Double glazing firm Safestyle UK has reported an "extremely challenging" first half following significant business disruption caused by aggressive new market entrant SafeGlaze UK.
Earlier this month Safestyle reached a settlement with SafeGlaze that will force the latter to change its name following alleged trade mark infringement.
Bradford-based Safestyle reported a pre-tax loss of £6m in the six months to June 30, down 164 per cent on the previous half year when it made a profit of £9m.
Safestyle and SafeGlaze, which is also based in Bradford, have become arch enemies since Safestyle accused its rival of “passing off, misuse of confidential information, malicious falsehood and various other matters”.
Safestyle said the settlement will prevent the possibility of any acts of intimidation or harassment of its workers and SafeGlaze has agreed to rebrand fully within an agreed period of time.
Safestyle's CEO Mike Gallacher said: "The SafeGlaze issues are behind us. It was a really tough start to the year. We were pleased we got a legal settlement.
"Our focus is putting that behind us and getting back to being a successful business."
Safestyle said the volume of frames installed fell 29 per cent to 99,491 in the first six months of 2018, down from 139,612 in the previous half year.
Mr Gallacher said: “The results reflect an unprecedented set of circumstances faced in the first half of the year that created a number of significant challenges for the business.
"The litigation we initiated against an aggressive new market entrant has now concluded in an out of court settlement. As a result we expect some recovery in the trading position of the company in the second half."
Safestyle sees a recovery in the fourth quarter of the year and said it is making progress in recruitment.
"Our head count has been impacted by the situation in the first half," said Mr Gallacher.
"It stabilised in May and we've rebuilt. We're a big employer in Bradford."
Despite the uncertain consumer environment, Mr Gallacher said the business has shown good growth and sales have improved by 12 per cent since the middle of the year.
However, this improvement in order intake from July to September has not flowed into revenue in the quarter as the improvement came too late to affect installation volumes. This resulted in a weaker third quarter performance.
As Safestyle exits the third quarter, the order book will be higher than originally forecast and as that converts into revenue, the group should be generating modest operating profit in the fourth quarter of 2018.
As a result, the group expects to report an underlying pre-tax loss for the full year in the region of £6.5m.
"Despite the challenges the business is going through, this year has seen the biggest set of changes since it was established," said Mr Gallacher.
"We are digitising the whole business. It has all been a paper-based business in the past. Now sales reps have tablets and we are digitising through to the back office."
The group is set to return to profit next year and said it had a very strong business model.
Chief financial officer Rob Neale said: "The next few years will be about transformation and rebuilding. We will become a more lean and efficient business."
Both Mr Gallacher and Mr Neale said they believe in the fundamental strength of the business.
"Both of us saw the same fantastic business opportunity," said Mr Gallacher.
"There's a lot we can so. Safestyle was a very successful business in the past and we are confident we can get back to that."
Analyst Charlie Campbell at Liberum said: "The encouraging news from the first half results announcement is that order intake is improving, with a run rate in September 12 per cent ahead of the start of July. The third quarter is likely to be loss making, as was the first half, but the fourth quarter should see a return to profitability.
"Although our estimate for the 2018 loss has widened, we are leaving profit forecasts for 2019 and 2020 unchanged.
"The board has been rebuilt with a new CEO, CFO and chairman joining since May 2018, litigation with an aggressive new entrant has been settled and management now has confidence in working on the next phases of recovery. We remain optimistic there is significant recovery potential as its lowest cost factory fills up once again, through share gains in a fragmented market."