What Fate For The National Installers In 2018?

2017 can’t exactly be called a great year for the national window and door installers. I am sure we all remember the dire trouble Entu found themselves in last year. Entu was comprised of a group of home improvement companies which included the likes of Zenith, Weatherseal, St Andrews Home Improvements and St Helens Glass. After various negative trading updates, spiralling costs and falling sales, the company was placed into administration. All looked lost at one point, however at the very last minute Brian Kennedy’s Latium Group bought the business, saving it from going under.

As we ended 2017 and entered a new year, the outlook didn’t look much better. In fact it looks pretty grim in some quarters.

Negative outlook

During 2017, Safestyle UK issued a number of profit warnings and negative trading updates which sent their share price diving more than 40%. In an interview with Anglian on Christmas Eve in This Is Money, they reported a £3.3m loss in the latest financial year, despite upping their revenues. In the same report, Jon Moulton, head of the investment firm that ploughed money into Everest admitted that their investment had “not done well”. Although no figures were mentioned, you only need to look at the other two major companies to hazard a guess as to how bad it really is.

The outlook doesn’t look great for this year either. Material and operating costs will continue to rise, and there is very little any of us can do to stop that. UK GDP growth will remain sluggish too, with predictions of a contraction in our sector in the previous year, this year and the next. With this scenario, the demographics that the national installers rely on are also the ones first to stop spending when things look like they’re going to get a little tight. They will blame things like Brexit and elections, but it’s also worth remembering that we’re eight and a half years into a ten year economic cycle, where it is becoming more and more likely that a recession could be possible, Brexit or no Brexit.

Add to that the fact that these types of companies have business models and sales tactics that continue to be decades out of date. Whilst the rest of the industry around them is evolving and growing up, they appear to be sticking to the same principles which can be dated back to their founding. We all know that home owners hate the hard sell, and have wised up to this sort of thing very well in the last decade or so. Still, the big ones are sticking with what they know, even if what they know doesn’t work any more.

Around them smaller installers have been adapting. The more proactive ones have recognised that the profitable future of the sector lies in the artisan, bespoke and custom built part of the window and door industry. This is where you will find the more discerning customers, willing to invest their time and money into new windows and doors, and see that purchase in the same way they do a luxury car, kitchen or holiday. The national retailers do not fit into that bracket, I would argue, and so have to compete at the end of the market where margins get thinner and costs go higher.

The past few years have been pretty good for the smaller installer, even if conditions around them haven’t looked so great. But it’s that adaptation that has allowed them to grow. I think that we are pay past the point of no return for our biggest.

Could we see one go?

There is no such thing as too big to fail. The banks found that out the hard way a decade ago. And the same goes for our industry too. There have been big companies in the past, major ones. They’re not here now, and that means that the current crop of nationals are not immune to it either.

From what I read and hear, out of the three, Safestyle are most likely the best placed in cash terms right now, despite their share price slashing. With Anglian reporting a multi-million pound loss and Everest’s investors admitting to under-performing, I would say these two are at most risk right now.

Could one of them actually disappear from the sector altogether? I would say most likely not. We are more likely to see a scenario play out where the three biggest play a waiting game, perhaps seeing who will wilt first and end up in a position where they become a cheap takeover. A little bit like the Entu buyout.

For me, given the mature nature of our industry and it’s evolution into something more artisan, there are still too many large regional and national installers trying to sell a type of product that home owners want less and less each year. This is where proactive and fluid business models that allow change and adaptations become very useful.

I’ll say this though, as much as many of us don’t like the very biggest, their presence in the industry is vital in one key way, and that is in advertising. Be it online or on TV, when a national advertises, they reach a very wide audience. They collectively give fence sitters a nudge and get them thinking about new windows and doors, even if they don’t actually end up buying from the company doing the advertising in the first place. The rest of the industry’s installers get a trickle down effect by way of leads and footfall, which eventually benefits them. So whilst they might be easy to sell against by way of their outdated methods, their presence does have some benefits.

This will be a crucial year for the very biggest in our industry, not just in installation but in fabrication as well. We’re still well over-populated in parts of our industry when you look at the niche spread, and it’s feasible that we could see quite a lot of disruption over the coming months as that evolution continues.