TIDMFA.
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 GBP21.4 million (H1 2022: GBP25.6
million) with UK revenue growth of 11% offset by a 63%
decline in International revenue
-- Gross profit down 32% to GBP3.8 million (H1 2022: GBP5.6
million)
-- Loss before tax of GBP4.0 million (H1 2022: GBP1.7 million)
-- Non-underlying items(1) of GBP0.4 million (H1 2022:
GBP0.1 million)
-- Underlying loss before tax(2) of GBP3.6 million (H1
2022: GBP1.7 million)
-- Underlying EBITDA(3) GBP(1.6) million (H1 2022: GBP(0.1)
million)
-- Inventory at 30 June 2023 of GBP10.0 million (30 June
2022: GBP4.7 million) reduced to GBP8.5 million at 31
August 2023
-- Net debt(4) (before lease obligations) at 30 June 2023
of GBP5.4 million (30 June 2022: GBP3.8 million; 31
December 2022: GBP4.8 million) comprising cash of GBP1.2
million, debt of GBP2.5 million and drawings under the
Company's invoice finance facility of GBP4.1 million.
As at 31 August 2023, net debt (3) (before lease obligations)
w as GBP4.2 million
-- Fundraising of GBP6.1 million (gross) was announced
on 6 June 2023
(1) Non underlying items comprise a share-based payments charge
of GBP0.2m, restructuring and strategic review costs of GBP0.4m and
the extinguishment of a financial liability gain of GBP0.3m (2022:
share-based payment charge of GBP0.1m)
(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 (GBP1.5 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 024 7771
plc 7700
Andrew Blazye, Non-Executive Chair
Neil Radley, Chief Executive Officer
Zoe Fox, Chief Finance Officer
Shore Capital (Nominated adviser 020 7408
and broker) 4050
Tom Griffiths/David Coaten/Tom Knibbs
0204 529
Houston (Financial PR) 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
CHAIR'S STATEMENT
My appointment as Non-Executive Chair of FireAngel on 6 June
2023 coincided with the announcement of the Company's GBP6.1
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 GBP21.4 million which is down 16%
on the comparable period last year (H1 2022: GBP25.6 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 GBP21.4 million in H1 2023,
down 16% on the same period last year (H1 2022: GBP25.6 million).
Gross profit was down by 32% to GBP3.8 million (H1 2022: GBP5.6
million), taking into account GBP1.1 million of losses on hedging
contracts and with no purchase price variance costs (H1 2022:
hedging gains of GBP1.4 million and exceptionally high purchase
price variance costs of GBP1.6 million). Underlying gross margin
was 17.9% (H1 2022: 21.9%) resulting in an underlying loss before
tax for the Period of GBP3.6 million (H1 2022: underlying loss
before tax of GBP1.7 million) and a reported loss before tax of
GBP4.0 million (H1 2022: loss before tax of GBP1.7 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 Average for H1
for year
ended 31
December
----------- ---------- -----------------
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
Six months Six months
ended ended
30 June 2023 30 June 2022 Change
Revenue GBP000 GBP000 GBP000 %
-------------------- -------------- -------------- ----------------------- ------
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 GBP15.9 million (H1 2022: GBP14.4 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 GBP3.3 million (H1
2022: GBP8.4 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 GBP1.1 million (H1 2022: GBP1.7 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 GBP10.0 million at 30 June
2023 (30 June 2022: GBP4.7 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 GBP8.5 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 GBP5.3 million which were used to
reduce debt and for working capital purposes. The reinforced
balance sheet position left the Group with n et debt(4) (before
lease obligations) at 30 June 2023 of GBP5.4 million (30 June 2022:
GBP3.8 million; 31 December 2022: GBP4.8 million) comprising cash
of GBP1.2 million, debt of GBP2.5 million and drawings under the
Company's invoice finance facility of GBP4.1 million. As at 31
August 2023, net debt (4) (before lease obligations) w as GBP4.2
million.
The Group has invested over GBP2.5 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
GBP10.0 million at 30 June 2023 to GBP8.5 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
GBP0.5 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 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 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
GBP000 GBP000 GBP000
------------------------------------------ --------------- -------------------------- -----------------------------
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 GBP000 GBP000 GBP000
--------------------------------- ---- -------------- ------------- ------------
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
Called up share capital 6,046 3,621 3,621
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
Share Currency
Called up share premium Warrant translation Retained
capital account reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- ------ -------- --------- ------------ --------- -------
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 - - - - - -
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
------------------------------------ ----- ------ ----- ---- -------- -------
Loss for the six months - - - - (3,882) (3,882)
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
Six months ended 30 June Six months ended 30 June 2022
2023 2022
GBP000 GBP000 GBP000
---------------------------- ---------------------------- ---------------------------- ----------------------------
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
(GBP'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)
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 Dec 2022
(restated) GBP000 (restated)
GBP000 GBP000
------------------------------------- ------------------ -------------------- -------------
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 Six months
ended ended GBP000
30 June 2023 30 June 2022
GBP000
GBP000
---------------------------- -------------- -------------- ---------------------------------
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)
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 Dec 2022
GBP000 GBP000 GBP000
------------------------------------------------ ------------------ ------------------------ --------------
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 GBP0.1 million. No such sales have been registered in H1 2023
with nil cash impact in the period.
b. Intangible capitalised development assets of GBP0.9 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 GBP 0.4
million were incurred, with GBP0.1 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 GBP 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 GBP2.1 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 GBP0.3 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 GBP0.3 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 GBP69,000 (30 June
2022: GBP91,000; 31 December 2022: GBP135,000).
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 GBP0.8 million to a
third party recognising GBP0.5 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)
Six months Six months Year ended
ended 30 June ended 30 June 31 Dec
2023 2022 2022
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) (3,882) (1,533) (5,845)
-------------------------------- --------------- --------------- ------------
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 30 June
2023 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)
30 June 31 Dec
30 June 2023 2022 2022
GBP000 GBP000 GBP000
----------------- ---------------- --------------- ------------ ----------
Canadian government COVID-19 - 23 -
loan
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)
30 June 31 Dec
30 June 2023 2022 2022
GBP000 GBP000 GBP000
-------------- ------------- --------------- ------------ ----------
Cash at bank and in hand 1,243 656 1,431
----------------------------- --------------- ------------ ----------
12. Provisions
(Unaudited)
30 June
2023
GBP000
---------- ---------- --- --- -------------
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)
30 June 31 Dec
30 June 2023 2022 2022
GBP000 GBP000 GBP000
-------------- ------------- --------------- ------------ ----------
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 Lease
Loans discounting liabilities Total
facility
GBP000 GBP000 GBP000 GBP000
------- ------------- ------------- --------
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 GBP6.1 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 GBP3.7
million. This was credited to the share premium account. Share
issue expenses amounted to GBP0.8 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 GBP2.1
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 GBP 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 GBP1.5 million.
15. Availability
Further copies of this announcement are available on the
FireAngel Safety Technology Group plc investor relations website,
www.fireangeltech.com .
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END
IR VELFLXKLZBBV
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September 26, 2023 02:00 ET (06:00 GMT)
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