SFE.L Regulatory News (SFE)

Safestyle UK plc

("Safestyle" or the "Group")

Unaudited interim results for the six months ended 30 June 2018

Safestyle UK plc (AIM: SFE), the leading1 UK-focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today announces its interim results for the six months ended 30 June 2018.

Financial and Operational performance

* Underlying EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, non-recurring costs and share based payments credits/(charges).

** Non-recurring costs are items that are not expected to occur regularly and include litigation costs, fines and onerous lease charges. Full details can be found in note 5.

· Extremely challenging first half with significant business disruption caused by an aggressive new market entrant

· Volume of frames installed decreased by 28.7% to 99,491 (H1 2017: 139,612)

· Average unit sales price up 2.9% to £616 (H1 2017: £599)

· Average order value up 4.9% to £3,388 (H1 2017: £3,230)

· Market share as measured by FENSA declined to 8.5% at 30 June 2018 (H1 2017: 10.8%)

· Non-recurring costs of £2.8m (H1 2017: £nil), predominantly due to litigation costs and a Health and Safety Executive ("HSE") fine

· Board appointments during and post the period with a new executive team, Chairman and Non-executive Director

· Litigation concluded in September, through an out of court settlement

· A detailed three phase turnaround plan has been developed which has clearly-defined projects and milestones that are designed to stabilise the Group and then return it to profitability

1 Data source: the Fenestration Self-Assessment Scheme ("FENSA")

Outlook

There has been steady improvement in our daily order intake which is almost 12% higher for September to date than it was at the start of July. However, this improvement in order intake through July to September has not flowed into revenue in the quarter as the improvement came too late to affect installation volumes. This has resulted in a weaker third quarter performance. 

Conversely, as we exit the third quarter, the opening order book will be higher than originally forecast and as that converts into revenue, the Board still expects that the Group will be generating modest operating profit in the fourth quarter of 2018. 

As a result, the Group expects to report an Underlying Loss Before Tax1 for the full year in the region of £(6.5m). 

The Group is implementing its turnaround plans and is making progress in recruitment, process improvement, efficiencies and various other margin-enhancing initiatives. Notwithstanding an uncertain consumer environment, and while we do not anticipate an immediate recovery back to 2016 and 2017 levels of financial performance, the Board's expectations of a return to profitability for the Financial Year 2019 remain unchanged. 

Commenting on the results, Mike Gallacher, CEO 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."

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

1 Underlying Loss Before Tax is defined as Loss Before Tax before non-recurring costs and share based payments credits/(charges).

Enquiries:

About Safestyle UK plc

The Group is the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market. For more information please visit www.safestyleukplc.co.uk or www.safestyle-windows.co.uk.

Chairman's Statement

Summary of Performance

The first half of the year for Safestyle has been an unprecedented period of disruption and change. The activities of an aggressive new entrant, SafeGlaze UK, had a significant impact on all areas of the Group's operations which culminated in the Group taking legal action to protect itself. This event, combined with a backdrop of a challenging consumer environment, has resulted in a severe decline in our financial performance for the six months ended 30 June 2018.

Revenue was down 26.6% to £60.5m (H1 2017: £82.5m). Data from FENSA indicates a rate of market decline in H1 of 6% and our market share has also reduced to 8.5% (H1 2017: 10.8%). 

Underlying EBITDA1 was a loss of £(2.5)m as compared to a £9.8m profit in H1 2017. EPS for the period was down from 8.3p to (5.7)p.

There were also significant non-recurring costs2 incurred in the year of £2.8m (H1 2017:£nil). These consist of costs principally associated with the litigation and a fine from the HSE of £0.9m following prosecution for an incident which occurred in March 2017.

Litigation

In May 2018, the Group issued a claim seeking injunctive relief and damages against NIAMAC Developments Ltd ("NIAMAC") (trading as SafeGlaze UK) and a number of named individuals. The claim was made in the Business and Property Courts of England & Wales, on the Intellectual Property list.

The claim asked the Court to determine whether Safestyle was entitled to injunctive relief and damages from what the Group considered to be passing off, the misuse of confidential information, unlawful means conspiracy and malicious falsehood. Safestyle also applied for urgent interim relief, pending the trial of this matter.

The Group has invested heavily in building its leading market position over many years and whilst the Group welcomes healthy competition in the market, it is committed to protecting its brand, its reputation, and its staff. 

As a result of interim applications to the Court, a series of injunctions were put in place in May and subsequently in July. On 3 September 2018, the Group announced that it had settled the claim against all parties.

In the settlement, NIAMAC agreed that the existing court injunctions will be replaced by appropriate undertakings to the Court. The settlement should ensure that there will be no misuse of confidential information or misleading statements to customers. Additionally, the settlement governs future relations between Safestyle UK and NIAMAC that should prevent the possibility of any acts of intimidation or harassment of Safestyle UK representatives. Finally, NIAMAC has agreed to change its trading name from SafeGlaze UK and rebrand fully within an agreed period of time.

Further details of the settlement will remain confidential, but the Board is pleased that this matter is now closed and the restoration of the Group to profitability can be our focus.

1 Underlying EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, non-recurring costs and share based payments credits/(charges)

2 Non-recurring costs are items that are not expected to occur regularly and include litigation costs, fines and onerous lease charges. Full details can be found in note 5

Directorate Changes

There have been a number of changes to the Board this year. Longstanding Executive Directors Steve Birmingham and Mike Robinson have now left the Group and the previous Chairman Steve Halbert and Non-Executive director Peter Richardson also left the Board in H1 2018.

The following Board appointments have been made in 2018:

· Mike Gallacher was appointed Group CEO on 1 May 2018 to replace Steve Birmingham. Mike has over 20 years' commercial and operational experience of building and managing businesses in the UK and internationally. He brings significant expertise in operational strategy, business development and performance improvement. Mike was most recently CEO of First Milk Limited, the UK major dairy company owned by British family farms, where he developed and implemented a major restructuring and turnaround strategy that delivered a £30m improvement in business profitability in 24 months. This was recognised as the 'Financial Restructuring of the Year 2016' by the Institute of Turnaround Management. Mike took up his role as CEO on 1 May 2018.

· I, Alan Lovell, was appointed as Non-Executive Chairman on 16 July 2018. I have held numerous listed company directorships, both executive and, more recently, non-executive. I have been the Non-Executive Chairman of Flowgroup plc since 2017, National Chairman of the Consumer Council for Water since 2015, and I was appointed as Senior Non-Executive Director at SIG plc in July 2018. I was a Non-Executive Council Member of Lloyd's of London from 2007 to 2016, the Senior Independent Director of Sweett Group plc between 2014 and 2016 and was Chairman of Sepura plc.

· Rob Neale was appointed Group CFO on 22 March 2018 to replace Mike Robinson. Rob was most recently Head of Leisure Travel Finance at Jet2.com and Jet2 Holidays, a division of AIM-listed Dart Group plc where he worked since 2013. Prior to this date, Rob's career includes roles as Commercial Finance Director for ghd. He also served as Finance Director for Stanley UK, part of Stanley Black & Decker Inc. Rob is a fellow of the Institute of Chartered Accountants of England and Wales and started his career at Arthur Anderson. Rob took up his role as CFO on 16 July 2018.

· On 17 September 2018, Fiona Goldsmith joined the Board as a Non-executive Director and Chair of the Audit Committee. Fiona was most recently a Non-executive Director, and Chair of the Audit Committee, at Walker Greenbank PLC. Fiona is a fellow of the Institute of Chartered Accountants of England and Wales and started her career with KPMG before moving to First Choice Holidays plc, where she became European Finance Director. From 2004 until 2008 she was Finance Director of Land Securities Trillium, a division of Land Securities Group plc.

These new appointees join Chris Davies, a Non-executive Director and Giles Richell, Chief Operating Officer, who both remain on the board. I look forward to working with the whole Board as we continue to work through the current challenges to return Safestyle to profitability and deliver value to our shareholders.

Business Review

The unprecedented set of circumstances faced in the first half of the year created a number of significant challenges for the business. The number of employees and agents working with us declined sharply in the first quarter which created huge disruption to our operations and resulted in a sudden and material reduction in leads, sales and installation capacity.

A detailed three phase turnaround plan has been developed which has clearly-defined projects and milestones which is designed to stabilise the Group before returning it to profitability and then accelerating growth. 

The first phase of the turnaround plan aimed to stabilise the business through the establishment of a new Board, to resolve the litigation and to ensure we have sufficient liquidity in place whilst developing the next phase of the plan. With the Group having now stabilised and some important additions made at the senior management level alongside the settling of the litigation, this phase is largely complete.

The second phase of the plan, which has begun and will run through 2019, is designed to return the group to profitability by recovering the momentum lost in our lead generation, sales, surveying and installation teams whilst also improving our margins and making our business more efficient. 

The third phase of the plan aims to accelerate growth through a combination of brand investment, the establishment of our national training academy, driving innovation and leveraging our digital platform.

The business model remains simple and focussed. We have one of the UK's leading production facilities in the sector and we also have terrific people in all areas of the organisation who have remained loyal to the business. I would like to thank our people for their hard work and dedication in what have been uniquely challenging times.

Outlook

There has been steady improvement in our daily order intake which is almost 12% higher for September to date than it was at the start of July. However, this improvement in order intake through July to September has not flowed into revenue in the quarter as the improvement came too late to affect installation volumes. This has resulted in a weaker third quarter performance. 

Conversely, as we exit the third quarter, the opening order book will be higher than originally forecast and as that converts into revenue, the Board still expects that the Group will be generating modest operating profit in the fourth quarter of 2018. 

As a result, the Group expects to report an Underlying Loss Before Tax1 for the full year in the region of £(6.5m). 

The Group is implementing its turnaround plans and is making progress in recruitment, process improvement, efficiencies and various other margin-enhancing initiatives. Notwithstanding an uncertain consumer environment, and while we do not anticipate an immediate recovery back to 2016 and 2017 levels of financial performance, the Board's expectations of a return to profitability for the Financial Year 2019 remain unchanged.

AC Lovell

Non-Executive Chairman

20 September 2018

Finance Review

Revenue

Revenue for the period was £60.5m compared to £82.5m for the same period last year, representing a decline of 26.6%. The key performance indicators were as follows:

· Leads generated from direct response media represented a slight decline from 42,680 to 41,306. However, leads from other sources, particularly canvass which was disrupted significantly by the actions of Safeglaze UK, declined by 64.5% in the first half versus H1 2017

· Conversion of leads into orders improved by 18.3%, partially offsetting the reduction in overall leads described above

· 30.5% decline in the volume of orders from 31,258 to 21,724

· 28.7% decline in the volume of frames installed from 139,612 to 99,491

· 2.9% growth in average unit price from £599 to £616 ex VAT

A price increase was implemented at the start of the year to negate cost increases as a result of Sterling weakness and commodity and silicone inflation. This effect, together with an increased share of higher value composite doors and coloured frames, resulted in the overall average price increase observed. 

This favourable impact was partially offset by an increase in uptake of our consumer finance products, the impact of which is deducted from revenue.

Gross profit

Gross profit reduced by 47.1% in the period to £14.6m (H1 2017: £27.5m). Gross margin reduced to 24.1% (H1 2017: 33.4%).

£5.9m of the reduction in gross profit is attributable to the decline in installation volumes. The other main factors behind the lower gross profit and diluted gross margin % are as follows:

· Although leads generated via direct response media have remained at similar levels to the prior period, there has a been significant year on year increase in 'Pay Per Click' rates driven by increased online competition

· There has been an increased utilisation of scaffolding solutions to ensure our teams are safely working at height

· Agent commission costs as a percentage of sales increased in the first half of the year as the business responded to the more competitive environment

Underlying other operating expenses1

Underlying other operating expenses were lower by £0.6m (3.1%) than H1 2017. Reductions in year on year investment in non-digital advertising were partially offset by additional investment in IT infrastructure, the digital transformation project and costs associated with recruiting and strengthening the management team.

1 Underlying other operating expenses are other operating expenses less non-recurring costs and share based payment credits/(charges).

Non-recurring costs

In the first half of the year, £2.8m of non-recurring costs1 were incurred. The largest single component being costs relating to the litigation activity described earlier in the Chairman's statement. 

Also included within these costs is a fine from the HSE of £0.9m following prosecution for a working at height accident in March 2017. Our Chief Operating Officer, Giles Richell, who also joined in March 2017, has taken significant steps to avoid such a reoccurrence. These measures include an increased use of scaffolding, investment in other market-leading solutions for working safely at height, establishing a new Group Health and Safety Function managed by an experienced manager and significantly increased safety audits alongside numerous other process improvements.

The full breakdown of all non-recurring costs is contained in note 5. 

EBITDA, PBT and EPS

Underlying EBITDA2 was a loss of £(2.5)m for the period (H1 2017: a profit of £9.8m).

(Loss)/Profit Before Tax was a loss of £(5.7)m in the period (H1 2017: a profit of £8.8m). This is after the non-recurring costs described above.

Basic earnings per share for the period were a loss of (5.7)p compared to 8.3p profit for the same period last year. The basis for these calculations is detailed in note 7 to the accounts.

Cash

The cash balance at 30 June 2018 was £4.6m, a decrease of £6.4m since the year end as a result of the losses referred to above.

Capital expenditure in the period was £1.5m, a considerable reduction on the £3.4m spend in H1 2017 which included £2.4m related to the factory expansion. Investment in the digital transformation project in the first half of the year represented the largest capital investment in the period.

Dividends

The Board is not declaring an interim dividend for this year (H1 2017: 3.75p per share). 

R Neale

Chief Financial Officer

20 September 2018

1 Non-recurring costs are items that are not expected to occur regularly and include litigation costs, fines and onerous lease charges. Full details can be found in note 5.

2 Underlying EBITDA is defined as earnings before interest, taxation, depreciation, amortisation, non-recurring costs and share based payments credits/(charges)

Condensed consolidated interim statement of comprehensive income

All operations were continuing throughout all periods.

Condensed consolidated interim statement of financial position

Condensed consolidated interim statement of changes in equity

Condensed consolidated interim statement of cash flows

Notes to the interim financial information

1 General information

The condensed interim financial information set out herein is in respect of Safestyle UK plc and its subsidiaries (the Group) for the period ended 30 June 2018.

Safestyle UK plc is a public listed company incorporated in Jersey. The registered office address of Safestyle UK plc is 47 Esplanade, St Helier, Jersey JE1 0BD.

The unaudited interim financial report for the half year ended 30 June 2018 does not constitute statutory accounts as defined in s435 of the Companies Act 2006. The financial statements for the year ended 31 December 2017 were prepared in accordance with IFRS and have been delivered to the Registrar of Companies. The report of the auditor on those financial statements was unmodified. In this report, the comparative figures for the year ended 31 December 2017 have been audited. The comparative figures for the half year ended 30 June 2017 are unaudited.

The company is not required to present parent company information.

2 Basis of preparation

The condensed consolidated interim financial information for the period ended 30 June 2018 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2017.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the period ended 31 December 2017 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The accounting policies adopted in the condensed interim financial information are consistent with those set out in financial statements for the period ended 31 December 2017.

3 Going concern

The Directors have prepared financial forecasts for the Group, comprising profit before and after taxation, balance sheets and cash flows through to 31 December 2020.

For the purpose of assessing the appropriateness of the preparation of the Group's accounts on a going concern basis, the Directors have considered the current cash position, the availability of committed funding facilities which will be finalised by the end of September, and sensitised forecasts of future trading through to 31 December 2020. This includes an assessment of the principal areas of risk and uncertainty.

Having considered the points above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Consequently, they continue to adopt the going concern basis in preparing the financial statements.

Significant accounting policies

Accounting estimates

In preparing this condensed consolidated interim financial report, significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2017.

Impairment

The Directors identified that the main impairment indicators of the Group's assets are a reduction in Gross Profit versus the prior year, a net cash outflow and a Loss Before Tax. If any such indicators exist, the asset's recoverable amount is estimated. As a result of the financial performance for the first half of the year where these impairment indicators have been evident, the Directors have performed an estimation of the recoverable amount of the Group's assets using the same financial forecasts referred to within the Going Concern note.

For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Impairment losses recognised (not relating to other intangible assets specifically) are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash-generating unit is the group of assets identified on acquisition that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

The recoverable amount of assets or the cash-generating unit is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

The Directors have completed their estimation of the recoverable amount and have concluded that there is no impairment of the Group's assets at 30 June 2018.

Revenue recognition

In 2017, a review of accounting policies in the run up to the adoption of IFRS 15 has led to the revenue from goods relating to financed products to be shown net of the charges incurred in those sales. Previously these were shown as a cost of sale and the results of 30 June 2017 and 31 December 2017 have been restated to reflect these. The effect on revenue in the period was £1,735k (£2,188k at 30 June 2017, £3,681k at 31 December 2017).

There is no effect on the overall gross margin or operating profit for the Group within these periods.

 Changes in significant accounting policies

IFRS 9 Financial Instruments - Impairment of financial assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' ("ECL") model. The new impairment model applies to financial assets measured at amortised cost. The Group has elected to measure loss allowances for trade receivables at an amount equal to lifetime ECLs.

Impact of the new impairment model

The Group has determined that the application of IFRS 9's impairment requirements at 1 January 2018 does not require an adjustment to the impairment allowance recognised at 31 December 2017. The previous basis of estimating irrecoverable losses is consistent with the methodology prescribed under IFRS 9.

The following table provides further detail about the calculation of ECLs related to trade receivables on the adoption of IFRS 9. The Group considers the model and some of the assumptions used in calculating these ECLs as key sources of estimation uncertainty.

The ECLs were calculated based on actual credit loss experience in 2016 which is the most recent reporting period where all credit losses are known. The impact of applying the standard on the financial statements as at 31 December 2018 may be subject to amendment as the weighted average loss rate for the 12 months will be dependent on future economic conditions.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue.  The Group has adopted IFRS 15 with effect from 1 January 2018.

Impact of implementing IFRS 15

The Group primarily earns revenues from the sale, design, manufacture and installation of domestic double-glazed replacement windows and doors. Product sales revenues are recognised once the goods have been installed.

A review of accounting policies in the run up to the adoption of IFRS 15 was performed in 2017. As at December 2017, the Group was satisfied that their treatment of Revenue complied broadly with IFRS 15. As a result of the 2017 review, there is no restatement required of the 2017 reported numbers for the implementation of IFRS 15.

IFRS 16 Leases

The Group has completed an initial impact assessment of the effect of IFRS 16 on the financial position of the Group. Given the annual value of operating lease costs, the change in accounting will have a material impact in the financial statements for the year ending 31 December 2019. This is expected to result in operating leases in the range of £9.2m to £10.2m being recognised in the balance sheet. The standard will be implemented for the interim results for 30 June 2019 and comparisons will be restated to reflect those changes on previous years.

4 Non-recurring costs

Litigation costs are costs incurred as a result of the SafeGlaze legal action referred to in the Chairman's statement. These costs are predominantly legal advisor's fees.

Fines relate to the HSE fine described in the Finance Review plus related legal representation fees.

Onerous leases represent an accrual for all rental costs up until the first lease break date for properties that were closed earlier in the year.

Restructuring and Operational costs are expenses incurred as a result of changes being made to reduce the cost structure of the business.

5 Dividends

A final dividend for the year end 31 December 2016 of 7.5 pence per ordinary share totalling £6,224,219 was paid on 10 July 2017.

An interim dividend for the half year end 30 June 2017 of 3.75 pence per ordinary share was paid on 6 November 2017.

6 Earnings per share

a) Basic earnings per share

b) Diluted earnings per share

7 Taxation

The condensed interim financial information includes a tax credit based on management's best estimate of the full year effective tax rate based on expected full year losses to 31 December 2018. The effective tax rate applied in the period was 16.51% (period ended 30 June 2017: 22.19%) which compares to the standard corporation tax rate of 19.00%. The main reason for the effective tax rate being lower than the standard rate is due to some of the non-recurring costs in the year being not deductible

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2017. This will reduce the Group's future current tax charge accordingly. The deferred tax asset and liability at 30 June 2018 has been calculated based on these rates.

8 Share based payments

At 30 June 2018 the Group had the following share based payment arrangements:

Long Term Incentive Plan ("LTIP")

The Group operates an equity-settled LTIP remuneration scheme for Directors and certain management ("LTIP 2016", "LTIP 2017" & "LTIP 2018").

On 18 June 2018, a further 1,333,333 options were granted ("LTIP 2018"). All schemes require a combination of specific performance based criteria and remaining an employee for a minimum period. The numbers of share options in existence during the year were as follows:

Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the period.

At the grant date there was limited share price history for the company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange.

SAYE

On 8 May 2018 the company launched a new share save (SAYE) scheme ("SAYE 2018") in addition to the existing schemes ("SAYE 2015", "SAYE 2016" and "SAYE 2017") for employees. All schemes allow employees to acquire a certain number of shares at a discount of 20% of the share price prior to the invitation to join the scheme, using amounts saved under a 'Save As You Earn' savings contract.

The "SAYE 2015" vested within the period and as of the 30 June 2018, no options have been issued.

The numbers of share options in existence during the year were as follows:

Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the year.

At the grant date there was limited share price history for the company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange.

The total share-based expense comprises:

10 Seasonality

Order intake is subject to small seasonal fluctuations with higher demand in the first and fourth quarters as a result of seasonal weather factors. The business can, within limits, smooth this demand by flexing its order book and aims to level load its operations to minimise costs. As a result revenues and profits would normally be similar for both halves of the year.