|bouncing off trendline|
|aye. looks like it's flatlining but it's getting ready to burst it's bollingers|
|underlying bid strengthening - up to 4.195 online|
|thanks for sharing Daz.
I think we'll see a pretty sharp rise soon.|
|On the acquisition, I've calculated by adding in the extra £1m pre tax profit, using the current tax rate and taking into account the extra shares when working out the EPS figure that the acquisition will add 7p to EPS, so the current forecast of 51p for 2017, should become 58p.
If profits increase to £1.25m in 2018, it would add 9p to 2018 forecasts.
It really does look like the market hasn't cottoned on to the significant effect that this acquisition will have. There still remains a trading risk but the management have some knowledge of the business, so I'm confident the target will be met.|
Interview: Styles & Wood CEO on restructuring, retail & the future of fit-out
5 SEPTEMBER, 2016BY CHARLIE SCHOUTEN
Full screenTony Lenehan CEO Styles and Wood
Refocus from retail
New sectors, new opportunities
Differentiating through data
Brexit vote prompts new focus
Back in growth mode
Having seen turnover fall from more than £250m to below £100m in the depths of the recession, how did Tony Lenehan turn around fit-out firm Styles & Wood – and what are its prospects for the future?
“It certainly doesn’t feel like five years – more like five minutes,” says Tony Lenehan, reflecting on his first half-decade at the helm of Styles & Wood.
Meeting the fit-out firm’s CEO at the group’s head office in Sale, Manchester, Construction News finds him in a positive mood – despite the prevailing sense of uncertainty since the EU referendum result. And looking back over the five-year journey to get to this point, it’s understandable why his spirits are generally high.
The company posted a £2.2m loss in its 2009 accounts as the recession deepened, followed by a further loss of £1.1m in 2010 – the year before Mr Lenehan took over from former CEO Ivan McKeever.
Mr Lenehan speaks proudly of the way the business has turned around since the recession and the strong position it now finds itself in. Yet there remains a warning in his tone, stressing that the business cannot now rest on its laurels.
Turning around any struggling business can represent a mammoth task – so how did Styles & Wood tackle the challenge during some of the construction industry’s most difficult times?
Refocus from retail
An engineer by trade, Tony Lenehan joined Styles & Wood in January 2011, having previously run Carillion’s integrated property services business and held an executive role with Bovis Lendlease covering the North and its property services in the defence sector.
Looking back to the time of his appointment, Mr Lenehan reflects on the sorry state the firm was in. “This business was suffering,” he says. “Revenues had slumped to sub-£100m and there were lots of question marks around profitability.”;
“When I first came to the business, the real conundrum was that Styles & Wood historically had probably played the lead in the retail world”
That is put into perspective by looking back to before the recession: in 2006, the firm was turning over an impressive £268.6m; by 2013, this had fallen to £93.9m. Today, its most recent results show revenue of £114.9m for the year to 31 December 2015.
The main reason for the decline, Mr Lenehan says, was the firm’s close historical ties with the retail sector. As he speaks, it becomes easier to see how he tackled the business’s problems methodically and thoroughly, addressing each individual issue head-on.
“When I first came to the business, the real conundrum was that Styles & Wood historically had probably played the lead in the retail world. But in a recessionary environment, being very heavily geared to one sector – and one that equally is subject to wild fluctuations in a macro-economic sense – isn’t good.”
He explains that “something like 90 per cent” of the business was geared towards retail before the recession, while five years ago it was still “probably 70 or 80 per cent”, which he describes as an “imbalanceR21;. But he adds that, despite the close ties to a floundering retail market, the fundamentals of a strong business were there – its focus was simply in the wrong place.
“At the heart of the business, there were two or three hundred people who were very good at what they did,” he says, and that concentrating efforts on the retail market made little sense. “Pointing them at retail when there was no retail work simply wasn’t sustainable.”
New sectors, new opportunities
Accordingly, shifting towards different sectors outside its traditional core represented the biggest challenge for the business, becoming its focus in the first years of Mr Lenehan’s tenure.
“We needed an ability to differentiate our offer, to create more of a solution rather than, ‘Yeah, we can do a contract for you’ – we can actually do a bit more”
Now, around 15-20 per cent of the business is focused on the sector, with more and more work coming from different areas: banking and finance; commercial; health; and higher education.
“My first task was to get a much better handle on the skills and capabilities and how to leverage that in different spaces, with an eye on perhaps four or five strategic sectors,” he says. “[We needed] an ability to differentiate our offer, to create more of a solution rather than, ‘Yeah, we can do a contract for you’ – we can actually do a bit more.”
He is also keen to emphasise that the turnaround of the business has been multi-faceted. It’s not simply been a case of targeting new sectors, but “thinking differently” about how work gets done and the solutions the company can offer.
As he describes the schemes that have used this approach, it’s clear he is passionate about delivering projects that are both innovative and efficient. This has involved adding to the firm’s skills base, particularly regarding big data, analytics and data management.
“We have run a comprehensive ATM upgrade and switch-out programme for a bank,” Mr Lenehan says. “It’s actually several thousand project interventions that need the co-ordination from a major manufacturer to get the kit ready, and all the upgrades and training associated with that needs to be managed.”
“Our view is that most people will be pulled into [using more technology], but at the minute, it’s a clear differentiator for our customers that we’re investing in”
Because of the way the group uses technology and big data, he says, it is easier to manage jobs and frameworks that might be made up of thousands of individual projects at any one time. “Historically, the bank was running at a rate of about 20 projects a month, which was a lot for them to handle – we’re doing that in a weekend.”
He adds that it was “a hard sell” to get the investment in place, particularly when the business was in recovery mode, but he argued at the time that the rationale behind it was “blindingly simple”. “We can either get drawn into a play for commoditised work, or we genuinely show some added value.”
Differentiating through data
Now the business’s offering is much more diverse – and he adds that, by investing in “a different way of working”, he believes the firm has stolen a march on its competition. “Our view is that most people will be pulled into [using more technology], but at the minute, it’s a clear differentiator for our customers that we’re investing in.”
Using that technology – and taking a value-added approach to contracts – has allowed the company to win more work, with a particular focus on frameworks. These have helped overcome a lack of certainty around workloads, which was down to the firm’s legacy in retail and its struggles in the recession.
“[Five years ago], most everything was tendered, and the framework relationships – insofar as they existed – were all subject to a yearly renewal,” he explains. “It was very hard to predict what was coming next, and very hard to plan and resource for that. As well as looking at different sectors to focus on, there was a key issue around having a better line of sight of opportunity.”
“People will refurb and refit driven by lease events but also by the need for building efficiency. Whether IT or energy-based, doing nothing doesn’t appear to be an option anymore”
The focus on frameworks has now fed through to the firm’s business model across the sectors, and Styles & Wood’s retail work – previously its bread and butter – is now largely focused on frameworks.
Mr Lenehan says part of the company’s new approach is about “homing in” on grocery retail, where clients with fast-moving change programmes across hundreds of stores need a company with a specific skillset to get the work done quickly and efficiently.
Brexit vote prompts new focus
Another market the company has targeted since Mr Lenehan’s appointment is the commercial sector, which now makes up 30 per cent of group sales.
The company “did its homework” on the market before deciding to bid for contracts, he says, which has led to 70 per cent of its work in the sector being repeat business from clients such as Aviva. “It’s around making better use of space, or offering a more lifecycle-type product in terms of both fit-out and refurb – that fits really well for us,” he says.
And it’s here that, perhaps unexpectedly, the firm sees an opportunity in the property industry’s post-referendum environment.
With a number of clients and developers looking at pausing speculative and new-build schemes amid Brexit uncertainty, Mr Lenehan points out that the likelihood of growth in refurbishment and refitting is “absolutely on the money”.
“The last five years doesn’t automatically translate into a mad dash for growth. It’s about picking off the right opportunities for the right reasons”
“When you introduce a pause in speculative development, you don’t then turn it back on again a week later. It will come back, but it might be in a year, or longer. While that happens, people will refurb and refit, driven by lease events, but also driven by the need for building efficiency. Whether that’s IT-based or whether it’s energy-based, doing nothing doesn’t appear to be an option anymore.”
Other sectors Styles & Wood sees at hotspots for growth include private healthcare and higher education. The firm has completed a library refurbishment for Lancaster University, which Mr Lenehan describes as “highly complex by anyone’s standards”.
“In this day and age, the library is still the hub of the academic campus, and our view is there are still several hundred of these to come over the next 10-15 years, so having a reference point puts us in a great place for more,” he adds.
Back in growth mode
Despite the firm’s recovery over the past five years, Mr Lenehan stresses that the hard work isn’t over yet.
While turnover is back above the £100m mark and pre-tax profit is at its highest level for years, he says the firm will not rest on its laurels.
“[The last five years] doesn’t automatically translate into a mad dash for growth in terms of revenue,” he warns. “It’s about picking off the right opportunities for the right reasons.”
Drilling that philosophy into the business from the top down has been Mr Lenehan’s challenge since taking over five years ago – and maintaining that for the next five will be just as challenging.
But with safeguards in place and a diverse portfolio, alongside a strong skills base and steady income streams, Mr Lenehan is confident that Styles & Wood is moving from recovery to growth mode once more.|
|i believe some buys goiing through at full ask of 430 but not being reported... reading between lines based on prices shown on tdw|
|Added earlier at 427.5,|
|flurry of buys|
|bargain price of the bolt on makes the p/e look even sillier|
|wonder if we might see a bit of director buying now that the acquisition news is in public domain|
|once this nudges above 425 - and it will soon - people will be scrambling to buy stock in anticipation of breakout.|
|Stock has massive potential. Doing all the right things - great acquisitions with challenging pay-out targets and highly incentivised to deliver - luckily topped up last week. I expect to see £7 this year and hopefully £10 next year :-)|
|will struggle to get anything now under 430|
|yes sheep, well done for remembering to cite the tm.
450 coming up|
|strapped in. Ready for Ver-tic-al|
|boom time (tm)?|
|time to strap in for lift off|
|ready to pop north... 3 shares will now cost 424.9 (i topped up at 423.5)|
|mms desperate for shares... offering 416 for decent volume|
|Yup, It's getting there.Nice purchase figures.
Regards , MoneyShelfBuildingBags
Disclaimer: This message may contain nuts|
|Yes, this looks a very good deal. STY's ptp in FY2015 was £2.4m . So this acquisition brings in £1m extra, which is additional 42% to boost earnings.
A re-rating soon IMO.
I added this morning.|
|Nice bolt on announced today and at a cracking price.
Paying £4M for a company that made £1M pre tax last year, mostly paid for in cash which helps earnings even more.
Possible £2M future earn out is a given I think but doesn't appear STY are having to pay a separate amount for the assets which is a further bonus.
All in all looks good.|
|great day for STY
don't want to see it go up more than 5% in a day... keeps the day traders away.|