The
TimberWindows.com Bi-Annual Trends Report
‘The last six months have seen some of the most challenging economic
conditions for many years’, says Neil Parsonson of Rigby Research,
which produced this report. ‘As the full extent of the US subprime
mortgage issue unfolded, its impact around the world became clear and
losses are expected to reach $1.3 trillion - 60% of which will affect
countries other than America.
‘The squeeze on credit has hit the housing market on all fronts.
The number of new homes sold in the final six months of 2007 was down
54% on the same period of 2006. House builders who would sell homes off
plan now have undeveloped plots standing idle. The boom in flats has fallen
away as buy-to-let investors struggle to find tenants. Sales of residential
property have fallen by 18% in the same period. Overall, 150,000 fewer
homeowners moved home. The range of mortgage offers has been heavily reduced
and the days of loans exceeding 100% of a property's value are over. The
credit squeeze has also hit the High Street, with many retailers reporting
weaker sales as consumer confidence falters. B&Q, Travis Perkins and
Homebase have all issued warnings of difficult times ahead and the BMF
reported merchant sales down 4.4% in the final quarter of 2007.
‘The CBI is forecasting UK growth of 1.7% this year, some way below
the Chancellor's expectation and well below the 3.1% achieved in 2007.
But talk of recession is premature. Latest employment figures show record
numbers in work. Further interest rate cuts will take place, the next
one possibly in April, easing pressure on the economy. It's clear that
if consumers want something enough they will go and buy it. For example,
new car sales in January and February this year reached 97% of the volume
sold 12 months previously - so most of the market is still there. It proves
that consumers prepared to spend large amounts are out there and spending
freely. Housing and home improvement is down, but not out’
Sales
A net* 20% of timber window manufacturers increased sales in the last
six months (September 2007-February 2008) compared with the previous six
months (March - August 2007) - see chart 1. Seventy-three percent of those
reporting a rise saw growth of 10% or more.
Large firms (net 60%) did best but small and mid-sized companies (14%
and 19% respectively) also sold more. A net 41% of manufacturers in the
Midlands saw sales rise compared with 15% of firms in the South and 6%
in the North.
* The difference between the percentage of companies reporting an increase
over those reporting a decrease is the net balance.
A balance of 28% of manufacturers also saw an improvement in the last
six months compared with the same six months of the previous year (chart
1).
More large firms (net 70%) saw rises than mid-sized (31%) and small firms
(19%). A net 55% of Midlands firms saw sales rise, compared with 21% in
the South and 13% in the North.
Forecasts
Forecasts for the next six months remain positive. On balance 23% of manufacturers
expect to sell more timber windows in the next six months (March - August
2008) compared with the previous six months (September 2007 - February
2008) - see chart 2. Large firms (net 60%) are most bullish but small
and mid-sized companies (19%) also expect growth. Manufacturers across
all parts of the country forecast higher sales.
Similarly a balance of 24% of manufacturers expect to sell more timber
windows in March - August 2008 compared with the same period 12 months
ago - see chart 2. Large firms (60%) are particularly confident compared
with small and mid-sized companies (20%)
Profits
A net 35% of manufacturers expect profits to increase over the next six
months compared with the previous six months (chart 3). More large firms
(net 70%) expect profit growth than small and mid-sized firms (31%).
Order Volumes
A net 27% of manufacturers report fuller order books compared with six
months ago (chart 4). Large firms (net 80%) were ahead of mid-size (28%)
and small companies (17%). More manufacturers in the Midlands (net 41%)
have increased orders than those in the South (26%) or North (16%).
Employment
On balance, 13% of firms took on more staff compared with six months ago
(chart 5). More large companies (40%) increased their workforce compared
with mid-sized (19%) and small firms (5%). A greater number of companies
in the South and Midlands (net 18%) took on more staff than those in the
North (3%).
Buying Prices
A balance of 83% of manufacturers reported higher purchase costs over
the last six months (chart 6) and this was reflected across all regions.
Large firms (net 40%) were least likely to have faced increases compared
to small and mid-size firms (88%). Half of all companies facing increases
reported rises of 10% or more.
Selling Prices
A net 57% of manufacturers put up prices compared with six months ago
(chart 6). This was mirrored across firms of all sizes and in all regions.
Of those who raised prices, 40% increased them by 10% or more.
Prospects
Manufacturers are confident with a net 30% more optimistic now about the
overall prospects for the timber window market than six months ago (chart
7). Large firms (70%) are more bullish than small and mid-sized companies
(26%). Those in the North (38%) were more optimistic than firms in the
Midlands (31%) and South (23%).
Investment
intentions
On balance, 14% of manufacturers expect to invest more on plant and machinery
over the next 12 months compared with the previous 12 months (chart 8).
Large companies (net 70%) are most likely to spend more this year compared
with mid-sized firms (18%) and small companies (2%). Those in the South
and North (net 18%) are more likely to increase investment than firms
in the Midlands (3%).
Window types and styles
Looking at styles manufactured, 53% are casements, 35% are vertical sliding
sashes, 5% reversible/pivots, 5% are tilt-turns and other styles account
for 2% (chart 9). Manufacturers report that 74% percent of softwood windows
and 77% of hardwood windows come from a certified or approved sustainable
source.
Problems
Supplier price rises (74%), margin squeeze (53%), slow payments &
bad debts (47%), a lack of skilled staff (45%), cash flow (43%) and changes
in legislation (42%) were the main problems experienced by manufacturers
over the last six months. However, a lack of skilled staff was the single
biggest problem, mentioned by 31% of those interviewed (chart 10).
Comment
‘Despite the current economic challenges, people are turning to timber
windows in ever bigger numbers’, says Chris Brunsdon, Managing Director
of TimberWindows.com, which sponsors this report. ‘Recent headlines
have made sobering reading - a squeeze on mortgage lending, falling house
prices and a tough time for many in the home improvements marketplace.
But it's not all bad news. In a market where the volume of PVC-U windows
continues to decline, sales of timber windows are up yet again. This latest
report indicates that more home owners than ever are prepared to pay a
premium over PVC-U to get a product that looks good and will enhance their
property. Some installers are afraid of timber's price premium but I think
this is an irrational fear. Homeowners are happier to pay for something
if they know it's worth it - and most know that putting in timber windows
will add value to their property and see it as a sound investment.
‘The challenge our industry faces is to ensure that the benefits
of timber windows are marketed strongly. For many, the opportunity to
restore the character of their home with modern, efficient timber windows
is one that needs to be explained and exploited. This will be especially
true if a homeowner's last experience of timber was of draughts and decaying
wood. Installers need to play their part in selling the long term benefits
of investing in timber if they are to make the most of a growing market.
In short, the smart money is on timber windows’.
For survey details or a copy of the full report call Stephanie Bradfield
on 01453 521 621 or visit http://www.rigby-research.co.uk
