diversification selectivity - keysource · secured through leveraging our successful project...

SELECTIVITY

DIVERSIFICATION&

STYLES &WOODGROUP

STYLES &WOODGROUP

Styles&Wood Group plcCavendish House,

Cross Street,Sale,

M33 7BU

T: +44 (0)161 926 6000F: +44 (0)161 926 6001

www.stylesandwood-group.co.uk

“WE TURN VISIONS TO DECISIONS

WITH PRECISION”

CONTENTS

STRATEGIC REPORT1.0 2016 A Review 5

2.0 Chairman’s Statement 9

3.0 Chief Executive Officer’s Review 11

4.0 Our Business Explained 15

5.0 People and Places 27

6.0 Financial Report 33

GOVERNANCE7.0 Board of Directors 37

8.0 Directors’ Report 41

9.0 Statement of Directors’ Responsibilities 45

10.0 Corporate Governance 47

11.0 Directors’ Remuneration Report 53

12.0 Independent Auditors’ Report 63

13.0 FINANCIAL STATEMENTSConsolidated Income Statement 68

Consolidated Statement of Changes in Equity 69

Company Statement of Changes in Equity 70

Consolidated Balance Sheet 71

Company Balance Sheet 72

Consolidated Cash Flow Statement 73

Company Cash Flow Statement 74

14.0 NOTES TO THE FINANCIAL STATEMENTS 75

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GROUP AT A GLANCE

BROADENING CUSTOMER BASE

The Group has increased its strategic customer base significantly over the course of the year through both organic and acquisitive growth. Around 76% of revenue for the year was secured through strategic customer relationships with ongoing framework commitments.

SECTOR DIVERSIFICATION

Within Banking and Finance, the Group now has business interest in a broad range of work streams including: office, retail, technologies and initiatives. This embraces our full service line range and, with better clarity regarding outlook, provides more predictable business interest. In Communities, Styles&Wood has new developing relationships with not-for-profit and private operators in healthcare which have been secured through leveraging our successful project references in NHS hospitals.

INNOVATION AND TECHNOLOGY SERVICES

The Group’s collaborative venture with Nationwide, in strategic asset management data analytics, has established a Governance, Risk and Compliance platform with relevance for the broader banking and finance industry. The associated product was launched at the British Bankers’ Association in February 2017.

STRATEGIC CUSTOMER RELATIONSHIPS

During the course of the year, two existing customer relationships were converted to longer term framework arrangements with potential five year exclusivity agreements. Additionally, a new UK centric relationship for a similar term has been confirmed with one of the world’s largest financial institutions. This position has been further enhanced through the single action negotiation to develop and implement a national rollout programme for a major grocery retailer with whom the Group has a multiple relationships. The establishment of a new type of property service provision for data centres within the blue-light and emergency sector also creates an exciting opportunity to further differentiate the Group’s proposition.

CASH BACKED GROWTH IN PROFITS

The Group has invested in new office premises, provided cash to support acquisitions and supported the development of strategic asset management and data analytics systems during the course of the year. Notwithstanding this, the FY 2017 cash position shows an improvement over 2016 at £6.1m.

CORPORATE ACTIVITY

KEYSOURCE

The acquisition of Keysource provides the Group with strong credentials and capabilities in the critical facilities space. The data centre and critical facilities market is an area the Group had been looking to access for some time, in order to address it’s strong growth prospects driven by a combination of macro and regulatory factors. Our previous successful consortium arrangement with Keysource provided a solid foundation for the acquisition and the Group remains confident that the acquisition will be earnings enhancing in FY 2017.

GDM (Post Balance Sheet Event)

The acquisition of GDM, completed in early 2017, considerably enhances the Group’s skills and expertise in mechanical, electrical and environmental services. These specialist capabilities, now integrated within the expanded Group, are increasingly relevant in a market highly geared to building services technologies. Again the Group is confident that this acquisition will be earnings enhancing during 2017.

1.0 2016 A REVIEW RESULTS

£104.7M

REVENUE

2015: £115M /▼8.9%

£5.85M

UNDERLYING EBITDA4

2015: £4.38M /▲33.6%

£4.10M

UNDERLYING PBT1

2015: £3.24M /▲26.5%

£3.54M

PBT

2015: £2.37M /▲49.4%

41.4P

UNDERLYING BASIC EPS5 2015: 37.2P /▲11.3%

34.2P

BASIC EPS

2015: 25.4P /▲34.6%

£6.09M

NET CASH & EQUIVALENTS2

2015: £5.60M /▲8.8%

£0.41M

NET DEBT

2015: £1.43M /▼71.3%

£130.2M

ORDER BOOK WEEK 15 20173

2016: £100.8M/▲29%

1 Underlying profit before tax is before charging non-recurring items and preference share accounting.

2 Cash balances less short-term facilities.

3 Represents secured and anticipated workload at 80% success rate.

4 Underlying EBITDA is underlying operating profit plus depreciation, amortisation and share option charge.

5 Underlying EPS is calculated based on underlying profit before tax after charge from taxation.

THE STRATEGIC REPORT

ON PAGES 5 TO 36 WERE

APPROVED BY THE BOARD

OF DIRECTORS ON 26

APRIL 2017 AND WERE

SIGNED ON ITS BEHALF BY

ANTHONY S LENEHAN

DIRECTOR

PHIL IP N LANIGAN

DIRECTOR

STYLES&WOOD GROUP PLC REGISTERED NUMBER 5622016

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JANUARY• Completed a 2.1 MW

ground mounted solar panel system with a value of £2 million for Greater Manchester Waste Disposal Authority (GMWDA)

• 25 colleagues on degree level course

JULY• Styles&Wood

celebrates 35th birthday

• Total number of colleagues: 315

MARCH• Styles&Wood Group plc

wins “Listed Business of the Year” in the North West Business Masters Awards

• Second major project commenced for Aviva in London, following on from the ongoing works to Westminster House in Manchester

SEPTEMBER• Styles&Wood Group

plc makes first acquisition, Keysource.

• 9 graduates employed

MAY • Specialist build fit-out

works commence for Addleshaw Goddard in One St Peter’s Square Manchester, the second project within the building

• 12 apprentices employed

NOVEMBER• Styles&Wood

reappointed to the framework of one of the UK’s leading financial services institutions to deliver construction services

• Colleagues raised a total of £10,540 for charity, in 2016

FEBRUARY• Management Development

Programme begins with 20 colleagues on the 2016

programme

• 15 colleagues studying for professional accreditations

AUGUST• Shortlisted: Building

Awards Specialist Contractor of the Year

• Appointed as one of four strategic partners for one of the world’s largest

banking and financial services organisations for

its UK capital plan

APRIL• Moved Head Office to

Cavendish House, Sale

• Confirmed as automation partners for one of the UK’s leading

high street banks

OCTOBER• Shortlisted: MEN

Business of the Year

• 95% of colleagues think Styles&Wood is “a great

place to work” (colleague survey results 2016)

JUNE• Styles&Wood Group

plc announces an increase in underlying PBT of 138.8% for the

half year • Appointed to deliver

the fit-out of two new easyHotels in Manchester

and Liverpool

DECEMBER• Keysource wins the Public

Services Digital Delivery category in the Datacentre

Dynamics (DCD) EMEA Awards 2016

2016 - A YEAR TO REMEMBER

The Group’s broadening of its service line capabilities and a selective approach to new business opportunities has resulted in a strong performance in 2016. I am pleased again to report an increase in profit before tax of 49%, relative to 2015. This is a clear testament to the improving underlying efficiency of the business. Our diversification strategy and recent acquisitions, together with a strengthening order book, provide a sound platform for future profitable growth.

PERFORMANCE

Full-year revenue is 9% below last year. This is primarily due to a deferral of framework allocations into 2017. In parallel, a more selective approach to the conversion of opportunities has seen underlying profit increase by 26.5% at £4.1m (2015: £3.2m). The workload for the year continued to be characterised by repeat order business, with 76% of revenue derived from existing customer relationships. Cash of £6.1m and net debt £0.4m were particularly encouraging in the light of the funding requirements for recent acquisition activities.

SELECTIVITY

Three strategic partnering arrangements for major blue-chip corporates have been successfully converted during the year, with initial three year terms and options for further two year extensions. This provides a sound basis for more predictable earnings and, against the backdrop of a growing pipeline of significant framework opportunities in the coming year, creates growing confidence regarding the Group’s outlook.

DIVERSIFICATION

The Group’s service line capabilities have been further strengthened. The launch of our Governance, Risk and Compliance platform in February 2017, in collaboration with Nationwide, means our professional services offer is now reflected by this clear point of difference. Similarly, the acquisition of both Keysource and GDM, post the period end, creates core business synergies and reinforces our technical credentials and relevance in the critical facilities arena.

CORPORATE DEVELOPMENT

The past two years have seen significant change at Styles&Wood, in the form of a strengthened balance sheet and latterly, successful, earnings-enhancing acquisitions. A new working capital facility has been negotiated with Santander Bank to provide the necessary support for future growth. The strength of the Board, in relation to mergers and acquisitions expertise, has proved invaluable during this new and exciting phase for the Group.

PROSPECTS

Property estate owners, operators and end users continue to seek efficiency gains through better asset utilisation. This creates a robust landscape of new business opportunities. The bandwidth of our service line is becoming increasingly relevant to our customers and, as a consequence, we are able to better leverage our existing relationships and create a broader proposition for new targets. The Board is confident that this strategic approach, reinforced by selective sector and services diversification, provides clear organic and acquisitive growth potential.

PAUL MITCHELLCHAIRMAN

CHAIRMAN’S STATEMENT

2.0

“The Group’s broadening of i t s ser vice

l ine capabi l i t ies and a se lec t ive

approach to new business

oppor tuni t ies have resul ted in a

s t rong per formance in 2016. “

2.0 CHAIRMAN’S STATEMENT

CHIEF EXECUTIVE OFFICER’S REVIEW

3.0

“Our se lec t ive approach to new business

oppor tuni ty has seen the Group’s prof i t

contr ibut ion increase s igni f icant ly over

the course of the year.“

Our selective approach to new business opportunities has seen the Group’s profit contribution increase significantly over the course of the year. A broadening of our service line capability through acquisitions supports the differentiation of our position within our core markets. This, aligned with a strengthening order book, provides growing confidence regarding the Group’s outlook and opportunities for future growth.

OVERVIEW

BUSINESS RESULT:

The Group has improved its profitability during the course of the year, both organically and through acquisition. An increase in underlying profit before tax to £4.10m [FY15: £3.24m] is underpinned by strong margin performance of 12.3% [FY15: 9.3%]. Revenues are lower than the prior year by (9%), primarily due to deferral of project and programme work into 2017. However, the forward order book has been significantly strengthened by securing three strategic customer relationships, each with a three year framework arrangement and strong performance in relation to recent acquisitions. We ended the year with cash of £6.1m [2015: £5.6m], notwithstanding the contribution required for funding the acquisitions of Keysource and, post the period end, GDM.

GROUP STRATEGY:

The Group now provides a broad based range of specialist end to end property support services to our customers. Our intention remains to create a differentiated offering through the provision of an integrated property services solution. Positive cash generation in projects’ work streams supports investment in professional services which in turn generates opportunities in programme management and implementation. The Group has enhanced its core skills in the period in engineering and technologies through acquisition. These specialist capabilities are reinforcing our differentiated offer and providing a better solution for both existing and new customers.

CORPORATE RESPONSIBILITY:

SAFETY AND ENVIRONMENT:

Health and Safety continues to be the number one priority for the business. The effective implementation of safety management systems is driven from the highest level throughout the business.

Our visible commitment to achieving the highest standards is endorsed by our ongoing accreditation to ISO 9001, ISO14001 and OHSAS18001.

We are delighted to be recognised by the Royal Society for the Prevention of Accidents, RoSPA, with the President’s Award for outstanding performance in Health and Safety at work over a period of 13 years, which demonstrates that the policies, procedures and measures implemented within the business achieve consistently high standards.

During 2016 we committed to a programme of continual improvement, and reinforced our existing processes with a “Behavioural Safety” programme which has been aimed at greater connectivity at all levels, particularly with the supply chain workforce. The programme is of key strategic importance to Styles&Wood and will provide the foundation for our safety agenda as we move into 2017.

Over the course of 2016 Styles&Wood were live on over 1500 sites and, notwithstanding the diversity in the scope and size of projects and work streams, our Accident Frequency Rate, (AFR), and Accident Incident Rate, (AIR), have both shown improvement over the prior year.

VISION, VALUES AND RESPONSIBILITY:

We remain committed to working together to make a difference with our customers, through the positive enhancement of their core business interests and the communities in which we jointly operate. The values we adopt in pursuit of this vision are a constant characteristic of our approach to service provision. Corporate Responsibility is embedded within our business decision-making process. As such, we are able to contribute to a better society by creating socioeconomic value and promoting environmentally responsible solutions.

TONY LENEHAN CEO

3.0 CHIEF EXECUTIVE OFFICER’S REVIEW

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SEGMENTAL REVIEW:

PROFESSIONAL SERVICES:

2016 has seen progress on both the strategic and the operational front. The introduction of Novus, our internally developed operating platform for both internal and external customers, will provide a clear point of differentiation. A range of specialist systems, including strategic asset management, governance, risk management and compliance, backed by a multi-disciplined design and programme services capability, creates an intelligent edge to our broader service line offer. Programme management and implementation, through framework arrangements, has also been strengthened during the period through the addition of new customer relationships and an extension of existing contractual agreements. Cross selling opportunities have additionally been created through successful acquisitions. Further improvement in underlying operating profit, before central costs, to £8.3m over a strong prior year [FY2015: £7.4m] underscores the relevance of this approach. Around 89% of revenue in professional services has been derived from repeat customer relationships.

CONTRACTING SERVICES:

Our success ratio in converting new business opportunities has remained better than 1 in 3, in line with prior year, and continues to support the more selective approach to new business opportunities pursued by the Group. Operating margin has improved by 56.1% with operating profit, before central costs, increasing to £4.0m [FY2015: £2.6m]. The Group now has a core expertise in the design and build of specialist refurbishment and fit-out projects. This continues to remain a diverse segment with significant, high value city centre office projects and large volume, multiple project concessions. Around 70% of business in contracting services is secured through repeat customer and adviser relationships.

FACILITIES SERVICES:

This is a new reporting segment for the Group and is centred on our complementary business interest, secured through the acquisition of Keysource. The associated client relationships provide opportunities to secure predictable income streams in the critical facilities and property life-cycle areas. Enhanced skills and capabilities in the building technologies space creates potential synergies through the provision of access to additional opportunities with both existing and new customers. A revenue performance of £3.2m in the last quarter of 2016 provides confidence regarding the future outlook for this segment.

DIVERSIFICATION:

BUSINESS RESILIENCE:

The consolidation of our portfolio services, and programme management and implementation offer under professional services establishes a consultancy-led focus for service provision. This approach provides an intelligent suite of support services for property estate owners and operators who continue to look for smart ways to make the best use of assets. The successful implementation of the Group’s acquisition plan has significantly increased our in-house technologies skills base, and provides a robust platform for the expansion of interest in facilities services.

NEW SECTORS:

Project successes in the Healthcare and Leisure sectors have helped establish reference points for future expansion. New business opportunities have been sourced in Education and Commercial, through leveraging the Group’s developing service line range. These initiatives provide a positive endorsement of the Group’s strategy and demonstrate the increasing market relevance of our core skills and capabilities.

POST-BALANCE SHEET EVENT:

GDM was acquired for an initial consideration of £4.0m, satisfied in cash and shares, with further potential deferred and contingent cash consideration, up to £3.1m, linked to performance and commercial objectives over the next three years. The associated addition of building services and environmental design consultancy services has considerably enhanced the Group’s expertise and credibility in building technologies. Additionally, the potential also exists to realise synergies with historic GDM customers, through the promotion of a broader service line offer incorporating more Group capabilities.

INTERNATIONAL:

DS&W Dubai: We have restructured our interests in the Middle East through the transfer of all of our operational teams to our partner Dutco. A new model is now under consideration, where the potential for Styles&Wood to offer our partner a direct support service for specific project undertakings is currently under evaluation.

MARKETS AND OUTLOOK:

GENERAL:

The Group has maintained its focus on four discrete sectors together with a number of associated, specific subsets. The continued realisation of cash generative profits within all key markets, together with a positive outlook, provides confidence for the future.

Commercial: The previously forecast high concentration of lease events and increasing drive for operational efficiency by property owners and end user occupiers, coupled with progressive changes in working practices, continues to drive demand in the requirement for office refurbishment and fit-out. The Group has received an appointment for professional services support to a leading distributor of building materials and products. This has the potential to extend to programme implementation and is a positive endorsement for the broader Group service line range.

Public and Community: Significant new opportunities are now presenting themselves in the public sector. The associated framework pipeline includes the grouping of refurbishment and fit-out for commercial offices, through the Government Hub initiative, and the aggregation of large scale capital expenditure in the Education Funding Agency framework retender which is planned for later in the year. With successful reference projects and a clear understanding of routes to market, the Group is well positioned to address these and other specific targets.

Retail and Leisure: Major grocery retailers continue to pursue strategies focused on improved utilisation of existing assets and enhanced store format. Having successfully completed a discrete national rollout programme for entrance improvement for over 300 stores in the year, the Group has a proven capability for the successful delivery of broad-based initiatives of this type.

Banking and Finance: Changes in Banking and Finance, in relation to consolidation and regional concentration for commercial and investment activities, smart technologies and the adoption of new retail models, continue to provide increased opportunities. A varied service line interest characterises a strong predictable work flow in real estate solutions. With three live client centric frameworks each with a potential five year period of exclusivity, the Group is now one of a small number of market leaders in this sector.

ORDER BOOK AND SIGHTLINE:

The order book for 2017 is tracking, at Week 15, around 29% ahead of prior year, strengthened by recent successful acquisitions. Additionally, the level and concentration of relevant framework opportunities being pursued by the Group is also significantly ahead of prior year.

3.0 CHIEF EXECUTIVE OFFICER’S REVIEW 3.0 CHIEF EXECUTIVE OFFICER’S REVIEW

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SMARTER SOLUTIONS FOR THE BUILT ENVIRONMENT

We have enhanced our suite of property support services to develop an integrated offering that brings together a range of professional and contracting services.

Our approach to service provision is informed by an extensive suite of core capabilities ensuring that, where individual services are provided, they are enhanced by the experience and expertise of the Group as a whole.

Our proven project and programme delivery models are fully scalable in line with our customers’ requirements and can be provided to complement existing operations or combined to form a fully outsourced solution.

CRITICAL ENVIRONMENTS

We deliver services across the full IT asset lifecycle from consultancy through to on-going operation, including decommissioning and live upgrades.

With over 30 years’ experience, our expert in-house teams have delivered award-winning IT asset solutions for organisations across the globe.

By working with our customers as trusted partners, we enable them to focus on their core business. By engaging early and taking the time to fully understand all of the requirements, we ensure our solutions meet our customers’ business, technology and commercial objectives.

SUSTAINABLE ENGINEERING

We deliver innovative low energy and sustainable design solutions for the built environment, throughout the UK, Europe and overseas.

Our focus is on building long-term relationships and we have over 25 years’ experience offering our customers more accessible, focused and professional services.

Promoting the use of sustainable products and technologies reduces our impact on the built environment, and by considering the building in its complete form, our innovative team explore the use of passive solutions using thermal storage, natural ventilation, night-time cooling, heat recovery systems and grey water recycling.

Styles&Wood provides a fully integrated range of specialist support services to some of the UK’s premier brands and leading blue-chip organisations.

Working extensively across the commercial, public and community, retail and leisure, and banking and finance sectors, the business utilises over 35 years’ industry experience to develop bespoke solutions, responding to the changing needs of our customers.

By diversifying our service offerings, our customers are able to benefit from a much wider range of in-house capabilities in technologies, critical facilities, engineering and professional services, delivered to the same exacting standards.

Our selective approach to targeting work within our chosen sectors has resulted in a much stronger, more robust Group, with an excellent platform for further development and growth.

PARTNERSHIPSUSTA INABLE ENGINEER ING

STYLES &WOODGROUP

CR I T ICAL ENV IRONMENTSKEYSOURCESTYLES &WOOD

INTEGRATED PROPERTY SERV ICES

4.0 OUR BUSINESS EXPLAINED

OUR BUSINESS EXPLAINED

4.0

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STYLES&WOOD GROUP PLC

SERVICE LINES

DESIG

N &

ENVIR

ONMEN

TS

PROGRAMME MANAGEMENT & IMPLEMENTATION

PROJECT

DEVELOPMENT

& DELIVERY

CRI

TIC

AL

EN

VIR

ON

MEN

TS

LIFEC

YCLE

SERV

ICES

CONTRACTING SERVICES

FACILITIES SERVICES

PROFESSIONAL SERVICES

4.0 OUR BUSINESS EXPLAINED

OPERATIONS AT A GLANCE

The Group continues to focus on four discrete sectors, specifically targeted for clear evidence of accessible and predictable income streams, providing the Group with a much improved measure of resilience. Commercial, public and community, retail and leisure, and banking and finance sectors, have all demonstrated an increasing demand for outsourced service provision and, most recently, a preference towards strategic partners with end-to-end provision capability.

REPORTING SEGMENTS REVENUE

STRATEGIC SECTORS REVENUE

BUILDING

INTELLIGENCE

GOVERNANCE, RISK & COMPLIANCE

PROG

RAM

ME

SERVIC

ES


50%

FACILITIES SERVICES

4%


46%

BANKING & FINANCEMODERNISATION

12%

BANKING & FINANCE FIT-OUT

13%PUBLIC SECTOR

HEALTHCARE

3%

CRITICAL FACILITIES

6%

BANKING & FINANCE TECHNOLOGIES

12%RETAIL & LEISURE

22%

COMMERICAL

32%

BUSINESS MODEL

Our integrated service model allows us to connect and adapt to the evolving needs of our customers, and the association of grouped service lines in the professional, contracting and facilities services fields, allows us to drive value through the provision of end to end property services.

The organic evolution of Group service lines, driven by a clear trend towards multi-disciplinary service provision amongst the blue-chip client base, has been aided by an acquisition strategy, geared around creating a broader range of support services, alongside a strengthened presence in key sectors of operation.

20113

“THIS SOLUTION WILL TRANSFORM THE WAY WE WORK AT HSL. IT WILL SAVE US TIME AND MONEY, REDUCING DOUBLE ENTRY, AND RETAIN INTEGRITY OF DATA. OUR JOURNEY WITH THE ISITE TEAM HAS BEEN HIGHLY EFFICIENT FROM OUR INITIAL MEETING THROUGH IMPLEMENTATION AND TRAINING ON THE PORTAL SYSTEM.”

“IN TERMS OF APPROACH, STYLES&WOOD WORKED IN CLOSE PARTNERSHIP WITH ADDLESHAW GODDARD THROUGHOUT THE PROCESS, WERE OPEN IN THEIR ENGAGEMENT, ASKING QUESTIONS AND CLARIFICATIONS TO ENSURE OUR NEEDS WERE CAPTURED AND INCORPORATED.

WE ARE EXTREMELY HAPPY WITH OUR FIT-OUT AND WE ENJOYED WHAT COULD HAVE BEEN A CHALLENGING PROCESS. STYLES&WOOD ENABLED US TO MEET OUR VISION FOR OUR NEW OFFICES BY TAKING A TRULY COLLABORATIVE APPROACH AND ARE HIGHLY RECOMMENDED AS A RESULT.”

Steve Bowman, Estates Manager, HSL

Caroline Cleverley, Programme Manager

PROVIDING TECHNOLOGY-BASED PROPERTY INFORMATION SOLUTIONS

HSL (High Seat Ltd) are a furniture retailer with 44 stores across the UK. The iSite team designed a cost-effective solution that would create a single view of the estate, using Portfolio for property and lease information. Planit is used for all property projects including new store fit-outs and opening. Caretaker will be used to manage all facilities activity across the business, including planned and preventative maintenance. The mobile website will also be utilised for accessing property information such as drawing revisions. HSL are aiming to add at least two stores per month to their network, with a goal of 120 by 2018. Portal will enable a step change across their business, bringing control and structure to operations as the property portfolio grows.

BUILDING INTELLIGENCE

Styles&Wood Group plc has developed an integrated service model, fully configurable in line with individual clients’ requirements.

With services grouped under the professional, contracting and facilities banners, we’re able to engage clients with a much broader service offer.

PROFESSIONAL SERVICES: PROFESSIONAL SERVICES:

PROVIDING DESIGN AND DEVELOPMENT SERVICES

Styles&Wood was appointed to deliver the £6.5m contract for the fit-out for Addleshaw Goddard LLP. The client’s main objectives were to create a modern open-plan office space with client-facing areas. The programme comprised high-end Cat A, Cat B and Cat C fit-out across the fifth, sixth and seventh floors of the city centre building.

The 65,000ft2 office space includes worldwide conferencing facilities, client hospitality areas, a reception area, bespoke FF&E in client-facing areas, open-plan desk space, meeting pods, meeting rooms, study rooms and a boardroom, as well as state-of-the-art catering facilities.

Styles&Wood Design were also involved throughout the delivery of the project, and produced the detailed design concept which enhanced the panoramic views of Manchester city centre.

DESIGN AND ENVIRONMENTS

4.0 OUR BUSINESS EXPLAINED 4.0 OUR BUSINESS EXPLAINED

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PROGRAMME SERVICES

DELIVERING OUTSOURCED MAJOR ROLL-OUT PROGRAMMES FOR FRAMEWORK CUSTOMERS

Styles&Wood was appointed onto the framework which involves the internal refurbishment of bank branches, including increasing the automation technology within the branch and creating three new working zones, (Greeting, Automation and Consultation).

As part of the framework, Styles&Wood identified an opportunity to support the bank by setting up a team of professional Branch Engagement Managers. Following the completion of a branch refurbishment, our Branch Engagement Managers work with the branch staff to support them during the transition to the new way of working.

WORKING WITH CLIENTS TO DEVELOP, SCOPE AND FULLY IMPLEMENT PROGRAMMES

Styles&Wood was approached by a leading supermarket chain, to negotiate the delivery of the modular overlay programme, targeting an enhanced customer services offer in over 350 stores.

Our in-house Design Team worked with the client to survey the branches and complete initial designs. Services were also provided by our Programme Management & Implementation Team, working alongside the client, to help them create a comprehensive programme of works. During the pre-construction phase the Team also performed value engineering in order to find the best solution for the store. Once the scope of works had been agreed, the Team then priced the project on the client’s behalf.

The scope of works included modification to the front of store to include coffee machines, chiller units, hot food display units, customer services desks and new security barriers. Also, in certain stores, Amazon collection points were installed alongside modifications to the existing dry-cleaning points and tobacco kiosks. The programme was delivered nationally and was divided into three main regions which were North, Midlands and South. Our Projects Team delivered works during a tight delivery window, outside of store trading hours, in order to maintain a “business as usual” environment. The programme ran at peak at 12 stores per week.

PROGRAMME MANAGEMENT AND IMPLEMENTATION


PROFESSIONAL SERVICES: PROFESSIONAL SERVICES:

OUR PROJECTS TEAM DELIVERED WORKS DURING A TIGHT DELIVERY WINDOW, OUTSIDE OF STORE TRADING HOURS, IN ORDER TO MAINTAIN A “BUSINESS AS USUAL” ENVIRONMENT.

“THE CHANGE AGENT WHO SUPPORTED US THE FIRST TWO DAYS OF OUR INTERNAL REFURBISHMENT WAS GREAT. REALLY CALM, COOL AND COLLECTED AND WAS VERY EASY TO DO BUSINESS WITH; SHE HELPED AND SUPPORTED US WHERE NEEDED, BUT DIDN’T STRESS - SHE WAS GREAT.” Branch Manager, Watford Town Centre

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PROVIDING A FULLY INTEGRATED RISK MANAGEMENT SYSTEM FOR FINANCIAL SERVICES PROVIDERS

Nationwide Building Society embarked upon an exercise to review its current risk management and control system. Working collaboratively with the Styles&Wood Technologies Team, they developed a new solution with the appropriate level of risk, controls and incident activity in a uniquely flexible and configurable framework.

The solution was developed over a period of 18 months and trialled with a small team before rolling out to the wider operational base of 4,500 users. Today, the risk and incident modules are live and operational, and the control module is in the process of being rolled out in phases over the coming months. Confidence around the operational efficiencies of the solution is high, to such an extent that the decision was made, with the full support and backing of Nationwide, to make the system available to the wider market place. Arctick was officially launched in February 2017 at the London HQ of the British Bankers’ Association.



CONFIDENCE AROUND THE OPERATIONAL EFFICIENCIES OF THE SOLUTION IS HIGH, TO SUCH AN EXTENT THAT THE DECISION WAS MADE, WITH THE FULL SUPPORT AND BACKING OF NATIONWIDE, TO MAKE THE SYSTEM AVAILABLE TO THE WIDER MARKET PLACE. ARCTICK WAS OFFICIALLY LAUNCHED IN FEBRUARY 2017 AT THE LONDON HQ OF THE BRITISH BANKERS’ ASSOCIATION.

“SINCE ENGAGING KEYSOURCE AS OUR FACILITIES MANAGEMENT PROVIDER, WE HAVE FOUND THEM TO BE EXTREMELY RESPONSIVE TO OUR NEEDS. THEY ARE VERY PROFESSIONAL IN THEIR APPROACH AND FLEXIBLE IN FINDING SOLUTIONS TO ANY OF OUR REQUESTS.”

WORKING WITH CLIENTS TO DELIVER “BUSINESS AS USUAL” WITHIN CRITICAL ENVIRONMENTS

Keysource is responsible for the management of two critical data centres for a major blue-light provider, as part of a wider strategic implementation of a technology transformation programme.

The highly secure, available and scalable data centres house critical IT systems, supporting services such as emergency service communications which handle an average of 6,000 emergency 999 and 15,000 non-emergency calls every day.

PROVISION OF SERVICES TO ASSIST IN MANAGING CLIENTS’ PROPERTIES

Keysource delivers a full range of FM services for TU at its Head Office in Reigate where nearly 100 employees are located. Key drivers for the contract are cost and efficiency, as well as the requirement to have a safe and healthy working environment for all staff.

The contract involves providing critical FM support along with responsibility for soft services, reactive maintenance and damage repair, including fire suppression, electrical testing and compliance.


Lisa Field Corporate Services at Tesco Underwriting

GOVERNANCE, RISK AND COMPLIANCE

CRITICAL ENVIRONMENTS

LIFECYCLE SERVICES

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PROJECT DEVELOPMENT AND DELIVERY

In February 2016, Styles&Wood was appointed to carry out extensive refurbishment works at Irongate House in the heart of London’s City Centre. Originally constructed in 1978, the building has a distinctive granite façade, and is surrounded by high-rise glazed buildings. The surrounding area is currently undergoing redevelopment with the introduction of a new road network and urban green-spaces.

Irongate House provides 26,000 ft2 of commercial office space, spread over seven floors, with the programme of works involving the Cat A fit-out across all floors of the unoccupied building. The programme of works will cover new raised floors, suspended ceilings, lifts, toilets, and M&E installation, as well as a new reception area being created on the ground floor, with a seating booth and a new reception desk.


CONTRACT SERVICES:

THE PROGRAMME OF WORKS WILL COVER NEW RAISED FLOORS, SUSPENDED CEILINGS, LIFTS, TOILETS, AND M&E INSTALLATION, AS WELL AS A NEW RECEPTION AREA BEING CREATED ON THE GROUND FLOOR, WITH A SEATING BOOTH AND A NEW RECEPTION DESK.

THE TEAM ESTABLISHED A GOOD WORKING RELATIONSHIP WITH THE CLIENT AND ARCHITECTS, WITH DESIGN AND CLIENT MEETINGS HELD MONTHLY. THE TEAM ALSO MANAGED THE ARCHITECTS WHILST WORKING ON THE PROJECT.

PROJECT DEVELOPMENT AND DELIVERY

FULFILLING THE ROLE OF PRINCIPAL CONTRACTOR FOR PROJECTS WITH VALUES RANGING FROM £100,000 TO £20M

Dakota House located on Concord Business Park, which is situated 1.5 miles from one of the UK’s busiest airports, Manchester. Within the Business Park, there are several other office buildings that were fully operational during the programme.

The Cat A refurbishment project involved the strip-out of all three floors back to shell, refurbishment of office space to a Grade A standard, the creation of a double height reception area, new M&E throughout the building, new glazed curtain walling and a new feature canopy entrance.

The site averaged 50 operatives per day, from over 15 different types of trade.

The team established a good working relationship with the client and architects, with design and client meetings held monthly. The team also managed the architects whilst working on the project, setting up an approvals process and controlling the dissemination of drawings.

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PEOPLE AND PLACES

5.0

As a responsible business,

Sty les&Wood Group plc unders tands

the impor tance of people.

5.0 PEOPLE AND PLACES

During 2016, the Group continued to champion an unwavering commitment to investing in people, to deliver a number of sustainable engagement activities aimed at creating opportunities for people, be they our own people, the people in the communities we serve or the future workforce.

Working with local schools enables us to engage with pupils at Year 7 onwards, to share information on the range of careers available to them in construction. Assemblies, careers days, mock interviews, work experience and mentoring all form part of our structured schools liaison programmes.

SECURING THE FUTURE WORKFORCE

“Speaking to our pupils after the visit, they expressed how much they enjoyed the experience. Real-life experiences like this help to reinforce the knowledge they gain in school, and the presentations delivered by Daniel and Joe help to ignite their enthusiasm for a career in the construction industry. Once again, I would like to thank you for all the hard work you have put in and hope that we can work together again in the future.” Richard Goldstone, Teacher, Parrs Wood High School.

“SHE Girls Club” was created in order to raise the aspiration of Year 8 female pupils and focus on a series of workshops including self-awareness, personal brand, celebrity culture and women in the media, role models, careers and team work.

“Just wanted to say the girls are really buzzing about “SHE Club.” It’s really developed its own identity and the girls are forming their own little community and it’s great to see. Really appreciate all the energy you put into the delivery, it’s so key in engaging our girls!” Michelle Dean, Assistant Head, Parrs Wood High School.

YEAR 10 BTEC CONSTRUCTION AND THE BUILT ENVIRONMENT STUDENTS FROM PARRS WOOD HIGH SCHOOL VISIT OUR WESTMINSTER HOUSE SITE IN MANCHESTER

CREATING EQUAL OPPORTUNITIES

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NURTURING TALENT

By investing in apprentices and graduates, we are able to identify and engage with new industry entrants of the highest calibre. Through programmes such as our Management Development Programme, we’re able to provide our people with varied careers, full of opportunities to develop and grow within their current role, whilst supporting their career aspirations.

INVESTING IN OUR PEOPLE

Styles&Wood has a rich tradition of investing in people, developing and promoting from within. Colleagues have access to a range of training and development opportunities, ranging from mandatory certificates and accreditations through to further learning and professional qualifications.

5.0 PEOPLE AND PLACES5.0 PEOPLE AND PLACES

NAT

IMOGEN

SAIF

RECRUITING DIFFERENTLY

We’re always looking for exceptional people to join the team and recognise that the recruiting pool is wider than just those candidates with a background in construction. Working with The Career Transition Partnership, an organisation that works with the armed forces to offer support and guidance to those servicemen/women who are looking to leave the military and gain civilian employment, we successfully recruited 11 men and women into project, commercial and supporting roles across our business.

MATT RUSSELL

“I’ve been with Styles&Wood now for a year and I feel extremely fortunate to be employed here. I’ve used the skills gained in the military and applied them to my role as Project Manager and it’s worked out really well. The business has also supported my studies and I’ve completed the first year of my degree. I’m so grateful for the opportunities I’ve been given at Styles&Wood and I’m looking forward to progressing in the business.”

SAIF REHMAN, APPRENTICE PROJECT MANAGER

“The best thing about being an apprentice is being able to study at college and get a qualification alongside working on site; I’m gaining construction knowledge and getting experience.”

IMOGEN WOODAGE, GRADUATE SPACE DESIGNER

“The Styles&Wood Graduate Scheme has kick-started my career in design and has supported my progress and development along the way. Through working on a wide range of projects with a variety of colleagues and clients, I have been able to expand my knowledge of the industry which has helped to grow my confidence. My supportive team are always on hand to offer advice and support, and make coming to work very enjoyable. I’m looking forward to my career here.”

NAT RILEY, MANAGEMENT DEVELOPMENT PROGRAMME

“The Styles&Wood Management Development Programme was one of the most enlightening experiences of my career so far. It gave me an excellent insight into management techniques, the importance of self-awareness and application of empathy and individuality. It also created an excellent platform to learn from individuals within different parts of business who were also on the course. We all embraced the open and honest sharing environment and were able to have some interesting discussions about our ideas on the future.” RYAN COMAC, BUSINESS ANALYST

“Styles&Wood has provided me with a unique opportunity to study Business Management at Manchester Metropolitan University. The course encourages collaboration between Styles&Wood and MMU, as projects are negotiated with the intention of providing me with a key academic understanding and also a tangible output which benefits Styles&Wood. I am grateful for the opportunity to return to education at this stage in my career, and feel that I am developing in a manner which complements the growth intentions of our organisation.”

RACHEL MORRIS, CIM CERTIFICATE IN MARKETING LEVEL 4

“I originally joined Styles&Wood as part of the graduate programme and since then, the business has continued to invest in my development. Most recently, I undertook the CIM Professional Certificate in Marketing and was fully supported, not only in terms of fees, but also with regards to study time and day release for course modules. Having the backing of the business to develop and grow has boosted my confidence, as well as my capability, and I’m grateful for the support I’ve received.

NICK O’GORMAN, SMSTS

“Styles&Wood has helped me to move forward in my career by providing me with extensive high quality training and an example of this is the SMSTS course that I completed. It was very informative and interesting and I feel I learned a lot from it. I feel much more confident now about fulfilling my role.”

MATT

NICK

RACHEL

RYAN

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SUPPORTING OUR COMMUNITIES

Donations, fundraising and volunteering are all ways in which we encourage colleagues to give back to the communities in which they work and live.

EASTER EGG COLLECTION – HEAD OFFICE

Donation of 175 chocolate Easter eggs to the Trussell Trust foodbank.

5.0 PEOPLE AND PLACES5.0 PEOPLE AND PLACES

“WE ARE SO GRATEFUL TO THE TEAM FROM

STYLES&WOOD FOR UNDERTAKING TOTAL

WARRIOR TO HELP RAISE FUNDS FOR ROYAL

MANCHESTER CHILDREN’S HOSPITAL CHARITY.

A MASSIVE THANK YOU AND WELL DONE TO

EVERYONE INVOLVED.”

“ONCE AGAIN, I WOULD LIKE TO THANK ALL YOUR

COLLEAGUES AT STYLES&WOOD FOR SUPPORTING

US. THESE TREATS ARE REALLY APPRECIATED BY

THE FAMILIES USING OUR FOODBANKS IN THE

TRAFFORD AREA.”Joel Oxberry, Charity Manager Royal Manchester Children’s Hospital.

John Lambie The South Trafford foodbank

TOTAL WARRIOR – HEAD OFFICE

On Saturday 6 August, Styles&Wood colleagues, family and friends took on the “Total Warrior Challenge” in the Lake District, in aid of Royal Manchester Children’s Hospital Charity. Our 34 brave contenders undertook the gruelling course of a 10k run through the valley of Shap, combined with 30 challenging obstacles, fire, water, endless hills, rivers and tonnes of mud! They raised £2,316.13 for the charity.

“I CAN’T THANK THE TEAM FROM STYLES&WOOD

ENOUGH. THEY ALL WORKED SO HARD AND DID

AN AMAZING JOB. THE 1950s CRAZY PAVING

AREA OUTSIDE THE SHOPS IS THE HEART OF OUR

COMMUNITY. SADLY, IT HAD BEEN NEGLECTED

FOR YEARS AND WAS FULL OF WEEDS, LITTER

AND CIGARETTE STUBS. THE STYLES&WOOD

TEAM CLEANED IT UP AND TURNED IT INTO AN

OASIS OF BEAUTIFUL PLANTS AND BUSHES. SINCE

THEN, WE HAVE HAD SO MANY RESIDENTS

COMMENT ON JUST HOW INCREDIBLE THE

TRANSFORMATION IS AND HOW MUCH THEY LIKE

IT. YOUR TEAM HAVE CHANGED NOT ONLY HOW

THE AREA LOOKS, BUT ALSO HOW PEOPLE FEEL

ABOUT THIS AREA, WHICH IS FANTASTIC. THANK

YOU FOR HAVING SUCH A MASSIVE IMPACT.”Paul G FORCE

GFORCE

Colleagues gave their time to support GForce, a local community group based in Timperley. The team renovated the area outside the shops and café, by removing flag stones and planting bushes. They also helped out in the local park to put up a fence and cut the grass.

“PLEASE PASS ON OUR MOST GRATEFUL THANKS

TO ALL THE VOLUNTEERS WHO CAME ALONG

ON TUESDAY 17 MAY. THEY WORKED SO HARD

AND IN GOOD SPIRITS. ANN FROM THE NEARBY

HOUSES WANTED TO SEND HER SPECIAL THANKS,

AS THE PATHWAY HAS BEEN A BUGBEAR FOR HER

FOR A LONG TIME. ONCE THE WILD FLOWERS

START GROWING I’LL SEND SOME PHOTOS.

THANKS AGAIN.”

“WE WOULD LIKE TO SEND A HUGE THANK YOU

TO THE STYLES&WOOD TEAM FOR THEIR SUPPORT.

THE WHOLE TEAM GOT STUCK IN ON THE DAY,

CLEANING, PAINTING, SORTING THE STORES AND IT

MADE A HUGE DIFFERENCE. WE FILLED A VAN WITH

RUBBISH THAT HAD JUST BEEN GATHERING DUST,

FREEING UP ROOM IN OUR STORES. EVERYONE

SEEMED TO ENJOY THE DAY AND WE CERTAINLY

ENJOYED YOUR PARTICIPATION. THANK YOU.”

Ruth Gorgeous Gorse Hill

Judith Lifeshare

GORGEOUS GORSE HILL

Colleagues visited Gorgeous Gorse Hill, a local community group working in Stretford, and helped out clearing a patch of land in preparation to grow wild flowers to enhance the busy footpath.

LIFESHARE

Colleagues also volunteered at Lifeshare, a homeless charity based in Manchester. The team worked in smaller groups and tackled tasks including sorting out food and clothing donations, as well as cleaning and painting.

AFTER

BEFOREDURING

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FINANCIAL REPORT

6.0

6.0 FINANCIAL REPORT

FINANCIAL PERFORMANCE

Revenue for the year ended 31 December 2016 reduced by £10.3m to £104.7m (2015: £115.0m).

Whilst revenue was lower in 2016, there was a much wider distribution by customer. The largest customer for the year accounted for16.6% (2015: 46.0%) of revenue and 4 (2015: 2) customers each delivered more than 10% of revenues. Revenues from these customers in 2016 were £57.3m (2015: £69.9m), reflecting a greater diversity and resilience of revenue.

Gross margin improved to 12.3% (2016: 9.3%) due to the increasingly specialist and technical nature of project work undertaken by the Group, the move into facility services through the Keysource acquisition and continuing operational efficiencies.

Underlying administrative expenses1 increased to £8.0m (2015: £6.8m), following the acquisition of Keysource in September and with additional expenditure on overhead infrastructure (personnel, premises, systems) to support the Group to provide a platform for future growth (through acquisition).

Underlying profit before tax2 increased by 26.5% to £4.1m (2015: £3.2m). Non-recurring expenditure on professional fees associated with acquisition of companies was £0.3m (2015: £nil); restructuring and integration costs post- acquisition of £0.1m (2015: £Nil); corporate finance fees associated with 2015 transaction £nil (2015: £0.4m); and accounting for notional interest on preference shares of £0.2m (2015: £0.5m) reduced the result to a profit before taxation of £3.5m (2015: £2.4m), an increase of 49.4%.

FINANCIAL COST

Net financing costs have reduced from the prior year due to the lower debt levels following the balance sheet strengthening in June 2015, and the improved trading performance of the business.

Net financing costs for the year reduced by £0.4m to £0.6m (2015: £1.0m) and included £0.2m (2015: £0.5m) of notional interest on preference shares.

Net interest and fees on bank borrowings were £0.1m (2015: £0.3m). Interest of £0.2m (2015: £0.1m) was payable on the loan notes issued during the year. Finance costs include the payment of interest on the preference shares of £0.15m (2015: £0.17m).

ACCOUNTING FOR PREFERENCE SHARE CAPITAL

The convertible redeemable preference shares of £1 each carry a cash coupon of 3% and are redeemable in tranches from December 2013 through to December 2019 or convertible into ordinary shares at a price of £9.375 at any time between August 2012 and July 2019, following the 1 for 10 share consolidation in 2014.

As the preference shares have a conversion option, the Group has to account for them in accordance with IAS 39, with the result that a proportion of the preference share capital is classed as debt with the remainder treated as equity. At 31 December 2016, £871,000 (2015: £670,000) of the preference share capital was classified as a current liability, being repayable on 31 December 2016 and £2,680,000 (2015: £3,364,000) of the preference share capital was classified as non-current liabilities, with the balance of £806,000 (2015: £993,000) shown as shareholders’ equity.

In addition, IAS 32 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 2016 was £187,000 (2015: £495,000). The cash dividend paid on the preference shares was £151,000 (2015: £174,000).

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.

1 Underlying administrative expenses exclude non-recurring administrative expenses

2 Underlying profit before tax is before charging non-recurring items and preference share accounting

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6.0 FINANCIAL REPORT 6.0 FINANCIAL REPORT

TAXATION

The tax charge for the year amounted to £1.0m (2015 £0.7m). The preference share interest charge of £0.3m (2015: £0.7m), being part notional charge and part preference share coupon, the share based payment accounting charge of £0.3m (2015: £Nil), non-deductible expenses (including acquisition related fees), and the losses incurred by the joint venture do not qualify for corporation tax deductions or reliefs. The impact of these non-tax deductible charges against profit results in an effective tax charge on the profit before tax of 27.7% (2015: 28.6%) compared to the UK corporation tax rate of 20.0% (2015: 20.25%).

DIVIDEND

No dividends on ordinary shares are proposed in respect of the year ended 31 December 2016 (2015: £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 34.2p (2015: 25.4p), an increase of 34.6%. Underlying earnings per share were 41.4p (2015: 37.2p).

ACQUISITION OF KEYSOURCE

On 20 September 2016, the Group acquired the whole of the issued share capital of Keysource Limited for an initial consideration of £4.5m, with contingent consideration of up to £5.0m payable dependent on financial performance for the three years ending 31 December 2018.

In the period following acquisition, Keysource contributed £0.4m of underlying profit before tax to Group performance on revenues of £3.2m.

STRENGTHENED BALANCE SHEET

For the first time since flotation in 2007, the Group has reported a consolidated balance sheet with positive net assets at 31 December of £3.4m (2015: net liabilities £1.0m). The improvement in financial strength is attributable to profitable trading, the issue of equity to the vendors of Keysource as part of the consideration and the exercise of the outstanding warrants.

NET CASH AND CASH FLOW

The Group closed the year, with net cash balances less short-term facilities at 31 December 2016, of £6.1m (2015: £5.6m), a net inflow of £0.5m. The net cash inflow from operations was £6.2m (2015: £7.5m) with an inflow before working capital movements £5.5m (2015: £4.0m) reflecting the improvement in underlying profitability.

Capital expenditure on property, plant and equipment, and software development was materially higher than prior year at £1.8m (2015: £0.3m) with the investment in the new Head Office Cavendish House, and the investment in product development in the iSite business of the Governance Risk and Controls product, “Arctick” and “Novus”, iSite’s new Property Management Information system.

Investing activities include £3.5m of cash consideration on the acquisition of Keysource Limited.

There was a small net outflow from financing activities of £0.03m (2015: £2.1m) as the proceeds from exercise of the outstanding warrants and reduction in cash collateral deposits offset financing costs and redemption of preference shares.

Overall, the Group’s net debt1 reduced to £0.4m (2015: £1.4m).

In February 2017, the Group entered into new banking arrangements with Santander PLC. The arrangement is for a committed £5.0m Revolving Credit Facility with a term of two and a half years.

INTERNATIONAL

A strategic review of our interests in Dubai was undertaken in conjunction with our partner in-region. The management effort to service a broad customer base and fund the working capital dynamics required in-region were viewed to be disproportionate to the returns. Following the review, the venture was repositioned in 2016 to focus on select, major fit-out opportunities to be undertaken with our in-country partner, rather than attempt to service a broad customer portfolio.

The share of losses included within the consolidated results are £0.38m (2015: £0.14m).

1Net debt comprises cash and cash equivalents less loans, preference shares and

commitments under hire purchase agreements

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7.0 BOARD OF DIRECTORS

PAUL MITCHELL

NON-EXECUTIVE CHAIRMAN OF THE NOMINATION COMMITTEE

Paul Mitchell joined the Styles&Wood Board in October 2006 as Non-Executive Director, a role that he held until 2015 when he accepted the role of Chairman. He is Chairman of Rickitt Mitchell & Partners Limited, a corporate finance advisory firm based in Manchester, where he has worked since 1981. Paul played a pivotal role in developing Rickitt Mitchell into a leading independent corporate finance boutique, delivering a variety of groundbreaking deals as adviser to a wide range of clients, over sectors as diverse as engineering, professional services, IT and airlines. As Non-Executive Chairman, Paul continues to create value and provide strategic guidance as a board member. He is also a Non-Executive Director of fully listed NCC Group PLC.

“2016 WAS ANOTHER SUCCESSFUL YEAR AS THE GROUP CONTINUED ITS STRATEGIC DIVERSIFICATION. I’D LIKE TO THANK ALL OF OUR PEOPLE FOR THEIR HARD WORK AND COMMITMENT.”

TONY LENEHAN

CHIEF EXECUTIVE OFFICER

Tony Lenehan was appointed to the Styles&Wood Board as Chief Executive Officer on 1 January 2011. Tony previously held senior executive roles in property and building with both Carillion and Bovis Lend Lease. He has been the driving force behind the transformation of Styles&Wood into a market-leading provider of specialist support services to the built environment. A chartered engineer by profession, Tony fully embraces the people agenda and champions the leadership programmes within Styles&Wood. He also has a role within the Marketplace Leadership Team for Business in the Community.

“THE BUSINESS HAS MADE GREAT STRIDES DURING THE YEAR, BOTH ORGANICALLY AND THROUGH STRATEGIC ACQUISITIONS, WHICH HAVE FURTHER BROADENED OUR SERVICE LINE CAPABILITY, LEAVING THE GROUP WELL POSITIONED FOR FUTURE GROWTH.”

BOARD OF DIRECTORS

7.0

40113

PHILIP LANIGAN

CHIEF FINANCE OFFICER COMPANY SECRETARY

Philip Lanigan joined the Styles&Wood Board in August 2009 as Chief Finance Officer and Company Secretary. A chartered accountant by profession, Philip has extensive commercial experience working for support services and project management businesses; over the course of his career he has played a significant role in a number of high profile corporate transactions. A keen advocate of customer relationship management, Philip has built upon his core financial expertise to understand the drivers behind value creation. Philip is also a Governor of The Manchester College.

“ THE GROUP ENJOYED ANOTHER STRONG FINANCIAL PERFORMANCE IN 2016, DELIVERING AN IMPROVED PROFIT PERFORMANCE AND MOVING TOWARDS A NET CASH POSITION. OUR STRONG TRADING PROSPECTS GIVE US CONFIDENCE FOR THE YEAR AHEAD.”

ROBERT HOUGH CBE DL

SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR CHAIRMAN OF THE REMUNERATION COMMITTEE AND THE AUDIT COMMITTEE

Robert Hough joined the Styles&Wood Board in October 2006, bringing with him a wealth of experience in sustainable regeneration. Robert was a partner in a Manchester legal practice before assuming a number of senior executive and non-executive roles for major UK corporates. He has made a substantial contribution to the regeneration of the North West, as past Chair of both the NW Regional Development Agency and the Chair of Liverpool City Regional Local Enterprise Partnership. Robert also holds active directorships within the Peel Group, for whom he previously held the position of Executive Deputy Chairman, for 13 years.

“THE STRENGTH AND EXPERTISE OF STYLES&WOOD’S BOARD WAS APPARENT DURING 2016 AS THE GROUP DELIVERED THE SUCCESSFUL ACQUISITION OF KEYSOURCE, FURTHER BUILDING OUT ITS SERVICE LINE CAPABILITIES”

MATT WIDDALL

NON-EXECUTIVE DIRECTOR

Matt is an Investor at BGF (Business Growth Fund), the UK’s most active provider of growth capital. Matt led BGF’s investment in Styles&Wood in June 2015 and subsequently joined the Board as a Non-Executive Director. Before joining BGF, Matt worked as a Director in Deloitte’s Corporate Finance Team in Manchester and in the Lloyds Bank Acquisition Finance Team. Matt qualified as a chartered accountant with Deloitte in 1998. With extensive experience in the corporate finance and private equity markets, Matt’s appointment adds value through the leverage provided by the BGF network.

“ STYLES&WOOD GOES INTO 2017 FROM A POSITION OF CONFIDENCE, WITH A BROADENED CUSTOMER BASE AND A STRONG MANAGEMENT TEAM.”

7.0 BOARD OF DIRECTORS7.0 BOARD OF DIRECTORS

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DIRECTORS’ REPORT

8.0

The Directors present their repor t and

the audi ted consol idated, F inancial

S tatements for the year ended 31

December 2016.

8.0 DIRECTORS’ REPORT

PRINCIPAL ACTIVITIES

The principal activities of the Group continue to be the provision of an extensive range of services to property owners and occupiers, through the full life-cycle of a property, from design through to facilities management. The services are provided to a number of sectors, including Commercial, public and community, retail and leisure, and banking and finance.

The Group coordinates all key aspects of the property lifecycle process, offering an integrated suite of professional, contracting and facilities services, managed within three reporting segments:

CONTRACTING SERVICES:

• Projects: fulfilling the role of Principal Contractor for projects with values ranging from £100,000 to £20m.


• Programme Services: delivering outsourced major roll-out programmes for framework customers.

• Design: providing design and development services.

• Big Data Integration and Analytics: providing technology-based property information solutions.

• Programme Management and Implementation: working with clients to develop, scope and fully implement programmes.

• Governance, Risk and Compliance: providing a fully integrated risk management system for financial services providers.


• Critical Environments: working with clients to deliver “business as usual” within critical environments.

• Lifecycle Services: provision of services to assist in managing clients’ properties.

The Group has a joint venture in the United Arab Emirates, Dutco Styles & Wood LLC, which offers contracting services to the local market through partnership working with our joint venture partner.

The principal activity of the Company is to act as a holding company for the Group.

REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS

A detailed review of the development and performance of the Group during the year, the Group’s position at year-end and an indication of future developments is given within the Chief Executive’s Report on pages 11-14.

RESULTS AND DIVIDENDS

The audited Financial Statements for the year ended 31 December 2016 are set out on pages 67-74.

Consolidated revenue and profit before taxation are stated at £104,712,000 (2015: £114,986,000) and £3,540,000 (2015: £2,369,000) respectively.

The Directors do not recommend payment of a final ordinary dividend (2015: nil). No interim dividend was paid on ordinary shares during the year (2015: nil). The cash coupon paid on the preference shares for the year ended 31 December 2016 was £151,000 (2015: £174,000).

FINANCIAL RISK MANAGEMENT

Information on the Group’s financial risk management policies and financial instruments can be found in note 3 to the Financial Statements.

GOING CONCERN

The Group has a strong cash position at the year-end of £6.1m. In addition, in February 2017, the Group entered into a £5.0m revolving credit facility with Santander. The Directors have reviewed the Group’s forecasts and projections, including assumptions concerning capital expenditure and the impact on cash flows, and have a reasonable expectation that the Group has sufficient financial resources to continue its operations for the foreseeable future. For this reason, they have continued to adopt the going concern basis in preparing the financial statements.

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8.0 DIRECTORS’ REPORT8.0 DIRECTORS’ REPORT

SIGNIFICANT AGREEMENTS

The Group’s new banking facilities agreement, entered into in February 2017 with Santander plc, contains a clause in relation to change of control, whereby, unless agreed in writing, the facility agreement will be cancelled upon a change of control.

There are no other significant agreements with a change of control clause.

DIRECTORS

The Directors who served throughout the year and at the date of this report were:

A S LENEHAN

P N LANIGAN

R E HOUGH CBE DL

P MITCHELL

M WIDDALL

Brief biographical details relating to each of the current Directors can be found on pages 37-40.

Further information relating to the Directors, including their interests in the ordinary shares of the Company and details of their service contracts are given in the Directors’ Remuneration Report on pages 53-62. Information on related party transactions is given in note 28 to the Financial Statements.

SUBSTANTIAL SHAREHOLDINGS

At 24 April 2017, the Company has been notified of the following interests of 3% or more in its ordinary shares:

EMPLOYEES

As an Investor in People organisation, Styles&Wood recognises the importance of good communication with its colleagues. The Group holds an Annual Conference to update all colleagues on matters such as strategy, financial and operational performance, and other key developments. The Group regularly communicates up-to-date information and measurement of performance to employees, through informal meetings, newsletters and notice boards. Each colleague has an annual personal development review, with development objectives being set that support the Group’s strategy.

Styles&Wood encourages employee participation in the Group’s performance through employee share schemes. Further details on these schemes can be found in note 22 to the Financial Statements.

The Group supports the employment of disabled persons wherever possible through recruitment and by the retention and retraining of those who become disabled during their employment. Employees with a disability are provided with training, career and promotion opportunities in line with their colleagues.

Styles&Wood is an inclusive employer and promotes equality and inclusion from recruitment and selection, through training and development, to promotion, reward and recognition.

POLICY AND PRACTICE ON PAYMENT OF CREDITORS

The Group’s policy is to set terms of payment with suppliers when agreeing the terms of each transaction, ensure that suppliers are made aware of the terms of payment, and abide by the terms of payment.

At 31 December 2016, the Group had 117 days’ purchases outstanding in respect of payments to suppliers (2015: 95 days). The Company had nil days’ purchases outstanding in respect of payments to suppliers (2015: nil).

SHARE CAPITAL

Details of the Company’s share capital, including the voting rights of each share type, are set out in note 21 to the Financial Statements. The rights attaching to shares are provided by the Articles of Association, which may be amended or replaced by means of a special resolution of the Company at a General Meeting.

The Directors of the Company have the authority to issue ordinary shares to the value of 65% of the Company’s current issued ordinary share capital. Authority also allows for shares with a value of up to 10% of the nominal value of issued ordinary share capital to be issued without being offered to existing shareholders. These authorities expire at the next Annual General Meeting, and a resolution to renew authority will be tabled at the forthcoming Annual General Meeting.

ANNUAL GENERAL MEETING

The Annual General Meeting will take place at 11am on 31 May 2017, at Cavendish House, Cross Street, Sale M33 7BU. Details of the resolutions to be proposed will be set out in the separate Notice of the Annual General Meeting which will be available on the Company’s website: www.stylesandwood-group.co.uk.

DIRECTORS’ INDEMNITIES

As permitted by the Articles of Association, the Directors have the benefit of an indemnity which is a qualifying third party indemnity provision, as defined by Section 34 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force. The Company also purchased and maintained, throughout the financial year, Directors’ and Officers’ liability insurance in respect of itself and its Directors.

DISCLOSURE OF INFORMATION TO AUDITORS

Each of the persons who is a Director of the Company at the date of this report confirms that:

• So far as each of the Directors is aware, there is no relevant audit information of which the Company’s Auditors are unaware; and

• Each of the Directors has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s Auditors are aware of that information.

INDEPENDENT AUDITORS

The Auditors, PricewaterhouseCoopers LLP have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the Annual General Meeting.

CORPORATE GOVERNANCE

The Company’s policy on corporate governance can be found on pages 47-52 of these Financial Statements. This does not form part of this Directors’ Report.

The Directors consider the Annual Report and Financial Statements taken as a whole to be fair, balanced and understandable, and to provide the information for shareholders to assess the Group’s performance, business model and strategy.

BY ORDER OF THE BOARD

PHILIP N LANIGAN COMPANY SECRETARY

STYLES&WOOD GROUP PLC Registered Number 5622016 26 April 2017

The Company maintains appropriate insurance cover in respect of legal action taken against its Directors.

24 Apri l 2017 31 December 2016

NAMENUMBER

OF SHARES HELD

% OF ISSUED

SHARES

NUMBER OF SHARES

HELD

% OF ISSUED

SHARES

Mr Paul Anthony Bel l

2,178,533 25.07% 2,178,533 25.81%

Business Growth Fund plc

1,516,429 17.45% 1,516,429 17.97%

Lombard Odier Asset Management (Europe) L imi ted

1,516,430 17.45% 1,516,430 17.97%

Laurence Werner 365,387 4.20% 365,387 4.33%

46113

STATEMENT OF DIRECTORS’

RESPONSIBILITIES

9.0

9.0 STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under Company Law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company, and of the profit or loss of the Group and Company for that period. In preparing the Financial Statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable IFRSs as adopted by the European Union have been followed for the Group Financial Statements and IFRSs as adopted by the European Union have been followed for the Company Financial Statements, subject to any material departures disclosed and explained in the Financial Statements;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company’s performance, business model and strategy.

Each of the Directors, whose names and functions are listed in Directors confirm that, to the best of their knowledge:

• the Company Financial Statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company;

• the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

• the Directors’ Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors’ Report is approved:

• so far as the Director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware; and

• they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group and Company’s auditors are aware of that information.

48113

CORPORATE GOVERNANCE

10.0

10.0 CORPORATE GOVERNANCE

Whilst Styles&Wood is not required to comply with the UK Corporate Governance Code, the Group is committed to maintaining high standards of Corporate Governance. The following disclosures are voluntary but are not intended to demonstrate compliance with the UK Corporate Governance Code.

THE BOARD

COMPOSITION

The Board of Styles&Wood comprises Non-Executive Chairman, Paul Mitchell, Non-Executive Directors, Robert Hough and Matt Widdall and two Executive Directors, Tony Lenehan and Philip Lanigan.

Brief biographical details of all the members of the Board are set out on pages 37-40. Both Paul Mitchell and Robert Hough are considered to be independent Directors.

The Senior Independent Director of the Board is Robert Hough. The roles of Chairman and Chief Executive are separate and clearly defined. The Chairman is responsible for leadership of the Board and creating the conditions for overall Board and individual Director effectiveness, both inside and outside the Boardroom.

The Chief Executive is responsible for running the Group’s business. The Company Secretary is responsible to the Board for ensuring that all Board procedures are followed and for advising the Board on Corporate Governance procedures.

RESPONSIBILITIES

The Board is responsible to shareholders for the overall strategy and direction of the Group. The Board meets on a regular basis with a minimum of ten meetings formally scheduled for each year. During the year ended 31 December 2016, the Board met on 11 occasions.

The Directors have adopted a formal schedule of matters reserved for the Board. Examples of such matters are : strategy and long-term objectives, extension of the Group’s activities into new business or geographical areas, acquisitions and disposals, major capital projects, changes to share capital, convening shareholder meetings and dividend policy.

Matters relating to the day-to-day running of the business are delegated to an Executive Leadership Team, comprising the Directors of Styles & Wood Limited, and, from October, Mike West, the former owner of Keysource Limited.

In advance of each Board Meeting, all Directors receive papers which include an agenda and reports from the Chief Executive, Chief Finance Officer and the Chair of Committees as relevant, together with comprehensive supporting information for other agenda items. The minutes of all Board Meetings are approved by the Chairman and a record of decisions taken, questions raised and a schedule of unresolved matters is kept. The Board has in place a formal process for authorisation of Directors’ conflicts of interest.

During the year ended 31 December 2016, the Non-Executive Directors, including the Chairman, met separately as a group on two occasions.

PERFORMANCE EVALUATION

Shortly after the end of the 2016 financial year, the Board, led by the Chairman, performed a formal evaluation of its own performance and that of its committees during 2016. The review was conducted by way of each Board member completing a questionnaire and the results being reviewed by the Board as a whole.

The review concluded that the Board and its committees had performed well during the year. The review identified a number of areas for focus in 2017, which included a review of management information in the context of the increasing diversity of the Group, following the acquisitions of Keysource and GDM, and the corporate strategy to deliver shareholder value in the long-term.

Following this review, the Board completed a formal evaluation of the performance of individual Directors, with each Director identifying areas for development in the forthcoming financial year.

ADVICE

The Directors are able to take independent professional advice at the expense of the Company, where they judge it necessary to discharge their responsibilities as Directors. They also have access to the advice and services of the Company Secretary and, where it is considered appropriate, training is made available to Directors. The Company maintains appropriate insurance cover in respect of legal action against its Directors.

RE-ELECTION

All Directors submit themselves for re-election at least once every three years, and are subject to re-election at the first Annual General Meeting after appointment.

50113

10.0 CORPORATE GOVERNANCE 10.0 CORPORATE GOVERNANCE

AUDIT COMMITTEE

The Audit Committee comprises the three Non-Executive Directors, Robert Hough, Paul Mitchell and Matt Widdall. It is chaired by Robert Hough, a former practising solicitor, who has considerable experience of governance and commercial functions within listed businesses and as Chairman of public sector bodies. The other two members of the committee, Paul Mitchell and Matt Widdall, are chartered accountants.

The Audit Committee met twice during the year ended 31 December 2016. The external auditors, the Chief Finance Officer and the Chief Executive have been invited to attend all, or part of all, meetings. The external auditors have unrestricted access to the committee and its Chairman, and during the year ended 31 December 2016, the committee met twice with the auditors without any Executive Director being present.

The Audit Committee is responsible for ensuring that the Board applies the Company’s financial reporting and internal control principles and reviews all financial results statements prior to their release. The committee also ensures that the Board maintains an appropriate relationship with the external auditors and makes recommendations to the Board on their appointment.

The committee receives reports by the external auditors on the full year results which highlight any issues with respect to the work undertaken on the audit.

PricewaterhouseCoopers LLP were appointed as auditors to the Group during 2006.

During 2016, the committee has considered their independence and objectivity, which included a review of the auditors’ annual statement, detailing their independence policies and safeguards. The committee also reviews the nature of any non-audit work to be undertaken by PricewaterhouseCoopers LLP and monitors the proposed fees to ensure that auditor independence is not impaired. Non-audit fees for the year of £16,000 related to taxation compliance and advice services. The Group operates a Quality Assurance system throughout the business which is subject to external accreditation and audit.

Given the scale of the Company, the committee is satisfied that no separate internal audit function is required at the current time, but will continue to review this position on an annual basis.

The Company has a whistle-blowing policy under which staff may, in confidence, raise concerns about possible improprieties. The policy is introduced to employees as part of their induction and is published on the Group’s intranet site, which is accessible to all employees.

BOARD AND COMMITTEE ATTENDANCE

The following table sets out the number of meetings held during the year ended 31 December 2016 together with the attendance of each Director:

DIALOGUE WITH SHAREHOLDERS

The Group encourages two-way communication with both its institutional and private shareholders, and responds promptly to any queries received, either verbally or in writing.

During 2016, the Chairman and Executive Directors have held meetings with significant shareholders, fund managers and analysts to discuss the performance of the Group and its future strategy. The Senior Independent Director is available to shareholders if they have concerns, where contact through the Chairman, Chief Executive and Chief Finance Officer fail to resolve, or where such contact is inappropriate. No such concerns were brought to the attention of the Senior Independent Director in the year ended 31 December 2016.

The Group publishes its Annual Report and Financial Statements on its website, where information on the Group’s activities, including shareholder information and regulatory announcements, can also be found.

The Company’s Annual General Meeting will take place at 11am on 31 May 2017, at Cavendish House, Cross Street, Sale, M33 7BU. At the Meeting, all shareholders will have the opportunity to meet and put questions to the Board of Directors, including the Chairman of the Board Committees. Separate resolutions will be proposed for each substantially different issue, to enable each one to receive proper consideration.

Proxy votes will be disclosed after each has been dealt with as a poll. Notice of the Annual General Meeting and related papers will be sent to shareholders at least 21 days in advance of the Meeting. The results of the Annual General Meeting are published on the Company’s website.

The written terms of reference of the audit committee are available on request from the Company Secretary and from www.stylesandwood-group.co.uk.

REMUNERATION COMMITTEE

The Remuneration Committee is chaired by Robert Hough and its other members are Paul Mitchell and Matt Widdall. The Remuneration Committee met twice during the year ended 31 December 2016. The Executive Directors were invited to attend all, or part of all, meetings as considered appropriate to discuss the remuneration of Directors and others and make proposals as necessary. No Executive Director takes part in discussions relating to his own remuneration and benefits.

Further details regarding remuneration and the Remuneration Committee can be found on pages 53-62. The written terms of reference of the Remuneration Committee are available on request from the Company Secretary and from the Company website www.stylesandwood-group.co.uk.

NOMINATION COMMITTEE

The Nomination Committee is chaired by Paul Mitchell. Its other member is Robert Hough.

The Nomination Committee met once during the year ended 31 December 2016. The Nomination Committee has written terms of reference and has responsibility for considering the size, structure and composition of the Board, Board Committee membership, succession planning, retirements and the appointment of additional and replacement Directors. The committee makes appropriate recommendations to the Board. The written terms of reference of the Nomination Committee are available on request from the Company Secretary and from the Company website www.stylesandwood-group.co.uk.

The letters of appointment of the Non-Executive Directors and the Executive Directors’ service agreements will be available for inspection 15 minutes prior to, and during, the Annual General Meeting at 11am on 31 May 2017.

BOARD AUDIT COMMITTEE REMUNERATION COMMITTEE NOMINATION COMMITTEE

Total Number of Meetings 11 2 2 1

P Mitchell 11 2 2 1

A S Lenehan 11 21 21 11

P N Lanigan 11 21 21 11

R E Hough 11 2 2 1

M Widdall 11 2 2 1

1 In attendance (in whole or in part) by invitation of the particular committee

52113

10.0 CORPORATE GOVERNANCE 10.0 CORPORATE GOVERNANCE

INTERNAL CONTROL AND RISK MANAGEMENT

The Board has ultimate responsibility for maintaining a sound system of internal control and risk management and for reviewing their effectiveness.

Throughout the Group, there is an ongoing system of internal budgeting and forecasting, which includes the reporting of financial and non-financial metrics, together with control processes and procedures designed to manage business risks. It is recognised by the Board that any system can only manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material mis-statement or loss.

The Company has in place a Business Risk Management assessment which is updated and reviewed in full by the Board each financial year. The assessment identifies and evaluates key risks in the areas of marketplace, people, delivery and procurement, health, safety and environmental, financial and regulatory.

Each risk is given a risk rating, based on impact and likelihood, and the risks are then ranked, both before and after taking into consideration current controls within the business that mitigate each risk. The risks are then managed in the form of a risk register. In 2017, the Group has introduced its Arctick risk management software to better systemise the identification and management of risks.

The key features of the internal control procedures in place are set out in the following sections:

I. MONTHLY REPORTING

Monthly financial and non-financial results are analysed by business division and are reported to the PLC Board via the Executive Leadership Team of Styles&Wood Limited, the Company’s main trading subsidiary. The Board receives comprehensive management accounts covering actual month, year to date and forecast year end results compared with the annual budget and prior year results for the same period, together with formal reports covering other key business matters including operational and commercial performance, health, safety and quality and human resources.

II. KEY CONTROLS

Key financial and non-financial controls and indicators used by management to manage the business risks include:

• The setting and review of an annual budget.

• Quarterly forecasting.

• Daily, weekly and monthly monitoring of actual cash balances, together with forecasts and related measures, such as aged debtor, retentions and project cash flows, to ensure the provision of adequate working capital.

• Weekly monitoring of the secured order book, including revenue gap analysis for identifying and tracking any potential shortfall in workload allocation.

• Monthly monitoring of key performance indicators relevant to the Group’s strategy relating to: financial (e.g. revenue, PBT, etc.), operational (e.g. quality, safety etc.), customer (e.g. order book, sales pipeline etc.), people (e.g. head count, retention rates, training etc.) and the preparation of consolidated financial information, that is reviewed by management and reconciled to the Group’s underlying financial systems.

III. DELEGATION AND AUTHORITY LEVELS

Reporting instructions and procedures include the delegation of authority and authorisation levels, segregation of duties and other control procedures and standardised accounting policies.

IV. EMPLOYMENT CONTRACTS

As an Investor in People group, all grades of staff have standard terms and conditions of employment and are managed using formalised policies complemented by annual performance development reviews linked to the strategy of the business.

V. GROUP POLICIES

The adoption of Group policies on a range of control related matters, including clear policies on ethics and whistle-blowing, are available to all employees through the Group’s intranet.

RISK & IMPACT MITIGATION

Market Conditions

• High gearing to any one specific sector

• Competitor advantage and poor new work conversion ratio

• Uncertainties in income streams

• Application of core skills sets to new sectors

• Consistent periodic review, objective appraisal and feedback for work winning performance with continuous improvement targets

• Highly selective and prioritised approach to new business opportunity

• Measured business interest in programmes, frameworks and projects

• Strategic plans for new customer and sector conversions

People

• Skills and capabilities enhancement: the attraction and retention of key individuals and particular expertise

• Constraints to growth

• The Group operates a Personal Development Review process for all colleagues which identifies and then supports the training and development needs of each colleague

• The Group has a succession planning process in place supported by a management development programme

• The Group seeks to maximise colleague reward through the operation of a targeted flexible benefit system

• The Group actively promotes internal communication including climate survey and regularly provides comprehensive business updates

Operational Performance

• Inequitable contractual risk transfer

• Performance failure: time, cost and quality

• Supply chain inconsistencies: lack of capacity, performance failure, and residual risks

• Erosion of margin

• The Group has a system of delegated authorities in place which govern tenders and acceptance of customers

• The Group has well-established processes and procedures to ensure that projects are operated in accordance with the corresponding contractual conditions

• The Group manages resource through its internally developed resource management system to ensure that the appropriate skill and numbers of colleagues are assigned to undertakings

• The Group operates a rigorous risk-based prequalification process to ensure that the appropriate sub-contractors are available for consideration on projects.

• The Group supports development of its suppliers and sub-contractors through targeted training programmes.

Health & Safety

• Health and safety performance is an objective qualification criterion for opportunity conversion: accidents are unacceptable

• Reputational damage and negative financial impact

• Established safety systems, regular site visits including participation by all senior management, monitoring and reporting are in place across the Group’s business interests

• Investigation and root cause analysis of accidents, incidents and near misses is comprehensively applied

• A clear, unambiguous commitment is made to the prioritisation of health and safety training, including behavioural safety initiatives

Financial

• Unstructured approach to cash management and collection

• Lack of capacity to support growth agenda

• Daily monitoring of cash levels and weekly forecasting of future cash balances

• Working capital monitored and managed at all levels from Group to Business Unit with a discrete focus for individual projects and programnmes

54113

DIRECTORS’ REMUNERATION

REPORT

11.0

11.0 DIRECTORS’ REMUNERATION REPORT

The Board believes that it is important to provide shareholders with information on the Remuneration Policy. This policy was initially approved by the shareholders in 2014 with the only subsequent change being the Long-Term Incentive arrangements (“2016 LTI”), as approved at the General Meeting on 21 January 2016. The Board therefore continues to provide a number of disclosures on a voluntary basis.

The revised Remuneration Policy is summarised in the table below.

ELEMENT

PURPOSE & L INK TO STRATEGY

OPERATION ( INCLUDING MAXIMUM LEVELS)

FRAMEWORK USED TO ASSESS PERFORMANCE

Salary To provide the core reward for the role.

Sufficient level to recruit and retain individuals of the necessary calibre to execute the Company’s business strategy.

Base salaries are normally reviewed annually, with changes effective from 1 January.

Salaries are typically set after considering the salary levels in companies of a similar size and complexity, the responsibilities of each individual role, individual performance, individual’s experience and Group performance. Our overall policy, having had due regard to the factors noted, is to target salaries to the market level.

The Committee considers individual salaries at the appropriate Committee meeting each year after having due regard to the factors noted in operating the salary policy.

Benefits Sufficient level to recruit and retain individuals of the necessary calibre to execute the Company’s business strategy and available to other senior managers within the Group.

Executive Directors receive personal life assurance cover (4.0 x salary). The cost to the Company of providing these benefits may vary from year to year, depending on the cost of insuring the benefit.

Executive Directors receive a car allowance of 15% of basic salary. The car allowance may be exchanged in full or in part for a Company car as a benefit in kind.

As with other employees paid a car allowance, the Executive Directors receive private fuel costs as a benefit in kind.

Executive Directors receive private medical insurance which includes cover for immediate family relations.

Not applicable.

Pension To provide employees with long-term savings via pension provisions.

The Group makes contributions of 20% of base salary to the Executive Directors’ individual personal pension plans.

Not applicable.

Annual Bonus To incentivise and recognise execution of the business strategy on an annual basis.

Rewards the achievement of annual financial and operational goals.

Maximum opportunity of 60% of salary for CEO and 40% of salary for other Executive Directors.

All bonus payments are at the discretion of the Committee, as described in the notes to this table.

Paid in cash following the announcement of results and the assessment of the outturn.

Bonuses are based on financial and operational performance measures as set and assessed by the Committee in its discretion.

Financial measures (e.g. profit before tax) will represent the majority of the bonus, with other measures representing the balance.

Long-Term Incentive Arrangements

To incentivise and recognise execution of the business strategy over the longer term.

Rewards strong financial performance and sustained increase in shareholder value.

Following consultation with major shareholders, the 2016 LTI was approved by shareholders in January 2016. Details are set out on page 102.

The 2016 LTI provides for a value pool based on 7,077,585 shares, with total benefits being equal to 20% of the market value generated from a share price above £1.25 and up to £4.25, and 10% of the market value above £4.25.

The CEO’s share of the pool will be 35% and the CFO’s share will be 20%. There is no cap on the value delivered, as this is generated by reference to the market value of the Company’s shares.

Awards will vest in full on an Exit Event (sale or similar change in ownership, as defined in the Plan Rules). If there is no Exit Event by 31 December 2018, 50% of the awards will vest. If there is no Exit Event before the tenth anniversary of the awards being made, the remaining awards will vest.

The element of the 2016 LTI through the 2016 Performance Share Plan does include a mechanism for recovery in certain circumstances. There are no recovery or withholding provisions applicable to any other element of remuneration.

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11.0 DIRECTORS’ REMUNERATION REPORT11.0 DIRECTORS’ REMUNERATION REPORT

HOW DID THE COMMITTEE CHOOSE PERFORMANCE METRICS AND HOW DOES THE COMMITTEE SET PERFORMANCE TARGETS?

Profit before tax is used to assess annual performance, as this reflects how successful we have been in managing our operations effectively, and aligns with the interests of the Group’s shareholders.

The absolute share price has been used as the performance metric for the 2016 LTI, as this provides a straightforward alignment with shareholders’ interests and our strategic goals.

HOW DOES THE EXECUTIVE PAY POLICY DIFFER FROM THAT OF OTHER EMPLOYEES?

Eligibility to participate in variable pay elements (bonus, Performance Share Awards) is restricted to senior management, and targeted at those individuals who have an ability to influence performance.

The Remuneration Policy for the Executive Directors is generally similar to those of other senior managers within the business, except that the percentages payable for bonus, pension contributions and car allowances are higher than for other employees. The Executive Directors also have higher potential rewards than other employees, under the Long-Term Incentive arrangements.

WHAT ARE THE EXECUTIVE DIRECTORS’ TERMS OF EMPLOYMENT?

Under the Executive Directors’ service contracts, both parties are required to give 6 months’ notice of termination of employment.

For Executive Directors, if notice is served by either party, the Executive Director can continue to receive basic salary, benefits and pension for the duration of their notice period,during which time the Company may require the individual to continue to fulfil their current duties, or may assign a period of “garden leave.”

Under the CEO’s contract, the Company, by mutual consent, may elect to make a payment in lieu of notice, equivalent in value to 6 months’ base salary, payable in monthly instalments, which would be subject to mitigation if alternative employment is taken up during this time.

Under the CFO’s contract, the Company, by mutual consent, may elect to make a payment in lieu of notice, equivalent in value to 6 months’ base salary.

The policy for a new hire would be based on similar terms and would also include the ability for Styles&Wood to make a payment in lieu of notice of up to 6 monthly instalments, which would be reduced if alternative employment was taken up. The Executive Directors’ service contracts and the Non-Executive Directors’ letters of appointment are available for inspection by shareholders at the Company’s registered office.

WHAT IS OUR POLICY WHEN AN EXECUTIVE DIRECTOR LEAVES OR THERE IS A TAKEOVER?

Generally, any outstanding share awards under the 2016 Performance Share Plan will lapse on leaving employment, except in certain exceptional circumstances (death, injury, illness, disability, retirement, the sale of the business or the company that employs the individual, or any other reason at the discretion of the Committee). In such circumstances, awards normally vest in accordance with the plan rules which allow for pro-rata of the awards if the performance criteria have been achieved.

On leaving employment, the Executive Director is required to sell their Employee Shareholder shares back to the Company at their nominal value, except in the exceptional circumstances of death or disability.

On a takeover, the Employee Shareholder shares will convert into ordinary shares as set out in the Articles.

WHAT IS THE ROLE OF OUR REMUNERATION COMMITTEE?

The Remuneration Committee has responsibility for determining remuneration for the Executive Directors. The Committee also reviews the incentive arrangements of the Company’s most senior executives in consultation with the CEO. The Committee takes into account the need to recruit and retain executives and aims to ensure that they are properly motivated to perform in the interests of the Company and its shareholders. The Committee’s terms of reference are available on the Company’s website.

WHAT DOES THE COMMITTEE CONSIDER WHEN SETTING REMUNERATION?

When setting the policy for Executive Directors’ remuneration, the Committee takes into account total remuneration levels operating in companies of a similar size and complexity; the strategic objectives of the Company and the views of its major shareholders; the responsibilities of each individual role; individual performance and an individual’s experience. The Committee also considers developments in institutional investors’ best practice expectations.

HOW DOES THE COMMITTEE TAKE INTO ACCOUNT THE VIEWS OF SHAREHOLDERS WHEN IT DETERMINES THE REMUNERATION POLICY?

We remain committed to shareholder dialogue and take an active interest in voting outcomes. We carried out an extensive shareholder consultation prior to the approval and implementation of the 2016 LTIP. We are committed to consulting with leading shareholders prior to any significant change to the current Remuneration Policy or changes in how we implement our policy.

58113

ELEMENTPURPOSE & L INK TO STRATEGY OPERATION ( INCLUDING MAXIMUM LEVELS)

Fees To attract and retain a high-calibre Chairman and Non-Executive Directors by offering market competitive fee levels.

The Chairman is paid an all- inclusive fee for all Board and Committee responsibilities. The other Non-Executive Directors receive a basic fee for all Board and Committee responsibilities.

The Non-Executive Directors do not participate in any of the Company’s incentive arrangements.

The fee levels are reviewed on a periodic basis, and may be decreased or increased taking into account factors such as the time commitment of the role and market levels in companies of comparable size and complexity. The fee may be increased in any particular year if there has been a material increase in the level of time commitment involved, in exceptional circumstances.

There is no cap on fees, and flexibility is retained to go above the current fee levels, if necessary to do so, to appoint a new Chairman or Non-Executive Director of an appropriate calibre.

No benefits or other remuneration are provided to Non-Executive Directors.


CONSIDERATION BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION COMMITTEE

The Remuneration Committee is chaired by Robert Hough, independent Non-Executive Director, and its other members are Paul Mitchell, independent Non-Executive Chairman and Matt Widdall, Non-Executive Director, from 24 November 2015.

The Remuneration Committee has agreed terms of reference detailing its authority and responsibilities and its purpose is:

• To ensure that the Executive Directors of the Company and other senior management are fairly rewarded for their individual contributions to the overall performance of the Company;

• To determine all elements of the remuneration of the Executive Directors and other senior management;

• To oversee and review the operation of the Company’s share incentive arrangements; and

• To demonstrate to the Company’s shareholders that the remuneration of the Executive Directors and other senior management is set by a Board Committee whose members have no personal interest in the outcome of the Committee’s decision and who will have appropriate regard to the interests of the shareholders.

ADVISERS TO THE REMUNERATION COMMITTEE

Throughout 2016, Aon Hewitt (“AH”) was the retained Adviser to the Remuneration Committee and provided the Company with assistance in respect of the incentive arrangements. AH, part of Aon plc, was first appointed as Advisers by the Remuneration Committee in 2006 following a competitive tender exercise.

The Committee reviews their performance on a regular basis and satisfies itself as to their advice and independence. During the year, the Remuneration Committee also consulted the Chief Executive and the Company Secretary, but not in relation to their own remuneration.

SINGLE TOTAL FIGURE OF REMUNERATION

The following table shows a single total figure of remuneration in respect of qualifying services for the 2016 financial year for each Director:

SALARY/ FEES £’000

BONUS £’000

LTIP £’000

TAXABLE BENEFITS £’000

PENSION CNTRBS. £’000

TOTAL £’000

SALARY/ FEES £’000

BONUS £’000

LTIP £’000

TAXABLE BENEFITS £’000

PENSION CNTRBS. £’000

TOTAL £’000

Tony Lenehan 204 - 42 41 287 200 97 18 36 40 391

Philip Lanigan 158 - 29 32 219 155 50 15 25 31 276

Total Executive 362 - 71 73 506 355 147 33 61 71 667

Paul Mitchell1, 2 65 - - - - 65 85 - - - - 85

Robert Hough 40 - - - - 40 36 - - - - 36

Matt Widdall3 - - - - - - - - - - - -

Total Non-Executive Directors 105 - - - - 105 121 - - - - 121

Total 467 - 71 73 611 476 147 33 61 71 788

20152016

1 Paul Mitchell’s fee in 2015 was paid to Rickitt Mitchell & Partners Limited

2 Paul Mitchell’s fees for 2015 included an additional £20,000 for the exceptional time incurred in the period up to the completion of the transaction in June 2015

3 Matt Widdall was appointed 24 June 2015 and did not receive a fee during the year for his services

WHAT IS THE POLICY ON EXECUTIVE DIRECTORS HOLDING EXTERNAL APPOINTMENTS?

Executive Directors are not permitted to accept an appointment on an external board or committee, without the prior written consent of the Board.

HOW ARE THE NON-EXECUTIVE DIRECTORS PAID?

The Chairman and Non-Executive Directors receive an annual fee (paid in monthly instalments). The fee for the Chairman is set by the Remuneration Committee and the fees for Non-Executive Directors are approved by the Board, on the recommendation of the Chairman and Chief Executive.

The following section provides details of the implementation of the Remuneration Policy for all Directors for the year ended 31 December 2016.

60113


ANNUAL BONUS PLAN

The Executive Directors, Tony Lenehan and Philip Lanigan, participated in the Company’s Annual Bonus Plan for 2016, with performance criteria linked to an underlying profit before tax (PBT) target range for the year ended 31 December 2016, which represented a significant improvement over 2015, and was also linked to a number of operational targets.

The underlying PBT of £4.1m (including contributions from Keysource Limited) for 2016 was below the threshold bonus target set of £4.3m (adjusted for the results of Keysource Limited) and, as such, the Executive Directors were not entitled to a cash bonus under this plan.

SHARE SCHEMES

The Committee consulted with its major shareholders in 2015 on the new 2016 LTI. Its design was connected to the re-positioning of the business during the year for growth, including the refinancing of the Convertible Preference shares in June 2015 and subsequent change in banking partner in October 2015.

The 2016 LTI was approved by shareholders on 21 January 2016, and has the rewards linked to absolute increase in the Company’s share price.

The principal commercial intentions of the proposals are as follows:

• to create a value “pool” as an incentive arrangement, with the value of such “pool” being calculated by reference to (i) the increase in share price per ordinary share from a floor price of £1.25 up to and beyond £4.25 and (ii) the number of ordinary shares in issue as at the date of this document (being, 7,077,585);

• the value of the “pool” will equate to 20 per cent of the total shareholder value uplift, achieved above a share price of £1.25 and below £4.25, and a further 10 per cent of the total shareholder value uplift, achieved above a share price of £4.25. The value “pool” will be calculated as follows:

(1) 20 per cent of the share price increase between £1.25 and £4.25 multiplied by 7,077,585 (being the number of ordinary shares in issue as at the date of this document); and

(2) 10 per cent of the share price increase above £4.25 multiplied by 7,077,585. The plan would give a total “pool value” of £4.25 million at a share price of £4.25. A share price of £5.00 would give a total “pool value” of £4.78 million; and

• The entitlement for the CEO and CFO to participate in the “pool” will crystallise upon the occurrence of an Exit Event. If no Exit Event has occurred by 31 December 2018, half of the value of the “pool” (if any) will crystallise at that date. The balance would remain dependent on the occurrence of an Exit Event.

• The CEO is entitled to 35% of the “pool value” and the CFO 20% of the “pool value” on any value when it has crystallised.

In order to deliver the above commercial intentions in a tax-efficient manner, the Committee has developed the arrangements, whereby:

(a) the value of the “pool” arising from the increase in share price per ordinary share from £1.25 up to £2.75 is proposed to be awarded pursuant to the New Incentive Plan; and

(b) the value of the “pool” arising from the increase in share price per ordinary share from £2.75 up to and beyond £4.25 has been awarded in the form of the hurdle shares.

The Committee determined that the incentive arrangements for the current Executive Directors under the 2016 LTI are intended to be the only equity-based incentive arrangements in which they will be entitled to participate. As such, they will be the sole equity-based means by which the Company will seek to incentivise and retain the Executive Directors.

SHAREHOLDER DILUTION

The maximum dilution under the 2006 LTI is 999,188 ordinary shares of 1p each at a share price of £4.25 on an Exit Event. Above a share price of £4.25, the dilutory effect of the 2006 LTI decreases as the value pool increases at the lower rate of 10% for any increase in the share price above £4.25.

The Group also has an approved Save as You Earn (“SAYE”) scheme. No awards are outstanding under the SAYE scheme, with all previously issued awards lapsing in 2010.

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STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS

The interests of the Directors, who were in office during the year ended 31 December 2016, in shares of the Company were:

All Directors’ interests are beneficially held. There has been no change in the interests set out above between 31 December 2016 and 26 April 2017.

The Directors have no interests in the shares of any Group members other than Styles&Wood Group plc.

There is no formal policy on shareholding requirements for Directors.

IMPLEMENTATION OF REMUNERATION POLICY FOR THE YEAR ENDING 31 DECEMBER 2017

Salary levels for current Executive Directors at the start of the 2017 financial year are as follows:

• Chief Executive: £210,120

• Chief Financial Officer: £162,740

The Bonus Plan for 2017 has a number of targets for Key Performance Indicators, with 75% of the bonus capacity payable against profit before tax, (PBT), targets.

No Long-Term Incentive grant will be made to Executive Directors in 2017.

Fee levels for current Non-Executive Directors (other than Matt Widdall, who does not receive a fee), for 2017 are as follows:

• Paul Mitchell1 - Non-Executive Chairman: £65,000;

• Robert Hough2 - Non-Executive Director: £40,000.

01/01/2016 OR APPOINTMENT 31/12/2016

Tony Lenehan

No. of ordinary shares of 1p owned outright 24,688 24,688

No. of hurdle shares - 3,500

Restricted share awards subject to performance conditions -

Philip Lanigan


No. of hurdle shares - 2,000

Restricted share awards subject to performance conditions 17,714 -

Paul Mitchell


No. of hurdle shares - -

Restricted share awards subject to performance conditions - -

Robert Hough




Matt Widdall

No. of ordinary shares of 1p owned outright - -



1Inclusive of his duties as a member of Audit, Nominations and Remuneration Committees2Inclusive of his duties as Chair of Audit, Nominations and Remuneration Committee


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INDEPENDENT AUDITORS’

REPORT

12.0

12.0 INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF STYLES & WOOD GROUP PLC

REPORT ON THE FINANCIAL STATEMENTS

OUR OPINION

In our opinion:

• Styles&Wood Group Plc’s Group Financial Statements and Company Financial Statements (the “Financial Statements”) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2016 and of the Group’s profit and the Group’s and the Company’s cash flows for the year then ended;

• the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union;

• the Company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.

HAZEL MACNAMARA (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester26 April 2016

WHAT WE HAVE AUDITED

The Financial Statements, included within the Annual Report, comprise:

• the consolidated and company balance sheet as at 31 December 2016;

• the consolidated income statement for the year then ended;

• the consolidated and company statement of changes in equity for the year then ended;

• the consolidated and company cash flow statement for the year then ended; and

• the notes to the Financial Statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the Financial Statements is IFRSs as adopted by the European Union and, as regards the Company Financial Statements statements, as applied in accordance with the provisions of the Companies Act 2006, and applicable law.

In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

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12.0 INDEPENDENT AUDITORS’ REPORT 12.0 INDEPENDENT AUDITORS’ REPORT

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In addition, in light of the knowledge and understanding of the group, the company and their environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and the Directors’ Report. We have nothing to report in this respect.

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT

OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS

As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

WHAT AN AUDIT OF FINANCIAL STATEMENTS INVOLVES

We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the Directors; and

• the overall presentation of the Financial Statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. With respect to the Strategic Report and Directors’ Report, we consider whether those reports include the disclosures required by applicable legal requirements

OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

ADEQUACY OF ACCOUNTING RECORDS AND INFORMATION AND EXPLANATIONS RECEIVED

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Company Financial Statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

DIRECTORS’ REMUNERATION

Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

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There is no difference between the profit/(loss) for the year and the total comprehensive income for the year. Accordingly no separate statement of comprehensive income has been presented.

All activities are derived from continuing operations. The Income Statement includes the results of Keysource Limited, following its ac-quisition on 20 September 2016 (see note 30). The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company income statement or statement of comprehensive income.

The profit of the parent company for the year ended 31 December 2016 was £550,000 including a dividend received of £2,000,000 and after charging a notional charge for effec-tive interest on preference shares of £187,000 (2015: profit of £1,473,000 including a dividend received of £3,000,000 and notional charge on preference shares of £495,000).

FINANCIAL STATEMENTS

13.0

NOTES

UNDERLYING

NON-RECURRING ITEMS AND

PREFERENCE SHARE

ACCOUNTING(NOTE 6)

TOTAL UNDERLYING


PREFERENCE SHARE

ACCOUNTING(NOTE 6)

TOTAL

£’000 £’000 £’000 £’000 £’000 £’000

Revenue 4 104,712 - 104,712 114,986 - 114,986

Cost of sales (91,843) - (91,843) (104,248) - (104,248)

Gross profit 12,869 - 12,869 10,738 - 10,738

Administrative expenses 6 (7,994) (375) (8,369) (6,854) (372) (7,226)

Operating profit 4,5,6 4,875 (375) 4,500 3,884 (372) 3,512

Finance costs 7 (398) (187) (585) (518) (495) (1,013)

Finance income 7 1 - 1 6 - 6

Share of loss of joint venture 31 (376) - (376) (136) - (136)

Profit/(loss) before taxation 4,102 (562) 3,540 3,236 (867) 2,369

Taxation 8 (1,003) 24 (979) (758) 81 (677)

Profit/(loss) for the year attributable to equity shareholders 3,099 (538) 2,561 2,478 (786) 1,692

Basic earnings/(loss) per share expressed in pence per share 9 41.4p (7.2)p 34.2p 37.2p (11.8)p 25.4p

Diluted earnings/(loss) per share expressed in pence per share 9 35.7p (6.2)p 29.5p 35.0p (11.1)p 23.9p

CONSOLIDATED INCOME STATEMENT

The notes on pages 75 to 112 are an integral part of these Financial Statements.

For the year ended 31 December 2016

20152016

70113

NOTESORDINARY

SHARE CAPITAL

HURDLE SHARES

PREFERENCE SHARE

CAPITAL

EQUITY RESERVE

SHARE PREMIUM

CAPITAL REDEMPTION

RESERVE

REVERSE ACQUISIT ION

RESERVE

RETAINED EARNINGS

TOTAL EQUITY

£'000 £’000 £’000 £’000 £'000 £’000 £'000 £'000 £'000

At 1 January 2015 Comprehensive income 20,456 - 2,975 16,300 2,000 (66,665) 18,325 (6,609)

Profit for the year - - - - - - - 1,692 1,692

Total comprehensive income - - - - - - - 1,692 1,692

Transactions with owners

Share option scheme – value of share awards 22 - - - - - - - 18 18

Redemption of preference shares 18 - - - - - 2,773 - (2,773) -

Preference share notional interest 18 - - (495) - - - - 495 -

Conversion of preference shares 18 5,200 - - - - - - - 5,200

Reallocation to debt - - (1,487) - - - - - (1,487)

Share issue net of expenses 3 - - - - - - - 3

Issue of Equity reserve - - - 182 - - - - 182

Total transactions with owners 5,203 - (1,982) 182 - 2,773 - (2,260) 3,916

At 31 December 2015 and as at 1 January 2016 25,659 - 993 182 16,300 4,773 (66,665) 17,757 (1,001)

Comprehensive income

Profit for the year - - - - - - - 2,561 2,561

Total comprehensive income - - - - - - - 2,561 2,561


Share option scheme – value of share awards 22 - 25 - - - - - 293 318

Redemption of preference shares 18 - - - - - 670 - (670) -

Preference share notional interest 18 - - (187) - - - - 187 -

Share issue net of expenses 21 14 - - (182) 1,702 - - - 1,534

Total transactions with owners 14 25 (187) (182) 1,702 670 - (190) 1,852

At 31 December 2016 25,673 25 806 - 18,002 5,443 (66,665) 20,128 3,412

NOTESORDINARY

SHARE CAPITAL

HURDLE SHARES

PREFERENCE SHARE

CAPITAL

EQUITY RESERVE

SHARE PREMIUM

CAPITAL REDEMPTION

RESERVE

RETAINED EARNINGS

TOTAL EQUITY

£'000 £’000 £’000 £’000 £'000 £’000 £'000 £'000

At 1 January 2015 Comprehensive income 20,456 - 2,975 - 16,300 2,000 2,625 44,356

Profit for the year - - - - - - 1,473 1,473

Total comprehensive income - - - - - - 1,473 1,473


Share option scheme – value of share awards 22 - - - - - - 18 18

Redemption of preference shares 18 - - - - - 2,773 (2,773) -

Preference share notional interest 18 - - (495) - - - 495 -

Conversion of preference shares 18 5,200 - - - - - - 5,200

Reallocation to debt - - (1,487) - - - - (1,487)

Share issue net of expenses 3 - - - - - - 3

Issue of Equity reserve - - - 182 - - - 182

Total transactions with owners 5,203 - (1,982) 182 - 2,773 (2,260) 3,916

At 31 December 2015 and as at 1 January 2016 25,659 - 993 182 16,300 4,773 1,838 49,745

Comprehensive Income

Profit for the year - - - - - - 550 550

Total comprehensive income - - - - - - 550 550


Share option scheme – value of share awards 22 - 25 - - - - 293 318

Redemption of preference shares 18 - - - - - 670 (670) -

Preference share notional interest 18 (187) - - - 187 -

Share issue net of expenses 21 14 - - (182) 1,702 - - 1,534

Total transactions with owners 14 25 (187) (182) 1,702 670 (190) 1,852

At 31 December 2016 25,673 25 806 - 18,002 5,443 2,198 52,147

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY COMPANY STATEMENT OF CHANGES IN EQUITY

The notes on pages 75 to 112 are an integral part of these Financial Statements. The notes on pages 75 to 112 are an integral part of these Financial Statements.

For the year ended 31 December 2016 For the year ended 31 December 2016

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NOTES

£’000 £’000

Non current assets

Intangible assets 11 8,399 347

Property, plant and equipment 12 1,161 455

Deferred tax asset 20 90 11

9,650 813

Current assets

Inventories 103 -

Trade and other receivables 13 37,437 26,223

Amounts owed by joint venture 31 1,661 1,852

Cash and cash equivalents 14 6,085 5,596

Other financial assets: cash collateral 15 590 1,049

45,876 34,720

Current liabilities

Trade and other payables 16 (40,744) (30,171)

Financial liabilities 18 (924) (670)

Contingent consideration 30 (1,000) -

Current income tax liabilities (676) (329)

(43,344) (31,170)

-

Net current assets 2,532 3,550

Total assets less current liabilities 12,182 4,363

Non current liabilities

Provisions 19 (210) -

Financial liabilities 18, 19 (4,760) (5,364)


(8,770) (5,364)

Net assets/(liabilities) 3,412 (1,001)

Shareholders' equity

Ordinary share capital 21 25,673 25,659

Hurdle shares 21 25 -

Preference share capital 18, 21 806 993

Share premium 18,002 16,300

Capital redemption reserve 5,443 4,773

Reverse acquisition reserve (66,665) (66,665)

Equity reserve - 182

Retained earnings 20,128 17,757

Total shareholders’ funds/(deficit) 3,412 (1,001)

NOTES

£’000 £’000

Non current assets

Investments in subsidiary companies 29 43,508 34,207

43,508 34,207

Current assets

Trade and other receivables 13 21,658 21,766

21,658 21,766

Current liabilities

Trade and other payables 16 (2,668) (194)

Financial liabilities: preference shares 18 (871) (670)


(4,539) (864)

Net current assets 17,119 20,902

Total assets less current liabilities 60,627 55,109

Non current liabilities

Financial liabilities 19 (4,680) (5,364)


(8,480) (5,364)

Net assets 52,147 49,745

Shareholders' equity

Ordinary share capital 21 25,673 25,659

Hurdle shares 21 25 -

Preference share capital 18, 21 806 993

Share premium 18,002 16,300

Capital redemption reserve 5,443 4,773

Equity reserve - 182

Retained Earnings:

At 1 January 1,838 2,625

Profit for the year 550 1,473

Other movements (190) (2,260)

At 31 December 2,198 1,838

Total shareholders' funds 52,147 49,745

as at 31 December 2016

CONSOLIDATED BALANCE SHEET

THE F INANCIAL

STATEMENTS ON PAGES

67 TO 112 WERE


OF DIRECTORS ON 26

APRIL 2017 AND WERE


THE F INANCIAL

STATEMENTS ON PAGES

67 TO 112 WERE


OF DIRECTORS ON 26

APRIL 2017 AND WERE


ANTHONY S LENEHAN

DIRECTOR

PHIL IP N LANIGAN

DIRECTOR

ANTHONY S LENEHAN

DIRECTOR

PHIL IP N LANIGAN

DIRECTOR



as at 31 December 2016

COMPANY BALANCE SHEET

20152016 20152016


74113

NOTES

£’000 £’000

Cash generated from operating activities 23 6,159 7,502

Income taxes paid (729) (581)

Net cash generated from operating activities 5,430 6,921

Cash flows from investing activities

Purchase of property, plant and equipment (900) (162)

Purchase of intangible assets - software (939) (183)

Acquisition of subsidiaries (3,522) -

Cash acquired 636

Amounts advanced to joint venture (185) (162)

Net cash used in investing activities (4,910) (507)

Cash flows from financing activities

Interest received 1 6

Interest paid (215) (173)

Redemption of preference share capital (670) (2,773)

Preference share coupon (151) (174)

Prepaid debt issue costs - (78)

Repayments on hire purchase agreements (10) -

New Loan note issued - 2,000

Proceeds of share issue (net of fees) 555 3

Option fee on warrants - 182

Cash collateral deposits 459 (1,049)

Net cash used in financing activities (31) (2,056)

Net increase in cash and cash equivalents 489 4,358

Cash and cash equivalents at beginning of year 5,596 1,238

Cash and cash equivalents at end of year 14 6,085 5,596

NOTES

£’000 £’000

Cash generated from/(used in) operations 23 1,997 (489)

Income taxes received - -

Net case generated from/(used in) operating activities 1,997 (489)

Cash flows from investing activities

Acquisition of subsidiary (3,522) -

Dividend received from subsidiary 2,000 3,000

Net cash (used in)/from investing activities (1,522) 3,000

Cash flows from financing activities

Interest received - 6

Interest paid (207) (89)

Redemption of preference share capital (670) (2,773)

Preference share coupon (151) (174)

Prepaid debt issue costs - (136)

Other bank fees and charges (2) (30)

New Loan note issued - 2,000

Proceeds of share issue (net of fees) 555 3

Option fee on warrants - 182

Net cash used in financing activities (475) (1,011)

Net increase in cash and cash equivalents - 1,500

Cash and cash equivalents at beginning of year - (1,500)

Cash and cash equivalents at end of year 14 - -

For the year ended 31 December 2016 For the year ended 31 December 2016

CONSOLIDATED CASH FLOW STATEMENT COMPANY CASH FLOW STATEMENT

20152016 20152016


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NOTES TO THE FINANCIAL

STATEMENTS

14.0

14.0 NOTES TO FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Styles&Wood Group plc (“the Company”) is a public limited company, limited by shares, incorporated and domiciled in the United Kingdom and listed on the Alternative Investment Market (“AiM”) of 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 which was established in 2009, providing retail property services to the local market. The address of Styles&Wood Group plc’s registered office is Cavendish House, Cross Street, Sale M33, 7BU. The operating companies of the Group are disclosed within notes 29 and 31. These Company and Consolidated Financial Statements (the “Financial Statements”) were authorised for issue by the Board of Directors on 26 April 2017.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

A. BASIS OF PREPARATION

The Financial Statements of Styles&Wood Group plc have been prepared in accordance with EU endorsed International Financial Reporting Standards (“IFRS”), IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS, on a going concern basis and under the historical cost convention.

STANDARDS, INTERPRETATIONS AND AMENDMENTS EFFECTIVE IN 2016

There are no IFRSs or IFRS IC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2016 that have a material impact on the Group.

STANDARDS, INTERPRETATIONS AND AMENDMENTS EFFECTIVE IN FUTURE YEARS

The following new standards, amendments and interpretations to existing international standards have been published but are not yet mandatory for the Group and have not been early adopted.

• IFRS 9 “Financial instruments.” This replaces the parts of IAS39 that deal with the classification and measurement of financial instruments. The standard is effective for accounting periods beginning on or after 1 January 2018. It is not anticipated that this will have a material impact on the Group.

• IFRS 15, which is effective for accounting periods beginning on or after 1 January 2018, prescribes the accounting treatment and disclosure requirements associated with revenue from contracts with customers. The Group is performing a detailed assessment of the impact of IFRS 15, with the assessment expected to be completed in the first half of 2017. The Group will be examining the potential impact on the timing of revenue recognition in relation to construction contracts. It is difficult at this stage to determine with any certainty the impact on revenue and profit from adopting this standard but further clarification will be provided in the second half of 2017 as it becomes available.

• IFRS 16, “Leases”. The new standard addresses the definition of a lease, recognition and measurement of leases and disclosure requirements. The application of the standard will affect primarily the accounting for the Group’s operating leases. The standard is effective for accounting periods beginning on or after 1 January 2019. As at the reporting date, the Group has non-cancellable operating lease commitments of £3,411,000, see note 27. However, the Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group’s profit and classification of cash flows.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. BASIS OF CONSOLIDATION

The Consolidated Financial Statements incorporate the Financial Statements of Styles&Wood Group plc and the entities controlled by Styles&Wood Group plc (its subsidiaries), together with a share of the results, assets and liabilities of its joint venture using the equity method of accounting, made up to the reporting date of 31 December each year. Control is achieved where Styles&Wood Group plc has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. A joint venture is an entity established to engage in economic activity, which the Company jointly controls with its fellow venturer.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquisition and the equity interests issued by the Group. The consideration transferred includes the fair value of any liability resulting from contingent consideration arrangements. Subsequent changes to the fair value of the contingent consideration is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition related costs are expensed as incurred.

All intra-group transactions, balances, income and expenses are eliminated on consolidation of subsidiaries. Where necessary, adjustments are made to the Financial Statements of subsidiaries and joint ventures to bring the accounting policies into line with those used by the Group.

On 19 October 2001, 20 May 2004 and 1 December 2005 the Group restructured and, as part of these restructurings, new holding companies (Styles&Wood Property Management Limited, Styles&Wood Investments Limited and Styles&Wood Group plc respectively) were inserted above the previous holding company Maraq Limited. Under IFRS 3 ‘Business Combinations’, the insertions of these new parent companies have been accounted for as reverse acquisitions, whereby Maraq Limited (being the legal parent company of the Group until 19 October 2001) acquired the subsequent legal parent companies. Arising from this treatment is the reverse acquisition reserve within shareholders’ equity.


C. USE OF ESTIMATES

The preparation of Financial Statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period.

Although based on management’s best judgements, actual results may ultimately differ from estimates made.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. These estimates and assumptions are rigorously reviewed by the Board on an ongoing basis. The revenue recognition policy is discussed further below.

REVENUE RECOGNITION The Group uses the percentage-of-completion method in accounting for its fixed price contracts to deliver property services. Use of the percentage-of-completion method requires the Group to estimate the services performed to date as a proportion of the total services to be performed, which requires management judgement. Where the outcome of a contract cannot be reliably estimated, contract costs are recognised as an expense when incurred, and revenue is only recognised to the extent of the contract costs incurred that it is probable will be recoverable.

INCOME TAXES Judgement is also required in determining the provision for corporation tax. The Group recognises liabilities for corporation tax based on management’s assessment of the tax treatment of transactions and makes provision for tax enquiry issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which agreement is reached.

The Consolidated Financial Statements, therefore, represent the Consolidated Financial Statements of Maraq Limited combined with the subsequent parent companies.

The Group applies IFRS 11 to joint arrangements and has assessed the nature of its joint arrangements and determined them to be joint ventures. Investments in joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. Impairment reviews are undertaken when there is an indication of impairment.

The Group’s share of its joint venture’s post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

As the joint venture started trading in the year ended 31 December 2009 the Group has a constructive obligation to provide additional funding to the joint venture until it is further established and hence has recorded its share of losses in full.

Unrealised gains on transactions between the Group and its joint venture are eliminated to the extent of the Group’s interest in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

ACQUISITION ACCOUNTING The valuation of customer relationship intangible assets arising on acquisition of subsidiaries are based upon management’s assessments of projected cash flows. These calculations require the use of estimates. Other acquisition related fair value adjustments are also calculated (note 30). The fair values of customer relationships and assets and liabilities acquired are calculated based upon historical and prospective information, and financial data specific to the business combination, with an appropriate discount factor applied based upon the weighted average cost of capital for the Group.

SHARE-BASED PAYMENTS Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions. The fair value of services received in return for share options is calculated with reference to the fair value of the award on the date of grant. A Black-Scholes model has been used to calculate the fair value and the Directors have therefore made estimates with regards to the inputs to that model, including risk-free rate and the period over which the share award is expected to vest (note 22).

CARRYING VALUE OF INVESTMENTS The Company regularly reviews the carrying value of its investments in subsidiaries and, if necessary, makes an impairment charge if the carrying value of the investments is considered to be greater than their recoverable value based upon the anticipated profits and cash flows. Should assumptions regarding anticipated profits and cash flows change, then the carrying value and amount of impairment may require adjustment.

In determining the fair value of the debt and equity components of convertible redeemable preference shares, an assumption regarding the fair value of each component is made on issue. This assumption is not revisited subsequent to issue.

14.0 NOTES TO FINANCIAL STATEMENTS 14.0 NOTES TO FINANCIAL STATEMENTS

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D. REVENUE RECOGNITION

Revenue represents amounts receivable in relation to the provision of property services, for services provided in the ordinary course of business, net of trade discounts, VAT and other sales-related taxes and excluding transactions with or between wholly owned subsidiaries. Further detail on the Group’s business segments can be found below under segmental reporting.

The Group applies IAS 11, ‘Construction Contracts’, to contracts which fall within its scope. Where the outcome of a contract can be measured reliably, contract revenue and costs are recognised by reference to the value of work done at the balance sheet date as determined by the Group’s internal quantity surveyors. Where the outcome of a contract cannot be reliably estimated, contract costs are recognised as an expense when incurred, and revenue is only recognised to the extent of the contract costs incurred that it is probable will be recoverable. In both cases, any expected contract loss is recognised immediately.

Amounts recoverable on contracts, which are included in trade receivables, represent the costs incurred on those contracts plus recognised profits less the sum of recognised losses and progress billings. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is included in trade and other payables as amounts due to customers.

Revenue generated from short-term contracts and other arrangements that do not fall within the scope of IAS 11 is recognised on provision of the relevant goods and services to customers, when the Group becomes entitled to consideration.

E. SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. Segmental reporting disclosures have been amended to fall in line with the Group’s new management reporting, and results are now disclosed for the following operating segments. Comparative disclosures have been restated accordingly.

CONTRACTING SERVICESProjects: Styles & Wood fulfils the role of Principal Contractor for projects with typical project values ranging from less than £100,000 to over £20m. Projects range from minor refresh to comprehensive refurbishment, shell fit-out, acquisition conversion, or complex structural re-configuration and renewable solutions.

PROFESSIONAL SERVICESFrameworks: 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 and 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.

FACILITIES SERVICES Facilities management and the provision of service to assist in managing clients’ properties including critical facilities.

The Group’s trade is generated primarily in the United Kingdom and, as such, the Group has only one geographical segment. The Group has a joint venture in Dubai and its results are currently immaterial to those of the Group. Its business segments are therefore its reportable segments.

Segment revenues, results, assets and liabilities include amounts directly attributable to a segment and amounts that can be reasonably allocated to a segment. Amounts that cannot be allocated to segments are included as unallocated.



F. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is initially measured at cost. Cost comprises the purchase price (after deducting trade discounts and rebates) and any directly attributable costs. Property, plant and equipment is stated at cost less accumulated depreciation and any provision for impairment in value.

Depreciation is provided on a straight line basis to write down assets to their residual value evenly over the estimated useful lives of the assets from the date of acquisition by the Group. The main estimated useful lives are:

Years

Leasehold improvements 5 - 10

Computer equipment 3

Plant and machinery 5 - 10

Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its estimated recoverable amount, if the asset’s carrying amount is greater than its estimated recoverable amount.

G. INTANGIBLE ASSETS

GOODWILLGoodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired. If the total of consideration transferred is less than the net assets of the subsidiary acquired, in the case of the bargain purchase, the difference is recognised directly in the income statement.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to a cash generating unit (CGU). Goodwill in the group is applicable to one CGU being Keysource, which is monitored at the individual entity level.

Goodwill impairment reviews are undertaken annually or more frequently if events change or circumstances indicate a potential impairment. The carrying value of the CGU is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

SOFTWARE Software is initially recognised at cost. Cost comprises purchase price and any directly attributable costs. Software is stated at cost less accumulated amortisation. Amortisation is provided on a straight line basis over the estimated useful life of the related software (3 – 5 years).

CUSTOMER CONTRACTS AND RELATIONSHIPSCustomer contracts and relationships are recognised at fair value as determined by discounted cash flow analysis. They have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated on a straight line basis over the estimated useful life of the intangible asset (4 – 5 years).

H. TAXATION

Current tax, which comprises UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on the difference between the carrying amounts of assets and liabilities in the balance sheet and the corresponding tax bases used in the computation of taxable profits, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date, and is charged/credited to the income statement, except where it relates to items charged or credited to equity via the statement of recognised income and expense, in which the deferred tax is also dealt with in equity and is shown in the statement of comprehensive income.


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N. DIVIDEND DISTRIBUTION

Dividend distributions to shareholders are recognised in the period in which the dividends are approved by the Company’s shareholders. A liability in respect of dividends payable to shareholders is recognised once the dividends have been approved.

O. NON-RECURRING ITEMS

Non-recurring items which are both material and non-recurring in nature, such as restructuring and redundancy costs, professional fees related to the acquisitions, are presented as non-recurring items in the financial statements, so as to provide a better indication of the Group’s underlying business performance.

P. FOREIGN EXCHANGE

Foreign currency transactions are translated into the functional currency of the Company (Sterling) using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement.

Q. INVESTMENTS

The Company’s investments in shares in group companies are stated at cost less provision for impairment. Any impairment is charged to the profit and loss account as it arises.

R. INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first in first out (‘FIFO) method.

The cost of raw materials, consumables, finished goods and goods for resale comprises purchase cost and, in the case of finished goods, the cost of transporting the goods to their stock location.

Net realisable value comprises the estimated selling price in the ordinary course of business less applicable variable selling expenses. Provision is made for obsolete, slow-moving or defective items where appropriate.


L. SHARE CAPITAL

Issued ordinary share capital is recorded in the balance sheet at nominal value with any premium at the date of issue being credited to the share premium account. Redeemable preference share capital, which carries a conversion right, is accounted for as a compound financial instrument (see note (k) above). The share premium account is used to pay up fully paid bonus shares and to write off directly related expenses of any issue of shares.

M. SHARE BASED PAYMENT

The Group operates a long term incentive (‘LTI’) arrangement which was approved by the shareholders and implemented in the current year. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense in the income statement. The total amount expensed over the vesting period is determined with reference to the fair value of the options granted, calculated using an option pricing model and the number of options expected to vest, given any non-market based conditions. At each balance sheet date, the number of options expected to vest is revisited and the impact of any revision is recognised in the income statement with a corresponding adjustment to equity.

The grant by the Company of these options over its equity instruments to employees of its subsidiary undertaking, Styles&Wood Limited, is treated as a capital contribution.

The fair value of the employee services received is recognised over the investing period as an increase to investments in subsidiary undertakings, with a corresponding credit to equity.


I. OPERATING LEASES AND HIRE PURCHASE AGREEMENTS

Leases in which a significant proportion of the risks and rewards are retained by the lessor are classified as operating leases. Rentals under operating leases are charged on a straight line basis over the lease term, even if the payments are not made on such a basis. Operating lease incentives are recognised on a straight line basis over the lease term.

Other leases are classified as finance leases.

Assets and liabilities under finance leases and hire purchase agreements are recognised in the balance sheet at the inception of the agreement at amounts equal to their fair value or, if lower, the net present value of the minimum payments under the agreement.

Depreciation on hire purchase and leased assets is provided at rates consistent with that for similar assets that are owned by the Group.

Subsequent to initial recognition, payments made are apportioned between the finance charge element and the reduction in the capital value of the outstanding liability. The finance charge is allocated to each period so as to produce a constant periodic rate of interest on the remaining balance of the liability.

J. PENSION AND OTHER POST-RETIREMENT BENEFITS

The Group makes contributions to a defined contribution Group Personal Pension Plan for employees. The pension charge for the period represents contributions payable in respect of an employee’s service in the year.

K. FINANCIAL INSTRUMENTS

CASH AND CASH EQUIVALENTSCash and cash equivalents include cash in hand and deposits held at call with banks and bank overdrafts including restricted cash. TRADE RECEIVABLESTrade receivables, including customer retentions, are classified as loans and other receivables and are initially recognised at fair value and subsequently at amortised cost. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The Group does not have a policy of discounting trade receivables as the impact would not be material.

CASH COLLATERALCash collateral reflects deposits placed with a Surety to secure a facility for the provision of performance bonds. The cash collateral is measured at fair value, being the cash deposited.

TRADE PAYABLESTrade payables are classified as other financial liabilities and are recognised initially at fair value. Subsequent to initial recognition, payables are measured at amortised cost using the effective interest method.

BORROWINGSAll borrowings are classified as other financial liabilities and are initially measured at fair value. This is taken to be the fair value of the consideration received. Transaction costs (any such costs incremental and directly attributable to the issue of the financial instrument) are included in the calculation of the effective interest rate and are, in effect, amortised through the profit and loss account over the life of the instrument. The subsequent measurement of borrowings is at amortised cost using the effective interest method.

PREFERENCE SHARESDue to the nature of the conversion rights attached to the redeemable preference shares, these instruments have been accounted for through the separation of their liability and equity components based on their respective fair values 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 rate and actual cash coupon is credited to retained earnings, reducing the equity component. In order to highlight this non-cash charge, it is shown separately on the face of the income statement as “preference share accounting”.

TREASURY DERIVATIVESDerivatives are classified as assets at fair value through profit and loss and are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value. The Group has an interest rate cap used to manage exposure to interest rate fluctuations. The cap has an immaterial fair value. Amounts payable/receivable under interest rate caps are accounted for within finance cost/income for the period.

FAIR VALUE DISCLOSURESThere is no difference between the fair value and book value of the Group’s financial instruments.


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3. FINANCIAL RISK MANAGEMENT

The Group’s operations and financial instruments expose it to a variety of financial risks that include interest rate risk, credit risk and liquidity risk. The Group’s policy is to finance its operations through a mixture of working capital (trade receivables, trade payables and cash and cash equivalents), bank borrowings and equity, including preference shares. The Group does not trade in financial instruments.

The Group does not have equity investments (other than those in its wholly owned subsidiaries and joint venture) or investments in commodities, and so does not consider itself to be exposed to any significant equity, commodity or other price risk.

The financial risk management policies set by the Board are implemented by the Group’s Finance Department on a day-to-day basis to meet Treasury requirements. These objectives include ensuring that the Group has sufficient liquidity to meet its day-to-day requirements and to fund its capital commitments and working capital requirements; deploying any surplus liquidity in a prudent and profitable manner; managing interest rate and credit exposures; and managing the Group’s relationship with banks and financial institutions.

The Directors will continue to monitor the appropriateness of the financial risk management policies should the Group’s operations change in size or nature.

INTEREST RATE RISKThe Group has both interest bearing assets and interest bearing liabilities. Interest bearing assets comprise only cash balances which earn interest at variable rates agreed between the Group and its banks with reference to the Bank of England Base Rate. Interest bearing liabilities comprise the revolving credit facility and multi-option facility when drawn down. All bear interest at a margin of 3.75% above bank base rate. The Group’s preference shares have a fixed coupon of 3% which is payable from 1 September 2012. The Group’s loan note carries fixed interest of 10% which is payable annually. For the year ended 31 December 2016, if the market interest rates had been 0.1% higher, interest income would have increased by £53 (2015: £1,589) and interest expense would have increased by £26 (2015: £2,753).

CREDIT RISK The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. Concentrations of credit risk with respect to trade receivables are limited, due to the Group’s customer base being large and unrelated.

Due to this, management believe there is no further credit risk provision required in excess of any normal provision for doubtful receivables. All cash deposits are held with banks with an A- credit rating or better and, as a result, management are satisfied there is no significant credit risk in relation to cash deposits. The Group does not hold any collateral or credit enhancements as security against credit risk.

LIQUIDITY RISK The Group has a bank facility that is designed to ensure the Group has sufficient available funds for operations and planned expansions. Management review cash balances and forecasts on a daily, weekly and monthly basis, to ensure that the Group is able to meet all obligations with respect to financial liabilities.The net cash position of the group is shown in note 24. A maturity profile of the Group’s borrowings can be found in notes 17 to 19.

FOREIGN EXCHANGE RISKThe Group has advanced working capital loans to its joint venture in Dubai which are denominated in United Arab Emirate dirhams. As such, the Group is exposed to foreign exchange risk in respect of these balances. The Group does not currently hedge this risk, but monitors the position on a monthly basis. There is no other significant foreign exchange risk.

CAPITAL RISK MANAGEMENTThe key objectives of the Group when managing capital are to safeguard the ability to continue as a going concern and to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain an appropriate level of capital and funding for the Group. The key objectives include minimising interest cost and maintaining sufficient levels of working capital within the business. In order to optimise the capital structure of the Company, the Board will consider the level and structure of the Group’s cash and debt, together with the amount and nature of share capital in issue, and may seek to alter these in order to support the Group’s strategic objectives.Management regularly considers metrics including EBITDA: interest cover, net cash position and EBITDA: debt service cover as part of its capital risk management. Total capital is calculated as “shareholders equity” as shown in the consolidated balance sheet plus net cash (note 24) and preference shares accounted for as debt.

BREXIT While the EU referendum result has not, to date, had a material impact, the economic influences arising from the UK’s departure from the EU are difficult to predict, and could affect customer and investor confidence.




FACIL IT IES SERVICES UNALLOCATED GROUP

£'000 £'000 £’000 £’000 £’000

Revenue 52,521 48,228 3,963 - 104,712

Underlying segment result 3,997 8,302 890 (8,314) 4,875

Non-recurring items (note 6) - - - (375) (375)

Segment result 3,997 8,302 890 (8,689) 4,500

Finance costs (585)

Finance income 1

Share of results of joint venture (376)

Profit before taxation 3,540

Taxation (979)

Profit for the year from continuing operations 2,561

Net profit attributable to equity shareholders 2,561

Segment assets 16, 219 12,414 5,331 - 33,964

Unallocated assets - - - 21,562 21,562

Total assets 16,219 12,414 5,331 21,562 55,526

Segment liabilities 20,892 13,742 288 - 34, 922

Unallocated liabilities - - - 17,192 17,192

Total liabilities 20,892 13,742 288 17,192 52,114


Year ended 31 December 2016

4. SEGMENTAL REPORTING

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FACIL IT IES SERVICES UNALLOCATED GROUP

£'000 £'000 £’000 £’000 £’000

Revenue 45,480 69,506 - - 114,986

Underlying segment result 2,560 7,423 - (6,099) 3,884

Non-recurring items (note 6) - - - (372) (372)

Segment result 2,560 7,423 - (6,471) 3,512

Finance costs (1,013)

Finance income 6

Share of results of joint venture (136)

Profit before taxation 2,369

Taxation (677)

Profit for the year from continuing operations 1,692

Net profit attributable to equity shareholders 1,692

Segment assets 20,742 8,247 - - 28,989

Unallocated assets - - - 6,544 6,544

Total assets 20,742 8,247 - 6,544 35,533

Segment liabilities 12,911 14,911 - - 27,822

Unallocated liabilities - - - 8,712 8,712

Total liabilities 12,911 14,911 - 8,712 36,534


Year ended 31 December 2015 (restated) The following items have been included in arriving at operating profit:

4. SEGMENTAL REPORTING (CONTINUED) 5. EXPENSES BY NATURE

All revenues arise 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. Segmental reporting disclosures have been amended in line with the Group’s new management reporting. Comparative disclosures have been restated accordingly in the table above.

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 and share option expenses. Transactions between segments are eliminated on consolidation.

In 2016 revenue of £57,251,000 was generated from four external customers, each of which contributed more than 10% of Group revenue. The most significant contributed revenue of £17,348,000. In 2015 two external customers each contributed more than 10% of Group revenue; the total revenue from these two customers was £69,878,000.

£’000 £’000

Staff costs (note 25) 19,670 18,558

Depreciation of property, plant and equipment (note 12) 263 203

Amortisation of software (note 11) 361 277

Amortisation of customer contracts (note 11) 29 -

Operating lease rentals

- plant and machinery 628 745

- other 684 538

Auditors’ remuneration 131 111

Subcontracted work 63,972 76,562

Loss on disposal of fixed assets 60 -

AUDITORS’ REMUNERATION During the year the group obtained the following services from its auditors pursuant to legislation. The fees payable were:

£’000 £’000

Fees payable for the audit of the Company’s annual Financial Statements 38 26

Fees payable for the audit of the Company’s subsidiaries 77 36

Total audit fees 115 62

Tax advisory services 16 10

Other services - 39

Total 131 111

20152016

20152016

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The Group’s results include the following items:

6. NON-RECURRING ITEMS AND PREFERENCE SHARE ACCOUNTING

a. In 2016, restructuring costs relate to costs associated with the restructure and integration of Keysource Limited following its acquisition.

b. Professional fees incurred on the acquisition of Keysource Limited and The GDM Group Limited. The acquisition of Keysource Limited created £1,050,000 of share premium in the Group, against which fees incurred on the transaction of £75,000 have been allocated and offset.

c. Corporate finance fees are for work on transactions in 2015.

d. Tax on non-recurring items reflects the non-deductibility of the notional interest on preference shares, and costs relating directly to acquisition activity.

NOTES

£’000 £’000

Charged to operating profit

Restructuring, redundancy and related costs (a) (109) -

Acquisition fees (b) (266) -

Corporate finance fees (c) - (372)

Total charged to operating profit (375) (372)

Finance costs

Notional interest on preference shares Note 18 (187) (495)

(187) (495)

Total non-recurring items before tax (562) (867)

Tax on non-recurring items (d) 24 81

Total non-recurring items after tax (538) (786)


7. FINANCE COSTS

£’000 £’000

Interest expense:

Interest on bank borrowings 2 117

Fees on bank facilities 2 56

Amortisation of prepaid debt issue costs: 39 64

Notional interest on preference shares 187 495

Cash coupon on preference shares 151 174

Interest on other loans 4 -

Loan interest 200 107

Total finance costs 585 1,013

Interest income:

Interest receivable on bank deposits (1) (6)

Total finance income (1) (6)

Net finance costs 584 1,007

20152016

20152016

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8. TAXATION

The standard rate of tax applied for the year ended 31 December 2016 is 20.0% (2015: 20.25%). The effective tax rate for the year ended 31 December 2016 is 27.7% (2015: 28.6%). The differences are explained in the table below.

£’000 £’000

Taxation comprises:

Current tax

Current tax on profits for the year 982 708

Adjustments in respect of previous years - 16

982 724

Deferred tax

In respect of the current year (3) (47)

Adjustments in respect of previous years - -

(3) (47)

Total taxation 979 677

£’000 £’000

Profit on ordinary activities before tax 3,540 2,369

Profit on ordinary activities multiplied by rate of corporation tax in the UK (20.0%, 2015: 20.25%) 708 480

Effects of:

Expenses not deductible for tax purposes 98 16

Research and development tax credit (33) -

Share based payments 64 2

Non-cash notional interest on preference shares 37 100

Cash coupon on preference shares 30 35

Losses of joint venture 75 28

Adjustments in respect of prior periods - 16

Total taxation 979 677

2016 UNDERLYING


PREFERENCE SHARE

ACCOUNTING

TOTAL

£'000 £'000 £’000

Profit attributable to equity holders of the Group (£’000) 3,099 (538) 2,561

Weighted average number of shares in issue 7,477,580 7,477,580 7,477,580

Basic earnings per share (pence per share) 41.4 (7.2) 34.2

Diluted earnings per share (pence per share) 35.7 (6.2) 29.5

2015 UNDERLYING


PREFERENCE SHARE

ACCOUNTING

TOTAL

£'000 £'000 £’000

Profit attributable to equity holders of the Group (£’000) 2,478 (786) 1,692

Weighted average number of shares in issue 6,653,562 6,653,562 6,653,562

Basic and diluted earnings per share (pence per share) 37.2 (11.8) 25.4

Diluted earnings per share (pence per share) 35.0 (11.1) 23.9


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

9. EARNINGS PER SHARE

On 19 June 2015, the Group issued 364,600 nil cost warrants for a consideration of £182,300 and a five year warrant over 740,000 new ordinary shares exercisable at a price of 75p per share. These warrants were redeemed on 20 September 2016 resulting in the issuance of 1,104,600 ordinary shares. The warrants were dilutive up to the point of redemption, which has been accounted for in the diluted earnings per share calculations.

The hurdle shares, and options awarded under the Performance Share Plan, are dilutive. The impact of the dilution of earnings per share has been calculated, based on average share price in 2016 from the date of award.

On 1 January 2015, the Company had outstanding 13,000,000 convertible preference shares which were convertible into 1,386,667 ordinary shares. On 19 June 2015 2,000,000 convertible preference shares which were redeemed and 5,200,000 convertible preference shares which were converted into 554,666 ordinary shares, and on 31 December 2015 1,000,000 of the shares were redeemed leaving 5,026,860 shares in issue which were convertible into 536,198 ordinary shares.

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 (on 26 October 2015) and of the Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred taxes at the balance sheet have been measured using these enacted rates and reflected in these financial statements.

2015

2015

2016

2016

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No interim dividend on ordinary shares was paid during the year (2015: nil) and no final ordinary dividend is proposed (2015: 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 2016 was £151,000 (2015: £174,000).

10. DIVIDENDS

GOODWILL CUSTOMERS SOFTWARE TOTAL

£'000 £'000 £’000 £’000

Cost

At 1 January 2015 - - 1,841 1,841

Additions at cost - - 183 183

Disposals at cost - - (763) (763)

At 31 December 2015 and 1 January 2016 - - 1,261 1,261

Acquisitions (note 30) 6,150 492 255 6,897

Additions at cost - - 1,556 1,556

Disposals at cost - - (788) (788)

At 31 December 2016 6,150 492 2,284 8,926

Accumulated amortisation

At 1 January 2015 - - 1,400 1,400

Charge for the year - - 277 277

On disposals - - (763) (763)

At 31 December 2015 and 1 January 2016 - - 914 914

Charge for the year - 29 361 390

On disposals - - (777) (777)

At 31 December 2016 - 29 498 527

Net book amount at 31 December 2016 6,150 463 1,786 8,399

Net book amount at 31 December 2015 - - 347 347

LEASEHOLD IMPROVEMENTS

PLANT AND EQUIPMENT TOTAL

£'000 £'000 £’000

Cost

At 1 January 2015 350 1,618 1,968

Additions at cost 12 150 162

Disposals at cost (91) (563) (654)

At 31 December 2015 and 1 January 2016 271 1,205 1,476

Acquisitions (note 30) 63 55 118

Additions at cost 820 80 900

Disposals at cost (99) (55) (154)

At 31 December 2016 1,055 1,285 2,340

Accumulated depreciation

At 1 January 2015 157 1,315 1,472

Charge for the year 33 170 203

On disposals (91) (563) (654)

At 31 December 2015 and 1 January 2016 99 922 1,021

Charge for the year 73 190 263

On disposals (55) (50) (105)

At 31 December 2016 117 1,062 1,179

Net book amount at 31 December 2016 938 223 1,161

Net book amount at 31 December 2015 172 283 455

The Group tests annually for impairment of goodwill. The impairment calculations use pre-tax cash flow projections, based on Board-approved budget for the year ending 31 December 2017 and projections for the year ending 31 December 2018. Subsequent cash flows are extrapolated using an estimated growth rate of 2%. The rate used to discount the project cash flows being a discount rate of 9.0%.

The impairment calculations described above, together with sensitivity analysis, indicate ample headroom and therefore do not give rise to impairment concerns.

Amortisation is charged to administrative expenses in the income statement.

The carrying value of assets held under hire purchase agreements is £227,000 (2015: £nil), with an acquisition cost of £255,000, relating to the software held by Keysource Limited.

Plant and equipment includes computer equipment and plant and machinery. Depreciation is charged to administrative expenses in the income statement.

11. INTANGIBLE ASSETS


12. PROPERTY, PLANT AND EQUIPMENT

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13. TRADE AND OTHER RECEIVABLES

Company £’000 £’000

Amounts falling due within one year

Amounts owed by Group undertakings 21,438 21,618

Prepayments 47 71

Other receivables 173 77

21,658 21,766

Group £’000 £’000

Amounts falling due within one year

Trade receivables 13,963 12,118

Amounts recoverable on contracts (see below) 20,593 12,946

Other receivables 1,163 122

Prepayments and accrued income 1,571 1,037

Corporation tax recoverable 147 -

37,437 26,223

Group £’000 £’000

Cash at bank and in hand 6,085 5,596

Cash and cash equivalents 6,085 5,596

Group £’000 £’000

Less than one month past due 2,268 738

One to two months past due 576 24

More than two months past due 4,385 1,486

7,229 2,248

Group £’000 £’000

Amounts recoverable on contracts

Gross amount due from customers on contract work 110,951 135,273

Less: progress payments received (90,358) (122,327)

Amounts recoverable on contracts 20,593 12,946

Trade receivables of £nil were written off in the year (2015: £nil). Trade receivables past due relate to a number of independent customers for whom there is no recent history of default. The analysis of these past due trade receivables is as follows:

Customer retentions, included within trade receivables, amount to £2,270,000 (2015: £962,000). Prepayments include £33,000 in respect of prepaid bank facility fees (2015: £72,000).

At 31 December 2016 the provision for impairment of trade receivables totalled £1,088,000 (2015: £797,000), the movement of £291,000 relates to an increase in provision during the year.

Amounts due from Group undertakings are unsecured, interest-free and are repayable on demand.

The Company had a bank balance of £nil at 31 December 2016 (2015: £nil).

At 31 December 2016 the Group had deposited cash of £590,000 (2015: £1,049,000) as collateral for the issue of performance bonds (note 26). The Company has no cash collateral (2015: £nil).

The aggregate amount of costs incurred plus recognised profits (less recognised losses) for contracts in progress at the balance sheet date was £110,951,000 (2015: £127,731,000).

Progress payments received from customers are disclosed in note 16.


13. TRADE AND OTHER RECEIVABLES (CONTINUED)

14. CASH AND CASH EQUIVALENTS

15. OTHER FINANCIAL ASSETS: CASH COLLATERAL

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20152016

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16. TRADE AND OTHER PAYABLES

Group £’000 £’000

Trade payables 35,583 25,443

Amounts due to customers (see below) 537 1,987

Other creditors 147 259

Accruals and deferred income 3,555 1,032

Other tax and social security payable 922 1,450

40,744 30,171

Group £’000 £’000

Gross amount due from customers on contract work 2,736 4,075

Less: progress payments received (3,273) (6,062)

Amounts due to customers (537) (1,987)

Company £’000 £’000

Amounts owed to Group undertakings 2,449 -

Accruals and deferred income 219 194

2,668 194

Supplier retentions amount to £2,149,000 (2015: £1,684,000).

Amounts due to Group undertakings are unsecured, interest free and are repayable on demand.


The Group and Company had the following committed undrawn borrowing facilities at the balance sheet date:

17. BORROWING FACILITIES

£’000 £’000 £’000 £’000

Available undrawn facilities 3,000 3,000 3,000 3,000

Group Company

The Group’s banking facility at 31 December 2016 comprised a £3.0m working capital facility which expires in October 2017.

On 17 February, the Group entered into new banking arrangements with Santander plc for a £5m revolving credit facility which expires in October 2019.

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20152016 20152016

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18. FINANCIAL LIABILITIES

Convertible redeemable preference shares £’000 £’000 £’000 £’000

Debt component

Carrying value at 1 January 4,034 10,025 4,034 10,025

Notional interest charge for year 187 495 187 495

Preference share allocation from equity - 1,487 - 1,487

Amounts converted in year - (5,200) - (5,200)

Amounts redeemed in year (670) (2,773) (670) (2,773)

Carrying value at 31 December 3,551 4,034 3,551 4,034

Classified as current liabilities:

due within one year 871 670 871 670

Classified as non-current liabilities: due in more than one year 2,680 3,364 2,680 3,364

Equity component

Carrying value at 1 January 993 2,975 993 2,975

Preference share allocation to debt - (1,487) - (1,487)

Notional interest charge for year (187) (495) (187) (495)

Carrying value at 31 December 806 993 806 993

Total carrying value 4,357 5,027 4,357 5,027

Group Company

£’000 £’000 £’000 £’000

Provisions 210 - - -

Deferred consideration (note 30) 3,800 - 3,800 -

Commitments under hire purchase agreements 80 - - -

Preference shares (note 18) 2,680 3,364 2,680 3,364

10% Loan Note 2018 2,000 2,000 2,000 2,000

Total non-current liabilities 8,770 5,364 8,480 5,364

Group Company


19. NON-CURRENT LIABILITIES

Due to the conversion rights attached to the preference shares, International Accounting Standards require them to be accounted for by separating the debt 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 rate and actual cash coupon is credited to retained earnings, reducing the equity component.

A cash coupon of £151,000 became payable in respect of the year ended 31 December 2016 (2015: £174,000). As a result £187,000 of the total £338,000 interest charge (2015: £495,000 of £669,000) has been credited back to the profit and loss reserve.

The Group now has in issue 4,356,780 (2015: 5,026,860) convertible, redeemable preference shares. The conversion rights allow the holder to convert the 4,356,780 shares into up to 464,723 ordinary shares at a price of £9.375p per share, in increasing tranches from 31 December 2017 to 31 December 2019. The shares carry a 3% cash coupon, unless converted by the holder, are redeemable in increasing tranches as follows:

£

31 December 2017 871,356

31 December 2018 697,085

31 December 2019 2,788,339

The Loan Note is repayable on 31 December 2018 and carries interest of 10%, with interest payments made on an annual basis.

£’000 £’000 £’000 £’000

Commitments under hire purchased agreements (note 19) 133 - - -

Preference shares (see below) 3,551 4,034 3,551 4,034

10% Loan Note 2018 (note 19) 2,000 2,000 2,000 2,000

5,684 6,034 5,551 6,034

Less: non-current portion (4,760) (5,364) (4,680) (5,364)

Total current financial liabilities 924 670 871 670

Group Company

20152016 20152016

20152016 20152016

20152016 20152016

Provisions 2016 £’000 £’000

At 1 January - -

On acquisition 221 -

Utilised in period (11) -

At 31 December 210 -

20152016

The above provisions are related to property occupied by the Group

The Group’s financial instruments comprise cash, obligations under hire purchase agreements, loan notes, preference shares and various items such as receivables and payables, which arise from its operations. All financial instruments in 2016 and 2015 were denominated in Sterling. There is no material foreign exchange risk in respect of these instruments.

The carrying amounts of all of the Group’s financial instruments are measured at amortised cost in the Financial Statements.

IFRS 13 (amended) Financial Instruments: Disclosures’ requires disclosure of financial instruments measured at fair value, grouped into Levels 1 to 3 below, based on the degree to which fair value is observable:

- Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities;

- Level 2 fair value measurements are those derived from inputs, other than quoted prices included within Level 1 above, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

All of the Group’s derivative financial instruments, as described in the note above, were classified as Level 2 in the current and prior year. There were no transfers between levels in either the current and prior year.

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Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2015: 20%). The movement on the deferred tax account is as shown below.

Group and Company

19. NON-CURRENT LIABILITIES (CONTINUED) 20. DEFERRED TAX

Group £’000 £’000

Deferred tax at 1 January 11 58

Deferred tax assets acquired (18) -

Movement from current tax 100 -

Charged to income statement (note 8) (3) (47)

Deferred tax asset at 31 December 90 11

£’000 £’000

Authorised Ordinary Share Capital

10,000,000 ordinary shares of 1p each (2015: 10,000,000) (a) 100,000 100,000

10,000,000 deferred shares of 1p each (2015: 10,000,000) 24,900,000 24,900,000

40,777,812 non-voting deferred ordinary shares of 25p each (2015: 40,777,812) (d) 10,194,453 10,194,453

35,194,453 35,194,453

Employee Shareholder Share Capital

10,000 hurdle shares of £2.50 each (2015: Nil) (b) 25,000 -

25,000

-

Preference Share Capital

4,356,780 convertible preference shares of £1 each (2015: 5,026,860) (c) 4,356,780 5,026,860

Total Authorised Share Capital 39,576,233 40,221,313

Issued and fully paid

Ordinary Share Capital

8,439,550 ordinary shares of 1p each (2015: 7,077,585) (a) 84,396 70,776

6,182,383 deferred shares of £2.49 each (2015: 6,182,383) 15,394,133 15,394,133

40,777,812 non-voting deferred ordinary shares of 25p each (2015: 40,777,812) (d) 10,194,453 10,194,453

25,672,982 25,659,362

Employee Shareholder Share Capital

10,000 hurdle shares of £2.50 each (2015: Nil) (b) 25,000 -

25,000 -

Preference Share Capital

4,356,780 convertible preference shares of £1 each (2015: 5,026,860) (c) 4,356,780 5,026,860

Less: amounts classified as liabilities (c) (3,551,187) (4,034,366)

805,593 992,494

Total issued and fully paid share capital 26,503,575 26,651,856

Deferred tax assets relate to depreciation in excess of capital allowances on property, plant and equipment of £49,000 (2015: £1,000), carried forward trading loses of £41,000 (2015: £Nil) and other short-term timing differences of £Nil (2015: £10,000) which are expected to be recovered against taxable profits in the foreseeable future.

The Group has not recognised a deferred tax asset of £174,000 (2015: £174,000) in respect of tax losses of the Company as these are not anticipated to be recovered. Of the deferred tax asset of £90,000, £53,000 is estimated to be recoverable within one year and £37,000 recoverable after more than one year.


21. CALLED UP SHARE CAPITAL

20152016

20152016

£’000 £’000

Amounts payable within 1 year 65 -

Amounts payable between 1 and 2 years 65 -

Amounts payable between 3 and 5 years 33 -

163 -

Less interest and finance charges relating to future periods (30) -

133 -

Current obligations 53 -

Non-current obligations 80 -

133 -

Future commitments under hire purchase agreements are as follows:

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21. CALLED UP SHARE CAPITAL (CONTINUED)

a. The Group’s ordinary shares are listed on the Alternative Investment Market of the London Stock Exchange. All of these ordinary shares rank equally with respect to voting rights and the rights to dividends. The holders of these ordinary shares are entitled, amongst other rights, to receive the Company’s Annual Report, to attend and speak at general meetings of the Company, to appoint proxies and to exercise voting rights.

On 21 September 2016, the Company issued 257,365 ordinary shares of 1p each at a value of 409p as part of the consideration for the acquisition of Keysource Limited.

On 21 September 2016, the holders of 1,104,600 warrants exercised the right to convert into 1,104,600 ordinary shares of 1p each.

b. On 21 January 2016, the authorised share capital of the Company was increased by 10,000 hurdle shares of £2.50 each.

On 26 January 2016, 10,000 hurdle shares of £2.50 were allotted to certain Directors and persons discharging managerial responsibility.

The hurdle shares are “employee shareholder shares”. They are convertible into ordinary shares of 1p each on an Exit Event, on the terms set out below, and in the event of an Exit Event not having occurred by 31 December 2018, 50% of the hurdle shares convert on the terms below.

Styles & Wood Group plc operated one share option scheme in 2016 which replaced the previously operated share scheme.

2016 LONG TERM INCENTIVE (‘LTI’) ARRANGEMENT The 2016 LTI was approved by shareholders on 21 January 2016, and has the rewards linked to absolute increase in the Company’s share price. Under this plan, certain key employees of the Group are granted share options. The options vest subject to the value ‘pool’ created which is calculated by reference to the increase in share price per ordinary share from a floor price of £1.25 up to and beyond £4.25. The value of the ‘pool’ arising from the increase in share price from £1.25 up to £2.75 is awarded pursuant to the New Incentive Plan. The value of the ‘pool’ arising from the increase in share price from £2.75 up to and beyond £4.25 has been awarded in the form of hurdle shares.

The conversion terms are as follows;

A value “pool” is calculated by reference to the increase in the share price from £2.75. The value of the “pool” equates to 20% of the uplift in the share price from £2.75 to £4.25 multiplied by 7,077,585 (being the number of shares in issue at 21 January 2016) plus 10% of any uplift in value above £4.25 multiplied by 7,077.585.

The “pool” is divided by the Exit Event share price to determine the number of ordinary shares per hurdle share.

If there has been no Exit Event by 31 December 2018, the average share price in December 2018 is used to determine the conversion price and therefore the number of ordinary shares to issue for each hurdle share.

c. The 4,356,780 (2015: 40,777,812) non-voting. These shares have the right to convert into 1 ordinary share of 1p and 1 non-voting deferred ordinary share at a conversion price of £9.375 per ordinary share. The preference shares have no voting rights and carry a right to a preference dividend of 3%. Due to the nature of the conversion rights attached to the preference shares issued as part of the refinancing, these instruments have been accounted for through the separation of their liability and equity components. See note 18 for further details.

d. The 40,777,812 (2015: 40,777,812) non-voting deferred ordinary shares have no voting rights and no right to dividends.

PERFORMANCE SHARE PLAN (‘PSP’) The PSP operated in 2015 but has been superseded in the year. Under the Styles&Wood Group plc Performance Share Plan, certain key employees, senior management and Directors of Styles&Wood Limited are granted nominal cost share options. The options vest subject to performance against three year targets and cash dividends accrue on the options over the vesting period. There have been no movements in the current year.

Options lapse if the employee ceases to be an employee of the Group other than as a result of death, injury, disability, ill health, redundancy or retirement. In these situations, the proportion of the award that ultimately vests is determined at the discretion of the Remuneration Committee.


22. SHARE OPTION SCHEMES

PSP SCHEME2012 GRANT NEW INCENTIVE PLAN

2016 GRANT

HURDLE SHARES2016 GRANT TOTAL

Group and Company £'000 £'000 £’000 £’000

At 1 January 2015 87,905 - - 87,905

Forfeited (10,782) - - (10,782)

Vested and exercised (31,436) - - (31,436)

Lapsed (44,731) - - (44,731)

At 31 December 2015 956 - - 956

Granted - 772,100 10,000 782,100

At 31 December 2016 956 772,100 10,000 783,056

Date of grant 09/10/12 01/06/16 21/01/16

Number of options granted 1,274,264 772,100 10,000

Exercise price Nil Nil Nil

Share price at date of grant 7.8p 323.5p 182.5p

Vesting conditionsAchievement of 3 year

share price growth targetOrdinary Share price per

share above £1.25 Ordinary Share price per

share above £2.75

Settlement Equity Equity Equity

Maximum option life 10 years 10 years Infinite

Valuation method Monte-Carlo Monte-Carlo Monte-Carlo

Expected option life 3 years 2.6 years 3 years

Expected volatility 40% 68% 69%

Expected dividend yield N/A N/A N/A

Risk-free interest rate 1.5% 0.8% 0.7%

Fair value at date of grant 1.1p 0.7p 0.19p

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• The average market price of the shares in the period to from 26 January 2016 to 31 December 2016 was 316.4p.

• A charge of £318,000 was recognised in respect of share options during 2016 (2015: £18,000).

• Options over 956 ordinary shares of 1p each were exercisable at 31 December 2016 (2015: 956).

On 1 June 2016, The Company granted awards under the 2016 Long Term Incentive Plan (“2016 LTIP”) through the 2016 Performance Share Plan.

The number of ordinary shares exercisable under the award is dependent on the Company’s share price. The award under the 2016 LTIP is through the creation of a value “pool”. The value of the “pool” equates to 20% of the increase in share price value from £1.25 to £2.75 multiplied by 7,077,585, being the number of ordinary shares in issue at the time of the award.

The awards crystallise on an Exit Event and in the event of an Exit Event not having occurred by 31 December 2018, 50% of the award crystallises.

On an Exit Event, the “pool” is divided by the Exit Event share price to determine the number of ordinary shares to vest.

If there has been no Exit Event by 31 December 2018, the average share price in December 2018 is used to determine the number of ordinary shares that vest.

The maximum number of ordinary shares in the Company in respect of which an award may vest is 772,100 at a conversion share price of £2.75.


22. SHARE OPTION SCHEMES (CONTINUED)


23. CASH FLOW FROM OPERATING ACTIVITIES

Group £’000 £’000

Profit before tax for the year 3,540 2,369

Adjustments for:

Finance costs 585 1,013

Finance income (1) (6)

Depreciation and amortisation 653 480

Share option charge 318 18

Share of loss of joint venture 376 136

Losses on disposal of fixed assets 60 -

Operating cash flows before movement in working capital 5,531 4,010

Increase in inventories (70) -

(Increase)/Decrease in trade and other receivables (6,231) 8,837

(Increase)/Decrease in trade and other receivables 6,929 (5,345)

Cash generated from operations 6,159 7,502

Company £’000 £’000

Profit before tax for the year 419 1,455

Adjustments for:

Dividend receivable (2,000) (3,000)

Finance costs 580 896

Share option charge 318 18

Operating cash flows before movement in working capital (683) (631)

Changes in working capital:

Decrease/(increase) in trade and other receivables 200 (7)

Increase in trade and other payables 2,480 149

Cash generated from/(used in) operations 1,997 (489)

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£’000 £’000

The movement in net cash is

At 1 January 5,596 1,238

Increase in cash and cash equivalents excluding restricted cash 489 4,358

At 31 December 6,085 5,596

£’000 £’000

Wages and salaries 16,768 16,146

Social security costs 1,796 1,710

Pension costs 788 684

Share option costs 318 18

19,670 18,558

£’000 £’000

Salaries, fees and short-term benefits 538 672

Social security costs 66 72

Pension contributions 73 71

Long-term incentive plans - 33

677 848


Net cash represents cash at bank and in hand and excludes preference shares classified as debt (note 18).

24. NET CASH

25. EMPLOYEES AND DIRECTORS

Average monthly number of people (including Executive Directors) employed by the Group

The Company has no employees. The Non-Executive Directors each have a contract for services with the Company, details of which can be found in the Remuneration Report on pages 53-62.

Further information about the Directors’ remuneration may be found in the Remuneration Report on pages 53-62.

Remuneration of the highest paid Director was £287,000 (2015: £391,000) including pension contributions made by the Group of £41,000 (2015: £40,000)

£’000 £’000

Projects 42 61

Frameworks 118 135

Design 32 39

iSite 27 31

Facilities Services 21 -

Central 88 73

328 339

Remuneration of Directors

The Directors who served as Directors of the Company throughout the year were:

Appointed

Anthony S Lenehan 01/01/2011

Philip N Lanigan 01/08/2009

Robert E Hough 18/10/2006

Paul Mitchell 02/10/2006

Matt Widdall 24/06/2015

The Directors are considered to be the key management personnel of the Group. Their aggregate remuneration was as follows:

The Group takes out Performance Bonds in the ordinary course of business. All bonds are taken out by Styles & Wood Limited, a subsidiary company. The aggregate amount of such bonds outstanding at 31 December 2016 is £2,957,000 (2015: £2,637,000). The aggregate amount of bonds outstanding at 31 December 2016 on projects where practical completion has been achieved is £432,000 (2015: £Nil).

It is not anticipated that any material liabilities will arise from the contingencies.


25. EMPLOYEES AND DIRECTORS (CONTINUED)

26. CONTINGENCIES

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27. CAPITAL AND OTHER FINANCIAL COMMITMENTS

£’000 £’000

Future aggregate minimum payments under operating leases

Due within one year 965 624

Due between one and five years 2,446 511

3,411 1,135

Operating lease commitments

£’000 £’000

Motor vehicles


Due between one and five years 631 337

Land and Buildings


Due between one and five years 1,815 174

3,411 1,135

£’000 £’000

Sales made to related parties - -

Purchases from related parties 110 527

Balances owed by related parties at the balance sheet date - -

Balances owed to related parties at the balance sheet date 7 17

Analysed as:

Operating leases for motor vehicles relate to company cars provided for employees and commercial vehicles. Operating leases for land and buildings relate to the Group’s four offices in Sale, London, Horsham and Nottingham and have various terms and renewal rights. None of the leases (offices or motor vehicles) includes contingent rents. The Company has no such commitments (2015: none).

In the year ended 31 December 2016, the Company paid fees of £Nil (2015: £85,000) to Rickitt Mitchell & Partners Limited in respect of Paul Mitchell’s services as a Non-Executive Director.

In the year ended 31 December 2016, the fees of £35,000 (2015: £18,555) to Business Growth Fund and accrued interest payable of £100,000 (2015: £53,699) on loan notes issued to the Business Growth Fund.

The following transactions have taken place between the Group and entities over which Paul Bell, who has a 25% (2015: 31%) shareholding in the Company. 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 on pages 53-62.

The Company received a dividend from its subsidiary company, Styles & Wood Investments Limited, during the year of £2m (2015: £3.0m).

Details of balances due from and to subsidiary companies can be found in notes 13 and 16.

There were no sales and purchases between Group companies during the year (2015: nil). Movements in inter-company balances occur in relation to the loan of cash, the transfer of group relief for taxation purposes and where certain expenses of the Company are paid for by a subsidiary company (£899,000 expenses for Styles&Wood Group plc and £75,000 for Maraq Limited paid for by Styles&Wood Limited).


28. RELATED PARTY TRANSACTIONS

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The Group subsidiaries are disclosed below. Transactions between subsidiaries and between the parent company and its subsidiaries are eliminated on consolidation.

All subsidiary companies have, as their registered office: Cavendish House, Cross Street, Sale, Cheshire, M33 7BU

On 20 September 2016, the Group acquired the entire share capital of Keysource Limited (“Keysource) for a consideration of £9,301,000 plus associated fees of £139,000, which are classified as non-recurring expenses (see note 6).

The initial consideration is satisfied by;

· Cash payment of £1,000,000

· Issue of 257,365 ordinary shares of 1p each with a fair value at acquisition date of £1,053,000.

· A payment reflecting excess cash over the working capital requirements of the business of £2,448,000, which was covered by the cash inherited in Keysource at the completion date.

Further contingent consideration of up to £5.0 million may be payable, in cash and shares subject to the achievement of certain financial performance criteria for the three year period ending 31 December 2018, details of which are set out below.

CONTINGENT CONSIDERATION · FY 2016 - Subject to the achievement of a minimum adjusted*

profit before tax (“PBT”) of £0.49 million, the Group will pay 100% of PBT generated (capped at £1.0 million);

· FY 2017 - Subject to the achievement of a minimum PBT of £0.86 million, the Group will pay 90% of PBT generated (capped at £2.0 million); and

· FY 2018 - Subject to the achievement of a minimum PBT of £0.94 million, the Group will pay 75% of PBT generated (capped at £2.0 million).

Note: *Adjusted for transaction and associated restructuring costs

The first £500,000 of any deferred consideration payable will be satisfied in cash. Thereafter, any excess over £500,000 will be satisfied in cash and shares at the discretion of Styles&Wood up to a maximum of 50% in shares.

The fair value of the deferred consideration arrangement of £4,800,000 was estimated by applying the income approach.

Keysource is a provider of specialist services to data centres and other critical environments.

The revenue included in the consolidated statement of comprehensive income since 21 September 2016 contributed by Keysource was £3,251,000. Keysource also contributed profit before tax of £408,000 over the same period.

Had Keysource been consolidated from 1 January 2016, the consolidated statement of income would show pro-forma total revenue of £114,464,000 and total profit before tax of £3,534,000.


29. SUBSIDIARY COMPANIES 30. ACQUISITIONS

NAME NATURE OF BUSINESS COUNTRY OF INCORPORATION TYPE OF SHARE GROUP

SHAREHOLDING

Styles&Wood Investments Limited Intermediate holding company UK Ordinary 100%

Styles&Wood Property Management Limited

Intermediate holding company UK Ordinary 100% via Styles&Wood

Investments Limited

Maraq Limited Property services provider UK Ordinary

100% via Styles&Wood Property Management

Limited

Styles&Wood Limited Property services provider UK Ordinary 100% via Maraq Limited

Keysource Limited Facilities Services Provider UK Ordinary 100%

a. Group investments

b. Investment in subsidiary undertakings

£’000 £’000

Original cost 47,980 38,679

Capital contribution – grant of share options 337 337

Impairment of investment (4,809) (4,809)

Net book amount 43,508 34,207

Net book amount

At 1 January 34,207 34,207

Additions in the period 9,301 -

Reversal of investment impairment - -

Capital contribution in the year - -

At 31 December 43,508 34,207

NET ASSETS ACQUIRED FAIR VALUE ADJUSTMENTS

FAIR VALUE OF ASSETS ACQUIRED

Intangible assets - Goodwill - - 6,150

Intangible assets - Customer contracts - - 492

Intangible assets - Software 257 (2) 255

Property, plant and equipment 190 (72) 118

Inventories 230 (197) 33

Trade and other receivables 5,511 (19) 5,492

Corporate Tax asset 147 0 147

Cash 636 0 636

Trade and other payables (3,515) (136) (3,651)

Provisions - (210) (210)

Loan (143) 0 (143)

Deferred income tax liability (18) 0 (18)

3,295 (636) 9,301

20152016

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The Group has a 49% investment in Dutco Styles & Wood LLC, a Company registered in Dubai. Registered address: PO Box 233, Dubai, UAE . The investment is held by Styles & Wood Limited and the terms of the joint venture agreement entitle Styles&Wood to jointly control the entity and to a 50% share of the profits of the joint venture. The joint venture had revenue of £1.67m in the year ended 31 December 2016 (2015: £11.69m) and made a loss of £0.75m (2015: loss of £0.14m).

ACQUISITION OF GDM

On 8 January 2017, the Company acquired the whole of the issued share capital of The GDM Group Limited for an initial consideration satisfied by;

• Cash payment of £2.235m.

• Issue of £0.675m in loan notes, payable January 2018.

• Issue of 250,778 ordinary shares of 1p each.

Potential further deferred and contingent consideration of up to £3.1m is payable subject to the following:

DEFERRED CONSIDERATION

Contingent consideration of up to £2.1 million may be payable subject to the achievement of certain financial performance criteria for the two year period ending 31 December 2018, details of which are set out below.

The level of Contingent Consideration due is dependent on future profitability of GDM:

· FY 2017 - On the achievement of a minimum PBT of £0.7 million, the Group will pay £0.35 million plus 75% of any PBT generated above the minimum threshold (capped at £1.075 million); and

· FY 2018 - On the achievement of a minimum PBT of £1.0 million, the Group will pay £0.35 million plus 70% of any PBT generated above the minimum threshold (capped at £1.025 million).

CONTINGENT CONSIDERATION

A further cash consideration of up to £1 million is contingent on the achievement of certain commercial objectives over the periods ending 31 December 2019.

BANKING ARRANGEMENTS

In February 2017, the Group entered into new banking arrangements with for the provision of a £5m revolving credit facility. The facility expires on 31 July 2019.

At 31 December 2016, the Group had advanced a working capital loan of £2,290,000 (2015: £2,105,000) to the joint venture. The loan is interest-free and repayable on demand. There were no other transactions with the joint venture (2015: nil).

Under equity accounting rules, once the investment in a joint venture has been reduced to nil, no further losses should be recorded, unless the investor has incurred legal or constructive obligations to fund those losses. As the joint venture started trading in the year ended 31 December 2009, the Group has a constructive obligation to provide additional funding to the joint venture until it is further established and hence has recorded its share of losses in full.


31. JOINT VENTURES 32. POST-BALANCE SHEET EVENTS

£’000 £’000

Cost

Initial investment 227 227

Share of accumulated losses (856) (480)

Working capital loan advanced 2,290 2,105

Net book amount 1,661 1,852

Net book amount

At 1 January 1,852 1,826

Share of losses for the year (376) (136)

Working capital loan advanced 185 162

At 31 December 1,661 1,852

£’000 £’000

Current assets 4,187 15,254

Non-current assets 2 316

Total assets 4,189 15,570

Current liabilities (3,840) (13,201)

Non-current liabilities (2,029) (3,547)

Total liabilities (5,869) (16,748)

Net liabilities (1,680) (1,178)

20152016

20152016

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