FireAngel (AIM: FA.), one of Europe's leading developers and suppliers of home safety products, announces its unaudited interim results for the six months ended 30 June 2019 and an update on trading for the year ending 31 December 2019.
· Revenue £20.7 million (2018: £17.7 million)
· Underlying operating loss1 £1.7 million, including £0.5 million impact of change to more prudent amortisation approach (2018: underlying operating loss £1.8 million)
· Adjusted gross profit2 £4.7 million (2018: £4.1 million)
· Adjusted gross margin2 22.5% (2018: 23.2%)
· Exceptional charges of £1.7 million comprising £1.4 million to increase provision for an isolated legacy issue relating to a third-party supplier first identified in April 2016 and £0.3 million of restructuring and fundraising costs (2018: nil)
· Loss before tax £3.6 million (2018: loss before tax £2.0 million)
· Basic and diluted EPS (5.0p) based on the weighted average number of shares outstanding during the period (2018: (3.2p))
· Capitalised product development costs and production set up costs reduced to £1.4 million (2018: £2.2 million)
· Net debt at 30 June 2019 £1.7 million (cash £1.5 million, debt £3.2 million) (30 June 2018: net cash £3.4 million; 31 December 2018: net debt £4.4 million)
· Fundraising of £6.0 million (gross) and the consequential repayment of £7.0 million revolving credit facility with HSBC
· Inventory reduced to £8.5 million (30 June 2018: £11.0 million)
· The Board is cautious regarding the timing of completion of certain strategically significant trials now committed or in progress. These are now expected to generate revenue in 2020 and beyond. As a result, despite sales expected to be ahead of last year, the Board now expects that the underlying operating result for the year ending 31 December 2019, before the increase in amortisation charge described above, to be a loss in the range of £1.0 million to £1.5 million (£1.9 million to £2.4 million including the increase in amortisation)
· UK Trade sales increased by 32% to £7.1 million; total UK sales increased by 17% to £14.5 million
· Underlying performance in the first half, before the increase in amortisation charge, was ahead of the Board's expectations
· The second half of 2019 is expected to deliver a profitable trading result with improved gross margins based on the revenue mix
· John Conoley appointed as Executive Chairman and Graham Whitworth's tenure as an Executive Director extended
1 Underlying operating loss of £1.7 million is before exceptional charges of £1.7 million (2018: nil) and, for H1 2018, before a share-based payments charge of £0.1 million.
2 Adjusted gross profit of £4.7 million is stated before the exceptional charge for legacy warranty of £1.4 million. For 2018, adjusted gross profit of £4.1 million is before a legacy warranty charge of £0.6 million included within 'Cost of sales before BRK distribution fee'). Adjusted gross margin is adjusted gross profit as a percentage of revenue.
Commenting on the results, John Conoley, Executive Chairman of FireAngel, said:
"We have continued to make progress in repositioning the business during the first half of 2019. The Board's focus over the next 18 months is on leveraging the investment made in differentiating our technology and establishing the processes to deliver the large and more strategic opportunities this investment is opening up. Although the completion of certain significant trials is now likely to take longer than originally expected, thereby negatively impacting the final results for 2019, the trials represent an important commercial validation of the Group's strategy and investment in differentiating technology. The Company will seek actively to execute on the range of opportunities it sees for gross margin progression in the short, medium, and long term."