TIDMFA.
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 GBP25.6 million (H1 2021: GBP22.2 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 GBP5.6 million (H1 2021: GBP5.2
million)
-- Gross margin at 21.9% (H1 2021: 23.5%) including GBP1.6m
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 GBP1.6m would have
been 28.2% (H1 2021: 24.3%)
-- Underlying operating loss(2) increased by 22% to GBP1.8
million (H1 2021: GBP1.4 million) which was particularly
impacted by the additional GBP1.4 million PPV
-- Underlying LBITDA(3) of GBP0.1 million (H1 2021: underlying
EBITDA(3) GBP0.2 million)
-- Underlying loss before tax of GBP1.7 million (H1 2021:
loss before tax GBP1.5 million)
-- Capitalised product development and production set up
costs of GBP0.8 million (H1 2021: GBP1.3 million)
-- Inventory at 30 June 2022 of GBP4.7 million (30 June 2021:
GBP4.9 million)
-- Net debt (before lease obligations) at 30 June 2022 materially
better than expectations at GBP3.8 million (30 June 2021:
GBP2.2 million net cash; 31 December 2021: GBP0.1 million
net cash) which comprised cash of GBP0.7 million, debt
of GBP3.1 million and drawings under the Company's invoice
finance facility of GBP1.4 million (with a further GBP4.1
million available to be drawn down)
-- Net debt (before lease obligations) at 23 September 2022
of GBP3.9 million which comprises cash of GBP0.1million,
debt of GBP3.0 million and drawings under the Company's
invoice finance facility of GBP1.8 million (with a further
GBP3.0 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 GBP1.6 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 GBP0.2 million)
(2) Underlying operating loss of GBP1.8 million in H1 2022 is
before unaudited share-based payments charge of GBP0.1 million (H1
2021: GBP1.4 million before a share-based payments charge of GBP0.1
million)
(3) Underlying LBITDA of GBP0.1 million in H1 2022 stated before
unaudited share-based payments charge of GBP0.1 million (H1 2021:
underlying EBITDA of GBP0.2 million stated before unaudited
share-based payments charge of GBP0.1 million)
Business and operational highlights
-- Both half year revenue and underlying gross profit were
the highest since H1 2017
-- Adjusted EBITDA(4) o f GBP1.5 million ( excluding the
exceptionally high PPV) (H1 2021: GBP0.3 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 GBP8.4 million (H1 2021:
GBP5.4 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 GBP1.5m is underlying LBITDA of GBP0.1
million stated before the exceptionally high PPV costs for securing
components of GBP1.6 million; prior to 2021, PPV had minimal impact
on the Company (H1 2021: adjusted EBITDA of GBP0.3m is underlying
EBITDA of GBP0.1 million stated before the PPV costs for securing
components of GBP0.2 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 GBP1.5m
-- 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 GBP1.5 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 GBP000 GBP000 GBP000 %
------------------------------------- ------------------ ------------------------------- -------- ------
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 GBP25.6m in H1 2022, up 15% on
the same period last year. Gross profit increased by 8% to GBP5.6m.
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 GBP45.0 million, the CLBILS (which
had reduced to GBP2.0 million at the end of March 2021) was
refinanced under the CBILS with HSBC UK. The new loan of, in
aggregate, GBP3.7 million ("New Loan") comprises a CBILS loan of
GBP3.2 million and an additional Receivables Finance CBILS of
GBP0.5 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 GBP3.2 million CBILS loan was drawn down in
March 2021, the GBP0.5 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 GBP7.5
million, which is GBP1.8 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 GBP3.5m. 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 GBP300,000 from GBP700,000 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 GBP279k 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
GBP1.5 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.
D elivering 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 Before Non-underlying Before Non-underlying
non-underlying items Total non- items Total non- items Total
items (note 5) underlying (note 5) underlying (note 5)
Note items items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ------ --------------- -------------- -------- ---------- -------------- ----------- ---------- -------------- --------
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
GBP000 GBP000 GBP000
------------------------------------------ --------------- -------------------------- -----------------------------
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 GBP000 GBP000 GBP000
--------------------------------- ---- -------------- ------------- ------------
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
--------------------------------- ---- -------------- ------------- ------------
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
Share Currency
Called up share premium translation Retained
capital account reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- ------ -------- ------------ --------- -------
Balance at 1 January 2021 2,531 22,104 121 (10,568) 14,188
---------------------------------- ------ -------- ------------ --------- -------
Loss for the six months - - - (1,378) (1,378)
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
---------------------------------- ----- ------ --- -------- -------
Loss for the six months - - - (1,533) (1,533)
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
Six months ended 30 June Six months ended 30 June 2021
2022 2021
GBP000 GBP000 GBP000
---------------------------- ---------------------------- ---------------------------- ----------------------------
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
(GBP'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
Six months ended Six months ended 30 June 2021 GBP000
30 June 2022 2021 GBP000
GBP000
------------------------------ ------------------ ----------------------------- -----------------------------
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
GBP000
---------------------------------- ------------------
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
Six months ended 30 June Six months Dec 2021 GBP000
2022 GBP000 ended 30 June
2021
GBP000
--------------------------- --------------------------- -------------------------- --------------------------
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: GBP0.1 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 GBP0.1 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 GBP0.3m.
6. Other Operating Income
Furlough payments of GBPnil were received under the Canadian
Emergency Wage Subsidy during the period (2021: GBP0.1 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
GBP83,000 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)
Six months Six months Year ended
ended 30 June ended 30 June 31 Dec
2022 2021 2021
Earnings from continuing
operations GBP000 GBP000 GBP000
-------------------------------- --------------- --------------- ------------
Earnings for the purposes
of basic and diluted earnings
per share (loss for the
period attributable to owners
of the parent) (1,533) (1,378) (3,280)
-------------------------------- --------------- --------------- ------------
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)
30 June 31 Dec
30 June 2022 2021 2021
GBP000 GBP000 GBP000
----------------- ---------------- --------------- ------------ ----------
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)
30 June 31 Dec
30 June 2022 2021 2021
GBP000 GBP000 GBP000
-------------- ------------- --------------- ------------ ----------
Cash at bank and in hand 656 5,839 3,294
----------------------------- --------------- ------------ ----------
12. Provisions
(Unaudited)
30 June
2022
GBP000
--------------- ------ ------------ ------------------- -------------
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)
30 June 31 Dec
30 June 2022 2021 2021
GBP000 GBP000 GBP000
-------------- ------------- --------------- ------------ ----------
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
Bank discounting Lease
Loans facility liabilities Total
GBP000 GBP000 GBP000 GBP000
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 .
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