Good morning!

Sorry to have missed lots of friends at the investor show on Saturday, I wasn't able to make it in the end. Hopefully it was an interesting day for those that did attend.


Sprue Aegis (LON:SPRP)

Share price: 340p (up 8.8% today)
No. shares: 45.6m
Market cap: £155.0m

Interim results - the figures seem to have come in as stated in their last trading update, which I reported here on 13 Jul 2015. Key figures;

Revenue £56.5m (as indicated on 13 Jul 2015)

Operating profit before share-based payments of £242k came in at £9.0m, again in line with expectations

These are fantastic numbers, with revenue being up 137% against H1 2014, and profit more than triple the prior year comparative. Striking figures indeed, although profit would have been another £6.1m higher still, at constant exchange rates.

Excitement needs to be tempered by remembering that Sprue has benefited from exceptional sales in France, driven by legislation requiring smoke alarms. The company confirms today that sales are now softening in France, so this H1 2015 period does look something of a one-off bonanza. Although the following comments today about Germany sound interesting;

Continental Europe continues to offer significant sales opportunities for the Group.  While sales into France are softening, the 10 year product replacement cycle in Germany is about to start and, in addition, two German states with approximately 10 million homes are required by law to fit smoke alarms before 31 December 2017.  German customers typically seek increased levels of product technology with wireless connectivity and, therefore, the sales value of replacement product sales is potentially significantly higher than the value of previous sales.

The narrative has further upbeat comments about product development, and possible price increases to improve margins. The full year outlook is confirmed;

Subject to no significant net adverse foreign exchange rate movements between Sterling and each of the Euro and the US Dollar, the Group is on track to deliver full year results in line with market expectations.

Broker consensus was raised after the positive trading update in Jul 2015, as you can see from the handy Stockopedia graphic below;

55f6978c33548SPRP_brokers.PNG

Given that the company has reported 16.8p diluted EPS for H1, then 21.7p for the full year seems rather low. Last time I looked, my feeling was that something nearer to 25p EPS might be more realistic for this…

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