Quarterly Trend Report

Trade Fabricators & Commercial firms see better times while Retail fabricators feel the cold

Sales - quarter-on-quarter

A net* 21% of fabricators sold more windows and doors in the last three months (July to September) compared with the previous three months (April to June) - chart 1. Large companies (37%) did better than small (18%) or mid-sized fabricators (16%).

Notably more firms in the Midlands (net 42%) increased sales than those in the South (17%) or North (3%). Commercial (40%) and Trade (35%) fabricators were ahead of Retail companies (5%).

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

July - September 2005 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	39%	22%	39%	100%	56
Medium	28%	12%	60%	100%	25
Large	42%	5%	53%	100%	19
Total	37%	16%	47%	100%	100

July - September 2005 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	38%	21%	41%	100%	39
Midlands	48%	7%	45%	100%	31
North	23%	20%	57%	100%	30
Total	37%	16%	47%	100%	100

Sales - year-on-year

Compared with the same three months last year, a net 20% of fabricators sold fewer windows and doors in the last three months (chart 2). Small (27%) and mid-sized (24%) firms suffered the most. A net 5% of large fabricators reported better sales.

Whilst companies in the South (34%) and North (26%) sold less over the period, a net 3% of fabricators in the Midlands saw sales rise. As in the last quarter, commercial fabricators did best with 4% reporting growth compared with a balance of 29% of retail firms and 25% trade fabricators whose sales fell.

Stocks

Overall, in this quarter's survey, fabricators reported no change in stock levels compared with three months ago. Fabricators in the Midlands (10%) and North (7%) built up stocks but a net 13% of firms in the South reported a fall.

Employment

Few fabricators took on new staff compared with three months ago (chart 3). Large (net 5%) and small (3%) companies and those in the North (14%) and Midlands (10%) continued to recruit, as did commercial (19%) and trade fabricators (15%). But mid-sized firms (8%), companies in the South (15%) and retail fabricators (14%) cut back.

Orders

A net 11% of fabricators reported fuller order books compared with three months ago (chart 4). Large (27%) and mid-sized firms (16%) did better than small fabricators (3%). Significantly more companies in the Midlands (net 36%) increased orders than those in the South (8%). Fabricators in the North (10%) recorded a drop in orders.

Trade firms (45%) were ahead of commercial fabricators (22%). Retail companies (6%) reported a drop in orders.

Capacity

Thirty one per cent of fabricators worked at capacity during July to September (chart 5). This is a sharp fall compared with 55% in the same period last year.

Raw materials

On balance, just over a third of fabricators absorbed an increase in the cost of materials compared with three months ago (chart 6). This is similar across firms of all sizes and in all regions, with the exception of large companies where not as many were affected by rising costs (21%).

Prices

For the second quarter in succession a net 3% of firms reported a drop in selling prices compared with three months ago (chart 6). The picture is similar across the board apart from mid-sized firms (8%) and those in the Midlands (4%) who raised prices. Notably more trade fabricators cut prices than commercial fabricators. Retail firms reported no change.

Price expectations

However, a net 31% of fabricators expect to have to increase prices in the next 12 months compared with the previous 12 months.

Investment intentions

Despite the capacity surplus, a net 12% of fabricators are still planning to invest more on plant and machinery over the next 12 months compared with the last 12 months (chart 7). Notably more large firms (net 21%) are looking to invest than small (13%) or mid-sized firms (4%). Fabricators in the Midlands (36%) and South (11%) expect to spend more but those in the North plan to cut back (10%).

Significantly more trade fabricators (40%) intend to invest than commercial companies (18%). A small number of retail firms (2%) are looking to spend less.

Outlook

Whatever their concerns about the overall market, a balance of 7% of fabricators expect to sell more windows and doors over the next three months (October to December) compared with the last three months. Small and mid-sized firms expect to do better but large companies forecast a drop. There is quite a difference between regions with fabricators in the Midlands (26%) anticipating higher sales, firms in the South expecting no change and those in the North forecasting a fall.

However, compared with the same period last year, a net 9% of fabricators expect to sell less over the next three months (chart 8). Looking at chart 3, we can see that this is the first time fabricators have forecast lower sales than the previous year.

In contrast to their views on quarter-on-quarter expectations, small and mid-sized firms (16%) forecast lower sales while large companies expect to sell more (21%). Fabricators in the Midlands and commercial companies are the most positive.

Prospects

A net 3% of fabricators are less confident now about the overall prospects of the window industry than three months ago (chart 9). Mid-sized (12%) and small companies (5%) are less optimistic but large firms (16%) are still bullish. Fabricators in the North are most positive.

The trade (net 10%) and commercial sectors (7%) remain confident but retail firms (15%) are less sure.

Profitability

A net 18% of fabricators forecast better profits in the next 12 months compared with the previous 12 months. Expectations are strongest in large fabricators (48%) and the North (31%).

Fabricators across all sectors are looking for better profits in the coming year, particularly trade fabricators.

Problems

Lack of confidence in the market (63%) and margin squeeze were the two main problems facing fabricators in the last three months. However, many also experienced low sales volume (58%) and price cutting in the market (54%).

The single biggest problem affecting sales of windows and doors was lack of sales leads (29%). This is the same as last quarter although there were more mentions for it in this quarter's survey.

Comment

“All three market sectors - consumer, public and housebuilding have suffered reverses in 2005," comments Winston Duguid, Managing Director of WHS Halo, who sponsor this report. "You have to go as far back as 1992, in the midst of the last economic recession, for a similar period. The hardship of the consumer sector has been well documented in the national press and all retailers, particularly those in home improvements, have suffered to a greater or lesser degree. The slow down in the housing market has had a predictable effect in the new build sector.

“The sector where there is a surprise is in social housing. With a government committed to the Decent Homes Standard and with councillors up and down the land who want re-election next May, it is incredible that a hiatus in social housing has been allowed to develop. Lack of funding, delay in housing stock transfer, and perhaps most frustratingly a bureaucratic log jam in deciding procurement policy have all contributed to what must be a temporary blip in the public sector.

“Looking ahead to 2006 Robert Palmer is forecasting a future decline in consumer windows, a modest pick up in conservatories and better times in both the new build and public sectors. The market won't be doing any of the industry participants any favours next year. Cutting out unnecessary cost, investing in machinery that gives better productivity and finding benefits that allow higher pricing based on genuine product and company differentiation will remain key for all those who want to succeed in 2006.”

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 12th and 21st October 2005 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 Lucia Di Stazio, Michael Rigby Associates 01 453 521 621 © Copyright Michael Rigby Associates 2005

Notably more firms in the Midlands (net 42%) increased sales than those in the South (17%) or North (3%). Commercial (40%) and Trade (35%) fabricators were ahead of Retail companies (5%).

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

July - September 2005 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	39%	22%	39%	100%	56
Medium	28%	12%	60%	100%	25
Large	42%	5%	53%	100%	19
Total	37%	16%	47%	100%	100

July - September 2005 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	38%	21%	41%	100%	39
Midlands	48%	7%	45%	100%	31
North	23%	20%	57%	100%	30
Total	37%	16%	47%	100%	100

Sales - year-on-year

Compared with the same three months last year, a net 20% of fabricators sold fewer windows and doors in the last three months (chart 2). Small (27%) and mid-sized (24%) firms suffered the most. A net 5% of large fabricators reported better sales.

Whilst companies in the South (34%) and North (26%) sold less over the period, a net 3% of fabricators in the Midlands saw sales rise. As in the last quarter, commercial fabricators did best with 4% reporting growth compared with a balance of 29% of retail firms and 25% trade fabricators whose sales fell.

Stocks

Overall, in this quarter's survey, fabricators reported no change in stock levels compared with three months ago. Fabricators in the Midlands (10%) and North (7%) built up stocks but a net 13% of firms in the South reported a fall.

Employment

Few fabricators took on new staff compared with three months ago (chart 3). Large (net 5%) and small (3%) companies and those in the North (14%) and Midlands (10%) continued to recruit, as did commercial (19%) and trade fabricators (15%). But mid-sized firms (8%), companies in the South (15%) and retail fabricators (14%) cut back.

Orders

A net 11% of fabricators reported fuller order books compared with three months ago (chart 4). Large (27%) and mid-sized firms (16%) did better than small fabricators (3%). Significantly more companies in the Midlands (net 36%) increased orders than those in the South (8%). Fabricators in the North (10%) recorded a drop in orders.

Trade firms (45%) were ahead of commercial fabricators (22%). Retail companies (6%) reported a drop in orders.

Capacity

Thirty one per cent of fabricators worked at capacity during July to September (chart 5). This is a sharp fall compared with 55% in the same period last year.

Raw materials

On balance, just over a third of fabricators absorbed an increase in the cost of materials compared with three months ago (chart 6). This is similar across firms of all sizes and in all regions, with the exception of large companies where not as many were affected by rising costs (21%).

Prices

For the second quarter in succession a net 3% of firms reported a drop in selling prices compared with three months ago (chart 6). The picture is similar across the board apart from mid-sized firms (8%) and those in the Midlands (4%) who raised prices. Notably more trade fabricators cut prices than commercial fabricators. Retail firms reported no change.

Price expectations

However, a net 31% of fabricators expect to have to increase prices in the next 12 months compared with the previous 12 months.

Investment intentions

Despite the capacity surplus, a net 12% of fabricators are still planning to invest more on plant and machinery over the next 12 months compared with the last 12 months (chart 7). Notably more large firms (net 21%) are looking to invest than small (13%) or mid-sized firms (4%). Fabricators in the Midlands (36%) and South (11%) expect to spend more but those in the North plan to cut back (10%).

Significantly more trade fabricators (40%) intend to invest than commercial companies (18%). A small number of retail firms (2%) are looking to spend less.

Outlook

Whatever their concerns about the overall market, a balance of 7% of fabricators expect to sell more windows and doors over the next three months (October to December) compared with the last three months. Small and mid-sized firms expect to do better but large companies forecast a drop. There is quite a difference between regions with fabricators in the Midlands (26%) anticipating higher sales, firms in the South expecting no change and those in the North forecasting a fall.

However, compared with the same period last year, a net 9% of fabricators expect to sell less over the next three months (chart 8). Looking at chart 3, we can see that this is the first time fabricators have forecast lower sales than the previous year.

In contrast to their views on quarter-on-quarter expectations, small and mid-sized firms (16%) forecast lower sales while large companies expect to sell more (21%). Fabricators in the Midlands and commercial companies are the most positive.

Prospects

A net 3% of fabricators are less confident now about the overall prospects of the window industry than three months ago (chart 9). Mid-sized (12%) and small companies (5%) are less optimistic but large firms (16%) are still bullish. Fabricators in the North are most positive.

The trade (net 10%) and commercial sectors (7%) remain confident but retail firms (15%) are less sure.

Profitability

A net 18% of fabricators forecast better profits in the next 12 months compared with the previous 12 months. Expectations are strongest in large fabricators (48%) and the North (31%).

Fabricators across all sectors are looking for better profits in the coming year, particularly trade fabricators.

Problems

Lack of confidence in the market (63%) and margin squeeze were the two main problems facing fabricators in the last three months. However, many also experienced low sales volume (58%) and price cutting in the market (54%).

The single biggest problem affecting sales of windows and doors was lack of sales leads (29%). This is the same as last quarter although there were more mentions for it in this quarter's survey.

Comment

“All three market sectors - consumer, public and housebuilding have suffered reverses in 2005," comments Winston Duguid, Managing Director of WHS Halo, who sponsor this report. "You have to go as far back as 1992, in the midst of the last economic recession, for a similar period. The hardship of the consumer sector has been well documented in the national press and all retailers, particularly those in home improvements, have suffered to a greater or lesser degree. The slow down in the housing market has had a predictable effect in the new build sector.

“The sector where there is a surprise is in social housing. With a government committed to the Decent Homes Standard and with councillors up and down the land who want re-election next May, it is incredible that a hiatus in social housing has been allowed to develop. Lack of funding, delay in housing stock transfer, and perhaps most frustratingly a bureaucratic log jam in deciding procurement policy have all contributed to what must be a temporary blip in the public sector.

“Looking ahead to 2006 Robert Palmer is forecasting a future decline in consumer windows, a modest pick up in conservatories and better times in both the new build and public sectors. The market won't be doing any of the industry participants any favours next year. Cutting out unnecessary cost, investing in machinery that gives better productivity and finding benefits that allow higher pricing based on genuine product and company differentiation will remain key for all those who want to succeed in 2006.”

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 12th and 21st October 2005 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 Lucia Di Stazio, Michael Rigby Associates 01 453 521 621 © Copyright Michael Rigby Associates 2005