Safestyle hit by falling consumer confidence

The Bradford-based firm 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 and hit the group in certain areas. Safestyle declined to name its new rival, but market observers pointed to 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.Safestyle said in a trading update: "As a result, the group's order intake in 2018 to date has been disappointing and below our expectations."The group announced in December that it had seen a continuing deterioration in the market resulting from declining consumer confidence and the board expected market conditions to continue to be very challenging in 2018. Safestyle has reviewed and reduced its cost base and carried out the planned restructuring of its sales and canvass functions.Guidance for the year to December 31, 2017, remains unchanged. "The board now expects group revenues and underlying profit before tax for the year ending December 31, 2018, to be materially below 2017 levels and current market expectations," the group said.Despite this, the firm pointed out that it continues to be cash generative, with a strong cash position and robust balance sheet. "Safestyle remains very well invested for any upturn in demand and the board expects the benefits of its cost savings programme to take effect in 2018, particularly in the second half," the group said.Analyst Charlie Campbell at Liberum said: "Safestyle has warned that it has seen no improvement in trading conditions since it warned of weak market conditions on December 13, and that the order intake has declined beyond the board’s expectations. "Management has said that it believes that the situation is being exacerbated by the competitive actions of a new entrant into the market, which we understand is attempting to scale up rapidly. We understand that the new entrant has had a significant impact on Safestyle because it has started activities in Safestyle's northern heartland, and we also understand that it has attracted some self-employed sales and canvass representatives from Safestyle."Management has already taken mitigating steps. It has carried out the planned restructuring of the sales and canvass functions as pledged at the end of 2017, and has also recently reviewed and reduced its cost base in anticipation of weaker sales activity."Around 40 per cent of sales leads have historically been generated by self-employed door canvassers, working for commissions from Safestyle. This has been effective as these agents explain the benefits of replacing aging PVC windows, often before the customer has started to shop around or firmly decided to replace windows."Safestyle will announce its final results on March 22, when it expects to declare a final dividend for 2017 of 7.5p in line with its normal policy.