Quarter-on-quarter sales

In the 12 months to September 1999 sales improved steadily with more than one in two fabricators reporting increased sales.

A useful way to look at the results is by the net balance of fabricators reporting either way. If, for example, 60% of fabricators saw an increase in sales and 40% a decrease, the outcome would be a net balance of +20%. A net balance around zero implies that little has changed.

On this basis sales peaked in the North at a net 56% in October-December. Sales were stronger in the South (net 47%) from July-September and in the Midlands (net 54%) in the period October-December. Small companies saw the strongest growth during April-June (net 45%) while medium and large fabricators recorded more increases in October-December (net 58% and 53% respectively).

Increases for trade fabricators were healthy during October-December but more subdued from January-March, although they recovered throughout the second half of the year and ended ahead of retail and commercial fabricators.

Year-on-year sales

Growth started on a high and then slowed down a little but remained healthy all year. In the North, increases were more subdued during January-March (net 29%) but picked back up to a net 55% at the end of the period. Growth in the South dropped over the course of the year and by September a net 24% of fabricators reported year on year sales up compared with a net 83% in January. Trade fabricators ended the period ahead of other types at a net 70%.

Stock

Stock levels increased steadily throughout the year. Companies in the North saw the most significant increases and trade fabricators held the highest levels of stock at the end of the year, despite having reduced stocks in April.

Employment

Growth in numbers employed slowed a little from July-September. The Midlands saw the greatest increase in January-March (when a net 36% of fabricators employed more staff) but also the most muted increases from July-September (a net 19% of fabricators employed more people). Large companies were the most active recruiters throughout the first nine months but slowed considerably during the last quarter to a net 11% taking on more staff.

Orders

Firms recording increased orders improved through the year, from a net 50% in January to a net 55% in October. Companies in the North ended on a particularly high note with 81% recording increased orders in the period July-September. Large companies experienced lower increases in orders from January-March but recovered well and ended with a net 67% of firms improving order volumes. Contract fabricators also recovered from a net 14% to a net 79% in the same period.

Capacity

Companies working at capacity changed little through the year with an overall 2 in 5 companies achieving full capacity. Small companies and those operating in the retail sector outperformed the others at the end of the twelve month period. Less than 1 in 6 trade fabricators achieved full utilisation from January-March but recovered to 1 in 3 by October.

Selling Prices

Prices increased throughout the year, most significantly during January-March when a net 27% of companies increased their selling prices. Large companies and commercial fabricators dropped prices from April-June (net -5% and -6% respectively). The same sector then recorded most price increases during the following quarter (net 33% and 32% respectively).

Price expectations

Firms expecting to increase their selling prices remained steady throughout the year, with expectations slightly lower in April-June. At the end of the period more companies in the North (a net 58%) and fabricators with weekly production of 50-125 frames (net 56%) were anticipating increased prices.

Purchase costs

The cost of raw materials rose through the year with the greatest net increase at the end of the period (net 61%). Companies producing more than 700 frames per week were most successful in keeping costs down (a net -13% experienced a decrease from April-June). Companies in the South and fabricators producing less than 50 frames per week suffered from rising costs.

Investment intentions

Companies forecast more investment spending at the beginning of the year (a net 31%), dropping in April to a net 14% before picking up to a net 23% at the end of the period. In the Midlands planned spending fell away from a net 39% in January to only net 7% in April recovering slightly to 12% in September. Large companies reported varying intentions, from a net 84% planning to invest in January, falling dramatically to -14% in April and again recovering to 22% in September. By September trade fabricators and firms producing more than 700 frames per week were anticipating most investment spending.

Profitability expectations

Profit expectations remained high during the 12 months. Small companies and companies in the Midlands lowered expectations as the year progressed. Fabricators in the South and medium and large sized companies ended on the most optimistic note, as did trade fabricators (a net 70% expecting profits over the next year compared with only 42% in January).

Outlook

The number of fabricators who are more confident about the prospects for the window industry weakened over the year from net 43% in January to net 23% in September with a low point in July (net 16%). Large companies and those in the Midlands lost confidence along with those producing less than 50 frames per week. Companies in the South and medium sized companies ended on a more bullish note.

Overview “At the end of 1999 we looked forward to low inflation, moderate consumer growth and a calming housing market”, says Mike Rigby whose company produced this survey. “The year 2000 was not without its' scares but shock-horror headlines such as the collapse of dot.com shares were mostly short-lived. Even the Millennium bug failed to bite. The petrol crisis may have been costly and mightily inconvenient but at least it gave us something to talk about. With hindsight we can be comfortable in the knowledge that we have enjoyed a more stable year than most economists predicted.

“At the time of writing the Bank of England MBC has voted to leave interest rates unchanged at 6% for the eighth month in succession. The housing market remains sensibly positive and even a jump in headline inflation to 3.3% does not appear to be a major cause for concern.

“And what of the year 2001? Prospects are uncertain. Concerns about the health and stability of the US stock market especially in the light of the current Middle East crisis continue to be aired and may yet impact on us all.

Comment

Gary McCartan, Divisional Director of Profile 22 Systems Ltd who sponsor the Quarterly Trends Survey comments: “Slowly but surely the window industry is changing shape before our eyes. Driven by the first effects of market saturation, its victims include even the largest and slickest operations, the national retailers whose sales have tumbled. Evolution teaches us that the more closely you are adapted to your market or environment, the more successful you will be. But on the downside the more you will suffer when it changes. And those mass-market retailers were very well adapted to the mass-market for replacement windows.

“But every cloud has a silver lining, and there are some highly exciting opportunities for fabricators or installers who are willing and flexible enough to look beyond the onset of saturation and adapt themselves to a more fragmented market. This is good news for smaller or more regionally based companies who are more flexible and better adapted to niche environments than their mass market counterparts.

“When most of the existing housing stock has been replaced, including older and more individual properties, the industry faces the bigger challenge of persuading consumers to upgrade to something better or more attractive. But other related markets, including conservatories and roofline are growing. New build and commercial contracts, and the Government transfer of housing stock to Housing Associations also offer excellent potential. More than anything, changes in the industry imply a real need for change along the entire supply chain. The winners will be those who work closely with their suppliers, evolving and adapting to the new environment.”

The Profile 22 report is produced for The Blue Book by Michael Rigby Associates, and sponsored by Profile 22 Systems Ltd in conjunction with Fabrication and Glazing Industries. The aim is to keep a finger on the market pulse, and to monitor fabricators' views and expectations of market movements. Michael Rigby Associates is a management consultancy specialising in marketing research and training programmes for the window and home improvement markets. The four Quarterly Trends surveys upon which this annual overview is based each cover a representative sample of 100 window fabricators. For each survey, telephone interviews took place across a balanced spread of size of firm, geographical area and type of fabricator. Numbers employed was used as an indication of company size. The categories are small (1-19 employees), medium (20-49) and large (over 50 employees). © Michael Rigby Associates 1999 Further information: Mike Rigby, Michael Rigby Associates (01453 521621)