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Safestyle warns on profits as market continues to deteriorate, competition hots up
Hot on the heels of a warning in December, AIM-listed windows and doors specialist Safestyle cautioned on Wednesday that revenues and underlying profit for 2018 will be "materially below" the previous year's levels and current market expectations as the market continues to deteriorate.
The company had already said at the end of last year that it had seen a continuing deterioration in the market on the back of declining consumer confidence and that conditions in 2018 were likely to be continue to be "very challenging".
Safestyle said the activities of "an aggressive new market entrant" have added to an already competitive landscape and hit certain areas of the group's operations. As a result, the order intake so far this year has been disappointing and below its expectations.
"The group has reviewed and reduced its cost base and carried out the planned restructuring of its sales and canvass functions. The group continues to invest in information technology to ensure it can deliver an enhanced end-to-end customer experience and improve operational efficiency."
Although guidance for the year to the end of December 2017 remains unchanged, Safestyle now expects revenues and underlying pre-tax profit for the year ending 31 December 2018 to be materially below 2017 levels and current market expectations.
"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."
Neil Wilson, senior market analyst at ETX Capital, said: "With chief executive Steve Birmingham offloading 1.4m shares worth £2.2m in December, shortly after that third warning, the overall picture is hardly one that inspires confidence."
Meanwhile, Liberum cut its stance on Safestyle to 'hold' from 'buy' after the warning, reducing the target price to 130p from 200p.
"We expect the stock market to take a prudent view of valuation until the impact of the new entrant is digested and cost savings delivered successfully," it said.
"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."
At 0940 GMT, the shares were down 22% to 118p.