Zeus Capital Equity Research Director Andy Hanson caught up with DirectorsTalk to discuss Safestyle UK PLC (LON:SFE)
Q1: Now Safestyle UK posted their first half results Andy, how are the results looking?
A1: A really good set of results from Safestyle this morning, revenues up 12.8% to £83.5 million, an underlying PBT of £10.6 million shows 18% growth year on year so good level of revenue growth which is being seen on the bottom line as well. Operationally, you have a look at the results and what the business is saying is really positive, average selling prices are increasing, average order values are up and the number of frames they’re installing is increasing as is the number of installations.
Q2: So what’s been happening in Safestyle’s market, how is the business performing against the market?
A2: Interestingly, the sensor data has suggested that the market in the first 6 months of the year was down about 2% so you compare this to what Safestyle are saying, obviously double digit revenue growth, the increase in order value, they’re seeing a 5-6% increase on the number of frames installed, they’re materially outperforming now the market.
Q3: So how is the competition doing?
A3: I think this is one of the reasons why Safestyle’s been outperforming the market is that the main national peers, Anglian and Everest, have sort of clung on to a legacy model where they’re reliant on financing commissions to generate profits which is quite different from Safestyle’s model. Safestyle makes money on the sale of its windows and has therefore been able to bring in quite attractive consumer financing packages which has driven their growth and allows them to take market share and I believe a lot of that market share is coming from the national competitors.
Q4: Safestyle appear to building a track record for increasing their dividend, is this because of that?
A4: Yes, that really is the case and today they announced a 10.3% increase in the interim dividends which I have gone and factored into my full year assumptions so this year I think they’ll pay about 11.3p of dividend which equates to dividend yield of about 4.3% so you’ve got the good dividend on a business that’s growing strongly. I would also say that last year they paid a special dividend of 6.8p, they have stated that when they’ve got excess cash they will return it to shareholders by way of special dividends so we probably do have more special dividends to come down the pipeline, maybe not this year but certainly into ’17 and ’18, this year is slightly different because there’s quite a big capex programme going on with regards to factories, they’ve doubled capacity there. Looking back to when Safestyle UK came to market we were assuming an 8p dividend for their first full year which was 2014 and in 2016 we’re now forecasting 11.3p, it shows 40% growth in the dividend across that time which is pretty impressive.
Q5: So the outlook looks good for Safestyle UK?
A5: Yes, very much so. Although the wider market is at best patchy Safestyle I think will continue to take market share and should the UK consumer improve, and we’ve certainly seen OK consumer confidence numbers, Safestyle should continue to grow very very nicely.
