FireAngel SafetyTech - Final Audited Results
06/06/2023 07:04
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230606:nRSF7816Ba&default-theme=true
RNS Number : 7816B FireAngel Safety Technology Group 06 June 2023
6 June 2023
FireAngel Safety Technology Group plc
('FireAngel', the 'Group' or the 'Company')
Final Audited Results
FireAngel (AIM: FA.), a leading developer and supplier of home safety
products, announces its audited final results for the year ended 31 December
2022.
Business highlights
· Strong revenue growth of 32%, despite being constrained
by supply chain issues and macro-economic challenges
· The delivery of management's improvement plans led to the Group's
highest revenue and adjusted gross profit performance since 2017
· Reported numbers adversely impacted by purchase price variance
("PPV"), unprecedented currency swings, inflation, and supply constraints on
especially higher margin connected products
· Significant progress was made on the Group's project with
Techem Energy Services GmbH ("Techem") to develop a new generation smoke alarm
primarily for the German market:
o Further milestones achieved on time
o Development now more than 45 per cent. complete on a planned man days
basis
o In addition, the electronics development of the agreement is more than 91
per cent. complete and on schedule to be delivered by 8 September 2023
Financial headlines
· Revenue growth of 32% to £57.5 million (2021: £43.5 million)
· Gross profit £10.1 million (2021: £10.1 million)
· Adjusted gross profit(1) £13.5 million (2021: £10.5 million)
· Gross margin 17.6% (2021: 23.2%)
· Adjusted gross margin(2) 23.5% (2021: 24.2%)
· LBITDA £2.4 million (2021: £0.1 million)
· Adjusted EBITDA(3) £1.7 million (2021: £0.3 million)
· Non-underlying items of £1.1 million before tax (2021: £0.3
million)
· Underlying loss before tax(4) £5.0 million (2021: £3.4 million)
· Loss before tax £6.1 million (2021: £3.7 million)
· Net debt (5) (before lease obligations) at 31 December 2022 £4.8
million (2021: net cash before lease obligations £0.1 million)
(1)Adjusted gross profit is stated before non-underlying items, PPV and Mark
to Market ("MTM") profit or loss on forward contracts expected to mature after
the balance sheet date
(2)Adjusted gross margin is adjusted gross profit as a percentage of revenue
(3)Adjusted EBITDA is loss before tax, depreciation and amortisation, finance
costs, non-underlying items, PPV, other operating incomes and expenses and MTM
loss on forward contracts
(4)Underlying loss before tax is before non-underlying items
(5)Net debt is calculated as the net value of cash and cash equivalents,
invoice discounting facilities and loans and borrowing.
Outlook and Post-balance sheet events
· Trading in the year to date is in line with the Board's revised
expectations, with two particular exceptions which will not be recovered this
year, as referred to in the Group's most recent trading update on 25 April
2023, with a weaker start to the year than anticipated being partly mitigated
by lower than expected costs.
· As announced on 18 April 2023, Production and Delivery contracts
have been signed with Techem, significantly advancing the progress of this
transformational partnership:
o The total income opportunity for FireAngel has grown significantly to an
aggregate of up to c.$7.50 per alarm since the original Development Agreement
was signed in 2021. This is based on the same previously announced number of
units planned for production and reflects inflation, the changing bill of
materials and the changed scope as the project has matured to this crucial
point of engaging a manufacturing partner
o Shipments of the new alarm expected to start in 2024 with production
volume building in 2025
· New contract wins announced on 31 March 2023 with British Gas
Services Limited and on 12 May 2023 with a government agency in the Middle
East, signify further progress against our strategy to migrate to higher value
activities and commercialise our investment in connected technology
· Range of further self-help measures underway and expected to
materially boost the Group's financial performance in 2023 and beyond
· Supply chain disruption, including component shortages, now
starting to stabilise, providing an improved environment for production
· An extensive review of the Group's operations and cost base took
place in Q2 2023 to help ensure that the Group is best positioned to return to
profitable growth as soon as possible, with an estimated saving of
approximately £1.5 million on overheads, including approximately £1.0
million in headcount savings, and administration costs and an additional £1.0
million in reduced capital expenditure, expected in 2023
· The Company has approved on 5 June 2023 the details of a placing,
subscription and open offer to raise £6.1 million (gross), £5.4 million net,
in order to reduce its net debt (excluding lease liabilities) and support the
increased working capital and investment requirements for its growth and
strategic ambitions. There are contractual commitments from certain existing
shareholders, new investors and the subscriber by means of a placing and
subscription of up to 120,711,091 new ordinary shares.
· The subscriber, Ningbo Siterwell Electronic Import & Export
Co. Ltd ("Siterwell"), a long-term manufacturing partner, has agreed to
subscribe for 55,322,431 ordinary shares of 2 pence each for the total
consideration of £2.8 million subject to clawback by qualifying shareholders
under the open offer.
· In addition, certain Board changes have been agreed, with Andrew
Blazye (ex-Chair of Universe plc) to be appointed as Non-Executive Chairman
and Neil Radley (ex-CEO of Universe plc) to be appointed as CEO both with
effect from 7 June 2023, and John Conoley stepping down as Executive Chairman
with effect from 5 June 2023.
· Following completion of the fundraising, the Board has committed
to undertake a strategic review to explore options to realise value for all
shareholders as soon as reasonably practicable which may or may not involve a
sale of the Company.
Zoe Fox, Chief Finance Officer of FireAngel, commented:
"Despite unprecedented macro circumstances, FireAngel has delivered its
strongest revenue and adjusted gross profit result since 2017, with the
progress made by the Group in the last two years underpinning this
performance. Whilst the reported result announced today was not what we set
out to achieve, the self-help measures implemented over the course of the year
have supported an underlying performance that better represents the strong
progress made in 2022.
"We continue to see growing demand for our safety products, driven by societal
and regulatory changes. Although trading in 2023 remains challenging,
particularly in the UK Trade market, the Board is confident that FireAngel is
continuing to deliver significant self-help measures, which are expected to
underpin a further improved performance in 2023 and beyond."
For further information, please contact:
FireAngel Safety Technology Group plc 024 7771 7700
Zoe Fox, Chief Finance Officer
Shore Capital (Nominated adviser and joint broker) 020 7408 4050
Tom Griffiths/David Coaten
Houston (Financial PR) 0204 529 0549
Kate Hoare/Kelsey Traynor/Ben Robinson
Notes to Editors
About FireAngel Safety Technology Group plc
FireAngel's mission is to protect and save lives by making innovative home
safety products which are simple and accessible. FireAngel is one of the
market leaders in the European home safety products market.
FireAngel's principal products are connected smoke alarms, CO alarms, heat
alarms and accessories. The Company has an extensive portfolio of patented
intellectual property in Europe, the US and other selected territories.
Products are sold under FireAngel' s leading brands of FireAngel, FireAngel
Pro, FireAngel Specification and AngelEye.
For further product information, please visit: www.fireangeltech.com
(http://www.fireangeltech.com/)
Strategic review
The Board of Directors' Statement
Despite the unprecedented macroeconomic and geopolitical conditions, FireAngel
delivered its strongest revenue and adjusted gross profit result since 2017.
The progress made by the Group in the last two years has helped it endure
the significant macroeconomic challenges and, as a result, our adjusted gross
margin progress remains robust. There is a growing demand for our safety
products, driven by societal and regulatory changes and to capitalise on this
demand, FireAngel is continuing to deliver significant self-help measures,
which are expected to underpin a further improved performance in 2023 and
beyond.
Over the course of FY22, further regulatory changes were introduced across
several of the markets which the Group operates in. Fire and Carbon Monoxide
alarm legislation, along with wider social housing reform and environmental
legislation across the UK and Benelux, continued to underpin demand for the
Group's products. The impact of regulation developments in the German market
and the 10-year replacement cycle from the 2014/2015 French legislation is
expected to support further growth in 2024 and beyond.
Whilst these market tailwinds helped to drive strong revenue growth in FY22,
the Group's ability to meet demand was significantly constrained by the widely
reported supply chain challenges and component shortages. When combined with
the impact of significant currency fluctuation, inflation and PPV, the Group
had to maintain an intense operational focus to manage the impact of these
dynamics. Therefore, whilst the reported results for FY22 inevitably reflect
these challenges, the Group implemented steps to drive improvements and manage
the impact of price rises, improve value engineering to reduce costs on
selected products, introduce additional entry level products and renegotiate
terms on certain contracts, which have all been critical in helping to deliver
revenue and adjusted margin growth. This delivered an underlying performance
that better demonstrates the strong progress made in the year.
Further headway has also been made against key strategic initiatives. A
significant highlight includes the progress made with the Group's long-term
partnership with Techem, the German energy efficiency service provider, to
develop a new generation smoke alarm. This partnership presents a
transformational opportunity for FireAngel with significant earnings
potential. In addition, on 18 April 2023, the Group was pleased to announce
the signing of production and delivery contracts with Techem and its long-term
manufacturing partner, marking yet another important milestone.
Financial performance
In FY22, the Group delivered impressive revenue growth, of 32% to £57.5
million (2021: £43.5 million). The adjusted gross profit(1) was £13.5
million (2021: £10.5 million), which represented an adjusted gross margin(2)
of 23.5% (2021: 24.2%).
As previously outlined, the Group's ability to meet demand was significantly
constrained by the widely reported supply chain challenges and component
shortages faced and the reported results for FY22 inevitably reflect these
difficulties. Despite the significant increase in revenue, the gross profit
was only in line with 2021 predominantly due to a combination of inflation,
high PPV on components due to global shortages and unfavourable currency
movements between the USD and GBP.
The Group had net debt (before lease obligations) of £4.8 million at 31
December 2022 (2021: net cash (before lease obligations) £0.1 million). On 20
June 2022, the Group announced that it had signed an agreement with its bank,
HSBC UK Bank plc, for a standby letter of credit facility which is supported
by UK Export Finance, up to a combined sum of £3.5 million, for an initial
term of 12 months (the "Facility"). The Facility supports the variability of
working capital arrangements with certain Group suppliers, which are driven by
longer lead times on components and the Group's expected growth. The Board
believes that the Facility is a prudent measure which will help offset the
unpredictability in the Group's supply chain and input prices. Further
details of the Facility are set out in the Performance review below.
During 2022, the Group met all banking covenants which relate to the CBILs
loan, excluding Q4 2022 which was waived by the bank. There has been a further
waiver in Q1 2023 of banking covenants agreed and reset from June 2023 to
align with revised forecasts and provide additional headroom from those
previously agreed.
Strategy
The Group continued to deliver against its strategic objectives and, as
previously communicated, its primary target is to continue to enhance gross
margin year-on-year by focusing on three key objectives:
· migrating to higher value activities whilst eliminating lower value and lower
impact activities;
· commercialising our investment in connected technology; and
· implement other gross margin improvements across the value chain.
Strategic progress
Despite the many macroeconomic and geopolitical challenges experienced in
FY22, further progress has been made against these objectives.
Moving to higher value activities
FY22 saw the Group progress its exclusive long-term partnership with Techem to
develop a new generation smoke alarm. Product development activities
progressed in line with the planned milestones and the development phase of
the project is now, as announced on 20 March 2023, pleasingly over 40%
complete on a planned man-days basis. In addition, the electronics development
of the agreement is over 90% complete and on schedule, with the focus now
turning to manufacturing related developments in partnership with the Group's
long term manufacturing partner.
As previously highlighted, on 18 April 2023, the Group announced that it had
signed production and delivery contracts for manufacturing the new alarm.
Techem has also selected FireAngel's CO sensor, which will be manufactured at
the Group's Pace Sensors factory in Mississauga, Canada, and will be
incorporated exclusively into the new alarm. We will invest in improving
capacity and efficiency in this facility in 2023 and 2024. Initial shipments
of the new alarm under these recently signed contracts are expected to
commence in 2024 and to be significantly cash generative for the Group
thereafter. The Techem partnership remains an opportunity from which the Board
expects that the Group, and its shareholders, will derive significant
long-term value.
In terms of other progress made the Group continued to progress its long term
partnership with Siterwell to source new cost-effective entry and mid-level
products. The project concluded in Q1 2022 and to date has generated over 1
million units and £6.7 million of sales with the production of margin
enhancing products for the Group as planned. A further range of entry level
products is now expected to be launched in Q4 2023 and is expected to generate
£2 million of revenue for the Group annually.
Commercialising connected technology
As evolving policy and legislation become more defined, FireAngel's connected
technology is increasingly well positioned to meet the growing demand for fire
safety technology across its markets. However, due to component sourcing
challenges throughout much of FY22, the supply of products has been a major
constraint on the growth of the Group's connected proposition.
These issues were particularly evident in UK Trade where the Group experienced
a loss of momentum in the sales of its connected products due to low and
intermittent supply. Despite this, 700,000 connected products were shipped
over the course of the year and the Board expects both supply and sales to
recover in 2023.
As visibility of component supply improves and production returns to normal
levels, the Group plans to re-energise its strategic connected vision during
2023 with a key spearhead in its Internet of Things ("IoT") offering being the
launch of the Home Environment Gateway expected in Q4 2023, which enables
temperature and humidity monitoring. The Board believes continued market and
societal development supports the success of this initiative.
Implement other gross margin improvements across the value chain
The Group continued to make wider operational improvements over the course of
the year alongside the introduction of new, low to mid-level products with its
partner, Siterwell, cost take down engineering, continued investment in
efficiency in improved IT systems and automation across UK and Canada,
packaging changes, selling price rises and renegotiated shipping fees. The
majority of these measures have either been completed or are already
significantly advanced.
These initiatives executed during 2021 and 2022 generated approximately £6
million of margin improvement by the end of FY22, which somewhat mitigated the
unexpected macroeconomic events of 2022. The Group also began work in
mid-FY22 on further measures, many of which are already significantly
advanced, or complete, and which are expected to deliver an estimated
additional £4 million of margin improvement during FY23, before any impact of
inflation or exceptional currency movements, on an annualised basis
thereafter. These include further market price adjustment, cost engineering of
selected products and packaging.
Environmental, Social & Governance ("ESG")
In order to place a more deliberate focus on the Group 's ESG activities, in
2022, the Group established an ESG Committee to provide oversight and
measurement of its ESG related activities and business.
The Committee's immediate priorities were to implement Environmental Standard
ISP 140001, with completion expected in 2023. A major initiative to review the
Group's packaging is also underway. The Group had already made the decision to
phase out PET packaging and this latest review will focus on CO2 emissions and
waste with the aim of CO2 emissions by 32 tonnes a year.
As a fire safety focused technology company, the Group also recognises the
role that it can play in driving awareness of fire and CO2 risk amongst trade
audiences and the general public. In order to drive better understanding, some
years ago, the Group launched an annual awareness campaign, Project SHOUT CO.
In 2022, the campaign reached over 9 million people and included outreach
programmes across the UK and EU to build a better understanding with the aim
of reducing fire risk and unsafe heating practices and raise awareness of
support with fuel, poverty and damp and mould.
Current trading and outlook
Trading in the year to date is in line with the Board's revised expectations,
with two particular exceptions which will not be recovered this year, as
referred to in the Group's most recent trading update on 25 April 2023, with a
weaker start to the year than anticipated being partly mitigated by lower than
expected costs. Supply chain disruption, including component shortages, is
however now starting to ease, providing an improved environment for production
and supply to end customers.
Society and the regulatory environment continue to evolve and to generate a
positive momentum to demand, underpinning the long-term growth prospects for
the Group, with recent new contract wins with British Gas and a government
agency in the Middle East being further testament to this progress.
The Group has approved on 5 June 2023 the details of a placing, subscription
and open offer to raise £6.1 million (gross), £5.4 million net, in order to
reduce net debt (excluding lease liabilities) and support the increased
working capital and investment requirements for its growth and strategic
ambitions. There are contractual commitments from certain existing
shareholders, new investors and the subscriber by means of a placing and
subscription of up to 120,711,091 new ordinary shares. Siterwell, a long term
manufacturing partner, has agreed to subscribe for 55,322,431 ordinary shares
of 2 pence each for the total consideration of £2.8 million subject to
clawback by qualifying shareholders under the open offer. In addition, certain
Board changes have been agreed, with Andrew Blazye (ex-Chair of Universe plc)
to be appointed as Non-Executive Chairman and Neil Radley (ex-CEO of Universe
plc) to be appointed as CEO with effect from 7 June 2023 and John Conoley
stepping down as Executive Chairman with effect from 5 June 2023.
In addition, following completion of the fundraising the Board has committed
to undertake a strategic review of the business to explore options to realise
value for all shareholders, including the possible sale of the Company. An
extensive review of the Group's operations and cost base has already taken
place in Q2 2023 to help ensure that the Group is best positioned to return to
profitable growth as soon as possible.
The Board of Directors
5 June 2023
Performance review
Group financial results
Overview
The Group's financial results for 2022 are its strongest since 2017 with
significant increases in revenue (2022: £57.5 million; 2021: £43.5 million)
and adjusted gross profit (2022: £13.5 million; 2021: £10.5 million) from
management's delivery of self-help improvement plans. Reported gross margin
was severely impacted adversely by PPV of £1.9 million, weakening of the GBP
against the USD (MTM loss on contracts due to mature post balance sheet date
of £1.6 million), inflation and supply constraints especially on higher
margin products.
Underlying Group performance
2022 2021
Before non-underlying items Non-underlying items Reported Before non-underlying items Non-underlying items Reported
£m £m £m £m £m £m
Revenue 57.5 - 57.5 43.5 - 43.5
Cost of sales (47.5) 0.1 (47.4) (33.4) - (33.4)
Gross profit 10.0 0.1 10.1 10.1 - 10.1
Operating expenses (15.3) (1.2) (16.5) (13.6) (0.3) (13.9)
Net other operating income/ expenses 0.5 - 0.5 0.1 - 0.1
Operating loss (4.8) (1.1) (5.9) (3.4) (0.3) (3.7)
Deduct:
Net other operating income/expenses relating to PPV 0.5 -
Add back:
Mark to Market on forward contracts 1.6 (0.3)
Purchase price variance 1.9 0.8
Adjusted EBITDA 1.7 0.3
Total revenue increased by 32% to £57.5million (2021: £43.5 million)
resulting in an adjusted EBITDA(1) of £1.7 million (2021: £0.3 million).
The gross profit was £10.1 million (2021: £10.1 million), which represented
a gross margin of 17.5% (2021: 23.2%). The operating loss was £5.9 million
(2021: £3.7 million). The loss before tax was £6.1 million (2021: £3.7
million).
The adjusted gross profit(2) was £13.5 million (2021: £10.5 million), which
represented an adjusted gross margin(3) of 23.5% (2021: 24.2%).
Adjusted gross profit is before PPV of £1.9m which is seen as unusually high
and is not expected to be material going forward and MTM of £1.6 million
which relates to forward contracts expected to mature after the balance sheet
date.
The key growth in revenue was generated from growing demand for safety
products, strong growth within online retailers, reduced impact of COVID-19
resulting in greater access to properties and legislation drivers within
certain territories. The adjusted gross margin continued to benefit from the
progress made on the self-help measures put in place over the last two years,
which enabled the Group to endure the significant macroeconomic challenges
seen during 2022.
Overall cash outflow in the year was £1.9 million (2021: inflow of £1.8
million) and net debt(4) (before lease obligations) at 31 December 2022 was
£4.8 million (2021: net cash (before lease obligations) of £0.1 million).
The net movement of £4.9 million comprised a decrease in cash and cash
equivalents of £1.9 million. There was a net increase in bank debt of £3.0
million through the drawdown of £3.4 million under the Group's invoice
discounting facility and a repayment of £0.4 million of loans under the
Coronavirus Business Interruption Loan Scheme ('CBILS').
(1)Adjusted EBITDA is loss before tax, depreciation and amortisation, finance
costs, non-underlying items, PPV, other operating incomes and expenses and MTM
loss on forward contracts
(2)Adjusted gross profit is stated before non-underlying items, PPV and MTM
losses on forward contracts
(3)Adjusted gross margin is adjusted gross profit as a percentage of revenue
(4)Net debt/cash is calculated as the net value of cash and cash equivalents,
invoice discounting facilities and loans and borrowing.
Income statement
Revenue by business unit
Revenue split between each of the Group's business units and Pace Sensors was
as follows:
2022 2021
2022 2021 Inc/(dec) Inc/(dec) Proportion Proportion
Restated
£m £m £m % % %
UK Trade 9.7 9.8 (0.1) -1% 17% 23%
UK Retail 19.8 15.9 3.9 25% 34% 37%
UK F&RS 3.3 2.4 0.9 38% 6% 6%
UK Utilities & Leisure 3.5 1.8 1.7 94% 6% 4%
Total sales in the UK 36.3 29.9 6.4 21% 63% 69%
International 16.3 10.9 5.4 50% 28% 25%
Techem 2.5 1.0 1.5 150% 4% 2%
Pace Sensors 2.4 1.7 0.7 41% 4% 4%
Total revenue 57.5 43.5
14.0 32% 100% 100%
As of 1 January 2022, the business reassigned a number of customers to
different business units. Four customers with a combined revenue of £1
million in 2021 which were previously reported within the UK Trade business
unit are now reporting through the Utilities & Leisure business unit.
Similarly, two customers with a combined revenue of £0.2 million in 2021
which were previously reported within the UK Trade business unit are now
reporting through the UK Retail business unit. The 2021 sales comparatives
have been adjusted accordingly for comparability.
Overall, the Group's revenue increased by 32% to £57.5 million (2021: £43.5
million). With exception of UK Trade, all business units' revenue grew
significantly.
Despite good new business momentum, underpinned by the tail end of legislation
in Scotland and the UK CO legislation, UK Trade sales, saw a 1% decrease in
revenue on prior year. This was primarily a result of the supply chain
constraints in H1 2022 which meant that the sales demand could not be
completely fulfilled.
UK Retail had a strong start to the year and significant growth of 25% on
prior year, with increased sales across most of the Group's main customers
such as Screwfix, Amazon and B&Q, with good take up of new entry and
mid-point ranges improving margins as detailed in the Strategic Review set out
above. UK Retail continued to experience good demand through the year which,
as with UK Trade above, could not be fully fulfilled.
International sales were up 50% over the prior year. Benefiting, in
particular, from legislation in the Netherlands, whilst supply was difficult
in H1 and demand out-stripped supply, there was still a large increase in
sales despite the unfortunate missed opportunities due to stock supply
restrictions. Germany, Hungary and Singapore also saw high sales growth in the
year.
The UK Fire and Rescue Services and UK Utilities and Leisure business units
both saw the markets opening back up benefiting from no further COVID-19
related access restrictions. However, as with the other business units, there
was more demand than the Group was able to meet from the available supply,
leading to customers buying from competitors to meet demand.
The £2.5 million of revenue from Techem, our European partner, is recognised
under IFRS15 accounting standards, adopting the input methodology approach to
phase revenue recognition as this is based upon direct efforts to satisfy the
dominant component of the performance obligation which is the product design.
The total revenue associated with this contract amalgamates the background IP,
minimum royalty amounts and the charges for the product development phases.
To determine the correct accounting treatment, the Group has looked at the
individual elements of the contract and concluded that there is one central
non-distinct performance obligation. See note 7 for further details.
Revenue at Pace Sensors, the Group's Canadian manufacturer of CO sensors,
increased during the year benefiting from increased CO sales in the UK
following the enactment of legislation.
Gross profit and gross margin
Adjusted gross profit increased to £13.5 million (2021: £10.5 million) and
represented a small decrease in adjusted gross margin of 23.5% (2021: 24.2%).
During 2022, there was a significant adverse movement on the GBP value against
the USD which resulted in a 5% reduction in the GM% year on year. However, the
Group made good progress on gross margin improvements and self-help measures.
During the year, overall gross profit was impacted by additional PPV net costs
of £1.4 million (2021: £0.7 million), caused by the global supply chain
challenges, predominantly increasing costs due to securing components on the
open market.
2022
£m
PPV costs included within cost of sales 1.9
PPV costs included within other operating expenses 0.3
PPV income included within other operating income (0.8)
Total Net PPV costs 1.4
While the total cost of these components in 2022 was £2.2 million, the Group
was successful in reselling some of these components for £0.8 million and,
therefore the net cost to the business was an additional £1.4 million.
Going forward, PPV costs are not expected to be material.
The non-underlying costs for the year within gross margin was a small net
credit of £54,000. Non-underlying items impacting gross profit in the prior
year amounted to a small net credit of £22,000.
In FY22, the overall gross profit was unchanged at £10.1 million,
representing a gross margin of 17.5% (2021: 23.2%). Despite a significant
increase in revenue by 32%, the gross profit was impacted by a combination of
inflation, high PPV on components due to global shortages and unfavourable
currency movements between the USD and GBP. The underlying gross profit of
£10.1 million was after £1.9 million of PPV costs and a £1.9 million loss
on MTM on forward contracts in the year.
Exchange rates
The Group has exposure to US Dollars, Euros and Canadian Dollars with 97% of
purchases being made in US Dollars and 28% of its revenue being in Euros.
The weakening of GBP against the US Dollar significantly impacted the overall
profitability in the year. The Group hedges to smooth the impact of currency
fluctuations and benefitted from £1.7 million of gains on forward contracts
maturing with in the year (2021: £0.6 million loss). After deducting a
£1.6 million loss in respect of the Mark to Market of forward contracts that
mature beyond the balance sheet date, the net impact of exchange rates on
operating profit in the year compared to 2021's exchange rates is estimated as
a net unfavourable debit of approximately £2.7 million, representing
approximately 5% of gross margin.
During September 2022, the US Dollar fell to a record low against GBP, given
the continued devaluation of the GBP. At the time, the Group took measures
to protect itself from further possible exchange rate deterioration and gain
some certainty on the currency impacts for the remainder of 2022 and part of
2023. It entered into a mixture of forward contracts and boosted forward
contracts providing a blended rate of 1.15 as at 31 December 2022 (further
details can be found in note 2). Following the rate rebound in the fourth
quarter, these forward contracts make up the majority of the £1.6m loss
carried forward as detailed above.
The average exchange rates against GBP are summarised below:
Budget rate Average for year Average for H1 Average for H2
2022 2022 2021 2022 2021 2022 2021
Euro 1.17 1.18 1.16 1.19 1.15 1.16 1.17
US Dollar 1.36 1.24 1.38 1.31 1.39 1.18 1.37
Canadian $ 1.65 1.61 1.73 1.66 1.74 1.56 1.71
This table shows that on average in 2022, GBP strengthened against the Euro by
2%, thereby reducing FireAngel's revenue and profit on its Euro denominated
income. Over the same period, GBP weakened against the USD by approximately
10% which increased the GBP value of USD denominated purchases.
Where possible, FireAngel has sought to increase 2022 and 2023 selling prices
to offset the product cost inflation as a result of GBP's weakness against the
USD. If GBP strengthens against the USD, FireAngel will see the benefit in
reduced GBP product costs and vice versa.
Overheads
The Group's overhead costs comprise the distribution and administrative costs
of running the business. Excluding non-underlying items totalling £1.1
million (2021: £0.3 million), further details of which are given below, and
depreciation and amortisation of £3.5 million (2021: £3.3 million),
overheads of £11.8 million were 15.1% higher than the prior year's £10.3
million. This was largely due to the increase in volume of revenue, high
inflation across the cost base of the Group particularly experienced in the
distribution costs impacted by global supply chain challenges and the
macro-economic issues.
Total overhead costs amounted to £16.5 million (2021: £13.9 million).
Non-underlying items in 2022
Non-underlying costs totalling £1.1 million were incurred in the year as
follows:
Within cost of sales:
Included a credit of £54,000 which included as follows:
· The Group was able to sell stock lines that had previously been
impaired which resulted in a non-underlying credit of £54,000
Within operating expenses:
· Non-cash impairment of intangible assets of £0.9 million
relating to historical product development which the Board has resolved will
not proceed
· Share-based payment charges of £0.2 million were incurred during
the year (2021: £0.3 million)
Non-underlying items in 2021
Non-underlying costs totalling £0.3 million were incurred in the prior year
as follows:
Within cost of sales:
Included a credit of £22,000 which included as follows:
· An amount of £66,000 was expensed in relation to the settlement
of warranty issues with certain distributors
· The Group was able to sell stock lines that had previously been
impaired which resulted in a non-underlying credit of £88,000
Within operating expenses:
· Share-based payment charges of £0.3 million were incurred during
the year
Result for the year
The Group's adjusted EBITDA for the year amounted to £1.7 million (2021:
£0.3 million).
The underlying operating loss for the year amounted to £4.8 million (2021:
£3.4 million). After taking account of non-underlying items of £1.1
million (2021: £0.3 million) and finance charges of £0.2 million (2021:
£nil), as a result of interest on borrowings in the year, the Group reported
a loss before tax of £6.1 million (2021: loss before tax £3.7 million).
The Group booked a tax credit of £0.3 million (2021: tax credit of £0.4
million) due largely to the recognition of tax losses and the surrender of
taxable losses for a research and development tax credit.
Basic and diluted EPS for the year was a loss of 3.2 pence per share (2021:
loss of 2.0 pence per share).
Statement of financial position
The net assets of the Group amounted to £14.6 million at 31 December 2022
(2021: £20.2 million) and can be summarised as follows:
2022 2021
£m £m
Goodwill 0.2 0.2
Plant and equipment 2.2 3.3
Capitalised development costs 10.2 11.8
Purchased software costs 1.2 1.6
Non-current assets 13.8 16.9
Net cash balances 1.4 3.3
Loans and borrowings (6.2) (3.2)
Net(debt)/ cash (4.8) 0.1
Lease liabilities (0.5) (1.0)
Net working capital 8.0 5.0
Net tax asset (including deferred tax) 0.7 0.5
Net derivative financial (liabilities)/ assets (1.6) 0.3
Warranty provision (1.0) (1.6)
Net assets 14.6 20.2
Non-current assets at 31 December 2022 amounted to £13.8 million (2021:
£16.9 million). The most significant components of this were capitalised
development costs, with a net book value of £10.2 million, plant and
equipment of £2.2 million and purchased software costs of £1.2 million.
Capitalised development assets of £0.9 million were impaired during the year
as a result of a thorough review of product lines and future development
costs.
Total capital expenditure (excluding right of use assets) decreased to £1.4
million (2021: £2.0 million). Of this total, £0.9 million represented
capitalised development expenditure to further enhance the Group's connected
homes and wider technology portfolio as described in note 18 to the financial
statements (2021: £1.5 million). All research and development costs
associated with the development of the new generation smoke alarm for Techem
was charged to the customer.
Total capital expenditure of £1.4 million (2021: £2.0 million) compares with
depreciation, amortisation and impairment charges totalling £4.5 million
(2021: £3.3 million).
Working capital increased by £3.0 million to £8.0 million at 31 December
2022. Stock increased by £4.4 million to £8.1 million (2021: £3.7
million) at 31 December 2022. The build-up of stock followed a severe stock
shortage earlier in the year from global component shortages which led to
increased lead times and transit time for our goods.
Trade and other receivables increased by £4.4 million to £13.8 million
(2021: £9.4 million) as a result of the increased revenue and the change in
customer mix in the last quarter towards higher retail sales, which have
longer payment terms. In the year, average debtor days decreased from 53 to 49
due to the higher proportion of International sales over the course of the
year.
Trade and other payables increased by £5.7 million to £13.8 million (2021:
£8.1 million), a result of increased stock purchases made during the year and
average creditor days remained similar to 2021 at 24 days (2021: 21 days).
This was due to the increased pressure to support our manufacturing partners
with extended working capital exposure from longer component lead times
resulting in increased credit exposure in addition to purchasing components on
the open market with minimal credit terms.
At 31 December 2022, current tax assets amounted to £0.7 million (2021: £0.5
million) and comprised a current tax asset of £0.7 million (2021: £0.4
million), deferred tax assets were £2.4 million (2021: £3.1 million) and
deferred tax liabilities were £2.4 million (2021: £3.1 million). Deferred
tax assets reflect temporary timing differences in the treatment for tax and
accounting of the Group's trading losses and share-based payments charge.
Deferred tax liabilities largely reflect timing differences in the treatment
of accelerated research and development tax credits on product development
costs.
The Group's warranty provision at 31 December 2022 amounted to £1.0 million
(2021: £1.6 million) of which £0.5 million is expected to be utilised within
twelve months of the balance sheet date. This provision predominantly covers
the expected costs of replacing smoke alarm products over the next two to
three years where, as announced in April 2016, an issue in certain batteries
provided by a third-party supplier, may cause a premature low battery warning
chirp. While the utilisation of the provision has broadly tracked to the
revised 31 December 2020 estimates, the amounts provided are the Board's best
estimate of the ongoing liability.
Cash
The Group had net debt (before lease obligations) of £4.8 million at 31
December 2022 (2021: net cash (before lease obligations) £0.1 million). The
movement in net debt (before lease obligations) during the year is reflected
in the statement of financial position as follows:
£m
Decrease in cash balances and net cash outflow 1.9
Increase of invoice discounting drawdown 3.4
Repayment of CBILS (0.4)
Increase in net debt (before lease obligations) 4.9
The net cash outflow of £1.9 million in the year is summarised in the table
below. The most significant non-operating cash flow items include the costs
of the warranty provision (referred to above) and other non-underlying items
totalling £0.6 million, capital expenditure of £1.4 million (as described
above), the draw down on the Group's invoice financing discounting facility of
£3.4 million and the repayment of the annual capital element of the CBILS
loan of £0.4 million.
On 20 June 2022, the Group announced that it had signed an agreement with its
bank, HSBC UK Bank plc, for a standby letter of credit facility which is
supported by UK Export Finance, up to a combined sum of £3.5 million, for an
initial term of 12 months (the "Facility"). The Facility will attract a
quarterly charge of 0.55% on the total amount available under the Facility.
The drawings on the Facility do not add to the Group's net debt position, and,
as expected, improve the Group's creditor days and creditor relations. The
Facility supports the variability of working capital arrangements with certain
suppliers, which is driven by longer lead times on components and the expected
growth of the Group.
2022 2021
£m £m
Underlying operating loss(1) (4.8) (3.4)
Depreciation and amortisation charges 3.5 3.3
Increase in working capital (2.8) (1.0)
Decrease/ (Increase) in fair value of derivatives 1.9 (1.0)
Cash used by operations before non-underlying payments (2.2) (2.1)
Cash cost of warranty provision and other non-underlying items (0.6) (1.3)
Cash used by operations (2.8) (3.4)
Interest paid (net) (0.4) (0.1)
Taxation received - 0.6
Capital expenditure (1.3) (2.0)
Proceeds from share issue (net) - 9.0
Drawdown/(Repayment) of invoice finance 3.5 (2.5)
Drawdown of loan - 3.2
Repayment of loan (0.4) (2.6)
Lease payments (0.5) (0.4)
Net cash flow (1.9) 1.8
( )
(1) Underlying operating loss in 2022 of £4.8 million is before
non-underlying items (2021: £3.4 million).
Use of non-GAAP financial performance measures
Certain disclosures and analyses set out in this annual report include
measures, which are not defined by generally accepted accounting principles
('GAAP') under UK-adopted International Accounting Standards. We believe
this information, along with comparable GAAP measurements, is useful to
investors. Management uses these financial measures, along with the most
directly comparable GAAP financial measures, in evaluating the Group's
operating performance. Non-GAAP measures should not be considered in
isolation from, or as a substitute for, financial information presented in
compliance with GAAP.
In the following table, we provide a reconciliation of this and other non-GAAP
measures, as defined in this Performance Review, relevant GAAP measures:
Underlying profit measures
2022 2021
£m £m
Adjusted gross profit
Reported gross profit 10.1 10.1
Non-underlying items:
- Provision for warranty costs - 0.1
- Provision against stock and disposal costs (net) (0.1) (0.1)
Adjusted items:
-MTM 1.6 (0.3)
-PPV 1.9 0.7
Adjusted gross profit 13.5 10.5
Adjusted gross margin percentage
Adjusted gross margin percentage is the adjusted gross profit (as defined
above) as a proportion of revenue.
2022 2021
£m £m
Underlying operating loss
Reported operating loss (5.9) (3.7)
Non-underlying items:
- Provision for warranty costs - 0.1
- Provision against stock and disposal costs (net) (0.1) (0.1)
- Impairment of intangible/ tangible assets(1) 1.0 -
- Share-based payments charge 0.2 0.3
Underlying operating loss (4.8) (3.4)
2022 2021
£m £m
Underlying loss before tax
Reported loss before tax (6.1) (3.7)
Non-underlying items:
- Provision for warranty costs - 0.1
- Provision against stock and disposal costs (net) (0.1) (0.1)
- Impairment of intangible/ tangible assets(1) 1.0 -
- Share-based payments charge 0.2 0.3
Underlying loss before tax (5.0) (3.4)
2022 2021
£m £m
Adjusted LBITDA
Reported loss before tax (6.1) (3.7)
Finance costs 0.2 -
Depreciation and amortisation 3.5 3.3
Non-underlying items:
- Provision for warranty costs - 0.1
- Provision against stock and disposal costs (net) (0.1) (0.1)
- Restructuring costs - -
- Impairment of intangible/ tangible assets(1) 1.0 -
- Share-based payments charge 0.2 0.3
- MTM 1.6 (0.3)
- PPV (net) 1.4 0.7
Adjusted EBITDA 1.7 0.3
2022 2021
£m £m
Net Debt
Cash and cash equivalent 1.4 3.3
Loans and borrowings (2.8) (3.2)
Invoice discount facility (3.4) -
Net (debt)/ cash (4.8) 0.1
(1)Impairment of intangible and tangible assets in the year amounted to
£946,000 and have been rounded to £1.0m in the non-GAPP measures above.
Net cash before lease obligations
Net cash before lease obligations is considered to be a non-GAAP measure as it
is not defined in IFRS. The most directly comparable IFRS measure is the
aggregate of loans and other borrowings (current and non-current) and cash and
cash equivalents. This is the calculation used by the Group to measure net
cash.
Dividend
As a result of the loss reported for the year, and consistent with the
decision not to declare an interim dividend (2021: nil pence per share), the
Directors do not recommend the payment of a final dividend (2021: nil pence
per share). The total dividend payable for 2022 is therefore nil pence per
share (2021: nil pence per share).
Post balance sheet events
As announced on 18 April 2023, the Group has entered into two complementary
agreements that enable the delivery in market of the New Generation Smoke
Alarm ("NGSA") which it has been developing with its partner, Techem. These
are supplementary to the original development agreement which was signed in
2021. These new agreements are the Delivery Contract for manufacturing the
NGSA and the Production Framework and Supply Agreement, which together
comprise a very significant milestone for the Company as it continues to
progress its transformational partnership with Techem. This initiative is
expected in due course to be highly cash generative for the Group and to
generate significant long-term strategic value for its shareholders. The total
income opportunity for FireAngel has grown significantly to an aggregate of up
to c.$7.50 per alarm since the original Development Agreement was signed in
2021. Pursuant to the terms of the delivery contract, initial shipments of
the NGSA are expected to commence in 2024. Volumes are expected to build up
further during the first half of 2025.
The Group was also pleased to announce new contract wins on 31 March 2023 with
British Gas Services Limited and on 12 May 2023 with a government agency in
the Middle East. Both contracts signify further progress against our strategy
to migrate to higher value activities and commercialise our investment in
connected technology.
The Company has approved on 5 June 2023 the details of a placing, subscription
and open offer to raise £6.1 million (gross), £5.4 million net, in order to
reduce net debt (excluding lease liabilities) and support the increased
working capital and investment requirements for its strategic ambitions. There
are contractual commitments from certain existing shareholders, new investors
and the subscriber by means of a placing and subscription of up to 120,711,091
new ordinary shares. Siterwell, a long term manufacturing partner, has agreed
to subscribe for 55,322,431 ordinary shares of 2 pence each for the total
consideration of £2.8 million subject to clawback by qualifying shareholders
under the open offer. In addition, certain Board changes have been agreed,
with Andrew Blazye (ex-Chair of Universe plc) to be appointed as Non-Executive
Chairman and Neil Radley (ex-CEO of Universe plc) to be appointed as CEO with
effect from 7 June 2023, and John Conoley stepping down as Executive Chairman
with effect from 5 June 2023.
An extensive review of the Group's operations and cost base has already taken
place in Q2 2023 to help ensure that the Group is best positioned to return to
profitable growth as soon as possible. In addition, following completion of
the fundraising, the Board has committed to undertake a strategic review to
explore options to realise value for all shareholders, including the possible
sale of the Company.
Zoe Fox
Chief Finance Officer
5 June 2023
Consolidated income statement
For the year ended 31 December 2022
2022 2021
Before non-underlying items Non-underlying items (note 6) Reported Before non-underlying items Non-underlying items (note 6) Reported
Restated
Note Restated
£000 £000 £000 £000 £000 £000
Revenue 4 57,461 - 57,461 43,472 - 43,472
Cost of sales (47,414) 54 (47,360) (33,393) 22 (33,371)
Gross profit 10,047 54 10,101 10,079 22 10,101
Operating expenses (15,362) (1,127) (16,489) (13,580) (280) (13,860)
Other operating income 7 834 - 834 82 - 82
Other operating expenses 7 (358) - (358) - - -
Loss from operations (4,839) (1,073) (5,912) (3,419) (258) (3,677)
Interest received on discounted cash flows 8 227 - 227 91 - 91
Finance costs 8 (422) - (422) (124) - (124)
Loss before tax (5,034) (1,073) (6,107) (3,452) (258) (3,710)
Income tax credit 9 262 - 262 430 - 430
Loss attributable to equity owners of the Parent (4,772) (1,073) (5,845) (3,022) (258) (3,280)
Basic earnings per share 11 (3.2) (2.0)
Diluted earnings per share 11 (3.2) (2.0)
All amounts stated relate to continuing activities.
2021 finance costs have been restated to split out the interest received on
discounted cash flows element.
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022 2021
£000 £000
Loss for the year (5,845) (3,280)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations (net of tax) 85 32
Total comprehensive loss for the year (5,760) (3,248)
Consolidated statement of financial position
As at 31 December 2022
Consolidated
Note 2022 2021
Non-current assets £000 £000
Goodwill 169 169
Other intangible assets 10,197 11,825
Purchased software costs 1,192 1,625
Property, plant and equipment 2,175 3,242
Trade and other receivables - -
Shares in subsidiaries - -
13,733 16,861
Current assets
Inventories 12 8,061 3,737
Trade and other receivables 13,804 9,430
Current tax asset 690 464
Derivative financial assets - 291
Cash and cash equivalents 1,431 3,294
23,986 17,216
Total assets 37,719 34,077
Current liabilities
Trade and other payables (13,805) (8,135)
Lease liabilities 13 (397) (456)
Provisions 15 (502) (1,012)
Invoice discounting facilities (3,451) -
Loans and borrowings 13 (664) (480)
Derivative financial liabilities (1,563) -
(20,382) (10,083)
Net current assets 3,604 7,133
Non-current liabilities
Loans and borrowings 13 (2,133) (2,743)
Lease liabilities 13 (94) (492)
Provisions 15 (471) (541)
(2,698) (3,776)
Total liabilities (23,080) (13,859)
Net assets 14,639 20,218
Equity
Called up share capital 3,621 3,621
Share premium account 30,009 30,009
Currency translation reserve 238 153
Retained earnings (19,229) (13,565)
Total equity attributable to equity holders of the Parent Company 14,639 20,218
Consolidated cash flow statement
For the year ended 31 December 2022
Consolidated
Note 2022 2021
£000 £000
Loss before tLoss before tax (6,107) (3,710)
Finance expense 195 33
Operating loss for the year (5,912) (3,677)
Adjustments for:
Depreciation of property, plant and equipment, and right-of-use assets 1,465 1,420
Amortisation of intangible assets 2,069 1,876
Loss on disposal of non-current assets 19 47
Non-underlying items 6 1,073 258
Cash flow relating to non-underlying items (582) (1,242)
Decrease/ (Increase) in fair value of derivatives 1,854 (984)
Provision against intercompany receivables - -
Operating cash flow before movements in working capital (14) (2,302)
Movement in inventories (4,270) 2,909
Movement in receivables (4,147) 732
Movement in payables 5,673 (4,714)
Cash (used in)/ generated by operations (2,758) (3,375)
Income taxes received 39 645
Net cash (used in)/ generated by operating activities (2,719) (2,730)
Investing activities
Capitalised development costs (928) (1,529)
Purchase of property, plant and equipment (436) (434)
Net cash used in investing activities (1,364) (1,963)
Financing activities
Repayment of loan (426) (2,600)
Drawdown of loan - 3,200
Repayment of invoice finance 55,854 42,989
Drawdown of invoice finance (52,403) (45,528)
Proceeds from issue of ordinary shares (net of expenses) - 8,995
Repayment of lease obligations (457) (441)
Interest paid (422) (124)
Net cash generated by/(used in) financing activities 2,146 6,491
Net (decrease)/ increase in cash and cash equivalents (1,937) 1,798
Cash and cash equivalents at beginning of year 3,294 1,466
Non-cash movements - foreign exchange 74 30
Cash and cash equivalents at end of year 1,431 3,294
Consolidated statement of changes in equity
For the year ended 31 December 2022
Share premium account Currency translation reserve
Share Retained earnings
capital Total
£000 £000 £000 £000 £000
Balance at 1 January 2021 2,531 22,104 121 (10,568) 14,188
Loss for the year - - - (3,280) (3,280)
Net foreign exchange gains from overseas subsidiaries - - 32 - 32
Total comprehensive loss for the year - - 32 (3,280) (3,248)
Transactions with owners in their capacity as owners:
Issue of equity shares 1,090 - - - 1,090
Premium arising on issue of equity shares - 8,711 - - 8,711
Share issue expenses - (806) - - (806)
Credit in relation to share-based payments - - - 283 283
Total transactions with owners in their capacity as owners 1,090 7,905 - 283 9,278
Balance at 31 December 2021 3,621 30,009 153 (13,565) 20,218
Loss for the year - - - (5,845) (5,845)
Net foreign exchange gains from overseas subsidiaries - - 85 - 85
Total comprehensive loss for the year - - 85 (5,845) (5,760)
Transactions with owners in their capacity as owners:
Credit in relation to share-based payments - - - 181 181
Total transactions with owners in their capacity as owners - - - 181 181
Balance at 31 December 2022 3,621 30,009 238 (19,229) 14,639
Notes to the financial information
For the year ended 31 December 2022
1. General information
FireAngel Safety Technology Group plc is registered and domiciled in England
and Wales, having been incorporated under the Companies Act, company
registration number 3991353. The Company is a public company limited by
shares and is listed on the Alternative Investment Market ('AIM') of the
London Stock Exchanges. The Company's registered office and the address of
its principal place of business is The Vanguard Centre, Sir William Lyons
Road, Coventry, West Midlands, CV4 7EZ.
The Company and its subsidiary undertakings (together the "Group") are in the
business of the design, sale and marketing of smoke, heat and CO alarms and
accessories sold under the brands of FireAngel, FireAngel Pro and
Specification, AngelEye and Pace Sensors. The Group also operates its own CO
sensor manufacturing facility in Canada.
The preliminary financial information does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006 for the financial
year ended 31 December 2022 but has been extracted from those accounts. The
annual accounts for the year ended 31 December 2022 have been prepared in
accordance with UK adopted International Accounting Standards. They have been
prepared using the historical cost convention except where the measurement of
balances at fair value is required. The financial information included in this
preliminary announcement does not include all the disclosures required in
accounts prepared in accordance with UK adopted International Accounting
Standards and accordingly it does not itself comply with UK adopted
International Accounting Standards.
The financial information for the period ended 31 December 2021 is derived
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The statutory accounts for the year ended 31 December
2022 will be delivered to the Registrar of Companies following the Company's
annual general meeting. The auditors have reported on the accounts for the
years ended 31 December 2021 and 2022; their reports were unqualified, did not
include any matters to which the auditor drew attention by way of emphasis and
did not contain a statement under s498(2) or s498(3) of the Companies Act
2006.
2. Summary of significant accounting policies
Basis of consolidation
The consolidated financial statements of the Group incorporate the financial
statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 December each year. The preparation of financial
statements requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where the Group's assumptions and
estimates are significant to the consolidated financial statements, are
disclosed in note 3.
Going concern
The Group has seen an increase in revenue of 32% on the prior year and is
delivering on its gross margin improvement plan which has layered in an
additional £6 million of profit from self-help measures over 2021 and 2022 of
which it is estimated approximately £3.4 million is within 2022, such as
customer price increases and moving to higher value activities as detailed in
the Board of Directors' statement. However, this has not been sufficient to
turn the Group back into profit in 2023 because of the impact of disrupted
supply chain, high inflation and volatile currency movements during the year.
The weakened GBP against the USD, the PPV incurred to source scarce components
and high inflation costs have offset much of the additional profit generated
from increased revenue and gross margin improvement plans. The Group is
continuing to deliver the gross margin improvement plan, improving margins
through 2023 to 2024 and the continued growth in the business underpinned by
recent announcements of the British Gas 3-year contract, government agency
contract in the Middle East and the signing of the production and delivery
contracts for the Techem project. A further cost savings and restructuring of
the business has been undertaken in Q2 2023 with an estimated saving of
approximately £1.5 million on overheads and administration costs, including
approximately £1.0 million in headcount savings, and an additional £1.0
million in reduced capital expenditure, expected in 2023. The forecasts have
been prepared taking this into consideration and management's extensive
industry knowledge, allied to the possibility of uncertainty in today's
markets.
The Directors have reviewed the forecast sales growth, budgets and cash
projections for the period to June 2024 including sensitivity analysis on the
key assumptions such as the potential impact of reduced sales and margins for
the next twelve months and beyond. The base case scenario reflects the
remaining uncertainty regarding supply chain and inflation. Various
plausible but severe downside scenarios were then applied to the base case
linked to the trading conditions seen in the 2022 financial year, assuming
revenues would not see the expected growth, that margins may deteriorate, and
GBP may weaken compared to USD. The results of the cash forecasts showed
sufficient cash headroom throughout the outlook period. The base case was
then reverse stress tested and the level of deterioration required for the
Group to exceed the banking headroom was deemed to be unlikely.
The Directors have assessed both the discretionary and the non-discretionary
cash requirements of the Group during this period. In determining whether the
Group and Parent Company's financial statements can be prepared on a going
concern basis, the Directors considered the Group's business activities,
together with the factors likely to affect its future development, performance
and position. During 2022, the Group met all banking covenants which relate
to the CBILs loan, excluding Q4 2022 which was waived by the bank. There has
been a further waiver in Q1 2023 of banking covenants agreed and reset from
June 2023 to align with revised forecasts and provide additional headroom from
those previously agreed. The Group has continued to benefit from a supportive
relationship with its bank and the Directors reviewed the financial position
of the Group, its cash flows, borrowing facilities and banking covenants. The
key factors considered by the Directors were the:
· implications of the current economic environment and future
uncertainties around the Group's revenues and profits by undertaking forecasts
and projections on a regular basis;
· impact of global component shortages impacting the supply of
products and costs
· impact of the competitive environment within which the Group
operates;
· impact of any further COVID-19 and related global supply chain
issues; and
· potential actions that could be taken in the event that revenues
or gross profits are worse than expected, to ensure that operating profit and
cash flows are protected
· the ability to raise additional funds through an issue of shares
including the willingness of certain investors to underwrite a substantial
element of a proposed fundraising
Based on the cash flow forecasts, the Group is anticipated to absorb cash in
H1 2023 starting to generate cash from H2 2023 through 2024 and beyond and has
been successful therefore in the waived bank covenants for Q1 2023 and
resetting the banking covenants from June 2023 for the CBILs loan to
accommodate the change in the business' working capital profile and current
currency rates. The Group will continue to use an invoice discount facility
provided by the bank and the facility is expected to renew as usual in 2023.
These facilities by themselves do not, however, provide the Group with the
necessary headroom to deliver the strategy and higher growth for the business.
The Company has approved on 5 June 2023 the details of a placing, subscription
and open offer to raise £6.1 million (gross), £5.4 million net, in order to
reduce net debt (excluding lease liabilities), support the increased working
capital and investment requirements for its strategic ambitions. There are
contractual commitments from certain existing shareholders, new investors and
the subscriber by means of a placing and subscription of up to 120,711,091 new
ordinary shares. Siterwell, a long term manufacturing partner, has agreed to
subscribe for 55,322,431 ordinary shares of 2 pence each for the total
consideration of £2.8 million subject to clawback by qualifying shareholders
under the open offer. Following completion of the fundraising, the Board has
committed to undertake a strategic review to explore options to realise value
for all shareholders, including the possible sale of the Company.
The Directors have reasonable expectations that the Group and the Company have
adequate resources to continue operations for the period of at least one year
from the date of approval of these financial statements. The Directors have
not identified any material uncertainties that may cast doubt over the ability
of the Group and the Company to continue as a going concern and the Directors
continue to adopt the going concern basis in preparing these financial
statements.
Accordingly, the full year accounts for 2022 have been prepared on the going
concern basis.
Changes in accounting policies and disclosures
New standards, amendments and interpretations adopted by the Group
The following new standards and amended standards, none of which have had a
material impact on these financial statements, are mandatory and relevant to
the Group for the first time for the financial period commencing 1 January
2022:
· Amendments to IFRS 3 - Reference to Conceptual Framework
· Amendments to IAS 16 - Property, Plant and Equipment: Proceeds
before Intended Use
· Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling a
Contract
· Annual Improvements to IFRS 2018-2020
Accounting standards in issue but not yet effective
At the date of authorisation of these financial statements the following
standards and interpretations, which have not been applied in these financial
statements and which are considered potentially relevant, were in issue but
not yet effective:
· Amendments to IAS 12 - Deferred tax related to Assets and
Liabilities arising from a Single Transaction
· Amendments to IAS 8 - Definition of Accounting Estimates
· Amendments to IAS 1 - Disclosure of Accounting Policies
The Directors anticipate that the adoption of the amendments to standards in
future periods will have no material impact on the recognition and measurement
of assets, liabilities and the associated performance of the Group or the
Company when the relevant standards and interpretations come into effect.
Revenue recognition
Revenue is recognised when revenue and associated costs can be measured
reliably and future economic benefits are probable. Revenue is measured at
the fair value of the consideration received or receivable for goods and
services provided in the normal course of business, net of rebates and
settlement discounts, VAT and other sales related taxes.
Revenue represents income derived from contracts for the provision of goods
and services, over time or at a point in time, by the Group, to customers in
exchange for consideration in the ordinary course of the Group's activities.
Contracts with customers are assessed to identify performance obligations for
both the transfer of goods or for the provision of services. Goods and
services are distinct and accounted for as separate performance obligations if
the customer can benefit from them either on their own or together with other
resources that are readily available to the customer and they are separately
identifiable in the contract. The Group has determined that all of these
contracts include a single performance obligation as the promises within the
contracts are not separately identifiable.
Revenue is recognised as performance obligations are satisfied as control of
the goods and services is transferred to the customer. For each performance
obligation within a contract, the Group determines whether it is satisfied
over time or at a point in time.
Performance obligations are satisfied over time if one of the following
criteria is satisfied:
• the customer simultaneously receives and consumes the benefits
provided by the Group's performance as it performs;
• the Group's performance creates or enhances an asset that the
customer controls as the asset is created or enhanced; or
• the Group's performance does not create an asset with an
alternative use to the Group and it has an enforceable right to payment for
performance completed to date.
For each performance method to be recognised over time, the Group recognises
revenue using an input method, based on costs incurred or as a proportion of
estimated total contract costs or physical proportion of contract work
completed in relation to the total. Revenue and attributable margin are
calculated by reference to reliable estimates of transaction price and total
expected costs and are therefore recognised progressively as costs are
incurred or work is completed.
When it is considered probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense immediately.
The Group has determined that most of its contracts satisfy the point in time
criteria as the sales of goods are recognised when control has been
transferred to the customer. For the majority of customers this is when
goods are delivered and title has passed. For others it is when goods are
delivered for shipment by our contract manufacturers, depending upon the terms
and conditions of the sales contract as to when the risks and rewards of
ownership are transferred.
Inventories
Inventories are stated at the lower of historical cost and net realisable
value. Cost comprises direct material cost and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is calculated
using the first-in first-out method. Net realisable value represents the
estimated selling price in the ordinary course of business less all estimated
costs to completion and selling costs to be incurred.
Forward currency derivatives
The Group enters into derivative foreign currency forward contracts which are
classified as financial instruments at fair value through profit and loss.
They are initially recognised at fair value on the date a derivative contract
is entered into and are subsequently re-measured at their fair value. Fair
value gains and losses are recognised in profit and loss.
The Group does not have the right of offset between such derivatives, and so
all derivatives that are financial assets are shown separately from all
derivatives that are financial liabilities, at each period end.
The Group has also entered in to boosted forward contracts in 2022 which gives
the group the right but not the obligation to buy currency at a more
beneficial forward rate provided the contract trades within the contracts
pre-defined range. If the contract matures outside of this pre-defined range
then the right to buy at the boosted rate is cancelled and replaced by an
obligation to buy currency at the strike rate.
3. Critical accounting estimates and areas of judgement
Impacting the Group
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates and assumptions will, by definition, seldom
equal the related actual results. The estimates and assumptions at the end
of the accounting period that have a significant risk of resulting in a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
European Partner Revenue recognition
In April 2021 the Group signed a long-term partnership agreement with, Techem,
to provide a fully funded research and development programme for a new
generation smoke alarm.
Consideration has been given as to whether to adopt IFSR15 revenue recognition
accounting principles or IFRS 11 joint venture accounting treatment. The
Group has concluded that Techem are in control of the design phase and thus do
not require a unanimous consent of both parties which is required to adopt
IFRS 11 treatment.
The assessment of the dominant factor in the contract requires significant
judgement. The Group have looked at the promises within the contract
(product design phases, licences and warranties) on their own merit to analyse
if they are distinct or whether they need to be treated as one combined
performance obligation. The Group has concluded that as the product design,
development, prototypes and licences are not distinct in the context of the
contract, there is a single combined performance obligation.
The assessment of the dominant factor also requires significant judgement and
on the balance of evidence the Group has taken the view that the development
services are dominant looking at both the contractual prices and level of
effort required to deliver the development services to the customer. The
Group has considered how the performance obligation is satisfied by analysing
the transfer of control of the intellectual property to the customer. The
asset created has no alternative use for FireAngel, that is only Techem can
use the product prototype and designs and FireAngel has an enforceable right
to payment for performance completed. As such the Group has concluded that
the Group's performance creates an asset that Techem controls as it is
created. Therefore, the licences (Background IP and Foreground IP) should be
evaluated under paragraphs 31-38 of IFRS 15, rather than the licence guidance
in paragraphs B58- B61. The Group has decided that the most appropriate
methodology to recognise revenue over time is the input methodology which is
based upon the Group's efforts to satisfy the performance obligation.
Using the input methodology, the Group have needed to consider the accuracy of
forecasted development costs. These forecasts are built from the ground up
and are the Group's best estimate of costs to complete the development
phase. Any changes in the total design phase costs will have an impact of
the timing of revenue recognition.
The Group has also had to consider the value prescribed to the royalty fees
earned during the contract. The contract between the two parties guarantees
a minimum royalty fee of €3 million. The minimum royalty fee of €3m has
been included in the initial contract consideration which is being recognised
as described above. This amount will be payable as products are sold and
therefore the contract includes a significant financing element. Once the
minimum royalty fee has been received the intellectual property transfers to
the German service provider and FireAngel is granted a licence to use this IP
for the development, manufacture and sale of FireAngel's own products. No
value has been attributed to the non-cash consideration represented by the
Group's future rights over this IP as until development is completed no
reliable assessment of fair value can be made and therefore it is not yet
probable that there will not be a significant reversal of any amount
recognised.
The Group has now recognised £3.6 million (56%) of the total consideration of
the contract and expects to recognise the remaining £2.7 million over the
next three years.
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its tangible
and intangible assets (including goodwill) to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs. Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis
can be identified.
Intangible assets with indefinite useful lives and other intangible assets not
yet available for use are tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately through the income statement, unless
the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
During 2022, the Group recognised an impairment charge of £0.9 million
against its capitalised intangible product development costs after a thorough
review of product lines and future development costs.
The Board notes that the Group has a significant value of intangible assets on
the balance sheet at the year end. Connected homes intangible assets with a
net book value of £2.5 million are not yet being amortised as they are
currently being developed for sale. Connected home intangible assets with a
net book value of £2.6 million are being amortised. The Board expects that
in future, the vast majority of products sold will in some way be connected
(through Wi-safe 2, Z-wave or Zigbee technology) and given that the Group
already has a connected homes technology product offering which is working,
the Board believes that the carrying value of connected homes technology
intangibles is not impaired. In reaching this conclusion, the Board also
acknowledges the losses incurred by the Group over the past three years and
the heightened risk of impairment that this leads to.
Deferred tax recognition
At 31 December 2022 there is a deferred tax asset of £2.8 million (2021:
£1.5 million) which has not been recognised as the timing of utilisation is
uncertain. Deferred tax assets should only be recognised where they are more
likely than not to be realised. Whilst the Group expects a return to
profitability in the future, the generous deduction available for research and
development expenditure means that it is likely to be several years before
these losses will need to be accessed.
4. Revenue and segmental reporting
The Group sells and distributes home safety products and accessories in the
UK, Continental Europe and certain other countries and undertakes
manufacturing activities in Canada. Its major customers are based throughout
the UK, Continental Europe and in a number of other countries outside
Continental Europe. Financial information is reported to the Board on a
consolidated basis with revenue and operating profit stated for the Group.
IFRS 8 requires the presentation of segmental information in relation to the
Group in the Annual Report on the same basis as information reported to the
Board. The Chief Operating Decision Maker ('CODM') has been determined to be
the Board which delegates day-to-day responsibility for managing the Group to
the Executive Management Team ('EMT') led by the Executive Chairman.
Based on the information on which strategic and operating decisions are made,
the CODM considers that there is one identifiable operating segment as there
are no separately identifiable business segments that are engaged in providing
individual products or services, or a group of related products and services,
that are subject to risks and returns that are different to the core business
of the home safety products market in Europe.
Revenue and gross profit for each of the Group's business units are reviewed
by the Board and rolled up into consolidated financial information with
non-business unit costs included to arrive at the results that investors
see. Business unit reporting to the Board generally excludes information on
overheads by business and other income statement information, which is all
reported on a consolidated basis. Assets and liabilities are also generally
reported to the Board on a consolidated basis.
2022 2021
Restated
Revenue from continuing operations £000 £000
Business Units:
UK Trade 9,655 9,820
UK Retail 19,776 15,835
UK Fire & Rescue Services 3,266 2,377
UK Utilities 3,487 1,829
International 16,349 10,891
Techem 2,517 1,043
Pace Sensors 2,411 1,677
Total revenue from external customers 57,461 43,472
All business units, excluding Pace Sensors and our European Partner, earn revenue from the sale of smoke, heat and CO alarms and accessories to end customers. Pace Sensors earns revenue from the manufacture and sale of CO sensors to a third-party CO detector assembler based in China. Revenue from our European Partner is derived from a research and development programme for a new generation smoke alarm, for further details see note 5.
As of 1 January 2022, the business has reassigned a number of customers to
different business units. Four customers with a combined revenue of £1
million in 2021 which were previously reported within the UK Trade business
unit are now reporting through the Utilities business unit. Similarly two
customers with a combined revenue of £0.2 million in 2021 which were
previously reported within the UK Trade business unit are now reporting
through the UK retail business unit. The 2021 sales comparatives have been
adjusted accordingly.
For 2022, revenues of approximately £6.6 million were derived from one
external customer (2021: £4.7 million from one external customer), which
individually contributed over 10% of total revenue of the Group. These
revenues are attributable to the UK Retail business unit. An analysis of the
Group's revenue is as follows:
2022 2021
£000 £000
Continuing operations:
UK 36,184 29,861
Continental 18,542 11,839
Europe
Rest of World 2,735 1,772
57,461 43,472
Non-current assets, excluding deferred tax assets, for UK and overseas
territories are as follows:
2022 2021
£000 £000
Continuing operations:
UK 13,491 16,671
Canada 242 190
Non-current assets 13,733 16,861
5. Revenue recognition - Techem
In April 2021 the Group signed a long-term partnership agreement with Techem
to provide a research and development programme for a new generation smoke
alarm. The Group has looked at the individual element of the contract and
has concluded that there are no separate performance obligations and as such
the contract forms one central non-distinct performance obligation.
In order to determine the total revenue associated with this contract the
Group has amalgamated the already agreed background IP and minimum royalty
amounts with the forecasted fees for the product development phases. The
payment structure agreed in the contract dictates that consideration will be
received at contract milestones during the development phase and once product
starts to be delivered. As a result of the payment schedule within the
contract it has been determined the contract includes a significant financing
element. Therefore, the expected cash flows have been discounted using the
Group's own borrowing rate at the contract's inception. These discounted
amounts will be recognised as interest earned using the same phasing
methodology as revenue.
To determine the phasing of the revenue recognition the Group has chosen to
adopt the input methodology approach as this is based upon direct efforts to
satisfy the dominant component of the performance obligation which is the
product design element. This methodology dictates that progress be measured
by viewing current spend against total projected development spend. At the
end of 2022 the Group has calculated it is 56% (2021: 17%) of the way through
its development process based on this methodology.
The contract between the two parties guarantees a minimum royalty fee of €3
million. The minimum royalty fee of €3 million has been included in the
initial contract consideration which is being recognised as described above.
This amount will be payable as products are sold and therefore the contract
includes a significant financing element. The Group currently values the
consideration of the design and development phase of the contract at £6.9
million (£6.3 million in revenue and £0.6 million as interest receivable).
The Group has recorded a net contract asset of £1.3 million (2021: £0.1
million) as the contract billing arrangements at specific milestones does not
mirror the accounting treatment of performance obligation satisfaction.
Once the minimum royalty fee has been fully paid the intellectual property
transfers to Techem and FireAngel will be granted a licence to use this IP for
the development, manufacture and sale of FireAngel's own products. No value
has been attributed to the non-cash consideration represented by the Group's
future rights over this IP as until development is completed no reliable
assessment of fair value can be made and therefore it is not yet probable that
there will not be a significant reversal of any amount recognised.
2022 2021
£000 £000
Revenue Recognised 2,517 1,043
Costs Recognised (1,299) (437)
Gross profit Attributable to contract 1,218 606
Revenue Recognised - cumulative 3,560 1,043
Interest income recognised - cumulative 318 91
Total Consideration 3,878 1,134
Billing to date (2,546) (1,060)
Accrued income 1,332 74
6. Non-underlying items
2022 2021
£000 £000
Within cost of sales
Commercial distributer settlements (note a) - 66
Provision against stock and disposal costs (note b) (54) (88)
(54) (22)
Within operating expenses
Impairment of intangible assets (note c) 916 -
Impairment of tangible assets 30 (3)
Share-based payment charges 181 283
1,127 280
Total non-underlying items 1,073 258
a. Customer settlements relating to the battery impedance totalled £nil for
the year (2021: £0.1 million). There was no cash impact in 2022 relating to
these settlements.
b. During 2022 the Group was able to sell stock lines that had previously
been impaired which resulted in a non-underlying credit of £0.1 million
(2021: £0.1 million credit). The cash impact in 2022 for disposing of stock
previously provided for was nil.
c. Intangible capitalised development assets of £0.9 million were impaired
during the year as a result of a thorough review of products line an future
development costs. There was no cash impact in 2022. The prior year charge
was £nil.
7. Other operating income and expenses
Due to the global supply chain shortages faced in 2022 the Group incurred
additional costs to maintain a supply of critical components. During the
second half of the year the Group was able to sell a surplus of some of these
components for £0.8 million to a third party recognising £0.5 million profit
on these transactions. The Group has not recognised these sales as revenue
as it does not view these as part of the business' ordinary activities (either
past, current or future planned)
Furlough payments of £nil (2021: £0.1million) were received under the
Canadian Emergency Wage Subsidy. The scheme enabled employers to retain staff
despite the economic impact of COVID-19 through government grants relating to
wage subsidies. As per the accounting policies adopted, the grant received was
recognised in the profit and loss in 'other income' as the related salaries
for the furloughed employees were recognised.
8. Finance costs
2022 2021
£000 £000
Interest expense on bank borrowings (398) (84)
Lease liability interest expense (24) (40)
Interest received on discounted cash flows 227 91
Total finance costs (195) (33)
9. Income tax
2022 2021
£000 £000
Current tax
UK corporation tax credit (307) (434)
UK - adjustments in respect of prior periods (credit)/charge 51 16
Foreign tax charge (6) (12)
(262) (430)
Deferred tax
Origination and reversal of temporary differences - -
Adjustments in respect of prior periods - -
Income tax credit (262) (430)
Domestic income tax is calculated at 19% (2021: 19.00%) of the estimated
assessable profit or loss for the year.
The tax credit for the year can be reconciled to the profit per the
consolidated income statement as follows:
2022 2021
£000 % £000 %
Loss before tax (6,107) (3,710)
Tax at the domestic income tax rate of 19.00% (2021: 19.00%) (1,158) (705)
Tax effect of expenses that are not deductible in determining taxable profit 35 60
Effect of allowance for capitalised development expenditure (169) (187)
Adjustments in respect of prior periods 51 16
Deferred tax not recognised 997 544
Impact of foreign tax rates (25) (30)
Difference in current and deferred tax rates 19 (351)
Effect of tax rate change on opening patent box set-off 0 279
Other adjustments (12) (56)
Tax credit and effective tax rate for the year (262) 4% (430) 12%
The weighted average applicable tax rate was 4% (2021: 12%). The tax credit
for 2022 is largely due to enhanced research and development tax relief
schemes and operating losses in the year of £6.1 million.
Tax losses are, where possible, realised during the year through surrender for
research and development tax credits. There are no time restrictions on the
utilisation of tax losses going forward.
At 31 December 2022 there is a deferred tax asset of £2.8 million (2021:
£1.5 million) which has not been recognised as the timing of utilisation is
uncertain. This was calculated using a corporation tax rate of 25%.
Deferred tax assets should only be recognised where they are more likely than
not to be realised. Whilst the Group expects a return to profitability in
the future, the generous deduction available for research and development
expenditure means that it is likely to be several years before these losses
will need to be accessed.
10. Dividends
As a result of the loss reported for the year, and consistent with the
decision not to pay an interim dividend (2021: nil pence per share), the
Directors do not recommend payment of a final dividend for the year (2021: nil
pence per share). The total dividend payable for 2022 is therefore nil pence
per share (2021: nil pence per share)
11. Earnings per share
2022 2021
Earnings from continuing operations £000 £000
Earnings for the purposes of basic and diluted earnings per share (loss for (5,845) (3,280)
the year attributable to owners of the Parent)
Number of shares '000 '000
Weighted average number of ordinary shares - basic calculation 181,067 160,308
Dilutive potential ordinary shares from share options - -
Weighted average number of ordinary shares - diluted calculation 181,067 160,308
2022 2021
Pence Pence
Basic earnings per share (3.2) (2.0)
Diluted earnings per share (3.2) (2.0)
Basic EPS is calculated by dividing the earnings attributable to ordinary
owners of the parent by the weighted average number of shares outstanding
during the period.
Diluted EPS is calculated on the same basis as basic EPS but with a further
adjustment to the number of weighted average shares in issue to reflect the
effect of all potentially dilutive share options. The number of potentially
dilutive share options is derived from the number of share options and awards
granted to employees and Directors where the exercise price is less than the
average market price of the Company's ordinary shares during the period.
Under IFRS no allowance is made for the dilutive impact of share options which
reduce a loss per share. The basic and diluted EPS measures are therefore
the same for the year ended 31 December 2022 and 31 December 2021.
12. Inventories
Group Group Company Company
2022 2021 2022 2021
£000 £000 £000 £000
Raw materials 177 161 - -
Work-in-progress 155 98 - -
Finished goods 8,086 4,026 - -
Total gross inventories 8,418 4,285 - -
Inventory provisions (357) (548) - -
Total net inventories 8,061 3,737 - -
Pace Sensors Limited, the Group's wholly owned subsidiary in Canada,
manufactures CO sensors for use in the Group's CO alarms. The CO sensors are
shipped to Pace Technologies, an independent third-party supplier based in
China, for assembly into finished CO alarms, which are then purchased by the
Group in the UK. The Group does not maintain a provision for unrealised
profit in CO sensors within finished CO alarm stock, as CO sensors are sold to
an independent third party, Pace Technologies, before being acquired as
finished CO alarm products and put into stock by the Group.
Stock impairment costs of £0.1 million were provided in the year (2021: £0.1
million).
13. Loans and borrowings
Group Group Company Company
2022 2021 2022 2021
£000 £000 £000 £000
Bank term loan 2,797 3,223 - -
Invoice discounting facilities 3,451 - - -
The Group maintained a £7.5 million invoice discounting facility, of which
£3.5 million was drawn down at the year end, with HSBC UK Bank plc secured on
UK and international trade debtors which can be accessed as required. This
facility incurs interest charges of 3.75% above the Bank of England base rate
and is repayable on demand.
The Group also has a Coronavirus Business Interruption Loan Scheme ("CBILS")
which incurs interest at 3.99% above the Bank of England base rate and is
repayable over the next 5 years. The loan has covenants which are attached
to the Group's liquidity ratios.
All loans and borrowings have a fair value which is equal to their carrying
value.
At 31 December 2022, the Group had the following lease liabilities totalling
£0.5 million:
Land and Plant and
buildings machinery Vehicles Total
£000 £000 £000 £000
At 1 January 2021 1,317 35 29 1,381
Additions - - 8 8
Accretion of interest 38 1 - 39
Payments (453) (10) (17) (480)
At 31 December 2021 902 26 20 948
Accretion of interest 24 - - 24
Payments (459) (10) (12) (481)
At 31 December 2022 467 16 8 491
Within 6 months
£000 Total at
Maturity analysis of lease liabilities 6 months 31 December 2022
to 1 year 1 to 5 years Over 5 years £000
£000 £000 £000
Payments
Land and buildings 220 169 87 - 476
Plant and machinery 2 8 8 - 18
Vehicles 4 4 - - 8
Total payments 226 181 95 - 502
Interest charge
Land and buildings (6) (2) (1) - (9)
Plant and machinery (1) (1) - - (2)
Vehicles - - - - -
Total interest charge (7) (3) (1) - (11)
Total lease liabilities at 31 December 2022 219 178 94 - 491
At 31 December 2021, the Group had the following lease liabilities totalling
£0.9 million:
Within 6 months
£000 6 months Total at
Maturity analysis of lease liabilities to 1 year 1 to 5 years Over 5 years 31 December 2021
£000 £000 £000 £000
Payments
Land and buildings 230 228 476 - 934
Plant and machinery 1 8 17 - 26
Vehicles 7 5 7 - 19
Total payments 238 241 500 - 979
Interest charge
Land and buildings (13) (10) (8) - (31)
Plant and machinery - - - - -
Vehicles - - - - -
Total interest charge (13) (10) (8) - (31)
Total lease liabilities 225 231 492 - 948
14. Changes in liabilities arising from financing activities
Invoice
Bank discounting Lease
Loans facility liabilities Total
£000 £000 £000 £000
Balance at 1 January 2021 2,623 2,539 1,381 6,543
Drawdown of facility 3,200 42,989 - 46,189
Repayment of facility (2,600) (45,528) - (48,128)
Capital payments - - (441) (441)
Interest charge - 61 40 101
Interest payments - (61) (40) (101)
Acquisition of leases - 8 8
Balance at 31 December 2021 3,223 - 948 4,171
Drawdown of facility - 55,854 - 55,854
Repayment of facility (426) (52,403) - (52,829)
Capital payments - - (457) (457)
Interest charge 118 155 24 297
Interest payments (118) (155) (24) (297)
Balance at 31 December 2022 2,797 3,451 491 6,739
15. Provisions
FireAngel warranty provisions
£000
At 1 January 2021 2,745
Charge in year -
Utilisation in year (1,192)
At 31 December 2021 1,553
Charge in year -
Utilisation in year (580)
At 31 December 2022 973
The total warranty provision is classified between less than one year and
greater than one year as follows:
2022 2021
£000 £000
Current provision 502 1,012
Non-current provision 471 541
Total warranty provisions 973 1,553
Review of warranty provision
The Group regularly reviews the return rates of affected products and
recalculates the provision based on the changing USD FX rates and supplier
pricing which has been particularly affected by the macro-economic factors
over the last 12-18 months. The Group expects the provision to be exhausted
in 2027 when the final products from 2017 production fall outside of the 10
year warranty period.
The provision was increased by £0.3 million in the year due to the effects of
increased product costs and the weakening of sterling. This was offset by a
£0.3 million release due to amending terminal return rates in the provision
calculation to reflect return patterns seen over the last 12-18 months.
The Company has no provisions for the period ending 31 December 2022 or 31
December 2021.
16. Post balance sheet events
The Group as announced on 18 April 2023, signed Production and Delivery
contracts with Techem, significantly advancing the progress of this
transformational partnership:
a. The total income opportunity for FireAngel has grown
significantly to an aggregate of up to c.$7.50 per alarm since the original
Development Agreement was signed in 2021. This is based on the same previously
announced number of units planned for production and reflects inflation, the
changing bill of materials and the changed scope as the project has matured to
this crucial point of engaging a manufacturing partner
b. Shipments of the new alarm expected to start in 2024 with
production volume building in 2025
The Group has also achieved 2 new contract wins announced on 31 March 2023
with British Gas Services Limited and on 12 May 2023 with a government agency
in the Middle East, signify further progress against our strategy to migrate
to higher value activities and commercialise our investment in connected
technology.
During Q2 2023 the Group has undertaken an extensive review of the its
operations and cost base to help ensure that it is best positioned to return
to profitable growth as soon as possible, with an estimated saving of
approximately £1.5 million on overheads and administration costs, including
approximately £1.0 million in headcount savings, and an additional £1.0
million in reduced capital expenditure, expected in 2023.
The Company has approved on 5 June 2023 the details of a placing, subscription
and open offer to raise £6.1 million (gross), £5.4 million net, in order to
reduce its net debt (excluding lease liabilities) and support the increased
working capital and investment requirements for its strategic ambitions. There
are contractual commitments from certain existing shareholders, new investors
and the subscriber by means of a placing and subscription of up to 120,711,091
new ordinary shares. Siterwell, a long term manufacturing partner, has agreed
to subscribe for 55,322,431 ordinary shares of 2 pence each for the total
consideration of £2.8 million subject to clawback by qualifying shareholders
under the open offer. In addition, the Board has agreed a number of changes,
with Andrew Blazye (ex-Chair of Universe plc) to be appointed as Non-Executive
Chairman and Neil Radley (ex-CEO of Universe plc) to be appointed as CEO with
effect from 7 June 2023, and John Conoley stepping down as Executive Chairman
with effect from 5 June 2023. Following completion of the fundraising, the
Board has committed to undertake a strategic review to explore options to
realise value for all shareholders, including the possible sale of the
company.
17. Availability of announcement
A copy of this announcement is available on the Company's website at
www.fireangeltech.com and at its registered office: FireAngel Safety
Technology Group plc, Vanguard Centre, Sir William Lyons Road, Coventry, CV4
7EZ.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UNVVROWUNRRR
Recent news on Fireangel Safety Technology
See all newsFireAngel SafetyTech Siterwell Electronic - Offer closed and compulsory acquisition
FireAngel SafetyTech - Award of Options and Director's Shareholdings
FireAngel SafetyTech - Unaudited Results & Temporary Suspension on AIM
FireAngel SafetyTech Siterwell Electronic - Acceptance Level Announcement
FireAngel SafetyTech Siterwell Electronic - Acceptance Level & Acquisition Update