Safestyle UK shares tumble following warning on debts
- Safestyle UK shares have plummeted by more than 90% since late March
- The firm’s pre-tax losses jumped to £6.7m for the six months ending 2 July
Safestyle shares sustained their downward spiral after the firm warned it would be unable to pay its debts should expected losses come to fruition.
Britain’s largest doors and windows seller said it was compliant with the covenants of a £7.5million borrowing facility, which it intends to utilise in the coming months to uphold ‘working capital and liquidity requirements.’
Yet the group told investors that if anticipated losses for the rest of the year occur, this would cause a ‘material shortfall’ and mean access to the lending facility could be completely blocked.
Talks ongoing: Safestyle UK revealed it had been in ‘productive’ discussions with shareholders and other third parties about receiving investment to help bolster its recovery
Safestyle UK shares have plummeted 43.2 per cent today to 2.5p, making them the biggest faller on the AIM All-Share index and continuing their steep downturn since late March, when they were around 30p.
The Bradford-based business revealed it had been in ‘productive’ discussions with shareholders and other third parties about receiving investment to help bolster its recovery and fund future growth.
It added that any working capital injection would not come through an equity raise but an ‘alternative financing structure.’
Alongside this, the firm said talks with its lender over gaining a covenant waiver on its revolving credit facility had been ‘good,’ although no arrangement has been fully agreed.
Bosses at Safestyle stated they were optimistic about getting ‘the ongoing support required to enable the group to navigate the near-term challenges presented by what is a difficult market context.’
Safestyle’s announcement comes less than a week after it declared pre-tax losses more than doubled to £6.7million for the six months ending 2 July amid a downturn in the replacement windows and doors market.
Order volumes were impacted by rising interest rates hitting disposable incomes and consumer confidence and increasing the cost of consumer finance products.
As a result, its turnover declined by 5.3 per cent to £74.1million even though price hikes helped boost the size of average customer orders.
The company warned that economic conditions remained ‘extremely difficult’ but noted that inflation was moderating from significantly elevated levels.
It also expects to profit from the need to upgrade the UK’s aged housing stock, which chief executive Rob Neale called ‘one of the most compelling opportunities for the business in the medium-term.’
Charlie Campbell and Edward Prest, analysts at investment bank Liberum, estimate that Safestyle’s annual revenues could reach £180million if it installed more than 180,000 frames in a year.
But should installation rates return to peak volumes, the firm’s annual sales would reach at least £200million, while its pre-tax profits would likely hit their medium-term target of £20million.