• Mark Watson-Mitchell

Safestyle UK – ghastly results due soon will be the prelude to a big bounce this year and next

Just a year ago the shares of this £50m group were trading at 78p, within three months they had fallen to a year’s low of 14p.


As I write this profile they have shown some price recovery to 36.5p.


The results for the year to end December 2020 should be announced in March – they will be awful.


Recovery due this year


However, just as the shares have started to show a resurgence in price, I think that this current year could see the horrors of 2020 being replaced by a very good set of returns.


Boring stock?


So what is so special about Safestyle UK (LON:SFE)?


It is not a tech stock, nor is it involved in producing vaccines or testing kits.


It is instead in the double-glazed replacement PVCu windows and doors business – in fact is the UK leader in its sector.


If that is boring, too boring for you to read further – then don’t.


However, you may well be missing out on the opportunity to double your money in the next couple of years.


Over 28 years old


Set up in 1992 in Bradford, West Yorkshire, the company called HPAS Ltd, traded under the name of Safestyle. But in those days it was focussed upon providing mortgages for ‘right-to-buy’ council tenants.


From supplying contact leads of its clients to various companies, it started to see potential in using leads that it was previously giving to home improvement suppliers, for its own advantage.


It progressed from giving leads to window and door companies to actually getting into the supply business itself.


Eventually it realised that there were better margins in making and selling on its own production.


From supplying leads to actual manufacture


Today the company is engaged in the sale, manufacture and installation of replacement un-plasticised poly vinyl chloride (PVCu) windows and doors for the UK homeowner market.


The company's segment includes the sale, design, manufacture, installation and maintenance of domestic, double-glazed, replacement windows and doors.


It has 36 sales branches and 12 distribution depots located throughout the UK.

It has manufactured over 280,000 frames and carried out approximately 60,000 installations.


The group’s production facility, in which it has invested over £8m, spans 18 acres, employs 600 specialist staff and makes more than 6,000 frames and 15,000 double-glazed sealed units every week in a normal non-Covid-19 impaired environment.


Over 1.06m customers have chosen Safestyle for their replacement doors and windows installations.


The average installed order volume has seen an increase to around £3,450, while its average frame order value has risen to £688.


2020 not a good year


Hiccups in its trading in 2018, with sales reduced from £158m to £116m and profits falling from £13.8m to a £16.3m loss, saw a new corporate strategy being kicked into gear.


The 2019 year saw sales increase to £126m and losses reduced to just £1.5m.


But then Covid-19 came about last year, with the factory closing for a couple of months or so. Estimates for the 2020 year’s revenues suggest a fall to £114m and an underlying pre-tax loss of £5m.


Those are the awful predictions mentioned earlier.


Trading Update mid-December shows the way forward


Two weeks before the year end the group gave out its pre-close Trading Update, which indicated to analysts that, due to the group’s increasing order book, the recovery could well get underway in the current year.


It is now suggested that the group could see sales lift up to £140m this year, to end December, and then up to £160m next year.


In the same period losses could well spin around to a £4m pre-tax profit for 2021 and then £7m next year, worth 2.5p then 4p per share in earnings.


Obviously, we will have to wait until the March finals announcement, when proper guidance will be given. The 17 December Update stated that the Board expects the 2021 financial performance to be significantly ahead of current market expectations.


Good list of institutional holders


There are 136.81m shares in issue, of which leading shareholders include Alantra EQMC Assets (11.5%), SFM UK Management (11.4%), Morgan Stanley Investment Management (9.01%), CI Investments (5.55%), Jupiter Asset Management (4.84%), Standard Life Investments (4.84%), Invesco Adviser (3.35%), Baillie Gifford (3.02%), Close Asset Management (2.93%), and Hargreaves Lansdown Stockbrokers (2.90%).


As I stated earlier the group’s shares have been as high as 78p in the last year but that was before the dreaded virus impacted its sales and production efforts.


At the current 36.5p I consider that the shares could well be lifted upwards prior to and after the March results, as the market gets the feel of its recovery for 2021 and 2022.



I now set a Target Price of 48p.


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