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 30 June 2020.
Financial and operational highlights
| Unaudited 6 months ended 30 Jun 2020 £m | Unaudited 6 months ended 30 Jun 2019 £m | % change | |
| Revenue | 42.1 | 64.4 | (34.7%) |
| Gross profit | 9.7 | 16.6 | (41.5%) |
| Gross margin % | 23.13% | 25.84% | (271bps) |
| Underlying (loss) before taxation1 | (5.1) | (0.8) | (513.5%) |
| Non-underlying items2 | (0.5) | (1.6) | 68.5% |
| (Loss) before taxation | (5.6) | (2.5) | (126.4%) |
| EPS – Basic | (5.0p) | (2.8p) | (78.6%) |
| Net cash / (debt)3 | 6.0 | (0.6) |
1 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.
2 Non-underlying items consist of non-recurring costs, share-based payments and the Commercial Agreement amortisation.
3 Net cash / (debt) is cash and cash equivalents less loan facility.
A reconciliation between the terms used in the above table and those in the financial statements can be found in the Financial Review.
· Prior to lockdown the Group had started the year well with turnover and profitability ahead of 2019
· The business continued to grow market share (as measured by FENSA), reaching 9.2% in Q1 2020 vs 8.5% in 2019
· Operations ceased on 23 March and hence revenue and profitability between March and May were materially lower versus the prior year as a result of the COVID-19 pandemic
· The business undertook a Placing of new shares in April which raised £8.2m to strengthen the Group’s balance sheet
· Operations were restarted in a phased way from late May and order intake since then has been strong, achieving year on year growth of 26.4% across the three month period between June to August
· Increased sales have required a step-up in headcount across survey, manufacturing, customer services and installation resource to match demand
· The business has experienced some operational challenges linked to the ramp up in capacity, the service / warranty backlog from lockdown and recent, temporary disruption to the supply chain
· Despite these challenges, progress has been made with operational capacity increases delivering revenue growth year on year of 13.5% for July and August
· The difference between the operational capacity requirement and order intake growth since the restart has resulted in an order book that was 45% higher than the prior year at the end of June increasing to 82% higher at the end of August
· Good progress has been sustained on operational KPIs, with average price per frame up 3.0% versus H1 2019 to £688 and average order value up by 4.1% versus H1 2019 to £3,440
· The Group’s financial position is strong, with net cash of £6.0m at the end of H1 2020 (31 December 2019: £0.4m). Alongside the Placing of new shares, the deferral of a £2.5m VAT payment until March 2021 has contributed to this favourable net cash position
Outlook
· The Group has seen strong customer demand since the restart of operations in May and we aim to continue to invest behind this growth and maintain a strong order book
· This growth in order intake has recently been matched by delivering a 20% increase in survey, processing, manufacturing and fit capacity which will enable double digit revenue growth in the second half of the year
· The operational challenges linked to recovery and growth have adversely impacted customer service levels post-lockdown and investment is now underway to address this rapidly
· There remains significant uncertainty around the short and medium term and the Board continues to closely monitor the Group’s performance to understand the sustainability of recent performance levels with the intention of providing guidance for the full year as soon as it is credible to do so
· The Board believes that as the clear national value brand in our category, with recent strong increases in market share, the business is well positioned to navigate the likely challenges ahead
Commenting on the results, Mike Gallacher, CEO said:
“The first half of 2020 presented some major management and operational challenges which were successfully navigated with strong support from our shareholders, effective Government intervention and the efforts of all of our staff. Clearly their health and safety, along with that of our customers, was our priority during the lockdown period.
Since we re-emerged from lockdown, our strong order intake performance has been sustained and we have moved to ramp up operational capacity to match this demand. We have experienced some operational challenges linked to recovering the backlog of warranty work from the lockdown, our growth and recent supplier performance. We are focused on ensuring that the impact of these issues on our good customer service levels is addressed promptly.
Concurrently, despite the challenges in the first half of 2020 our team have been able to make tangible progress on our longer-term strategic priorities. This includes modernising our brand, professionalising our sales force and embedding best practice compliance processes.
It is not yet clear if the recent strong trading performance is sustainable in light of the current economic environment and any uncertainty is likely to impact consumer confidence. However our strong order book, our position as a leading national value brand and the progress made on modernising the business leaves us well positioned to sustain our momentum as we move into 2021.”
