Woes continue for Safestyle as demand weakens further

Window and door manufacturer Safestyle says it expects trading conditions next year to remain “very challenging” after warning that sales for the final quarter of 2017 will be below its “already reduced” expectations.

In September, the Bradford-based company signalled a continuing deterioration in the market resulting from declining customer confidence, prompting a cautious outlook.

This morning, it said that demand has weakened further, and in the three months to 30 November 2017 the group’s sales have been 0.3% lower by value, and 6.8% lower by volume, than the corresponding period in 2016.

It said that while it believes it has made significant market share gains in 2017, for the 11 month period to 30 November 2017 the group’s sales by value are 0.8% lower than for the same period in 2016.

“With sales in the short month of December not helped by severe weather disruption to the planned installation programme, it is clear that Q4 sales will now be below our already reduced expectations,” Safestyle said.

“At the same time, those sales have come at an increased cost of acquisition, due to higher lead generation expense in a competitive landscape and a higher proportion being made on extended finance terms, negatively impacting margins. As a consequence, our 2017 full year outturn (namely underlying profit before tax, before exceptional restructuring costs and share based payment charges) is now expected to be below current market expectations, at a level of least £15m.”

Safestyle said it continues to be highly cash generative and expects to have a strong cash balance of approximately £12m at the year end and a robust balance sheet.
The completion of a major capital investment programme leaves the business “very well invested for future trading and any upturn in demand”, the company said.

“We are actively reviewing all of our costs and seeking operational efficiencies where we can, and have already implemented substantial savings across the business, including a major restructuring of our Sales and Canvass function. At the same time we are investing in technology and other developments to enhance operational efficiency and improve the customer experience.

“Looking ahead, we expect market conditions to continue to be very challenging in 2018 and, although we aim to further consolidate our position of market leadership, the board has lowered its expectations of the group’s performance in FY2018.”

It added that the benefits of its cost saving and efficiency programme will fall mainly in 2018 and as such should help mitigate the impact on profitability of any further fall in market demand.

“We, therefore, expect only modest growth in earnings over 2017.”