Finally, some reprieve for Safestyle UK and their share price as their latest interim update provided some relief after a series of previous updates had sent the stock price crashing.

After the September 21st update, this is what happened to the stock price:

Credit: Bloomberg

This latest update has gone some way to wiping out the losses that occurred earlier on in the month, although not quote recovering totally to those levels.

Often you get an overreaction to trading updates, with traders choosing safe havens in a bid to protect their money. This is overdone on some occasions, and looks like it is this time.

This was the statement released along with the figures by CEO Steve Birmingham:

The first half of 2017 was an increasingly challenging market however Safestyle increased revenue and market share albeit at a higher cost than historically. As a result, we have experienced a decline in profits in what was the severest contraction of our market since 2008/09.

“So far in H2 we have maintained our order intake in line with the previous year and have already commenced a number of initiatives to reduce our cost base.

“The Group’s cash conversion and balance sheet remain strong and the Board is confident of outperforming the market and gaining market share based on our differentiators of price competitiveness, promotional finance offers, quality energy efficient products and outstanding manufacturing capability.

And this was the published summary:

The markets in which Safestyle operates have become more challenging in recent months, and it is with this backdrop that the Group reports its trading performance for the six months ended 30 June 2017.

Revenue was up 1.4% to £82.5 million (H1 2016: £81.4 million, having been restated following a review of accounting policies in the run up to the introduction of IFRS 15 Revenue Recognition – see Finance Review and Note 4). FENSA statistics show the rate of market decline in H1 2017 accelerated from a Q1 reduction of 2.4% to 17.2% in Q2, and we believe this significantly steeper rate of decline has continued into the first two months of Q3. Our response has been to protect revenues and gain market share, which now stands at 11.2% at 30 June 2017, which has increased the costs of lead generation and conversion into orders. Order intake was up 1.8% for the first 6 months of the year.

Profit before tax declined to £8.8 million (H1 2016: £9.5 million), with underlying EBITDA down 11.7% at £9.8 million. EPS for the period was down from 9.4p to 8.3p. The results reflect the increased cost of delivering sales revenues, and our underlying EBITDA margin declined from 13.6% to 11.8%.

The business continues to successfully convert profit into cash, with H1 2017 cash conversion (the ratio of net cashflow from operating activities before taxation to underlying EBITDA) for the period at 85%, compared with 88% for H1 2016. The Group’s balance sheet is robust with cash of £17.7 million at 30 June 2017 (£13.5 million as at 31 December 2016).

Read the full trading update here

On the face of it, some tightening, but we’re way of an Entu sort of situation. But, this isn’t the end of matters. More of a warning.

DGB Features

A wake-up call

Perhaps more than anything else this has been a wake-up call for Safestyle and other similar structured and sized businesses in our sector. As we are all pretty much aware sales in some areas have been struggling, for one reason or another. We have seen what has happened to Entu. We have seen share prices of some of our biggest go up and down like a roller coaster. This has to be a signal to all to say things have to change.

Even in the past 12 months the landscape of our industry has changed. Rising costs from most parts have caused a pinch for many fabricators and installers. Commodity price increases, rising import costs, currency fluctuations and general uncertainty have produced a scenario where our indstry has had to get used to charging home owners more for new windows and doors. This inflation has likely been long overdue. Nevertheless, this is a new environment we all have to get used to, but always hurts the biggest companies first and worst.

The question is now, as we all move forward in this new trading environment, is how many will move with the times and adapt, or remain determined to sell by price only and risk pricing themselves out of business. Rocky times ahead for some I think.

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