REG - Safestyle UK PLC - Trading Update

Safestyle UKAnnouncement

29/11/2022 07:00

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RNS Number : 8521H  Safestyle UK PLC  29 November 2022

29 November 2022

 

The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018.  Upon the publication of this
announcement via the Regulatory Information Service, this inside information
is now considered to be in the public domain.

 

Safestyle UK plc

("Safestyle" or the "Group")

 

 Trading Update

 

Safestyle UK plc (AIM: SFE), the leading UK focused retailer and manufacturer
of PVCu replacement windows and doors for the homeowner market, today issues
the following trading update.

 

Trading update

 

Order intake across the period from late September to the end of October has
been volatile.  The Board attributes this to the well-reported political and
economic news and events that have had a direct, adverse impact on consumer
confidence.  Consequently, order intake (value) across this period was 7.6%
behind expectations and 2.7% lower than the prior year.  In addition, the
Group experienced higher costs of acquisition than forecast which the Board
also attributes to the challenging market context.

 

Encouragingly, since early November, demand has improved which has resulted in
order intake (value) returning to expected levels and growing by over 30% year
on year across these last three weeks.  Lead generation costs have also
returned to expected levels.

 

The lower order intake of September/October will result in lower installation
volume levels (c.5k frames) than expected this year.  The improved order
intake in November has driven an increase in cost in the month, but came too
late to deliver the associated revenue this year.  Unfortunately, both
aspects will significantly impact FY22 profitability.  The improved order
intake later in the year will, however, result in an order book that will
close the year significantly ahead of our original expectations which will
help mitigate any sales volatility in early FY23.

 

Operational update

 

The Group continues to execute the plan to transition to its new supplier of
PVCu profile which will conclude by the end of the year.  There is expected
to be a small impact on manufacturing volumes and thus installation volume
levels (which is included in the overall volume shortfall quantified above) to
ensure there is sufficient time for a smooth switchover.

 

The Group has also maintained the installation capacity levels that it has
built in the last few years.  This has helped resource the resolution of a
backlog of customer service issues that arose during the year following the
cyber-attack and subsequent summer factory disruption caused by record summer
temperatures.  The Board looks forward to moving into calmer waters and
making progress with its initiatives and plans to further improve the customer
experience as described at its recent Capital Markets Day.

 

Borrowing facility update

 

The Board can confirm that it has reached agreement on heads of terms for a
replacement of its existing facility with a new £7.5m RCF extending out to
the end of 2026.  The Board expects legal completion by the end of the
year.  This new facility will also be provided by Aurelius, the Group's
existing facility provider.  The terms and pricing represent a reduced cost
that is commensurate with the much-improved health of the balance sheet since
the previous borrowing facility was secured in 2018.

 

Outlook

 

The Board continues to focus on delivery of its strategies and medium-term
financial targets which were shared at the recent Capital Markets Day.

 

In the immediate term, as described above, the economic uncertainty has had an
adverse impact on demand levels in a trading period that under-pinned
installation volume expectations for the last months of the financial year.
 Demand has significantly improved in November and the Board is expecting the
Group to continue to achieve strong year on year order intake growth until the
end of the year.  This performance will come too late to positively influence
FY22's outturn, but will materially increase the closing order book versus
previous expectations.

 

These reduced sales and thus lower installation volumes combined with higher
costs of order acquisition incurred until early November, costs of maintaining
capacity levels in the short-term and investment in a larger closing order
book will adversely impact the Group's gross margin.  As a result, the Board
expects that the Group's underlying profit before taxation for FY22 will be
materially below current market expectations.  The Board also forecasts that
net cash, whilst still remaining healthy, will be lower than expectations at
c.£9m at the year-end.

 

Looking ahead into 2023, there remains limited visibility on the strength of
demand for next year, but the Board expects that the market will continue to
be sensitive to negative sentiment.  The Board reiterates that demand levels
have improved recently and points to the fact that the Group operates in what
has historically been a resilient and consistently-performing category despite
previous challenging macroeconomic conditions.

 

In addition, the Group has a strong track record of out-performing the market
in an environment such as this.  The Board intends to continue with its sales
and marketing strategies to ensure that consumers are aware of the Group's
value proposition whilst also emphasising the energy savings that our products
can deliver.

 

Despite the recent volatility in trading, the Board is focused on advancing
our strategic agenda and remains confident that this will lead to progressive
increases in the Group's share of the market as well as driving improved
margins over the coming years.

 

Enquiries:

 

 Safestyle UK plc                             via FTI Consulting

 Mike Gallacher, Chief Executive Officer

 Rob Neale, Chief Financial Officer

 Zeus (Nominated Adviser & Joint Broker)      Tel: 0203 829 5000

 Dan Bate / James Edis (Investment Banking)

 Dominic King (Corporate Broking)

 Liberum Capital Limited (Joint Broker)       Tel: 0203 100 2100

 Neil Patel / Jamie Richards

 FTI Consulting (Financial PR)                Tel: 0203 727 1000

 Alex Beagley / Sam Macpherson / Amy Goldup

About Safestyle UK plc

The Group is the leading retailer and manufacturer of PVCu replacement windows
and doors to the UK homeowner market.  For more information please visit
www.safestyleukplc.co.uk (http://www.safestyleukplc.co.uk) or
www.safestyle-windows.co.uk (http://www.safestyle-windows.co.uk) .

 

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