SFE.L Regulatory News (SFE)

11 July 2018

Safestyle UK plc

("Safestyle", the "Company" or the "Group")

Trading Update

Safestyle UK plc, the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, today issues an update on trading.

Since the appointment of Mike Gallacher as CEO on 1 May 2018, the Board and Executive Team have progressed three key priorities - the stabilisation of Safestyle's organisation, the previously announced legal action against NIAMIC Developments Ltd (trading as SafeGlaze UK) and a comprehensive review of the Group's current trading and outlook.

Against a background of weaker consumer spending on higher value home improvement products, exacerbated by the loss of significant numbers of canvass, sales and installation staff to the new competitor, order intake has firmed up in recent weeks, albeit at a lower level than the previous management team had expected. Whilst pricing has been firm, with recent price increases being successfully implemented, gross margins in the current year have been impacted through higher digital marketing costs and sales commissions.

At an operational level, the organisation has now been stabilised and the rebuilding of the sales, survey and installation teams is well progressed, both in terms of numbers and capability, albeit the importance of maintaining the quality of recruitment to ensure high customer service levels means this process is likely to extend into 2019. In the short term this has resulted in additional recruitment and some temporary staffing costs.

The Board has assessed the market and operational outlook for the remainder of the year and, providing there is no further material deterioration in market conditions, expects Group revenues to be below market expectations and for the Group to report a small underlying loss before tax for the full year, reflecting the impact of reduced gross margin and increased operating costs. The Company expects to report non-recurring exceptional cash costs of c.£6m in the current financial year. These include, amongst other items, the previously-announced fine following the Health & Safety Executive investigation, the costs of the legal action against NIAMAC Developments Ltd and restructuring costs.

Over the medium and longer term, the Board remains confident of the Group's prospects. The Board expects exit momentum from the current year to benefit from the programme of costs and margin improvement actions now in train which are expected to result in material annualised savings benefiting future financial years.

As a result of the loss of profits and exceptional costs in the current financial year, offset by working capital management, the Company expects to report a break-even cash balance at the year-end. The business has put in place suitable borrowing facilities to ensure that it has access to appropriate funding, should it be needed, to cover these changed circumstances and any other contingency.

The Company will announce its interim results for the six months ended 30 June 2018 on 20 September 2018.

The Group will also provide an update on its legal action against NIAMIC Developments Ltd in due course.

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.

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.