Bradford based national installers Safestyle UK saw their share price plummet on Friday by 30% as their latest trading update disappointed investors. This follows a string of bad news stories for the UK glazing industry as it grapples with a changing landscape and an economy showing signs of flattening in some areas.
This is what happened on Friday after the trading update:
It also dragged on other major companies in our sector, sending share prices of the likes of Eurocell and Epwin down a few percentage points too. The update was not good.
What was said
Here is the trading update, as published on the Investor Relations part of their website:
The Group announced on 18 July 2017 that given the uncertain market conditions and weaker consumer confidence it anticipated profit for the year would be lower than previously expected and broadly in line with 2016. Since then, the Group’s order intake has declined beyond the Board’s expectations. The Board believes this is due to an accelerating weakness in the market resulting from increasing consumer caution, as evidenced by the latest FENSA statistics, which show that the overall market has deteriorated further, with installations down by 18% in June and July compared to 2016.
Safestyle has continued to grow market share and remains well positioned in the event of a market recovery. However, given the marked change in market conditions, we now expect Full Year 2017 Group revenues to be flat year on year. At the same time, our efforts to drive order intake are incurring additional costs, thereby adversely affecting the Group’s margin performance, and leading to a material impact on full year profits.
The Group remains cash generative, with a significant cash balance and a robust balance sheet.
The Group will announce its interim results on 21 September 2017.
They’re going to need to rely on that “robust” balance sheet if they are going to move forwards from here.
A sign of things to come?
They mentioned in their update that FENSA’s latest figures show further deterioration in the marketplace. That is probably true in some areas. Yet for others I don’t think this is the case.
I continue to believe that those who seek niche areas of the market, higher end options, seeking to attract the more affluent home owner is where the growth is coming to come from. The demographic that Safestyle often attracts is not that. They are the people who are more sensitive to economic changes, and as we have seen, there have been changes in the past year. Add to that material cost increases, there has been a significant squeeze for businesses like Safestyle.
However, there are signs that growth remains perfectly possible. You look at companies like Solidor, Roseview, Residence Collection, Masterframe and so, who all report really strong sales so far this year, with double-digit percentage growth year on year.
There’s a pinch for some out there, a pinch that some might not even survive. But change your business model, alter the business you look for and it might just be the trick to turn things around.
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