to take advantage of the growing confidence in our core markets."

Enquiries:

Chief Executive Officer's Statement

Group Results

While Group revenue for the six months ending 30 June 2014 decreased to £33.6m (H1 2013: £40.4m), the underlying operating position improved to break even, (H1 2013: loss of £0.8m), as a result of a changing business mix and management focus on margin improvement.

Revenue is currently forecast to recover to beyond prior year levels during the fourth quarter. As previously stated, the heavy weighting of workload in H2, relative to H1, is primarily due to the deferral of programmes scheduled for this calendar year by two of our strategic customers in the Banking and Finance sector.

The underlying loss before tax improved to £0.5m (H1 2013: £1.4m). Loss before tax, including non-recurring items and notional interest on preference shares was £1.2m (H1 2013: £2.0m)

The improvement in gross margin to 8.25% (H1 2013: 5.63%) endorses the Company's strategy and the investment made in supporting the Group's ongoing diversification plans. In addition, the cost base for the Group at operating level is now aligned with management's plans for growth and has shown a 13% improvement relative to H1 2013. This strategic approach to resource planning and headcount reduction has enabled the Group to better manage timing issues around workload allocation.

The recent seasonal pattern for the business to absorb cash in the first half of the year was exacerbated by the start on site of a large number of framework projects being deferred to the second half of the year. At period end the Group had net debt of £3.5m, (H1 2013 £0.2m). However the increase in activity in H2 has seen the Group's cash position recovering towards 2013 levels.

The weighted sightline for new business is currently tracking over 10% ahead of prior year and the order book for 2014 has an unexecuted value of £57.2m which is 14% ahead of H1 2013 (£50.3m).

Overview

There are increasing levels of activity and confidence in the sectors in which we operate. This improving outlook is supported by growth in UK construction output of 5.4% and 4.8% for Q1 and Q2 respectively relative to 2013[1]. We now have an improving pipeline of new business opportunities and are able to differentiate our refurbishment and fit out offers through the integration of other service lines including space planning and management systems. This has enabled the Group to create a point of difference and strengthen our diversification plans. We now have strategic relationships with five blue chip clients for the provision of multiple services within formal framework arrangements, typically with a two to four year period of exclusivity.

[1] Office for National Statistics: Output in the Construction Industry: March and Q1 2014/June and Q2014

Segmental Performance:

Professional Services

The revenue within the period for Building Intelligence, Design and Programmes was in line with the prior year at £22.1m. Programmes included retail and banking frameworks with full service line provision for leading supermarkets including Waitrose and Tesco and three of the four largest high street banks. Additionally, the Group expanded its project delivery service to include design and space planning for the Post Office's Crown Transformation Programme. Margins for frameworks have continued to prove resilient and the benefits of this will flow through with the increased revenue in the second half.

Contracting Services

The revenue in the period for Project Delivery, including Renewable Technologies, declined to £11.2m (H1 2013: £17m). However, a number of successful project conversions during the reporting period are planned to be delivered during H2 including several new stores for Lidl and the refurbishment of Lancaster University Library. The refurbishment of the Royal Northern College of Music, commenced in Q1, is scheduled to complete towards the end of the year. Niche high end retail and corporate facilities for premiership football stadia have also provided robust sources of new project workload. The current strike rate for tendered project wins remains around 1 in 4 by both number and value.

Market Review

Banking and Finance: The main clearing banks are overtly pursuing a strategy to focus on retail and commercial banking on the domestic front. This is evidenced in real estate terms by an increasing workload promoting brand and new technology, estate rationalisation and new concept property models.

Public and Community: Despite continuing constraints on public sector spending, investment in Health and Education remain a priority for the government. There is a continuing emphasis on maximising the potential of existing real estate through refurbishment and rationalisation schemes, as opposed to new build, which reinforces confidence in our ability to drive growth in this sector. The Group now has a range of successfully completed reference projects from which to leverage new business opportunities.

Commercial: Increased demand is being driven by a shortage of new available office space, a high concentration of lease transactions, changes to working practices and a more responsible approach to environment and energy. This is projected to create sustainable growth in demand for commercial office refurbishment over the next five years[2]. We additionally now have a complementary renewable technologies offer, centred on the provision of solar photovoltaic arrays.

Retail and Leisure: The UK's major grocery retailers are being challenged by a need to compete with value based retail offerings which are driving an expansion into convenience, on-line and multi-channel formats. This has created an increasing demand for refresh, refit and refurbishment which is expected to provide significant opportunities over the short to medium term.

Niche Geographies: London is leading the refurbishment market in all of our target sectors. As such we have established a dedicated business unit located in the capital and are ideally situated to target new market share. In addition, our joint venture in Dubai is also beginning to see a marked improvement in outlook which is considered to offer sound growth opportunity. We have recently been appointed as main contractor for the complete refurbishment of a 200 bedroom hotel for Emaar.

New Work Weighted Sightline

Our current weighted sightline at week 32 of £124.9m is 10% ahead of prior year on a consistent basis.. This includes £57.2m of unexecuted order book value for 2014 which compares with £50.3m for the comparable period in 2013.

In particular, the work mix for H2 2014 will have a strong bias towards frameworks with around 70% of the corresponding full year work stream value to be completed during H2. Additionally, International operations are anticipated to return to profit by the year end compared with a loss of £163k in 2013.

Corporate

During the period the Group undertook a capital reorganisation and transferred its listing from the Official List to the AIM market of the London Stock Exchange. The Board believes that the transfer to the AIM market will provide the Group with the regulatory flexibility to agree and execute certain transactions more quickly and cost effectively, while the capital reorganisation will provide the Group with the ability to make future share issues should the appropriate opportunity arise.

In June 2014 Jim Martin stepped down from his role as Chairman of the Board after serving for eight years on the Board, to be replaced by Paul Mitchell. We would like to thank Jim for his substantial contribution to the Group and wish him well in retirement.

Outlook

The property support services market in interior fit out and refurbishment is now forecast to recover to 2008 levels by 2017 and the corresponding annual growth rate from 2014 to 2018 is anticipated to be in the region of 4-5%[2]. This would be a significant improvement over the preceding five years and represents a considerable opportunity for the period ahead. In order to optimise outcomes to support an improved business result, Styles&Wood has targeted a number of sector priorities which will provide a more diverse and resilient focus for the Group.

The full year forecast is in line with management's expectations.

[2] Interior Refurbishment and Fit Out Market Report UK 2014-18: AMA Research May 2014

Tony Lenehan Chief Executive Officer

Responsibility Statement

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS34 as adopted by the European Union and that the interim management report contained herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

§ an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

§ material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report

The Directors of Styles & Wood Group plc are listed in the Annual Report for the year ended 31 December 2013. Jim Martin retired from the Board on 26 June 2014.

By order of the Board

Tony Lenehan Philip Lanigan

25 September 2014 25 September 2014

Chief Executive Officer Group Finance Director

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.

Underlying results are shown before charging non-recurring expenses (note 7) and accounting for notional interest on preference shares (note 14).

The notes that follow are an integral part of the condensed interim financial statements

The notes that follow are an integral part of the condensed interim financial statements.

The notes that follow are an integral part of the condensed interim financial statements.

The notes that follow are an integral part of the condensed interim financial statements.

Notes to the interim financial information

1. General information

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 property services to banking, retail, leisure, commercial and public organisations within the UK. The Group has a joint venture in Dubai providing property services to the local market. The address of Styles & Wood Group plc's registered office is Aspect House, Manchester Road, Altrincham, Cheshire, WA14 5PG.

This condensed consolidated financial information was approved for issue on 25th September 2014.

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 2013 and comparative results to 30 June 2013 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 2013 which were approved by the Board of Directors on 29 April 2014 and 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.

2. Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2013 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (formerly the Financial Services Authority) and with IAS34 "Interim financial reporting" as adopted by the European Union. The condensed interim results should be read in conjunction with the annual report and financial statements for the year ended 31 December 2012 which are available from the group's website www.stylesandwood-group.co.uk.

Going concern basis

The Group meets its day to day working capital requirements through its bank facilities. The group's current forecasts and projections, which take account of reasonably possible changes in trading conditions, show that the Group should be able to operate within the level of its current facilities, details of which can be found in note 12. Therefore the Group continues to adopt the going concern basis in preparing the consolidated interim financial information.

3. Accounting policies

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.

There are no new IFRSs or IFRICs that are effective for the first time for this interim period that would be expected to have a material impact on this group.

4. Estimates

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2013

5. Principal Risks

The Group's operations and financial instruments expose it to a variety of financial and other risks. This interim financial information does not contain all risk management information and should be read in conjunction with the annual report and financial statements.

There have been no changes in the risk management policies or risks since the annual report for the year ended 31 December 2013 was published.

6. Revenue and profit from business segments

All revenues arise from external customers for the provision of property related services 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 segment result reflects expenses relating to the overall Group rather than a particular segment and includes people costs, professional fees and share option expenses. Transactions between segments are eliminated on consolidation.

7. Non-recurring items and preference share accounting

The Group's results include the following items:

(a) Restructuring costs relate to an exercise to restructure the management and within the Group's trading subsidiary.

(b) Transfer to listing from Premium market to Alternative Investment Market ("AIM")

(c) Tax on non-recurring items reflects the non-deductibility of the notional preference share interest (note 14).

8. Finance costs

9. 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. The estimated average effective annual tax rate used for the year to 31 December 2014 is 25.9% (the estimated average effective annual tax rate for the six months ended 30 June 2013 was 29.6%).

A deferred tax asset has been recognised in respect of trading losses incurred in the first half of the financial year as management expect that they will be offset against future trading profits.

 10. (Loss)/earnings per share

On 28th May 2014, a share consolidation was completed with shareholders receiving 1 New Ordinary Share for every 10 existing Ordinary Shares. The Share Capital Details of the earnings and the number of shares used in the calculation are set out below, and reflect the share consolidation:

The Company has in issue 14,000,000 convertible preference shares which are convertible into 1,466,667 ordinary shares. These shares are not currently dilutive. Share options in issue within the Group are not considered to be dilutive.

11. Dividend

The Board does not consider it appropriate to pay an interim dividend on ordinary shares (2013: nil). A dividend on the preference shares accrued from 1 September 2012 at a rate of 3%. The charge for the six months ended 30 June 2014 was £210,000 (six months ended 30 June 2013 £225,000, year ended 31 December 2013; £450,000).

12. Financial liabilities: bank borrowings

The Group's current banking facility comprises a £3.5m multi-option loan facility, including a revolving credit, overdraft and guarantee facility. This facility will be available until 30th June 2015 and will reduce to £3.25m at 31 December 2014.

At 30 June 2014 £3,472,000 had been drawn down as an overdraft and £321,000 utilised to provide performance bonds (30 June 2013: £839,000 for performance bonds only, 31 December 2013: £816,000 for performance bonds only).

Issue costs in respect of the facilities have been prepaid and are being amortised over the life of the facilities.

13. Net (debt)/cash

Net (debt)/cash excludes preference share capital of £10.6m (30 June 2012: £10.8m, 31 December 2013 £10.2m) included within liabilities due to the nature of the conversion rights attached to those shares.

14. Preference share capital

The 14,000,000 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 14,000,000 preference shares into 1,466,667 ordinary shares at a price of £9.375 per share, in increasing tranches from 31 December 2014 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 2014 as follows:

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 issue. Subsequent to issue the liability component is measured at amortised cost and a notional interest charge, which is greater than the cash coupon payable on the shares, is made to the income statement. The difference between the imputed notional interest charge and the actual cash coupon is then credited to the profit and loss reserve, reducing the equity component.

A cash coupon of £210,000 is payable in respect of the six months ended 30 June 2014 (six months ended 30 June 2013: £225,000, year ended 31 December 2013: £450,000) has been charged within underlying profit. Notional interest of £402,000 has been credited back to reserves (six months ended 30 June 2013: £398,000, year ended 31 December 2013: £820,000).

15. Notes to the cash flow statement