Office fit-out specialist Styles & Wood (STY:AIM) is on a roll, landing a deal it expects to deliver £100 million in revenue from a major banking institution – on top of £23 million new contract wins announced earlier in the year and a big increase in profit at results announced in April.

Shares in Styles & Wood trade 17% higher at 398p and are up more than 600% over the last 18 months after after a June 2015 refinancing designed to clean up the balance sheet and a strong run of trading performance since.

The business now looks in decent shape and its latest contract win, which is worth an expected £20 million a year for the next five years, provides further operating momentum moving into 2017, says analyst Robin Speakman at house broker Shore Capital.


'We believe that this award potentially extends revenue visibility for Styles to a material degree from 2017,' writes Speakman.

'Work will be tendered to the end of the current year, but only bits and pieces are expected to flow over this period. The framework has a wide scope and covers the client's whole property estate including data centres, commercial back office and high street locations etc.

'Margins under the framework are expected to be within Styles normal operating range. In sum we believe this to be an exciting win for the company; we will reassess our forecasts from 2017 onwards on the announcement of the interim results ending June in mid-September.

Speakman forecasts Styles to boast a net cash balance by its 31 December 2016 year-end, marking a potential turning point from the days when the business carried too much debt for its cyclical end-markets.

Sector peer ISG ran into similar difficulties in 2015, forcing it to raise expensive new equity and eventually leading to a takeover by private equity outfit Provexis.

Styles announced £23 million of new contract wins on 10 June in the commercial office, healthcare and hospitality sectors.

Results for the year to 31 December 2015, published in April, showed revenue up 18.6% to £115 million and underlying operating profit up 54% to £3.9 million. Earnings per share was 35p versus 25.3p a year earlier.

Issue Date: 31 Aug 2016