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Safestyle UK – hopefully my warnings were heeded as now a “material” profit warning

By Steve Moore | Friday 8 September 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hopefully my warnings were heeded – on the previous update on trading from Safestyle UK (SFE) I concluded the announcement and continuing outlook saw me continue to remain bearish. Now there’s a further “Trading Update” including “we now expect full year 2017 group revenues to be flat year on year. At the same time, our efforts to drive order intake are incurring additional costs, thereby adversely affecting the group's margin performance, and leading to a material impact on full year profits”. Uh oh…

The announcement also includes that “the group announced on 18 July 2017 that given the uncertain market conditions and weaker consumer confidence it anticipated profit for the year would be lower than previously expected and broadly in line with 2016”. That 18th July update also included “we expect to report marginal revenue growth in the first half of 2017… we consider it prudent to expect only modest revenue growth again in the second half of the year”.

This doesn’t look like having been nearly “prudent” enough then – despite the company having “continued to grow market share”. This is with it noting “latest FENSA statistics, which show that the overall market has deteriorated further, with installations down by 18% in June and July compared to 2016” amidst “increasing consumer caution”.

The shares have slumped to below 170p and the company emphasises it “remains cash generative, with a significant cash balance and a robust balance sheet… remains well positioned in the event of a market recovery”.

This may be so, but currently it’s self-stated “increasing consumer caution” and “accelerating weakness in the market”. Until there are at least signs of some stability, I’ll certainly continue to avoid.

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