TIDMSPRP
RNS Number : 4491B
Sprue Aegis plc
04 April 2017
4 April 2017
Sprue Aegis plc
("Sprue", the "Company" or the "Group")
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2016
Sprue, one of Europe's leading developers and suppliers of home
safety products, announces its audited final results for the year
ended 31 December 2016.
Financial highlights
-- Group revenue of GBP57.1m (2015: GBP88.3m) impacted by volume
declines in France and H1 2016 product certification delays in
Germany
- At constant currency, total revenue up 5% to GBP60.0m
- Total sales in H2 2016 of GBP31.2m (H1 2016: GBP25.9m)
- H2 2016 sales into Germany increased 165% compared to H2 2015
- UK Retail sales increased by GBP1.5m, or 11%, to GBP15.4m (2015: GBP13.9m)
-- Adjusted operating profit* of GBP2.2m (2015: GBP12.8m)
-- Adjusted profit before tax* of GBP2.3m (2015: GBP12.8m)
-- Adjusted gross margin** of 28.6% (2015: 30.3%), decrease principally due to:
- Lower proportion of sales into Continental Europe;
- Higher proportion of UK Retail sales; and
- GBP0.4m increase in stock provisions compared to 31 December 2015
-- Strong balance sheet, no debt and net cash of GBP14.3m as at
31 December 2016 (2015: GBP22.4m)
-- After deducting the BRK distribution fee of GBP3.0m (2015:
GBP3.5m), the gross profit on BRK product sales was GBPnil (2015:
GBP4.6m)
-- Basic EPS of 4.0p per share (2015: 13.2p per share)
-- The Board recommends paying a maintained final dividend of
5.5p per share; total 2016 dividend maintained of 8.0p per share
(2015: 8.0p per share)
Operational highlights
-- Acquisition of Intamac Systems' source code for a maximum
cash consideration of GBP2.8m (initial consideration paid of
GBP1.6m), to expand the Group's addressable market into connected
home products
-- Launched Wi-Safe Connect and Z-Wave compatible alarms to
further enhance connected homes proposition
-- Maintained market-leading position in CO alarm provision in the UK
-- Increased focus on marketing in Continental Europe to drive
CO awareness and sales from a relatively low base
-- Battery warranty exposure now ring-fenced
- GBP0.8m settlement reached with battery supplier with the
benefit to be provided to Sprue through free of charge replacement
batteries over the next 2-3 years (benefit received in 2016
GBPnil)
- Product returns and warranty costs were in line with the
Board's expectations with a net GBP2.2m of total GBP6.8m warranty
provision as at 31 December 2015 utilised during the year
- Net FireAngel warranty expensed in the year was GBP0.7m, just over 1% of total sales
Post-year end
Distribution Agreement ("DA") and Manufacturing Agreement
("MA")
-- On 31 March 2017, Sprue received the requisite 12 months'
written notice from Newell Brands Inc. ("Newell"), to terminate the
distribution agreement entered into between Sprue and BRK Brands
Europe Limited ("BRK"). The DA will terminate on 31 March 2018
-- Expiry of the 12 months' notice period will end Sprue's
obligation to pay the fixed BRK annual distribution fee of GBP2.9m
and Sprue's right to distribute BRK's products and brands in
Europe, both with effect from 31 March 2018
-- Also on 31 March 2017, Sprue received the requisite 12
months' written notice from Newell to terminate its manufacturing
and supply agreement with DTL. The MA will terminate on 31 March
2018
-- While Newell has given notice to terminate the DA and MA,
Sprue will continue to purchase and source products under both
agreements until 31 March 2018 and honour its contractual
commitments
Appointment of two new strategic manufacturing partners
-- As announced on 31 March 2017, the Company entered into a
manufacturing and supply agreement ("MSA") with Flex to source a
range of smoke and heat alarms and accessories from Flex's facility
in Tczew, Poland
-- Also on 31 March 2017, the Company entered into an additional
supply agreement with a leading manufacturer based in the Far East
to purchase alternatives to the BRK products
Graham Whitworth, Executive Chairman of Sprue, commented:
"Sprue has emerged fitter, leaner and better placed to
capitalise on a number of pivotal strategic initiatives despite
facing a number of challenges during 2016. Our strong performance
in the second half of last year gives a clear indication of the
positive momentum we are now experiencing across the business.
We have made a solid start to 2017, which serves as a sound
foundation to announce a number of transformational initiatives,
which we believe will provide a springboard to expand our
technological and operational footprint into new markets and
territories and greatly enhance the Group's earnings
potential."
*Adjusted operating profit and profit before tax are stated
before share-based payments charge of GBP0.5m (2015: GBP0.5m) and
exceptional GBP0.2m restructuring charge reflecting a reduction in
head count in the UK (2015: GBP5.5m warranty charge)
** Adjusted gross margin is stated before the BRK distribution
fee of GBP3.0m (2015: GBP3.5m) and before exceptional items GBPnil
(2015: GBP5.5m exceptional warranty charge)
For further information, please contact:
Sprue Aegis plc 02477 717700
Graham Whitworth, Executive
Chairman
Neil Smith, Group Chief Executive
John Gahan, Group Finance Director
Vigo Communications
Jeremy Garcia / Fiona Henson
/ Antonia Pollock 020 7830 9700
Stockdale Securities 0207 601 6100
Tom Griffiths
Notes to Editors
About Sprue Aegis plc
Sprue's mission is to protect, save and improve our customers'
lives by making innovative, leading edge technology simple and
accessible. Sprue is one of the market leaders in the European home
safety products market and launched its own connected homes product
proposition at the end of 2016.
Sprue's principal products are smoke alarms, CO alarms and
accessories. The Group has an extensive portfolio of patented
intellectual property in Europe, the US and other selected
territories. Products are sold under Sprue's leading brands of
FireAngel, FireAngel Pro, FireAngel Spec, AngelEye and FireAngel
Connect.
For further product information, please visit: www.sprue.com
Executive Chairman's Statement
Review of the year
I am pleased to report significant progress across the business
in a year in which we faced a number of operational challenges.
Sprue continues to establish itself as the leading supplier of
innovative home safety products leveraging the Group's best in
class technology to serve each of the markets in which it operates,
as reflected in Sprue's market leading position in four of its five
markets. Whilst sales for the full year decreased to GBP57.1m
(2015: GBP88.3m), primarily to due to reduced demand in France
(post- implementation of the French smoke alarm legislation in
2015) and delays in product certification in Germany, the Group
delivered a much improved performance in the second half of the
year with total sales in Germany and UK Retail significantly ahead
of the previous year.
H2 2016 sales into Germany increased 165% compared to H2 2015,
underpinned by the launch of the new FireAngel products in the
second half. Due to the staggered introduction of regional
regulation in Germany and replacement cycles, the Board expects
Germany to remain a robust market going forward and to deliver
sustainable profitable growth for Sprue.
Our balance sheet remains strong with GBP14.3m of cash at the
year-end (2015: GBP22.4m) and no debt. In addition, total warranty
costs incurred in 2016 were in-line with the Board's
expectations.
The acquisition of Intamac Systems' source code with development
rights, for a maximum cash consideration of GBP2.8m, has expanded
the Group's addressable market into connected home products, which
the Board believes is a key growth area. Sales of connected home
products are already underway in the UK and Germany which enable
customers to remotely monitor their connected devices from their
smartphone, tablet device or interoperate with other smart
devices.
Sprue is seeking to use the data it collects from these products
to not only detect fires but also to identify properties at an
elevated risk of experiencing a fire in the future. We believe this
is a major development for the Company as it significantly extends
Sprue's technical capability and provides an opportunity to sell a
wide range of internet-enabled products and services as part of our
new connected home strategy. This has potential over time to
deliver recurring revenues for our business.
The Board is also pleased to announce that it recommends payment
of a maintained final dividend of 5.5p per share (2015: 5.5p per
share) which takes the total 2016 dividend to 8.0p per share (2015:
8.0p per share).
Strategic update
The appointment of two new manufacturing partners announced on
31 March 2017 will significantly increase Sprue's scale and value
proposition. The Board believes these changes will be
transformational for Sprue and help deliver our long term strategic
goals, whilst also creating value for shareholders.
Outlook
We have continued to develop our business over the last 12
months and have made significant strategic progress. The signing of
our new manufacturing agreement with Flex is transformational for
the Group.
Flex, with its global reach, has the ability to be responsive
locally to our customers' needs and opens up international
opportunities for Sprue to expand its addressable markets.
We believe the Group is now ideally placed to develop and source
"best in class product" and to explore new opportunities to greatly
enhance the Group's earnings potential.
Sprue will continue to innovate, develop and design new home
safety products whilst outsourcing manufacturing. This "outsourced"
and highly scalable business model has served the Group well and
the Board is optimistic about future growth prospects of the
Group.
Graham Whitworth
Executive Chairman
Group Chief Executive's Statement
Review of the year
The Group has made significant progress across the business
during the year despite the challenges experienced. The battery
warranty issue which arose early last year was particularly
disappointing after a period of sustained growth for the Group.
However, our ability to retain the support and confidence of our
customers is testament to the underlying strength of the
relationships we have built and the quality of our products, which
is reflected in a far stronger sales performance in the second half
of 2016.
This is as a result of the excellent response from colleagues
across Sprue dealing with our customers proactively, positively and
professionally, once again demonstrating the incredible team we
have, of whom I am extremely proud, and grateful to, for their
ongoing commitment and contribution.
We have undertaken significant analysis around the issues that
occurred with the batteries and have implemented a series of
measures, including the strengthening of our quality team and
improving our internal controls and processes in order to minimise
the impact and likelihood of any such future incidents.
Despite the disruption in the first half of the year, we made
good progress against our stated strategic goals:
-- Best ever quality, service and availability
o Investment within people and processes and new management
information tools with success measured through clear KPIs
-- Leadership within existing markets
o Increased smoke alarm sales in Germany by circa 50% year on
year with the successful launch of the new "P Line" FireAngel
range
o Maintained market leading position in CO alarm provision in
the UK by continuing to raise awareness of the dangers of CO
through "Project Shout", and through the addition of new
customers
o Launched "Un Cri D'Alarme" in France to drive CO sales
supported by a bespoke advertising campaign on French
television
-- Extend product and brand reach into new markets and channels
o The new markets plan is on track with significant
international growth potential outside our core French and German
markets
o The launch of our products into Poland has been especially
pleasing with FireAngel CO alarms selected by Warsaw City Council
for use in all of its social housing which is a strong endorsement
of our brand and product
-- The multi-sensing and connected solution provider
o The acquisition of Intamac Systems' source code has brought
control of this technology in-house and is managed by ex-Intamac
software engineers who now work for Sprue
o Launch of FireAngel Connect and Z-Wave compatible alarms
enabling our products to connect with other devices, such as
lighting and security products, takes Sprue into exciting new
incremental market sectors
Innovation is a core strength of our business and in the past
two years we have invested approximately GBP5.4m in new product
development to strengthen our innovation base, reduce our time to
market and to ensure we are the first to introduce exciting new
products and services.
We continue to improve our internal processes, which will
continue to deliver better results as we focus on the greatest
value opportunities and ensure we execute our plans on time and in
full to continue to win new customers.
The FireAngel brand is the number one brand within UK Retail and
is highly trusted by the UK Fire & Rescue Services, many of
which buy FireAngel products. Through greater focus on, and
consolidated investment in, the FireAngel brand, we are confident
we can accelerate market penetration and growth into new markets
and sectors throughout the UK and Continental Europe.
The recent signing of the Manufacturing and Supply Agreement
with Flex is a vital and key component of our strategic growth plan
and we are delighted to be working with a partner of Flex's scale,
experience and expertise.
Production from Flex's world class, highly automated facility
located in Poland will help Sprue accelerate the development of its
products and technology. Flex has the scale and resources to help
us chart our own destiny with the people and processes in place to
unlock the true potential of Sprue.
With production at Flex neighbouring our key markets, this will
enable us to be more responsive to our customers' needs and
expectations with the associated supply chain benefits. In
addition, with Poland only a short flight from the UK with a one
hour time difference, we expect to build a close collaborative and
productive relationship with Flex.
Connecting our leading technology with our new manufacturing
partner, delivered through our talented, committed people and our
trusted brands will create a uniquely compelling proposition. This
we believe will in turn deliver real value to Sprue's
shareholders.
We anticipate 2017 and 2018 will be pivotal years for Sprue and
with the focus, determination and belief we have as a Board and
wider team we look forward to reporting further progress at a time
of real opportunity for Sprue.
Neil Smith
Group Chief Executive
Financial Report
Summary
Sprue achieved revenue of GBP57.1m (2015: GBP88.3m) with the
decline in sales principally attributable to a fall in French sales
and product certification delays in Germany. Adjusted operating
profit* reduced to GBP2.2m (2015: GBP12.8m) and at constant FX with
2015 would have been GBP1.7m (2015: GBP12.8m).
Adjusted gross margin** declined by 1.7% to 28.6% (2015: 30.3%)
principally due to:
-- Lower proportion of Continental European sales
-- Higher proportion of UK Retail sales
-- GBP0.4m net increase in stock provisions compared to 31 December 2015
FireAngel warranty returns and the cost of free of charge
replacement products in relation to the battery issue announced in
April 2016 were in line with the Board's expectations.
The Group maintained warranty provisions as at 31 December 2016
of GBP4.6m (31 December 2015: GBP6.8m) of which, the largest
element relates to the expected cost of replacing smoke alarm
products over the next four to five years where an issue in certain
batteries supplied by a third party supplier may cause a premature
low battery warning chirp.
Sprue expensed a net GBP0.7m for FireAngel warranty (just over
1% of total 2016 sales) after utilisation of part of the brought
forward FireAngel warranty provision as at 31 December 2015. The
Board continues to closely monitor the level of product returns as
the warranty provision for each year of production is based on the
expected level of returns for 2012 production. Accounting for
warranties remains a critical judgement area as outlined further in
the Company's 2016 Annual Report & Accounts.
During 2016, Sprue reached a GBP0.8m settlement with the battery
supplier of the high impedance batteries with the benefit to be
provided to Sprue through free of charge replacement batteries over
the next 2-3 years (benefit received in 2016: GBPnil).
After deducting the BRK distribution fee of GBP3.0m (2015:
GBP3.5m), the gross profit on sales of BRK products into three
business units (UK Retail, UK Trade and EMEA) was GBPnil (2015:
GBP4.6m). There are no BRK product sales into the UK Fire and
Rescue Services ("UK FRS") or Utilities.
Distribution costs increased to GBP1.1m (2015: GBP0.8m) due to
the higher cost of servicing sales due to the change in sales mix
with significantly lower sales into Continental Europe.
The Group reported a modest tax credit of GBP0.2m principally
due to taxable losses due to significant R&D tax credits (2015:
GBP0.8m tax charge). Whilst the tax credit boosted Basic EPS in
2016, net income was lower than in the previous year and Basic EPS
was therefore lower at 4.0p per share (2015: 13.2p per share).
The Board recommends payment of a final dividend of 5.5p per
share (2015: 5.5p per share) with the total 2016 dividend
maintained at 8.0p per share (2015: 8.0p per share)
*Adjusted operating profit is stated before share based payments
charge of GBP0.5m (2015: GBP0.5m) and exceptional GBP0.2m
restructuring charge reflecting a reduction in head count in the UK
(2015: GBP5.5m warranty charge)
** Adjusted gross margin is stated before the BRK distribution
fee of GBP3.0m (2015: GBP3.5m) and before exceptional items GBPnil
(2015: GBP5.5m exceptional warranty charge)
Revenue by business unit
The table below summarises the reported revenue for each of the
Group's business units and Pace Sensors. At like-for-like exchange
rates with 2015, the Sterling value of European revenue in 2016
would have been approximately 5% or GBP2.9m higher than
reported.
2016 2015 Change
Revenue Revenue 2016 2015 2015-2016
Revenue from continuing operations GBPm GBPm % % GBPm
---------------------------------------- -------- -------- ----- ----- ----------
Business Units:
Europe 23.3 53.8 41 61 (30.5)
Retail 15.4 13.9 27 16 1.5
Trade 7.2 7.3 13 8 (0.1)
Fire & Rescue Services 5.4 7.8 9 9 (2.4)
Utilities 2.1 2.6 4 3 (0.5)
Pace Sensors 3.7 2.9 6 3 0.8
--------------------------------------- -------- -------- ----- ----- ----------
Total revenue from external customers 57.1 88.3 100% 100% (31.2)
---------------------------------------- -------- -------- ----- ----- ----------
The principal changes in revenue are as follows:
-- Following the spike in sales in 2015 due to the legislation
requiring all homes in France to fit at least one working smoke
alarm, sales into France in 2016 declined significantly which
reduced total sales into Europe. The reductions were partially
offset by an increase in sales into Germany (H2 2016 sales
increased 165% compared to H2 2015)
-- 11% increase in UK Retail sales with sales growth across all
major product groups; sales were also boosted by the addition of
new customers
-- UK Trade sales were flat overall but non-CO product sales still increased 5% year on year
-- As expected, UK FRS sales declined by GBP2.4m to GBP5.4m as
2015 sales benefitted from GBP2.3m of smoke and CO alarms funded by
the Department for Communities and Local Government ("DCLG")
-- Utilities sales declined by GBP0.5m to GBP2.1m due to the
2015 CO landlord legislation which boosted sales in the prior
year
-- Pace Sensors' sales increased by GBP0.8m to GBP3.7m and
benefitted from Sterling weakness against the US dollar
Exchange rates
Average month end exchange rates against Sterling are summarised
below.
Average for Average Average
year for H1 for H2
------------ -------------- ------------ ------------
2016 2015 2016 2015 2016 2015
------------ ------ ------ ----- ----- ----- -----
Euro 1.23 1.38 1.27 1.36 1.16 1.39
------------ ------ ------ ----- ----- ----- -----
US Dollar 1.36 1.53 1.42 1.52 1.27 1.53
------------ ------ ------ ----- ----- ----- -----
Canadian $ 1.80 1.95 1.87 1.89 1.69 2.02
------------ ------ ------ ----- ----- ----- -----
This table shows that on average, in 2016, Sterling weakened
against the Euro by 11%, thereby increasing Sprue's revenue and
profit on its Euro denominated income. However, over the same
period, Sterling also weakened against the US Dollar by 11% which
significantly increased the Sterling equivalent cost of Sprue's US
Dollar CO detector purchases from Pace Tech and smoke and accessory
products (and BRK CO detectors) from Detector Technologies
Limited.
Where possible, Sprue is increasing 2017 selling prices to
offset the product cost inflation as a result of Sterling's
weakness against the US Dollar.
Much of Sterling's decline occurred in H2 2016 following the EU
Referendum result. On a like for like basis with 2015, the
operating profit for 2016 would have been approximately
GBP1.7m.
Net gains or losses on forward contracts are marked to market
and taken to the income statement in the month that they occur. The
Group does not do hedge accounting for foreign exchange gains and
losses on forward contracts.
Balance sheet and cash flow
Cash declined by GBP8.1m principally due to continued product
development and capex investment of GBP2.7m in total (2015:
GBP2.7m), the GBP1.6m initial cash consideration* for the
acquisition of the Intamac Systems' source code and the maintained
payment of the dividend of GBP3.7m (2015: GBP3.9m). However, the
balance sheet remained strong with net cash of GBP14.3m as at 31
December 2016 (2015: GBP22.4m) and no debt.
Stock declined by GBP2.2m in the year but year end stock levels
were still higher than the Board would have liked. Net of
provisions, stock reduced by 15 per cent. to GBP13.3m (2015:
GBP15.6m). Stock provisions were increased by GBP0.4m in the year
to GBP0.7m, primarily in relation to French stock.
Debtors increased in 2016 to GBP13.5m (2015: GBP11.7m) due to
increased sales in December 2016 compared to the prior year.
The continued investment in new product development increased
the total net book value of other intangible assets to GBP8.3m
(excluding the Intamac software), equivalent to 15 per cent of
sales or approximately 50 per cent of 2016 gross profit before
payment of the BRK distribution fee.
The purchase of in-house test equipment increased the net book
value of tangible assets to GBP0.9m (2015: GBP0.7m) and deferred
tax assets (reflecting unrelieved taxable losses) also increased
from GBP0.3m to GBP0.6m taking total non-current assets to GBP11.6m
(31 December 2015: GBP7.6m). The Group expects to gradually utilise
its unrelieved tax losses over the next two to three years and to
receive a further GBP0.2m tax refund (in addition to the GBP0.5m
tax refund received in December 2016), once its 2016 tax
computation has been agreed with HMRC.
Warranty costs and product returns in 2016 were in line with the
Board's expectations and net warranty provisions reduced by GBP2.2m
to GBP4.6m (2015: GBP6.8m). The Group continued to expense a modest
level of FireAngel warranty at GBP0.7m in 2016, just over 1% of
total sales in the year in respect of non-high impedance FireAngel
battery issues.
Average debtor days improved during the year to 58 days (2015:
67 days) reflecting the change in sales mix by business unit.
Average creditor days also reduced during the year to 76 days
(2015: 82 days). The Group undertakes to pay its suppliers in line
with agreed credit terms.
*total cash consideration payable for the Intamac software is up
to GBP2.8m (excluding VAT)
Dividend
The Board is recommending the payment of a maintained final
dividend of 5.5 pence per share on 7 July 2017 to shareholders on
the register on 23 June 2017, which if approved by shareholders at
the Company's AGM which is expected to be held on 15 June 2017,
takes the full year 2016 dividend to 8.0 pence per share (2015: 8.0
pence per share).
Signed on behalf of the Board
Neil Smith John Gahan
Group Chief Executive Group Finance Director
CONSOLIDATED INCOME STATEMENT
YEARED 31 DECEMBER 2016
Notes 2016 2015
GBP000 GBP000
--------------------------------------------------------------------------- ----- ---------- ----------------------
Revenue 3 57,106 88,303
--------------------------------------------------------------------------- ----- ---------- ----------------------
Cost of sales excluding BRK distribution fee and exceptional warranty
charge (40,789) (61,548)
BRK distribution fee (2,982) (3,460)
Exceptional warranty charge 9 - (5,500)
--------------------------------------------------------------------------- ----- ---------- ----------------------
Total cost of sales (43,771) (70,508)
--------------------------------------------------------------------------- ----- ---------- ----------------------
Gross profit 13,335 17,795
--------------------------------------------------------------------------- ----- ---------- ----------------------
Distribution costs (1,083) (750)
--------------------------------------------------------------------------- ----- ---------- ----------------------
Administrative expenses excluding share-based payments charge (10,182) (9,788)
Share-based payments charge (563) (527)
Total administrative expenses* (10,745) (10,315)
--------------------------------------------------------------------------- ----- ---------- ----------------------
Total fixed costs (11,828) (11,065)
--------------------------------------------------------------------------- ----- ---------- ----------------------
Profit from operations pre-exceptional GBP0.2m restructuring charge (2015:
warranty charge
GBP5.5m) and pre share-based payments charge 2,236 12,757
Profit from operations 1,507 6,730
Finance income 66 89
--------------------------------------------------------------------------- ----- ---------- ----------------------
Profit before tax 1,573 6,819
Income tax credit / (charge) 4 246 (810)
--------------------------------------------------------------------------- ----- ---------- ----------------------
Profit attributable to equity owners of the parent 1,819 6,009
--------------------------------------------------------------------------- ----- ---------- ----------------------
Earnings per share (pence) 5
From continuing operations:
Basic 4.0 13.2
Diluted 4.0 13.1
--------------------------------------------------------------------------- ----- ---------- ----------------------
*Total administrative expenses include a GBP0.2m restructuring
charge reflecting a reduction in head count in the UK (2015:
GBPnil)
Continuing operations
None of the Group's activities are treated as acquired or
discontinued during the above periods.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016 2015
GBP000 GBP000
----------------------------------------------------------------------------- ------ ------
Revenue Profit for the period 1,819 6,009
Items that may be reclassified subsequently to profit and loss:
Net exchange gain / (loss) on translation of foreign operations (net of tax) 393 (60)
Other comprehensive income / (expense) for the period 393 (60)
------------------------------------------------------------------------------ ------ ------
Total comprehensive income for the period 2,212 5,949
------------------------------------------------------------------------------ ------ ------
consolidated FINANCIAL POSITION
AS AT 31 DECEMBER 2016
NOTES 2016 2015
GBP000 GBP000
------------------------------------------------------ ----- -------- --------
Non-current assets
Goodwill 169 169
Other intangible assets 6 8,271 6,396
Purchased software costs 6 1,649 -
Plant and equipment 916 740
Deferred tax assets 625 284
------------------------------------------------------ ----- -------- --------
11,630 7,589
------------------------------------------------------ ----- -------- --------
Current assets
Inventories 7 13,316 15,557
Trade and other receivables 8 13,451 11,717
Current tax assets 287 308
Derivative financial assets 14 1 91
Cash and cash equivalents 14,333 22,403
------------------------------------------------------ ----- -------- --------
41,388 50,076
------------------------------------------------------ ----- -------- --------
Total assets 53,018 57,665
------------------------------------------------------ ----- -------- --------
Current liabilities
Trade and other payables (16,741) (18,202)
Current tax liabilities (43) -
Provisions 9 (2,800) (2,200)
Derivative financial liabilities 14 (88) (187)
------------------------------------------------------ ----- -------- --------
(19,672) (20,589)
------------------------------------------------------ ----- -------- --------
Net current assets 21,716 29,487
------------------------------------------------------ ----- -------- --------
Non-current liabilities
Provisions 9 (1,793) (4,593)
Deferred tax liabilities (1,569) (1,386)
------------------------------------------------------ ----- -------- --------
Total non-current liabilities (3,362) (5,979)
------------------------------------------------------ ----- -------- --------
Total liabilities (23,034) (26,568)
------------------------------------------------------ ----- -------- --------
Net assets 29,984 31,097
------------------------------------------------------ ----- -------- --------
Equity
Share capital 10 917 917
Share premium 12,713 12,713
Foreign exchange reserve 264 (129)
Retained earnings 16,090 17,596
------------------------------------------------------ ----- -------- --------
Total equity attributable to the owners of the parent 29,984 31,097
------------------------------------------------------ ----- -------- --------
consolidated STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Foreign
Share Share exchange Retained
capital premium reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------ -------- --------- --------- -------
Balance at 1 January 2015 909 12,003 (69) 14,795 27,638
Profit for the year - - - 6,009 6,009
Foreign exchange losses from overseas
subsidiaries - - (60) - (60)
--------------------------------------- ------ -------- --------- --------- -------
Total comprehensive income for
the year - - (60) 6,009 5,949
Transactions with owners in their
capacity as owners:-
Dividends - - - (3,877) (3,877)
Issue of shares 8 - - - 8
Premium arising on issue of equity
shares - 710 - - 710
Total transactions with owners
in their capacity as owners 8 710 - (3,877) (3,159)
Share-based payment charge - - - 527 527
Deferred tax credit on share-based
payments charge - - - 63 63
Current tax credit on share-based
payments charge - - - 79 79
Balance at 31 December 2015 917 12,713 (129) 17,596 31,097
--------------------------------------- ------ -------- --------- --------- -------
Balance at 1 January 2016 917 12,713 (129) 17,596 31,097
Profit for the year - - - 1,819 1,819
Foreign exchange gains from overseas
subsidiaries - - 393 - 393
----------------------------------------- --- ------ ----- ------- -------
Total comprehensive income for
the year - - 393 1,819 2,212
Transactions with owners in their
capacity as owners:-
Dividends - - - (3,668) (3,668)
Total transactions with owners
in their capacity as owners - - - (3,668) (3,668)
Share-based payment charge - - - 563 563
Deferred tax (charge) on share-based
payments - - - (220) (220)
----------------------------------------- --- ------ ----- ------- -------
Balance at 31 December 2016 917 12,713 264 16,090 29,984
----------------------------------------- --- ------ ----- ------- -------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2016
2016 2015
GBP000 GBP000
-------------------------------------------------------- ------- -------
Profit before tax 1,573 6,818
Finance income (66) (89)
--------------------------------------------------------- ------- -------
Operating profit for the year 1,507 6,729
Adjustments for:
Depreciation of property, plant and equipment 281 203
Amortisation of intangible assets 332 258
(Increase) / reduction in fair value of derivatives (10) 464
Share-based payments charge 563 527
--------------------------------------------------------- ------- -------
Operating cash flow before movements in working capital 2,673 8,181
Movement in inventories 2,241 (7,248)
Movement in receivables (1,734) 8,496
Movement in provisions (2,200) 5,920
Movement in payables (1,460) (1,745)
--------------------------------------------------------- ------- -------
Cash (used) / generated by operations (480) 13,604
Income tax paid (56) (1,197)
--------------------------------------------------------- ------- -------
Net cash (used) / generated from operating activities (536) 12,407
--------------------------------------------------------- ------- -------
Investing activities
Purchase of intangible assets (2,207) (2,321)
Purchase of software costs (1,649) -
Purchase of property, plant and equipment (497) (411)
Interest received 66 89
--------------------------------------------------------- ------- -------
Net cash used on investing activities (4,287) (2,643)
--------------------------------------------------------- ------- -------
Financing activities
Proceeds from issue of ordinary shares - 718
Dividends paid (3,668) (3,877)
--------------------------------------------------------- ------- -------
Net cash used on financing activities (3,668) (3,159)
--------------------------------------------------------- ------- -------
Net (decrease) / increase in cash and cash equivalents (8,491) 6,605
Cash and cash equivalents at beginning of year 22,403 15,887
Non-cash movements 421 (89)
--------------------------------------------------------- ------- -------
Cash and cash equivalents at end of the year 14,333 22,403
--------------------------------------------------------- ------- -------
Notes to the financial information
1. General information
This consolidated financial information does not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006.
2. Accounting policies
Basis of preparation
In accordance with Section 435 of the Companies Act 2006, the
Group confirms that the financial information for the years ended
31 December 2016 and 2015 is derived from the Group's audited
financial statements and that these are not statutory accounts and,
as such, do not contain all information required to be disclosed in
the financial statements prepared in accordance with International
Financial Reporting Standards ("IFRS"). The statutory accounts for
the year ended 31 December 2016 have been audited and approved, but
have not yet been filed.
The statutory accounts for the year ended 31 December 2015 have
been delivered to the Registrar of Companies. These accounts were
prepared under International Financial Reporting Standards as
adopted by the European Union ("IFRS").
The Group's audited financial statements for the year ended 31
December 2016 received an unqualified audit opinion and the
auditor's report contained no statement under section 498(2) or
498(3) of the Companies Act 2006.
The financial information contained within this announcement was
approved and authorised for issue by the Board on 3 April 2017.
The accounting policies adopted in the preparation of the
consolidated financial information are consistent with those
followed in the preparation of the Group's financial statements for
the year ended 31 December 2016 except where disclosed otherwise in
this note.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group
is described in the 2016 financial statements, including exposure
to foreign exchange rate fluctuation, in particular the strength of
Sterling relative to the US Dollar and Euro. It is anticipated that
the risk profile will not significantly change for the remainder of
the year. Risk is an inherent part of doing business and the strong
cash position of the Group, along with the underlying profitability
of the core business, leads the Directors to believe that the Group
is well placed to manage the business risks the Group faces.
Going concern
The Group's forecasts and projections, taking account of
reasonably predictable changes in trading performance, support the
conclusion that there is a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future, a period of not less than
twelve months from the date of this report. Accordingly, the going
concern basis has been adopted in preparing the financial
information.
New standards, amendments and interpretations
The following new standards and amended standards, none of which
have had a material impact on these financial statements, are
mandatory and relevant to the Group for the first time for the
financial period commencing 1 January 2016:
-- Annual improvements 2012-2014
-- Amendments to IAS 1 Disclosure Initiative
-- Amendments to IAS 16 and IAS 38: Clarification of acceptable
Methods of Depreciation and Amortisation
Accounting standards in issue but not yet effective:
At the date of authorisation of these financial statements the
following standards and interpretations, which have not been
applied in these financial statements and which are considered
potentially relevant, were in issue but not yet effective (and in
some cases had not yet been adopted by the EU):
-- IFRS 9: Financial Instruments
-- IFRS 15: Revenue from contracts with customers
-- IFRS 16: Leases
-- Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses
-- Amendments to IAS 7: Disclosure Initiative
-- Clarifications to IFRS 15: Revenue from Contracts with Customers
-- Amendments to IFRS 2: Classification and measurement of share-based payment transactions
With regards IFRS 15, this brings into play significantly
different principles for determining how revenue should be
recognised and how it is measured in comparison with IAS 18. The
Group is still in the process of determining which sales
transactions (if any) will be affected and hence are unable to
quantify the impact at this time. However, the Group is aware of
the potential additional disclosures that may be required and
therefore a need to consider how this information will be captured
is necessary.
In addition, IFRS 16 on 'Leases' will also impact the financial
statements and the relevant disclosures as the Group has operating
leases that will be need to be disclosed and identified separately
on the face of the Consolidated Financial Position. The Group is
still in the process of quantifying the impact and deciding on
which transitional exemptions it decides to take.
The Directors anticipate that the adoption of the remaining
standards and interpretations in future periods will have no
material impact on the financial statements of the Group or the
Company when the relevant standards and interpretations come into
effect.
3. Operating segments
Sprue sells and distributes home safety products and accessories
in the UK, Continental Europe and certain other countries and
undertakes manufacturing activities in Canada. Its major customers
are based throughout the UK and Continental Europe. Financial
information is reported to the Board on a consolidated basis with
revenue and operating profit stated for the Group.
The Board considers that there are no identifiable business
segments that are engaged in providing individual products or
services or a group of related products and services that are
subject to risks and returns that are different to the core
business.
Segmental revenues for each of the Group's business units,
comprising gross and net sales to external customers and movement
in gross profit from previous forecasts is the main financial
information reported to the Board at business unit level. Business
unit reporting to the Board excludes information on overheads and
other income statement information, which is reported on an
aggregated basis.
All assets are consolidated on a Group basis and reported as
such to the Board.
Business units earn revenue from the sale of smoke and carbon monoxide detectors and accessories
to end customers. Pace Sensors earns revenue from the manufacture and sale of carbon monoxide
sensors to a third party carbon monoxide detector assembler based in China.
For 2016, revenues of approximately GBP15.0m (2015: GBP39.0m) were derived from one external
customer (2015: two external customers), which individually contributed over 10% of total
revenue of the Group. These revenues are attributable to the European business units.
A geographical analysis of the Group's revenue is as follows:
2016 2015
GBP000 GBP000
----------------------------------------------------------- -------------------- -------------------
Continuing operations:
United Kingdom 30,080 31,614
Rest of World 27,026 56,689
------------------------------------------------------------ -------------------- -------------------
57,106 88,303
----------------------------------------------------------- -------------------- -------------------
Non-current assets, excluding deferred tax assets, for UK and overseas territories are shown
as follows:
2016 2015
GBP000 GBP000
------------------------------------------------------------ -------------------- -------------------
Continuing operations:
UK 10,720 7,112
Canada 285 193
------------------------------------------------------------ -------------------- -------------------
Non-current assets 11,005 7,305
------------------------------------------------------------ -------------------- -------------------
4. Income tax
The major components of income tax (credit) / charge in the
Income Statement are as follows:
2016 2015
GBP000 GBP000
------------------------------------- --------- ---------
Current tax
UK corporation tax (credit)
/ charge (99) 301
UK - Adjustments in
respect of prior periods (46)
(credit) - (38)
Foreign tax charge 267 235
-------------------------------------- --------- ---------
122 498
--- --------------------------------- --------- ---------
Deferred tax
Origination and reversal
of temporary differences (368) 312
Income tax (credit)
/ charge (246) 810
-------------------------------------- --------- ---------
Domestic income tax is calculated at 20% (2015:
20.25%) of the estimated assessable profit
for the year.
The tax credit for 2016 is primarily attributed to claiming
small company's enhanced R&D tax relief at the elevated 230%
rate (2015: 230%).
Legislation to reduce the main rate of corporation tax from 20%
to 19% from 1 April 2017 has been enacted. The deferred tax
balances have been calculated at 17% where they are expected to be
utilised after 1 April 2017.
5. Earnings per share
The calculation of the basic and diluted earnings
per share is based on the following data:
Earnings from continuing 2016 2015
operations GBP000 GBP000
--------------------------------------------------------------------------- -------- --------
Earnings for the purposes
of basic and diluted earnings
per share (profit for
the year attributable
to owners of the parent) 1,819 6,009
Number of shares '000 '000
--------------------------------------------------------------------------- -------- --------
Weighted average number
of ordinary shares for
the purposes of basic
earnings per share 45,855 45,613
Effect of dilutive potential
ordinary shares:
Deemed issue of potentially
dilutive shares 71 322
--------------------------------------------------------------------------- -------- --------
Weighted average number
of ordinary shares for
the purposes of diluted
earnings per share 45,926 45,935
--------------------------------------------------------------------------- -------- --------
2016 2015
pence pence
--------------------------------------------------------------------------- -------- --------
Basic earnings per share 4.0 13.2
Diluted earnings per share 4.0 13.1
--------------------------------------------------------------------------- -------- --------
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.
6. Other intangible assets
Product Purchased
development software Computer
costs costs software Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 2015 5,824 - 240 6,064
Additions 2,271 - 50 2,321
At 31 December 2015 8,095 - 290 8,385
Additions 2,178 1,649 29 3,856
At 31 December 2016 10,273 1,649 319 12,241
---------------------- ------------- ---------- ---------- ---------
Amortisation
At 1 January 2015 1,531 - 200 1,731
Amortisation for the
year 231 - 27 258
At 31 December 2015 1,762 - 227 1,989
Amortisation for the
year 300 - 32 332
At 31 December 2016 2,062 - 259 2,321
---------------------- ------------- ---------- ---------- ---------
Carrying amount
At 31 December 2015 6,333 - 63 6,396
---------------------- ------------- ---------- ---------- ---------
At 31 December 2016 8,211 1,649 60 9,920
---------------------- ------------- ---------- ---------- ---------
A summary of product development costs (including the purchased
software costs of GBP1.6m) with a net book value of GBP9.9m as at
31 December 2016, is shown below, along with the average remaining
useful economic life of each intangible asset which are typically
amortised between 7 to 15 years.
Smoke CO
Connected Wi-safe sensing Future sensing
home* 2 SONA Nano products products* Other products Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 509 1,505 1,164 1,403 1,273 341 1,505 395 8,095
Additions 2,335 233 335 - 241 224 330 129 3,827
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
At 31
December 2,844 1,738 1,499 1,403 1,514 565 1,835 524 11,922
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
Amortisation
At 1 January - 155 19 - 270 - 1,278 40 1,762
Charge 2 105 53 19 82 - 13 26 300
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
At 31
December 2 260 72 19 352 - 1,291 66 2,062
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
Carrying
amount
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
At 31
December
2015 509 1,350 1,145 1,403 1,003 341 227 355 6,333
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
At 31
December
2016 2,842 1,478 1,427 1,384 1,162 565 544 458 9,860
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
% of total 29% 15% 14% 14% 12% 6% 5% 5% 100%
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
Average
UEL left
(yrs) 15.0 8.5 11.4 11.8 7.7 10.0 2.1 8.7 9.4
-------------- ---------- -------------- -------------- ------------- ---------------- --------------- ---------------- --------------- --------------------
*products within the Connected Homes and various future products
are still under development and as such, are not finalised and
therefore there is no amortisation charge in respect of these
intangibles.
Additions relate to new products and / or technology under
development which will be amortised over their expected useful
economic lives once sales of the associated products commence. The
following is a high level summary of the products in the table
above:
Wi-safe 2
Wi-safe 2 (including products using wi-safe 2 capabilities) are
an enhancement and development on the Group's Wi-safe I technology
with a combined NBV of GBP1.5m as at 31 December 2016. Wi-safe 2 is
a core piece of technology which is expected to underpin a number
of key products and accessories going forwards, especially in the
Connected Homes arena.
Nano
Nano is the miniaturised CO sensor developed by Sprue's wholly
owned subsidiary in Canada, Pace Sensors. The Nano went into
production into finished CO detectors in November 2016. Nano's net
book value of GBP1.4m as at 31 December 2016 represents the costs
incurred in the development of the CO sensor and the final
development of finished CO products that incorporate the
sensor.
SONA
Sprue launched a new fully certified range of mains powered SONA
branded smoke and carbon monoxide products and accessories for the
UK Trade sector which includes heat alarms, smoke alarms, CO alarms
and a remote test and reset product in December 2015.
SONA technology provides an advantage over competitor products
especially with its market leading low power consumption, which is
particularly important for new housing projects which require a
"sustainability" assessment. The net book value of SONA, which also
includes other SONA technology related products under development
this year, amounted to GBP1.4m as at 31 December 2016.
Smoke sensing products
The net book value of smoke sensing products as at 31 December
2016 amounted to GBP1.2m and includes all Sprue's own branded
FireAngel developed products and smoke products under
development.
Connected Home Solutions ("CHS")
CHS allows Sprue to connect and monitor a wider range of Sprue's
own products through its interface gateway technology to the
internet. As part of this plan, Sprue is developing an app for
users which will work on any Android or iOS device. At the same
time, Sprue is expanding the skills and capabilities of its
Technical team to accelerate product development in this area. The
net book value of CHS as at 31 December 2016 amounted to GBP2.8m
and includes the following net book values:
-- Intamac source code and purchased development software GBP1.6m
-- Intamac internally generated technology GBP0.8m
-- Z-wave module (wireless language technology) GBP0.3m
-- Innohome (cooker shut off products) GBP0.1m
In the deal announced with Intamac in September 2016, Sprue
acquired the software and development rights to the source code to
Intamac's software. As part of that transaction, Sprue and Intamac
agreed to convert Sprue's prepaid licence fee of GBP0.45m into
consideration for the acquisition of Intamac's software and the
GBP0.45m prepayment was therefore reclassified into intangible
assets as stated above.
Various future products ("VFP")
The net book value of VFP amounted to GBP0.6m as at 31 December
2016 and consists primarily of the Group's next generation smoke
and CO alarms. These are major projects which are expected to come
to market over the next few years.
CO sensing products
The net book value of CO sensing products as at 31 December 2016
was GBP0.5m which includes Sprue's 10 year life CO alarm, the
British Gas developed CO alarm and CO sensing products currently
under development. The CO market is growing through marketing
activities and increased awareness of the dangers of carbon
monoxide.
Other
Other includes various smaller products that do not fall neatly
into any one category or where the net book values are not
individually significant.
Impairment review
During 2016, the Group did not record any impairment charges
upon review of its product development cost intangible assets.
Products completed and available for sale
As part of the Group's impairment review, the Group prepares a
schedule that compares the net book value of each intangible asset
with the gross profit in the next 12 months which is expected to be
derived from the sale of products that use the relevant intangible
asset. The purpose of this review is to ensure that the value of
the intangible asset is likely to be "recovered" within the next
few years. In many cases, the expected gross profit within the next
12 months from the sale of products that use the intangible asset
is actually significantly larger than the net book value of the
individual intangible asset on the balance sheet. This provides
significant comfort that the carrying value of each intangible is
reasonable and is therefore not impaired.
Products not yet completed
Product development costs and other intangible assets not yet
available for use are tested for impairment annually, and are
assessed whether there is any indication that the asset may be
impaired. This assessment includes consideration of the likely cost
of completing the project.
7. Inventories
2016 2015
GBP000 GBP000
Raw materials 236 142
Work-in-progress 370 170
Finished goods 13,404 15,523
---------------------------- --------- ---------
Total gross inventories 14,010 15,835
Inventory provisions (694) (278)
---------------------------- --------- ---------
Total net inventories 13,316 15,557
---------------------------- --------- ---------
Inventory provision %
of total gross inventory 4.9% 1.8%
---------------------------- --------- ---------
Pace Sensors, the Group's wholly owned subsidiary in Canada,
manufactures carbon monoxide sensors ("CO sensors") for use in the
Group's CO detectors. The CO sensors are shipped to Pace
Technology, an independent third party supplier based in China, for
assembly into finished CO detectors which are then purchased by
Sprue in the UK. The Group does not maintain a provision for
unrealised profit in CO sensors within finished CO detector stock
as CO sensors are sold to an independent third party, Pace
Technologies before being acquired as finished CO detector
products.
8. Trade and other receivables
2016 2015
GBP000 GBP000
----------------------------- --------- ---------
Trade receivables 13,003 11,297
Other debtors 47 113
Prepayments 401 307
Trade and other receivables 13,451 11,717
------------------------------ --------- ---------
9. Provisions
FireAngel BRK Brands
warranty warranty
provisions provisions Total
GBP000 GBP000 GBP000
--------------------------- ------------ ------------ ---------
At 1 January 2015 819 55 874
Additional provision in
year 5,500 950 6,450
Increase / (utilisation)
of provision 144 (675) (531)
At 31 December
2015 6,463 330 6,793
Increase in provision
in year 447 651 1,098
Utilisation of provision (2,577) (721) (3,298)
At 31 December 2016 4,333 260 4,593
---------------------------- ------------ ------------ ---------
The total warranty provision is classified between less than one
year and greater than 1 year as follows:
2016 2015
GBP000 GBP000
Current provision 2,800 2,200
Non-current provision 1,793 4,593
--------------------------- ---------- ---------------
Total warranty provision 4,593 6,793
--------------------------- ---------- ---------------
Review of warranty provision
With specific reference to FireAngel products, the determination
of the amount of the provision, which reflects the Board's best
estimate of resolving these issues, requires the exercise of
significant judgement. It is necessary, therefore, to form a view
on matters which are inherently uncertain, such as the returns
profile over time, the final return rate, whether the return rate
of each year of production will be similar, whether the return
rates from different sales channels will vary and the average cost
of redress.
There is a greater degree of uncertainty in assessing these
factors when an issue is first identified. Consequently, the
continued appropriateness of the underlying assumptions will be
reviewed on an ongoing basis against actual experience and other
relevant evidence and adjustment made to the provision over time as
required.
The actual product returns in 2016 were in line with
management's expected level of product returns and therefore no
further adjustment to the provision (upwards or downwards) was
deemed necessary as at 31 December 2016.
The provision relates mainly to the high impedance battery issue
and is most sensitive to the assumption regarding the final return
percentage rate. For reference, a 10% increase in the estimated
final return rate, with no further improvement for each subsequent
year of affected production, would result in an increase in the
provision of approximately GBP0.5m. The Board is not aware of any
other major warranty issues but has continued to expense a
FireAngel warranty charge at just over 1% of sales in the year in
the absence of any other major warranty issues.
10. Share capital
Company Company
2016 2015
Number Number
Authorised: '000 '000
-------------------------------- ------------ ------------
100,000,000 Ordinary shares
of 2p each
-------------------------------- ------------ ------------
Ordinary shares in issue:
As at 1 January 45,855 45,496
Issue of shares in respect
of share options exercised - 359
--------------------------------- ------------ ------------
As at 31 December 45,855 45,855
--------------------------------- ------------ ------------
Issued and fully paid Ordinary
shares of 2p each: GBP000 GBP000
As at 1 January 917 909
Issue of share capital in
respect of share options
exercised - 8
--------------------------------- ------------ ------------
As at 31 December 917 917
--------------------------------- ------------ ------------
The Company has one class of ordinary share which carries no
right to fixed income.
11. Options
A summary of the change in options is set out below:
2016 2015
-------------------- --------------------
Weighted Weighted
average average
Options exercise Options exercise
'000 price '000 price
----------------------------- -------- ---------- -------- ----------
Outstanding at
1 January 2,025 102p 1,479 200p
Exercised during
the year - 200p (359) 200p
Granted during
the year - 2p 975 2p
Forfeited during
the year (73) 200p (70) 200p
---------------------------------- -------- ---------- -------- ----------
Outstanding and exercisable
31 December 1,952 97p 2,025 102p
---------------------------------- -------- ---------- -------- ----------
Further details of share options outstanding
at 31 December 2016 are as follows:
Exercised Granted *Forfeited
Outstanding during during during Outstanding
Grant at start the the the at end Expiry Exercise
date of year year year year of year date price
------------ ------------ ---------- -------- ----------- ------------ ----------- ---------
Directors'
share options
25/04/2014 319,445 - - - 319,445 28/04/2021 200p
03/06/2015 900,000 - - - 900,000 03/06/2025 2p
Employee share
options
30/06/2010 50,000 - - - 50,000 29/06/2017 35p
25/04/2014 681,230 - - (73,616) 607,614 28/04/2021 200p
03/06/2015 45,000 - - - 45,000 03/06/2025 2p
03/06/2015 30,000 - - - 30,000 03/06/2015 2p
2,025,675 - - (73,616) 1,952,059
------------ ------------ ---------- -------- ----------- ------------ ----------- ---------
*forfeited share options during the period relate to employees
who left the Group in 2016
12. Dividends
On 22 July 2016, a dividend of GBP2.5m, 5.5 pence per share, was
paid to shareholders. On 31 October 2016 an interim dividend of
GBP1.1m, 2.5 pence per share, was paid to shareholders.
In respect of the year ended 31 December 2016, the directors
recommend the payment of a final dividend of 5.5 pence per share on
7 July 2017 to shareholders on the register on 23 June 2017. This
dividend is subject to approval by shareholders at the Annual
General Meeting to be held on 15 June 2017 and has not been
included as a liability in these financial statements. The total
estimated final dividend to be paid is GBP2.5m.
13. Foreign currency
The Group continues to generate significant amounts of Euros in
excess of its Euro payment requirements and is exposed to movements
between GBP and the USD which can significantly affect the Group's
product cost of sales. The Group has forward contracts in place to
help manage its net foreign exchange rate exposure extending out to
July 2017. All contracts are marked to market at the balance sheet
date with the net gain or loss arising taken to cost of sales in
the relevant month.
14. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks
that include currency risk, interest rate risk, credit risk and
liquidity risk.
These financial statements do not include all financial risk
management information and disclosures required in the annual
financial statements which should therefore be read in conjunction
with the Group's financial statements as at 31 December 2016. There
have been no changes to the risk management policies since the year
ended 31 December 2016.
The Group's bank performs the valuations of financial
derivatives for financial reporting purposes. The market value of
derivative financial assets as at 31 December 2016 was GBP1,000 (31
December 2015: GBP91,000).
The market value of derivative financial liabilities as at 31
December 2016 was GBPGBP88,000 (31 December 2015: GBP187,000).
The total net profit on forward contracts recognised in the
operating result for the period ended 31 December 2016 was
GBP10,000 (2015: GBP0.5m loss) and is included within "Cost of
Sales".
15. Related parties: Newell Brands Inc. ("Newell Brands")
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
In 2016, Newell Brands acquired the entire issued share capital
of Jarden Corporation, the largest individual shareholder that
owned 23.4% of the Group as at 31 December 2016.
During the year, Group companies entered into
the following transactions with Newell Brands
which is not a member of the Group:
Newell Brands
--------------------
2016 2015
GBP000 GBP000
Sales of goods in year 196 3,168
19,534
Purchases of goods in
period including engineering
fees 9,975 49,581
Distribution agreement
fee 2,982 3,460
Dividends payable 912 912
Amounts owed by related
parties at year end - -
Amounts owed to related
parties at year end 7,670 11,221
-------------------------------- ------- --------- ---------
Newell Brands has representation on the Company's Board of
directors with a right to nominate one director and to jointly
nominate a second director for appointment to the Sprue Board.
Consequently, the Directors consider that Newell Brands is a
related party to the Company. Purchases between related parties are
made under contractual arrangements negotiated on an arm's length
basis.
Newell Brands represents the single largest supplier to the
Group supplying a significant proportion of the Group's purchased
products. Sales of goods in the year relate to Newell Brands'
wholly owned subsidiary, Mapa Spontex, which is based in
France.
16. Post balance sheet events
Distribution Agreement ("DA") and Manufacturing Agreement
("MA")
On 31 March 2017, Sprue received the requisite 12 months'
written notice from Newell Brands to terminate the distribution
agreement entered into between Sprue and BRK Brands Europe Limited
("BRK") dated 10 April 2010. The DA will terminate on 31 March
2018.
Expiry of the 12 months' notice period on the DA will end
Sprue's obligation to pay the fixed BRK annual distribution fee of
GBP2.9m and Sprue's right to distribute BRK's products and brands
in Europe, both with effect from 31 March 2018.
Also on 31 March 2017, Sprue received the requisite 12 months'
written notice from Newell Brands to terminate its manufacturing
and supply agreement with DTL. The MA will terminate on 31 March
2018.
While Newell Brands has given notice to terminate the DA and MA,
Sprue will continue to purchase and source products under both
agreements until 31 March 2018 and honour its contractual
commitments.
Appointment of two new strategic manufacturing partners
As announced on 31 March 2017, the Company entered into a
manufacturing and supply agreement ("MSA") with Flex to source a
range of smoke and heat alarms and accessories from Flex's facility
in Tczew, Poland.
Also on 31 March 2017, the Company entered into an additional
supply agreement with a leading manufacturer based in the Far East
to purchase alternatives to the BRK products.
Resignation of a Non-Executive Director
On 31 March 2017, the nominated Non-Executive Director of Newell
Brands, Tom Russo, resigned with immediate effect from the Board by
mutual agreement.
17. Date of approval of financial information
The financial information covers the period 1 January 2016 to 31
December 2016 and the results were approved by the Board on 3 April
2017. Further copies of the financial information can be accessed
on the Sprue Aegis plc investor relations website,
www.sprueaegis.com.
Board of Directors
Executive
G Whitworth Executive
Chairman
N Smith Group Chief Executive
J Gahan Group Finance
Director
N Rutter Chief Product
Officer
Non-executive
W Payne
A Silverton
T Russo (resigned 31 March
2017)
J Shepherd
Corporate Directory
REGISTERED NUMBER SECRETARY
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SHAREHOLDER ENQUIRIES
Any shareholder with enquiries should, in the first instance,
contact our registrar, Neville Registrars, using the address
provided in the Corporate Directory.
SHARE PRICE INFORMATION
London Stock Exchange Alternative Investment Market (AIM)
symbol: SPRP
Information on the Company's share price is available on the
Sprue Aegis investor relations website at www.sprueaegis.com
INVESTOR RELATIONS
Vanguard Centre
Sir William Lyons Road
Coventry
CV4 7EZ
England
Telephone: 024 7771 7700
Email: info@sprueaegis.com
Website: www.sprueaegis.com
FINANCIAL CALENDAR
Financial year end 31 December
2016
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Full year results announced 4 April 2017
------------------------------- -------------
Annual General Meeting 15 June 2017
------------------------------- -------------
Record date for final dividend 23 June 2017
------------------------------- -------------
Final dividend payment 7 July 2017
------------------------------- -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUMWCUPMGBW
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April 04, 2017 02:00 ET (06:00 GMT)
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