LifeSafe warns on Q4 profits as costs rise

Fire safety technology company LifeSafe reported a robust trading performance for the 11 months through November on Wednesday, although related increased costs led to it warning on fourth-quarter earnings.

The AIM-traded firm said that LifeSafe achieved substantial sales growth during the period, with revenues reaching £5.4m.

That represented an impressive 62% increase compared to last year’s period.

It said the remarkable sales growth was primarily driven by the group’s digital consumer channels in the UK and the US, showcasing the strong appeal of the StaySafe 5-in-1 and StaySafe All-in-1 products.

The positive developments set the stage for the upcoming launch of new products and fluids in 2024, aimed at expanding into LifeSafe’s wholesale and industrial markets.

LifeSafe said its strategic partnerships with industry leaders like Wormald and QBE, announced on 26 September, aligned with its long-term strategic plan and were expected to bolster growth further.

However, the sales growth still involved challenges, with LifeSafe experiencing increased costs related to digital advertising and logistics, particularly in the rapidly expanding US market.

As a result, the firm anticipated failing to achieve monthly EBITDA profitability in the fourth quarter, as previously expected.

The company’s board now guided that the 2023 EBITDA loss would exceed current market expectations, likely falling within the range of £1.3m to £1.5m, with revenue estimated to be between £5.7m and £5.9m.

It said the reduced revenue growth was partly attributed to the underperformance of a digital marketing partner in the US compared to the prior year.

To address the challenges, LifeSafe said it had initiated a cost reduction programme, focusing on overheads and supply chain expenses and implementing changes to its marketing strategy.

The company expected that the actions, combined with an improved margin mix driven by increased wholesale and industrial sales, would enhance operating margins in the future.

“While we are disappointed with the impact of the unexpected increased costs within our digital sales channel, the company continues to show strong sales growth this year, which is already 62% ahead of 2022,” said chairman Dominic Berger.

“This performance has come during a time when our focus was to establish our brand in the market and drive further top-line growth in our digital channel, both of which we have delivered.

“The diversification and development of new fluid variants aimed at the higher margin industrial and wholesale sectors is ahead of plan, notably in the fight against the threat of fire events with lithium-ion batteries, and in our partnerships with Wormald and QBE.”

Berger said the company continued investing in research and development to meet the challenges of increased fire threats driven by climate change, technology, the environment, and legislation, and it looked forward to showcasing its efforts shortly.

“Our focus in the short term is to leverage our greater understanding of our digital channels and logistics, alongside the development of our industrial and wholesale channels.”

LifeSafe said it would provide a further trading update after the busy Christmas period in January.

At 1214 GMT, shares in LifeSafe Holdings were down 46.21% at 15.6p.

Reporting by Josh White for Sharecast.com.