Tag: SFE

Safestyle UK plc (LON: SFE), the leading UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today announced its final results for financial year 2021¹.

Commenting on the results, Mike Gallacher, CEO said:

“Despite the continued uncertainty caused by the pandemic as well as the widely-documented supply chain and inflationary pressures, I am delighted we have been able to deliver our best financial performance since 2017 and make significant progress against our stated strategic objectives.

The Group’s underlying profit before tax for the year represents a £16.4m turnaround from 2018’s underlying losses as we continued to improve margins and deliver growth. The strong performance of the business in 2021 made the cyber attack in January 2022 even more frustrating, however our previous investments in upgrading IT systems proved invaluable in helping to mitigate the worst of its impacts.

Looking ahead, the Group will continue to proactively manage cost-inflation, however we expect consumer confidence to be impacted by the ongoing cost-of-living crisis.  Pleasingly, our record-level order book will allow us to smooth the impact of any short term slowing of demand. Notwithstanding the factors above, the Board and I remain positive on the outlook for 2022 as the business emerges transformed after four very challenging years and continues its return to our historically strong financial performance and growth.”

Financial and operational highlights

	FY 2021	FY 2020	FY 2019	FY21 v FY20 % change	FY21 v FY19 % change
Revenue (£m)	143.3	113.2	126.2	26.6%	13.5%
Gross profit (£m)	43.8	28.5	31.9	53.7%	37.2%
Gross margin %2	30.54%	25.14%	25.27%	540bps	527bps
Underlying profit / (loss) before taxation3 (£m)	7.6	(4.8)	(1.5)	n/a	n/a
Non-underlying items4 (£m)	(1.6)	(1.4)	(2.3)	(17.9%)	28.7%
Profit / (Loss) before taxation (£m)	6.0	(6.2)	(3.8)	n/a	n/a
EPS – Basic (pence)	3.5p	(4.3p)	(4.0p)	n/a	n/a
Net cash5 (£m)	12.1	7.6	0.4	n/a	n/a

For the purposes of this announcement, where appropriate we have included comparisons of the Group’s financial and operating performance for 2020 and also 2019 with the latter, in many cases, a more meaningful comparative being prior to the disruption of the COVID-19 pandemic in 2020.

1)	The financial statements are presented for the year ended on the closest Sunday to the end of December.  This date was 2 January 2022 for the current reporting year and 3 January 2021 for the prior year.  All references made throughout these accounts for the financial year 2021 are for the period 4 January 2021 to 2 January 2022 and references to the financial year 2020 are for the period 30 December 2019 to 3 January 2021.
2)	Gross margin % is gross profit divided by revenue.
3)	Underlying profit / (loss) before taxation is defined as reported profit / (loss) before taxation before non-underlying items and is included as an alternative performance measure in order to aid users in understanding the ongoing performance of the Group.
4)	Non-underlying items consist of non-recurring costs, share-based payments and the Commercial Agreement amortisation.
5)	Net cash is cash and cash equivalents less borrowings.

A reconciliation between the terms used in the above table and those in the financial statements can be found in the Financial Review.

Financial headlines

·      The Group’s underlying profit before taxation of £7.6m represents the first return to full year profitability since 2017 and a £16.4m turnaround versus 2018.

·      Revenue growth of 13.5% versus 2019 demonstrates the Group’s improving revenue trajectory.

·      Early anticipation of cost inflation combined with the positive impact of strategic initiatives delivered a 527bps improvement in gross margin versus 2019.

·      Net cash position strengthened to £12.1m versus £7.6m at the end of 2020.

Operational headlines

·      The COVID pandemic continued to impact operations in 2021 and our priority remained the safety of our staff and customers throughout the period.  Managers and staff have shown huge flexibility and resilience as we have maintained our commercial operations.

·      Despite the sustained disruption, continued progress was made against our core strategic priorities, including brand development, consumer finance costs, revenue management, compliance and sustainability.

·      A 14^th installation depot was opened in Milton Keynes during the year.  This investment improves operational coverage, reduces travelling time and will help drive the productivity of our fitting teams.

·      Order book at the end of the year was 8.4% lower than 2020’s record levels, but remains healthy at over a third higher than any other year.

·      The Group has achieved a 19% reduction in its CO₂ per frames installed metric versus 2020 which represents early achievement of our 2024 target.  Over 95% of the waste generated from the Group’s operations, which includes the removal of old product from customers’ homes, was recycled.   

·      Customer service provision was extremely challenging due to the broad range of disruption experienced, most notably labour availability.  Investment in resource resulted in the backlog being cleared by the end of the year.

Post balance sheet event

·      Having achieved our objectives set out in the Turnaround Plan and reporting a strong financial performance in 2021, the business was hit by a cyber attack, originating from Russia, at the end of January 2022.

·      Business continuity actions, as well as IT investments in the last two years, mitigated the impact, although it caused a level of operational disruption that took some weeks to fully recover from.

·      We have now recovered our systems and processes and the Group is trading in line with original plans.  

Outlook

·      Despite strong progress being made by the Group in 2021 to overcome well documented labour shortages, we anticipate resource shortages in critical skilled labour pools will continue in the short to medium term.

·      Cost pressures have escalated in the first quarter across raw materials, fuel and labour.  We will continue to address these issues through pricing whilst also using our scale advantage to mitigate the impact.

·      Demand has remained robust in the first quarter.

·      We successfully launched our new TV campaign in February 2022 which has underpinned our continued order book growth in the first quarter. 

·      Over the full year, we aim to maintain a balance between order intake and installations capacity to continue to optimise margins.

·      Despite the short-term impact of the cyber attack on the financial performance of the business, the Group has a strong balance sheet and the Board therefore intends to continue to invest behind its strategic initiatives.

·      The Board expects performance for 2022 to be in line with current expectations with annualised H2 financial performance representing further growth on the good profit delivery of 2021.

A webinar for analysts and investors for the 2021 Full Year Results will be held today at 10:00 am.  If you would like to join, please contact FTI Consulting at [email protected] in order to access the registration details.

CEO’s Statement

Faced with another year of turbulence, our core challenge through 2021 was to deliver both a step change in our financial performance and to accelerate the pace of our strategic transformation.  I am delighted to report that against these objectives in 2021, we delivered our best financial performance since 2017 and made significant progress across the breadth of our strategic agenda.

Once again, I have been hugely impressed by the agility and resilience of our staff and self-employed agents.  The overwhelming priority of maintaining a safe working environment for our people and our customers posed day to day challenges through the year.  However, from our return to work from the first lockdown in May 2020, we were able to sustain manufacturing and installations operations continually, despite the impact of labour and supply interruptions.

Financial delivery despite turbulence

The Group’s underlying profit before tax for the year represents a £16.4m turnaround from 2018’s underlying losses, a £22.2m improvement versus 2018’s reported loss before tax and a strong step up from 2019 as we continued to improve margins and deliver growth.  Our financial delivery in H2 was impacted by an investment in recovering customer service levels, which were disrupted by the operational challenges associated with increased COVID isolations in early summer, the post pandemic supply chain shortages and latterly, the Omicron surge at the end of the year.  Despite this, the financial progress we have made demonstrates the underlying potential and resilience of the business model as we emerge from three years of turbulence.  The performance also completes the execution of the Group’s Turnaround Plan.

Revenue growth of 26.6% vs 2020 and 13.5% versus 2019 showed a sustained trajectory of performance and was underpinned by an early and proactive response to emerging cost pressure and capacity constraints.  The number of frames installed improved by 12.1% year on year and gross margin increased to 30.5%, an improvement of 540bps vs 2020 and 527bps vs 2019.   

Our strong order intake in 2020 built a record order book for the start of 2021 and allowed us to smooth the interruptions in sales caused by the third national lockdown.  Subsequently, the excellent order intake continued through 2021 giving us a closing order book 8.4% lower than 2020’s record closing level, albeit more than 30% higher than any other year in the Group’s history.

The impact of operational disruption on our customers meant that it was imperative that we invested in recovering our customer service levels in H2.  This required central resource and, inevitably, utilisation of our installation capacity to complete orders that were partially delayed or impacted by disruption.  As a result, we ended the year having returned to normal levels of service.

The priority given to improving our customer experience is in line with our strategic work to focus on the consumer experience, building our brand through word of mouth recommendation in addition to TV investment.  However, the inefficiency associated with this recovery underlined the need to accelerate the modernisation of our core business IT systems which is underway.

Our net cash position improved during the year to £12.1m at year end, an increase of £4.5m from 2020.  This represents a return to a healthy and stable financial position and is after the Group repaid £2.4m of VAT that was deferred from 2020 as part of our COVID support measures.   

Accelerated strategic delivery

The work done during 2020 enabled us to accelerate the pace of change within the business during 2021.

Levelling Up Depots and Sales Branches: The range of performance across our sites represents a significant opportunity and is being unlocked through embedding Standard Operating Procedures (‘SOPs’), effective IT systems and through establishing training and performance management processes.  During 2020, SOPs were developed for both Operations and Sales and H2 saw us establish, recruit and train almost 100 new PAYE sales branch management roles.

Delivering Profitable Growth: Our brand development project completed work on a modernised brand logo and refreshed brand communications campaign, fronted by David Seaman MBE, the former England goalkeeper.  This work was underpinned by new research and consumer insight which informs much of our business strategy during 2022.  We continued to advance our digital marketing capability, which now encompasses the use of artificial intelligence, to drive volume and mitigate cost pressure in the digital channel.  We continued to move pricing promptly in response to emerging cost pressure and capacity constraints and this delivered revenue growth and margin improvement.

Transforming the Customer Experience: Our metrics show that the vast majority of our customers have a seamless experience from sales through to installations, but we know we have an opportunity to improve this further.  During 2021 we implemented Net Promoter Score (‘NPS’) across our operations divisions, combined with financial incentives for quality performance across our depot network.  While disrupted by supply and labour issues in H2, the underlying progress is clear and these actions support our intent of placing customer experience at the heart of the business.  

Embedding Sustainability and Compliance: I have been delighted that we were able to exceed our original target of 10% reduction in our CO₂ per frame by 2024 well ahead of time, achieving a 19% reduction this year.  We now see an opportunity for a further 6% improvement before 2025.  This will be delivered by continued incremental improvement ahead of the introduction, when technology and infrastructure enables it, of a fully-electrified vehicle fleet.  We will continue to target the elimination of the remaining 5% of consumer waste going to landfill in conjunction with both existing and new partners.  In addition, we will conduct a Scope 3 audit of our ten largest suppliers in 2022 to ensure that progress on reducing emissions is also being made downstream. 

The year also saw us become the first major sales force in the industry to join the Association of Professional Sales and be awarded their ethical sales business accreditation.

Our progress in financial delivery and against our strategic priorities has been supported by sustained investment in our people and in modernising our systems.  The latter has encompassed the replacement of legacy systems, system resilience and most importantly, the preparation for implementing a new CRM system in 2022.

We are particularly proud of the launch of the Safestyle Academy, the largest professional development programme for installers in the UK.  This is a major long term investment and illustrates our commitment to raising professional standards across the industry.

Sustaining the strategic transformation in 2022

Despite the progress made in 2021, we have more work ahead to complete and embed the strategic changes that are now underway in the business.

Our key strategies will remain;

·      Delivering our Financial Roadmap

·      Levelling Up our Depots and Branches

·      Driving Profitable Growth

·      Transforming our Customer Experience

·      Embedding Sustainability and Compliance

All supported by our two enabling strategies; investing in the development of our people and modernising our systems and processes.

Current trading and outlook

Our first quarter has seen robust order intake supported by the successful launch of our new TV Advertising campaign, our largest investment in our brand since 2017.  This saw the fruition of our 2021 brand development work.  Our communication focuses on value with a ‘Safestyle Saves’ message, fronted by David Seaman.  Initial results have been positive with the campaign still underway.

It was immensely frustrating that as we emerged from four years of turbulence and following strong financial performance in 2021, the business was hit on 25 January 2022 by a sophisticated cyber attack, which originated from Russia.  Safestyle was one of a number of businesses impacted by what we understand to be a significant increase in cyber attacks on mid-size UK businesses.  The immediate response from our staff was prompt and impressive and we were able to sustain our core operations, sales, surveying, manufacturing and installations throughout the business recovery period, which is now complete. 

It is clear that our programme of recent IT investments contributed to significantly mitigating the impact of the attack.

Despite our ability to sustain our core operations, the attack did cause a level of disruption as we temporarily reverted to our business continuity processes.  The business now has all core systems back up and running and concurrently has further enhanced our cyber security measures.  Based on the increased and likely persistent threat to UK businesses, we plan to accelerate our existing IT modernisation plan further during 2022 and 2023.

Looking forward, we expect the impact of inflation and consumer confidence to be reflected in consumer demand for the year ahead, albeit our order book, which is now at record levels, will allow us to smooth the impact of any mid term slowing of demand.  Furthermore, our historic performance as a value brand has demonstrated resilience through periods of reduced consumer demand.  Meanwhile, raw material, labour and material cost inflation are at record levels and we intend to mitigate these impacts through pricing whilst maintaining focus on both costs and productivity to limit the impact as far as possible.

The business will continue to assess opportunities to accelerate growth in line with our strategy, which encompasses acquisitions, new business development and organic core business growth.  This will be the prime call on our cash, but we do intend, if our net cash position grows from its current levels after these growth opportunities, to return to the dividend list in the relatively near future.  The timing of this will depend on the scale and timing of our investments.

Our strategic intent remains consistent into 2022; to build long term value by consolidating our position as the clear UK market leader.  Despite the factors above, the Board remains positive on the outlook for 2022 as the business emerges transformed after three very challenging years and continues to deliver a return to our historical strong financial performance and growth.

Mike Gallacher

Safestyle UK Chief Executive Officer

20 April 2022

Safestyle UK plc (LON:SFE), the leading UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today announced its interim results for the six months ended 4th July 2021.

Financial and operational highlights

	H1 2021	H1 2020	H1 2019	H1 21 v 20 % change	H1 21 v 19 % change
Revenue (£m)	73.0	42.1	64.4	73.4%	13.3%
Gross profit (£m)	23.5	9.7	16.6	141.7%	41.4%
Gross margin %	32.23%	23.13%	25.84%	910bps	639bps
Underlying profit / (loss) before taxation1 (£m)	5.1	(5.1)	(0.8)	n/a	n/a
Non-underlying items2 (£m)	(0.8)	(0.5)	(1.6)	(47.3%)	53.5%
Profit / (Loss) before taxation (£m)	4.3	(5.6)	(2.5)	n/a	n/a
EPS – Basic (pence)	3.0p	(5.0p)	(2.8p)	n/a	n/a
Net cash / (debt)3 (£m)	14.4	6.0	(0.6)

For the purposes of this announcement, where appropriate we have included comparisons of the Group’s financial and operating performance for H1 2020 and also H1 2019 with the latter, in many cases, a more meaningful comparative being prior to the disruption of the COVID-19 pandemic in 2020.

1)	Underlying profit / (loss) before taxation is defined as reported profit / (loss) before taxation before non-underlying items and is included as an alternative performance measure in order to aid users in understanding the ongoing performance of the Group.
2)	Non-underlying items consist of non-recurring items, share-based payments and the Commercial Agreement amortisation.
3)	Net cash / (debt) is cash and cash equivalents less borrowings.

A reconciliation between the terms used in the above table and those in the financial statements can be found in the Financial Review.

Financial headlines

·    The Group’s underlying profit before taxation of £5.1m represents the strongest financial performance of the business since H2 2017 and a £10.4m turnaround versus H2 2018.  This was driven by a recovery in volume and improvements in gross margin alongside a transformation agenda.

·     The net cash position of the business has strengthened to £14.4m versus £6.0m at the end of H1 2020 which included the support received from shareholders in May 2020.  Based on this and current expectations for 2022, the Board will engage with shareholders in Q4 to discuss its cash allocation policy.  Clearly this will be in the context of any other investment opportunities.

·     Revenue growth of 13.3% versus H1 2019 demonstrates the Group’s execution of its Turnaround Plan from 2018.

·     Early anticipation of cost inflation, a benign market combined with the impact of strategic initiatives delivered a 639bps improvement in gross margin versus H1 2019.

Operational headlines

·     The COVID pandemic continued to impact operations in H1 2021 and our priority remained the safety of our staff and customers throughout the period.  Managers and staff have shown huge flexibility and resilience as we have sustained our commercial operations.

·   Despite the sustained turbulence, continued progress was made against our core strategies, including brand development, consumer finance costs, revenue management, compliance and sustainability.

·    A 14^th installation depot was recently opened in Milton Keynes.  This investment improves operational coverage, reduces travelling time and will help drive the productivity of our fitting teams.

·     Order book at the end of H1 was 9.6% ahead of H1 2020’s position and 65.7% ahead of the closing position at the end of H1 2019.

·    The Group has achieved a 10.9% reduction in its CO₂ per frames installed metric versus 2020.  95% of the waste generated from the Group’s operations, which includes the removal of old product from customers’ homes, was recycled.  Several initiatives are underway which are expected to further reduce emissions and increase this recycling % in H2. 

·     Customer service provision has remained a challenge due to the broad range of disruption experienced, most notably labour availability.

Outlook

·    Continued operational challenges are anticipated for the remainder of the year, particularly potential supply chain disruption and resource shortages in critical skilled labour pools.

·     The business will take prompt action to anticipate further cost pressures during H2, including raw materials and labour cost increases.

·     Demand has normalised over the summer versus very high levels in February to April as other channels for consumer spending re-opened.  However, household savings remain at historic highs and we will maintain a balance between order intake with installations capacity to continue to optimise margins.

·     Like many companies, the Group is focused on recovering and improving its customer service levels, a priority aligned with our pre-pandemic strategic focus on transforming our customer experience.

·     Trading in July and August has continued to be as expected notwithstanding the operational challenges we continue to experience.  H2 will see continued focus on delivering and embedding our long term strategic priorities.  Faced with this sustained uncertainty, the Board expects performance for the full 2021 year to be in line with current expectations.

Commenting on the results, Mike Gallacher, Safestyle UK CEO said:

“The business faced continued operational disruption during H1 and I am proud of the flexibility and resilience of all our staff in sustaining our operations while ensuring the safety of our customers and our people.

The momentum we built on return from the first lockdown was sustained into H1 2021 resulting in strong revenue growth versus 2019 and an order book 65.7% higher than at the end of H1 2019.  This performance has underpinned our ability to deliver a rapid recovery in profitability and a further strengthening of our balance sheet.

Despite the continuing challenges of managing the disruption caused by the pandemic we have continued to make progress on a number of our strategic priorities.  Our aim remains to build long term value for shareholders by modernising the business and hence building the foundations for sustained long term growth.”

Safestyle UK plc (LON:SFE), the leading UK focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, Chairman Alan Lovell, will make the following statement at today’s Annual General Meeting:

Trading Update

Since our preliminary results announcement at the end of March, I am pleased to report that our trading and financial performance has continued in line with recently increased market expectations. 

Revenue for the four months to 30 April 2021 was up 10.4% compared to 2019 and 50.9% compared to 2020.  Due to the first lockdown in 2020 where no revenue was earnt for the entirety of April, we believe 2019 represents a more meaningful comparative. 

Alongside this revenue performance, margins have improved markedly versus both comparative periods with the Group’s margin-enhancing initiatives now contributing meaningfully to our financial results.  This improved margin performance is after the impact of cost inflation in resin, other materials and resource-related costs as a result of the current strong demand in our sector.

Order Intake

Following the restart of sales and canvass activity during Q1 as the third COVID lockdown restrictions began to subside, order intake has continued to perform well into Q2.  This has enabled us to replenish the majority of the order book utilised in Q1, when sales were partly restricted and installations continued.  Consequently, the Group’s order book remains at levels similar to 2021’s strong opening position which continues to provide good visibility of near-term revenues.

So far this year the cost of order acquisition remains below pre-COVID levels although costs have started to climb in this area as the restrictions on other economic activity are removed.  So far, this cost movement has tracked the timing of the milestones of the UK Government’s roadmap for lifting all COVID-related restrictions by the end of June.  These cost increases remain within the Group’s forecast expectations.

Operations

We have also made progress on the many operational challenges that emerged as the business restarted last year.  This includes a specific focus on improving our customer service levels with meaningful investment in areas including call centre staffing, the installations network and ensuring appropriate resource levels to recover a service backlog which built in H2 2020.

Whilst progress has been tangible, there continue to be ongoing challenges in retaining and attracting quality installers and other specialist skillsets as wider market demand strengthens.  The actions being taken to address these challenges fit closely with our strategic focus on customer service and establishing standardised business processes.

Strategic priorities progress

Safestyle UK has continued to balance driving operational performance alongside the programme of strategic change needed to enable sustained long-term growth.

Our programme of work to standardise best practices across our sales and depot network continues.  Within sales, our regional management structure and increased availability of management information has started to unlock measurable performance improvements. The same process is underway across our operations network.  The process of embedding Standard Operating Processes is expected to be complete by the end of 2022.

There continues to be significant activity aimed at improving and standardising our customer service experience.  This has required additional investment in our customer care teams, investment in new technology and software and the recruitment of additional service support staff.

Our work on developing our brand positioning and communication continues, with an agreed set of criteria established for the timing of our return to TV advertising.

Overall, despite the continued disruption in Q1, the business has been able to retain a good level of resource and focus on our longer-term priorities.

Outlook 

In light of the continued health of the Group’s order book alongside our current operational capacity levels, the guidance for 2021’s full year financial performance remains unchanged.  At this stage the Board views the risk of significant further COVID-related disruption to be low, but it continues to monitor developments closely.

The Board plans to provide a half year trading update to the market in mid-July and intends to announce its half year results on Thursday 23 September 2021.

Safestyle UK plc (LON:SFE), the leading UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, has today announced its final results for financial year 2020¹.

Financial and operational highlights

	FY 2020	FY 2019
£m	£m	% change
Revenue	113.2	126.2	(10.3)%
Gross profit	28.5	31.9	(10.8)%
Gross margin %2	25.1%	25.3%	(13)bps
Underlying (loss) before taxation3	(4.8)	(1.5)	(213.4)%
Non-underlying items4	(1.4)	(2.3)	39.5%
(Loss) before taxation	(6.2)	(3.8)	(60.6)%
EPS – Basic	(4.3p)	(4.0p)	(7.5)%
Net cash5	7.6	0.4

¹ The financial statements are presented for the year ended on the closest Sunday to the end of December.  This date was 3 January 2021 for the current reporting year and 29 December 2019 for the prior year.  All references made throughout these accounts for the financial year 2020 are for the period 30 December 2019 to 3 January 2021 and references to the financial year 2019 are for the period 31 December 2018 to 29 December 2019.  

² Gross margin % is defined as gross profit divided by revenue.

³ Underlying (loss) before taxation is defined as reported (loss) before taxation before non-underlying items and is included as an alternative performance measure in order to aid users in understanding the ongoing performance of the Group. 

⁴ Non-underlying items consist of non-recurring costs, share based payments and the Commercial Agreement amortisation.  See Financial Review for more detail. 

⁵ Net cash is cash and cash equivalents less borrowings.

Operational

·     Staff, consumer and business protection was paramount through 2020 with COVID-safe practices in place across our sites and in home.

·     Growth in order intake exceeded the 15% growth in revenue in H2 and generated a strong order book at year end, 83% larger than 2019.

·     This large order book has supported sustained operations during the January 2021 cessation of in home sales & door  canvass.

·     Post H1 lockdown, operations were resilient with no site closures and continued manufacturing and installation activity thoughout H2, into Q1 2021.

·     Capacity increases in H2 were enabled by increases in headcount across survey, manufacturing, customer services and installations.

·     Market share (as measured by FENSA) rose to 9.2% from 8.4% in 2019.

·     Good progress made on operational KPIs, with average price per frame up 3.8% to £704 and average order value up by 4.1% to £3,474, with the trend continuing in Q1 2021.

·     Continued progress on the Group’s sustainability programme with CO₂ emissions per frame installed reducing by  6.1%.

·      Tangible delivery on the Group’s strategic priorities despite the challenging backdrop, including modernising the Safestyle brand, improving the national sales and depot network and sustaining progress in compliance. 

Financial

·     Progressive increase in revenue comparisons in H2 with Q3 being 9% ahead of prior year and Q4 being 20% ahead of prior year.

·     The impact of cessation of operations in H1 resulted in a £(6.0)m loss across the March to May period with underlying profit before taxation achieved of £0.3m in H2 after material investment in order book.

·     The Group received £1.8m from the Government’s Coronavirus Job Retention Scheme (‘CJRS’) which partly reduced the first half loss.

·     The business undertook a Placing of New Shares in April which raised £8.2m net of directly attributable costs of £0.3m to strengthen the Group’s balance sheet which allowed a strong restart of operations in late May and a strong year end position, with year-end net cash of £7.6m (2019: £0.4m). 

Outlook

·     2021 started with immediate disruption to sales as in-home selling and canvass operations were halted.

·     Restrictions have now eased and the Group is seeing a good recovery of sales momentum from 2020. 

·     Despite the impact the lockdown has had on order intake thus far in 2021, management actions and investment in the order book in 2020 have underpinned a good level of manufacturing and installations activity in the first quarter of 2021.  This has minimised further disruption to our customers and many areas of the business.

·     Revenue has grown by double digits in Q1 2021 and levels of profitability have increased versus 2020 exit rate.

·     The order book continues to remain ahead of the prior year although it has been run down in the first quarter and converted into profit and cash.

·     In summary, the Group has had a good start to 2021 and will achieve the highest level of profitability in Q1 for any quarter since 2017 while also maintaining a healthy installation pipeline. 

·     The UK Government has set out its roadmap for cessation of all restrictions by the end of June 2021 and based on this plan, the Board expects there to be no further significant interruption to our operations.

·     Despite the uncertain operating environment, the Board expects to see good levels of demand for its products and is recapturing the order intake momentum achieved in the second half of 2020 now restrictions on sales activities have been lifted.

·     As a result of this encouraging start to the year, the Board expects 2021 financial performance to be significantly ahead of market expectations.

·     The Board also expects to revisit its dividend policy later in 2021 assuming that the Group has returned to a consistent delivery of profitability.

Commenting on the results, Mike Gallacher, Safestyle UK CEO said:

“I am extremely proud of the way that our colleagues responded to what was a year with unparalleled challenges, at all times keeping a constant focus on health and safety while remaining committed to delivering for our customers.

Having taken decisive action to support the business during the period, we saw a strong recovery in the second half of the year with good order intake growth and a step up in operational capacity, as customer demand remained robust. By the end of 2020, our order book was 83% larger than 2019’s closing position, which has given us a strong platform to maintain momentum at the beginning of the current financial year in spite of the external disruption.

Notwithstanding the uncertain operating environment, as a result of the strategic and operational progress we have made along with our strong order book, cash position and market leading brand, the Board now expects the Group’s 2021 financial performance to be significantly ahead of market expectations.

Our intention remains as before the crisis; to build long term value for shareholders by consolidating our position as the UK’s number 1 choice for replacement windows and doors.”

A conference call for analysts and investors for the 2020 Final Results will be held today at 9.30 am. If you would like to join, please contact FTI Consulting at [email protected] or using the details below in order to access the registration details.

Safestyle UK plc (LON:SFE), the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, has today issued a trading and operations update in advance of its preliminary results announcement for the year ended 31 December 2020 (‘FY20’) on 25 March 2021.

Trading Performance

Following the Trading Update issued on 17 December 2020, the Group confirms that it expects FY 2020 revenue to be over £113m, with H2 2020 revenue up 15% year on year.  The underlying loss before taxation for the full year is expected to be approximately £(4.7)m, the loss being fully attributable to the cessation of operations during the first national lockdown in H1.  The Group returned to profit for H2 in line with expectations.  Finally, the closing net cash position is expected to be approximately £7.6m at year-end.

Operations Update

In early January, in response to the current national lockdown and in conjunction with guidance provided by the industry body, the Glass and Glazing Federation (the ‘GGF’), the Group temporarily ceased in-home selling and door canvass operations.  After close consultation with Government, the GGF further updated its guidance at the end of January and as a result, the Group has restarted in-home selling in February.  Given the context of the lockdown, Door Canvass operations remain temporarily halted.

The Safestyle UK Group maintained remote sales appointments through January, leveraging the investment in technology and training made through 2020.  Going into the new year, management actions and investment had resulted in an order book that was over 80% higher than 2019’s closing position.  Whilst the Group continues to make use of the healthy order book built during H2 2020, the interruption of in-home sales at the start of the new financial year has had some impact on further order intake momentum.  But critically, using strict and effective COVID-safe policies, the Group has been able to maintain healthy revenue levels thus far in 2021 as its manufacturing and installation operations continue.

Outlook

The restart of in-home selling in February presents an opportunity for the Group to regain the strong order intake momentum established in H2 2020.  The business is optimistic that Door Canvass operations will be allowed to restart during Q2 2021 as the UK moves out of the current lockdown.

Given the Group’s strong order book and installation pipeline, the Board expects to make good progress in 2021.

Safestyle UK plc (LON:SFE), the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, has issued an update on current trading for the year ending 31 December 2020.

Following the Government’s implementation of a second national lockdown in November, the Group was able to continue largely normal operations with its strict COVID-safe policies that were developed during and after the first lockdown and embedded throughout the business.

Trading Update

Since the Group’s interim results announcement on 17 September 2020, the Board is pleased to report that in response to the strong order intake growth described in its previous announcement, the business has continued to increase its operational capacity, recruiting staff across processing, survey, manufacturing and installations.  This response delivered 9% year on year revenue growth in Q3 and is expected to deliver c.20% revenue growth for Q4. 

This revenue growth was achieved despite major supply chain issues attributable to the overall increase in industry demand, reduced third party supply chain inventories and specific global and European supply constraints.  Despite these significant operational disruptions, the increase in capacity has enabled the Group to deliver its fastest acceleration in revenue growth since flotation in 2013.

Throughout the second half of this year, management have worked to balance trading and installation activities to optimise order intake growth and deliver margin improvement whilst controlling customer lead times and service levels.  This is illustrated by the Group taking the opportunity to grow the order book to a position that is more than double what it was at the end of Q3 last year and a forecast year-end level that is 75% higher than 2019’s closing position.

The Group will therefore enter 2021 with its strongest ever installation pipeline at this stage of the year, providing a solid platform to maintain its current trading momentum whilst at the same time providing some insulation against the potential impact of disruption to future sales activities from further lockdowns.

Strategic Activities

Despite the challenges associated with operating safely and effectively through H2, progress has also been made on our longer-term strategic priorities.  Our new commercial management team have started to standardise our sales branch structure and processes and the same activities are underway within our depot network.  Significant investments have been made in improving our customer service and this focus will be sustained in 2021.  In addition, a range of margin enhancing activities have been completed that are now starting to positively impact our financial performance.

Outlook

The level of installations activity in Q4 is expected to help deliver our strongest financial result for any quarter since 2017.  The Group has built capacity to deliver double digit revenue growth and has also invested in strengthening the year-end order book.  At the same time, management have navigated a range of issues including supply chain disruption, additional COVID-related costs, temporary restrictions on canvass operations and investments to deal with lockdown warranty work.  Together, these factors have impacted profitability levels.  

As a result, H2 revenue is expected to be approximately £71m with an underlying profit before taxation of around £0.5m, materially lowered by the investments made into building our order book and the issues highlighted above.  

Full year revenue is therefore expected to be over £113m with an underlying loss before taxation of approximately £(4.5)m, the loss being fully attributable to the cessation of operations during the first national lockdown in H1.  Liquidity remains strong with year-end net cash forecast to be approximately £7m, with £3m of the Group’s banking facilities remaining undrawn and a significant level of covenant headroom available.  The year-end net cash position benefits from an agreed deferral of a £2.5m VAT liability originally payable during the first lockdown in May which will be paid in March 2021. 

The Group has made good progress in its margin initiatives as a result of actions taken through the year, most importantly through addressing the costs of our consumer finance proposition.  The benefits of these items are only recently translating into installation revenue, with the majority of the improvement currently reflected in the order book. 

Notwithstanding the obvious uncertainty of the consumer context, the Board is confident that the Group’s revenue and profitability momentum in Q4 will carry through into 2021, a performance level that is underpinned by the strength of the order book. 

Consequently, the Board expects 2021 financial performance to be significantly ahead of current market expectations.

Mike Gallacher, CEO of Safestyle UK, commented:

“Despite the unprecedented challenges faced by the Group during the year, I am pleased with the recent tangible progress we have made in stepping up our operational capacity and delivering strong revenue growth, whilst further strengthening our order book.  Moreover, we have also made good progress on our longer-term strategic priorities.  Notwithstanding the uncertainty associated with the current economic backdrop, the Group is well positioned to build on this positive momentum going into 2021.  I would again like to thank our staff and all of our stakeholders for their efforts and support over the course of the year.”

Safestyle UK plc (LON:SFE), the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, has today issued an update on the agreement entered into with Mr M. Misra on 19 October 2018, details of which were announced on 22 October 2018 and included within the Group’s accounts for the periods ended 31 December 2018 and 2019.

Under the terms of this agreement, Mr Misra was entitled to receive consideration comprising of 4,000,000 ordinary shares of 1 pence each and payment of cash consideration of between £nil and £2.0 million in Q4 2020, subject to the satisfaction of certain performance conditions of the Group which were partially achieved in 2019.

As a result, Safestyle UK announces that the 4,000,000 Shares have been issued and allotted to Mr Misra at a price of £nil pence per Share.  Application has been made for the Shares to be admitted to trading on AIM and Admission is expected to take place on 26 October 2020. The cash consideration payable is £1.0 million and this has also been paid today.  Following the Admission and payment, the Group has now satisfied the terms of the agreement and no further consideration will be paid to Mr Misra. 

Following Admission, the total number of ordinary shares and voting rights in the Company will be 136,808,896. The Company does not hold any shares in treasury. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Safestyle UK plc (LON:SFE) interim results highlight the impact to the business from the nationwide lockdown that started in late March and began to ease in mid to late May. Within today’s results, the outlook statement is probably of most interest. The strong demand highlighted in the trading update in July has continued through August and into September. With the balance sheet in a strong position, post the fund raise, demand firmer than expected and national competitors struggling, Safestyle is in a good position. The recovery had been well underway until the COVID-19 lockdown interrupted operations but Safestyle has come through it in a position to capitalise on good market demand and weak competitors. Revenue numbers for FY20 increase marginally to c. £110.0m but profit forecasts are unchanged. The level of order intake has outstripped the short-term capacity to install orders leaving the order book 82% higher yoy, indicating that the run rate into FY21 should be positive in terms of forecasts.    

• Order book outstripping deliverability: The UK private RMI market has seen a material uplift in demand since the easing of lockdown, much stronger than purely catch up. All areas of the building product space have reiterated the underlying strength over the last few weeks. Safestyle is capitalising more than most as it benefits from the additional structural challenges faced by its national competitors. The sales order intake is up 26.4% in the last three months, this shows an acceleration during August. Revenue increased 13.5% in July and August and this will be sustained during H2 resulting in double digit growth yoy. This leads to an upgrade in FY20 revenue of c. 3.0% to £110.0m. With the cost base increasing to meet operational requirements from the sustained levels of demand, profit estimates remain unchanged.    

• Interim results show a strong start to the year and recovery from May onwards:  Revenue declined 34.7% in H1 with trading ahead yoy up until the 23^rd of March when the UK went into lockdown. Gross profit declined 41.5% to £9.7m (HY19: £16.6m) as margin declined 271bps to 23.1%. This resulted in an underlying loss before tax of £5.1m (HY19: -£0.8m). However, it should be stressed that the loss during the 8/9 week lockdown period was c. £6.0m highlighting the improved performance of the business when compared against the same operating days yoy. Since the easing of restrictions trading has recovered strongly.

• The improvement in revenue should see operational gearing drive earnings higher: The recovery of the business was being maintained during Jan and Feb with revenue up 3.4%, gross profit up 11.4% and the business generating a positive PBT of c. £1.0m against a loss in the previous year. The strength of the order book will see this continue during H2 and margin will begin to improve as the increase in costs to meet demand stabilises. This will underpin operational gearing and its impact on Safestyle UK earnings.

Safestyle UK plc (LON:SFE), the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, has issued an update following an announcement made by UK Window Group of which the Group’s PVCu profile supplier Duraflex is a part.

UK Window Group yesterday announced that certain assets of the Company, including all assets utilised by Duraflex, have been sold to a subsidiary of its current owners. This is part of a wider strategic restructuring programme that it believes will secure the long-term future of the Company with a much improved financial position.

Safestyle UK has been working closely with the board of UK Window Group and its owners over the last nine months as they have been implementing a turnaround plan for their business. During this process we have put in place a range of risk mitigation measures, including building significant buffer stocks of window profiles. This ensures the Group has sufficient stock in place to largely mitigate the impact of a forced change in profile supplier.   

Following this restructure by UK Window Group, the Board does not anticipate any major interruption to our supply of PVCu profiles.  Supply chains generally remain stretched by recent good levels of demand in the industry but these challenges will be manageable over the coming months.

The Board will provide an update on the Group’s recent trading as part of our half year results announcement on 17 September 2020.