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Though retailers face a tough 2008, Styles & Wood, which delivers an array of store development services to the sector’s ‘Premier League’ players, enters 2008 in fine fettle with a £137m order book.

Unloved lately, like other stocks perceived as cyclical, Styles & Wood has issued an upbeat update for 2007 – annual results are out in February – which represented its 14th consecutive year of growth. Buoyed by strong second-half trading, results should beat City forecasts and the company has continued to pick up new customers including Co-op, Morrisons and Nationwide. Allied to new framework deals secured with existing clients such as Asda and Sainsburys, forecast upgrades are in the offing.

Though the outlook for retailers is challenging, with consumers feeling the pinch of interest rate rises and the credit crunch sapping sector optimism, Styles & Wood serves retailers, who continue to invest in ‘the store environment’ in order to keep and attract customers. Trends towards 'multi-format' retailing, which is generating further investment in stores, and for major retailers to outsource property services, should underpin the group’s growth going forward, particularly within its support service divisions. Furthermore, the food retail sector, where other group clients include Tesco and Waitrose, is expected to perform well in the coming year.

Based on the 2007 consensus – pre-tax profits of £11.5m and 12.1p of earnings – Styles & Wood trades on a miserly p/e of 9.9 and with analysts targeting a 175p price, the shares look oversold. Buy.

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Styles & Wood	LSE	£7.74m	12.00p	0.75p
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