Quarterly Trends Report

Window market strong for summer

Sales

Fifty seven percent of fabricators saw an increase in sales in the three months to June compared with the previous three. Eight percent saw a decrease and 35% stayed the same.

The difference between the number of companies reporting an increase over those reporting a decrease is the net balance, expressed as a percentage. A positive net balance indicates growth, a net balance of zero implies little has changed.

On this basis a net 49% of companies recorded an increase in sales. More fabricators in the Midlands (net 59%) saw improvement over the quarter than those in the North or South (49% and 46% respectively). Small and medium-sized companies (net 50%) were just ahead of large companies (47%). Fabricators with a weekly production of over 300 frames (64%) performed best. Trade fabricators (net 69%) recorded better sales increases than retail (58%) or commercial fabricators (24%).

April-June 2003 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	56%	7%	37%	100%	55
Medium	57%	7%	36%	100%	30
Large	60%	13%	27%	100%	15
Total	57%	8%	35%	100%	100

April-June 2003 sales compared with the previous three months - by area

SIZE	Increase	Decrease	Same	Total	Base
South	54%	9%	37%	100%	35
Midlands	63%	4%	33%	100%	27
North	55%	11%	34%	100%	38
Total	57%	8%	35%	100%	100

Compared with the same period of last year a net 43% of firms who took part in the survey increased sales compared with the same period last year (see chart 1). Fabricators in the Midlands (net 56%) reported more activity than those in the North (45%) and South (32%). Sales increases were widespread across all sizes of firms with medium-sized companies (47%) doing best.

Mix of Business

Twenty three percent of the windows and doors produced went into conservatories. Looking to 2005 fabricators expect this to grow to 27%.

Stocks

A net 17% of fabricators increased stock levels this quarter compared with the previous quarter. Firms in the Midlands (net 30%) reported more stock increases than elsewhere. Small companies (net 22%) raised stock levels more than medium-sized companies.

More fabricators producing over 300 frames a week (net 36%) increased stock levels than smaller producers.

Employment

A net 18% of fabricators increased staff between April and June compared with the previous three months (chart 2). Medium sized companies and those in the Midlands (30%) recruited most actively.

Orders

Just under a net one in two fabricators reported increased orders from April to June compared with last quarter (chart 3). Increases were widespread across the country. Medium and large companies (53%) increased order volumes more than small companies (44%).

Capacity

A high 55% of fabricators we spoke to worked at capacity in the quarter (chart 4).

Prices

A net 14% of firms put up their prices in the last three months (chart 5) compared with the previous three. More companies in the South (26%) put up prices than in the North or Midlands. Retail specialists increased selling prices more than trade or commercial firms.

Raw materials

A net 57% of fabricators recorded an increase in the purchase cost of materials in the last three months compared with the previous three (chart 5). All regions bore an increase in purchase costs with the South (71%) being most affected and the North (37%) least so. Small companies bore the brunt.

Price expectations

A net 43% of fabricators expect to increase profit in the next twelve months compared with the previous twelve. Small companies (net 46%) and those in the Midlands (59%) have the greatest expectations.

Investment intentions

A net 25% of companies (chart 6) plan to invest in building, equipment etc in the next twelve months compared with the previous twelve months. Fabricators in the Midlands (41%) expect to spend more than those in the South (29%) and the North (11%). More small companies (35%) plan to invest than medium-sized or large companies.

Outlook

The outlook for the next three months is positive with a net 56% of fabricators expecting to increase sales compared with the last three months (chart 7). More fabricators in the North (66%) expect to do better in the next three months than those in the Midlands or the South (56% and 46% respectively). All company sizes have high expectations with medium sized firms (63%) the most positive. All type of fabricators are optimistic.

Compared with the same period last year sales expectations for the next three months are high with a net 56% of fabricators expecting to grow. All regions are bullish. All sizes of company have high expectations with medium-sized companies (net 60%) the most positive.

Prospects

A net 16% of firms are optimistic about the next three months compared with the previous three months (chart 7). Companies in the Midlands (22%) are more optimistic than the North (19%) and the South (9%). Large companies (29%) are more positive than medium (17%) and small companies (13%). Retail fabricators (21%) are the most optimistic and commercial fabricators (-10%) the least optimistic.

Profitability

A net 43% of fabricators expect profit to improve over the next twelve months compared with the previous twelve. Small companies (46%) and those in the Midlands (59%) are most buoyant.

Problems

Price cutting in the market, margin squeeze and lack of skilled staff were the main problems for fabricators this quarter. The single biggest problem identified by fabricators was lack of skilled staff, highlighted by 32% of those interviewed. This together with the high number of firms operating at capacity is a sure sign of the current strength of the market.

Comment

“The half year is usually one of those points in the calendar where many take stock of progress or otherwise of the market and their respective companies,” comments Winston Duguid, Managing Director of the UK Commercial Division of Bowater Windows, who sponsor this report. “The perception is that there are more differences in company performance this year as opposed to recent previous years. Some of this is down to geography but undoubtedly some of it is due to the company, its brand image and positioning and management.

“Overall estimates of PVCu consumption in the first half is of a total British market at best neutral or flat. Whilst a much better performance than the vast majority of Western Europe markets it is nevertheless disappointing. The new build market has shown some growth and PVCu is still growing market share. The public sector has grown, but in terms of frames nearly all growth is in the North of England (from the Trent upwards). It is puzzling why the South of England has been less quick to address what are, according to Government, urgent priorities of meeting the Decent Homes Standard. The recently published English House Survey still shows a backlog of urgent repairs on the housing stock, standing at an incredible £26bn. The number of dwellings failing to provide a decent home (that is unfit, in need of modernisation or providing insufficient thermal comfort) fell from 9.4m homes (46% of stock) in 1996 to 7m (33%) in 2001. The Government is currently committed to eliminate the non-decent homes in the social sector by 2010.

“Finally the retail / trade sector has perhaps seen the biggest discrepancy in company performance. Many companies, large and small, were looking keenly for business between January and April. May, brought about by the Bank Holidays and the increasing British habit of more shorter holidays, has become a slow month but June saw business pick up and this has carried on through to the second half of July. What is becoming clear is that the progress of conservatories remains firm. More and more players are noticing the percentage of their windows going into conservatories, rather than window replacement, is climbing. A ratio of only 20% a few years back is for many increasingly nearer or above 40%.”

The Bowater Windows Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by Bowater Windows 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. The survey covers a representative sample of 100 window fabricators. Telephone interviews took place between the 1st and the 7th July 2003 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). © Copyright Michael Rigby Associates 2003 For further information contact: Kirsten Storgaard, Michael Rigby Associates (01453) 521621