Safestyle UK PLC (LON:SFE) blamed an “unprecedented set of circumstances” as it swung to a loss in the first half, but shares rose after the double glazing firm reported that order intake is starting to pick up again.
The AIM-quoted firm, which makes and sells PVC windows and doors, was forced to issue two profit warnings earlier this year after an “aggressive” new competitor entered the market.
READ: Safestyle shares climb on settlement
That rival was Safeglaze, which was set up by Safestyle’s founder and former sales chief Mitu Misra.
In addition to taking some business away from it, Safestyle alleged that a number of its staff, including sales and installation staff, had been poached by its competitor.
Bradford-based Safestyle took the newbie to court and sought damages for “passing off, the misuse of confidential information, unlawful means conspiracy and malicious falsehood”.
Earlier this month, the two parties reached an agreement that will see Safeglaze change its name and promise not to make “misleading statements to customers”.
The companies will also work together to prevent the possibility of any “any acts of intimidation or harassment of Safestyle UK representatives”.
With the litigation concluded, Safestyle has seen a rise in orders which, although they won’t feed through into the third quarter results, should see the company return to profitability in the final quarter of the year.
Return to profitability in 2019
The company expects to report a full-year loss of £6.5mln, although it is guiding for a return to profitability in 2019.
For the six months ended June 30, the company posted revenue of £60.5mln (H1 17: £82.5mln) and a loss before tax of £5.7mln (H1 17: Profit of £8.8mln). Given the sudden downturn, the board scrapped the dividend, while its cash position fell to £4.6mln (H1 17: £17.7mln).
“The results announced today reflect an unprecedented set of circumstances faced in the first half of the year that created a number of significant challenges for the business,” said chief executive Mike Gallacher, who was brought in in May.
“The litigation we initiated against an aggressive new market entrant has now concluded in an out of court settlement; as a result, we expect some recovery in the trading position of the company in the second half.”
He added: “The board and the executive team, including a number of new and high calibre appointees, believe in the fundamental strength of the core business model.
“We have developed a three-phase turnaround plan which is designed to stabilise the Group before returning it to profitability and then accelerating growth. The focus of the whole Group is now on delivering this plan quickly and effectively.”
Shares were up 23.4% to 49.9p in late afternoon trading on Thursday.