Bullish Fabricators forecast Stronger Market for 2006

With 14 per cent of conservatory fabricators reporting a fall in sales in October to December 2005 - compared with the previous three months, 9% of fabricators sold less in October to December 2005 compared with the same three months in 2004.

However, Fabricators remain positive with a net 37% anticipating sales growth over the next three months compared with the same period last year (see Chart 4).

32% of fabricators are more confident now about the overall prospects for the conservatory market than three months ago. Small firms (net 36%) and fabricators in the Midlands (43%) are most bullish.

On balance, 11% of fabricators expected the conservatory market to improve by the end of 2005 compared with 2004. Of those forecasting growth, 78% expected an increase of up to 20%.

Overview

‘While the conservatory market and indeed the UK economy are still underperforming' says Mike Rigby, whose company Michael Rigby Associates produced this report, ‘predictions of doom and gloom have not come true. We've escaped the worst with a soft landing, at least for now. In the long term it's a different story.

‘The UK in particular has watched its manufacturing output fall sharply, and public spending, which has fuelled the economy and employment, has eased back. However, it is not all bad news. The housing market has stabilised, and interest rates are relatively low.

‘Despite the confusing picture, there are clues that point towards an upturn in the Conservatory market. With consumers regaining their confidence, new government targets to increase the number of houses built per year, and the settling down of the economy, the home improvement sector will see a modest recovery.

Home-owners still want more space - especially affordable space - and the opportunity to better their lifestyle, and now they seem to be regaining their confidence to pay, and borrow for it. If the industry responds equally confidently, the market will recover and grow in 2006.'

Problems

The main problems facing conservatory fabricators in the last three months were lack of confidence in the market (63%), price cutting (62%) and margin squeeze (58%). The single biggest problem facing fabricators though was a lack of sales leads, mentioned by 21% of respondents.

Comment

‘The past year has been difficult for conservatories' says David Leng, Managing Director of Eurocell, ‘Not as difficult as replacement windows, but at least fabricators and installers selling replacement windows had notice that the market was getting harder and more competitive. There were warning signs from as early as 2000, whereas the conservatory market was storming away until the last quarter of 2004.

‘It was a shock that a market with big potential could stumble so suddenly. But when consumer confidence wilts under rising interest rates and a weaker house market, homeowners spend less and put a hold on their wish list.

‘They haven't gone away, and gloomier scenarios have not materialised. Housing is recovering, and with it consumer confidence. Homeowners are being tempted back to work their way down their wish list, and conservatories remain high on their lists.

‘What is different from the conservatory boom times of 2003-2004 is the number of companies competing for their business, and a more careful spending climate. It is a buyers market.

‘In common with other retail markets consumers expect companies to compete for their business, in value for money and in interest. They do not expect to have to make all the running themselves.

‘Proactive companies, who invest more in marketing, improve their selling, take the trouble to differentiate themselves and tell potential customers why they should buy from them rather than all the others who offer conservatories will do well in a big market with big potential. Those who wait for the telephone to ring could have lots of time on their hands in 2006'.