FOR IMMEDIATE RELEASE 27th April 2010
Sprue Aegis plc
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
Sprue Aegis plc ("Sprue Aegis" or "the Group"; PLUS-quoted: SPRP), the designer
and marketer of the FireAngel range of innovative safety products, announces
its results for the financial year ended 31 December 2009.
Results in Brief:
Year to 31 December(£million) 2009 2008 % chg
y-on-y
Turnover 14.4 9.4 +53%
Operating profit1 2.3 1.6 +44%
Profit before tax (per statutory results) 1.9 1.6 +19%
Cash 2.7 1.6 +69%
Free cash flow2 1.2 0.6 +100%
Adjusted basic earnings per share3 5.23p 3.42p +53%
Earnings per share (Basic EPS per statutory 4.67p 3.42p +37%
results)
1 Operating profit is stated beforeexceptional items
2 Free cash flow is cash generated from operations less tax, net interest,
development costs and capital expenditure
3Basic earnings per share are adjusted to exclude the after tax impact of
exceptional items
Operational highlights:
* Revenue growth driven by expansion of customer base, particularly in the
social housing and utility sectors
* Continued focus on product development, accelerated the introduction of new
and technically enhanced products
* Acquisition of the remaining 66% of Pace Sensors in Canada brings
proprietary CO sensor technology into the Group
* Increased economies of scale and value engineering efforts have enhanced
price competitiveness even further
* Move to larger premises accommodated increase in headcount to 29 and
provides scope for further expansion
* Post year end, Sprue Aegis' appointment as the exclusive European
distributor for BRK Brands Europe Limited provides significantly enhanced
growth opportunities in both the UK and Continental Europe
* Proposed payment of a maiden final dividend of 0.5 pence per share in
respect of financial year 2009
Graham Whitworth, Chairman & CEO of Sprue Aegis plc, commented:
"Despite the challenging UK economic backdrop, it is immensely satisfying that
Sprue Aegis progressed as planned and has produced another solid set of
results,demonstrating significant growth in revenue and operating profit in
2009."
"As announced in April 2010, the appointment of Sprue Aegis as the exclusive
distributor for BRK Brands Europe provides an enhanced platform for growth in
the UK and Europe and brings the established brands of BRK®,Dicon® and First
Alert®into the Group. I am confident that our broader European market position,
coupled with our strong product innovation and customer base,willprovide
significant growthopportunities and enhance shareholder value."
Notes to Editors
About Sprue Aegis
Based in Coventry, UK, Sprue Aegis designs, manufactures and distributes
innovative home safety products, notably smoke, carbon monoxide detectors and
wireless safety accessories under the FireAngel brand. Since launching in 2001,
FireAngel has developed a prominent UK retail footprint and has become the
leading approved supplier of smoke alarms to the UK's Fire Brigades via the
"FireBuy" National procurement framework. Other distribution channels include
social housing, electrical distributors, utility providers and the leisure
industry. Sprue Aegis owns European and US patented technology and the Group's
existing range of battery operated smoke and carbon monoxide detectors are
certified to the latest European standards. For further product information,
please visit www.fireangel.co.uk.
For further information, please contact:
Sprue Aegis plc 02476 323 232
Graham Whitworth, Chairman & CEO
Arbuthnot Securities 020 7012 2000
Alastair Moreton/Ed Gay
CHAIRMAN'S STATEMENT
Introduction
2009 was an extremely busy and pivotal year in the development of Sprue Aegis
and I am delighted to update shareholders on our progress.
These results provide further evidence that our products are highly regarded by
all customers - FireAngel is now the supplier of choice to over 90% of the UK's
Fire and Rescue Services and we have a strong and growing presence with retail
and utility companies. The results are also an endorsement of our strategy to
broaden our customer base whilst continually developing and providing
innovative and technology-led products to position the Group as a leading
supplier of domestic fire and safety related products in Europe.
Exclusive European Distribution Agreement with BRK Brands Europe Limited
Our appointment, announced to the market on 7 April 2010, as the exclusive
distributor for BRK Brands Europe Limited ("BRK") to distribute, alongside our
own FireAngel products, BRK's entire range of fire, smoke and related safety
products and safes, sold under the BRK®, Dicon® and First Alert® brands,
cements our position as Europe's leading suppliers to the fire and home safety
market and provides the Group with an excellent platform for growth.
The distribution agreement broadens our UK customer base, adding new retail
accounts including Wickes, Focus, Costco and Robert Dyas. Additionally, BRK has
a strong presence in the UK trade sector, especially with new build and
contractor mains-powered products, an area where FireAngel has been developing
its presence.
Sprue Aegis has an ongoing obligation to pay £4.16 million per annum for the
distribution rights for the BRK products over a rolling five year term of the
agreement and we expect the arrangement to be earnings enhancing for the Group
in 2010 with the potential to build sustainable growth in the future.
The Group has also entered into discussions with BRK's parent company in the US
to evaluate the potential of BRK Incorporated distributing selected FireAngel
products in the Americas. We will update shareholders later this year pending
the outcome of this review.
Pace Sensors
On December 1st 2009, Sprue Aegis announced the strategic acquisition of the
remaining 66% of Pace Sensors Limited, a carbon monoxide ("CO") sensor
manufacturer based near Toronto, Canada, for a net consideration of £0.2
million. This, combined with a longer term agreement with Pace Technology to
manufacture CO detectors in China, will provide us with a more secure CO supply
chain and strengthen our position as a leading global player in the development
and production of domestic CO alarms. The acquisition also provides us with
proprietary CO sensor technology and brings CO sensor manufacture entirely
in-house.
Engineering and design improvements to reduce the costs of the sensors are
already well underway and we expect these benefits to begin to accrue in the
second half of 2010. Pace Sensors generated sales of around £0.1 million in
December 2009 and its contribution to Group profits in the period was
negligible.
Dupont Settlement
I am also pleased to report that the Group reached agreement over the royalty
dispute with DuPont, paying £266,000 (US$425,000) to finally bring this matter
to a close. The Group is now free to sell its products in North America if it
chooses to do so.
Financial Overview
Group turnover increased by £5.0 million to £14.4 million (2008: £9.4 million)
due to our increased penetration of non-retail markets, particularly in the
utility and social housing sectors. Our success with the Fire & Rescue Services
("FRS") continued; now over 90% of the UK's Fire Brigades regularly source our
products, making FireAngel their "brand of choice".
The gross margin reduced to 37.5% (2008: 42.8%), primarily as a result of the
decline in the value of Sterling against the US Dollar. The average Sterling/
USD exchange rate in 2009 was 1.57 compared with 1.86 in 2008.
The Group remains committed to its product development programme and in total
amortised and expensed £0.4 million (2008: £0.3 million) of development costs
in the year with additional new products and variants being launched throughout
2010.
Cash increased from £1.6 million to £2.7 million at the end of 2009 and the
Group continues to carefully monitor its working capital requirements to ensure
it maximises operational cash flow whilst at the same time ensuring trade
creditors are paid within agreed terms.
Group borrowings at the end of 2009 amounted to £1.0 million in total,
represented by a £0.5 million loan note repayable in December 2010 and a
further £0.5 million loan note repayable in 2013.
The Group closed the year with distributable reserves of £0.9 million and the
Board is pleased to announce the proposed payment of a maiden dividend of 0.5
pence per share.
Operational Review
We continue to progress our strategy of diversifying our customer base and to
operate in a broad range of sectors where non-discretionary expenditure is less
prone to public sector cuts. Indeed budgetary pressures are likely to further
encourage potential local authority and social housing customers to consider
more innovative, price competitive offerings such as those of FireAngel to meet
their duty of care obligations.
We continue to liaise closely with the FRS to help educate local authorities
and landlords to the benefits of fitting smoke and CO alarms purchased through
the national "FireBuy" scheme. The role of the FRS is changing with an
increasing emphasis on fire prevention through community initiatives and
education, often with the involvement of other support agencies and
organisations. In the five years since the Government awarded £36 million of
grants for fire safety, the FRS have conducted nearly 2 million Home Fire Risk
Safety Checks and installed over 2.4 million new smoke alarms.
Despite the recession, our UK retail sales have remained buoyant throughout the
year. This is partly because our products are considered an "essential
purchase" for many households, and partly as result of increased awareness from
the retailers embracing national safety initiatives, such as the CO campaigns
from both COCAA and the Gas Safe Register. However, retail buying patterns were
erratic at times as retailers sought to de-stock to conserve their cash flow.
I am delighted to report that B&Q and Tesco were early adopters of our 9-series
range of CO alarms which are selling well. This range of products was
developed internally and incorporates Pace Sensor's patented electrochemical
cell sensor technology to provide accurate measurement of CO, as well as sealed
7-year life battery variants.
Building on contract wins with EON and EDF, we are seeing increasing demand
from the utilities' sector, where FireAngel is engaging in joint product
promotions. Importantly, in terms of future sales volumes, a number of leading
energy providers are now offering to install FireAngel CO alarms as part of
their installation and annual maintenance programmes. FireAngel is also gaining
strong momentum within the wholesale sector, working closely with the likes of
Wolseley and PTS as fulfilment partners for our social housing and energy
sector customers.
Board Changes
In December 2009, Jan Kreminski stepped down as a non-executive director of
Sprue Aegis to pursue his other commercial interests. The Board would like to
thank Jan for his contribution and his international business perspectives have
been particularly insightful.
In early 2010, John Gahan joined Sprue Aegis as a full-time Group Finance
Director and was subsequently appointed to the Board on 1st April 2010. John, a
Fellow of the Institute of Chartered Accountants of England and Wales, spent
ten years with KPMG, followed by six years at GKN plc in senior corporate
finance, financial and operational roles. As a result, William Payne, Sprue
Aegis' former part-time finance director, has assumed the role of a
non-executive director, providing invaluable experience and continuity.
In addition to his business development role for the Group, John Walsh has
assumed the position of President of Pace Sensors. He led both the formation of
the initial joint venture in 2008 and the subsequent acquisition of the
outstanding equity in Pace Sensors. Going forward, John, who holds dual UK and
Canadian citizenships, will be responsible for the integration and expansion of
Pace Sensors within the Group.
Proposed final dividend forfinancial year2009
I am delighted to announce that the Board has approved the proposed payment of
a final dividend in respect of financial year 2009 of 0.5 pence per share. The
proposed cost to the company amounts to £0.17 million and, if approved by
shareholders at the forthcoming AGM on 27 May 2010, the ex-dividend date and
associated record date would be 9 June and 11 June 2010 respectively and would
be paid to shareholders by 23 July 2010, being 30 business days of the record
date.
Outlook
For the second year running, Sprue Aegis appeared in The Sunday Times "Fast
Track 100" rankings in 2009 and I continue to be genuinely excited about Sprue
Aegis' prospects for the future.
My thanks go to all of our staff who have embraced our move to new, larger
premises and ensured that the move was achieved with minimal disruption to the
business. I would also like to welcome our new colleagues who joined the Group
from BRK in April 2010. We share similar values and cultures and I am sure that
we will collectively enjoy making the most of the opportunities ahead as we
look to establish Sprue Aegis as Europe's leading safety products supplier.
To our shareholders, I emphasise that the agreement with BRK is expected to be
earnings accretive and Sprue Aegis remains well placed to deliver sustainable
long-term growth. We continue to focus on driving shareholder value and
maximizing free cash flow. With an extremely busy start to 2010 combined with
a strong quarter one operating performance, 2010 looks set to be another
interesting year for the Group.
I am encouraged by the integration of the BRK Europe brands, alongside the
FireAngel brand and look forward to capitalising on Sprue Aegis' undoubted
potential in the future.
Graham RA Whitworth 27th April 2010
Chairman & CEO
Sprue Aegis plc
- ENDS -
The Directors of the issuer accept responsibility for this statement
CONSOLIDATED PROFIT & LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2009
Year ended Year ended
31 December 31 December
2009 2008
Note £'000 £'000
Turnover 2 14,356 9,368
Cost of sales (8,972) (5,358)
------ -----
Gross profit 5,384 4,010
Distribution costs (223) (155)
Research and development (423) (342)
Administrative expenses before exceptional (2,454) (1,946)
item
Exceptional item - DuPont settlement 3 (266) -
Goodwill amortisation (17) (17)
----- -----
Operating profit 2,001 1,550
Interest receivable and similar income 3 33
Interest payable and similar charges 4 (91) (6)
------ -----
Profit on ordinary activities before 1,913 1,577
taxation
Tax on profit on ordinary activities 5 (338) (493)
----- -----
Profit for the year 1,575 1,084
------ -----
Earnings per share (pence) 6
Basic 4.67 3.42
Fully diluted 4.49 3.36
Continuing operations
None of the Group's activities are treated as acquired or discontinued during
the above two financial years.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS & LOSSES
FOR THE YEAR ENDED 31 DECEMBER 2009
Year ended Year ended
31 December 31 December
2009 2008
£'000 £'000
Profit for the year 1,575 1,084
Currency translation differences on foreign 24 (48)
currency net investments
Total recognised gains for the year 1,599 1,036
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2009
As at As at
31 December 31 December
2009 2008
£'000 £'000
Fixed assets
Intangible assets 776 552
Tangible assets 45 45
Investments - 9
----- -----
821 606
----- -----
Current assets
Stocks 1,391 1,068
Debtors 3,712 2,651
Cash at bank and in hand 2,705 1,635
------ -----
7,808 5,354
Creditors: amounts falling due within one year (3,435) (1,935)
------ ------
Net current assets 4,373 3,419
------ ------
Total assets less current liabilities 5,194 4,025
Creditors: amounts falling due after more than one (488) (953)
year
----- -----
Net assets 4,706 3,072
----- -----
Capital and reserves
Called up share capital 674 674
Share premium account 3,175 3,175
Profit and loss account 857 (777)
----- -----
Equity shareholders' funds 4,706 3,072
----- -----
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
Year ended Year ended
31 December 31 December
2009 2008
Note £'000 £'000
Net cash inflow from operating activities 7 1,795 920
Return on investment and servicing of (88) 27
finance
Taxation (188) -
Capital expenditure and financial (291) (357)
investment
Acquisitions (154) -
---- -----
Cash inflow before use of liquid resources 1,074 590
and financing
Financing - (5)
----- -----
Increase in cash during the year 1,074 585
----- -----
Reconciliation of net cash flow to movement
in net debt
Increase in cash during the year 1,074 585
Cash outflow from decrease in debt - 5
Non cash movement in loan and unamortised (10) 979
issue costs
----- -----
Change in net debt resulting from cash 1,064 1,569
flows
Translation difference (4) -
----- -----
Movement in net funds in the year 1,060 1,569
Net funds at beginning of year 682 (887)
------ ----
Net funds at end of year 8 1,742 682
Notes to the financial statements
1. Basis of preparation
The financial statements are prepared under the historical cost convention and
in accordance with applicable accounting standards and on a going concern
basis.
The Group financial statements consolidate the financial statements of Sprue
Aegis plc and its subsidiary undertakings drawn up to 31st December 2009. The
results of subsidiaries acquired are consolidated for the period from the date
on which control passed.
These financial statements include the results of Pace Sensors Limited for the
period from 30th November 2009. The income and expenses for the month of
December 2009 were not material to the Group so have not been separately
disclosed in the profit and loss account.
2. Turnover
The turnover, result and net assets are wholly derived from the Group's
principal activity. An analysis of turnover by geographical market for the
years ended 31 December 2009 and 31 December 2008 is given below:
Year to Year to
31 December 31 December
2009 2008
£'000 £'000
United Kingdom and Eire 14,288 9,356
Others 68 12
Total 14,356 9,368
3. DuPont settlement
In December 2004 the company entered into a License and Distribution agreement
with E I du Pont de Nemours and Company ("DuPont") for the sale of the
company's products under the DuPont brand in North America. Through 2005 and
early 2006 the company received Advance Royalty payments of $1.4 million to
cover costs incurred during the period specific to product development and
support of the North American market. The advanced royalties were to be
deducted from earned royalties resulting from DuPont's sales of Sprue Aegis'
products. In the event DuPont made few sales in the North American market, and
subsequently demanded the repayment of the Advance Royalty. No provision was
made for 2008 as the company strongly maintained that it had no obligation in
this regard for any such repayment. Through mediation proceedings during 2009,
Sprue Aegis and DuPont resolved this dispute and the company agreed to repay £
265,625 to DuPont as final settlement.
4. Interest payable and similar charges
Year to Year to
31 December 31 December
2009 2008
£'000 £'000
Interest on other loans/other interest 91 125
Interest released on conversion of unsecured - (119)
loan notes
Total 91 6
5. Taxation
Analysis of charge in year
Year to Year to
31 December 31 December
2009 2008
£'000 £'000
Current tax:
Corporation tax charge for the period 388 193
Adjustment in respect of prior periods (50) -
Total current tax charge 338 193
Release of deferred tax asset - 300
Tax on profit on ordinary activities 338 493
6. Earnings per share
Year to Year to
31 December 31 December
2009 2008
£'000 £'000
Profit attributable to shareholders being profit 1,575 1,084
after taxation
Weighted average number of shares in issue for basic 33,719 31,703
calculation (΄000)
Deemed issue of potentially dilutive shares (΄000) 1,381 546
Weighted average number of shares in issue for 35,100 32,249
diluted calculation (΄000)
Earnings per share (p)
- basic 4.67 3.42
- fully diluted 4.49 3.36
7. Reconciliation of operating profit to operating cash flows
Year to Year to
31 December 31 December
2009 2008
£'000 £'000
Operating profit 2,001 1,549
Amortisation 239 186
Depreciation charges 16 17
Exchange differences (197) (48)
Share based payment expense 35 21
Movement in debtors (1,061) (900)
Movement in stock (323) 126
Movement in creditors 1,085 (31)
Net cash inflow from operating activities 1,795 920
8. Analysis of net debt
At beginning Cash Non-cash Exchange At end
of year flows movements difference of year
£'000 £'000 £'000 £'000 £'000
Cash at bank and in 1,635 1,074 - (4) 2,705
hand
Debt due within one - (475) (475)
year
Debt due after one (953) 475 (10) (488)
year
682 1,074 (10) (4) 1,742
Non-cash movements represent the write-off of unamortised unsecured loan stock
issue costs.
9. Post Balance Sheet Event
On 7 April 2010, the company entered into an exclusive distribution agreement
("Distribution Agreement") with BRK Brands Europe Limited ("BRK") to distribute
BRK's entire range of fire, smoke and related safety products and safes, sold
under the BRK®, Dicon® and First Alert® brands, alongside the company's
FireAngel® brand in Europe.
The Distribution Agreement is for a minimum period of five years and provides
that Sprue Aegis will pay BRK a fixed distribution fee of £4.16m per annum,
payable quarterly in arrears.
The Distribution Agreement will continue indefinitely for successive periods of
five years, unless terminated by either party on 12 months' notice expiring at
the end of a 5 year term.
From 7 April 2010, BRK's employees transferred, creating an enlarged Group of
over 50 employees spread over two sites at the FireAngel head office in
Coventry and BRK's head office in Gloucester.
As part of the arrangements, Sprue Aegis has also entered into other agreements
with BRK which provide that Sprue Aegis will acquire the existing BRK inventory
and BRK will retain its fixed assets which will be leased to Sprue Aegis during
the term of the Distribution Agreement. Sprue Aegis and BRK will provide each
other with certain transitional services.
10. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 423 of the Companies Act
2006.
The summarised balance sheet at 31 December 2009 and the summarised profit and
loss account for the year then ended have been extracted from the Group's
audited 2009 statutory financial statements. The Group's auditors have agreed
to the release of this announcement.
The accounts for the year ended 31 December 2009 will be posted to shareholders
in due course and will be delivered to the Companies Registrar after they have
been laid before the company at the next annual general meeting. Copies will
also be available from Sprue Aegis plc's head office: Vanguard Centre, Sir
William Lyons Road, Coventry, CV4 7EZ, or via the websites (www.sprueaegis.com)
or (www.fireangel.co.uk).
COCAA - Carbon Monoxide Consumer Awareness Alliance
The Gas Safe Register replaced the CORGI Gas Register as of 01/04/09
Sprue Aegis plc: Results for the year ended 31 December 2009 / page 2
END