Safestyle UK plc (LON:SFE), the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, has issued a trading update for the six months ended 30 June 2020, in advance of its half year results announcement scheduled for 17 September 2020.
Highlights
· Strong rebound in order intake post-lockdown with order intake for the eight weeks from 25 May 23.2% ahead of the same period last year
· The Group was profitable for the months of January, February and June 2020
· Net cash £6.0m at the end of June 2020
· Order book carried into H2 is 45% higher than at the same point last year
· Focus is on continuing to increase our survey, order processing and installation capacity
· Board is encouraged by the restart performance whilst cognisant that confidence and consumer demand remain uncertain
Trading and Operational Update
The Group restarted operations in mid-May with a phased return to work which allowed the smooth implementation of COVID safe policies, a balancing of work in progress and a good level of collaboration with suppliers. Every function in the business was impacted by our new COVID safe practices, with a particular focus placed on ensuring safe in-home operations. The consumer response was supportive and flexible with existing customers keen to have their windows and doors fitted, reassured by the practices we had adopted.
On restart it became clear that consumer demand was ahead of our expectations. The strength of this demand combined with the speed of our return to full operations delivered excellent initial order intake, with growth of 23.2% versus 2019 for the eight week period from 25 May.
In this context the Group has been focused on scaling up capacity to meet the increased demand. As a result, initial installation revenues were only marginally ahead for the same eight week period of the prior year. Progress on capacity has been made and hence the last three weeks delivered a 16.9% growth in installation revenue.
All of the above has resulted in an order book carried into H2 that is now 45% higher than at the same point last year.
Our current focus is on continuing to ramp up our survey, order processing and installation capacity to match our trading performance. We aim to do this while ensuring we maintain discipline on fixed overhead levels.
H1 Financial Headlines
H1 revenues were impacted by the cessation of all activities on 23 March with installation activities restarting on 25 May. As a result of this, revenues for the period will be c.£42.1m, 34.7% below H1 2019 despite the first two months of the year delivering revenue growth year on year.
Net Cash at 30 June 2020 was c.£6.0m, with £3.0m of the Group’s committed banking facilities undrawn. The net cash position has benefitted from the Placing of new shares raising £8.2m (net) on 8 April 2020 and a delay in VAT payments agreed with HMRC of £2.7m. With this exception, working capital is being controlled normally and the Group is generating positive net cash inflows.
Outlook
The Board is encouraged by the performance of the business following the restart of operations. However, it is not yet clear whether the recent performance is sustainable in an environment where confidence and consumer demand remain uncertain.
Faced with this uncertainty, the Board will continue to closely monitor the Group’s performance and market fundamentals in the months ahead with the intention of providing guidance for the full year as soon as it is credible to do so.
Mike Gallacher, CEO of Safestyle UK, commented:
“Prior to the lockdown on 23 March the business was ahead of our internal budget and making good progress on its strategic priorities. The lockdown was managed smoothly with a small skeleton staff maintaining our order book, providing emergency customer support and running a trial remote digital sales team. During April we were pleased to receive strong support from our shareholders in a £8.5m placing of new shares which significantly strengthened our balance sheet and provided additional liquidity which proved helpful as we restarted the business.
“The Board took an early decision to accelerate the Group’s return to full operations in response to the strong consumer demand experienced in May and early June. Our cash position supported our ability to trade proactively and we have undoubtedly benefited from a slower competitor response since the lockdown lifted. Our view is that the combination of deferred lockdown demand and a major shift in consumer spend from travel and leisure to home improvement have driven the increased demand we have experienced.
“Despite very good levels of current consumer demand the medium term economic outlook remains uncertain. We will therefore maintain a balanced approach, seeking to grow the business while keeping our costs controlled and net cash position positive.”
