- Windows and doors installer warns profits to disappoint
- Political and economic turmoil hits consumer confidence
- Reduced sales and higher costs crimp margins
Shares in Safestyle UK (SFE:AIM) slumped 22% to 24p after the replacement windows and doors retailer warned underlying pre-tax profit for 2022 will be ‘materially below’ market expectations.
The home improvement products purveyor pinned the blame for recent disappointing sales on a dip in consumer confidence following recent political and economic uncertainty.
Bradford-based Safestyle said order levels since late September to the end of October have proved ‘volatile’, with order intake some 7.6% behind expectations and 2.7% lower year-on-year.
In addition, the company has had to spend more to generate orders given the ‘challenging market context’.
MARGINS AND CASH COME UNDER PRESSURE
Lower than expected installation volumes this year combined with higher customer acquisition costs, plus the costs of maintaining installation capacity levels to work through a backlog of customer service issues caused by a cyber-attack and then factory disruption caused by the summer heatwave, will ‘adversely impact’ gross margins, warned the PVCu replacement windows and doors seller.
Investors were also unnerved as Safestyle cautioned that year-end net cash, whilst still remaining healthy, will be lower than expected at roughly £9 million.
On the bright side, demand has picked up ‘significantly’ in November, Safestyle expects to continue generating strong year-on-year order intake growth until the end of the year and lead generation costs have also returned to expected levels.
WHY MANAGEMENT REMAINS OPTMISTIC
Guided by CEO Mike Gallacher, Safestyle conceded demand visibility for 2023 remains ‘limited’ and the market will continue to be ‘sensitive to negative sentiment’.
However, Safestyle stressed it operates in ‘what has historically been a resilient and consistently-performing category despite previous challenging macroeconomic conditions’, and reminded investors it has ‘a strong track record of outperforming the market in an environment such as this’.
Safestyle also plans to push ahead with its sales and marketing strategies ‘to ensure that consumers are aware of the group’s value proposition whilst also emphasising the energy savings that our products can deliver.’
