Styles & Wood has had a tough few years, taking huge hits as the retail fit-out market nose-dived. Building finds out how new boss Tony Lenehan plans to turn things round - and why you could be seeing more of the northern-based firm in London
Taking on your first CEO job is always going to be nerve-wracking. But what about when the company you join is going through a tumultuous time and you are being brought in at short notice to replace the former chief executive after a surprise statement announces his departure? This was the situation facing Tony Lenehan, the former Bovis man, when he walked through the door of troubled northern fit-out firm S&W - formally Styles & Wood - on his first day at the start of January this year.
New year celebrations must have been short lived for Lenehan who was immediately embroiled in trying to get the company back on its feet. Since 2009 the fit-out company has been floundering. First there was a £17m refinancing deal back in May 2009 after the firm made a loss of just under £1m in 2008. This was swiftly followed by a massive 39% fall in first-half turnover in 2009. Things looked better in 2010 but still far from rosy as the group posted a £1.8m pre-tax loss in April and issued a turnover warning in October - this was confirmed in April this year when it was revealed that turnover had fallen once again; this time by 29%.
It was right in the middle of this catalogue of disasters that the group’s former chief executive Ivan McKeever suddenly stepped down. The announcement, made at the same time as Lenehan’s appointment, came as a surprise. McKeever has worked tirelessly to bring the company back from the brink, overseeing the refinancing and steering S&W out of the worst of its problems at that stage. No surprise, therefore, that his departure raised questions. And Lenehan’s arrival came amid much speculation - none of which he is prepared to comment on today.
Whatever the circumstances of McKeever’s exit, it is Lenehan’s task to turn the business around. No one in the industry thinks that’s going to be a piece of cake - though Lenehan’s appointment has been welcomed: “On paper Lenehan looks like a good appointment,” says Tony Williams, chairman of construction analysts, Building Value. “But there is no doubt about it - S&W has been to hell and back. So it’s a big challenge for him.”
Lenehan, a former managing director of Carillion’s building division, has wasted no time in putting a new strategy in place - one that brings the group into London and, hopefully, into profit once again.
His first major manoeuvre since joining S&W seven months ago has been to get the business operating in London. This is where he feels the opportunities lie in such a difficult climate - being a northern-based fit-out firm and having predominantly northern-based clients has been a stumbling block for S&W during the downturn. Work from its traditional client base tailed off while winning new business became almost impossible. It was therefore essential that S&W got some sort of foothold in London.
And there are signs it is achieving just that. Buoyed by contract wins on the Olympic park and a few banking frameworks, S&W will finish 2011 in a much stronger position in the City. Lenehan says: “S&W entered this year with little if any business interests in the capital. However, by the end of this year 15% of our sales will have come from there. There’s an awful lot going on in London so it’s absolutely vital that we should be here.”
It’s not about chasing growth, it’s about being very selective and then using that selection to build a platform for growth
The real challenge will be how Lenehan ensures S&W doesn’t get muscled out of the, already fiercely competitive, London market: “It’s a brave move to target the capital,” says Tony Williams. “You have very smart operators here like market leaders Overbury [Morgan Sindall’s refurb division] and Wates. Those firms are so well established it’s likely S&W will find it extraordinarily difficult to compete with them.
So how does Lenehan plan to make it work? The trick will be to build on existing contacts and hope for a snowball effect. Before business took a tumble, S&W did have a small presence in the London market and Lenehan wants to re-engage with S&W’s old client base there. He also wants to invest more time and money bidding for higher-profile contracts in the City and West End - something the company has never done previously.
Out with the old
The other part of Lenehan’s strategy is to move S&W away from solely retail fit-out to concentrate on the burgeoning banking fit-out market. Historically retail fit-out has accounted for the lion’s share of S&W’s business but the new market conditions and a deep slump in consumer spending have forced a rethink.
The solution may lie in the banking sector where fit-out work is on the up. Last year retail work represented 66% of S&W’s revenues, compared with 77% the year before. During the same period the banking and office sectors’ share of turnover rose to 38% from 23%. This year over half the firm’s revenue will come exclusively from the banking market. S&W can now claim Barclays, Nationwide, RBS and Lloyds as key customers from the sector.
“It’s not about chasing growth, it’s about being very selective and then using that selection to build a platform for growth,” says Lenehan. “We’ve begun to reorganise the structure now but it’s hard work and it doesn’t happen overnight.”
In order to transform the company, Lenehan knew he would have to work on its structure as a priority. No one was necessarily expecting a troubled firm to increase staff as part of its new management plan. But that’s exactly what he plans to do. The group will bolster headcount by 10-15% over the next year as it takes on more staff-intensive work: “It’s been a bit of a sea change,” he says. “And it’s hard for some staff because rather than saying go and deliver the project, the challenge is to develop new business opportunities. Fortunately the S&W team have stepped up to the mark.”
Stepping up to the mark is exactly what Lenehan has done too and the question now is whether it will be enough to steer S&W out of the danger zone and onto a road to recovery.
Company profile: Styles & Wood
Disciplines covered: fit-out, refurbishment, design and build
Chief executive: Tony Lenehan
Non-executive Chairman: Jim Martin
Turnover: £99.1m (2010)
Pre-tax loss: £703,000 (2010)
Number of staff: approx 250
Number of offices: 4 (UK); 2 (UAE)
Countries active in: 2
List of five key, current projects
Refurbishing the central atrium of Selfridges’ Manchester Exchange Square Store
Two projects for British Telecom which involves refurbishment and replacement programme of joinery and special works package
Agreement with Nationwide Building Society to refurbish 25 branches
Carrying out refurbishment works at parts of Harrod’s store in London
Deal with Asda’s southern division to install new power units and refurb customer toilet facilities