If you try and see through the bloated PR and spun news articles distorting the real picture, there are some ways you can gleam something a bit more accurate as to the state of the fenestration sector right now.
Safestyle’s latest trading updating, focusing on H1 of 2023, is one of those snapshots. After a very positive 2021 and 2022, their latest update paints a very different picture.
Safestyle UK downgrades
Here is the statement in full, provided via their PLC website:
Safestyle UK plc (AIM: SFE), the leading UK focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today issues a trading and operations update for the six months ended 2 July 2023 (“H1”).
Trading and operations update
The Group expects to report H1 revenue of £74.0m, a decline of 5.4% on H1 2022, which is in line with our forecasts and reflects the challenging trading conditions of the first half of the year.
The combination of inflation, which has continued to remain higher than economist forecasters expected, and consequential higher interest rates, have put even greater pressure on our customers’ disposable incomes, weakened consumer confidence and increased the cost of providing our market leading finance products. That being said, following the £1.4m investment in the Group’s Q1 TV Campaign, brand awareness has continued to grow and our market share has increased by 30bps to 8.0% (3.9% growth) in H1.
H1 industry data from Fensa shows that the market for installations is c.8% lower year on year, with Q2 representing a declining trend at c.12% lower. Alongside the reduction in installations in the market, the average number of frames per installation has also declined. H1 order intake (value) was 6.4% lower than the prior year and our H1 order book closed 22% lower than an unusually strong H1 22 comparator.
In response to the challenging market conditions, the Board initiated the largest efficiency and cost reduction programme for many years which, regrettably, included a small number of redundancies at all levels across the business. These actions equate to a c.£2m annualised saving from levels at the start of 2023.
Although these actions have not been enough to fully counter the volume and margin impact of the trading environment, the Board remains focused on delivering monthly run rate profitability in a challenging market which was achieved at the end of H1. In line with our forecasts, the Group expects to report an underlying loss before taxation for H1 2023 of c.£(6.0)m.
The impact of the H1 financial performance, alongside a one‐off change in timing of payments to our new profile supplier, has resulted in net cash at 2 July 2023 of c.£0.9m.
Outlook
The challenging market conditions have worsened over the last 5 weeks into July and have adversely impacted order intake volumes which the Board forecasts will be an ongoing trend to the extent the Group’s full year performance is now expected to be materially below current market expectations. The Board continues to forecast an underlying profit before taxation for H2, now expected to be c.£0.5m. This performance level represents ongoing delivery of monthly profitability established at the end of H1 into H2. The Board also remains confident that the Group will continue to deliver market share growth for the remainder of the year.
The net cash position at the end of the year is still expected to be positive. The Group also remains fully compliant with its borrowing facility arrangements and the full £7.5m facility continues to be accessible.
More detail on the Group’s financial performance, the delivery of its efficiency and cost reduction programme and the progress made against its strategic priorities will be provided in its interim results for the six months ended 2 July 2022 on 27 September 2023.
This statement represents a significant downgrade when compared to forecasts for 2023. The company has made redundancies at all level within the business. They describe them as small, but this is a stark change in fortunes when compared to the boom after the end of the first lockdown in May 2020.
The only positive point they try to make is growth in market share, but that may be coming through diminishing competition rather than anything else. There is more to unpack in this statement, especially due to the data that is mentioned. It shines a light on the general state of the sector. Safestyle UK is a bell-weather company. One that gives a glimpse into what is going on within the wider fenestration sector.
Shares in Safestyle UK are trading at an all-time-low. If they were to fall into single digits this may cause further concern. You can view real-time share price data here: https://www.safestyleukplc.co.uk/investor-relations/share-price-information.aspx
If we are to extrapolate this into the wider industry, then it points to some pain ahead for many.
You can read the original statement here: https://otp.tools.investis.com/clients/uk/safestyle/rns/regulatory-story.aspx?cid=745&newsid=1705232
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