Contractor hopes refinancing deal will draw a line under months of uncertainty and a nosedive into the red
Major retail fit-out specialist Styles & Wood hopes clients will award it more work after its refinancing last week.
The contractor believes it missed out on new jobs in recent months because of uncertainties over its ownership and balance sheet.
Styles & Wood last week announced a huge dive into the red – a pre-tax loss for 2008 of £950,000 – and, consequently, a deal to raise more than £12 million and clear its debts.
Its future has been up in the air since an aborted takeover by former chairman Gerard Quiligotti and chief executive Neil Davies at the start of 2008.
But it said it hoped the refinancing would reinstall confidence in its framework clients to award it with increased levels of work.
Chairman Jim Martin said: “Over the past few months, we believe some of our framework customers have been reluctant to place new business with us owing to the uncertainty surrounding our ownership and the strength of our balance sheet.
“The substantial refinancing proposals announced are designed to address those customer concerns, alleviate some of the pressure recently placed upon us by our suppliers, and provide us with the requisite cash and debt resources to trade through the current economic cycle.“
The refinancing deal included the release of more than 50 million shares, and a debt-for-equity swap with the Royal Bank of Scotland for just under 20 per cent of the company.
In its full year results, the firm also admitted it had continued to experience significant pressure on its margins, with retailers keen to cut costs to the bone. Its customer base includes the likes of Tesco, Asda, Morrisons, the Co-operative Group, Waitrose, Sainsbury’s, Barclays and Lloyds TSB.
The Association for Consultancy and Engineering has accused Tesco of “draconian” cuts of up to 40 per cent in its fees to contractors.
Styles & Wood refused to comment on its relationship with Tesco, but said: “Our retail customers reacted to continued uncertainty in the general economy and the slowdown in consumer spending by deferring scheduled property spend and demanding greater value from their supply chains.”
The contractor said it would continue to put pressure on its own supply chain to help it climb back out of the red. It held discussions with its trade contractors and suppliers last autumn in an attempt to thrash out ways of cutting costs.
Chief executive Ivan McKeever said: “As customers place greater demands on Styles & Wood both in respect of quality, price and payment terms, we must look in turn to the supply chain, which has a significant role to play in supporting our business.”
Mr McKeever said a continued focus on the cost base of the group was also “critical” during the recession.
How Styles & Wood lost £950k in a year
Styles & Wood plummeted into the red in 2008 as clients put increasing pressure on margins.
The group’s profits plunged from a pre-tax profit of £11.8 million in 2007, to a loss of £950,000 last year.
Revenues also fell 23 per cent, from £315.5 million to £243.1 million.
Styles & Wood chairman Jim Martin said: “In response to the negative economic outlook and intense financial pressure, our customers have reduced capital expenditure budgets, which has resulted in orders being cancelled, delayed or deferred.
“This significantly reduced our revenues in 2008 which, combined with gross margins being under pressure in many of the framework arrangements, accounts for the major fall in profits.”
The contractor also spent £800,000 on redundancies last year, as well as a further £300,000 on an aborted takeover by former chairman Gerard Quiligotti and chief executive Neil Davies.
Styles said while it would continue to focus on the retail sector, Styles & Wood would also be targeting new markets, including the public sector, office and leisure markets.
It said it had also made its “first cautious steps” to create an international division, setting up in the Gulf offering both construction and support services.