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 interim results for the six months ended 4 July 2021.
Financial and operational highlights
| H1 2021 | H1 2020 | H1 2019 | H1 21 v 20 % change | H1 21 v 19 % change | |
| Revenue (£m) | 73.0 | 42.1 | 64.4 | 73.4% | 13.3% |
| Gross profit (£m) | 23.5 | 9.7 | 16.6 | 141.7% | 41.4% |
| Gross margin % | 32.23% | 23.13% | 25.84% | 910bps | 639bps |
| Underlying profit / (loss) before taxation1 (£m) | 5.1 | (5.1) | (0.8) | n/a | n/a |
| Non-underlying items2 (£m) | (0.8) | (0.5) | (1.6) | (47.3%) | 53.5% |
| Profit / (Loss) before taxation (£m) | 4.3 | (5.6) | (2.5) | n/a | n/a |
| EPS – Basic (pence) | 3.0p | (5.0p) | (2.8p) | n/a | n/a |
| Net cash / (debt)3 (£m) | 14.4 | 6.0 | (0.6) |
For the purposes of this announcement, where appropriate we have included comparisons of the Group’s financial and operating performance for H1 2020 and also H1 2019 with the latter, in many cases, a more meaningful comparative being prior to the disruption of the COVID-19 pandemic in 2020.
| 1) | Underlying profit / (loss) before taxation is defined as reported profit / (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. |
| 2) | Non-underlying items consist of non-recurring items, share-based payments and the Commercial Agreement amortisation. |
| 3) | Net cash / (debt) 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.
Financial headlines
· The Group’s underlying profit before taxation of £5.1m represents the strongest financial performance of the business since H2 2017 and a £10.4m turnaround versus H2 2018. This was driven by a recovery in volume and improvements in gross margin alongside a transformation agenda.
· The net cash position of the business has strengthened to £14.4m versus £6.0m at the end of H1 2020 which included the support received from shareholders in May 2020. Based on this and current expectations for 2022, the Board will engage with shareholders in Q4 to discuss its cash allocation policy. Clearly this will be in the context of any other investment opportunities.
· Revenue growth of 13.3% versus H1 2019 demonstrates the Group’s execution of its Turnaround Plan from 2018.
· Early anticipation of cost inflation, a benign market combined with the impact of strategic initiatives delivered a 639bps improvement in gross margin versus H1 2019.
Operational headlines
· The COVID pandemic continued to impact operations in H1 2021 and our priority remained the safety of our staff and customers throughout the period. Managers and staff have shown huge flexibility and resilience as we have sustained our commercial operations.
· Despite the sustained turbulence, continued progress was made against our core strategies, including brand development, consumer finance costs, revenue management, compliance and sustainability.
· A 14th installation depot was recently opened in Milton Keynes. This investment improves operational coverage, reduces travelling time and will help drive the productivity of our fitting teams.
· Order book at the end of H1 was 9.6% ahead of H1 2020’s position and 65.7% ahead of the closing position at the end of H1 2019.
· The Group has achieved a 10.9% reduction in its CO2 per frames installed metric versus 2020. 95% of the waste generated from the Group’s operations, which includes the removal of old product from customers’ homes, was recycled. Several initiatives are underway which are expected to further reduce emissions and increase this recycling % in H2.
· Customer service provision has remained a challenge due to the broad range of disruption experienced, most notably labour availability.
Outlook
· Continued operational challenges are anticipated for the remainder of the year, particularly potential supply chain disruption and resource shortages in critical skilled labour pools.
· The business will take prompt action to anticipate further cost pressures during H2, including raw materials and labour cost increases.
· Demand has normalised over the summer versus very high levels in February to April as other channels for consumer spending re-opened. However, household savings remain at historic highs and we will maintain a balance between order intake with installations capacity to continue to optimise margins.
· Like many companies, the Group is focused on recovering and improving its customer service levels, a priority aligned with our pre-pandemic strategic focus on transforming our customer experience.
· Trading in July and August has continued to be as expected notwithstanding the operational challenges we continue to experience. H2 will see continued focus on delivering and embedding our long term strategic priorities. Faced with this sustained uncertainty, the Board expects performance for the full 2021 year to be in line with current expectations.
Commenting on the results, Mike Gallacher, CEO said:
“The business faced continued operational disruption during H1 and I am proud of the flexibility and resilience of all our staff in sustaining our operations while ensuring the safety of our customers and our people.
The momentum we built on return from the first lockdown was sustained into H1 2021 resulting in strong revenue growth versus 2019 and an order book 65.7% higher than at the end of H1 2019. This performance has underpinned our ability to deliver a rapid recovery in profitability and a further strengthening of our balance sheet.
Despite the continuing challenges of managing the disruption caused by the pandemic we have continued to make progress on a number of our strategic priorities. Our aim remains to build long term value for shareholders by modernising the business and hence building the foundations for sustained long term growth.”
A webinar for analysts and investors for the 2021 Interim Results will be held today at 9.00 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.
