Quarterly Trends Report

Sales

According to this latest quarterly trends report produced by Michael Rigby Associates a net 42% of fabricators reported an increase in sales compared with the previous three months.

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 net 71% of fabricators in the Midlands were ahead of firms in other parts of the country.

The picture is similar across all size of company and all types of business activity.

October-December 2001 sales compared with the previous three months - by size

SIZE	Increase	Decrease	Same	Total	Base
Small	59%	12%	29%	100%	51
Medium	48%	13%	39%	100%	31
Large	50%	11%	39%	100%	18
Total	54%	12%	34%	100%	100

October-December 2001 sales compared with the previous three months - by area

AREA	Increase	Decrease	Same	Total	Base
South	54%	14%	32%	100%	37
Midlands	75%	4%	21%	100%	28
North	37%	17%	46%	100%	35
Total	54%	12%	34%	100%	100

Year-on-year a net 67% of firms recorded increased sales compared with the same three months of the previous year. As with quarter-on-quarter sales, fabricators in the Midlands are slightly ahead (net 75%) compared with companies in the South (69%) and the North (57%). Firms producing between 50-125 frames per week (net 74%) saw the most significant increases. This compares with companies producing less than 50 frames per week (48%) and those producing in excess of 125 frames per week (70%).

Trade and retail specialists (net 70%) are ahead of commercial specialists (net 36%).

Forty per cent of fabricators recorded an increase in sales of 20% or more.

Conservatories

Just over three in ten companies produce between 10-20% of their windows and doors for conservatories.

Stocks

A net 6% of fabricators overall recorded an increase in stock levels. More firms in the Midlands (18%) grew stocks than companies in the South (3%). Medium and large firms (net -6%) decreased stocks compared with a net 18% of small companies upping levels. Retail firms (net 17%) reported an increase, compared with contract and trade specialists (-7 and -12% respectively) who reduced stocks.

Employment

Overall a net 17% of firms interviewed took on more staff over the three months to December. Medium sized fabricators (net 35%) and firms in the South and Midlands (23%) were the most active.

Orders

A net 41% of fabricators reported fuller order books compared with three months ago. The larger the firm the more widespread the increase.

Companies producing less than 50 frames per week (net 5%) were behind compared with all other size of company. Firms producing between 125-300 frames per week (63%) and contract specialists (net 57%) reported the most increases.

Capacity

Just over three in five outlets overall reported to be working below capacity. More trade specialists (73%) were working below capacity than contract or retail firms (43% and 61% respectively).

Prices

A net 14% of fabricators overall recorded an increase in selling prices compared with three months ago. Companies in the South (16%) and North (20%) were slightly ahead compared with firms in the Midlands (net 4%).

Significantly more large fabricators (net 33%) increased prices with none of those interviewed cutting back. This compares with small companies (8%). More retail specialists (net 17%) reported an increase in selling prices than contract and trade firms (7% and 12% respectively).

Price expectations

A balance of 59% of fabricators expect to hike their selling prices in the next twelve months compared with the previous twelve. Firms in the North and South (net 60% and 69% respectively) expect to up their prices compared with companies in the Midlands (43%). As with last quarter more medium sized firms (net 70%) expect their prices to rise than small (51%) and large companies (61%).

Outlook

A net 35% of fabricators forecast improved sales in the next three months compared with the last three months. Significantly more large firms expect sales to improve (net 67%) with none of those interviewed expecting a decrease. Companies producing over 700 frames per week (71%) expect sales to grow. Retail specialists are ahead (net 44%) compared with commercial (29%) and trade (12%) fabricators.

A balance of just under seven in ten fabricators expect sales to grow in the next three months compared with the same three months of last year. Companies in the North (net 77%) have higher expectations than those in the South (67%) and the Midlands (63%). None of those interviewed in the South or the Midlands forecast a drop. The larger the firm the more widespread the expectation for growth. No small or medium companies expect sales to drop.

Raw materials

A balance of just over three in ten outlets reported an increase in purchase cost of materials compared with three months ago. More firms in the Midlands (net 46%) noted price rises compared with companies in the South and North (32% and 27% respectively). The picture is similar across size of company and business activity.

Investment intentions

A balance of three in ten fabricators plan to increase investment in the next twelve months compared with the previous twelve. More firms in the South and Midlands (43%) plan to increase investment than companies in the North (9%). A balance of just under one in two trade specialists plan to invest more compared with retail and commercial fabricators.

Prospects

A net 32% of companies interviewed are more confident than they were three months ago. The picture is similar across all regions and type of fabricator. Large firms (net 56%) are slightly more optimistic than small and medium companies (24% and 32% respectively).

Profitability

Looking ahead, a balance of just under three in five fabricators expect profits to increase in the next twelve months compared with the previous twelve. Large fabricators (net 89%) and firms in the North (66%) have the highest expectations for improved profits. In terms of weekly production the larger the company the more widespread the expectation for profits to increase. The picture is similar across all types of business activity.

Problems

Price cutting in the market, margin squeeze and lack of skilled staff continue to be the main concerns for fabricators.

The single biggest problem reported by 26% of companies interviewed this quarter was again lack of skilled staff. In contrast 8% of fabricators reported experiencing no problems at all.

Comment

In the last report Dr Ron Shakesheff, Chief Executive of Bowater Windows, whose company sponsor this survey, commented on the immediate aftermath of September 11th, the response of the International Finance Community and the impact on the window industry. He noted that whilst the impact initially had not been too severe, the next few months were critical in assessing the longer-term impact.

In this report, he comments that consumer confidence in the UK has remained strong and with continued increased spending by local authorities, the prospects for 2002 for the UK window industry are optimistic. Low interest rates and very low inflation have encouraged consumers to keep spending particularly on home improvement items.

“Looking at the other three large European Window markets, there are different developments to report. The position in Germany is very different to the UK with much lower confidence in the economy, much higher unemployment and continued recession. Building and construction related expenditure is even more depressed than the economy as a whole. The replacement window market has declined substantially with growing business failure amongst fabricators. France's position appears to be somewhere between the British and the German position. Whilst economic growth has continued, the French Window market has seen little growth.”

“In contrast Poland has seen a mini-recovery, interest rates have fallen and consumer expenditure has risen. It is still too early to judge whether this revival is a short-term affair or marks a better longer-term trend. Czechia continues to perform well and growth is strong in other Eastern European Countries.” “Looking at the UK market in more detail, companies with a broader market base, with less dependence on the retail sector, appear to be performing well. Government expenditure should ensure further growth in the Public Sector market, although the Chancellors scope for further increases looks limited.”

“The New Build market is more difficult to predict. Rapidly rising house prices, combined with low increases in material costs, have enhanced margins for builders. In turn they have been rationing the number of houses they are building focussing more on improving margins. If house prices stabilise they may decide to increase their output, which will assist PVCu window producers who have a large share of this market.” “The main concern is the retail window replacement market which is inevitably becoming more saturated. If interest rates rise later in the year, this could slow down demand.”

“Conservatories, however, are likely to grow rapidly in 2002 irrespective of the general economic climate, as consumers continue to recognise the excellent value for the money of the product compared with other ways of increasing living space.”

“There are three other important issues facing the UK window industry. The first of which is Building Regulation Part L in England and Wales, and Part J in Scotland, now very close to implementation. The setting up of FENSA has been a remarkable success enabling the industry to respond positively to the Government Environmental Legislation whilst minimising the risk of unnecessary, expensive and bureaucratic systems.”

“The second is the Environmental Lobby. The European Profile Producers Association (EPPA) has drafted a Voluntary Commitment whereby we commit ourselves as an industry to recycle 25% of available, collectable post consumer windows by 2003 and 50% by 2005. There is also a commitment to reduce the use of lead by 30% by 2010. The issues involved in this Voluntary Commitment are numerous and the BPF has taken the initiative in setting up working parties that will report back within the next few months on how our Commitment can be implemented.”

“The third issue is a draft European Standard for windows and external doors currently being prepared which excludes a number of requirements currently in BS7412. If this draft standard is published as a BS EN then some fear that any manufacturer can claim compliance with the British Standard with an inferior window or door to that which we can currently provide at, presumably, a lower cost.”

“All three issues are important and the latter two, in particular, will require extrusion companies to co-operate with each other on a scale that has not been known for some years.”

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 4th and the 8th January 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