Safestyle UK says Russia cyber attack to hit earnings

Shares of Bradford-based window and door company Safestyle UK fell about 6% on Monday after it said that a recent cyber attack from Russia will have a 10% impact on its first-half revenues and a material impact on its expectations for first-half earnings.

“Further to our announcement on 28 January 2022 regarding a cyber incident, the group is now able to provide an update on the recovery process and impact on trading,” said Safestyle.

“The incident occurred on 25 January 2022 and was a highly sophisticated attack that we are advised emanated from Russia.

“The impact of the attack was mitigated by recent investments to modernise our IT infrastructure.

“Further, through effective business continuity actions, the business has been able to continue to sell, survey, manufacture and install since the attack.

“Our sales momentum, supported by our return to TV advertising on 14 February, has remained strong and our order book has continued to build.

“Our balance sheet, liquidity and net cash positions remain healthy and are comparable to those levels previously communicated at the end of 2021 (net cash is currently over £12m).

“Order processing and customer services operations were, however, severely impacted by the attack and our On Time in Full (OTIF) levels were increasingly disrupted until the relevant installations systems were successfully recovered.

“That recovery has now been achieved and we expect the level of disruption to markedly reduce as we return to normal business operations over the next month or so.

“Whilst the issue itself is largely behind us, the board has concluded that the interruption to our usual order processing and customer service levels, and the required recovery, will have a c.10% impact on our H1 revenues and, therefore, a material impact on our expectations for H1 earnings.

“This is expected mainly to impact trading in the first quarter of 2022.

“With OTIF run rates now quickly expected to return to targeted levels, a strong order book and a high level of confidence that we will maintain good levels of order intake, we maintain our guidance for H2.

“After careful consideration, we have decided not to change our strategic investment plans in 2022, including our return to TV advertising, and we also expect, in light of the attack, to accelerate our existing multi-year IT investment plans.

“As a result, and in the absence of other external factors, cashflow is expected to be broadly neutral for the year.

“Our core business systems are now operating effectively and our focus will be in recovering our customer service levels, sustaining our strong sales momentum and continuing our focus on our strategic agenda.

“Finally, the incident has delayed the timing of completion of the audit for the year ended 2 January 2022 (‘FY 21’) and the board advises that the full year results for FY 21 will now be announced on 21 April 2022.

“The results update and guidance for FY 21 communicated on 26 January remain unchanged.”

Safestyle CEO Mike Gallacher said: “This has been another huge challenge for the business, impacting us as we emerged out of the operational disruption caused by the pandemic.

“Whilst it has been tough, our people have responded with resilience, flexibility and incredible levels of commitment to ensure that we have minimised the impact on our customers and our business performance.”