FireAngel SafetyTech - Interim Results
26/09/2023 07:00
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RNS Number : 5934N FireAngel Safety Technology Group 26 September 2023
26 September 2023
FireAngel Safety Technology Group plc
('FireAngel', the 'Group' or the 'Company')
Interim Results
FireAngel (AIM: FA.), a leading developer and supplier of home safety
products, announces its unaudited interim results for the six months ended 30
June 2023 ("H1 2023" or the "Period").
FINANCIAL HIGHLIGHTS
· Revenue down 16% to £21.4 million (H1 2022: £25.6 million) with UK revenue
growth of 11% offset by a 63% decline in International revenue
· Gross profit down 32% to £3.8 million (H1 2022: £5.6 million)
· Loss before tax of £4.0 million (H1 2022: £1.7 million)
· Non-underlying items(1) of £0.4 million (H1 2022: £0.1 million)
· Underlying loss before tax(2) of £3.6 million (H1 2022: £1.7 million)
· Underlying EBITDA(3) £(1.6) million (H1 2022: £(0.1) million)
· Inventory at 30 June 2023 of £10.0 million (30 June 2022: £4.7 million)
reduced to £8.5 million at 31 August 2023
· Net debt(4) (before lease obligations) at 30 June 2023 of £5.4 million (30
June 2022: £3.8 million; 31 December 2022: £4.8 million) comprising cash of
£1.2 million, debt of £2.5 million and drawings under the Company's invoice
finance facility of £4.1 million. As at 31 August 2023, net debt(3) (before
lease obligations) was £4.2 million
· Fundraising of £6.1 million (gross) was announced on 6 June 2023
(1)Non underlying items comprise a share-based payments charge of £0.2m,
restructuring and strategic review costs of £0.4m and the extinguishment of a
financial liability gain of £0.3m (2022: share-based payment charge of
£0.1m)
(2)Underlying loss before tax is before non-underlying items
(3)Underlying EBITDA is earnings before tax, depreciation and amortisation,
finance costs and non-underlying items
(4)Net debt is calculated as the net value of cash and cash equivalents,
invoice discounting facilities and loans and borrowing.
BUSINESS HIGHLIGHTS
· New business won includes contracts signed with Yale, British Gas Services and
a Middle East government agency
· Signing of delivery and production contracts with Techem and our long term
manufacturing partner
· Price rises agreed with major customers during H1 2023
· Resignation of Executive Chairman John Conoley on 6 June 2023 and replaced by
Andrew Blazye (Non-Executive Chair) and Neil Radley (CEO)
· Strategic review commenced on 6 June 2023 and actions already taken to reduce
inventory (£1.5 million reduction from 30 June 2023 to 31 August 2023) and
operating costs
· Reinvigoration of Senior Leadership Team with 3 key appointments made since
period end
BUSINESS OUTLOOK
· Future projections continue to be worked on and verified
· Key products (NGSA with Techem and our own HEG solution) due to be delivered
in 2024
· Cost management initiatives being implemented including the right sizing of
manufacturing capability. This has resulted in the recent notice of
termination of one manufacturing supplier contract
· Realisation of certain assets for cash being explored
· Due to the ongoing strategic review, combined with the notice of termination
of one manufacturing supplier contract referred to above and the uncertainty
around the realisation of any asset sales, the Directors believe there are
some material uncertainties which could impact the Company's future cash
forecasts and banking covenants (details of which are set out below in note 2
to the Financial Information)
Andrew Blazye, Non-Executive Chair of FireAngel, commented: "The significant
headwinds facing the Company are being addressed, the benefits of which will
start to bear fruit in 2024."
For further information, please contact:
FireAngel Safety Technology Group plc 024 7771 7700
Andrew Blazye, Non-Executive Chair
Neil Radley, Chief Executive Officer
Zoe Fox, Chief Finance Officer
Shore Capital (Nominated adviser and broker) 020 7408 4050
Tom Griffiths/David Coaten/Tom Knibbs
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
(https://url.avanan.click/v2/___http:/www.fireangeltech.com/___.YXAxZTpzaG9yZWNhcDphOm86MTFjYTFkNTgxNmYzZDRkNWNiZWI1ZGVjMWM5YzMyNzQ6NjowNmJiOjY2NjVjOWM1ZGQ4NjAxY2E0NDZlOGZkOWMwMmViZjQwNDg2YzlkNzhhOTAzMjhkYjFjM2U2M2JhNWUyZmU1OTc6cDpU)
CHAIR'S STATEMENT
My appointment as Non-Executive Chair of FireAngel on 6 June 2023 coincided
with the announcement of the Company's £6.1 million fundraising. The net
proceeds of the fundraising have provided FireAngel with the capital which it
can use to begin to drive an improvement in business momentum and, as such, I
would like to thank our shareholders (old and new) for their valuable support.
Along with the fundraising, the Company announced that a strategic review
would be undertaken to explore options to realise value for shareholders,
which may or may not involve a sale of the Company, which is being led by its
newly appointed Chief Executive Officer, Neil Radley. The strategic review is
focused on future proofing the Group and returning it to profitability as
quickly as possible and, even though it has yet to be completed, the Board is
encouraged by its early findings.
Independent market assessments have ratified the Board's confidence in the
continuing demand for the Group's safety products, driven by societal and
regulatory changes across several of the Group's markets, including fire and
carbon monoxide alarm legislation, along with wider social housing reform and
environmental legislation, which is due to be enacted in the UK later this
year. Forthcoming regulatory tailwinds, particularly in Germany and France,
are expected to underpin further growth in future years and the Board remains
confident in the Company's long-term fundamentals.
Nevertheless, there remains much work to be done. The well publicised global
supply chain issues of 2022 affected the Company significantly, resulted in
lower production than planned and led to restricted and intermittent supply to
end customers. Sadly, this loss of momentum will not be recovered in 2023 and
its impact is clear in these interim results, resulting, as previously
announced, in H1 2023 unaudited revenue of £21.4 million which is down 16% on
the comparable period last year (H1 2022: £25.6 million).
Analysis of the Group's operations by the senior leadership team and external
advisors has identified areas where we can improve market penetration, product
margin, procurement and inventory controls and tighten cost management. We are
already taking action in a number of these areas and will look to target an
improved performance from these self-help measures which, while beginning to
have an impact in H2 2023, will be much more meaningful in 2024 and beyond.
Board
Alongside the announcement of my appointment as Chair, the Company announced
the appointment of Neil Radley as Chief Executive Officer and the resignation
of its former Executive Chairman, John Conoley. Neil, who has over 20 years'
experience in the finance, retail and technology sectors and was previously
the CEO of Universe Group plc, an AIM quoted provider of transaction products
and services to the retail industry, brings a valuable breadth of experience
to lead the Group through this next phase.
On 25 July 2023, the Company announced that Simon Herrick, its Senior
Independent Director, had resigned with immediate effect due to the increased
commitment of his other business interests. As separately announced today,
Graham Bird has been appointed with immediate effect as Senior Independent
Director and Jon Kempster will resign as a Non-Executive Director on 30
September 2023. Graham is currently Chief Financial Officer of XP Factory plc,
was formerly a Non-Executive Director of Universe Group plc and brings a
wealth of experience to the Board which will prove invaluable during this
transitional period.
Andrew Blazye
Non-Executive Chair
CHIEF EXECUTIVE'S STATEMENT
BUSINESS AND FINANCIAL REVIEW
Overview
I joined FireAngel in June 2023 following the announcement of the Company's
successful fundraising with a clear mandate to lead a turnaround of the
business. My first priority was to lead an in-depth strategic review which has
proved a vital foundation in helping us to understand and address certain key
issues to enable us to drive the Group forward.
As these interim results clearly show, there has been a significant loss of
momentum in the Group over the course of the last nine months which will not
be recovered in this financial year. Our immediate focus is therefore on
addressing the issues associated with these challenges, in order to regain
sales momentum and improve cash flows. We have already made a number of
important management changes and begun various operational initiatives,
further details of which are set out below, and I have been pleased with the
way our teams are responding during this transitional period.
Financial Performance
The Company achieved revenues of £21.4 million in H1 2023, down 16% on the
same period last year (H1 2022: £25.6 million). Gross profit was down by 32%
to £3.8 million (H1 2022: £5.6 million), taking into account £1.1 million
of losses on hedging contracts and with no purchase price variance costs (H1
2022: hedging gains of £1.4 million and exceptionally high purchase price
variance costs of £1.6 million). Underlying gross margin was 17.9% (H1 2022:
21.9%) resulting in an underlying loss before tax for the Period of £3.6
million (H1 2022: underlying loss before tax of £1.7 million) and a reported
loss before tax of £4.0 million (H1 2022: loss before tax of £1.7 million).
The Group continues to make headway on cost savings through its self-help
measures. The benefits from the measures taken in H1 2023, including price
increases, are now being realised and further measures taken in H2 2023 as
part of the Company's ongoing strategic review (further details of which are
set out below) will begin to be realised in Q4 2023 and throughout 2024.
The average exchange rate for USD to GBP in H1 2023 was 6% lower than the
average rate for H1 2022 which increased the GBP value of USD denominated
purchases compared to the comparable period in the prior year and reduced the
gross margin. The average exchange rates against GBP are summarised below:
Average for year ended 31 December Average for H1
2022 2022 2023
US Dollar 1.24 1.31 1.23
The revenue split in H1 2023 between the Group's business units was as
follows:
Unaudited Unaudited Change
Six months ended
Six months ended
30 June 2023
30 June 2022
Revenue £000 £000 £000 %
UK Trade 4,120 4,025 95 2%
UK Retail 8,773 7,157 1,616 23%
UK Fire & Rescue Services ("F&RS") 1,786 1,575 211 13%
UK Utilities & Leisure 1,256 1,642 (386) (24%)
Total UK sales 15,935 14,399 1,536 11%
International 3,306 8,404 (5,098) (61%)
Techem 1,118 1,698 (580) (34%)
Pace Sensors 1,089 1,055 34 3%
Total revenue 21,448 25,556 (4,108) (16%)
From 1 January 2023, certain customers previously reported within the UK Trade
business unit are now reported through UK Utilities & Leisure. The 2022
comparatives have been adjusted accordingly.
Total UK sales improved by 11% on the comparable period in the prior year to
£15.9 million (H1 2022: £14.4 million) driven mainly by the impact of price
increases which successfully mitigated the reduction in UK sales volumes in H1
2023. New contract opportunities secured during the Period included Yale
(announced on 26 January 2023) and British Gas Services Limited (announced on
31 March 2023). However, the impact of the delay in signing the British Gas
Services contract resulted in a significant decline in UK Utilities &
Leisure's revenue in the Period.
International sales fell by more than half to £3.3 million (H1 2022: £8.4
million), which was primarily the result of the impact of new legislation in
Benelux which had led to a surge in customer demand for products in the
comparable period in the prior year and significantly less demand in H1 2023
as customers looked to reduce inventory intake. Whilst the Group was pleased
to have secured a new contract with a government agency in the Middle East
(announced on 12 May 2023), the delay in signing this contract also compounded
a weaker international performance in H1 2023.
The Company's partnership with Techem Energy Services GmbH ("Techem")
continued to progress well during the period. On 18 April 2023, the Group
announced the signing of production and delivery contracts with Techem and its
long-term manufacturing partner, marking yet another important milestone.
Initial shipments of the next generation smoke alarm ("NGSA") being developed
for Techem are expected to commence in late 2024 and be significantly cash
generative for the Group thereafter. I am also pleased to confirm that the
sixth (of ten) contractual NGSA development milestone of our agreement with
Techem has also now been successfully delivered on schedule. This deliverable
which includes all plastic parts for the product and sample units with
functional Printed Circuit Boards ("PCBs") represents the final milestone
based around product design and subsequent deliverables are focused on the
testing and production of devices.
The £1.1 million (H1 2022: £1.7 million) of revenue from Techem in H1 2023
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. The revenue reported in the Period is lower than
in H1 2022 due to the phasing of the development work and lower costs incurred
in the Period.
As a result of H1 2023's weak sales volume performance and a lack of agility
in the Group's forecasting process to cope with these shifts in demand,
inventory was £10.0 million at 30 June 2023 (30 June 2022: £4.7 million).
This has been an immediate area of focus for the Company's strategic review
and the actions being taken to improve sales performance, as detailed below,
have meant that this had fallen to £8.5 million as at 31 August 2023. We are
now focused on renegotiating contracts with suppliers to better reflect the
current volume demand and manage our existing stock. As a result, notice was
served earlier this month to end the manufacturing contract with one supplier
and both sides are working together to ensure a smooth exit.
On 14 June 2023, the Group successfully completed a fundraising resulting in
net proceeds of £5.3 million which were used to reduce debt and for working
capital purposes. The reinforced balance sheet position left the Group with
net debt(4) (before lease obligations) at 30 June 2023 of £5.4 million (30
June 2022: £3.8 million; 31 December 2022: £4.8 million) comprising cash of
£1.2 million, debt of £2.5 million and drawings under the Company's invoice
finance facility of £4.1 million. As at 31 August 2023, net debt(4) (before
lease obligations) was £4.2 million.
The Group has invested over £2.5 million into its new Home Environment
Gateway ("HEG") product which is due to be launched in Q1 2024. The Company
believes the solution opens up the Trade market by allowing inter-connected
capability within and between connected premises. In addition, it extends
functionality into the damp and mould detection market with full monitoring
capability. The business model allows for long term recurring revenue.
(4)Net debt is calculated as the net value of cash and cash equivalents,
invoice discounting facilities and loans and borrowing
Strategic Review Update
Whilst the strategic review, which was announced on 6 June 2023, remains
ongoing, the following outlines the two phases of work being undertaken by the
Company:
Phase One - Refocusing business under new management team
H2 2023 - Q1 2024
Recover sales performance and cash generation. Key issues currently being
addressed:
· Sales: analysis has shown that the Group needs to focus more on key segments
of the market where it is underweight compared to its competitors. In
addition, improvements in its forecasting process are being made so that
issues can be identified and dealt with much earlier in the business cycle.
Investment in the Company's sales team to seek out new opportunities is also
being made.
· Margins: certain customers, products and market segments have been identified
where the Group's returns are not adequate and, therefore, unless appropriate
returns are obtained, the Group will cease doing business with those customers
and/or withdraw products and/or exit certain market segments.
· Products: the Board has analysed the Company's product roadmap for the medium
term and is in the process of finalising its strategy. The Home Environment
Gateway product is expected to be launched in Q1 2024 and the NGSA being
developed for Techem remains on track for a late 2024 delivery. The strategic
review has focused on understanding those products where the Group can
leverage its IP versus those which it can source 'ready made' (but with the
expected FireAngel quality) direct from manufacturers. A new range of smoke
and heat detectors is being planned for delivery in early 2025. In addition to
analysing the Company's product roadmap, a review of all current products has
been made with the plan to reduce our current product offer from more than 200
SKUs to less than 100.
· Manufacturing: as a result of poor historical sales forecasting, the Group's
procurement has been out of sync and, as a result, it has built up excess
inventory. In the short term, the Board is focused on reducing the inventory
to appropriate levels through reducing manufacturing volumes and is working
closely with manufacturing partners to reduce the impact on their production
schedules. As highlighted previously, this has resulted in a fall in inventory
from £10.0 million at 30 June 2023 to £8.5 million at 31 August 2023.
· Cost Management: a thorough review of the Group's cost base has been
undertaken and cost savings are being implemented.
Phase Two - Optimising business to deliver sustainable growth
FY2024
Deliver key investment initiatives and improve planning. Key issues currently
being addressed:
· Sales/Margin Growth and Stock Management: ensure the short term initiatives
noted above are sustained and built upon
· Improve Forecasting: independent market research has confirmed the annualised
total potential European market at over £0.5 billion per annum. FireAngel
must ensure it has the right product set to take advantage of the current and
future fast evolving legislative landscape
· NGSA Delivery: launch of the NGSA in partnership with Techem - initial
shipments of products expected to commence in late 2024
· HEG: ensure that the solution is launched in a manner that maximises the
commercial opportunities
· Build Generation 6 Product Range: utilising certain IP and learnings from the
Techem partnership, launch a new range of Smoke and Heat detectors. Target
date Q1 2025.
Senior Management
As the Company enters a new phase in its history, Nick Rutter (Chief Product
Officer) Rene Nolten (Sales Director) and James Seaman (Product Delivery
Director) will be leaving shortly to pursue new opportunities. On behalf of
the Group, I would like to thank each of them for their contributions during
their time with us.
I am also pleased to announce the appointments of Neal Marathe (Sales
Director) and John Walsh (Product Delivery Director) who have already joined
and Adrian Wilding (Commercial Director) who will join us in early October. We
look forward to their contribution as we continue to deliver on our plans.
Current Trading and Outlook
As previously outlined, whilst every effort is being made to mitigate the
impact of the momentum lost across the Group in H1 2023, it will take some
time to recover.
The Company will continue to build on the progress made since June 2023 as the
Board seeks to refocus the Group and expects to see the benefit of further
cost management initiatives in Q4 2023 and into 2024.
I would like to thank all of the staff at FireAngel for their ongoing
commitment to the Group during what has been a challenging period.
Neil Radley
Chief Executive Officer
Consolidated income statement
For the six months ended 30 June 2023
(Unaudited) (Unaudited) (Audited)
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
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 21,448 - 21,448 25,556 - 25,556 57,461 - 57,461
Cost of sales (17,619) - (17,619) (19,952) - (19,952) (47,414) 54 (47,360)
Gross profit 3,829 - 3,829 5,604 - 5,604 10,047 54 10,101
Operating expenses (7,300) (638) (7,938) (7,359) (76) (7,435) (15,362) (1,127) (16,489)
Other operating income 6 69 - 69 - - - 834 - 834
Other operating expenses 6 - - - - - - (358) - (358)
Loss from operations (3,402) (638) (4,040) (1,755) (76) (1,831) (4,839) (1,073) (5,912)
Interest received on discounted cash flows 188 - 188 148 - 148 227 - 227
Finance income - 272 272 - - - - - -
Finance costs (372) - (372) (44) - (44) (422) - (422)
Loss before tax (3,586) (366) (3,952) (1,651) (76) (1,727) (5,034) (1,073) (6,107)
Income tax credit 7 70 - 70 194 - 194 262 - 262
Loss attributable to equity owners of the Parent (3,516) (366) (3,882) (1,457) (76) (1,533) (4,772) (1,073) (5,845)
Basic earnings per share 9 (2.1) (0.8) (3.2)
Diluted earnings per share 9 (2.1) (0.8) (3.2)
All amounts stated relate to continuing activities.
Consolidated statement of comprehensive income
For the six months ended 30 June 2023
(Unaudited) (Unaudited) (Audited)
Six months Six months ended 30 June Year ended 31 December 2022
ended 30 June 2022
2023
£000 £000 £000
Loss for the period (3,882) (1,533) (5,845)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations (net of tax) (53) 196 85
Total comprehensive loss for the period (3,935) (1,337) (5,760)
Consolidated statement of financial position
As at 30 June 2023
(Unaudited) (Unaudited) (Audited)
30 June 2023 30 June 2022 31 Dec 2022
Note £000 £000 £000
Non-current assets
Goodwill 169 169 169
Other intangible assets 9,805 11,702 10,197
Purchased software costs 975 1,409 1,192
Property, plant and equipment 1,913 2,684 2,175
12,862 15,964 13,733
Current assets
Inventories 10,030 4,706 8,061
Trade and other receivables 10,832 13,599 13,804
Current tax asset 447 621 690
Derivative financial assets - 971 -
Cash and cash equivalents 11 1,243 656 1,431
22,552 20,553 23,986
Total assets 35,414 36,517 37,719
Current liabilities
Trade and other payables (10,502) (11,128) (13,805)
Lease liabilities (324) (463) (397)
Provisions 12 (329) (658) (502)
Invoice discounting facilities 10 (4,128) (1,361) (3,451)
Loans and borrowings 10 (640) (693) (664)
Derivative financial liabilities (1,070) - (1,563)
(16,993) (14,303) (20,382)
Net current assets 5,559 6,250 3,604
Non-current liabilities
Loans and borrowings 10 (1,837) (2,426) (2,133)
Lease liabilities (270) (263) (94)
Provisions 12 (342) (568) (471)
(2,449) (3,257) (2,698)
Total liabilities (19,442) (17,560) (23,080)
Net assets 15,972 18,957 14,639
Equity 6,046 3,621 3,621
Called up share capital
Share premium account 34,167 30,009 30,009
Warrant reserve (1,517) - -
Currency translation reserve 185 349 238
Retained earnings (22,909) (15,022) (19,229)
Total equity attributable to equity holders of the Parent Company 15,972 18,957 14,639
Consolidated statement of changes in equity
For the six months ended 30 June 2023
Called up share Share premium account Currency translation reserve Retained earnings
capital Warrant reserve Total
£000 £000 £000 £000 £000 £000
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 - - - - - -
Credit in relation to share-based payments - - - - 112 112
Total transactions with owners in their capacity as owners - - - - 112 112
Balance at 30 June 2022 3,621 30,009 - 349 (15,022) 18,957
Balance at 1 January 2023 3,621 30,009 - 238 (19,229) 14,639
- - - - (3,882) (3,882)
Loss for the six months
Foreign exchange gains from overseas subsidiaries - - - (53) - (53)
Total comprehensive income/(loss) for the six months - - - (53) (3,882) (3,935)
Transactions with owners in their capacity as owners:
Issue of equity shares 2,425 - - - - 2,425
Premium arising on issue of shares - 1,893 - - - 3,410
Share issue expenses - (769) - - - (769)
Debt to equity valuation adjustment 272 (272) -
Warrant reserve - 1,517 - - -
Credit in relation to share-based payments - - - - 202 202
Total transactions with owners in their capacity as owners 2,425 1,396 1,517 - (70) 5,268
Balance at 30 June 2023 6,046 31,405 1,517 185 (23,181) 15,972
Consolidated cash flow statement
For the six months ended 30 June 2023
(Unaudited) (Unaudited) (Audited) Year ended 31 Dec 2022
Six months ended 30 June 2023 Six months ended 30 June 2022
£000 £000 £000
Loss before tax (3,952) (1,727) (6,107)
Finance expense (88) (104) 195
Operating loss for the period (4,040) (1,831) (5,912)
Adjustments for:
Depreciation of property, plant and equipment, and right-of-use assets 732 720 1,465
Amortisation of intangible assets 1,078 963 2,069
Loss on disposal of non-current assets 1 9 19
Non-underlying items 638 76 1,073
Cash flow relating to non-underlying items (447) (330) (582)
Increase in fair value of derivatives (493) (680) 1,854
Operating cash flow before movements in working capital (2,531) (1,073) (14)
Movement in inventories (1,968) (968) (4,270)
Movement in receivables 3,094 (4,021) (4,147)
Movement in payables (3,595) 2,995 5,673
Cash used by operations (5,000) (3,067) (2,758)
Income taxes received /(paid) 382 38 39
Net cash used by operating activities (4,618) (3,029) (2,719)
Investing activities
Capitalised development costs (469) (623) (928)
Purchase of property, plant and equipment (153) (154) (436)
Net cash used in investing activities (622) (777) (1,364)
Financing activities
Cash proceeds from issue of ordinary shares (net of expenses) 3,221 - -
Debt to equity issue of ordinary shares 2,117 - -
Drawdown of invoice finance 24,467 23,647 55,854
Repayment of invoice finance (23,790) (22,286) (52,403)
Repayment of loan (321) (104) (426)
Repayment of lease obligations (224) (222) (457)
Interest paid (372) (44) (422)
Net cash generated by financing activities 5,098 991 2,146
Net (decrease)/ increase in cash and cash equivalents (142) (2,815) (1,937)
Cash and cash equivalents at beginning of period 1,431 3,294 3,294
Non-cash movements (46) 177 74
Cash and cash equivalents at end of period 1,243 656 1,431
Notes to the financial information
1. General information
These consolidated interim financial statements were approved by the Board of
Directors on 26 September 2023.
2. Basis of preparation
These consolidated interim financial statements of the Group are for the six
months ended 30 June 2023.
The condensed consolidated interim financial statements for the six months to
30 June 2023 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 2022 which
are available at www.fireangeltech.com/investors.
The condensed consolidated interim financial statements for the six months to
30 June 2023 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 2023 have been prepared on the basis of the accounting policies
expected to be adopted for the year ending 31 December 2023. These are
anticipated to be consistent with those set out in the Group's latest annual
financial statements for the year ended 31 December 2022. 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.
Going concern
The Group has seen a significant loss in momentum over the last 9 months with
a decrease in revenue of 16% on the prior year. It is delivering on several
operational and margin improvements but unfortunately the loss in volume of
sales resulted in a larger loss than expected for the period.
On 6 June 2023 a strategic review of the company was announced. Whilst this
remains ongoing, the work undertaken includes refocusing the business with a
new management team, recovery of sales, cost savings and improvement in
forecasting to deal with issues much earlier in the business cycle. The review
process has also identified where the Group's returns are not adequate and
therefore unless appropriate returns are obtained, the Group will cease doing
business with those customers and/or withdraw products and/or exit certain
market segments. The forecasts have been prepared taking these factors into
consideration alongside management's extensive industry knowledge but
recognising the uncertainty inherent in today's markets.
In determining whether the Group and Parent Company's financial statements can
be prepared on a going concern basis, the Directors have considered the
Group's business activities, together with the factors likely to affect its
future development, performance and position. During 2023, the Company's
bank waived the Q1 2023 banking covenants and reset them from June 2023. All
banking covenants since June 2023 have been met.
The Directors have 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;
· 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;
· impact of major supplier exit; and
· divesting certain assets for cash.
In addition, the Directors have reviewed the Company forecasts for the period
to 31 December 2024 and have run sensitivity analyses on the key assumptions,
including sales and margins. The base case scenario showed sufficient cash
headroom. Through mitigating actions the sensitised downside scenarios would
also provide sufficient cash headroom.
Whilst the previously noted exit of one supplier arrangement is seen as
beneficial to the business in the medium term, due to the timing of the notice
it is too early to quantify the complete costs of exit. This therefore
provides a material uncertainty to the Company's future cash forecasts.
Whilst the cash headroom is expected to be sufficient, the strategic review
(combined with the impact of the supplier exit) has highlighted the need to
potentially revisit our banking covenants.
The Directors have reasonable expectations that the Group and the Company have
adequate resources to continue operations for at least one year from the date
of approval of these interim results. Whilst the Directors have identified
material uncertainties that may cast doubt over the ability of the Group and
the Company to continue as a going concern (see above) 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
Six months ended Six months ended
31 Dec 2022
30 June 2022
30 June 2023
(restated)
(restated) £000
£000
£000
Revenue from continuing operations:
UK Trade 4,120 4,025 9,611
UK Retail 8,773 7,157 19,776
UK Fire & Rescue Services 1,786 1,575 3,266
UK Utilities & Leisure 1,256 1,642 3,531
Total sales in the UK 15,935 14,399 36,184
International 3,306 8,404 16,349
Techem 1,118 1,698 2,517
Pace Sensors 1,089 1,055 2,411
Total revenue 21,448 25,556 57,461
From 1 January 2023, certain customers previously reported within the UK Trade
business unit are now reported through UK Utilities & Leisure. The 2022
comparatives have been adjusted accordingly.
4. Revenue recognition - Techem
In April 2021 the Group signed a long-term partnership agreement with a 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 2022.
(Unaudited) (Unaudited) (Audited) Year ended 31 Dec 2022
Six months ended Six months ended
30 June 2023 30 June 2022 £000
£000
£000
Revenue recognised 1,118 1,698 2,517
Costs recognised (596) (785) (1,299)
Gross profit attributable to contract 522 913 1,218
Revenue recognised
4,678
2,741
3,560
Interest income recognised 504 239 318
Total consideration 5,182 2,980 3,878
Billing to date (3,653) (2,075) (2,546)
Accrued income 1,529 905 1,332
5. Non-underlying items
(Unaudited) (Unaudited) (Audited)
Year ended
Six months ended Six months ended
31 Dec 2022
30 June 2023 30 June 2022 £000
£000 £000
Within cost of sales
Provision against stock and disposal costs (a) - - (54)
- - (54)
Within operating expenses
Impairment of intangible assets (note b) - - 916
Impairment of tangible assets (note c) - - 30
Restructuring and fundraising costs (note d) 361 - -
Strategic review (note e) 75 - -
Extinguishment of financial liability (note f) (272) - -
Share-based payment charges 202 76 181
366 76 1,127
Total non-underlying items 366 76 1,073
a. 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. No such sales have been registered in H1 2023 with nil cash impact
in the period.
b. Intangible capitalised development assets of £0.9 million were
impaired during the year ended 31 December 2022 as a result of a thorough
review of product lines and future development costs. There will be no cash
impact on this impairment.
c. A small number of tangible assets were impaired during the year
ended 31 December 2022 as a result of a thorough review of tooling required
for ongoing product lines. There will be no cash impact on this impairment.
d. Restructuring and certain fundraising costs of £0.4 million were
incurred, with £0.1 million paid as at 30 June 2023.
e. Following the announcement on 6 June 2023 of a strategic review, the
Group has incurred costs to date of £0.1 million. There was no cash impact as
at 30 June 2023.
f. As part of the Company's fundraising, on 28 June 2023, the
Company agreed to a debt for equity swap with one of its major suppliers.
Trade payables due within one year with a carrying value of £2.1 million were
derecognised in exchange for the issue of new ordinary shares. The gain on
extinguishing the financial liability and the realized FX movement was £0.3
million and has been recognised in the profit and loss account and debited
against the share premium account.
No change to the value of the warranty provision has been made since 2020.
The balance continues to unwind and during H1 2023 the cash outflow was £0.3
million.
6. Other Operating Income
From 1 January 2023, the Group has opted to treat its Research &
Development expenditure credit from HMRC as an 'above the line' credit in
other operating income to give a more representative view of the business'
performance in the Period. Previously these claims have been accounted for
within income tax. The estimated claim value for the Period is £69,000 (30
June 2022: £91,000; 31 December 2022: £135,000).
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 2022, 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). There were no such transactions for the
period ended 30 June 2023.
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
2023.
8. Dividends
As a result of the loss reported for the Period, the Directors do not propose
payment of an interim dividend for 2023 (2022: nil pence per share).
9. Earnings per share
Earnings per share are as follows:
(Unaudited) (Unaudited) (Audited)
Year ended 31 Dec 2022
Six months ended 30 June 2023 Six months ended 30 June 2022
Earnings from continuing operations £000 £000 £000
Earnings for the purposes of basic and diluted earnings per share (loss for (3,882) (1,533) (5,845)
the period attributable to owners of the parent)
Number of shares '000 '000 '000
Weighted average number of ordinary shares - basic earnings calculation 183,092 181,067 181,067
Dilutive potential ordinary shares from share options - - -
Weighted average number of ordinary shares - diluted calculation 183,092 181,067 181,067
30 June 2023 30 June 2022 31 Dec 2022
pence pence pence
Basic earnings per share (2.1) (0.8) (3.2)
Diluted earnings per share (2.1) (0.8) (3.2)
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 2023.
10. Loans and borrowings
(Unaudited) (Unaudited) (Audited)
31 Dec 2022
30 June 2023 30 June 2022
£000
£000 £000
Canadian government COVID-19 loan - 23 -
Bank Term Loan 2,477 3,096 2,797
Invoice discounting facilities 4,128 1,361 3,451
6,605 4,480 6,248
11. Cash and cash equivalents
(Unaudited) (Unaudited) (Audited)
31 Dec 2022
30 June 2023 30 June 2022
£000
£000 £000
Cash at bank and in hand 1,243 656 1,431
12. Provisions
(Unaudited)
30 June 2023
£000
At 1 January 2022 1,553
Charge in period -
Utilisation (327)
At 30 June 2022 1,226
At 1 January 2023 973
Charge in period -
Utilisation (302)
At 30 June 2023 671
The total warranty provision is classified between less than one year and
greater than one year as follows:
(Unaudited) (Unaudited) (Audited)
31 Dec 2022
30 June 2023 30 June 2022
£000
£000 £000
Current provision 329 658 502
Non-current provision 342 568 471
Total warranty provision 671 1,226 973
13. Changes in liabilities arising from financing activities
Bank Invoice discounting facility Lease
Loans liabilities Total
£000 £000 £000 £000
Balance at 1 January 2022 3,223 - 948 4,171
Drawdown of facility - 23,647 - 23,647
Repayment of facility (104) (22,286) - (22,390)
Capital payments - - (222) (222)
Interest charge 27 22 13 62
Interest payments (27) (22) (13) (62)
Balance at 30 June 2022 3,119 1,361 726 5,206
Balance at 1 January 2023 2,797 3,451 491 6,739
Drawdown of facility - 24,467 - 24,467
Repayment of facility (320) (23,790) - (24,110)
Capital payments - - (240) (240)
FX Restatement - - (6) (6)
Interest charge 107 172 11 290
Interest payments (107) (172) (11) (290)
Acquisition of leases - - 349 349
Balance at 30 June 2023 2,477 4,128 594 7,199
14. Share capital and reserves
On 28 June 2023, the Company raised £6.1 million (gross) through the issue of
120,711,091 new ordinary shares with a nominal value of 2p each at an issue
price of 5.05p per share.
The premium on issue was 3.05p per share amounting to £3.7 million. This
was credited to the share premium account. Share issue expenses amounted to
£0.8 million. These were debited to the share premium account.
As part of the above fundraising, on 28 June 2023, the Company agreed to a
debt for equity swap with one of its major suppliers. Trade payables due
within one year with a carrying value of £2.1 million were derecognised in
exchange for the issue of new ordinary shares. The gain on extinguishing the
financial liability and the realised FX movement was £0.3 million and has
been recognised in the profit and loss account and debited against the share
premium account.
As part of the above fundraising, on 30 June 2023, a general meeting approved
the issuing of 60,355,529 warrants at 3p per share. These warrants are
exercisable from 30 June 2024 to 30 June 2026. Using the Black Scholes
model, the fair value of the warrants has been calculated at £1.5 million.
15. Availability
Further copies of this announcement are available on the FireAngel Safety
Technology Group plc investor relations website, www.fireangeltech.com
(https://url.avanan.click/v2/___http:/www.fireangeltech.com___.YXAxZTpzaG9yZWNhcDphOm86NTEyMjVmNWJjNGFhOTI4NTZhMGVkNjY3Mzk1NjZjZmM6NjphMTI2OmRkMGVlMmRjMDBlOThiNjI3MjgwNDcyYWMzZTQwNmRkOGQ4OWQwZmFhZDA2YTQ4YzVjZmYxYjc5OThhZjE1Yzk6cDpU)
.
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. END IR VELFLXKLZBBV
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