Sprue Aegis expects second half pick-up

Sprue Aegis reported first half trading was slightly ahead of management´s expectations a large drop in the company´s revenues, with management expressing confidence in its ability to return to the profitability in the backhalf of 2016.

The supplier of home safety products, such as smoke detectors, said sales fell 54% during the first six months of the year to reach £25.9m.

A ramp-up in demand in France in 2015 was the main reason behind the step-change in the firm´s top line, after the passing of the March 2015 deadline for evey domestic property in that country to fit at least one working alarm.

Issues surrounding the batteries for its FireAngel detectors also contributed to a £1.6m fall in German sales, as customers opted to push orders back into the second half as they waited products with a Panasonic battery.

The company also said the warranty costs associated with the high impedance battery issue flagged earlier in 2016 were tracking in-line with management´s expectations.

The total warranty provision stood at £5.7m as of 30 June, versus £6.8m at year-end 2015.

Operating profits also declined sharply, falling from £9.0m to a loss of £0.9m, as gross margins deteriorated from 29.0% one year ago to 25.5%.

Nonetheless, the company continued to be free of debt, although cash at period-end reduced from £28.9m to £14.7m due to an order of buffer stock to offset potential supply chain disruptions after the relocation of its factory in China.

For the full-year 2016, management continued to expect the company´s sales and operating profits before share-based payments to be in-line with market expectations at approximately £58.0m and £1.9m, respectively.

Post period-end, Sprue Aegis bought the source code and development rights for software developed by Intamac Systems for a total consideration of £2.8m in cash.

The interim dividend was set at 2.5p.

Shares in Sprue Aegis fell 9.21% to 143.0p.