H1 17 was severely impacted by challenging market conditions and consumer caution.
Companies: Safestyle UK Plc
Safestyle (LON: SFE) has released its H1 17 interims today, along with a second announcement detailing a share buy-back worth £2.5m.
The forgettable start to FY17 was crippled by declined consumer confidence and a weak market that impacted the Group's order intake, leading to two profit warnings in as many months.
Revenue growth was relatively flat, up 1.4% to £82.5m whilst PBT declined to £8.8m (H1 16 £9.5m), with underlying EBITDA down 11.7% to £9.8m.
EPS for the period was also down from 9.4p to 8.3p. These figures reflect the Group's increased cost of delivering sales revenues.
Underlying EBITDA margin also declined from 13.6% to 11.8%.
Management went on to say that Q3 isn't looking much better, commenting:
The rate of market decline in H1 2017 accelerated from a Q1 reduction of 2.4% to 17.2% in Q2, and we believe this significantly steeper rate of decline has continued into the first two months of Q3."
The Group will, however, issue an interim dividend of 3.75p, the same as H1 16.
Management also noted their less than optimistic outlook on the future of the market, saying:
Our expectation is that the market will continue to be weak for at least the remainder of 2017. Consumer confidence has declined, and our outlook is therefore cautious. We expect to continue to gain market share in H2, although sales will continue to be expensive to win and we expect operating margins to be challenging."
The second RNS announcement was issued regarding a share buy-back scheme worth up to £2.5m, with the purpose of "reducing the share capital of the Company with all Ordinary Shares repurchased being cancelled."
Liberum and Zeus both released research notes regarding Safestyle's announcements today, with Liberum's note commenting on the buy-back, saying:
"We see this as a sign of confidence in the market stabilising, its ability to trim the cost base and the strength of its balance sheet and cash flows."
Zeus' research note said:
"We reduce our dividend expectations to reflect the flat interim dividend, but welcome today’s announcement of plans to return capital to shareholders through a £2.5m share buy-back programme. We now expect FY17 dividend to be flat YoY at 11.3p and assume 3.0% growth thereafter."
Safestyle currently has a market cap of £153m and is trading a PE ratio of 11x versus the industry median of 14x. Full Year Revenue and Profit Growth in the five years to 2016 was healthy, whilst FY17 won't see this growth continue.
EPS growth was also relatively healthy while the Group's cash position remains positive. However, SFE is clearly facing some tough headwinds at the moment.
