Safestyle issues further profit warning and outlines £6m exceptional costs
Bradford-headquartered Safestyle issued a further profit warning this morning, outlining its expectations to report exceptional costs of £6m due to restructuring, an ongoing Heath and Safety investigation and legal costs against a competitor.
The listed window retailer and manufacturer said its revenues for the full year would be impacted and that it was expecting to report “small underlying” pre-tax losses. The firm added that order intake had “firmed up” in recent weeks.
Safestyle said that as a result of the loss of profits and exceptional costs in the current financial year, offset by working capital management, the company expected to report a break-even cash balance at the year-end.
The company is currently undergoing a major restructure after a turbulent year in which it issued a series of profit warnings and suffered severe drops in the its share price. In April, it was announced Safetsyle had been hit with an £850,000 fine after a contractor was injured while working at height.
Mike Gallacher was appointed as CEO on 1 May. Safestyle said this morning that the board and executive team had since progressed three key priorities – the stabilisation of Safestyle’s organisation, the previously announced legal action against NIAMIC Developments – trading as SafeGlaze UK- and a comprehensive review of the group’s current trading and outlook. These, among other items, will see the firm report £6m exceptional cash costs.
The firm said: “Against a background of weaker consumer spending on higher value home improvement products, exacerbated by the loss of significant numbers of canvass, sales and installation staff to the new competitor, order intake has firmed up in recent weeks, albeit at a lower level than the previous management team had expected.
“Whilst pricing has been firm, with recent price increases being successfully implemented, gross margins in the current year have been impacted through higher digital marketing costs and sales commissions.”
Safestyle said that at an operational level, the organisation had now been stabilised and the rebuilding of the sales, survey and installation teams is well progressed, both in terms of numbers and capability. The firm added that the importance of maintaining the quality of recruitment to ensure high customer service levels meant this process was likely to extend into 2019.
“In the short term this has resulted in additional recruitment and some temporary staffing costs,” said Safestyle.
In the trading update, the company said that over the medium and longer term, the board remained confident of the group’s prospects, adding: “The Board expects exit momentum from the current year to benefit from the programme of costs and margin improvement actions now in train which are expected to result in material annualised savings benefiting future financial years.”
The business has put in place suitable borrowing facilities to ensure that it has access to appropriate funding, should it be needed, to cover these changed circumstances and any other contingency.
The Company will announce its interim results for the six months ended 30 June 2018 on 20 September 2018.
The Group will also provide an update on its legal action against NIAMIC Developments Ltd in due course.
