Safestyle hit by falling consumer confidence

The Bradford-based firm warned last month that 2018 trading has been disappointing and it expects this year's profits will be "materially below" 2017 levels.Safestyle has been hit by falling consumer confidence as home owners cut back on non-essential spending. In addition to the tough trading conditions, Safestyle said the activities of an "aggressive new market entrant" have added to an already competitive landscape. Safestyle's CEO Steve Birmingham confirmed that the new entrant to the market is SafeGlaze, which is also based in Bradford. SafeGlaze is understood to have undercut Safestyle's prices and stolen market share, adding to Safestyle's well documented difficulties. However Mr Birmingham said: "We are not in direct competition with them. It's not as though they are specifically trying to undercut us."Safestyle's pre-tax profit fell 28.5 per cent to £14m in the year to December 31 on flat revenue of £159m.Volume of frames installed decreased by 8 per cent to 265,716 although the average unit sales price rose 8 per cent to £608.The group has managed to gain market share despite the arrival of SafeGlaze. Safestyle's market share rose to 10.7 per cent at the end of 2017, up from 10.2 per cent at the end of 2016.Mr Birmingham said: "The start to 2018 has been difficult and as previously announced our order intake has been below management expectations as a result of the continued deteriorating market, declining consumer confidence and increased competitive environment."Market conditions remain challenging, given the current economic uncertainties."Asked whether Brexit uncertainty was behind the downturn, he said: "I think everyone is sick of Brexit and they're saying let's get it over and done with. Brexit is one element of it, but no-one knows quite what the future will look like. It's the uncertainty. Unemployment figures are good - we are almost at full employment. Consumer confidence is not as high as it should be."A lot of retailers on the high street are referring to the lack of consumer confidence. Our having a higher ticket price has exacerbated it."Asked when there will be an upturn, Mr Birmingham said: "We think the replacement cycle has extended. If we get better news on inflation, wage growth and the economy and housing transactions increase, I believe we'll see a pick up in our industry."We are not sat here accepting everything in the industry. We have a number of strategic initiatives."The group has taken action to reduce its cost base and modernise its sales and canvass operations. "We expect the major benefits of these efforts to take effect in the second half of 2018," said Mr Birmingham."2018 will be a year of transition as we continue to invest in operational improvements so that by the end of the year we will have a leaner, fitter and more cost effective business.”Safestyle said the market contracted sharply in 2017 and volumes fell 10.2 per cent, reflecting declining consumer confidence. It added that the current outlook for the market for large household discretionary purchases remains challenging and the board expects market conditions to continue to be difficult in 2018.Safestyle estimates that the overall market in 2018 will be around 10 per cent lower than last year, reflecting the trend seen in the last three quarters of 2017. As a result of the deteriorating market conditions and the activities of SafeGlaze, the group said its order intake in 2018 to date has been weak and its market share is under pressure.The group's underlying pre-tax profit fell £5.4m to £15.1m in 2017. This was primarily due to increases in door canvass and digital lead generation costs, increased finance subsidy costs and raw material price increases as a result of sterling's weakness and commodity price inflation.The group said it completed its new factory extension at Wombwell, South Yorkshire, on time and on budget. This modern facility is now fully operational and is delivering the anticipated manufacturing productivity gains.Analyst Charlie Campbell at Liberum said: "2018 brings challenges from a weak market and the competitive actions of an aggressive new entrant, which has taken a sizeable number of Safestyle’s lead generators. "Management is determinedly counteracting these challenges by cost reduction, replacing lost people and continuing the push towards professionalising and digitising sales channels. The shares remain oversold, understandably given uncertainty caused by the speed of expansion of the new entrant."