Safestyle hit by new sector player

Safestyle said that the new entrant is now disrupting its business
Safestyle said that the new entrant is now disrupting its business
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Shares in double glazing firm ​Safestyle ​UK ​​plunged 26 per cent after the firm warned that trading conditions have deteriorated, ​part​ly because of the actions of a very aggressive new entrant​, namely SafeGlaze, which is also based in Bradford.

Safestyle said that the new entrant is now disrupting Safestyle's business across a wider geographical range and in more business ​areas ​such as installation.​

​The firm ​said its 2018 revenue and profit are expected to be significantly below market estimates and cancelled its final dividend.

​It also pointed to declining consumer confidence and announced the departure of its chairman.

​The group said the new entrant's ​activities have intensified and ​Safestyle has taken longer to rebuild its order intake to the rate previously anticipated​. It has also experienced cost increases as management takes the necessary actions to address these challenges.

​The group said in an update: "​The board now expects group revenues and underlying profit before tax for the year ending 31 December 2018 to be significantly below current market expectations with profits for the year expected to be heavily weighted to the second half."

Shares crashed ​21p to 59p following the update.

Safestyle intends to cancel its final dividend of 7.5p a share as it scrambles to strengthen its balance sheet.

As part of the update, the firm said chairman Steve Halbert has resigned from the board with immediate effect.

Non-executive Peter Richardson has been appointed as replacement.

He said: "I am now looking forward to working with the board and the executive team during what is a challenging period for the group as it undertakes a number of actions to emerge as a stronger, fitter, more agile business."

Mr Richardson joined the Safestyle ​b​oard in July 2016 and ​the firm said he ​has extensive ​b​oard level and ​n​on-​e​xecutive ​d​irectorship experience across a number of sectors including technology and engineering, fast moving consumer goods (FMCG) and utilities.

He was a ​g​roup ​b​oard ​d​irector and ​c​hief ​o​perating ​o​fficer at Dyson for almost 15 years, during which time the business grew from a revenue base of £40​m to more than £1​bn. ​His early career was spent in the sales and marketing functions of Cadbury Schweppes, Coca-Cola and Colgate Palmolive.

Last year, ​Safestyle cited figures from repair, maintenance and improvement industry body Fensa, which showed overall market installations had dropped 18​ per cent​ throughout June and July compared with 2016​ as customers cut back on non-essential spending.

Analyst Charlie Campbell at Liberum said: "Safestyle has reported that trading conditions have deteriorated further compared to the last report on March 22, mainly as the very aggressive new entrant has intensified actions taken to drive market share gains.

"The new entrant initially poached sales and door canvass staff from Safestyle in northern areas, but this has broadened into the South and we understand that other parts of Safestyle's workforce have also been targeted (eg installers).

"Safestyle's management believes that it has had some success in building up lost orders in areas initially targeted, but the outlook for sales has deteriorated as new areas have come under attack."

Mr Campbell has cut his 2018 pre-tax profit estimate from £12m to £4m and cut his target share price from 90p to 50p. He said this level should be underpinned by cash flow, a still robust balance sheet, with £11m of net cash expected to be maintained across 2018.

"As well as a deterioration in expected revenues, management has also flagged increased costs. We understand that it is having to pay more to retain staff and the sudden appearance of a fourth national replacement window company has driven up the cost of digital lead generation," he added.