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 and operations update for the year ended 2 January 2022.
Key Highlights
· Underlying profit before tax ahead of market expectations
· Strong net cash position of c.£12.1m
· Effective action to mitigate ongoing cost inflation and supply chain pressures
· Continued progress against core strategic priorities
· Trading during the first weeks of 2022 has remained healthy with order book growing in line with usual Q1 trading pattern
Mike Gallacher, CEO of Safestyle UK, commented:
“I am delighted that despite the turbulent context in which we have operated over the last 12 months we have been able to both improve our financial delivery and make strong progress on our strategic priorities. This has delivered our best financial performance since 2017 whilst also building the foundations for sustainable long-term growth.
As a result, the Board expects 2021’s full year underlying profit before tax to be ahead of current market expectations.”
FY 21 Financial Headlines
The Group expects to report revenue growth of 26.6% for FY 21 compared to 2020 and 13.6% compared to 2019, delivering Group revenues of c.£143.3m. 2019 provides a more meaningful comparative as a result of the COVID lockdown in the first half of 2020 during which the business generated no revenue for almost two full months.
Consistent with the Group’s interim results in September 2021, the progress reported on improved margins versus both comparative periods has been sustained for the full year. However, as a result of the historically low lead generation costs in H1 which normalised to pre-pandemic levels in H2, the full year gross margin, which is still expected to be over 30%, is expected to be lower than the 32.3% reported for the first half of the year.
Notwithstanding the above, the Group expects to report underlying profit before tax ahead of market expectations.
The Group’s cash position has also significantly increased by £4.5m against the prior year and is now a strong net cash balance of c.£12.1m at 2 Jan 2022. This balance is after the repayment of £2.4m of the VAT deferral from May 2020. £3.0m of the Group’s committed banking facilities remain undrawn.
Trading and Operational Update
Trading remained robust through H2 and the Group finished the year with its second highest order book ever, only slightly behind the record levels at the end of 2020. Trading during the first weeks of 2022 has remained healthy with our order book growing in line with our usual Q1 trading pattern.
Pricing pressure, supply chain uncertainty and labour shortages continued to characterise the wider market in H2, combined with the impact of COVID on scheduled work and productivity. However, the business continued to take prompt action to navigate these challenges including addressing cost pressures through pricing.
Since the interim results announcement, the Group has continued to address the critical labour shortages which have impacted the industry. During H2 this resource was focused both on new customers and on recovering customer service levels that had deteriorated during the pandemic. Throughout this period, maintaining our operational schedules in the midst of widespread disruption proved challenging and provided a constraint upon both revenue and efficiency. Nonetheless, the Board is pleased with the progress that was achieved by the end of the year and believes this will underpin a more efficient operational performance in 2022.
Strategic Update
Despite the operational challenges outlined above, the Group has made excellent progress across its core strategic priorities. Specifically:
· The modernisation of our brand will be reflected in a return to TV advertising through a new national campaign during Q1 2022. The updated brand positioning reflects our strength in the ‘value segment’ supported by a new brand ambassador, former England goalkeeper, David Seaman MBE.
· We opened our new Safestyle Academy in Q4 2021, enabling our vision of embedding Safestyle standards of expertise and customer service in the industry, while also developing the next generation of installers.
· Our initiative to introduce Standard Operating Procedures and training to level up performance across our sales branches and depots has progressed. To support this, we have established new roles for sales branch management and recruited c.100 PAYE employees into these roles. This supports our ability to train, manage and continually improve our national field sales operations.
· We have introduced Net Promoter Score (‘NPS’) metrics across our installation network and supported this initiative with new incentives that reward the delivery of customer satisfaction. Concurrently, we have invested to improve our call centres, ensuring better responsiveness and service levels.
· C02 targets which we set for 2024 have been exceeded three years in advance due to a strong set of initiatives implemented ahead of plan during 2021. This positive progress will drive an upgrade in our targets that we will communicate later in the year.
Outlook
Looking ahead, the Board expects that the operating conditions, which have generated continuing operational challenges through the pandemic, will improve in 2022. The Board plans to leverage the expected operational stability versus the last two years to underpin strong investments in developing the business.
This investment will encompass the return to TV advertising, continued investment in training staff in our new Academy as well as further improving our customer experience. These long-term investments are overdue and the Board believes that they will enable sustained market share growth in the years to come.
A further trading update will be provided as part of our full year results announcements for the year ended 2 January 2022, which will be published on 24 March 2022.
