TIDMFA.
RNS Number : 3124G
FireAngel Safety Technology Group
29 March 2022
29 March 2022
FireAngel Safety Technology Group plc
('FireAngel', the 'Group' or the 'Company')
Final Results
FireAngel (AIM: FA.), a leading developer and supplier of home
safety products, announces its audited final results for the year
ended 31 December 2021.
Operational headlines
-- Demand, especially for connected products, was much higher
than the Company's ability to supply, which has continued in the
first few months of 2022
-- The Company was pleased with its revenue growth through 2021
(2021: GBP43.5 million, 2020: GBP39.9 million)
-- Severe supply chain disruption and inflation in H2,
especially in Q4, of 2021 prevented an even better outcome for the
year
-- 2021 started to benefit from the delivery of the gross margin
improvement plan with gross margin of 23.2% (2020: 19.8%)
-- Valuable agreement announced on 28 March 2022 with Techem
Energy Services GmbH ("Techem") to develop a new generation smoke
alarm primarily for the German market. Completion of phase 1 of
this project, which has been paid for by Techem, has enabled the
transition to a second development phase under an extended
agreement with Techem
Financial headlines
-- Revenue GBP43.5 million (2020: GBP39.9 million)
-- Underlying LBITDA(1) GBP0.1 million (2020: LBITDA(1) GBP1.5 million)
-- Underlying operating loss(2) GBP3.4 million (2020: underlying
operating loss(2) GBP5.4 million)
-- Gross profit(3) GBP10.1 million (2020: GBP6.2 million);
adjusted gross profit(3) GBP10.1 million (2020: GBP7.9 million)
-- Gross margin 23.2% (2020: 15.9%) on track with gross margin
improvement plan; adjusted gross margin(3) 23.2% (2020: 19.8%)
-- Non-underlying items totalling GBP0.3 million before tax (2020: GBP3.6 million)
-- Underlying loss before tax(4) GBP3.4 million (2020:
underlying loss before tax(4) GBP5.7 million)
-- Loss before tax GBP3.7 million (2020: loss before tax GBP9.3 million)
-- Basic and diluted EPS (2.0p) (2020: (7.7p))
-- Net cash (before lease obligations) at 31 December 2021
GBP0.1 million (cash GBP3.3 million, invoice discounting drawdowns
GBPnil, Coronavirus Business Interruption Loan Scheme ("CBILS")
loan GBP3.2 million) (2020: net debt (before lease obligations)
GBP3.7 million)
-- Equity fundraising of GBP9.0 million (net of expenses) and
refinancing of Coronavirus Large Business Interruption Loan Scheme
("CLBILS") into CBILS to generate an additional GBP1.7 million of
cash strengthened the balance sheet in support of the Company's aim
to improve margins substantially
-- Financial performance improved compared with 2020 and in line with market expectations
(1) Underlying LBITDA of GBP0.1 million is loss before tax,
depreciation and amortisation, finance costs and non-underlying
items (2020: underlying LBITDA of GBP1.5 million).
(2) Underlying operating loss of GBP3.4 million is before
non-underlying items (2020: underlying operating loss of GBP5.4
million before non-underlying items). A reconciliation of
'alternative performance measures' to measures prescribed in
financial standards is given in the Performance Review section
below.
(3) Adjusted gross profit of GBP10.1 million is stated before
non-underlying items (2020: adjusted gross profit GBP7.9 million).
Adjusted gross margin 23.2% is adjusted gross profit as a
percentage of revenue, (2020: adjusted gross margin 19.8%).
(4) Underlying loss before tax of GBP3.4 million is before
non-underlying items (2020: underlying loss before tax of GBP5.7
million before non-underlying items)
Post-balance sheet events and outlook
-- The Company announced on 28 March 2022 the formal conclusion
of the agreement with Techem for development phase 2, with a
detailed specification to develop a new generation alarm ("NGSA")
primarily for the German market
-- Delivering a step change in gross margin enhancement from Q2 2022 onwards as planned
-- A materially positive EBITDA forecast for 2022
John Conoley, Executive Chairman of FireAngel, commented:
"We have made excellent progress in 2021 against our primary
goal, to drive margin expansion and, in doing so, return to
profitability, with the aim of becoming cash generative at the end
of 2022. Despite seeing further impact from the pandemic and its
strong knock-on effects to global supply chains, I am pleased with
how the Group has performed."
"Our team has done an excellent job of navigating a difficult
year. Our steadfast focus on our strategic initiatives, the
significant deals signed and our successful fundraising of GBP9.8m,
(before expenses), in April have provided us with a strong platform
for further improvement. Meanwhile, the investments we have made to
improve efficiencies and counter supply chain issues going forward
leave us well positioned for growth, and importantly for further
margin expansion in the immediate, medium and long term."
Investor webinar
The management team will be hosting a live presentation with
Q&A for retail investors at 16:15 BST today. The presentation
can be accessed via the Investor Meet Company platform. Interested
investors can sign up to Investor Meet Company for free and add to
meet FIREANGEL SAFETY TECHNOLOGY GROUP PLC via the link:
https://www.investormeetcompany.com/fireangel-safety-technology-group-plc/register-investor
For further information, please contact:
FireAngel Safety Technology Group plc 024 7771 7700
John Conoley, Executive Chairman
Zoe Fox, Chief Finance Officer
Shore Capital (Nominated adviser and
joint broker) 020 7408 4050
Tom Griffiths/David Coaten
Singer Capital Markets (Joint broker) 0207 496 3000
Rick Thompson/Alex Bond
Houston (Financial PR) 0204 529 0549
Kate Hoare/Joe Burgess
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
Strategic review
Executive Chairman's statement
Overview
We entered 2021 with strong momentum and, despite it being
another unprecedented year shaped by the COVID-19 pandemic and its
knock-on effects to global supply chains, the Board is pleased with
how FireAngel has navigated these. The Company delivered improved
financial performance through ongoing careful management of costs
and changes to pricing. We are grateful for the support received
from shareholders both old and new in the equity fundraising
undertaken in April 2021, which raised GBP9.8 million (before
expenses) and I am pleased that we have been able to deliver
against our commitments made at that time.
Our primary goal at the start of 2021 was to drive margin
expansion and, in doing so, return to profitability and become cash
generative by the end of 2022. This goal remains unchanged. We have
made excellent progress through the improvement of underlying gross
margin from 19.8% to 23.2%, delivering next generation products and
connected homes technology, whilst maintaining our leading position
in each of our UK Retail, UK Trade and International business
units. I t has been encouraging to see the excellent progress,
providing a strong platform for further improvement.
In April 2021, we were delighted to sign a strategically
important partnership agreement with Techem Energy Services GmbH
("Techem"), a leading service provider for green and smart
buildings and a major supplier of technical solutions to the
European rental market. Under the agreement, FireAngel is
developing a new generation smoke alarm initially for the German
rental market. This agreement is expected to be transformational
for the Group and financial contributions are expected from 2021
and to be significant from 2024, especially, from FY 2025
onwards.
We saw further relevant legislation announced in 2021 that is
expected to take effect in 2022. Crucially, the Department for
Levelling Up, Housing and Communities announced in November 2021
changes that would require carbon monoxide alarms to be fitted in
all UK rental properties with gas boilers or fires, as part of
social housing reforms intended to improve standards. Precise
details of timing and commitments are still under consideration,
but we would expect to step up to meet any additional opportunity
for the Company during the remainder of 2022 and 2023.
During the lockdowns of each of the last two years, as an
essential business, we successfully maintained a balance between
colleagues working from home and attending our sites in Coventry
and Gloucester in person. There were no days in any lockdown where
at least some of FireAngel' s staff did not attend the Company's UK
locations in person to maintain the Company's mission to protect
and save lives. However, we did not fully overcome the effects of
product shortages which impacted customer satisfaction during the
fourth quarter of 2021, and in the earlier part of this year. We
experienced daily and unpredictable changes in expected supply,
which stretched our teams and processes, and caused frustration to
some customers for which I am truly sorry. The overall ledger is
much to the credit of our colleagues and the Company, whose
goodwill and commitment in the face of so many headwinds enabled us
to still ship products to hundreds of thousands (if not millions)
of customers last year.
I remain proud of the Company and of its staff for their
achievements last year, and I thank my colleagues sincerely for
their commitment.
Financial performance
The revenue outturn for 2021 was GBP43.5 million, an increase
from GBP39.9 million in the prior year, which, whilst in line with
our expectations, was restricted due to the effects of COVID-19 on
the global supply chain. The gross margin for the year at 23.2%
(2020: 15.9%) benefitted from planned internal improvements, but
there were some additional product costs caused by the shortage of
components.
The Group's balance sheet was further strengthened in the year
through the refinancing of the Coronavirus Large Business
Interruption Loan Scheme (" CLBILS") loan and replacing it with a
Coronavirus Business Interruption Loan Scheme (" CBILS")
introducing a further GBP1.7 million of cash in the year and, as
set out above, raising GBP9.0 million (net of expenses) through an
issue of new equity.
With gross margin and underlying operating profit above both the
2019 and 2020 comparables, several strategically important deals
signed over the year, and the successful fundraising referred to
above strengthening the Group's balance sheet and providing working
capital for the next phase of our development, we are extremely
pleased with our performance over the year. We believe that
FireAngel is in an excellent position to capitalise on growth
opportunities going forward.
Strategy
Our medium-term objectives remain unchanged from last year and,
as has been previously outlined, the core target for the business
is to continue improving gross margin year-on-year, by focusing on
three key strands:
-- Migrating to higher value activities and cut out lower value, lower impact activities;
-- Commercialising our investment in Connected technology; and
-- Streamlining our value chain of end-to-end administrative and production activities.
We are pleased with the progress made against each of these
objectives.
The funds raised from the equity fundraising in April 2021 have
been deployed to improve efficiencies and capabilities across the
business, reducing costs, and further expanding our gross margin as
part of the above strategic objectives. The funds have also been
particularly helpful as we seek to mitigate the current global
supply chain challenges and allowed us to forward procure more
components.
Strategic progress
Moving to Higher Value Activities
As we confirmed in 31 January 2022's trading update, the Group's
project to source entry level products, which are uneconomic to
design and produce in Europe, from an existing Chinese partner, has
been successful. Deliveries of these products to customers started
this month and are expected to be margin enhancing from Q2 2022.
This newer product set has, to date, not been materially affected
by component issues.
In April 2021, we announced our agreement with Techem, as
outlined above. Following a GBP1.4 million fee for use of our IP
payable over the development period, a royalty fee per product will
be payable to FireAngel, with 7 million devices forecast to be
produced once manufacturing of the new alarms begins in 2024.
We are scaling up our activities to deliver on this agreement,
with the second phase (Development Phase 2) having commenced in
late 2021. Billing originally commenced in Q2 2021 with
approximately GBP1.0 million having been invoiced by the Company in
the year for development work and for use of existing Company IP in
the project.
Commercialising connected technology
In February 2021, we announced an agreement with a social
housing customer in Scotland to provide approximately 4,000
properties with connected smoke, heat, and carbon monoxide alarms.
This contract was of strategic importance as we believe we can be a
key supplier of safety equipment for new homes and see excellent
potential in supplying the social housing market, particularly
given the UK Government's target of building 300,000 new homes each
year.
Our expertise in connected technology was also a material factor
in securing our partnership with Techem. The world of green and
smart buildings is a connected world and we have long been pioneers
in connected alarms for safety.
Overall, during the year, and, in particular, the latter part,
we could not meet demand for connected products in all sectors due
to the supply chain issues and component shortages referred to
above. In addition, in 2021, we absorbed inflation which, despite
the improving gross margin overall, restricted our gross margin
performance. Good performances in many areas were in spite of the
issues faced.
We were pleased to announce that we had been re-selected as one
of the official suppliers of smoke alarms and associated products
to the UK Fire and Rescue Service ("UK F&RS") for four years.
This contract was awarded in March 2021 and, with a greater focus
on connected products, was testament to the quality and reliability
of FireAngel's products as the selection process was concluded
following rigorous price, quality, and social impact
evaluations.
In 2020, we sold approximately 500,000 connected alarms. Despite
our supply problems in 2021, we still managed to sell 665,000
connected alarms, a 33% increase on the preceding year. I am
pleased with that of course, but we had unsatisfied demand for far
more, especially in UK Retail and UK Trade.
In 2021, we unveiled our new Connected Homes technology, the
"New Generation Cellular Gateway", which will enable predictive
safety data to be passed onto social housing landlords, meaning
that they are better able to offer protective and preventative
measures for their tenants. We expect to produce this in volume in
Q3 of this year.
Our initial trials with such initiatives have either been
delayed or knocked off course by the immediate imperatives of our
own business these past two years, and by the COVID-19 related
priorities and/or concerns in turn of our customers. However, we
expect to be able to regain momentum this year, and we remain
confident that safety and care data will be an important
contributor to our success in the medium to long term.
At the end of 2021, there were 32,000 devices registered on our
mobile app, showing continued strong growth in the uptake of these
products and it is pleasing to see that our customers are using
them to their full potential.
Value Chain Improvements
We continued to make improvements to the Group's value chain
over the course of the year, particularly against our strategy to
review the economic potential of our Stock Keeping Units ("SKUs").
This review highlighted that several of our lower value alarms were
uneconomic and led us to reduce our SKUs by a third. The aim has
been to reduce complexity and increase efficiency, while lowering
risks on stock obsolescence.
Efficiencies across the business have been improved from
increasing our electronic data interchange ("EDI") capabilities to
development of our IT and software systems to provide automated
improved processes and communications and reducing the need to
increase headcount in line with the increased volumes of the
business. The move over to cardboard packaging for our products has
not only removed 10 tons of plastics waste from the supply chain in
2021, but also added 1% to our gross margin for 2021 and in future
years.
Environmental, Social & Governance ("ESG")
As a fire safety focused technology company, Environmental,
Social and Governance ("ESG") issues are already at the heart of
our business. In order to put a more deliberate focus on the
Company's ESG activities, we have established an ESG Committee. The
committee, which is chaired by me, has been put in place to provide
oversight and measurement of our ESG related activities across the
business.
The committee is comprised of employees at various levels from
across the business. Whilst we will develop a longer-term journey,
we have decided on some clear initial goals for this year which
include carbon footprint measurement and commencing implementation
of the environmental standard ISO 140001. We will update on
progress in future results announcements.
Management team
The Group was delighted to promote Zoe Fox in April 2021 to the
Board as Chief Finance Officer having been Company Secretary since
2019 and Finance Director of the Group's principal subsidiary since
2010. Prior to this, she was Finance Director of BRK Brands Europe
Limited, part of the Jarden Corporation. Jon Kempster who was the
Company's interim CFO from December 2020 until April 2021 remains
on the Board as a Non-Executive Director. Jon is a chartered
accountant whose career has included various CFO plc Board
positions. Jon's broad financial knowledge and experience bring
additional support and input to the Board.
Outlook
We are confident that the middle part of this year will see a
step change in gross margin performance, as planned. We have
recently begun to ship our new entry level products, a project we
initiated in 2020, which will add to the gross margin performance
of the overall business beginning Q2 2022. We have reviewed our
pricing arrangements, particularly to offset the strong
inflationary pressures, and our actions here will begin to have an
impact as Q2 2022 progresses.
With the return of an adequate supply of components and
products, we expect to see a continuation of the shift of our
product mix towards higher margin connected products. We will also
continue to put measures in place to safeguard our growth and meet
the strong demand we are seeing for our connected products, while
developing initiatives focused on growing the core business.
We are excited to have begun the second and major phase of our
partnership with Techem. This is a transformational opportunity,
from which I expect the Company and its shareholders will derive
significant value. We will continue to update investors on this
project's progress as we cross key milestones.
We are in an improved financial position and are well
capitalised following our April 2021 fundraising and remain
comfortable with market expectations for FireAngel to be materially
EBITDA positive in 2022. We will continue to support our near-term
financial performance with cost mitigations and price adjustments
where necessary or prudent to position ourselves to take full
advantage of future growth opportunities.
Whilst we do not underestimate the current challenges and
uncertainties facing us, we believe that our business model, the
strong demand for our products, our ability to adapt to changing
circumstances and the increasing regulation around safety
standards, leaves us in a good position to continue to grow and
prosper.
Underpinning our excellent progress is our proposition to
protect and save lives with innovative, cutting-edge home safety
technology. We are excited about the potential in our business
pipeline and believe that we are well placed to deliver attractive
growth and shareholder returns.
John Conoley
Executive Chairman
28 March 2022
Performance review
Group financial results
Overview
2021 started with strong momentum in sales which continued
through the year, but the impact of COVID-19 on the global supply
chain reduced the ability to achieve all of the Group's full sales
potential, especially in H2. Excellent progress was made within the
year in the Company's gross margin improvement plan with improved
margins starting to be achieved across all business units.
Underlying Group performance
2021 2020
Before Non-underlying Total Before Non-underlying Total
non-underlying items non-underlying items
items items
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 43.5 - 43.5 39.9 - 39.9
Cost of sales (33.4) - (33.4) (32.0) (1.7) (33.7)
---------------- --------------- ------- ---------------- --------------- -------
Gross profit 10.1 - 10.1 7.9 (1.7) 6.2
Operating expenses (13.6) (0.3) (13.9) (13.6) (1.9) (15.5)
Other operating
income 0.1 - 0.1 0.3 - 0.3
---------------- --------------- ------- ---------------- --------------- -------
Operating loss (3.4) (0.3) (3.7) (5.4) (3.6) (9.0)
---------------- --------------- ------- ---------------- --------------- -------
Add back:
Depreciation
and amortisation 3.3 3.9
---------------- ----------------
Underlying LBITDA (0.1) (1.5)
---------------- ----------------
Total revenue increased by 9.0% to GBP43.5 million (2020:
GBP39.9 million) resulting in an underlying LBITDA(1) of GBP0.1
million (2020: GBP1.5 million). The adjusted gross profit(2) was
GBP10.1 million (2020: GBP7.9 million), which represented an
adjusted gross margin(2) of 23.2% (2020: 19.8%). The underlying
operating loss(3) was GBP3.4 million (2020: underlying operating
loss of GBP5.4 million). The underlying loss before tax(4) was
GBP3.4 million (2020: underlying loss before tax GBP5.7
million).
(1) Underlying LBITDA of GBP0.1 million is loss before tax,
depreciation and amortisation, finance costs and non-underlying
items (2020: underlying LBITDA of GBP1.5 million).
(2) Adjusted gross profit is stated before non-underlying items.
Adjusted gross margin is adjusted gross profit as a percentage of
revenue.
(3) Underlying operating loss of GBP3.4 million is before
non-underlying items (2020: underlying operating loss of GBP5.4
million before non-underlying items)
(4) Underlying loss before tax of GBP3.4 million is before
non-underlying items (2020: underlying loss before tax of GBP5.7
million before non-underlying items)
The key drivers for changes in revenue and adjusted gross margin
are detailed above in the Executive Chairman's statement.
Overall cash inflow in the year was GBP1.8 million (2020:
outflow of GBP0.6 million) and net cash (before lease obligations)
at 31 December 2021 was GBP0.1 million. This compared with net debt
(before lease obligations) of GBP3.7 million at 31 December 2020.
The net movement of GBP3.8 million comprised an increase in cash
and cash equivalents of GBP1.8 million. There was a net decrease in
bank debt of GBP1.9 million through an equity fundraise of GBP9.0
million (net of fees), the repayment of GBP2.5 million under the
Company's invoice discounting facility, a repayment of GBP2.6
million of loans under the Coronavirus Large Business Interruption
Loan Scheme ('CLBILS') and a drawdown of GBP3.2 million of loans
under the Coronavirus Business Interruption Loan Scheme
('CBILS').
Income statement
Revenue by business unit
Revenue split between each of the Group's business units and
Pace Sensors was as follows:
2021 2020
2021 2020 Inc/(dec) Inc/(dec) Proportion Proportion
GBPm GBPm GBPm % % %
UK Trade 11.1 8.0 3.1 39% 26% 19%
UK Retail 15.6 16.6 (1.0) (6%) 36% 42%
UK F&RS 2.4 2.9 (0.5) (17%) 5% 7%
UK Utilities & Leisure 0.8 0.9 (0.1) (11%) 2% 3%
----- ----- ---------- ---------- ----------- -----------
Total sales in the UK 29.9 28.4 1.5 5% 69% 71%
International 10.9 9.2 1.7 18% 25% 23%
European Partner 1.0 - 1.0 N/A 2% -
Pace Sensors 1.7 2.3 (0.6) (26%) 4% 6%
----- ----- ---------- ---------- ----------- -----------
Total revenue 43.5 39.9 3.6 9.0% 100% 100%
----- ----- ---------- ---------- ----------- -----------
As of 1 January 2021, the Company reassigned a number of
customers to different business units. Four customers with a
combined revenue of GBP0.4 million in 2020 which were previously
reported within the Utilities business unit are now reporting
through the Trade business unit. The 2020 sales comparatives have
been adjusted accordingly.
Overall, the Group's revenue increased by 9.0% to GBP43.5
million (2020: GBP39.9 million). The GBP3.6 million increase in
sales was largely due to stronger international sales, legislation,
increased connected sales and relaxing of COVID-19 lockdown
restrictions .
UK Trade sales, one the higher margin business units, had a 39%
increase on prior year, H1 2021 saw strong performance across UK
Trade as lockdown restrictions were lifted and the market fully
reopened, demand continued into H2, but due to supply chain
constraints could not be completely fulfilled. New business was won
and an uplift in sales was seen as a result of Scottish
legislation.
UK Retail was another business unit which had a strong start to
the year and continued with strong demand into H2 which was not all
fulfilled. Margins increased with the improved mix of Connected
sales. Sales in the full year retracted slightly by 6% but would
have outperformed 2020 sales had it not been for the supply chain
challenges in H2.
International sales were up 18% over the prior year. The impact
of the COVID-19 lockdown restrictions continued to significantly
hamper international retail sales in the earlier part of the year
but recovered in H2 with sales growing in Amazon in multiple
countries and, in particular, Benelux Trade which grew, with sales
up 47% on 2020 and 65% up on 2019 driven by Dutch legislation.
UK F&RS and UK Utilities & Leisure business units
continued to be impacted by COVID-19 with restricted access to
properties and COVID-19 priorities for the customers. The Group was
also pleased to announce in March 2021 that it had been re-selected
as one of the official suppliers of smoke alarms and associated
products to the UK F&RS , which continues FireAngel's long
standing relationship with UK F&RS and is the second time the
Group has been included in such a framework agreement.
As set out in the Chairman's statement above, the increase in
demand for our products was not met in full during H2 2021 as the
global supply chain challenges impacted our ability to supply.
However, the Group was able to sell more Connected alarms in 2021
than in the previous two years for UK Trade, UK Retail,
International, UK F&RS, and Utilities & Leisure, which
improve the Group's margins.
The revenue of GBP1.0 million from our European partner, Techem,
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. To determine the correct accounting treatment
the Group has looked at the individual elements of the contract and
has concluded that there is one central non-distinct performance
obligation. See note 5 for further details.
Revenue at Pace Sensors, the Group's manufacturer of CO sensors,
decreased to GBP1.7 million (2020: GBP2.3 million), reflecting the
higher stock levels in the supply chain.
Gross profit and gross margin
Adjusted gross profit increased to GBP10.1 million (2020: GBP7.9
million) and represented an improved adjusted gross margin of 23.2%
(2020: 19.8%).
During the year, overall gross profit was impacted by additional
purchase price variances caused from the global supply chain
challenges, predominantly increasing costs due to securing
components on the open market. This added an additional GBP0.8
million to the cost of sales. The non-underlying costs for the year
within gross margin was a small net credit of GBP22,000.
Non-underlying items impacting gross profit in the prior year
amounted to GBP1.7 million.
The overall gross profit increased from GBP6.2 million to
GBP10.1 million, representing a gross margin of 23.2% (2020:
15.9%). The increase in gross profit was largely due to the
reduction in non-underlying items to a credit of GBP22,000 (2020:
charge of GBP1.7 million), described below, the increase in revenue
and the progress made in improving the Group's gross profit by
delivering connected technology and moving to higher value
activities as part of the Company's gross margin improvement
plan.
Exchange rates
During the year, on average the value of sterling against the US
dollar remained largely the same with the peak in May and June 2021
where sterling strengthened against the US Dollar by 3% from the
average rate for the year. Sterling strengthened against the Euro
with a 6% increase over the course of the year. The Group has a
forward hedging policy, which aims to mitigate the risk of currency
fluctuations by locking into current rates for future periods on a
set percentage of expected future currency flows. The weakening or
strengthening of sterling against the US dollar or Euro during the
year increases or decreases the committed sterling cost of forward
contracts entered into in accordance with the Group's policy to
hedge future US dollar purchase and Euro sale requirements. This
mark-to-market decrease or increase in sterling cost is required to
be recognised in cost of sales for the year and, to the extent that
this was not mitigated, by the retranslation of other US dollar or
Euro denominated monetary items. The Group had a GBP1.0 million
positive impact on the gross margin for the year, in 2020 there was
a GBP0.3 million increase in the sterling cost which was
detrimental to the gross profit.
Overheads
The Group's overhead costs comprise of the distribution and
administrative costs of running the business. Excluding
non-underlying items totalling GBP0.3 million (2020: GBP1.9
million), further details of which are given below, and
depreciation and amortisation of GBP3.3 million (2020: GBP3.9
million), overheads of GBP10.3 million were 6.1% higher than the
prior year's GBP9.7 million, due largely to the increased
distribution costs impacted by global supply chain challenges and
the continued investment in people to improve processes across the
organisation and to deliver the Company strategic objectives.
Total overhead costs amounted to GBP13.9 million (2020: GBP15.5
million).
Non-underlying items in 2021
Non-underlying costs totalling GBP0.3 million were incurred in
the year as follows:
Within cost of sales:
Included a credit of GBP22,000 which included as follows:
-- An amount of GBP66,000 was expensed in relation to the
settlement of warranty issues with certain distributors (2020:
GBP0.3 million)
-- The Group was able to sell stock lines that had previously
been impaired which resulted in a non-underlying credit of
GBP88,000
Within operating expenses:
-- Share-based payment charges of GBP 0.3 million were incurred
during the year (2020: GBP0.2 million)
Non-underlying items in 2020
Non-underlying costs totalling GBP3.6 million were incurred in
the year as follows:
Within cost of sales:
-- Provision for warranty costs: the FireAngel battery warranty
provision, an isolated historical issue relating to a third-party
supplier first identified in April 2016, was increased by GBP1.2
million to reflect an increase in the terminal volume of units
expected to be impacted by the issue based on the level of returns
currently being seen; in addition, an amount of GBP0.3 million was
expensed in relation to the settlement of warranty issues with
certain distributors.
-- Stock impairment and disposal costs: GBP0.2 million net was
provided in the year as a result of a further review of product
lines and future development plans in line with the Group's
strategy to become a more technology-led connected home solutions
provider. This comprised gross impairment charges of GBP0.4 million
offset by proceeds of GBP0.2 million from stock previously
impaired.
Within operating expenses:
-- Intangible capitalised development assets of GBP1.4 million
were impaired during the year as a result of a thorough review of
product lines and future development costs.
-- Tangible assets of GBP0.2 million were impaired during the
year as a result of a thorough review of tooling required for
ongoing product lines.
-- Restructuring costs of GBP0.1 million were incurred in the year.
-- Share-based payment charges of GBP0.2 million were incurred during the year.
Result for the year
The Group's underlying LBITDA for the year amounted to GBP0.1
million compared with underlying LBITDA of GBP1.5 million in
2020.
The underlying operating loss for the year amounted to GBP3.4
million compared to an underlying operating loss of GBP5.4 million
in 2020. After taking account of non-underlying items of GBP0.3
million (2020: GBP3.6 million) and finance charges of GBPnil (2020:
GBP0.3 million) as a result of interest on borrowings in the year,
the Group reported a loss before tax of GBP3.7 million (2020: loss
before tax GBP9.3 million).
The Group booked a tax credit of GBP0.4 million (2020: tax
credit of GBP0.6 million) due largely to the recognition of tax
losses and the surrender of taxable losses for a research and
development tax credit.
Basic and diluted EPS for the year was a loss of 2.0 pence per
share (2020: loss of 7.7 pence per share).
Statement of financial position
The net assets of the Group amounted to GBP20.2 million at 31
December 2021 (2020: GBP14.2 million) and can be summarised as
follows:
2021 2020
GBPm GBPm
Goodwill 0.2 0.2
Plant and equipment 3.3 4.3
Capitalised development costs 11.8 11.7
Purchased software costs 1.6 2.0
------ ------
Non-current assets 16.9 18.2
------ ------
Net cash balances 3.3 1.5
Loans and borrowings (3.2) (5.2)
------ ------
Net cash / (debt) 0.1 (3.7)
Lease liabilities (1.0) (1.4)
Net working capital 5.0 3.8
Net tax asset (including deferred tax) 0.5 0.7
Net derivative financial assets/ (liabilities) 0.3 (0.7)
Warranty provision (1.6) (2.7)
------
Net assets 20.2 14.2
------ ------
Non-current assets at 31 December 2021 amounted to GBP16.9
million compared with GBP18.2 million at 31 December 2020. The most
significant components of this were capitalised development costs,
with a net book value of GBP11.8 million, plant and equipment of
GBP3.3 million and purchased software costs of GBP1.6 million.
Capitalised development assets of GBP0.1 million were impaired
during the year as a result of a review of product lines and future
development costs.
Total capital expenditure (excluding right of use assets)
decreased to GBP2.0 million compared to GBP2.8 million in 2020. Of
this total, GBP1.5 million represented capitalised development
expenditure to further enhance the Group's connected homes and
wider technology (2020: GBP2.6 million). All research and
development costs associated with the development of the new
generation smoke alarm for Techem was charged to the customer.
Total capital expenditure of GBP2.0 million (2020: GBP2.8
million) compares with depreciation, amortisation and impairment
charges totalling GBP3.3 million (2020: GBP5.4 million).
Working capital increased by GBP1.2 million to GBP5.0 million at
31 December 2021. While stock decreased by GBP2.9 million to GBP3.7
million (2020: GBP6.6 million) at 31 December 2021, the build-up of
stock was hindered due to the ongoing effect of COVID-19 impacting
the global supply chain thereby reducing our supply of stock from
some suppliers and the Company also saw the benefits on the stock
of the value chain improvements of reducing the SKU numbers. Trade
and other receivables decreased by GBP0.7 million to GBP9.4 million
(2020: GBP10.1 million) as a result of reduced revenue in the final
quarter of the year due to supply chain challenges resulting in
lower stock being available for sale in the last few months of the
year. In the year, average debtor days decreased from 62 to 53 due
to a change in the mix of sales and lower UK Retail sales as a
proportion of the total revenue in Q4 2021.
Trade and other payables decreased by GBP4.7 million to GBP8.1
million (2020: GBP12.8 million). Average creditor days reduced
significantly to 21 days (2020: 72 days) due to the increased
pressure to support our manufacturing partners with extended
working capital exposure from longer component lead times resulting
in increased credit exposure in addition to purchasing components
on the open market with minimal credit terms.
Net tax assets at 31 December 2021 amounted to GBP0.4 million
(2020: GBP0.7 million) and comprised a current tax asset of GBP0.4
million (2020: GBP0.7 million), deferred tax assets of GBP3.1
million (2020: GBP2.4 million) and deferred tax liabilities of
GBP3.1 million (2020: GBP2.4 million). Deferred tax assets reflect
temporary timing differences in the treatment for tax and
accounting of the Group's trading losses and share-based payments
charge. Deferred tax liabilities largely reflect timing differences
in the treatment of accelerated research and development tax
credits on product development costs.
The Group's warranty provision at 31 December 2021 amounted to
GBP1.6 million (2020: GBP2.7 million) of which GBP1.0 million is
expected to be utilised within twelve months of the balance sheet
date. This provision predominantly covers the expected costs of
replacing smoke alarm products over the next two to three years
where an issue in certain batteries provided by a third-party
supplier, announced in April 2016, may cause a premature low
battery warning chirp. While the utilisation of the provision has
broadly tracked to the revised 31 December 2020 estimates, the
amounts provided are the Board's best estimate of the ongoing
liability.
Cash
The Group had net cash (before lease obligations) (1) of GBP0.1
million at 31 December 2021 (2020: net debt (before lease
obligations) (1) GBP3.7 million). The movement in net debt (before
lease obligations) during the year is reflected in the statement of
financial position as follows:
GBPm
Increase in cash balances
and net cash inflow (1.8)
Reduction of invoice discounting
drawdown (2.5)
Repayment of CLBILs (2.6)
Drawdown of CBILS loan 3.2
------
Reduction in net debt
(before lease obligations) (3.7)
------
The net cash inflow of GBP1.8 million in the year is summarised
in the table below. The most significant non-operating cash flow
items include the costs of the warranty provision and other
non-underlying items totalling GBP1.3 million, capital expenditure
of GBP2.0 million (as described above), the draw down on the
Coronavirus Business Interruption Loan Scheme ("CBILS") loan of
GBP3.2 million and the repayment of the Coronavirus Large Business
Interruption Loan Scheme ("CLBILS") of GBP2.6 million and the cash
flows in relation to the equity fundraising described below.
In March 2021, the Group refinanced its existing CLBILS . As the
Group's revenue dropped below GBP45.0 million, the CLBILS (which
had reduced to GBP2.0 million at the end of March 2021) was
refinanced under the CBILS with HSBC UK. The new loan of, in
aggregate, GBP3.7 million ("New Loan") comprises a CBILS loan of
GBP3.2 million and an additional Receivables Finance CBILS of
GBP0.5 million. The New Loan, which was used to partially to pay
off the balance of the CLBILS, has a term of 6 years with the first
year being free of interest and capital repayments and an interest
rate thereafter of 3.99 per cent. over the Bank of England's base
rate. While the full GBP3.2 million CBILS loan was drawn down in
full in March 2021, the GBP0.5 million additional Receivables
Finance CBILS as at the date of this announcement has not been
drawn on. The Group maintains its existing Invoice Discounting
Facility of GBP7.5 million, which at 31 December had not been drawn
on.
In April 2021, the Group raised GBP9.8 million (gross) through
the issue of 54,444,444 new ordinary shares of 2p nominal value at
an issue price of 18p per share. Share issue expenses amounted to
GBP0.8 million. The net proceeds of GBP 9.0 million were to provide
the Group with the resources to deliver the strategy and return to
profitability.
2021 2020
GBPm GBPm
Underlying operating loss(2) (3.4) (5.4)
Depreciation and amortisation charges 3.3 3.9
(Increase)/ decrease in working capital (1.0) 2.1
Decrease in fair value of derivatives (1.0) 0.3
(Used by)/from operations before non-underlying
payments (2.1) 0.9
Cash cost of warranty provision and other
non-underlying items (1.3) (2.3)
Cash used by operations (3.4) (1.4)
Interest paid (net) (0.1) (0.3)
Taxation received 0.6 0.7
Capital expenditure (2.0) (2.8)
Proceeds from share issue (net) 9.0 5.5
(Repayment) of invoice finance (2.5) (4.4)
Drawdown of loan 3.2 3.2
Repayment of loan (2.6) (0.6)
Loan restructuring costs - -
Lease payments (0.4) (0.5)
Net cash flow 1.8 (0.6)
------ ------
(1) Net cash (before lease obligations) in 2021 of GBP0.1
million is calculated as cash and cash equivalents, loans and
borrowings and invoice discounting facilities (2020: net debt
(before lease obligations): GBP3.7 million)
(2) Underlying operating loss in 2021 of GBP3.4 million is
before non-underlying items (2020: underlying operating loss of
GBP5.4 million before non-underlying items).
Use of non-GAAP financial performance measures
Certain disclosures and analyses set out in this announcement
include measures, which are not defined by generally accepted
accounting principles ('GAAP') under international accounting
standards in conformity with the Companies Act 2006. We believe
this information, along with comparable GAAP measurements, is
useful to investors. Management uses these financial measures,
along with the most directly comparable GAAP financial measures, in
evaluating our operating performance. Non-GAAP measures should not
be considered in isolation from, or as a substitute for, financial
information presented in compliance with GAAP.
In the following table, we provide a reconciliation of this and
other non-GAAP measures, as defined in this Performance Review,
relevant GAAP measures:
Underlying profit measures
2021 2020
GBPm GBPm
Adjusted gross profit
Reported gross profit 10.1 6.2
Non-underlying items: -
- Provision for warranty costs 0.1 1.5
- Provision against stock and disposal
costs (net) (0.1) 0.2
------- ------
Adjusted gross profit 10.1 7.9
------- ------
Adjusted gross margin percentage
Adjusted gross margin percentage is the adjusted gross profit
(as defined above) as a proportion of revenue.
2021 2020
GBPm GBPm
Underlying operating loss
Reported operating loss (3.7) (9.0)
Non-underlying items:
- Provision for warranty costs 0.1 1.5
- Provision against stock and disposal
costs (net) (0.1) 0.2
- Restructuring costs - 0.1
- Impairment of intangible assets - 1.4
- Impairment of tangible assets - 0.2
- Share-based payments charge 0.3 0.2
------- ------
Underlying operating loss (3.4) (5.4)
------- ------
2021 2020
GBPm GBPm
Underlying loss before tax
Reported loss before tax (3.7) (9.3)
Non-underlying items:
- Provision for warranty costs 0.1 1.5
- Provision against stock and disposal
costs (net) (0.1) 0.2
- Restructuring costs - 0.1
- Impairment of intangible assets - 1.4
- Impairment of tangible assets - 0.2
- Share-based payments charge 0.3 0.2
------ ------
Underlying loss before tax (3.4) (5.7)
------ ------
2021 2020
GBPm GBPm
Underlying LBITDA
Reported loss before tax (3.7) (9.3)
Finance costs - 0.3
Depreciation and amortisation 3.3 3.9
Non-underlying items:
- Provision for warranty costs 0.1 1.5
- Provision against stock and disposal
costs (net) (0.1) 0.2
- Restructuring costs - 0.1
- Impairment of intangible assets - 1.4
- Impairment of tangible assets - 0.2
- Share-based payments charge 0.3 0.2
------ ------
Underlying LBITDA (0.1) (1.5)
------ ------
Net cash before lease obligations
Net cash before lease obligations is considered to be a non-GAAP
measure as it is not defined in IFRS. The most directly comparable
IFRS measure is the aggregate of loans and other borrowings
(current and non-current) and cash and cash equivalents. This is
the calculation used by the Group to measure net cash and is
calculated as the net of cash and cash equivalents, loans and
borrowings and invoice discounting facilities.
Dividend
As a result of the loss reported for the year, and consistent
with the decision not to declare an interim dividend (2020: nil
pence per share), the Directors do not recommend the payment of a
final dividend (2020: nil pence per share). The total dividend
payable for 2021 is therefore nil pence per share (2020: nil pence
per share).
Post balance sheet events
As announced on 28 March 2022 the Group successfully completed
the fully funded Development Phase 1 (DP1) of its partnership with
Techem and has now formally concluded the agreement with Techem for
Development Phase 2 (DP2), with a detailed specification. It is
expected that the development period will last until the end of
2024 and the new generation smoke alarm will be available for sale
in H2 2024. Techem has also selected the FireAngel CO sensor,
manufactured by FireAngel's CO sensor factory in Canada, to be
incorporated exclusively into the new alarm, which is expected to
significantly increase the medium-term financial opportunity for
the Group.
Zoe Fox
Chief Finance Officer
28 March 2022
Consolidated income statement
For the year ended 31 December 2021
2021 2020
Before Non-underlying Before Non-underlying
non-underlying items (note 6 ) Total non-underlying items (note 6 ) Total
items items
Note
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Revenue 4 43,472 - 43,472 39,928 - 39,928
Cost of sales (33,393) 22 (33,371) (32,032) (1,717) (33,749)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Gross profit 10,079 22 10,101 7,896 (1,717) 6,179
Operating
expenses (13,580) (280) (13,860) (13,606) (1,924) (15,530)
Other operating
income 82 - 82 291 - 291
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Loss from
operations (3,419) (258) (3,677) (5,419) (3,641) (9,060)
Finance costs 8 (33) - (33) (278) - (278)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Loss before tax (3,452) (258) (3,710) (5,697) (3,641) (9,338)
Income tax
credit 9 430 - 430 630 - 630
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Loss
attributable to
equity owners
of the Parent (3,022) (258) (3,280) (5,067) (3,641) (8,708)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Basic earnings
per share 11 (2.0) (7.7)
Diluted earnings
per share 11 (2.0) (7.7)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
All amounts stated relate to continuing activities.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
2021 2020
GBP000 GBP000
------------------------------------------------------------------------ -------- --------
Loss for the year (3,280) (8,708)
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations (net of tax) 32 (22)
------------------------------------------------------------------------ -------- --------
Total comprehensive loss for the year (3,248) (8,730)
------------------------------------------------------------------------ -------- --------
Consolidated and Company statement of financial position
As at 31 December 2021
Consolidated
Note 2021 2020
GBP000 GBP000
------------------------------------------------------------------ ---- -------- ----------
Non-current assets
Goodwill 169 169
Other intangible assets 11,825 11,738
Purchased software costs 1,625 2,059
Property, plant and equipment 3,242 4,263
Shares in subsidiaries - -
16,861 18,229
------------------------------------------------------------------ ---- -------- ----------
Current assets
Inventories 12 3,737 6,558
Trade and other receivables 9,430 10,071
Current tax asset 464 711
Derivative financial assets 291 -
Cash and cash equivalents 3,294 1,466
------------------------------------------------------------------- ---- -------- ----------
17,216 18,806
------------------------------------------------------------------ ---- -------- ----------
Total assets 34,077 37,035
------------------------------------------------------------------- ---- -------- ----------
Current liabilities
Trade and other payables (8,135) (12,834)
Lease liabilities 13 (456) (440)
Current tax liabilities - (32)
Provisions 14 (1,012) (1,491)
Invoice discounting facilities - (2,539)
Loans and borrowings 13 (480) (2,600)
Derivative financial liabilities - (693)
------------------------------------------------------------------- ---- -------- ----------
(10,083) (20,629)
------------------------------------------------------------------ ---- -------- ----------
Net current assets /(liabilities) 7,133 (1,823)
------------------------------------------------------------------- ---- -------- ----------
Non-current liabilities
Loans and borrowings 13 (2,743) (23)
Lease liabilities 13 (492) (941)
Provisions 14 (541) (1,254)
(3,776) (2,218)
------------------------------------------------------------------ ---- -------- ----------
Total liabilities (13,859) (22,847)
------------------------------------------------------------------- ---- -------- ----------
Net assets 20,218 14,188
------------------------------------------------------------------- ---- -------- ----------
Equity
Called up share capital 3,621 2,531
Share premium account 30,009 22,104
Currency translation reserve 153 121
Retained earnings (13,565) (10,568)
------------------------------------------------------------------- ---- -------- --------
Total equity attributable to equity holders of the Parent Company 20,218 14,188
------------------------------------------------------------------- ---- -------- --------
Consolidated and Company cash flow statement
For the year ended 31 December 2021
Consolidated
----------------
Note 2021 2020
GBP000 GBP000
----------------------------------------------------------------------- ---- ------- -------
Loss before tax (3,710) (9,338)
Finance expense 33 278
----------------------------------------------------------------------- ---- ------- -------
Operating loss for the year (3,677) (9,060)
Adjustments for:
Depreciation of property, plant and equipment, and right-of-use assets 1,420 1,429
Amortisation of intangible assets 1,876 2,482
Loss on disposal of non-current assets 47 -
Non-underlying items 6 258 3,641
Cash flow relating to non-underlying items (1,242) (2,287)
Decrease in fair value of derivatives (984) 264
Operating cash flow before movements in working capital (2,302) (3,531)
Movement in inventories 2,909 (479)
Movement in receivables 732 1,911
Movement in provisions - (28)
Movement in payables (4,714) 683
----------------------------------------------------------------------- ---- ------- -------
Cash used in by operations (3,375) (1,444)
Income taxes received 645 680
Net cash used in by operating activities (2,730) (764)
----------------------------------------------------------------------- ---- ------- -------
Investing activities
Capitalised development costs (1,529) (2,554)
Purchase of property, plant and equipment (434) (277)
Net cash used in investing activities (1,963) (2,831)
----------------------------------------------------------------------- ---- ------- -------
Financing activities
Repayment of loan (2,600) (600)
Drawdown of loan 3,200 3,223
Repayment of invoice finance (2,539) (4,445)
Proceeds from issue of ordinary shares (net of expenses) 8,995 5,499
Repayment of lease obligations (441) (381)
Interest paid (124) (278)
----------------------------------------------------------------------- ---- ------- -------
Net cash generated by financing activities 6,491 3,018
----------------------------------------------------------------------- ---- ------- -------
Net increase/ (decrease) in cash and cash equivalents 1,798 (577)
Cash and cash equivalents at beginning of year 1,466 2,062
Non-cash movements - foreign exchange 30 (19)
----------------------------------------------------------------------- ---- ------- -------
Cash and cash equivalents at end of year 3,294 1,466
----------------------------------------------------------------------- ---- ------- -------
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share Currency
Share premium translation Retained
capital account reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2020 1,519 17,617 143 (2,103) 17,176
----------------------------------- --------- -------- ------------ ---------- -------
Loss for the year - - - (8,708) (8,708)
Net foreign exchange gains from
overseas subsidiaries - - (22) - (22)
----------------------------------- --------- -------- ------------ ---------- -------
Total comprehensive loss for
the year - - (22) (8,708) (8,730)
----------------------------------- --------- -------- ------------ ---------- -------
Transactions with owners in their
capacity as owners:
Issue of equity shares 1,012 - - - 1,012
Premium arising on issue of equity
shares - 5,062 - - 5,062
Share issue expenses - (575) - - (575)
Credit in relation to share-based
payments - - - 243 243
----------------------------------- --------- -------- ------------ ---------- -------
Total transactions with owners
in their capacity as owners 1,012 4,487 - 243 5,742
----------------------------------- --------- -------- ------------ ---------- -------
Balance at 31 December 2020 2,531 22,104 121 (10,568) 14,188
----------------------------------- --------- -------- ------------ ---------- -------
Loss for the year - - - (3,280) (3,280)
Net foreign exchange gains from
overseas subsidiaries - - 32 - 32
----------------------------------- --------- -------- ------------ ---------- -------
Total comprehensive loss for
the year - - 32 (3,280) (3,248)
----------------------------------- --------- -------- ------------ ---------- -------
Transactions with owners in their
capacity as owners:
Issue of equity shares 1,090 - - - 1,090
Premium arising on issue of equity
shares - 8,711 - - 8,711
Share issue expenses - (806) - - (806)
Credit in relation to share-based
payments - - - 283 283
----------------------------------- --------- -------- ------------ ---------- -------
Total transactions with owners
in their capacity as owners 1,090 7,905 - 283 9,278
----------------------------------- --------- -------- ------------ ---------- -------
Balance at 31 December 2021 3,621 30,009 153 (13,565) 20,218
----------------------------------- --------- -------- ------------ ---------- -------
Notes to the financial information
For the year ended 31 December 2021
1. General information
FireAngel Safety Technology Group plc is registered and
domiciled in England and Wales, having been incorporated under the
Companies Act, company registration number 3991353. The Company is
a public company limited by shares and is listed on the Alternative
Investment Market ('AIM') of the London Stock Exchanges. The
Company's registered office and the address of its principal place
of business is The Vanguard Centre, Sir William Lyons Road,
Coventry, West Midlands, CV4 7EZ.
The Company and its subsidiary undertakings (together the
"Group") are in the business of the design, sale and marketing of
smoke, heat and CO alarms and accessories sold under the brands of
FireAngel, FireAngel Pro and Specification, AngelEye and Pace
Sensors. The Group also operates its own CO sensor manufacturing
facility in Canada.
The Board of Directors approved this announcement on 28 March
2022
The preliminary financial information does not constitute
statutory accounts within the meaning of Section 434 of the
Companies Act 2006 for the financial year ended 31 December 2021
but has been extracted from those accounts. The annual accounts for
the year ended 31 December 2021 have been prepared in accordance
with UK adopted International Accounting Standards. They have been
prepared using the historical cost convention except where the
measurement of balances at fair value is required. The financial
information included in this preliminary announcement does not
include all the disclosures required in accounts prepared in
accordance with UK adopted International Accounting Standards and
accordingly it does not itself comply with UK adopted International
Accounting Standards.
The financial information for the period ended 31 December 2020
is derived from the statutory accounts for that year which have
been delivered to the Registrar of Companies. The statutory
accounts for the year ended 31 December 2021 will be delivered to
the Registrar of Companies following the Company's annual general
meeting. The auditors have reported on the accounts for the years
ended 31 December 2020 and 2021; their reports were unqualified,
did not include any matters to which the auditor drew attention by
way of emphasis and did not contain a statement under s498(2) or
s498(3) of the Companies Act 2006.
2. Summary of significant accounting policies
Basis of consolidation
The consolidated financial statements of the Group incorporate
the financial statements of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 December each
year.
Revenue recognition
Revenue represents income derived from contracts for the
provision of goods and services, over time or at a point in time,
by the Group, to customers in exchange for consideration in the
ordinary course of the Group's activities
Contracts with customers are assessed to identify performance
obligations for both the transfer of goods or for the provision of
services. Goods and services are distinct and accounted for as
separate performance obligations if the customer can benefit from
them either on their own or together with other resources that are
readily available to the customer and they are separately
identifiable in the contract. The Group has determined that all of
these contracts include a single performance obligation as the
promises within the contracts are not separately identifiable.
Revenue is recognised as performance obligations are satisfied
as control of the goods and services is transferred to the
customer. For each performance obligation within a contract, the
Group determines whether it is satisfied over time or at a point in
time.
Performance obligations are satisfied over time if one of the
following criteria is satisfied:
-- the customer simultaneously receives and consumes the
benefits provided by the Group ' s performance as it performs;
-- the Group ' s performance creates or enhances an asset that
the customer controls as the asset is created or enhanced; or
-- the Group ' s performance does not create an asset with an
alternative use to the Group and it has an enforceable right to
payment for performance completed to date.
For each performance method to be recognised over time, the
Group recognises revenue using an input method, based on costs
incurred or as a proportion of estimated total contract costs or
physical proportion of contract work completed in relation to the
total. Revenue and attributable margin are calculated by reference
to reliable estimates of transaction price and total expected costs
and are therefore recognised progressively as costs are incurred or
work is completed.
When it is considered probable that total contract costs will
exceed total contract revenue, the expected loss is recognised as
an expense immediately.
The Group has determined that most of its contracts satisfy the
point in time criteria as the sales of goods are recognised when
the risks and rewards of ownership have been transferred to the
customer. For the majority of customers this is when goods are
delivered and title has passed. For others it is when goods are
delivered for shipment by our contract manufacturers, depending
upon the terms and conditions of the sales contract as to when the
risks and rewards of ownership are transferred.
Revenue is recognised when revenue and associated costs can be
measured reliably and future economic benefits are probable.
Revenue is measured at the fair value of the consideration received
or receivable for goods and services provided in the normal course
of business, net of rebates and settlement discounts, VAT and other
sales related taxes.
Going concern
The Group has been loss making in recent years and absorbed cash
at an operational level. The Group has raised fresh equity and
support from its bank through the government backed loan schemes.
The impact of COVID-19 has been material to the Group due to the
knock-on effect of COVID-19 on global supply chains. The Company
has navigated these well, but shortage of inventory and components
has prevented the growth originally planned. In H1 2021 the
business saw good expansion and improvements in its underlying
trading, this was curtailed in H2 by the supply chain restrictions
experienced, but the Group started to deliver on the gross margin
improvement plan improving adjusted margins from 19.8% in 2020 to
23.2% in 2021 which, along with new pricing strategies has provided
a strong platform to protect and improve margins in 2022.
The Group is anticipated to absorb cash in FY 2022 but will
start to generate cash from H2 2022 and continue in full year 2023.
The forecasts show the Group has sufficient cash to deliver the
strategy and return the Group to profitability and cash generative
activity levels.
The Directors have reviewed the forecast sales growth, budgets
and cash projections for the period to June 2023 including
sensitivity analysis on the key assumptions such as the potential
impact of reduced sales for the next twelve months and beyond. The
base case scenario reflects the remaining uncertainty regarding the
timing of the return to normal trading circumstances. Various
plausible but severe downside scenarios were then applied to the
base case linked to the trading conditions seen in the 2021
financial year, assuming revenues would not see the expected growth
and that margins may deteriorate. The results showed sufficient
cash headroom throughout the outlook period. The base case was then
reverse stress tested and the level of deterioration required for
the Group to exceed the banking headroom was deemed to be highly
unlikely.
The Directors have assessed both the discretionary and the
non-discretionary cash requirements of the Group during this
period. In determining whether the Group and Parent Company's
financial statements can be prepared on a going concern basis, the
Directors considered the Group's business activities, together with
the factors likely to affect its future development, performance
and position. The Group has continued to benefit from a supportive
relationship with its bank and 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;
-- the impact of the competitive environment within which the Group operates;
-- the impact of COVID-19 and related global supply chain issues;
-- the potential actions that could be taken in the event that
revenues or gross profits are worse than expected, to ensure that
operating profit and cash flows are protected.
The Directors have reasonable expectations that the Group and
the Company have adequate resources to continue operations for the
period of at least one year from the date of approval of these
financial statements. The Directors have not identified any
material uncertainties that may cast doubt over the ability of the
Group and Company to continue as a going concern and the Directors
continue to adopt the going concern basis in preparing these
financial statements.
Inventories
Inventories are stated at the lower of historical cost and net
realisable value. Cost comprises direct material cost and, where
applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and
condition. Cost is calculated using the first-in first-out method.
Net realisable value represents the estimated selling price in the
ordinary course of business less all estimated costs to completion
and selling costs to be incurred. The Group's approach to inventory
provisioning is described in note 12 .
Forward currency derivatives
The Group enters into derivative foreign currency forward
contracts which are classified as financial instruments at fair
value through profit and loss. They are initially recognised at
fair value on the date a derivative contract is entered into and
are subsequently re-measured at their fair value. Fair value gains
and losses are recognised in profit and loss
3. Critical accounting estimates and areas of judgement
Impacting the Group
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates and assumptions will, by
definition, seldom equal the related actual results. The estimates
and assumptions at the end of the accounting period that have a
significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
European Partner Revenue recognition
In April 2021 the Group signed a long-term partnership agreement
with, Techem, to provide a fully funded research and development
programme for a new generation smoke alarm.
Consideration has been given as to whether to adopt IFSR15
revenue recognition accounting principles or IFRS 11 joint venture
accounting treatment. The Group has concluded that Techem are in
control of the design phase and thus do not require a unanimous
consent of both parties which is required to adopt IFRS 11
treatment.
The assessment of the dominant factor in the contract requires
significant judgement. The Group have looked at the promises within
the contract (product design phases, licences and warranties) on
their own merit to analyse if they are distinct or whether they
need to be treated as one combined performance obligation. The
Group has concluded that as the product design, development,
prototypes and licences are not distinct in the context of the
contract, there is a single combined performance obligation.
The assessment of the dominant factor also requires significant
judgement and on the balance of evidence the Group has taken the
view that the development services are dominant looking at both the
contractual prices and level of effort required to deliver the
development services to the customer. The Group has considered how
the performance obligation is satisfied by analysing the transfer
of control of the intellectual property to the customer. The asset
created has no alternative use for FireAngel, that is only Techem
can use the product prototype and designs and FireAngel has an
enforceable right to payment for performance completed. As such the
Group has concluded that the Group's performance creates an asset
that Techem controls as it is created. Therefore, the licences
(Background IP and Foreground IP) should be evaluated under
paragraphs 31-38 of IFRS 15, rather than the licence guidance in
paragraphs B58- B61. The Group has decided that the most
appropriate methodology to recognise revenue over time is the input
methodology which is based upon the Group's efforts to satisfy the
performance obligation.
Using the input methodology, the Group have needed to consider
the accuracy of forecasted development costs. These forecasts are
built from the ground up and are the Group's best estimate of costs
to complete the development phase. Any changes in the total design
phase costs will have an impact of the timing of revenue
recognition.
The Group has also had to consider the value prescribed to the
royalty fees earned during the contract. The contract between the
two parties guarantees a minimum royalty fee of EUR3 million. The
minimum royalty fee of EUR3m has been included in the initial
contract consideration which is being recognised as described
above. This amount will be payable as products are sold and
therefore the contract includes a significant financing element.
Once the minimum royalty fee has been received the intellectual
property transfers to the German service provider and FireAngel is
granted a licence to use this IP for the development, manufacture
and sale of FireAngel's own products. No value has been attributed
to the non-cash consideration represented by the Group's future
rights over this IP as until development is completed no reliable
assessment of fair value can be made and therefore it is not yet
probable that there will not be a significant reversal of any
amount recognised.
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts
of its tangible and intangible assets (including goodwill) to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs. Where a reasonable and consistent
basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they
are allocated to the smallest group of cash-generating units for
which a reasonable and consistent allocation basis can be
identified.
Intangible assets with indefinite useful lives and other
intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit)
is reduced to its recoverable amount. An impairment loss is
recognised immediately through the income statement, unless the
relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
During 2021, the Group recognised an impairment charge of GBP
0.1 million against its capitalised intangible product development
costs after a thorough review of product lines and future
development costs.
The Board notes that the Group has a significant value of
intangible assets on the balance sheet at the year end. Connected
homes intangible assets with a net book value of GBP2.1 million are
not yet being amortised as they are currently being developed for
sale. Connected home intangible assets with a net book value of GBP
3.4 million are being amortised. The Board expects that in future,
the vast majority of products sold will in some way be connected
(through Wi-safe 2, Z-wave or Zigbee technology) and given that the
Group already has a connected homes technology product offering
which is working, the Board believes that the carrying value of
connected homes technology intangibles is not impaired. In reaching
this conclusion, the Board also acknowledges the losses incurred by
the Group over the past three years and the heightened risk of
impairment that this leads to.
Deferred tax recognition
At 31 December 2021 there is a deferred tax asset of
GBP1,500,811 which has not been recognised as the timing of
utilisation is uncertain. Deferred tax assets should only be
recognised where they are more likely than not to be realised.
Whilst the Group expects a return to profitability in the future,
the generous deduction available for research and development
expenditure means that it is likely to be several years before
these losses will need to be accessed.
Inventory provision
The Group reviews each stock keeping unit ('SKU') on a
line-by-line basis taking into account sales and gross margins
achieved on every SKU over the past 24 months and the expected
sales of each SKU over the next twelve months (and beyond) and the
likely gross margin thereon.
Discontinued SKUs are fully provided against (at 100% of the
cost) as future sales are very unlikely. In addition, where stock
is identified as being slow-moving, a 10% provision is typically
booked against the cost of the stock. The Group's stock
provisioning policy reviews unit sales and margins on each line of
stock and considers the level of sales likely to be achieved in the
future, and at what margin, before determining if a stock provision
is required.
Historically, on eventual sale of slow-moving SKUs, the Group
has not experienced any material issues where the net realisable
value of stock ultimately transpires to be less than the book value
of the stock (plus associated rework costs). Moreover, where stock
has been identified as slow-moving, ten-year life products are
typically reworked into seven-year or five-year product packaging
and sold as such still at a positive net margin. Even after rework
costs, the net realisable value of slow-moving SKUs typically
exceeds the combined product and rework costs. The Group is
fortunate that products are certified to common European standards
(and certain country standards) and many products are saleable in
markets other than the original market destination.
The inventory provision at 31 December 2021 amounted to GBP0.5
million (2020: GBP0.6 million).
4. Revenue and segmental reporting
The Group 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, Continental Europe and
in a number of other countries outside Continental Europe.
Financial information is reported to the Board on a consolidated
basis with revenue and operating profit stated for the Group.
IFRS 8 requires operating segments to be determined based on the
Group's internal reporting to the Chief Operating Decision Maker
('CODM'). The CODM has been determined to be the Executive Chairman
as he is primarily responsible for the allocation of resources and
the assessment of the performance.
Based on the information on which strategic and operating
decisions are made, the CODM 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 of the home safety products market in
Europe.
Revenue and gross profit for each of the Group's business units
are reviewed by the Board and rolled up into consolidated financial
information with non-business unit costs included to arrive at the
results that investors see. Business unit reporting to the Board
generally excludes information on overheads by business and other
income statement information, which is all reported on a
consolidated basis. Assets and liabilities are also generally
reported to the Board on a consolidated basis.
2021 2020
Revenue from continuing operations GBP000 GBP000
--------------------------------------- ------- -------
Business Units:
UK Trade 11,054 8,000
UK Retail 15,614 16,603
UK Fire & Rescue Services 2,367 2,875
UK Utilities 826 923
International 10,891 9,198
European Partner 1,043 -
Pace Sensors 1,677 2,329
--------------------------------------- ------- -------
Total revenue from external customers 43,472 39,928
--------------------------------------- ------- -------
All business units, excluding Pace Sensors and our European
Partner, earn revenue from the sale of smoke, heat and CO alarms
and accessories to end customers. Pace Sensors earns revenue from
the manufacture and sale of CO sensors to a third-party CO detector
assembler based in China. Revenue from our European Partner is
derived from a research and development programme for a new
generation smoke alarm, for further details see note 5.
As of 1 January 2021, the Company reassigned a number of
customers to different business units. Four customers with a
combined revenue of GBP0.4 million in 2020 which were previously
reported within the Utilities business unit are now reporting
through the Trade business unit. The 2020 sales comparatives have
been adjusted accordingly.
For 2021, revenues of approximately GBP4.7 million were derived
from one external customer (2020: GBP9.4 million from two external
customers), which individually contributed over 10% of the Group's
total revenue. These revenues are attributable to the UK Retail
business unit. An analysis of the Group's revenue is as
follows:
2021 2020
GBP000 GBP000
------------------------ -------- --------
Continuing operations:
UK 29,861 28,400
Continental Europe 11,839 8,961
Rest of World 1,772 2,567
------------------------ -------- --------
43,472 39,928
------------------------ -------- --------
Non-current assets, excluding deferred tax assets, for UK and
overseas territories are as follows:
2021 2020
GBP000 GBP000
------------------------ -------- --------
Continuing operations:
UK 16,671 18,050
Canada 190 179
------------------------ -------- --------
Non-current assets 16,861 18,229
------------------------ -------- --------
5. Revenue recognition - European Partner
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
element 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.
In order to determine the total revenue associated with this
contract the Group has amalgamated the already agreed background IP
and minimum royalty amounts with the forecasted fees for the
product development phases. The payment structure agreed in the
contract dictates that consideration will be received at contract
milestones during the development phase and once product starts to
be delivered. As a result of the payment schedule within the
contract it has been determined the contract includes a significant
financing element. Therefore, the expected cash flows have been
discounted using the Group's own borrowing rate. These discounted
amounts will be recognised as interest earned using the same
phasing methodology as revenue .
To determine the phasing of the revenue recognition the Group
has chosen to adopt the input methodology approach as this is based
upon direct efforts to satisfy the dominant component of the
performance obligation which is the product design element. This
methodology dictates that progress be measured by viewing current
spend against total projected development spend. At the end of 2021
the Group has calculated it is 17% of the way through its
development process based on this methodology.
The contract between the two parties guarantees a minimum
royalty fee of EUR3 million. The minimum royalty fee of EUR3m has
been included in the initial contract consideration which is being
recognised as described above. This amount will be payable as
products are sold and therefore the contract includes a significant
financing element. The Group currently values the consideration of
the design and development phase of the contract at GBP6.7 million
(GBP6.2 million in revenue and GBP0.5 million as interest
receivable). The Group has recorded a net contract asset of GBP0.1m
as the contract billing arrangements at specific milestones does
not mirror the accounting treatment of performance obligation
satisfaction.
Once the minimum royalty fee has been fully paid the
intellectual property transfers to the German service provider and
FireAngel will be granted a licence to use this IP for the
development, manufacture and sale of FireAngel's own products. No
value has been attributed to the non-cash consideration represented
by the Group's future rights over this IP as until development is
completed no reliable assessment of fair value can be made and
therefore it is not yet probable that there will not be a
significant reversal of any amount recognised.
2021
GBP000
--------------------------------------- ---------
Revenue recognised 1,043
Costs recognised (437)
--------------------------------------- ---------
Gross profit attributable to contract 606
Revenue recognised 1,043
Interest income recognised 91
--------------------------------------- ---------
Total consideration 1,134
Billing to date (1,060)
--------------------------------------- ---------
Accrued income 74
--------------------------------------- ---------
6. Non-underlying items
2021 2020
GBP000 GBP000
-------------------------------------------- --------- ---------
Within cost of sales
Provision for warranty costs (note a) - 1,168
Commercial distributer settlements (note
b) 66 324
Provision against stock and disposal costs
(note c) (88) 225
-------------------------------------------- --------- ---------
(22) 1,717
Within operating expenses
Restructuring and fundraising costs (note
d) - 77
Impairment of intangible assets (note e) - 1,416
Impairment of tangible assets (note f) (3) 188
Share-based payment charges 283 243
-------------------------------------------- --------- ---------
280 1,924
Total non-underlying items 258 3,641
-------------------------------------------- --------- ---------
a. In 2020, the FireAngel battery warranty provision, an
isolated legacy issue relating to a third-party supplier first
identified in April 2016, was increased by GBP1.2 million. The
additional provision was made to reflect an increase in the
terminal volume of units expected to be impacted by the issue based
on the level of returns being seen. The cash impact of the warranty
provision in 2021 was GBP1.2 million.
b. Customer settlements relating to the battery impedance
totalled GBP0.1 million for the year (2020: GBP0.3 million). There
was no cash impact in 2021 relating to these settlements.
c. During 2021 the Group was able to sell stock lines that had
previously been impaired which resulted in a non-underlying credit
of GBP0.1 million (2020: GBP0.2 million charge). The cash impact in
2021 for disposing of stock previously provided for was
GBP50,000.
d. Restructuring and certain fundraising costs of GBP0.1 million
were incurred and paid in 2020.
e. No non-underlying intangible impairment charge was recorded
in 2021 following a review of product lines and future development
costs. The prior year charge was GBP1.4 million.
f. Tangible assets of GBP0.2 million were impaired during 2020
as a result of a thorough review of tooling required for ongoing
product lines.
7. Other operating income
Furlough payments of GBPnil were received under the UK
Government's Coronavirus Job Retention Scheme and GBP0.1 million
under the Canadian Emergency Wage Subsidy. The scheme enabled
employers to retain staff despite the economic impact of COVID-19
through government grants relating to wage subsidies. As per the
accounting policies adopted, the grant received was recognised in
the profit and loss in 'other income' as the related salaries for
the furloughed employees were recognised.
8. Finance costs
2021 2020
GBP000 GBP000
-------------------------------------------- -------- --------
( 227
Interest expense on bank balance (84) )
Lease liability interest expense (40) (51)
Interest received on discounted cash flows 91 -
-------------------------------------------- -------- --------
( 278
Total finance costs (33) )
-------------------------------------------- -------- --------
9. Income tax
2021 2020
GBP000 GBP000
-------------------------------------------------------------- --------- ---------
Current tax
( 711
UK corporation tax credit (434) )
UK - adjustments in respect of prior periods charge/(credit) 16 (49)
Foreign tax charge (12) 130
-------------------------------------------------------------- --------- ---------
(430) (630)
-------------------------------------------------------------- --------- ---------
Deferred tax
Origination and reversal of temporary differences - -
Adjustments in respect of prior periods - -
( 630
Income tax credit (430) )
-------------------------------------------------------------- --------- ---------
Domestic income tax is calculated at 19% (2020: 19.00%) of the
estimated assessable profit or loss for the year.
The tax credit for the year can be reconciled to the profit per
the consolidated income statement as follows:
2021 2020
GBP000 % GBP000 %
------------------------------------------------- -------- ---- -------- ---
( 9,338
Loss before tax (3,710) )
------------------------------------------------- -------- ---- -------- ---
Tax at the domestic income tax rate of 19.00% ( 1,774
(2020: 19.00%) (705) )
Tax effect of expenses that are not deductible
in determining taxable profit 60 52
Effect of allowance for capitalised development ( 306
expenditure (187) )
Adjustments in respect of prior periods 16 (49)
Deferred tax not recognised 544 1,428
Impact of foreign tax rates (30) 59
Difference in current and deferred tax rates (351) -
Effect of tax rate change on opening patent 279 -
box set-off
Other adjustments (56) (40)
------------------------------------------------- -------- ---- -------- ---
( 630 7
Tax credit and effective tax rate for the year (430) 12% ) %
------------------------------------------------- -------- ---- -------- ---
The weighted average applicable tax rate was 12% (2020: 7%). The
tax credit for 2021 is largely due to enhanced research and
development tax relief at a rate of 230% and operating losses in
the year of GBP3.7 million.
Tax losses are, where possible, realised during the year through
surrender for research and development tax credits.
At 31 December 2021 there is a deferred tax asset of GBP
1,500,811 which has not been recognised as the timing of
utilisation is uncertain. Deferred tax assets should only be
recognised where they are more likely than not to be realised.
Whilst the Group expects a return to profitability in the future,
the generous deduction available for research and development
expenditure means that it is likely to be several years before
these losses will need to be accessed.
The income tax charged to equity during the 2021 was nil (2020:
nil)
10. Dividends
As a result of the loss reported for the year, and consistent
with the decision not to pay an interim dividend (2020: nil pence
per share), the Directors do not recommend payment of a final
dividend for the year (2020: nil pence per share). The total
dividend payable for 2021 is therefore nil pence per share (2020:
nil pence per share).
11. Earnings per share
2021 2020
Earnings from continuing operations GBP000 GBP000
-------------------------------------------------------------------------------------- -------- --------
Earnings for the purposes of
basic and diluted earnings per
share (loss for the year attributable
to owners of the Parent) (3,280) (8,708)
-------------------------------------------------------------------------------------- -------- --------
Number of shares '000 '000
-------------------------------------------------------------------------------------- -------- --------
Weighted average number of ordinary
shares - basic calculation 160,308 112,865
Dilutive potential ordinary
shares from share options - -
-------------------------------------------------------------------------------------- -------- --------
Weighted average number of ordinary
shares - diluted calculation 160,308 112,865
-------------------------------------------------------------------------------------- -------- --------
2021 2020
Pence Pence
-------------------------------------------------------------------------------------- -------- --------
Basic earnings per share (2.0) (7.7)
Diluted earnings per share (2.0) (7.7)
-------------------------------------------------------------------------------------- -------- --------
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 weighted average number of 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 year ended 31 December
2021.
12. Inventories
2021 2020
GBP000 GBP000
Raw materials 161 133
Work-in-progress 98 267
Finished goods 4,026 6,790
------------------------- --------- ---------
Total gross inventories 4,285 7,190
Inventory provisions (548) (632)
------------------------- --------- ---------
Total net inventories 3,737 6,558
------------------------- --------- ---------
Pace Sensors Limited, the Group's wholly owned subsidiary in
Canada, manufactures CO sensors for use in the Group's CO alarms.
The CO sensors are shipped to Pace Technologies, an independent
third-party supplier based in China, for assembly into finished CO
alarms, which are then purchased by the Group in the UK. The Group
does not maintain a provision for unrealised profit in CO sensors
within finished CO alarm stock, as CO sensors are sold to an
independent third party, Pace Technologies, before being acquired
as finished CO alarm products and put into stock by the Group.
Stock impairment costs of GBP 0.1 million were provided in the
year (2020: GBP1.7 million).
13. Loans and borrowings
2021 2020
GBP000 GBP000
Bank term loan 3,223 2,623
Invoice discounting facilities - 2,539
-------------------------------- --------- ---------
During the year the Group refinanced its existing Coronavirus
Large Business Interruption Loan Scheme ("CLBILS") with HSBC UK.
The new loan of, in aggregate, GBP3.7 million comprises a
Coronavirus Business Interruption Loan Scheme ("CBILS") loan of
GBP3.2 million and an additional Receivables Finance CBILS of
GBP0.5 million which has yet to be drawn down. The CBILS loan,
which was used to pay off the balance of the CLBILS, has a term of
6 years with the first year being free of interest and capital
repayments and an interest rate thereafter of 3.99 per cent. over
the Bank of England's base rate. The Group maintains its existing
Invoice Discounting Facility of GBP7.5 million, which at 31
December had not been drawn on.
At 31 December 2021, the Group had the following lease
liabilities totalling GBP0.9 million:
6 months Total at
Within to 1 year 1 to 5 Over 5 31 December
6 months GBP000 years years 2021
GBP000 GBP000 GBP000 GBP000
Maturity analysis of
lease liabilities:
Land and buildings 217 218 468 - 903
Plant and machinery 1 8 17 - 26
Vehicles 7 5 7 - 19
------------------------- ---------- ---------------- --------- --------- --------------
Total lease liabilities 225 231 492 - 948
------------------------- ---------- ---------------- --------- --------- --------------
14. Provisions
FireAngel BRK Brands
warranty warranty Total
provisions provisions GBP000
GBP000 GBP000
--------------------- ------------ ------------- ---------
At 1 January 2020 3,465 28 3,493
Charge in year 1,167 - 1,167
( 1,915
Utilisation in year (1,887) (28) )
At 31 December 2020 2,745 - 2,745
Charge in year - - -
Utilisation in year (1,192) - (1,192)
--------------------- ------------ ------------- ---------
At 31 December 2021 1,553 - 1,553
--------------------- ------------ ------------- ---------
The total warranty provision is classified between less than one
year and greater than one year as follows:
2021 2020
GBP000 GBP000
--------------------------- -------- --------
Current provision 1,012 1,491
Non-current provision 541 1,254
Total warranty provisions 1,553 2,745
--------------------------- -------- --------
Review of warranty provision
In assessing the adequacy of the warranty provision, it is
necessary to form a view on matters which are inherently uncertain,
such as the returns profile over time, the final return rate,
whether the product return rates 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 although with the known
battery warranty issue (which represents the majority of the
provision) the Board has considerably more experience of the
returns rates having monitored product returns by year of
manufacture by market for several years. Consequently, the
continued appropriateness of the underlying assumptions is reviewed
on an ongoing basis against actual experience and other relevant
evidence and adjustment made to the provision over time as
required.
15. Share capital and reserves
On 8 May 2021, the Company raised GBP9.8 million (gross) through
the issue of 54,444,444 new ordinary shares of 2p nominal value
each at an issue price of 18p per share. The premium on issue was
16p per share amounting to GBP8.7 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.
16. Changes in liabilities arising from financing activities
Invoice
Bank discounting Lease
Loans facility liabilities Total
GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2020 - 6,985 1,479 8,464
------------------------------ ------- ------------- ------------- -------
Net cash generated/ (used in)
financing activities 2,623 (4,446) (381) (2,204)
Acquisition of leases - 283 283
Balance at 31 December 2020 2,623 2,539 1,381 6,543
------------------------------ ------- ------------- ------------- -------
Net cash generated/ (used in)
financing activities 600 (2,539) (441) (2,380)
Acquisition of leases - - 8 8
Balance at 31 December 2021 3,223 - 948 4,171
------------------------------ ------- ------------- ------------- -------
17. Post balance sheet event
As announced on 28 March 2022 the Group successfully completed
the fully funded Development phase 1 (DP1) of its partnership with
Techem, to develop a new generation alarm primarily for the German
market and has now formally concluded the agreement with Techem for
Development Phase 2 (DP2), with a detailed specification. It is
expected that the development period will last until the end of
2024 and the new generation smoke alarm will be available for sale
in H2 2024. Techem has also selected the FireAngel CO sensor,
manufactured by FireAngel's CO sensor factory in Canada, to be
incorporated exclusively into the new alarm, which is expected to
significantly increase the medium-term financial opportunity for
the Group.
18. Availability of announcement
A copy of this announcement is available on the Company's
website at www.fireangeltech.com and at its registered office:
FireAngel Safety Technology Group plc, Vanguard Centre, Sir William
Lyons Road, Coventry, CV4 7EZ.
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END
FR SEUEFAEESESD
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