Overview
Safestyle UK Plc (SFE) is a UK based company engaged in the business of retailing and manufacturing PVCu. The company is dealing in windows and doors PVCu to the homeowner replacement market. The company was incorporated in the year 1992 and has become the UK’s largest company in window and door replacement market. The company manufactured over 265,000 frames in the year 2017 and carried over 59,500 installations.

Financial Highlights – Financial Year 2018 (£, thousand)

(Source: Annual Report, Company Website)
 
In the financial year ending 31^st December 2018, the company’s reported revenue was down by 26.57 per cent to £116,426 thousandfrom £158,552 thousand in FY2017 due to drastic decline in the installation volumes (NIAMAC disruption), rapid loss of the permanent, cost to retaining staff and agentsincreased and the cost of litigation and the diversion of management time. The company’s gross profit for FY2018 declined by £25,542 thousand to £25,877 thousandfrom £51,419 thousand in FY2017. In FY2018, the company’s operating loss stood at £16,127 thousand against an operating profit of £13,789 thousand in FY2017. Underlying Loss Before Taxation for FY2018 was £8.7 millionagainst a profit of £15.1 million in FY2017. Loss Before Taxation for FY2018 was £16,262 thousandagainst a profit of £13,814 thousand in FY2017. In FY2018, the company received a tax rebate of £2,964 thousandagainst tax expense of £2,986 thousand in FY2017. The company’s loss of the year in FY2018 stood at £13,298 thousand against a profit of £10,828 thousand in FY2017. The basic loss per share for FY2018 stood at 16.1 pence against basic earnings per share of 13.1 pence in FY2017. The diluted loss per share for FY2018 stood at 16.1 pence against diluted earnings per share of 13.0 pence in FY2017. The company’s net cash reduced by £10.7 million to £0.3 million in FY2018 from £11 million in FY2017. The company’s average installed order value was up by 3 per cent to £3,319 in FY2018.

Share Price Performance

Daily Chart as at May-20-19, before the market closed(Source: Thomson Reuters)

On 20^th May 2019, at the time of writing (before the market close, GMT 09:25 AM), Safestyle UK Plc shares were trading at GBX 78.00, down by 1.01 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 97.64/GBX 30.80. The outstanding market capitalisation was around £65.24 million.

Conclusion
The company’s top-line and bottom-line performance declined significantly in the current financial year. The company’s revenue was impacted by the rapid loss of employees and an increase in the cost to retain the employees. The company announced that its forecasted profits will be below current expectations due to a surge in Legal expenses and labor cost. The company’s operations are impacted by the uncertainty created by the Brexit which will affect the company’s supply chain and increase the input costs. The company operates in a highly regulated market and with breach of regulations, the business could face financial or existential consequences. The company operates in a competitive market and is exposed to the UK’s economic performance. The company operates in an industry with low barriers to entry exist for new competitors which can disrupt the market locally.Keeping in mind the risks faced by the company, investors are recommended to keep a cautious WATCH on the stock at the closing price of GBX 78.80 (as on 17th May 2019), while we look for any upcoming catalysts for any correction.

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