(Alliance News) - Safestyle UK PLC on Monday said it is expects to report a loss for 2019, albeit a narrowed one, with costs from its ongoing transformation programme likely to hurt 2020 profitability as well.
Shares in Safestyle were down 13% at 60.00 pence each in London in morning trade.
The PVCu replacement windows and doors manufacturer is predicting an underlying pretax loss of up to GBP1.5 million, narrowed from GBP8.7 million in 2018. This underlying figure excludes items such as non-recurring costs and share based payment.
The narrowing of this loss has been mostly driven by revenue, which for 2019 is forecast at around GBP126 million, an 8.2% rise from GBP116.4 million. This would put Safestyle's second-half revenue around 11% ahead of the year before.
Safestyle said the reason it is still expecting to post a loss is that it incurred "additional lead generation costs" in the fourth quarter.
Safestyle's market share has recovered somewhat from 2018, reaching 8.3% at the end of its third quarter in September from 7.0% at the end of 2018. Moreover, its year-end order book is up 24% from the order book at the end of 2018.
Throughout the the majority of the second half of 2019, Safestyle delivered a monthly profit and was able to increase its overall net cash position to GBP400,000 from GBP300,000 at the end of 2018.
The firm is embarking on a "turnaround plan" aimed at recovering its volumes and market share, as well as cutting costs and improving margins. Safestyle is moving into the third phase of this plan, which involves modernising the brand, working on systems and training to enable growth, and working on regulations, customer service, and health and safety.
In 2020, Safestyle will invest around GBP3.0 million in these initiatives, which is "expected to have a negative impact on short-term profitability" but is ultimately planned to "deliver material benefit" starting in 2021.
Chief Executive Mike Gallacher said: "The new executive team has been in place for 12 months and I am pleased with the pace at which we have stabilised the business, reduced costs, embedded regulatory compliance and enhanced our operational effectiveness. However, there remains a lot to do as we move into the final phase of our turnaround plan. Recently and concurrent with our internal challenges, there have been huge regulatory changes in the industry, whilst consumer buying behaviour and customer service expectations have evolved.
"As the UK market leader, with the right investment in 2020, we believe we are ideally placed to benefit from these trends and I am determined to further establish the foundations needed to deliver sustainable profit growth and long-term success for Safestyle."
By Anna Farley; annafarley@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
