Over the weekend I was receiving messages from both sides as to the impending Safestyle UK/SafeGlaze UK deal, and as expected, I have been given the official press release stating so.

These are the things we know, and fair to say, stock price reactions have been good.

The statement

Commercial Agreement

Further to the announcement made by the Company on 19 October 2018, Safestyle UK plc (AIM: SFE) announces that it has entered into an agreement with Mr M. Misra, who was a party to the Company’s dispute involving NIAMAC Developments Ltd (trading as SafeGlaze UK), and which is currently in the process of rebranding following the recent legal settlement with Safestyle.

Whilst the full detail of the agreement is confidential, it encompasses a five year non-compete agreement and the provision of services by Mr Misra in support of the continued recovery of Safestyle.  The Company has agreed consideration with Mr Misra subject to the satisfaction of both clear performance conditions by him over the period to Q4 2020 and Safestyle’s trading performance in 2019 being above existing market expectations.

Subject to satisfying the strict terms of the agreement the consideration will take the form of an allotment by Safestyle to Mr Misra of four million ordinary shares of 1 pence each in the capital of the Company (conditional on admission to trading on AIM of such shares) (the “Shares”) and a payment of cash consideration of between £nil and £2.0 million (the “Cash Fees”).  Both the allotment of Shares and payment of the Cash Fees, if any, would only be made in Q4 2020.

Mike Gallacher, Chief Executive of Safestyle UK plc, commented:

“The three phase turnaround plan that was outlined in our Interim Results is underway and is already helping to stabilise the Group before returning it to profitability and then accelerating growth.  The focus of the whole Group remains on delivering this plan quickly and effectively.”

So, from forming a new company to compete with Safestyle, Mr Misra is now helping the recovery effort of the company he left. The five year non-compete clause is to make sure he cannot form another company, and ensures his efforts remain with Safestyle.

His deal looks to be performance based. He’ll get shares, albeit at 1p per share, with a cash payment of up to £2m payable in Q4 of 2020. This however is dependent on the performance of the company during this time. This means it is in Mr Misra’s interest to ensure that the business really does perform.

The end result is that a competitor has now been removed from the market place, the main threat to Safestyle UK at the time. The owner is now involved in the recovery of his old company. All in all, this is a good morning to be Safestyle.

As you can appreciate, the share price responded to the news in a pretty positive way.

DGB People

Share prices rockets

As you can imagine, investors took this news very well:

Credit: Bloomberg

At the time of writing, the Safestyle share price is up nearly 29%. This reaction for me is justified. They have removed a competitor from the market. They have their old chief back to help turn the ship around. SafeGlaze were a big threat to the company, and that has now been negated. Job done on that front.

This is one of their biggest share price rises in a very long time, and in fact reaches a high not seen since April of this year. But before we all get carried away, we need to look at the bigger picture:

One month

Credit: Bloomberg

Year To Date

Credit: Bloomberg

Five Years

Credit: Bloomberg

The one month chart looks amazing. Almost vertical. But when you take a look at the year to date and 5 year charts, it’s clear that the recovery is only just getting going, and there is still a mountain to climb if the company is to ever get back to the share price highs seen in 2017. Remember, it was a rapid decline, the recovery is likely to take much longer.

I think this phase of threat is now over, with this deal. However the bigger task at hand is to rebuild the business in a way suitable for 2019. This year is write-off. 2019 should be the target for building business and market share back up to a position where they can compete with their challengers, such as Anglian and Everest. Their business model needs adapting. The hard-sell needs to go. Higher end products are the way forward with better profit margins. Marketing needs to suit a tech-savvy audience. All these points need addressing.

I would also like to note that I have been getting emails privately from those who used to work at SafeGlaze, complaining about the way this deal has come about, as well as matters relating to pay and communications. I suspect LinkedIn will be seeing posts about these issues in the coming days.

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