Alan Lovell, Chairman of Safestyle UK plc (LON: SFE), the leading UK focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, will make the following statement at today’s Annual General Meeting in respect of current trading:
“Following the progress made during H2 2018 in stabilising the business, Phase Two of our Turnaround Plan is now well underway. Our focus for Phase Two continues to be on recovering volumes and market share, restoring our operational effectiveness, reducing our costs and enhancing our margins. We remain on track to conclude this Phase at the end of 2019 and then plan to move into Phase Three in 2020 which has a primary focus on accelerating our growth.
During the first four months of the year, the business has continued to rebuild its order book and the Board expects the business to grow its revenue by c.10% versus H1 2018, accelerating towards 20% in H2 2019 against the comparative period in 2018. While elements of consumer demand do appear to be soft, the market (as measured by FENSA) has seen volume growth in the first four months of the year of 2.7% and against this backdrop it is pleasing to see that we have grown at more than twice that rate.
Progress has also been made on the Group’s gross margin and the Board expects the H1 2019 margin performance to have improved by c.4.5% versus H2 2018. This momentum is expected to continue through the remainder of the year.
As previously referenced, during 2017 and 2018, the cost base of the business had grown significantly. Management are addressing this robustly and it is expected that the Group will deliver a material improvement in its operating margin versus 2018 based on actions already taken this year.
Despite the progress, margin improvement has been slower than expected, impacted by higher lead generation costs and the pace of recovery in improving the Group’s operational effectiveness. Consequently, whilst the Board does expect turnover to remain broadly in line with current market expectations and continues to forecast a small profit for the full year, it does expect this profit to be below current market expectations.
The Board remains confident that as Phase Two reaches completion, the full benefits of the changes implemented will be seen in FY 2020 and will create a platform to drive Phase Three of the Turnaround Plan.
The Board also continues to forecast that the Group’s net cash position will increase versus 2018’s closing positive level (£0.3m) as a result of effective management control on capital expenditure levels and working capital management.
The Board remains focussed on delivery of the three stage Turnaround Plan and is cautiously optimistic about achieving a strong exit rate this year to set the Group up for a further step-up in its profit delivery in 2020.”