SFE.L Regulatory News (SFE)

13 December 2017

Safestyle UK plc

("Safestyle" or the "Group")

Trading Update

Safestyle UK plc, the leading retailer and manufacturer of PVCu replacement windows and doors to the UK homeowner market, issues the following trading update:

In our interim results announcement on 21 September 2017 we signalled a continuing deterioration in the market resulting from declining customer confidence and that accordingly our forward outlook was cautious. Since then demand has weakened further, and in the three months to 30 November 2017 the Group's sales have been 0.3% lower by value, and 6.8% lower by volume, than the corresponding period in 2016. Whilst we believe we will have made significant market share gains in 2017, for the 11 month period to 30 November 2017 the Group's sales by value are 0.8% lower than for the same period in 2016.

With sales in the short month of December not helped by severe weather disruption to the planned installation programme, it is clear that Q4 sales will now be below our already reduced expectations. At the same time, those sales have come at an increased cost of acquisition, due to higher lead generation expense in a competitive landscape and a higher proportion being made on extended finance terms, negatively impacting margins. As a consequence, our 2017 full year outturn (namely underlying profit before tax, before exceptional restructuring costs and share based payment charges) is now expected to be below current market expectations, at a level of least £15 million.

The Group continues to be highly cash generative and expects to have a strong cash balance of approximately £12 million at the year end and a robust balance sheet. During the year we completed a major capital investment programme, which leaves the business very well invested for future trading and any upturn in demand. Furthermore, we remain fully committed to our progressive ordinary dividend policy.

We are actively reviewing all of our costs and seeking operational efficiencies where we can, and have already implemented substantial savings across the business, including a major restructuring of our Sales and Canvass function. At the same time we are investing in technology and other developments to enhance operational efficiency and improve the customer experience.

Looking ahead, we expect market conditions to continue to be very challenging in 2018 and, although we aim to further consolidate our position of market leadership, the Board has lowered its expectations of the Group's performance in FY2018. The benefits of our cost saving and efficiency programme will fall mainly in 2018 and as such should help mitigate the impact on profitability of any further fall in market demand. We, therefore, expect only modest growth in earnings over 2017.

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.