FireAngel SafetyTech - Trading Update

Fireangel Safety Technology

24/01/2023 07:00

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RNS Number : 6171N  FireAngel Safety Technology Group  24 January 2023

24th January 2023

 

FireAngel Safety Technology Group plc

('FireAngel', the ' Group' or the 'Company')

 

Trading Update

 

FireAngel (AIM: FA.), a leading developer and supplier of home safety
products, announces a trading update for the year ended 31 December 2022 (the
"Year" or "FY22").  The figures set out in this announcement are subject to
audit.

 

Strong growth

 

The Group has delivered a resilient performance in 2022, resulting in its
strongest revenue performance since 2017.  Business Unit performance has been
strong across most territories with demand outweighing supply, driven by the
tailwind of increasing legislation.

 

 ·         Outstanding sales growth of 32 per cent. to £57.5 million (2021: £43.5
           million)
 ·         Adjusted loss before tax(1) ("LBT") reduced by 30 per cent. to £2.1 million
           (2021: adjusted LBT £3.0 million)
 ·         Adjusted EBITDA(2) of £1.6 million (2021: adjusted EBITDA £0.3 million)
 ·         The Board remains confident of the outlook for 2023 with significantly
           increased revenue and enhanced gross margin expected.

(1)Adjusted LBT is loss before tax, non-underlying items, purchase price
variance ("PPV") for exceptionally high costs for securing scarcely sourced
components and mark to market ("MTM") losses on forward currency contracts.

 

(2) Adjusted EBITDA is loss before tax, depreciation, amortisation, finance
costs, non-underlying items, PPV and MTM losses on forward currency contracts.

Underlying gross margin ("GM") broadly maintained, despite significant
external headwinds, with currency fluctuations and PPV impacting reported GM

 

In the face of the macro challenges experienced in H2 2022, the Company began
work on a range of further self-help measures and these adjustments are
expected to boost materially the Company's financial performance in 2023 and
subsequent years.  Those improvements include:

 

·    the impact of price rises;

·    value engineering to reduce costs on selected products;

·    introduction of an additional entry level product; and

·    renegotiation of terms on certain contracts.

 

Together, these and other changes are expected to restore the financial
journey that the Board outlined at the time of the Company's fundraising in H1
2021.

 

Currency

The majority of the Company's goods and services are currently purchased in
USD. As previously announced in September 2022, the Company chose to establish
a level of certainty by hedging a large proportion of the USD purchases for
the remainder of the year and into 2023 at an average rate of 1.14 USD/GBP.
This established a level of certainty as regards cash performance in the rest
of the year and into 2023. At 31 December 2022, there was a mark-to-market
loss on the forward currency contracts taken out from September 2022 of £1.6
million (2021: gain of £0.3 million).

 

PPV

Exceptionally high PPV costs for securing scarce components of £1.4 million
were incurred in the year compared to £0.8m in 2021. The Company does not
expect these costs to be a material cost going forward.

 

Balance sheet update

 

The significant impact of the global supply chain challenges previously
reported improved across H2 2022, however, the Company and its suppliers are
still having to commit to purchases 12 to 15 months ahead, as opposed to a
historic norm of 3 to 6 months. Changes in product and sourcing mix along with
extended shipping times from Asia have impacted the level of stock held by the
Company. As a result, stock at 31 December 2022 stood at approximately £8.0
million, compared to an abnormally low comparable position as at 31 December
2021 of £3.7 million. The Board had anticipated a Year end stock number
closer to £7.0 million.

 

Net debt before lease obligations at 31 December 2022 was £4.8 million (2021:
net cash £0.1 million) and comprised cash balances of £1.4 million (2021:
cash £3.3 million), invoice discount facility ("IDF") draw down of £3.4
million (2021: IDF drawn down nil) and a CBILS loan of £2.8 million (2021:
CBILs £3.2 million).

 

The Company's audited final results for FY22 are expected to include a
non-cash impairment of intangible assets of £0.9 million relating to
historical product development which the Board has resolved will not proceed.

 

Further progress against strategic initiatives to move to higher value
activities

 

 FireAngel's partnership with Techem Gmbh ("Techem") remains on track
 ·         Product development activities have progressed to date in line with planned
           milestones over the last 12 months. The project is now 37% complete; and
 ·         The development of a three-way manufacturing contract is progressing.

 Continued progress in sourcing entry level products from existing Chinese
 partner
 ·         Launch of several entry to mid-level products, which began in Q2 2022, have
           been margin enhancing as planned; and
 ·         Since launch, over 800,000 units had been sold up to 31 December 2022.

 

Outlook

 

Demand for the Company's products remains strong and the Board expects the
Company to grow revenue and enhance gross margin significantly in 2023.

 

John Conoley, the Company's Executive Chairman, said: "The expected FY22
result represents an outstanding performance set against the unprecedented
macro circumstances. Whilst the reported result will not be what we had set
out to achieve, the underlying numbers demonstrate the strong progress made in
line with our ambitions outlined at the time of the Company's fundraising in
H1 2021.

 

"Societal and regulatory development continues to drive demand for our
products. Our continuing focus on self-help pleasingly shows a resilience in
overcoming a wide range of macro headwinds to leverage this demand. The Board
expects additional significant improvement in our financial journey in 2023,
positioning the Group for further progress against our strategic plans."

 

The Company will provide a further update on current trading at the time of
its audited final results for the year ended 31 December 2022.

 

For further information, please contact:

 

 FireAngel Safety Technology Group plc               024 7771 7700
 John Conoley, Executive Chairman
 Zoe Fox, Chief Finance Officer
 Shore Capital (Nominated adviser and joint broker)  020 7408 4050
 Tom Griffiths/David Coaten/Tom Knibbs
 Singer Capital Markets (Joint broker)               0207 496 3000
 Rick Thompson/Alex Bond
 Houston (Financial PR)                              0204 529 0549
 Kate Hoare/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)

 

 

 

 

 

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