Safestyle UK shares tumble following warning on debts

Safestyle shares continued their downward spiral after the company warned it would not be able to pay its debts if expected losses materialized.

Britain’s biggest seller of doors and windows said it met the conditions of a £7.5m credit facility, which it intends to draw down in the coming months to meet “liquidity and working capital requirements”.

However, the group told investors that if forecast losses occurred for the rest of the year, this would cause a “material shortfall” and mean access to the credit facility could be completely blocked.

Safestyle UK Stock have plummeted 43.2 per cent today to 2.5p, making them the biggest faller on the AIM All-Share Index and continuing their sharp fall since late March, when they were around 30p.

The Bradford-based company revealed it had held “productive” discussions with shareholders and other third parties about welcoming investment to help drive its recovery and fund future growth.

He added that any injection of working capital would not come through a capital increase but rather an “alternative financing structure.”

In addition to this, the company said discussions with its lender to obtain a waiver from the agreement on its revolving credit facility had been “good”, although a full agreement has not been reached.

Safestyle bosses stated that they were optimistic about obtaining “the ongoing support necessary to enable the group to meet the short-term challenges presented by a difficult market environment”.

Safestyle’s announcement comes less than a week after it declared pre-tax losses more than doubled to £6.7m for the six months ending July 2 amid a slowdown in replacement doors and windows market.

Order volumes were affected by rising interest rates, which affected disposable income and consumer confidence and increased the cost of consumer finance products.

As a result, its turnover fell by 5.3 per cent to £74.1 million, even though price increases helped increase the size of customers’ average orders.

The company warned that economic conditions remained “extremely difficult” but noted that inflation was moderating from significantly elevated levels.

It also hopes to benefit from the need to upgrade the UK’s older housing stock, which chief executive Rob Neale called “one of the most attractive opportunities for the business in the medium term”.

Charlie Campbell and Edward Perst, analysts at investment bank Liberum, estimate Safestyle’s annual revenue could reach £180m if it installed more than 180,000 frames in a year.

But if installation rates were to return to peak volumes, the company’s annual sales would reach at least £200m, while its pre-tax profits would likely reach its medium-term target of £20m.