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Safestyle UK FY19 performance reflects the progress in the turnaround and FY20 had started well

Safestyle UK plc (LON:SFE) FY19 results are in line with the detailed guidance provided at the time of pre close trading update in late January. Revenue of £126.2m was 8.4% ahead yoy highlighting the progress the business has made in recovering from the issues it experienced in FY18. A return to profitability was achieved in the middle of the year on the back of a much-improved performance in revenue and margin, gross margin increasing 240bps yoy. This signalled the end of stage two of the recovery process set out by the management team. Stage three, accelerating growth, had begun in earnest with the year-end order book up 24% yoy. The good order run rate continued into the first two months of FY20 with both revenue and profitability materially ahead on FY18.

  • FY19 shows material progress with revenue returning strongly: Revenue of£126.2m is up 8.4% yoy and 10.7% in H219, relative to the last six months of FY18. The loss before tax of £1.5m is a material improvement on the £8.7m in FY18. The performance could have been even better, but management made the right decision to invest in the last few months of the year to drive orders. This was reflected in the year end order book up 24% yoy. Frame installations increased 3.3% and price per frame increased again to £678, a 5% improvement. Gross margin increased 240bps to 25.3% reflecting the fundamental improvement in the business as the management team has executed its turnaround strategy. Net cash position at year end was £0.4m and the business has a committed £7.5m debt facility that has been extended for a further twelve months.
  • Market share improving as the recovery picks up pace: Safestyle still has a significant competitive advantage against its peers, this will become increasingly apparent as the order book and revenue builds. The stated market share at the end of the year was 8.5%, this is still materially below the 10.7% achieved in 2017. In normal market circumstances, there is no reason why Safestyle can’t once again achieve double digit share. Both national competitors continue to struggle to compete in terms of price. 
  • Forecasts: The strong start to FY20 has been encouraging and whilst too early in the year to think about positively moving forecasts if, as we suspect, it had continued we would have had to review them in a few months’ time. Unfortunately, Covid-19 has increased uncertainty on the outlook for Safestyle UK. The business is in better position to cope with the ramifications than it has been for some time with extended financing facilities and a leaner more variable cost base. The additional £3.0m marketing investment to drive growth is being deferred to preserve cash. It is too early to assess the impact to forecasts leaving FY20 numbers unchanged for the time being.

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