Added Safestyle UK as a long term hold

Tuesday, Nov 21 2017 by
4

Safestyle UK sells double glazing windows, doors and conservatories, and due to the contraction in the double glazing market in the last year have suffered three profit warnings, which means that their share price has taken a battering.

However, they have a strong balance sheet, their current assets at £26m in the last interim report stand at £3m more than all liabilities combined, and I am a big fan of companies whose current assets amount to more than all liabilities combined.

In fact, companies like that are just my type of company, and at the current share price they pay a good dividend, the yield close to 6%, and I see the potential for perhaps yet another special dividend this year (they paid one out last year, and have a policy of paying out excess cash to shareholders).

A few things I am weary of, for one, the gap between the current assets and total liabilities is dwindling, but this is mainly because of the new factory that they have built, which is a one off cost, and because of the special dividend that they paid out last year, so I am alright with that.

Something else I am weary of, how many houses need double glazing these days really, or rather, with Brexit on the horizon, how many households are willing to pay to upgrade to new windows; further more, how many are willing to pay to have a conservatory built; then there is the housing market, it's been doing well for a good while now, and I don't know why, but something just sits uneasy with me about the current state of it.

Regardless, weighing up the pros and cons, I've decided to purchase Safestyle UK at 201p per share.  The plan is for a long term buy, but I will be keeping a close eye on things, so that might change.

The other three purchases I have made are more trade based buys than long term holds, Marks and Spencers have dipped below 300p a share, which to me despite all the tailwinds against them at current, for example the fact they lag massively in the online world, and the fact that food division is teetering, to me is a buy point.  Will see.  Probably sell if they get above 340p.

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Safestyle UK plc is a United Kingdom-based company engaged in the sale, manufacture and installation of replacement un-plasticized poly vinyl chloride (PVCu) windows and doors for the United Kingdom homeowner market. The Company's segment includes the sale, design, manufacture, installation and maintenance of domestic, double-glazed, replacement windows and doors. The Company has over 30 sales branches and approximately 10 distribution depots located throughout the United Kingdom. Its product range includes EcoDiamond WINDOWS, EcoDiamond UPVC DOORS, EcoDiamond BI-FOLD DOORS, EcoDiamond REPLACEMENT CONSERVATORIES, GuardDoor, Pavilion and Inspire. It has manufactured over 279,000 frames and carried out approximately 60,000 installations. The Company's subsidiaries include Style Group Holdings Limited, Style Group Limited and HPAS Limited. more »

LSE Price
51.4p
Change
2.8%
Mkt Cap (£m)
42.6
P/E (fwd)
10.8
Yield (fwd)
1.8

National Grid plc is an electricity and gas utility company focused on transmission and distribution activities in electricity and gas in both the United Kingdom and the United States. The Company's segments include UK Electricity Transmission, which is engaged in high voltage electricity transmission networks in Great Britain; UK Gas Transmission, which is the gas transmission network in Great Britain and United Kingdom liquefied natural gas (LNG) storage activities; UK Gas Distribution, which includes approximately four of the eight regional networks of Great Britain's gas distribution system, and US Regulated, which includes gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York, and New England and electricity generation facilities in New York. Its other activities relate to non-regulated businesses and other commercial operations not included within the above segments. more »

NYQ Price
$51.91
Change
-0.3%
Mkt Cap (£m)
29,688
P/E (fwd)
14.2
Yield (fwd)
5.8

Marks and Spencer Group plc (M&S) is a retailer in the United Kingdom, with over 1,380 stores around the world. The Company is the holding company of the Marks & Spencer Group of companies. The Company operates through two segments: UK and International. The UK segment consists of the United Kingdom retail business and the United Kingdom franchise operations. The International segment consists of Marks & Spencer owned businesses in the Republic of Ireland, Europe and Asia, together with international franchise operations. The Company is engaged in delivering own brand food, clothing and home products in its stores and online both in the United Kingdom and internationally. The Company sells womenswear, lingerie, menswear, kidswear, beauty and home products, serving customers through approximately 300 full-line stores and Website, M&S.com. It has approximately 910 United Kingdom stores, including over 220 owned and approximately 350 franchise Simply Food stores. more »

LSE Price
186.7p
Change
-2.6%
Mkt Cap (£m)
3,641
P/E (fwd)
9.5
Yield (fwd)
5.9



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15 Posts on this Thread show/hide all

Gray Woods 13th Dec '17 1 of 15

Well after today's trading update, looks like I made a poor call on these guys as seems history does always repeat itself, and profit warnings do come in threes.

Still like these, as they are cash generative and the dividend seems pretty secure. And they do look good value based on that dividend despite the fact that they are likely to be flat for a couple of years.

Will have a proper look at the trading update and write more when I have a chance! But if anyone has any thoughts to offer, happy to hear them!

Blog: The Lone Wolf Investor
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smatthews1 14th Dec '17 2 of 15
1

These have been on my watch list for a while, and have stayed there ever since. The reason being is the RMI market has been flat for a while and just doesn't show any signs of improving. This is also read across into other companies such as Eurocell (LON:ECEL) Epwin (LON:EPWN) and to some extent Alumasc (LON:ALU).

Although they mention about making some improvement's to efficiencies and cost cutting I personally see this as bit of a fire fighting strategy to protect the bottom line figures whilst the underlying market remains weak.

I am also not a big fan of their pressurised door to door sales tactics, which I guess is a result from constantly having to find new customers as their product is not really classed as repeatable business. which is tough in he best of times.

I personally prefer Eurocell mainly because they recycle a lot of material which should keep their margins robust. Although Its the sector itself which holds me off from buying any of these at the minute.

Thanks
Sean

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herbie47 14th Dec '17 3 of 15
2

RE Safestyle UK (LON:SFE), their sales tactics are very aggressive, you know the sort, sit in someone house until they sign even if it takes 6 hours, you can read reviews. Also believe they were the first company to be taken to court for harassment and got fined. There have been many other complaints. Also recently one salesman was warned by police after he called a person 33 times in one day. Warning don't give them your contact details. Anyway it seems tough at the moment, one local company near me, in this field has gone into liquidation, just a few weeks ago and they seemed busy.

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Gray Woods 15th Dec '17 4 of 15

In reply to post #253758

Yeah the sector is going through a rough patch, but it's a cyclical sector, the aim is really just trying to find the bottom, as I suspect things will eventually turn. Though like you say, could be a while off.

Never looked at Eurocell before, will give them a look! Any further thoughts to offer on them before I do?

And thanks for your thoughts!

Blog: The Lone Wolf Investor
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Gray Woods 15th Dec '17 5 of 15
1

In reply to post #253813

Yeah the tactics are a downside, they do work, but the CEO could definitely do something to alter tactics and improve their rep a little. Certainly wouldn't go amiss.

And thanks for the info, especially regards the liquidation, definitely gives food for thought!

Blog: The Lone Wolf Investor
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Wimbledonsprinter 15th Dec '17 6 of 15
2

I hold Epwin (LON:EPWN) (windows, PVC-UE roofing and decking) and Titon Holdings (LON:TON) (ventilation) in this sector and Epwin (LON:EPWN) is even cheaper than Safestyle UK (LON:SFE), but it has its own unique issues. I have seen nothing but gloomy trading for the UK RMI (repair, maintenance and improvement sector) but yesterday its its year-end results, Titon quoted figures (seemingly from the ONS) that private sector RMI spending was up 9% in the year to Sept 2017 and up 4% in Q3. But public sector RMI expenditure is down. If these numbers are accurate none of the companies dependent on RMI seem to be benefitting.

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herbie47 15th Dec '17 7 of 15

In reply to post #254823

My concern which why I'm not invested in this sector is things are not that bad and could get a whole lot worse over the next 3 years, if they are struggling now, what happens if there is a recession?

Someone said Safestyle UK (LON:SFE) is bulletproof but I'm not so sure. Anyway I won't be investing I don't like their sales tactics. I think some of them should be banned.

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Gray Woods 15th Dec '17 8 of 15

In reply to post #254973

"If these numbers are accurate none of the companies dependent on RMI seem to be benefitting."

That's an interesting point, and:

"I have seen nothing but gloomy trading for the UK RMI"

And I agree, what I can't decide is whether, whether it's fully merited, the sector is interesting right now but most definitely tough to gauge.

Thanks for the thoughts. And will take a look at Epwin, seem interesting!

Blog: The Lone Wolf Investor
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Wimbledonsprinter 15th Dec '17 9 of 15
1

In reply to post #255218

If you look at Epwin (LON:EPWN) make sure you look at the issues around Entu and SIG. Both are company specific issues for Epwin (without a lot of clarity at present) - it is a question of how cheap the stock needs to be reflect these.

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Edward John Canham 16th Dec '17 10 of 15

In reply to post #255238

Spot on.

Every so often I look at Epwin (LON:EPWN) - it looks good - but this legacy is too much.

Phil

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Gray Woods 16th Dec '17 11 of 15

In reply to post #255238

Thanks for the info, will defo keep that in mind!

Blog: The Lone Wolf Investor
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smatthews1 16th Dec '17 12 of 15
1

In reply to post #254823

Eurocell (LON:ECEL) Fundamentals look pretty good, their ROC is strong at nearly 35%, and their operating margin has been steadily above 10% for the past 4 years, and net debt seems manageable.

I think their exposure to the RMI market is around 80% of their revenues, so again whilst that remains weak I am not currently interested, I would consider these in a market sell off, but would have to watch them very closely.

Also worth noting the PVC prices are loosely tied in with the price of oil, so whilst these are currently low and benefiting from decent margins, the recent reports about oil production cuts in the middle east is aiming to drive this higher.

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Edinburgh Investor 16th Dec '17 13 of 15
1

Regarding National Grid (LON:NG.) I believe the market is factoring in the possibility of the Labor government (if they won under JC) nationalising the company and won't pay a decent price for your trouble. Otherwise I would consider it as a long term trend towards electric cars, I expect they will be a key benificiary for how are we going to charge all of these.

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Gray Woods 17th Dec '17 14 of 15

In reply to post #255363

"Also worth noting the PVC prices are loosely tied in with the price of oil."

That's a great point, when I gave them a little look the other day I did note this, never a fan of non oillies that are linked to the oil price, that's why I'm not a fan of airline companies.

Like you say, not a big link and I'm sure would be manageable, but at the current price seems fairly valued. But certainly an interesting company, and will be keeping an eye on them, so thanks for the input!

Blog: The Lone Wolf Investor
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Gray Woods 17th Dec '17 15 of 15
1

In reply to post #255368

"I believe the market is factoring in the possibility of the Labor government (if they won under JC)"

I agree, but I feel it's an overreaction, even if JC got in, I cannot see him actually going through with all these nationalisations, at least not without paying a fair price. I could of course be wrong, but I don't believe he would get enough support within the Labour party itself to actually be able to go through with.

That's just conjecture on my part of course, and in the end time will tell.

The point about the move towards electric cars is a good one, and is one of the main factors behind why I believe they are worth buying into, the more electric cars there are, the more National Grid will benefit. Time will tell of course, but good points so thanks for the input!

Blog: The Lone Wolf Investor
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