Safestyle UK returns to profitability with best financial performance since 2017

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 20211.

Commenting on the results, Mike Gallacher, CEO said:

“Despite the continued uncertainty caused by the pandemic as well as the widely-documented supply chain and inflationary pressures, I am delighted we have been able to deliver our best financial performance since 2017 and make significant progress against our stated strategic objectives.

The Group’s underlying profit before tax for the year represents a £16.4m turnaround from 2018’s underlying losses as we continued to improve margins and deliver growth.  The strong performance of the business in 2021 made the cyber attack in January 2022 even more frustrating, however our previous investments in upgrading IT systems proved invaluable in helping to mitigate the worst of its impacts.

Looking ahead, the Group will continue to proactively manage cost-inflation, however we expect consumer confidence to be impacted by the ongoing cost-of-living crisis.  Pleasingly, our record-level order book will allow us to smooth the impact of any short term slowing of demand.  Notwithstanding the factors above, the Board and I remain positive on the outlook for 2022 as the business emerges transformed after four very challenging years and continues its return to our historically strong financial performance and growth.”

Financial and operational highlights

 FY 2021FY 2020FY 2019FY21 v FY20 % changeFY21 v FY19 % change
Revenue (£m)143.3113.2126.226.6%13.5%
Gross profit (£m)43.828.531.953.7%37.2%
Gross margin %230.54%25.14%25.27%540bps527bps
Underlying profit / (loss) before taxation3 (£m)7.6(4.8)(1.5)n/an/a
Non-underlying items4 (£m)(1.6)(1.4)(2.3)(17.9%)28.7%
Profit / (Loss) before taxation (£m)6.0(6.2)(3.8)n/an/a
EPS – Basic (pence)3.5p(4.3p)(4.0p)n/an/a
Net cash5 (£m)12.17.60.4n/an/a

For the purposes of this announcement, where appropriate we have included comparisons of the Group’s financial and operating performance for 2020 and also 2019 with the latter, in many cases, a more meaningful comparative being prior to the disruption of the COVID-19 pandemic in 2020.

1)The financial statements are presented for the year ended on the closest Sunday to the end of December.  This date was 2 January 2022 for the current reporting year and 3 January 2021 for the prior year.  All references made throughout these accounts for the financial year 2021 are for the period 4 January 2021 to 2 January 2022 and references to the financial year 2020 are for the period 30 December 2019 to 3 January 2021.  
2)Gross margin % is gross profit divided by revenue. 
3)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. 
4)Non-underlying items consist of non-recurring costs, share-based payments and the Commercial Agreement amortisation.
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.

Financial headlines

· The Group’s underlying profit before taxation of £7.6m represents the first return to full year profitability since 2017 and a £16.4m turnaround versus 2018.

· Revenue growth of 13.5% versus 2019 demonstrates the Group’s improving revenue trajectory.

· Early anticipation of cost inflation combined with the positive impact of strategic initiatives delivered a 527bps improvement in gross margin versus 2019.

· Net cash position strengthened to £12.1m versus £7.6m at the end of 2020.

Operational headlines

· The COVID pandemic continued to impact operations in 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 maintained our commercial operations.

· Despite the sustained disruption, continued progress was made against our core strategic priorities, including brand development, consumer finance costs, revenue management, compliance and sustainability.

· A 14th installation depot was opened in Milton Keynes during the year.  This investment improves operational coverage, reduces travelling time and will help drive the productivity of our fitting teams.

· Order book at the end of the year was 8.4% lower than 2020’s record levels, but remains healthy at over a third higher than any other year.

· The Group has achieved a 19% reduction in its CO2 per frames installed metric versus 2020 which represents early achievement of our 2024 target.  Over 95% of the waste generated from the Group’s operations, which includes the removal of old product from customers’ homes, was recycled. 

· Customer service provision was extremely challenging due to the broad range of disruption experienced, most notably labour availability.  Investment in resource resulted in the backlog being cleared by the end of the year.

Post balance sheet event

· Having achieved our objectives set out in the Turnaround Plan and reporting a strong financial performance in 2021, the business was hit by a cyber attack, originating from Russia, at the end of January 2022.

· Business continuity actions, as well as IT investments in the last two years, mitigated the impact, although it caused a level of operational disruption that took some weeks to fully recover from.

· We have now recovered our systems and processes and the Group is trading in line with original plans. 

Outlook

· Despite strong progress being made by the Group in 2021 to overcome well documented labour shortages, we anticipate resource shortages in critical skilled labour pools will continue in the short to medium term.

· Cost pressures have escalated in the first quarter across raw materials, fuel and labour.  We will continue to address these issues through pricing whilst also using our scale advantage to mitigate the impact.

· Demand has remained robust in the first quarter.

· We successfully launched our new TV campaign in February 2022 which has underpinned our continued order book growth in the first quarter. 

· Over the full year, we aim to maintain a balance between order intake and installations capacity to continue to optimise margins.

· Despite the short-term impact of the cyber attack on the financial performance of the business, the Group has a strong balance sheet and the Board therefore intends to continue to invest behind its strategic initiatives.

· The Board expects performance for 2022 to be in line with current expectations with annualised H2 financial performance representing further growth on the good profit delivery of 2021.

A webinar for analysts and investors for the 2021 Full Year Results will be held today at 10:00 am.  If you would like to join, please contact FTI Consulting at safestyle@fticonsulting.com in order to access the registration details.

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