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Safestyle UK plc Delivers solid recovery

Safestyle UK plc (LON: SFE), the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, today issued a trading update in advance of its preliminary results announcement for the year ended 31 December 2019 on 19 March 2020.

Trading Update

Since the Group’s interim results announcement on 19 September 2019, management is pleased to report continued progress with its Turnaround Plan albeit against a backdrop of weak consumer confidence and challenging market conditions in the second half of the year.

Turnover for FY19 is expected to be c.£126 million, with the second half of 2019 delivering c.10.7% higher revenue than for the same period in the prior year.

The Group has delivered a solid recovery in market share from 7.0% at the end of 2018 to 8.4% in Q3 2019. Sales performance accelerated in November and December, driving additional lead generation costs in Q4 while strengthening the year-end order book, which increased by 24% versus 2018’s closing position. As a result of this investment the Board now expects an underlying loss before tax for FY19 of up to £1.5m.

The Board can also report that the Group delivered monthly profits across most of H2 and achieved an improvement in its overall net cash position, increasing to £0.4m at 31 December 2019.

The Board is also pleased to announce that it has extended its existing borrowing facility with Aurelius Finance Company to October 2021. This facility provides considerable liquidity for the Group as it moves into phase three of the Turnaround Plan.

Group Outlook

The Group has made good progress on reaching the milestones outlined in phase two of its Turnaround Plan; recovering volumes and market share, restoring operational effectiveness, reducing costs and enhancing margins.

As the business moves into phase three of this plan in 2020, the focus is on maintaining the Group’s strong momentum, whilst continuing to put in place the foundations for sustainable, long term growth and UK market leadership which will include the following key initiatives:

· Invest significantly in modernising the Safestyle brand and communicating its compelling value proposition both on and offline, primarily through TV advertising. This follows two years of restricted investment and aims to increase brand awareness and drive further growth in the Group’s market share position.

· Continue to establish robust systems, training and processes to underpin the future growth of the business; and finally

· Continue to embed the considerable progress made on regulatory compliance, health and safety and customer service – reflecting the changing operating environment and consumer expectations.

The Group will invest c.£3m in 2020 in order to deliver these initiatives. Whilst this is expected to have a negative impact on short-term profitability, the Board believes that the substantial uplift in media spend alongside selective investment to continue transforming key areas of the business will deliver material benefit to Safestyle from 2021 onwards.

Although the Board remains cautious in light of the broader market environment, it believes that this increased investment to deliver future growth will ensure that the Group is well placed to continue to improve its market share position and take advantage of a longer-term recovery in the market.

Mike Gallacher, CEO of Safestyle UK, commented:

“The new Executive team has been in place for 12 months and I am pleased with the pace at which we have stabilised the business, reduced costs, embedded regulatory compliance and enhanced our operational effectiveness. However, there remains a lot to do as we move into the final phase of our Turnaround Plan. Recently and concurrent with our internal challenges, there have been huge regulatory changes in the industry, whilst consumer buying behaviour and customer service expectations have evolved. As the UK market leader, with the right investment in 2020, we believe we are ideally placed to benefit from these trends and I am determined to further establish the foundations needed to deliver sustainable profit growth and long-term success for Safestyle.”