Forecasts buck slowdown: competition will intensify in the slower economy in 2005

The Global Roof Conservatory Quarterly Trends Report appears in Conservatory Design & Build. As well as the quarterly trend survey, monthly trackers are published in intervening months in Glass Age. The report, a quarterly trends survey, is produced by Michael Rigby Associates, and sponsored by Synseal Extrusions Ltd. For survey details or a free copy of the full report visit www.521621.com or contact Madhuri Sheth, Michael Rigby Associates (01453 521621).

Highlights this quarter:

• A net –13% of conservatory fabricators reported lower sales in October to December 2004 compared with the previous three months.
• A net 20% of fabricators increased sales in the last three months compared with the same period in 2003.
• Forecasts are robust with a balance of 25% of firms expecting sales to improve both quarter-on-quarter and year-on-year.

18 per cent of conservatory fabricators increased conservatory sales in October to December 2004 compared with the previous three months. 31% saw a decrease and 51% stayed the same.

The difference between the number of companies reporting an increase over those reporting a decrease is the net balance, expressed as a percentage. A positive net balance indicates growth; a net balance of zero implies little has changed.

On this basis, a net -13% of conservatory fabricators reported a decrease in sales in the last three months compared with the previous three months. While small (-16%) and medium-sized (-21%) firms recorded a drop in sales, large fabricators (13%) did well over the period. Conservatory fabricators across the country reported fewer sales.

In contrast, year-on-year sales are up. A net 20% of conservatory fabricators sold more in October to December 2004 compared with the same time in 2003 (chart 1). More large firms (38%) increased sales compared with medium-sized (17%) and small (16%) companies. Regionally, conservatory fabricators in the North (38%) and Midlands (28%) did well. The South reported little change. More fabricators whose total sales of conservatories were more than £20,000 last month reported increased sales.

Prices

The average installed price of a conservatory in December fell 5% from £7,957 in September to £7,549. Prices exclude VAT, dwarf walls and bases.

Conservatory Styles

Edwardians/Georgians accounted for 52% of the conservatories installed in December, Victorians accounted for 32%, and Lean-to conservatories for 11%. A small proportion (5%) were ‘Other’ styles.

Sales Forecasts

A balance of just under one in four conservatory fabricators forecast additional sales in the next three months compared with the previous three months. Significantly more large fabricators (63%) expect better sales than medium (21%) or small (15%) firms. Regionally, almost an equal number of conservatory fabricators in the South (26%) Midlands (24%) and North (22%) forecast a rise in sales in the next quarter compared with last quarter.

Year-on-year forecasts are similar, with a net 26% of conservatory fabricators expecting sales to increase over the next three months compared with the same three months of 2003 (chart 2). Firms of all sizes and in all regions are positive about future sales of conservatories, especially medium-sized companies (35%) and fabricators in the South and North (32%). Although the trend (chart 2) points to slower growth expectations, compared with most markets it is strongly positive.

Outlook

Prospects are upbeat again this quarter with a net 35% of companies more confident now about the overall prospects for the conservatory market than three months ago. More medium (48%) and large (38%) firms are optimistic about prospects for the conservatory market but small firms (27%) are also positive. Confidence is high across all regions especially in the North (47%). A net 52% of firms whose conservatory sales value last month was greater than £50,000 were more optimistic than three months ago.

Despite reports of a downturn, the overall outlook for the conservatory market in 2004 compared with 2003 remained positive. A net 42% of those interviewed expected the market to grow in 2004, a trend reflected across fabricators of all sizes and regions. A net 55% of firms whose sales of conservatories last month were more than £50,000 are most positive.

Of those expecting growth, 54% anticipate an increase of 10-19% in 2004 compared with 2003. A further 20% anticipated a rise of 20-29%.

Problem Areas

Price cutting in the market, lack of sales leads and supplier price rises are the main problems affecting sales of conservatories in the last quarter. The single biggest problem was price cutting in the market mentioned by 18% of respondents. Significantly, 40% of fabricators reported no problems in the last three months.

Overview

The dollar is weak and both the US government and consumers are heavily in debt but that hasn’t knocked confidence. Both spending and borrowing are on the rise and the economy is booming,’ says Mike Rigby, whose company Michael Rigby Associates produced this report.

‘Closer to home, European growth remains elusive. The UK has had uninterrupted growth for the last 13 years. But the economy is slowing down.

‘There is a high degree of uncertainty in the UK housing market, but interest rates now at 4.75% have brought about a slowdown. The jury’s still out on far this might go.

The issue is whether an uncertain housing market and cost of trading up prompts homeowners to improve their existing properties by adding a conservatory.’