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Styles & Wood posts solid 2012 but warns of further margin pressure

Styles & Wood has reported a solid 2012 but warned of “significant pressure on margins in the short term”.

The property services and fit-out firm said revenue was down 3 per cent to £97.9m (2011: £101m) in the year to 31 December 2012, as pre-tax profit edged up from £0.5m to £0.8m. The company’s order book was up 10 per cent from £56.4m to £61.9m.

The group’s preliminary results saw a 20 per cent increase in operating profit to £2.3m and a fivefold rise in earnings per share (EPS).

Chief executive Tony Lenehan said market conditions in the first quarter of 2013 have also been challenging, as “competitive pressure remains strong”.

Net cash was halved from £6.7m to £3.6m, after the company invested £3.3m in operations (2011: £0.1m).

That followed extra investment in framework arrangements, particularly in the banking sector, where the bulk of payments from customers are made at the conclusion of projects.

Styles & Wood said it also had to increase funding to firms in the supply chain, “who continue to struggle to secure credit insurance in our market”.

There was a non-recurring £0.2m expenditure on restructuring (2011: £0.3m) and accounting for notional interest on preference shares of £1m (2011:£1m).

The company said it is focusing on the provision of property support services, including professional, refit, refurbish and remodel, with an associated element of contracting services.

Banking, commercial and the public sector makes up 75 per cent of revenues, up from 58 per cent a year earlier, with the balance coming from the firm’s traditional sector of retail.

Styles & Wood said a competitive market and investment in new areas is putting “significant pressure on margins in the short term”. The company warned that market conditions “remain extremely challenging and show few signs of an imminent recovery”.

It is also “selectively adding to the team while at the same time reducing our numbers where skills do not correspond with the needs of a changing market”.

That has included “a fundamental change on a number of fronts, including realignment and strengthening of the executive leadership team”, along with the introduction of “a new fully integrated operating platform together with a suite of management systems”.

Styles & Wood also started a strategic partnering arrangement with Consensus Capital Private Equity in 2012 to bring a fully funded solar PV installation solution to the marketplace.

Mr Lenehan 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, while 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.”

The firm launched a turnaround strategy in 2010 and saw a new management structure put in place in 2011.

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