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Safestyle UK Temporary Closure of Sites – Zeus Capital

Following on from Boris Johnson’s statement yesterday evening, Safestyle UK PLC (LON:SFE) has announced a temporary closure of its sites across the UK along with the cessation of all installation activities. This should not come as a surprise; management had indicated last week this was a likely short-term outcome as the pandemic progressed. With the turnaround at Safestyle having picked up pace in the final few weeks of FY19 and into the early part of FY20 the impact from Covid-19 is frustrating. However, the short-term focus is on dealing with the issues and the business is in a far better shape to deal with the situation than it has been for some time with extended financing facilities and a leaner more variable cost base.

Temporary closure of facilities: Safestyle will be temporarily closing all its facilities including the main factory in Wombwell, Yorkshire, sales offices across the country and at the same time ceasing installations. The closure process will be orderly and all installations in progress will be completed, consumers will not be left with unfinished jobs. Installations in the order book will be rescheduled for four to six weeks’ time and will be rescheduled on a rolling basis, dependent on guidance from government. This will allow for the resumption of work in an orderly fashion as and when allowed.

Financial impact: There will of course be a financial impact to the current FY20 financial year to the end of December. Scenario modelling by management indicate that with the financing available to the business along with the already announced Government financial support, Safestyle has the financial capacity to withstand the closure of facilities beyond June 2020. Management has already enacted actions to manage the impact including reductions in costs and capital expenditure. Further help provided by government will also be utilised should it be forthcoming and appropriate to do so.

Forecasts: It remains difficult to provide detailed financial forecasts and as such we leave FY20 forecast unchanged, effectively pre any impact from Covid-19, and await further guidance as and when it is forthcoming from management.

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