Safestyle UK have issued their first trading update since their October Commercial Agreement with Safeglaze. This is the first test for the company as they seek to recover lost ground this year.
Here is the text of the update as published on their PLC website:
Safestyle UK plc, the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, today issues an update on current trading.
Since the Commercial Agreement announced on 22 October 2018, the Group has experienced a significant increase in its contracted workforce across its canvass, sales, surveying and installations operations. This has resulted in an improved sales order intake that is in line with the same six week period last year.
Linked to this growth in workforce that was previously not forecast, the Group has invested more than budgeted in lead generation, commissions and associated overheads. Whilst management anticipates that turnover for the last month of the year will be ahead of that previously forecast, the majority of the benefit of this recruitment and the return on this increased investment will only occur in 2019.
As a result of the timing difference between incurring these higher costs and the installations taking place, the Board now expects that for the year ending 31 December 2018, the Group will deliver an underlying loss before tax that is between £(8.2m) and £(8.6m).
However, as a result of the aforementioned recruitment activity and associated investment in growth and notwithstanding the fact that management’s three phase turnaround plan is in its early stages against a backdrop of weaker consumer confidence, the Board is confident that the recovery and performance in 2019 will be ahead of current market expectations.
On the face of it, a loss of over £8m pre-tax sounds awful. But, it could have been worse if the tide had not been stemmed earlier on in the year. The statement actually reads as fairly positive. They report that since their Commercial Agreement they have seen a big up turn in staff levels. This means they will have been able to install much more, improving the cash flow of the business via finished contracts. As a result, they have been spending more on lead generation.
2019 is going to be a key year for the company. The economic outlook looks choppy at best next year, and not just because of Brexit, but due to European and global issues as well. Consumer confidence remaining stable is going to be an absolute must. However, if you take the recent news from the high street in recent weeks as a sign, it doesn’t look all that positive.
This latest trading update sent the share price of Safestyle higher by 4% in trading this morning:
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