Safestyle UK PLC – Final Results

Safestyle UK plc (AIM: SFE), the leading UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today announces its final results for the 12 months ended 31 December 2018.

Financial and operational highlights

	Year ended	Year ended
	31 December 2018	31 December 2017
	£m	£m	% change
Revenue	116.4	158.6	-27%
Underlying gross profit1	26.7	51.4	-48%
Underying gross margin %	22.9%	32.4%	-950bps
Gross profit	25.9	51.4	-50%
Gross margin %	22.2%	32.4%	-1,020bps
Underlying (loss) / profit before taxation2	(8.7)	15.1	-158%
Non-underlying items3	(7.5)	(1.3)	-501%
(Loss) / profit before taxation	(16.3)	13.8	-218%
EPS – Basic	(16.1p)	13.1p	-223%
Net cash4	0.3	11.0	-98%

 ¹ Underlying gross grofit is defined as reported gross profit 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 Underlying (loss) / profit before taxation is defined as reported (loss) / profit 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.
³ Non-underlying items consist of non-recurring costs, share-based payments and the Commercial Agreement amortisation.
⁴ Net Cash 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.

• Challenging 2018 with significant business disruption caused by an aggressive new market entrant.
• By year end, following appropriate legal action, the Group had achieved a substantial recovery in its contracted workforce across its canvass, sales, surveying and installations operations, resulting in a significantly improved sales order intake in the final two months of the year.
• A detailed three phase turnaround plan was developed in mid-2018, the first phase of which – stabilising the business – was completed by October 2018.
• The implementation of phase two is well underway, which involves returning the Group to profitability.
• Volume of frames installed decreased by 30.7% to 184,184 (2017: 265,716).
• Average unit sales price up 6.2% to £646 (2017: £608).
• Conversion of leads into orders improved by 16.1% versus 2017, offsetting to some extent the reduction in total leads caused by disruption relating to the aggressive competitor.
• Investment made into improving customer service, compliance and Health & Safety processes, training and equipment.
• Digital Transformation project progressed which will increase efficiency and enhance customer experience.

Outlook

2019 represents a key year for the Group’s turnaround and the Board is confident, despite the broader market backdrop of weaker consumer confidence, that Safestyle can emerge stronger for the future. 

The momentum generated by an improvement in sales order intake in the last two months of 2018, following the recovery in the Group’s contracted workforce numbers, has continued into the first part of 2019.  This represents an encouraging start to the year.

Safestyle is well-invested in its manufacturing facilities and remains focused on implementing phase two of its three phase turnaround plan to develop a more efficient, professional and profitable business, whilst retaining as much as possible of what made the Group successful in the past. 

The Board expects the Group to return to profitability in 2019 and to generate positive cashflow. Whilst cognisant of the broader macro-economic uncertainty, the Board recognises that 2019 represents a year of turnaround as opposed to an immediate return to the Group’s historical levels of financial performance. 

Commenting on the results, Mike Gallacher, CEO said: 

“The business faced a unique and challenging operating context in 2018, but I am pleased to say that, through the dedication and hard work of our people, we ended the year with our business stabilised and trading position materially improved. 

With many of the issues faced in 2018 behind us, our experienced management team is wholly focused on driving growth, improving margins and building on the underlying strengths of the business.  We are the UK market leader, with a strong brand, industry leading production facilities and skilled people across the organisation.  Whilst there is still much work to do, we look forward to the opportunities of the year ahead and returning Safestyle to profitability.”