Safestyle UK PLC (LON:SFE) shares plummeted on Wednesday morning as the company said it expects to report “small underlying loss before tax” and group revenues to be below market expectations.
In a trading update, the AIM-listed firm said it expects to report exceptional cash costs of approximately £6mln, due to fine following the Health & Safety Executive investigation, the costs of the legal action against NIAMAC Developments Ltd and restructuring costs.
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The company said against a background of weaker consumer spending on higher value home improvement products, order intake has firmed up in recent weeks, albeit at a lower level than the previous management team had expected.
Safestyle UK said gross margins in the current year have been impacted through higher digital marketing costs and sales commissions.
As a result of the loss of profits and exceptional costs in the current financial year, offset by working capital management, the company said it expects to report a break-even cash balance at the year-end.
In morning trading, Safestyle’s shares fell 17.9% to 40.80p.
In a note to clients, analysts at Liberum Capital said they cup Safestyle’s price target to 40p from 60p to anticipate the likely stock market reaction.
“But we are starting to see significant upside on a two year view if recovery takes hold, noting that the shares would only be on two times peak earnings at that level,” the analysts said.
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