Safestyle has now released its interim results for 2014.
When compared to the first half of last year, revenues increased by £6.6M and cost of sales increased by £3.8M to give a gross profit some £2.8M ahead of the same period last year. Operating profit also increased, driven by an increase in salary costs due to the annual pay award and auto-enrolment, and increased marketing costs due to TV advertising. Finance income fell slightly and tax was somewhat higher to give a profit for the year of £6.6M, an increase of £648K when compared to the first six months of 2013.
When compared to the end point of last year total assets were up £7.7M driven by a £5.6M increase in cash and a £1.9M growth in trade and receivables. Liabilities also increased, due predominantly to accrued dividends increasing by £4.3M. The net result of this is a tangible asset increase of £2.8M to £2.1M.
Before movements in working capital, cash profits for the first half of the year were £9.5M, a £1.4M increase on the same period of last year. This was reduced by an increase in receivables, although this was less than last year and due to seasonal fluctuations, and a £656K increase in tax paid meant that net cash from operations stood at £6.3M, some £1.7M better than in the first half of 2013. Capital expenditure was only £661K and finance leases just £93K so that there was a £5.6M positive cash flow during the period, although £4.3M will be paid out in dividends. This still represents a very decent cash flow, however.
During the year the group continued to increase market share, up to 8.24% from 7.85% at the end of last year and underlying EBITDA was up over 12%. During the first half of the year installation volumes were up 8% with average unit sales price up 1.5% to £503. The continued focus on expansion in the South East was evident, where sales were up 21%. The group has undergone some operational efficiencies which is an effort to combat some headwinds including the increased price of glass and TV advertising along with a regulatory change that requires insurance backed guarantees for all domestic glazing installations.
Going forward, the expectation for the market as a whole is of modest volume growth for the rest of 2014 and going in to 2015. With a focus on increased geographical penetration and market share gains, the board expect to report further progress in sales, profit and cash flow growth for the full year.
An interim dividend of 3.1p has been declared which, together with the final dividend already paid represents a yield of 4.7% which is pretty decent. This is clearly a good set of results, profits were up, net tangible assets increased and there was a good, positive cash flow with cash left over even after the dividend payment. The net tangible asset level is still a bit precarious and the increasing cost of raw glass is a bit of a concern but things seems to be going well for the group and I am thinking of making an initial purchase.
Typical! A couple of days after I purchased shares in this company, director Kiran Misra sold 1,470,000 shares to bring his total down to 2,418,889 shares representing 3.11% of the company. This is clearly not great news but it should be noted that Kiran has sold shares before and has no intention to dispose of any more over the next year.
On the 13th January it was announced that Chris Davies, director of the company and his wife had purchased 25,000 shares at a cost of £42,125 to give him an interest of 145,000 shares in total. After Kiran’s sale it is good to see another director giving the company a vote of confidence.
On the 26th January the group released a year end trading update. The company has traded well with revenues increasing by 9% to £136M and profits before tax in line with expectations at about £16.7M. The group grew market share from 7.85% to 8.48% within a slightly contracting overall market and manufactured 7% more frames and undertook 4.7% more installations than last year. The order book at the year end increased by 3%. The group finished the year with a cash level of £8.5M, an increase of £3.3M compared to the end point of last year and going forward a continued focus on the South of England is expected to drive growth and enable them to out perform the market in 2015. Overall this is a pleasing update that bodes well for the final results released in a couple of months time.