Trading Update

19 September 2023

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.

Performance update

As reported in our half year trading update on 27 July, our numerous mitigation actions returned the business to profitability at the end of the first half despite reduced volumes in this more challenging market.  I am pleased to confirm that we achieved our profit expectations in July and August.

Market and trading update

The Group is now in its most important trading period of the year.  This period begins in mid-August and runs through to early December as customers prepare their homes for the colder months which typically results in increased demand for our products.

Whilst our order intake went according to plan in early August, since mid-August we have fallen behind our internal forecasts and this has persisted into early September.  Other independent indicators of market health, such as online search activity, indicates that the current market is performing at c.24% below the July and August levels of 2022.  Pleasingly, our order intake has not fallen this far, it is currently down c.11% YoY which shows our product offering is withstanding wider market pressures better than others.

It is management's belief that following a wet summer, the unseasonally warm weather at the end of August into the hottest early September on record is compounding the macroeconomic factors that influence current market demand levels.

Despite these challenging headwinds, the latest data from FENSA demonstrates that we are continuing to grow our market share, which is now estimated at over 8%.  This growth in our market share, coupled with the proactive actions management have taken to stimulate demand and protect the business are expected to be a benefit as we move forward.

We are attempting to stimulate demand and purchase intent through online activity, the deployment of our upgraded website, discount management and our commitment to a leading consumer finance portfolio.  However, the impact of an industry wide fall in volumes due to market conditions is combining with higher lead generation costs and a lower average frame rate than expected. 

As a result, management has continued to take further steps to mitigate these weaker demand levels.  These include reduced shifts in our factory and voluntary pay and fee waivers for the Board, alongside maintaining other measures implemented earlier in the year that have reduced annualised operating expenses by over £2m since the start of H2. 

These measures alone are, however, not sufficient to fully mitigate the adverse impact of current demand and thus, volume levels in the short-term.  Our best estimate is that, whilst we expect demand levels will pick up versus current levels in line with seasonal trends, we believe it is likely to be below previously expected levels.  Consequently, the Board now expects the Group's revenue for 2023 will be between £140m - £142m and consequently, underlying loss will be in the range of £(9.5)m - £(10.5)m.

On the above basis, year-end net debt is expected to be between £(5.5)m and £(6.5)m.  The Group has debt facilities of £7.5m and was in a net cash position of £1.5m as at the end of its August reporting period.  The trading outlook and timing of working capital outflows for the year to go are the primary cause of the expected year-end net debt position.  The Group intends to engage with stakeholders to strengthen the balance sheet in order to support its recovery and help facilitate future growth.

The Board maintains the growth recovery prospects are strong and clear data highlighting the UK's ageing housing stock in need of repair underpins this.  As will be reported in the interim results statement, the Group has also made progress on its strategic priorities and our market share growth is a further sign that there remains a compelling opportunity for the business to capitalise on a market recovery and achieve its medium-term targets.

Enquiries:

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 or www.safestyle-windows.co.uk.