Styles and Wood : Acquisition of The GDM Group Limited

9 January 2017

Styles&Wood Group plc

('Styles&Wood' or the 'Group')

Acquisition of The GDM Group Limited

Styles&Wood, the integrated property services and project delivery specialist, is pleased to announce that it has acquired the entire issued share capital of specialist mechanical, electrical and environmental consultancy services provider, The GDM Group Limited ('GDM'), for an initial consideration of £4.0 million, to be satisfied in cash and shares (the 'Acquisition'). The Board envisages the Acquisition to be earnings enhancing from FY 2017 onwards.

Highlights of the Acquisition

· Initial consideration to be satisfied by:

o a cash payment of £2.325 million;

o the issue of £0.675 million in loan notes, payable January 2018; and

o 250,778 shares to the Vendors of GDM, who will remain with the business;

· Potential further deferred and contingent consideration of up to £3.1 million, to be satisfied in cash, subject to the achievement of certain financial performance and commercial objectives over the three year period, ending 31 December 2019;

· Acquisition in line with Styles&Wood's strategic focus on diversifying its service offering across key sectors;

· Enhances the Group's service line capabilities in engineering and professional services;

· Provides new opportunities to broaden work streams to both existing and new customers;

· Acquisition funded from the Group's existing financial resources; and

· Expected to be earnings enhancing in FY 2017.

Information on GDM

Based in Dartford, Kent and incorporated in 2001, GDM currently employs in excess of 50 staff and provides mechanical, electrical and project management services to some of the UK's largest property owners. GDM specialises in delivering engineering and project management services and solutions for customers in their business critical environments. The management team has over 90 years' experience working with a range of blue-chip customers throughout the UK and Europe.

In the unaudited financial year ended 30 April 2016, GDM delivered revenues of £7.9 million and underlying pre-tax profits of £1.0 million. Net assets as at 30 April 2016 stood at £0.6 million.

As part of the Acquisition, all GDM employees will remain employed by GDM which will be positioned within the wider Styles&Wood Group.

Rationale for the Acquisition

The Acquisition reinforces Styles&Wood's growth plans and further enhances its skills and expertise in engineering and professional services. GDM will additionally provide Styles&Wood with an expert engineering procurement capability. Clear synergies have been identified and a recent collaboration with GDM, on a new framework agreement they successfully negotiated, provides an insight to future potential for the Group, as enlarged by the Acquisition.

Terms of the Acquisition

GDM has been acquired for an initial consideration of £4.0 million. The initial consideration is to be satisfied by a cash payment of £2.325 million, (funded through the Group's existing cash resources), an issue of £0.675 million in loan notes, payable in January 2018, and the issue of 250,778 new ordinary shares in the capital of Styles&Wood(the 'Consideration Shares').

Deferred Consideration

Deferred consideration of up to £2.1 million ('Deferred Consideration') may be payable, in cash, 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 Deferred Consideration, if payable, is expected to be self-funding from future cash-flows generated by the enlarged Group based on the challenging financial targets set.

The level of Deferred 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 ('Contingent Consideration'). The Contingent Consideration, if payable, is expected to be self-funding from future cash-flows generated by the enlarged Group.

Lock-in and orderly market provision

Under the terms of the acquisition agreement, the Vendors have entered into an irrevocable undertaking not to dispose (save in certain specified circumstances) of any interest in their Consideration Shares for a period of one year from the date of issue ( the 'Lock-in period').

Application has been made to London Stock Exchange plc for the Consideration Shares to be admitted to trading on AIM. Admission of the Consideration Shares to trading on AIM is expected to take place on 12 January 2017. On admission of the Consideration Shares, the enlarged issues share capital of the Group will be 8,690,328 ordinary shares of 1p each.

Tony Lenehan, Chief Executive Officer, commented:

'We are delighted to announce the acquisition of GDM. There is a clear trend in the market towards multidisciplinary service provision for blue-chip clients, and this acquisition builds upon the strength of both businesses, as experts in project delivery in live environments. Styles&Wood has a proven diversification strategy which has enhanced our client relationships across our focus sectors. The acquisition of GDM further reinforces our strategic vision and will enable us to widen our service offering to both existing and new customers, and create new sustainable business opportunities for the Group as a whole.

As demonstrated by our recent successful collaboration with GDM on a new framework agreement, we have been very impressed with the team's engineering excellence and strong customer base, and look forward to GDM becoming part of the enlarged Group.'

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