FireAngel SafetyTech - Interim Results
27/09/2022 07:00
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RNS Number : 7194A FireAngel Safety Technology Group 27 September 2022
27 September 2022
FireAngel Safety Technology Group plc
('FireAngel', the 'Group' or the 'Company')
Interim results
FireAngel (AIM: FA.), one of Europe's leading developers and suppliers of home
safety products, announces its unaudited interim results for the six months
ended 30 June 2022 ('H1 2022' or the 'period').
Financial highlights
· Revenue up 15% to £25.6 million (H1 2021: £22.2 million) ahead of the
Board's expectations as disclosed in the Company's H1 trading update released
on 27 July 2022. This is against a backdrop of macro supply issues which
restricted a much-improved performance.
· Gross profit up 8% to £5.6 million (H1 2021: £5.2 million)
· Gross margin at 21.9% (H1 2021: 23.5%) including £1.6m of exceptionally high
purchase price variance costs ("PPV") to secure components
· Adjusted gross margin(1) before the exceptionally high PPV costs for securing
components of £1.6m would have been 28.2% (H1 2021: 24.3%)
· Underlying operating loss(2) increased by 22% to £1.8 million (H1 2021: £1.4
million) which was particularly impacted by the additional £1.4 million PPV
· Underlying LBITDA(3) of £0.1 million (H1 2021: underlying EBITDA(3) £0.2
million)
· Underlying loss before tax of £1.7 million (H1 2021: loss before tax £1.5
million)
· Capitalised product development and production set up costs of £0.8 million
(H1 2021: £1.3 million)
· Inventory at 30 June 2022 of £4.7 million (30 June 2021: £4.9 million)
· Net debt (before lease obligations) at 30 June 2022 materially better than
expectations at £3.8 million (30 June 2021: £2.2 million net cash; 31
December 2021: £0.1 million net cash) which comprised cash of £0.7 million,
debt of £3.1 million and drawings under the Company's invoice finance
facility of £1.4 million (with a further £4.1 million available to be drawn
down)
· Net debt (before lease obligations) at 23 September 2022 of £3.9 million
which comprises cash of £0.1million, debt of £3.0 million and drawings under
the Company's invoice finance facility of £1.8 million (with a further £3.0
million available to be drawn down on)
(1) Adjusted gross margin before the exceptionally high PPV costs for securing
components of 28.2% is the gross margin before PPV of £1.6 million; prior to
2021, PPV had minimal impact on the Company (H1 2021: gross margin before the
PPV costs for securing components is the gross margin before PPV of £0.2
million)
(2) Underlying operating loss of £1.8 million in H1 2022 is before unaudited
share-based payments charge of £0.1 million (H1 2021: £1.4 million before a
share-based payments charge of £0.1 million)
(3) Underlying LBITDA of £0.1 million in H1 2022 stated before unaudited
share-based payments charge of £0.1 million (H1 2021: underlying EBITDA of
£0.2 million stated before unaudited share-based payments charge of £0.1
million)
Business and operational highlights
· Both half year revenue and underlying gross profit were the highest since H1
2017
· Adjusted EBITDA(4) of £1.5 million (excluding the exceptionally high PPV) (H1
2021: £0.3 million) - the highest since H1 2017
· Q2 2022 sales of 1.4 million units as supply constraints eased, up 40% from 1
million units in Q1 2022, was the highest volume per quarter since Q4 2019
· International sales, up 55% to £8.4 million (H1 2021: £5.4 million), the
highest for a first half year since 2017, benefitted from legislation in
Benelux. In the period, Benelux achieved the highest sales in that region in
its history
· Techem's selection of FireAngel's CO sensor, which will now be incorporated in
the new generation smoke alarm, materially enhances the future value of this
partnership
(4)Adjusted EBITDA of £1.5m is underlying LBITDA of £0.1 million stated
before the exceptionally high PPV costs for securing components of £1.6
million; prior to 2021, PPV had minimal impact on the Company (H1 2021:
adjusted EBITDA of £0.3m is underlying EBITDA of £0.1 million stated before
the PPV costs for securing components of £0.2 million)
Outlook
· The Company is EBITDA positive in the year to date (with its historically
strongest trading quarter to come) and expected to be cash generative in H2
2022 and expects further positive cash generation in 2023
· The Company expects to deliver its best full year performance since 2017 when
the Company's results were partially fuelled by demand driven by the impact of
German legislation
· Revenue for the full year expected to be towards the top end of market
expectations
· However, the impact of foreign exchange and inflation means the Company will
not overcome those headwinds at the margin level, which will result in EBITDA
for the full year being materially below market expectations and to be between
break even and £1.5m
· H2 is traditionally the Company's strongest half and further supports the
expansion of revenue and profit (before any unusual exchange rates movements)
· The Board's actions combined with continued market demand means FireAngel
continues to expect further financial improvement in 2023, including enhanced
cash generation
John Conoley, Executive Chairman of FireAngel, commented:
"I am delighted by the revenue performance and the continuing success of our
margin improvement activities. Our execution so far this year has largely
conformed to our plans which delivered the expected underlying margin
improvement before the combined impact of adverse currency movement and
inflation. While the circumstances outside our control have been particularly
frustrating, the Board expects 2022 to demonstrate the first proof that we
have turned the Company around with more still to come."
For further information, please contact:
FireAngel Safety Technology Group
plc
0247 771 7700
John Conoley, Executive Chairman
Zoe Fox, Chief Finance Officer
Shore Capital (Nominated Adviser & Joint
Broker)
0207 408 4050
Tom Griffiths/David Coaten
Singer Capital Markets (Joint
Broker)
0207 496 3000
Rick Thompson/Alex Bond
Houston (Financial
PR)
0204 529 0549
Kate Hoare/Joe Burgess
( )
( )
Executive Chairman's Statement
Overview
I am pleased with the resilience shown by the Company in the first half of the
year. As expected, the Company's underlying financial performance in H1 2022
showed a material improvement, resulting in it being the best half year
revenue performance since 2017 and ahead of Board expectations. While we
expect our performance in H2 2022 should lead to revenue for the year ending
31 December 2022 ("FY2022") being at the top end of market expectations, the
impact of foreign exchange and inflation on our input costs mean that we will
not overcome all those headwinds at the margin level which will result in
profit for FY2022 being materially below market expectations. FY2022 EBITDA is
expected to be between break even and £1.5 million.
H1 2022 was another period marred by external macroeconomic factors, including
the war in Ukraine, ongoing lockdowns in China, global supply chain issues,
widespread cost inflation, and the availability of skilled labour, which have
all been, and remain, a challenge.
Whilst the Company is not immune from the impact of these factors on its
day-to-day operations, the Board's continued focus on careful and prudent
improvement to our operations and supply chains has helped mitigate these
challenges somewhat. This has left the Group better positioned with its supply
chain as we began to see an easing in related disruption that has been a
constant issue facing the Company over the last couple of years. This is
demonstrated in the 1.4 million products that the Company sold in Q2 2022,
being 40% more than it sold in Q1 2022. The Company executed price rises to
mitigate inflation which began to ease this issue from late Q2 2022. A further
round of price rises will take effect during Q4 2022 and Q1 2023 offering
further mitigation against inflation and currency fluctuations.
The Company also continued to make progress with its strategically important
project alongside its partner Techem Gmbh ("Techem"), a leading service
provider for green and smart buildings and a major supplier of technical
solutions to the European rental market. As part of the agreement, FireAngel
is working to develop a new generation smoke alarm primarily for the German
market. Techem has also selected the FireAngel CO sensor to be incorporated
exclusively into the new alarm, which is expected to significantly increase
the medium-term financial opportunity for the Company.
I am proud of the Company and of its staff for their achievements so far this
year. Our resilience in the face of immense external challenges provides the
Board with confidence in our ability to deliver an improved second half
performance, which we are on track to achieve.
Financial performance
Revenue split between the Group's business units was as follows:
Unaudited Unaudited
Six months ended Six months ended 30 June 2021 Change
30 June 2022
Revenue £000 £000 £000 %
UK Trade 4,047 5,187 (1,140) (22%)
UK Retail 7,157 8,382 (1,225) (15%)
UK Fire & Rescue Services ("F&RS") 1,575 1,488 87 6%
UK Utilities 1,620 757 863 114%
Total sales in the UK 14,399 15,814 (1,415) (9%)
International 8,404 5,434 2,970 55%
Techem 1,698 174 1,524 876%
Pace Sensors 1,055 799 256 32%
Total revenue 25,556 22,221 3,335 15%
From 1 January 2022, certain customers previously reported within the UK Trade
business unit are now reported through UK Retail & UK Utilities. The
2021 comparatives have been adjusted accordingly.
The Company achieved revenues of £25.6m in H1 2022, up 15% on the same period
last year. Gross profit increased by 8% to £5.6m. The Company continued to
make progress against its strategy to improve gross margins, albeit this was
held back by external factors, including adverse Purchase Price Variance
("PPV") costs and foreign exchange fluctuations. Gross margin was 21.9% (H1
2021 23.5%) and underlying gross margin (excluding the exceptionally high PPV)
was 28.2% (H1 2021: 24.3%). As a result of the loss reported for the period,
the Directors do not propose the payment of an interim dividend (2021:
nil).
Business Unit performance has been strong across most territories with demand
outweighing supply. International revenue was 55% up on the same period last
year predominantly due to sales driven through the introduction of legislation
in Benelux, where sales were the highest in the Company's history. Sales also
grew in the online channels and retail areas of International. Both UK Trade
and Retail sales were lower in H1 2022 than in the comparative period last
year due to the supply constraints, particularly in relation to connected
products. However, again there was demand which would have exceeded the
comparative period last year if sufficient inventory had been available. Both
F&RS and Utilities sales have increased compared to the same period last
year and have benefitted from no longer being restricted by the property
access issues we saw in early 2021 caused by COVID-19. The Company's
partnership with Techem continued to progress well, and all milestone
deliverables were met, further details of which are set out below. The total
revenue associated with this contract amalgamates the background IP, minimum
royalty amounts and the charges for the product development phases. Pace
Sensors also saw an increase in revenue in the period of 32% compared to the
comparable period last year, as we launched our new range of CO products.
In March 2021, the Group refinanced its existing CLBILS. As the Group's
revenue dropped below £45.0 million, the CLBILS (which had reduced to £2.0
million at the end of March 2021) was refinanced under the CBILS with HSBC
UK. The new loan of, in aggregate, £3.7 million ("New Loan") comprises a
CBILS loan of £3.2 million and an additional Receivables Finance CBILS of
£0.5 million. The New Loan, which was used partially to pay off the balance
of the CLBILS, had a term of 6 years with the first year being free of
interest and capital repayments and an interest rate thereafter of 3.99 per
cent. over the Bank of England's base rate. While the full £3.2 million CBILS
loan was drawn down in March 2021, the £0.5 million additional Receivables
Finance CBILS as at the date of this announcement has not been drawn down. The
Group maintains its existing Invoice Discounting Facility of £7.5 million,
which is £1.8 million drawn on as at 23 September 2022. Interest and capital
repayment of the CBILs commenced in May 2022.
The Group's balance sheet was further strengthened following the Company
reaching an agreement for a standby letter of credit facility with its bank,
HSBC UK Bank plc and UK Export Finance, up to a combined sum of £3.5m. This
facility is for an initial term of 12 months. The continued support of our
bank in providing this facility has provided greater certainty in our supply
chain. It has offered additional reassurance for suppliers who are procuring
longer-term inventory needed for the Company's growth over the next few years.
The proactive actions initiated by the Board, along with the net proceeds of
the fundraising undertaken in Q2 2021, have meant that the Company was much
better placed to tackle external headwinds than would otherwise have been the
case. Creditor days as at 30 June 2022 were 19 days (30 June 2021: 21 days).
The Company's journey towards positive cash generation has continued. Notably,
cash consumed by the historic battery issues in H1 2022 more than halved to
£300,000 from £700,000 in H2 2021. This is now rapidly becoming a legacy
issue and is expected to be of lower materiality during 2023. The Company's
net debt position at 30 June 2022 was materially better than we planned and
the Company will be cash generative in H2 2022.
The Company's FY2022 budget was prepared in Q4 2021, using a forecast exchange
rate of 1.36 USD to GBP. At 30 June 2022, the Board considered a number of
exchange rate scenarios ranging from 1.17 to 1.26. Given the continued
devaluation of GBP, the Board has now decided to gain certainty by hedging the
majority of the remaining exposure for the balance of the year at blended rate
of 1.15 USD to GBP, which removes a volatility, but locks in a lower margin
outturn than previously forecast for the remainder of the year. The Company
is reviewing its hedging strategy for 2023 and the impact on gross margins for
2023 and 2024.
Strategic progress
The core target for the business is to continue improving gross margin
year-on-year, by continuing to focus on three key strands:
· Migrating to higher value activities while cutting out lower
value, lower impact activities;
· Commercialising our investment in Connected technology; and
· Streamlining our value chain of end-to-end administrative and
production activities.
Moving to Higher Value Activities
The Group's project to source entry level products, which are uneconomic to
design and produce in Europe, from an existing Chinese partner, was delivered
at the end of Q1 2022. The project has added 3% to the Company's gross margin,
as planned, with over 500k units shipped to customers to date since the
launch, replacing previous models sold by the Company.
The Company has also made significant further progress with its project to
develop a new generation smoke alarm alongside its partner, Techem. Two
development milestones were achieved in Q2 2022, and the development phase of
the project is now 32% complete. A further financial milestone was achieved in
June 2022 when a contracted payment of £279k was made by Techem to the
Company for use of its pre-existing IP within the project. The Company
continues to work closely with Techem to select a manufacturing partner,
details of which will be announced in due course. Techem also selected the
FireAngel CO sensor, which will be manufactured at the Company's own factory
in Mississauga, Canada, to be incorporated exclusively into the alarm. This is
expected to significantly increase the medium-term financial opportunity for
the Company.
The Techem partnership remains a transformational opportunity for the Company
and one from which the Board expects that the Company and its shareholders
will derive significant value. We will continue to update investors on further
progress as we cross key milestones.
The world of Internet of Things (IoT) is expected to offer more opportunities
for different types and scales of partnership, and the Company expects to
explore such opportunities to maximise the impact of its significant
understanding and investment in the connected and IoT worlds.
Commercialising connected technology
Basic supply of product has of course been the Company's primary focus due to
the many constraints, and it has not advanced on all of the fronts it had
hoped to at the more strategic application level. However, the Company is
about to launch a key new technology, SYNC-IT(TM), that will enable customers
who operate social or private rental properties to check environmental data at
the time of annual checks or any event driven intervention in social or rented
properties. This will operate through a new mobile phone App, seamlessly
extracting data from non-connected Carbon Monoxide alarms, and automatically
synchronizing to the Company's cloud server, providing further support for
environmental data in H2 2023. This is expected to present a material
demonstration of the potential of connectivity and data in the safety and care
environments and will be a companion app to the Company's Predict(TM) product.
Supply of connected products was particularly challenging and has been
restricted by component supply constraints which began in Q3 2021 and
continued throughout H1 2022. Even so, 290,000 connected products were shipped
in H1 2022 and in H2 2022 the Company expects to ship around 500,000. Our new
generation cellular gateway product will now see initial production beginning
early in the new year which was previously anticipated in Q3 2022 and moving
into volume production during Q3 2023. This product will widen the scope of
the Company's IoT opportunity in H2 2023.
Value Chain Improvements
The key focus in 2022 has been around improving both the predictability and
visibility in the Company's supply chain. This has meant establishing longer
term supply agreements with partners than has historically been the case, the
Company now provides forecasts and commitments up to the end of 2023 and
beyond for specific components. At the start of the year, the Company booked
nearly all shipping slots from Asia for the whole year to take one variable
away from its list of challenges, rather than waiting to potentially obtain
the best price. Sales forecasts and customer plans are already under
consideration by the Company out to the end of 2023.
The previously announced move to cardboard packaging for all of the Company's
products, not only removed 10 tons of plastics waste from the supply chain in
2021 but has also added about 1% to the Company's gross margin since 2021.
Additionally, a large project to further improve efficiencies in packaging
through 2023 is now underway. This is also in line with the Company's ESG
strategy.
The Company will continue working with its suppliers to find efficiencies and
support improvements across 2023 and beyond that should help mitigate currency
and inflationary impacts on performance.
Environmental, Social & Governance ("ESG")
An ESG Committee was established in early 2022 and is chaired by me. Its
initial focus has been on measurement, education and planning. However, a
solid commitment has been made to implement the environmental standard ISO
140001, which specifies the requirements for an environmental management
system that can be used by the Company to enhance environmental performance,
and the Company will be ready for certification in 2023. Other recent data
points to help us plan have included carbon measurement, and results from an
employee survey for ESG attitudes, and customer and supplier surveys. The
previously mentioned packaging initiative will be a direct result of ESG
discussions.
As part of its efforts to be a responsible employer, the Company was also
pleased to provide staff an interim cost of living pay rise in July 2022,
given that nobody is immune to the unprecedented cost of living crisis we are
currently experiencing. The Company aims to be sensitive to the wider societal
factors in being a responsible and attractive employer.
Finally, the Company has appointed consultants to help it conduct a review and
implementation plan for the Group's ESG strategy currently under development.
We will continue to update on progress in this area as part of future results
announcements.
Outlook
The Board believes a significantly improved financial performance remains
achievable, following the resilience and agility displayed by the Company in
the year to date in meeting so many stated challenges. Revenue for FY2022 is
expected to be towards the top end of market expectations, yet the impact of
currency and inflation has reduced the outlook for profitability such that the
Board expects EBITDA to be between break even to £1.5 million, being
materially below market expectations.
The underlying improvements made by the Board have protected FireAngel's
position to a significant extent, which, in particular, has enabled the
Company to be cash generative in H2 2022.
The Company has for some time been noting the energy and cost of living
situation as it pertains to society. This winter across Europe is the type of
crisis point which may accelerate a whole range of societal and legislative
change. The Company's strategy and its current and planned products mean that
it can help society's response in a broader way than just fire safety, yet
broadly within the Company's existing plans and investments. The ability to
access and act on environmental data from the Company's devices in the home is
expected to offer much wider opportunities for the Company. Caring for
people's welfare in their own homes will be a major issue over the next few
winters, and the Board believes the Company can play a major role and be part
of the solution.
Whilst the Board does not underestimate the current challenges and
uncertainties facing the Company, it believes that the Company's business
model, the strong demand for our products, our ability to adapt to changing
circumstances and the increasing regulation around safety standards, leave the
Company in a good position to continue to grow and prosper.
Underpinning the Company's excellent progress is its proposition to protect
and save lives with innovative, cutting-edge home safety technology. The Board
is excited about the potential in the business pipeline and believes that the
Company is well placed to deliver attractive growth and shareholder returns in
the long term.
Delivering our plan means the full year revenue is expected to be the
Company's best performance since 2017 and our further mitigating actions will
not only positively impact Q4 2022 but also FY 2023. While the macro headwinds
have been and continue to be particularly frustrating, we look forward to Q4
2022 and FY 2023 with justified optimism.
John Conoley
Executive Chairman
27 September 2022
Consolidated income statement
For the six months ended 30 June 2022
(Unaudited) (Unaudited) (Audited)
Six months ended 30 June 2022 Six months ended 30 June 2021 Year ended 31 December 2021
Before non-underlying items Non-underlying items Before non-underlying items Non-underlying items Before non-underlying items Non-underlying items
(note 5) Total (note 5) Total (note 5) Total
Note
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 3 25,556 - 25,556 22,221 - 22,221 43,472 - 43,472
Cost of sales (19,952) - (19,952) (17,009) - (17,009) (33,393) 22 (33,371)
Gross profit 5,604 - 5,604 5,212 - 5,212 10,079 22 10,101
Operating expenses (7,359) (76) (7,435) (6,778) (112) (6,890) (13,580) (280) (13,860)
Other operating income 6 - - - 122 - 122 82 - 82
Loss from operations (1,755) (76) (1,831) (1,444) (112) (1,556) (3,419) (258) (3,677)
Finance costs (44) - (44) (104) - (104) (124) - (124)
Finance income 148 - 148 - - - 91 - 91
Loss before tax (1,651) (76) (1,727) (1,548) (112) (1,660) (3,452) (258) (3,710)
Income tax credit 7 194 - 194 282 - 282 430 - 430
Loss attributable to equity owners of the Parent (1,457) (76) (1,533) (1,266) (112) (1,378) (3,022) (258) (3,280)
Basic earnings per share 9 (0.8) (1.0) (2.0)
Diluted earnings per share 9 (0.8) (1.0) (2.0)
All amounts stated relate to continuing activities.
Consolidated statement of comprehensive income
For the six months ended 30 June 2022
(Unaudited) (Unaudited) (Audited)
Six months Six months ended 30 June Year ended 31 December 2021
ended 30 June 2021
2022
£000 £000 £000
Loss for the period (1,533) (1,378) (3,280)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations (net of tax) 196 38 32
Total comprehensive loss for the period (1,337) (1,340) (3,248)
Consolidated statement of financial position
As at 30 June 2022
(Unaudited) (Unaudited) (Audited)
30 June 2022 30 June 2021 31 Dec 2021
Note £000 £000 £000
Non-current assets
Goodwill 169 169 169
Other intangible assets 11,702 12,045 11,825
Purchased software costs 1,409 1,842 1,625
Property, plant and equipment 2,684 3,860 3,242
15,964 17,916 16,861
Current assets
Inventories 4,706 4,894 3,737
Trade and other receivables 13,599 9,442 9,430
Current tax asset 621 1,012 464
Derivative financial assets 971 - 291
Cash and cash equivalents 11 656 5,839 3,294
20,553 21,187 17,216
Total assets 36,517 39,103 34,077
Current liabilities
Trade and other payables (11,128) (10,060) (8,135)
Lease liabilities (463) (444) (456)
Provisions 12 (658) (1,304) (1,012)
Invoice discounting facilities 10 (1,361) (409) -
Loans and borrowings 10 (693) (160) (480)
Derivative financial liabilities - (117) -
(14,303) (12,494) (10,083)
Net current assets 6,250 8,693 7,133
Non-current liabilities
Loans and borrowings 10 (2,426) (3,063) (2,743)
Lease liabilities (263) (722) (492)
Provisions 12 (568) (870) (541)
(3,257) (4,655) (3,776)
Total liabilities (17,560) (17,149) (13,859)
Net assets 18,957 21,954 20,218
36,517
39,103
34,077
Current liabilities
Trade and other payables
(11,128)
(10,060)
(8,135)
Lease liabilities
(463)
(444)
(456)
Provisions
12
(658)
(1,304)
(1,012)
Invoice discounting facilities
10
(1,361)
(409)
-
Loans and borrowings
10
(693)
(160)
(480)
Derivative financial liabilities
-
(117)
-
(14,303)
(12,494)
(10,083)
Net current assets
6,250
8,693
7,133
Non-current liabilities
Loans and borrowings
10
(2,426)
(3,063)
(2,743)
Lease liabilities
(263)
(722)
(492)
Provisions
12
(568)
(870)
(541)
(3,257)
(4,655)
(3,776)
Total liabilities
(17,560)
(17,149)
(13,859)
Net assets
18,957
21,954
20,218
Equity
Called up share capital 3,621 3,621 3,621
Share premium account 30,009 30,008 30,009
Currency translation reserve 349 159 153
Retained earnings (15,022) (11,834) (13,565)
Total equity attributable to equity holders of the Parent Company 18,957 21,954 20,218
Consolidated statement of changes in equity
For the six months ended 30 June 2022
Called up share Share premium account Currency translation reserve Retained earnings
capital Total
£000 £000 £000 £000 £000
Balance at 1 January 2021 2,531 22,104 121 (10,568) 14,188
- - - (1,378) (1,378)
Loss for the six months
Foreign exchange gains from overseas subsidiaries - - 38 - 38
Total comprehensive income/(loss) for the six months - - 38 (1,378) (1,340)
Transactions with owners in their capacity as owners:
Issue of equity shares 1,090 - - - 1,090
Premium arising on issue of shares - 8,711 - - 8,711
Share issue expenses - (807) - - (807)
Total transactions with owners in their capacity as owners 1,090 7,904 - - 8,994
Credit in relation to share-based payments - - - 112 112
Balance at 30 June 2021 3,621 30,008 159 (11,834) 21,954
Balance at 1 January 2022 3,621 30,009 153 (13,565) 20,218
- - - (1,533) (1,533)
Loss for the six months
Foreign exchange gains from overseas subsidiaries - - 196 - 196
Total comprehensive income/(loss) for the six months - - 196 (1,533) (1,337)
Transactions with owners in their capacity as owners:
Issue of equity shares - - - - -
Premium arising on issue of shares - - - - -
Share issue expenses - - - - -
Total transactions with owners in their capacity as owners - - - - -
Credit in relation to share-based payments - - - 76 76
Balance at 30 June 2022 3,621 30,009 349 (15,022) 18,957
Consolidated cash flow statement
For the six months ended 30 June 2022
(Unaudited) (Unaudited) (Audited) Year ended 31 Dec 2021
Six months ended 30 June 2022 Six months ended 30 June 2021
£000 £000 £000
Loss before tax (1,727) (1,660) (3,710)
Finance expense (104) 104 33
Operating loss for the period (1,831) (1,556) (3,677)
Adjustments for:
Depreciation of property, plant and equipment, and right-of-use assets 720 697 1,420
Amortisation of intangible assets 963 909 1,876
Loss on disposal of non-current assets 9 23 47
Non-underlying items 76 112 258
Cash flow relating to non-underlying items (330) (610) (1,242)
Increase in fair value of derivatives (680) (576) (984)
Operating cash flow before movements in working capital (1,073) (1,001) (2,302)
Movement in inventories (968) 1,664 2,909
Movement in receivables (4,021) 629 732
Movement in provisions - - -
Movement in payables 2,995 (2,734) (4,714)
Cash used by operations (3,067) (1,442) (3,375)
Income taxes received /(paid) 38 (50) 645
Net cash used by operating activities (3,029) (1,492) (2,730)
Investing activities
Capitalised development costs (623) (998) (1,529)
Purchase of property, plant and equipment (154) (315) (434)
Net cash used in investing activities (777) (1,313) (1,963)
Financing activities
Proceeds from issue of ordinary shares (net of expenses) - 8,993 8,995
Drawdown/(Repayment) of invoice finance 1,361 (2,131) (2,539)
Drawdown of loan - 3,200 3,200
Repayment of loan (104) (2,600) (2,600)
Repayment of lease obligations (222) (215) (441)
Interest paid (44) (104) (124)
Net cash generated by financing activities 991 7,143 6,491
Net (decrease)/ increase in cash and cash equivalents (2,815) 4,338 1,798
Cash and cash equivalents at beginning of period 3,294 1,466 1,466
Non-cash movements 177 35 30
Cash and cash equivalents at end of period 656 5,839 3,294
Notes to the financial information
1. General information
These unaudited consolidated interim financial statements were approved by the
Board of Directors on 26 September 2022.
2. Basis of preparation
These unaudited consolidated interim financial statements of the Group are for
the six months ended 30 June 2022.
The condensed consolidated interim financial statements for the six months to
30 June 2022 do not include all the information and disclosures required in
the annual financial statements and should be read in conjunction with the
Group's annual financial statements for the year ended 31 December 2021 which
are available at www.fireangeltech.com/investors.
The condensed consolidated interim financial statements for the six months to
30 June 2022 have not been audited or reviewed by an auditor pursuant to the
Auditing Practices Board guidance on Review of Interim Financial Information.
The condensed consolidated interim financial statements for the six months to
30 June 2022 have been prepared on the basis of the accounting policies
expected to be adopted for the year ending 31 December 2022. These are
anticipated to be consistent with those set out in the Group's latest annual
financial statements for the year ended 31 December 2021. These consolidated
financial statements are prepared in accordance with UK-adopted international
accounting standards in conformity with the Companies Act 2006 ('IFRS').
The financial statements are presented in thousands (£'000) unless otherwise
indicated.
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. The Directors prepared cash flow
forecasts for the period ending 31 December 2023 which considered the
financial position of the Group, its cash flows, borrowing facilities and
financial covenants thereon.
The Group has been loss making in recent years and absorbed cash at an
operational level. The Group has raised fresh equity and support from its bank
through the Government backed loan schemes. The impact of COVID-19 has been
material to the Group due to the knock-on effect on global supply chains. The
Group has navigated these well, but shortage of inventory and components has
prevented the growth originally planned. The Group saw demand for their
products outweighing the supply in H1 2022 due to global supply chain
constraints, with this easing towards the end of H1 2022 and the supply of
products improving. In 2021, the Group started to deliver on the gross margin
improvement plan improving adjusted margins from 19.8% in 2020 to 23.2% in
2021 which, along with new pricing strategies has provided a strong platform
to protect and improve margins as we moved into 2022 and help mitigate the
additional inflationary costs the Group has seen in H1 2022.
The Group has absorbed cash in H1 2022 but below budgeted rates through
inventory and cost controls and the Group will start to generate cash from H2
2022 and continue in the year ending 31 December 2023. The Group's forecasts
show that it has sufficient cash to deliver the strategy and return to
profitability and cash generative activity levels.
The Directors have reviewed the Group's forecasts, including the sales growth,
budgets and cash projections for the period to 31 December 2023 and including
sensitivity analysis on the key assumptions such as the potential impact of
reduced sales and weakening British Pound for the next twelve months and
beyond. The forecasts showed sufficient cash headroom throughout the outlook
period. The base case was also 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's Interim 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.
The Group has continued to benefit from a supportive relationship with its
bank, HSBC, and reviewed its financial position, 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;
· the impact of a weakening British pound against the US Dollar;
· the impact of the competitive environment within which the Group
operates;
· the impact of COVID-19 and related global supply chain issues; and
· the 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 Directors have reasonable expectations that the Group has adequate
resources to continue operations for the period of at least one year from the
date of approval of these Interim results. The Directors have not identified
any material uncertainties that may cast doubt over the ability of the Group
to continue as a going concern and the Directors continue to adopt the going
concern basis in preparing these financial statements.
AIM-quoted companies are not required to comply with IAS 34 Interim Financial
Reporting and accordingly the Company has taken advantage of this exemption.
3. Operating segments
An analysis of the Group's revenue by business unit is as follows:
(Unaudited) (Unaudited) (Audited) Year ended 31 Dec
2021 £000
Six months ended Six months ended 30 June
2021 £000
30 June 2022
£000
Revenue from continuing operations:
UK Trade 4,047 5,187 9,822
UK Retail 7,157 8,382 15,842
UK Fire & Rescue Services 1,575 1,488 2,367
UK Utilities 1,620 757 1,830
Total sales in the UK 14,399 15,814 29,861
International 8,404 5,434 10,891
Techem 1,698 174 1,043
Pace Sensors 1,055 799 1,677
Total revenue 25,556 22,221 43,472
From 1 January 2022, certain customers previously reported within the UK Trade
business unit are now reported through UK Retail & UK Utilities. The
2021 comparatives have been adjusted accordingly.
4. Revenue recognition - European Partner
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 elements of the contract and
has concluded that there are not separate performance obligations and as such
the contract forms one central non-distinct performance obligation.
Full details of the revenue recognition methodology and assumptions
surrounding this can be found in the Group's annual financial statements for
the year ended 31 December 2021 which are available at
www.fireangeltech.com/investors.
(Unaudited)
Six months ended
30 June 2022
£000
Revenue recognised in period 1,698
Costs recognised (785)
Gross profit attributable to contract 913
Total contact revenue recognised
2,741
Interest income recognised 239
Total consideration 2,980
Billing to date (2,075)
Accrued income 905
5. Non-underlying items
(Unaudited) (Unaudited) (Audited) Year ended 31 Dec
2021 £000
Six months ended 30 June Six months ended 30 June 2021
2022 £000
£000
Within cost of sales
Commercial distributer settlements (a) - - 66
Provision against stock and disposal costs (b) - - (88)
- - (22)
Within operating expenses
Impairment of tangible assets - - (3)
Share-based payments charge 76 112 283
76 112 280
Total non-underlying items 76 112 258
a. Customer settlements relating to the battery impedance totalled nil
in the period (H1 2021: £0.1 million). There was no cash impact in H1 2022
relating to these settlements.
b. During 2021, the Group was able to sell stock lines that had
previously been impaired which resulted in a non-underlying credit of £0.1
million. No such sales have been registered in H1 2022 with nil cash impact
in the period.
No change to the value of the warranty provision has been made since 2020.
The balance continues to unwind and during H1 2022 the cash outflow was
£0.3m.
6. Other Operating Income
Furlough payments of £nil were received under the Canadian Emergency Wage
Subsidy during the period (2021: £0.1 million). 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.
An error has been identified in the presentation of the Group's accounts ended
31 December 2021 whereby furlough income of £83,000 was not adjusted out of
operating expenses and cost of sales and reclassified into other operating
income. There is no impact to profit. Due to the size and nature of this
misstatement, it has been deemed non-material and as such has not been
adjusted.
7. Income tax
The income tax credit for the period is based on the estimated rate of
corporation tax that is likely to be effective for the year to 31 December
2022.
8. Dividends
As a result of the loss reported for the period, the Directors do not propose
the payment of an interim dividend (2021: nil).
9. Earnings per share
Earnings per share are as follows:
(Unaudited) (Unaudited) (Audited)
Year ended 31 Dec 2021
Six months ended 30 June 2022 Six months ended 30 June 2021
Earnings from continuing operations £000 £000 £000
Earnings for the purposes of basic and diluted earnings per share (loss for (1,533) (1,378) (3,280)
the period attributable to owners of the parent)
Number of shares '000 '000 '000
Weighted average number of ordinary shares - basic earnings calculation 181,067 139,204 160,308
Dilutive potential ordinary shares from share options - - -
Weighted average number of ordinary shares - diluted calculation 181,067 139,204 160,308
2022 2021 2020
pence pence pence
Basic earnings per share (0.8) (1.0) (2.0)
Diluted earnings per share (0.8) (1.0) (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 period ended 30 June 2022.
10. Loans and borrowings
(Unaudited) (Unaudited) (Audited)
31 Dec 2021
30 June 2022 30 June 2021
£000
£000 £000
Canadian government COVID-19 loan 23 23 23
Bank Term Loan 3,096 3,200 3,200
Invoice discounting facilities 1,361 409 -
4,480 3,632 3,223
11. Cash and cash equivalents
(Unaudited) (Unaudited) (Audited)
31 Dec 2021
30 June 2022 30 June 2021
£000
£000 £000
Cash at bank and in hand 656 5,839 3,294
12. Provisions
(Unaudited)
30 June 2022
£000
At 1 January 2021
Charge in period 2,745
Utilisation (571)
At 30 June 2021 2,174
At 1 January 2022 1,553
Utilisation (327)
At 30 June 2022 1,226
The total warranty provision is classified between less than one year and
greater than one year as follows:
(Unaudited) (Unaudited) (Audited)
31 Dec 2021
30 June 2022 30 June 2021
£000
£000 £000
Current provision 658 1,304 1,012
Non-current provision 568 870 541
Total warranty provision 1,226 2,174 1,553
13. Changes in liabilities arising from financing activities
Invoice discounting facility
Bank Lease
Loans liabilities Total
£000 £000 £000 £000
Balance at 1 January 2021 2,623 2,539 1,381 6,543
Net cash generated/ (used in) financing activities 600 (2,130) (215) (1,745)
Acquisition of leases
Balance at 30 June 2021 3,223 409 1,166 4,798
Balance at 1 January 2022 3,223 - 948 4,171
Net cash generated/ (used in) financing activities (104) 1,361 (222) 1,035
Balance at 30 June 2022 3,119 1,361 726 5,206
14. Availability
Further copies of this interim announcement are available on the FireAngel
Safety Technology Group plc investor relations website, www.fireangeltech.com
(http://www.fireangeltech.com) .
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. END IR DDGDCGDDDGDL
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