Sprue Aegis tumbles at it warns over 2016 and 2017 profit

Shares in Sprue Aegis tumbled on Monday after the home safety products supplier downgraded its 2015 profit expectations.

The company said it has recently identified an issue in certain batteries supplied by a third party supplier that may cause a premature low battery warning chirp in certain of its smoke alarm models sold in the UK and in Continental Europe.

To support its customer service obligations, the board has proposed to increase the group's warranty provision as at 31 December 2015 by £5.5m to £6.8m, compared with £0.9m in 2014.

As a result, Sprue now expects operating profit for the year ended 31 December 2015 to be around £7.3m versus previous expectations of £12.1m.

Executive chairman Graham Whitworth said: “I am deeply disappointed about the impact this third party component issue is having and I wish to reassure customers and all stakeholders that the company takes the quality of all of its products very seriously.

“To prevent the issue happening in the future and to ensure all the group's smoke products perform to the highest standards, the group has introduced additional screening processes on the production line prior to the battery being fitted into finished smoke alarms and we are reviewing, and, if necessary, will enhance our internal operational controls and processes."

The company also said challenging trading conditions in France mainly due to overstocking and weaker sales in Germany due to product certification delays were likely to significantly affect its expected results for this year.

Sprue now expects a first half operating loss of approximately £1.9m and an operating profit in the second half of approximately £3.8m, with sales and operating profit in the full year of around £55.0m and £1.9m respectively.

At 0908 BST, shares were down 42% to 155p.