For Subscribers

Get the complete article now!

TWST: Can we start with a quick introduction to Ultraframe (London: UTF.L) including a brief historical sketch and then just bring us up to date with how the company is positioned today?

Mr. David Moore: Ultraframe is the world's leading supplier of conservatory and sunroom systems – conservatories, as known in the UK, and sunrooms being the more generic term in the US. The business commenced just over 20 years ago and today operates in Europe, mainly in the United Kingdom through a business called Ultraframe UK Limited. We also operate in North America through a business called Four Seasons Sunrooms. Both UK and US businesses are the leaders, and the leaders by some margin, in their respective markets. In the UK, Ultraframe has enjoyed very rapid organic growth in both revenue and profit during its development. The Company has really been driven by adhering to what we would call core values or core excellences, which include engineering and designed based structures for conservatories. Alongside that, there has been very heavy investment in design and engineering functions to support our excellence. I think a key driver has been rapid innovation: development, and technical excellence of the product range. It has led us to have a substantial patent and broad intellectual property portfolio, which gives us competitive advantage. Another key to the business is our very strong culture. We were initially an owner-managed, entrepreneurial-founded business, with a very strong customer service orientation. That orientation led us to develop products that benefit installers in that they are quick and simple to install. In terms of milestones, a critical point in the Company's development was certainly the successful floatation we enjoyed in October 1997 when we achieved a full listing on the London Stock Exchange. Certainly, the last five-and-a-half years have been an interesting time to be a public company, not least with the macro economic geo-political situation we find ourselves in today. The next significant development for the Group was in July 2001 when we acquired the Four Seasons business in North America. That provided Ultraframe with a critical mass in what we believe to be an important emerging market for us. In the UK today, we enjoy a unique position in the market. We sell some 6,000 products and components into the conservatory industry, covering all routes to market, which is quite unique. The business specializes in the UK on the most technically complex area of the conservatory- the roof. In contrast, the Four Seasons business in North America supplies a complete sunroom offering – comprising both the roof and the side frame systems -- through some 300 dealers and franchisees on a state-wide basis. Four Seasons, interestingly, is the only business of its type in North America that benefits from the extensive distribution network that we have on a state-wide basis. It also benefits from an established and recognized consumer brand, which is very important in the North American market. The brand is important in that it allows us to get our lifestyle message to the consumer directly, which is very important when trying to develop a market.

TWST: Would you sketch out the milestones and objectives the company might be passing over the next few years that should be of interest to potential investors?

Mr. David Moore: For both territories we operate in we will look to achieve further organic growth. As far as the UK is concerned, I think we will continue to develop the UK market potential. I know that one issue investors raise is how much market there is to go after in the UK but I think it is important to characterize the UK market as being in its early teens in terms of development; it is actually still quite a young market. By contrast, we are really in a position of taking the North American market in its infancy and driving, stimulating growth, and actually developing the market there. The key driver in the US is about investing in the infrastructure of the business we've acquired to ensure that it is scalable and capable of growing as we move out to the next 36, 48 months. However, it is important to note that the UK market still has tremendous potential left in it. And there it is really about widening or opening up new distribution channels to ensure that the rate of installations of conservatories can actually increase, because that is currently an inhibitor to the development of the market place.

TWST: What’s you sense of market size then, UK and US?

Mr. David Moore: If you look at the UK today, there is probably a housing stock of some 25 million homes. If you discount flats, maisonettes, the rental sector and public sector housing; which are those areas I would classify as not being ideally suited for a conservatory today -- although we may get them later, and that’s an interesting point – then you probably take the housing stock down to around 11-12 million homes. We call that our addressable market. Today in the UK, there are only around 1.8 million conservatories installed, so we have less than 15% penetration. Consider the demographic I just gave you of the key buyers of conservatories. There are 6 million home owners out there without a conservatory who fall into the key buyers profile for today. Therefore, it is a case of getting to them. But, the interesting statistic, and I think it characterizes the developments of the market, is that the current rates of installation of conservatories in the UK for the industry as a whole is only 200,000 per annum, arelatively modest rate of penetration. Couple with that, the fact that there are 150,000 new build completions per annum -- a fairly significant proportion of which could take a conservatory, although there is currently less than 4% penetration -- then I think the market is being topped up at quite a high rate. The current market structure is characteristic of a market still in its early stages of development, i.e. all the mass distribution channels, your do-it-yourself channel through big box stores or builders merchants, for example, have not yet developed.