Safestyle UK plc (LON:SFE), the leading UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, has announced its final results for financial year 20201.
Financial and operational highlights
| FY 2020 £m | FY 2019 £m | % change | |
| Revenue | 113.2 | 126.2 | (10.3)% |
| Gross profit | 28.5 | 31.9 | (10.8)% |
| Gross margin %2 | 25.1% | 25.3% | (13)bps |
| Underlying (loss) before taxation3 | (4.8) | (1.5) | (213.4)% |
| Non-underlying items4 | (1.4) | (2.3) | 39.5% |
| (Loss) before taxation | (6.2) | (3.8) | (60.6)% |
| EPS – Basic | (4.3p) | (4.0p) | (7.5)% |
| Net cash5 | 7.6 | 0.4 |
1 The financial statements are presented for the year ended on the closest Sunday to the end of December. This date was 3 January 2021 for the current reporting year and 29 December 2019 for the prior year. All references made throughout these accounts for the financial year 2020 are for the period 30 December 2019 to 3 January 2021 and references to the financial year 2019 are for the period 31 December 2018 to 29 December 2019.
2 Gross margin % is defined as gross profit divided by revenue.
3 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.
4 Non-underlying items consist of non-recurring costs, share based payments and the Commercial Agreement amortisation. See Financial Review for more detail.
5 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.
Operational
· Staff, consumer and business protection was paramount through 2020 with COVID-safe practices in place across our sites and in home.
· Growth in order intake exceeded the 15% growth in revenue in H2 and generated a strong order book at year end, 83% larger than 2019.
· This large order book has supported sustained operations during the January 2021 cessation of in home sales & door canvass.
· Post H1 lockdown, operations were resilient with no site closures and continued manufacturing and installation activity thoughout H2, into Q1 2021.
· Capacity increases in H2 were enabled by increases in headcount across survey, manufacturing, customer services and installations.
· Market share (as measured by FENSA) rose to 9.2% from 8.4% in 2019.
· Good progress made on operational KPIs, with average price per frame up 3.8% to £704 and average order value up by 4.1% to £3,474, with the trend continuing in Q1 2021.
· Continued progress on the Group’s sustainability programme with CO2 emissions per frame installed reducing by 6.1%.
· Tangible delivery on the Group’s strategic priorities despite the challenging backdrop, including modernising the Safestyle brand, improving the national sales and depot network and sustaining progress in compliance.
Financial
· Progressive increase in revenue comparisons in H2 with Q3 being 9% ahead of prior year and Q4 being 20% ahead of prior year.
· The impact of cessation of operations in H1 resulted in a £(6.0)m loss across the March to May period with underlying profit before taxation achieved of £0.3m in H2 after material investment in order book.
· The Group received £1.8m from the Government’s Coronavirus Job Retention Scheme which partly reduced the first half loss.
· The business undertook a Placing of New Shares in April which raised £8.2m net of directly attributable costs of £0.3m to strengthen the Group’s balance sheet which allowed a strong restart of operations in late May and a strong year end position, with year-end net cash of £7.6m (2019: £0.4m).
Outlook
· 2021 started with immediate disruption to sales as in-home selling and canvass operations were halted.
· Restrictions have now eased and the Group is seeing a good recovery of sales momentum from 2020.
· Despite the impact the lockdown has had on order intake thus far in 2021, management actions and investment in the order book in 2020 have underpinned a good level of manufacturing and installations activity in the first quarter of 2021. This has minimised further disruption to our customers and many areas of the business.
· Revenue has grown by double digits in Q1 2021 and levels of profitability have increased versus 2020 exit rate.
· The order book continues to remain ahead of the prior year although it has been run down in the first quarter and converted into profit and cash.
· In summary, the Group has had a good start to 2021 and will achieve the highest level of profitability in Q1 for any quarter since 2017 while also maintaining a healthy installation pipeline.
· The UK Government has set out its roadmap for cessation of all restrictions by the end of June 2021 and based on this plan, the Board expects there to be no further significant interruption to our operations.
· Despite the uncertain operating environment, the Board expects to see good levels of demand for its products and is recapturing the order intake momentum achieved in the second half of 2020 now restrictions on sales activities have been lifted.
· As a result of this encouraging start to the year, the Board expects 2021 financial performance to be significantly ahead of market expectations.
· The Board also expects to revisit its dividend policy later in 2021 assuming that the Group has returned to a consistent delivery of profitability.
Commenting on the results, Mike Gallacher, CEO said:
“I am extremely proud of the way that our colleagues responded to what was a year with unparalleled challenges, at all times keeping a constant focus on health and safety while remaining committed to delivering for our customers.
Having taken decisive action to support the business during the period, we saw a strong recovery in the second half of the year with good order intake growth and a step up in operational capacity, as customer demand remained robust. By the end of 2020, our order book was 83% larger than 2019’s closing position, which has given us a strong platform to maintain momentum at the beginning of the current financial year in spite of the external disruption.
Notwithstanding the uncertain operating environment, as a result of the strategic and operational progress we have made along with our strong order book, cash position and market leading brand, the Board now expects the Group’s 2021 financial performance to be significantly ahead of market expectations.
Our intention remains as before the crisis; to build long term value for shareholders by consolidating our position as the UK’s number 1 choice for replacement windows and doors.”
A conference call for analysts and investors for the 2020 Final Results will be held today at 9.30 am. If you would like to join, please contact FTI Consulting at safestyle@fticonsulting.com or using the details below in order to access the registration details.
