Interim results for H1 of 2023 show that Safestyle UK suffered a £6.7m loss. This was news that was signposted in a statement 8 days prior, which sent share prices tumbling to all-time-lows and saw the market cap value of the company briefly dip below £6m.
Safestyle H1 results
This is the statement of results published by Safestyle:
Financial and operational highlights
1.The interim financial statements are presented for the period ended on the closest Sunday to the end of June. This date was 2 July 2023 for the current reporting period and 3 July 2022 for the prior period. All references made throughout to H1 2023 are for the period 2 January 2023 to 2 July 2023 and references to H1 2022 are for the period 3 January 2022 to 3 July 2022.
2. Underlying (loss) before taxation is defined as reported (loss) before taxation before non-underlying items and is included as an alternative performance measure in order to aid users in understanding the ongoing performance of the Group.
3. Non-underlying items consist of non-recurring costs, share-based payments and the Commercial Agreement amortisation.
4. Net cash is cash and cash equivalents less borrowings.
A reconciliation between the terms used in the above table and those in the financial statements can be found in the Financial Review.
The trading context of the UK economy and consumer confidence remains extremely difficult. Encouragingly, inflation is beginning to show some signs of moderating, but that follows a period of sustained high inflation. The impact of significantly higher interest rates than expected is clearly impacting consumers’ disposable income.
As reported in our Trading Update on the 19th September 2023, whilst our order intake went according to plan in early August, the period since mid-August has been challenging with independent indicators of market health, such as online search activity, showing that the current market is performing at c.24% below the July and August levels of 2022. Pleasingly, our order intake has not fallen this far, being down c.11% YoY which shows our product offering is withstanding wider market pressures better than others.
We continue to attempt to stimulate demand and purchase intent through a combination of our online activity, the deployment of our upgraded website, discount management and our commitment to a leading consumer finance portfolio.
The Group continues to engage with its stakeholders to discuss ways to strengthen the balance sheet in order to support its recovery and help facilitate future growth and a further update will be provided in due course.
Looking further ahead, the Board maintains that growth recovery prospects are strong and data of an ageing housing stock in need of repair underpins this. The Board highlights the progress described above in the Group’s strategic priorities, its transformation and market share growth as signs that there remains a compelling opportunity for the business to capitalise on a market recovery and achieve its medium-term targets.
Commenting on the results, Rob Neale, CEO said:
“As has been widely reported, the first half of 2023 saw continued economic uncertainty and depressed consumer confidence, which resulted in another challenging period for the business. I would like to thank our hard-working people for their ongoing dedication and resilience during this time. As outlined in our most recent trading update, we have continued to work hard to mitigate these ongoing headwinds and we remain focused on delivering on our strategic efficiency and cost reduction programme that will deliver annualised reductions of c.£2.8m.
I am pleased that we continue to grow our market share and I remain confident that the business is well-positioned to deliver a strong recovery when macro conditions improve. The volume of the UK’s aging housing stock in need of repair remains one of the most compelling opportunities for the business in the medium-term and I believe that the progress made against our core strategic priorities will stand us in good stead as we look to the future as the UK’s market leader.”
You can view the original report here: https://otp.investis.com/clients/uk/safestyle/rns/regulatory-story.aspx?newsid=1717784&cid=656
The results are as bad as forecasted in the trading update 8 days previous to this. That is also the reason why there was barely any reaction in the share price. It remains at all-time-lows and is now stuck there in that range.
Some of the language used in this set of results reveals a little bit more of the truth than some of the positive spin would have you believe. For example, it is not often you see trading conditions described as “extremely difficult”. Other than during the COVID years, I cannot remember seeing such frank language used to describe trading conditions.
The link the company makes between their own performance and drop in search traffic is barely a point at all. General search traffic paints a generic picture of the situation at the time. Using it to compare to individual company performance is tenuous at best. The company describes that their own downtrend isn’t the same as the overall drop in search traffic. I don’t think many are going to buy that.
They reiterate the point about growing market share, but that is almost certainly down to grabbing extra share from the downfall of all, rather outperformance. They also mention the UK’s ageing housing stock as a point of strength and potential growth. But as they point out themselves, rising interest rates are hamstringing consumer confidence and spending. There’s no advantage to an ageing housing stock if the people living in those homes cannot afford to buy new windows and doors in the first place.
The long and short of all of this is that the company, and indeed the sector is in for a tough old time. The rumour mill is spinning again with certain companies mentioned being in a spot of bother and a bit worse. Unless Safestyle manages a Safeglaze-era turnaround, then it is going to be hard to see how the company turns the ship in the near term, as well as recovering any sort of value in the share price.
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