The window and door manufacturer's order intake has fallen significantly, impacting performance.
Companies: Safestyle UK Plc
Safestyle UK (LON: SFE) has issued a trading update today announcing their second profit warning in two months, which blames a weak market and increasing consumer caution meaning installations of their window and door products are down 18% in June and July compared to 2016.
A profit warning was also issued in July, with Management again blaming uncertain market conditions and reduced consumer confidence causing profit expectations for the year to be lower than previously expected and broadly in line with 2016.
Since July's update, the Group's order intake further declined "beyond the Board's expectations".
Safestyle expects Full Year 2017 revenues to be relatively flat year on year, but margins will be impacted by the Company's "efforts to drive order intake" along with the drop in orders and installations.
Interims for the Group are set to be released on September 21st.
Singers, Liberum and Zeus all released research notes today along with the Group's trading update, with Zeus' note saying:
"While this morning’s announcement is clearly disappointing, Safestyle remains the market leader in the sector. We believe the weakness in current trading is symptomatic of a more challenging environment across the industry, and more widely representative of increased consumer uncertainty, particularly for big ticket items."
Singers note was much the same:
"The impact of these changes is a downgrade of 17.5% in FY17 to £16.5m PBT (16.2p EPS, -18.5% YoY), and 18.6% in FY18 to £17.5m PBT (17.4p EPS, +6.9% YoY)." With a new target price of 180p (vs 225p) we reiterate our Sell recommendation."
Liberum said Safestyle was a Buy share, commenting:
"In support of the shares, we note the high dividend yield (c5%) and cash on the balance sheet (7% mkt cap). Management still has many levers to generate outperformance and we see cost reduction driving profit
progress in 2018."
Shares in the Group are down 30% this morning.
Safestyle currently has a market cap of £195m and is trading a PE ratio of 11x versus the industry median of 10x. Revenue and profit charts in the five years to 2016 were healthy, and are now expected to flatten out with Management's new forecast today.
EPS growth has also been relatively healthy while cash for the Group has also been positive. However, SFE is clearly facing some tough headwinds at the moment.
