FireAngel set for improved performance despite supply issues

(Sharecast News) - Home safety product company FireAngel said in an update on Monday that it was on target to meet market expectations for an adjusted loss before tax for the year ending 31 December, representing a "significant improvement" on 2020.
The AIM-traded firm did warn, however, that its revenue for the year was likely to be at the "lower end" of market expectations, although net debt was set to be ahead of market forecasts.

It said that "resilience" reflected its "ongoing and extensive efforts" to mitigate the impact of Covid-19 and the related global supply chain issues, through continued management of costs and price increases.

The remaining risk to the company achieving its market expectations for 2021 was from developing Covid-19-related measures in any given country, and related shipping variability.

Its improving financial results were said to have been driven in part by the group's 'self-help' gross margin improvement plan, which was resulting in improving margins and stronger control of costs.

The adjusted gross margin for the year was expected to be in the range of 22% to 24%, up from 19.8% in 2020, with the final figure depending on precise currency movements.

FireAngel said the "well-documented" supply chain issues, as it outlined in its unaudited interim results in September, had continued to intensify during the second half, with rising costs and component shortages affecting its ability to build products and increase stock inventory to meet growing demand.

The firm said it recently had been seeking to forward-procure more components than historically, and would continue to focus on that use of working capital to help mitigate any further impact from the supply issues.

It said it had seen a "slight improvement" in component availability, which was encouraging for the first half of 2022.

The board said it would closely monitor all supply chain developments, and in late January would provide an update on that, as well as the outturn for the 2021 financial year and the company's prospects for 2022.

FireAngel also reported that its key partnership with a German energy and efficiency service provider for the real estate sector, as announced in April, was progressing well.

The company said it was working with the partner on a fully-funded research and development programme for a "new-generation" smoke alarm, which entered the second development phase earlier in December.

Phase one of the project was focussed on defining the specification for the alarm, mainly for the German market, while the second phase aimed to develop the new alarm to be available for sale by early 2025.

In addition, the group's "important project" to source certain entry-level products uneconomic to design and produce in Europe, from an existing Chinese partner, also remained on track.

Having passed certification, the production pilot was now complete, and the firm said it was on target to launch the products as planned.

The project was expected to be margin-enhancing in the 2022 financial year.

"The board is pleased that despite severe headwinds, the company is on track to deliver an improved financial performance in 2021 and to have sufficient working capital for its forecasted needs," said executive chairman John Conoley.

"It is especially satisfying that both gross margin and underlying operating profit are above both 2019 and 2020 comparables.

"These improvements are being delivered through the determination of our internal teams despite all challenges."

Conoley said it was disappointing that the global supply chain issues had continued during the second half, and were still impacting the global economy.

"However, we have made good progress against our strategic priorities, in particular our gross margin improvement plan.

"The growing interest and demand we are seeing for our connected offering further reinforce our confidence in the long-term opportunity for FireAngel."

At 0900 GMT, shares in FireAngel Safety Technology Group were flat at 13.5p.