(Sharecast News) - AIM-listed double glazing group Safestyle said on Thursday that it swung to a loss in the first half as revenues dropped in "extremely challenging" conditions.In the six months to 30 June, the company swung to a pre-tax loss of £5.7m from a profit of £8.8m in the same period a year ago, as revenue dropped 27% to £60.5m. Underlying earnings before interest, taxes, depreciation and amortisation fell 125% to £2.5m and Safestyle said there would be no interim dividend, versus a 3.75p a share dividend in the first half of 2017.Volumes of frames installed were down 29% to 99,491 but the average order value was up 4.9% to £3,388.The group pointed to an "extremely challenging" first half, which saw "significant" business disruption from "aggressive new market entrant" SafeGlaze.The company said it has seen a steady improvement in its daily order intake, which is up nearly 12% for September to date versus the start of July. However, this improvement in order intake through July to September has not flowed into revenue in the quarter as it came too late to affect installation volumes. As a result, the third quarter performance has been weaker.Still, the opening order book will be higher than originally forecast as the group exits the third quarter, and as that converts into revenue, Safestyle will be generating modest operating profit in the fourth quarter of 2018. As a result, it expects to report an underlying pre-tax loss for the full year of around £6.5m.The group incurred non-recurring costs of £2.8m in the first half, mostly due to litigation costs and an £850,000 fine from the Health and Safety Executive.Earlier this month, Safestyle announced that it had settled its claims against rival SafeGlaze, which agreed to change its name and rebrand fully. Safestyle had accused NIAMAC developments, trading as SafeGlaze, of trade mark infringement, passing off, misuse of confidential information, malicious falsehood and various other matters.As part of the settlement, NIAMAC agreed that the court injunctions put in place in May and July would be replaced by appropriate undertakings to the court.Chief executive officer Mike Gallacher said: "The results announced today 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."The board and the executive team, including a number of new and high calibre appointees, believe in the fundamental strength of the core business model. We have developed a three phase turnaround plan which is designed to stabilise the group before returning it to profitability and then accelerating growth. The focus of the whole group is now on delivering this plan quickly and effectively."Liberum said: "We believe that there is significant recovery potential as Safestyle replaces employees poached by SafeGlaze and market share starts to be recovered and grows once again."This remains a very fragmented industry, with Safestyle having around 9% market share and competitors 2-4 (Anglian, Everest and SafeGlaze) having 15-20%. We remain convinced that Safestyle has a cost advantage in manufacturing, which should enable momentum in market share to be turned positive once again."At 0940 BST, the shares were up 4.6% to 42.30p.
