Quarterly Trends Report

Document L is no break for sales

Sales

According to this latest quarterly trends report produced by Michael Rigby Associates more than three in five fabricators reported an increase in sales compared with the previous three months. Fewer than one in five recorded a decrease and sales had stayed the same for just over one in five.

A useful way to look at this 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 net balance would be +20%. Reverse the figures and it would be a net -20%. A balance of zero implies that little has changed.

On this basis a balance of 44% fabricators improved sales compared with the previous three months.

More firms in the North (net 63%) recorded an increase in sales than those in the Midlands (54%) and the South (23%). The larger the company the more widespread the increase. Retail firms are ahead of commercial and trade fabricators with a net 53% of retail specialists reporting increased sales.

January-March 2002 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	56%	24%	20%	100%	55
Medium	65%	12%	23%	100%	26
Large	68%	5%	27%	100%	19
Total	61%	17%	22%	100%	100

January-March 2002 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	47%	25%	28%	100%	40
Midlands	68%	14%	18%	100%	28
North	72%	9%	19%	100%	32
Total	61%	17%	22%	100%	100

Compared with the same period of 2001 a net 65% of fabricators had higher sales. Significantly more medium and large outlets (net 76%) reported an increase in sales than small firms (56%). The larger the company by weekly production the more widespread the increases. A net 67% of retail fabricators saw sales rise over the period. Trade and commercial specialists also saw growth (60% and 59% respectively).

Forty-seven per cent of firms had sales growth of 20% or more over the same period last year.

Conservatories

Just under 30% of companies turn more than 20% of their windows and doors into conservatories.

Stocks

A net 31% of fabricators increased their stocks this quarter. As with last quarter firms in the Midlands (net 43%) increased stocks, more than those in the North and the South (31% and 23% respectively). Small companies (40%) grew stock levels more than large (21%) and medium sized firms (19%). More retail specialists (37%) increased stock levels than commercial or trade firms (24%).

Employment

A balance of fewer than three in ten fabricators took on more staff in the last three months. The Midlands (net 43%) were more active than those in the North (31%) or South (13%). The larger the company by number of employee, the more widespread the increase. Fabricators producing less than 50 frames per week were most cautious (net 4%).

Orders

A balance of 56% of fabricators reported an increase in orders compared with three months ago. The Midlands and medium-sized companies did better than others.

Significantly more firms producing between 50-125 frames per week and in excess of three hundred frames per week (net 76%) reported an increase than fabricators producing less than fifty frames per week (46%) and those producing between 125-300 frames per week (35%). Retail specialists are ahead (net 63%) compared with trade and commercial firms (46% and 35% respectively).

Capacity

Just over one in two fabricators were working below capacity. Trade specialists had the most capacity (77%). Small fabricators too had more spare capacity than larger firms.

Prices

A net 38% of fabricators raised selling prices compared with the previous three months. Firms in the North were more active (net 44%) than others.

The picture is similar across size of company by number of employees. But those making more than 700 frames a week and those who made less than fifty a week were slower to raise prices.

Price expectations

A net 75% of fabricators expect to put up their selling prices in the next twelve months compared with the last twelve. This is similar for firms across the Country. No one we spoke to expects to drop their prices.

The smaller the company the more widespread the expectation to raise prices. Firms producing between 125-300 frames per week (net 85%) expect to increase prices compared with companies producing in excess of three hundred frames per week (53%). More trade specialists forecast a rise in prices (85%) than any other business activity.

Outlook

A balance of 51% of companies expect sales to gather momentum in the next three months. Expectations are similar across all regions. Both small and large businesses (56%) are more confident than medium sized firms (39%). More fabricators producing between 50-125 frames per week (net 62%) expect sales to improve than any other size of company. Trade specialists (net 77%) are more bullish than commercial or retail firms (35% and 38% respectively).

Compared with the same period last year a balance of more than three in five fabricators expect sales to increase in the three months to June. The larger the fabricator by weekly production the more widespread the expectation of growth. Trade specialists are again slightly ahead in their expectations (net 68%) compared with retail firms (65%) and commercial companies (59%).

Raw materials

Just over one in two firms suffered a rise in the purchase cost of materials compared with three months ago. More companies in the South (58%) noted price rises than firms in the North (50%) and Midlands (43%). More medium sized companies were hit harder than either large or small firms.

Investment intentions

Overall a net 36% of fabricators plan to spend more on plant and machinery in the next twelve months. More firms in the North (net 44%) are planning to invest than those in the South and Midlands (35% and 29% respectively). Medium sized fabricators and those making more than 700 frames a week will be first to invest.

Prospects

A balance of just over three in ten fabricators are more confident than they were three months ago. The picture is similar across region. Large companies are more bullish (net 44%) than small and medium sized firms (31%). Trade and retail specialists are more optimistic than commercial firms.

Profitability

Overall a net 54% of fabricators forecast better profits in the next twelve months compared with the previous twelve. Firms in the North (net 69%) are more confident than companies in the Midlands (57%) and the South (40%). Large fabricators are most certain of profit improvements. Trade fabricators (net 69%) are more bullish than retail firms (55%) and commercial companies (24%).

Problems

Lack of skilled staff and price cutting in the market continue to be the main concerns. Too much volume is also a concern this quarter. Surprisingly, given its importance and the focus given to Document L, only four mentioned it.

The single biggest problem reported by 29% of the firms interviewed this quarter was lack of skilled staff. Just 3% of fabricators reported experiencing no problems at all. Staff training (42%) and marketing (27%) are thought to be the most important issues in the coming twelve months.

Comment

Dr Ron Shakesheff, Chief Executive of Bowater Windows, whose company sponsored this survey, reflects on the resilience of the UK Window market.

“At the start of 2002 prospects were uncertain and the threat of a worldwide recession was still real. Four months into the year the UK economy appears to be holding up well, helped by resurgence in the USA and this has been reflected in the Home Improvement market. Low interest rates and continued growth in house prices have encouraged consumers to increase expenditure on their homes.”

“The introduction of Document L and the work of FENSA have increased consumer awareness of the benefits of higher quality more thermally efficient windows, both for replacement and New Build. This can only help the industry in the future and make life more difficult for the lower price, poor quality "cowboys" in our industry.”

“Similarly, the Public Sector market continues to benefit from increased expenditure and the transfer of Council properties to Housing Associations. With the notable exception of Birmingham, the majority of tenants seem supportive of this move.”

“In the short-term UK prospects appear good but longer-term there are a number of concerns. The problems in the Middle East, their impact on oil supplies and price and the "knock on" effect on PVC resin are one concern. The likely increase in interest rates and the adverse impact this has on consumer confidence and house prices is another. Of course, the saturation of the UK Window replacement market remains and may have been accelerated by the strong sales in early 2002.”

“However, on a positive note Conservatory sales have outstripped even the most optimistic forecasts and this trend should continue, if at a lower growth rate, even if the UK economic climate worsens.”

“Turning to Continental Europe, Germany remains in a very poor state, with increasing bankruptcies, such as Holtzman in the Construction industry and Kirch in Media. Demand has fallen further in 2002 from an already very low base. There are some signs of a mini-recovery in the German economy but it may be a "false alarm". The other major European economies, although not as bad, are projected to have another year of no window growth.”

“In contrast in Poland, the Window industry remains very buoyant, interest rates continue to fall and longer-term demand is very high. Lack of financial institutions to provide credit is holding back consumers. Poland is now both the fourth largest window market in Europe and the fourth largest PVCu window market in Europe. The Czech Republic has also seen rising sales and other Eastern European countries continue to grow from a low base.”

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. Michael Rigby Associates is a management consultancy specialising in marketing research, marketing and business improvement for the window and home improvement markets. The survey covers a representative sample of 100 window fabricators. Telephone interviews took place between the 2nd and the 4th April 2002 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, 2002 Further information: Fiona Lund, Michael Rigby Associates, tel (01453) 521621