Safestyle surges as it signs non-compete agreement with co-founder

Shares in Safestyle surged on Monday as the AIM-listed double glazing group said it has signed a commercial agreement with its co-founder, Mitu Misra, who is now working with competitor NIAMAC.

The company has entered into a five-year non-compete agreement with Misra, who will also provide services to support the recovery of Safestyle. Misra, who was party to the dispute involving NIAMAC, trading as SafeGlaze UK, will receive 4 million ordinary shares and a cash consideration of up to £2m.

The consideration will be payable from the fourth quarter of 2020 subject to the satisfaction of clear performance conditions and Safestyle's trading performance in 2019 coming in ahead of existing market expectations.

Chief executive Mike Gallacher said: "The three phase turnaround plan that was outlined in our interim results is underway and is already helping to stabilise the group before returning it to profitability and then accelerating growth. The focus of the whole group remains on delivering this plan quickly and effectively."

Liberum upped its stance on the stock to 'buy' from 'hold' on the back of the news and lifted the price target to 80p from 50p.

"The five year non-compete agreement is likely to halt the momentum of SafeGlaze and could lead to agents and employees returning to Safestyle, in our opinion.

"This is likely to mean an acceleration in the recovery at Safestyle. In recognition of improving visibility in Safestyle's recovery we upgrade our rating."

Liberum added: "We understand that the non-compete arrangement means that Mr Misra will no longer play a role at SafeGlaze and will not be permitted to invest more resources into that business. This is likely to mean that at the very least SafeGlaze's momentum is halted. Without access to additional funds, SafeGlaze may struggle to carry out the rebranding required by the settlement reached in September 2018, in our view."

At 1050 BST, the shares were up 31% to 74p.