Sales - quarter-on-quarter

Window sales continue to do well. A balance* of 16% of window fabricators (the difference between 36% who sold more windows and doors and 20% who sold less) sold more windows and doors in the last three months (October to December) compared with the previous three months (July to September) - see chart 1.

More large firms (net 36%) experienced growth than mid-sized (12%) or small companies (9%). Fabricators across the country saw an improvement.

Trade fabricators (net 20%) reported an increase compared with 6% of those in the commercial or retail sectors.

*The difference between the percentage of companies reporting an increase over those reporting a decrease is the net balance.

October - December 2006 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	36%	26%	38%	100%	53
Medium	28%	16%	56%	100%	25
Large	46%	9%	45%	100%	22
Total	36%	20%	44%	100%	100

October - December 2006 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	38%	24%	38%	100%	37
Midlands	36%	19%	45%	100%	31
North	34%	16%	50%	100%	32
Total	36%	20%	44%	100%	100

Sales - year-on-year

Sales also improved compared with the same period last year. A net 34% of companies sold more windows in October to December 2006 compared with the same three months of 2005 (chart 2). Large firms (net 45%) did best but small (34%) and mid-sized companies (24%) also experienced growth.

Fabricators in the Midlands (net 42%) did better than those in the South (32%) and North (28%).

A balance of 41% of retail fabricators also reported better sales. Commercial (38%) and trade fabricators (35%) also did well.

Stocks

A net 2% of fabricators increased stock levels compared with three months ago.

While large (net 9%) and mid-sized firms (4%) built up stocks a net 2% of small fabricators reported a drop.

Trade (net 8%) and commercial fabricators (6%) raised stocks over the period but a balance of 13% of retail firms cut back.

Employment

A balance of 3% of fabricators took on more staff compared with three months ago (chart 3). More large companies (9%) took on staff than mid-sized firms (4%). Staffing in small firms remained the same. Those in the Midlands (net 19%) were most active at recruiting compared with 3% of firms in the North. Eleven percent of firms in the South reduced staffing levels.

Orders

Orders are also up compared with three months ago with a net 17% of fabricators reporting fuller books (chart 4). Large firms (net 45%) and those in the Midlands (23%) picked up most.

Capacity

Thirty two percent of fabricators now say they are working at capacity (chart 5).

Raw materials

A net 85% of fabricators reported a rise in purchase costs of materials compared with three months ago (chart 6). Large fabricators (91%) and those in the South and Midlands (87%) were most affected.

Prices

On balance 16% of fabricators put up prices compared with three months ago (chart 6). Mid-sized firms (24%) and those in the South (32%) were most active in raising prices.

Price expectations

A net 61% of fabricators also expect to put up prices over the next 12 months compared with the previous 12 months.

Investment intentions

On balance 8% of fabricators interviewed expect to spend more on new plant and machinery over the next 12 months compared with the previous 12 months (chart 7).

Outlook

Expectations for the next quarter are good with a balance of 44% of fabricators forecasting an increase in sales in January to March 2007 compared with the previous three months. More large (net 73%) and mid-sized firms (60%) forecast an increase than small companies (25%). Across the country, fabricators are positive.

Commercial fabricators (net 75%) are more optimistic than the trade (45%) or retail secotrs (31%).

On balance 48% of fabricators also expect to sell more in January to March 2007 compared with the same three months of 2006 (chart 8). Large firms (64%) are more bullish than small (47%) or mid-sized companies (36%).

Prospects

A net 11% of fabricators are more confident now about the overall prospects for the window industry than three months ago (chart 9).

Large fabricators (net 32%) and mid-sized firms (20%) are significantly more optimistic than small firms, where 2% are less confident about the future. Fabricators in the Midlands (19%) are more positive than those in the South (8%) and North (6%).

Profitability

With rises in sales and expectations, it is not surprising that a net 39% of fabricators also expect profits to improve over the next 12 months compared with the previous 12 months.

Expectations were strongest among large firms (net 59%) and those in the North 50% and Midlands (42%).

Problems

Margin squeeze (66%), price cutting in the market (63%), and supplier price rises (62%) were the main problems facing fabricators over the last three months.

The single biggest problem over the last three months was supplier price rises, mentioned by 22% of those interviewed.

Comment

"The consumer market (supplied by the trade and retail fabricators) continued to confound the pessimists right up to Christmas and has continued to do so so into January 2007" comments Winston Duguid, Managing Director of WHS Halo, who sponsor this report. "The recovery started in June, where the expected football world cup downturn never materialised, and each month after when fabricators reported a steady improvement. What is encouraging about Januray 2007 is that, despite a surprise interest rate rise, demand is healthier than January 2006. Installers particularly are reporting a good lead influx with some recording almost double the leads against the same period last year.

"The newbuild market remains steady although clearly there is over supply of apartments and under supply of detached properties in some parts of the country. The public sector remains the trickiest market to call. 2006 was supposed to be a boom year in this sector with Decent Homes monies being plentiful. The reality was a sharp postponement in expenditure, particularly in Southern England, as the Treasury exerted its authority on Local Authorities and ALMO's in order to keep public expenditure within the Chancellor's 'golden rule'. Indications are that it is only a postponement and that the market will return after the start of the new financial year (April) when the new three year Comprehensive Spending Review has been settled and at long last we have confirmation that the Decent Homes Standard will have been extended from 2010 to 2012.

"As PVC-U fights back on the sustainability agenda with some impressive progress on the industry's voluntary commitment, the main issue apart from overall demand will be cost increases. Despite oil slipping back to the $50 level from the highs of the late summer of 2006, oil is still double what most of the supply chain have been used to between 1985 and 2004. Whilst the global economy remains in expansionist mode it is most unlikely that materials such as oil and metals will go back to pre 2004 levels, and pricing throughout the supply chain will need to reflect that to protect investment and in some cases solvency."

The WHS Halo Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by WHS Halo in conjunction with The Fabricator. The aim is to keep a finger on the market pulse, and to monitor fabricators' views and expectations of market movements. The survey covers a representative sample of 100 window fabricators. Telephone interviews took place between the 2nd and 19th January 2007 across a balanced spread of size of firm, geographical area and type of fabricator. For survey details or a copy of the full report call Jenny Reilly, Michael Rigby Associates 01453 521621. © Copyright Michael Rigby Associates 2007