StockMarketWire.com - Safestyle UK said sales fell 26.6% to £60.5m in the six months to 30 June 2018 following an extremely challenging first half.

The company blamed significant business disruption on an aggressive new market entrant.

HIGHLIGHTS:

- 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

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 tax 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.

CEO Mike Gallacher 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."




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