FireAngel Safety Technology Group plc
(‘FireAngel’, the ‘Group’ or the ‘Company’)
Business update: Q1 trading and the impact of COVID-19
FireAngel (AIM: FA.), one of Europe’s leading developers and suppliers of home safety products, provides the following update on, among other matters, Q1 trading, the impact of COVID-19 and mitigating actions taken as a result and connected trials.
The Company’s performance in the first quarter of 2020 was close to the Board’s expectations, with revenue and gross profit slightly below budget. Gross profit margin remains ahead of Q1 2019 and in line with budget. However, an opportunity to outperform was lost in part due to the impact of COVID-19 as March progressed.
Impact of COVID-19
COVID-19 will clearly have an impact on the Company outlook in the very short term, although the medium and long-term prospects are underpinned by the market need matching our compelling and unique products. This offers the possibility of a quick rebound, and the Board has taken certain mitigating actions, further details of which are set out below, which aim to balance the clear uncertainty with maintaining capability while conserving the Group’s cash and protecting its profit.
The Board expects the most significant effects of COVID-19 on revenue and profitability to be in Q2 2020. This initial view will be revised in the light of events should it be required. A reasonable, albeit much reduced, level of revenue is expected to be maintained due to regulatory requirement drivers, the ongoing market need to maintain overall safety, and the different stages which each of our markets will enter as restrictions are lifted. Installation of our products is often driven by community safety groups, construction and self-employed tradesmen, who we would expect to be highly motivated to recover lost ground following the lifting of the current restrictions.
The first half of the year typically accounts for just over 40% of the Company’s annual revenue. This year, for reasons previously announced, the Company’s second half revenue is expected to be at a higher margin than the first half and, therefore, the timing of the COVID-19 pandemic is expected to have a more limited impact on the Company’s performance than might have been the case later in the year.
The Company continues to receive orders, develop products, work with Fire & Rescue Services across the UK and other customers, and improve its gross margin potential. FireAngel alarms are safety-critical items and remain on sale where traditional retailers which sell them remain open for business. Online sales have proved to be particularly resilient with sales impacted much less than through bricks and mortar retailers. International sales have continued to perform close to budgeted levels.
Mitigating actions taken to conserve cash and protect profit
The Board’s initial response to COVID-19 includes a range of measures which are expected to reduce planned expenditure this year by approximately £0.4 million. We have placed 18 employees (representing 15% of the UK workforce) on furlough for an initial period of four weeks. A thorough review of the timing of certain R&D project deliverables has enabled further limited headcount reductions. The Board has agreed to take reductions of 10% of salary for Executive Directors and 20% of fees for Non-Executive Directors for two months. All measures will be subject to continued review as the macro and trading picture become clearer.
Re-phasing of R&D is unlikely to have a material effect on future revenues. The existing, already spent, investment in Intellectual Property provides ample support for revenue and margin growth.
The Company has also implemented a further range of cash conservation measures. These include deferral of payments, such as VAT and payroll taxes, as well as arrangements with landlords and suppliers. At all times, the Company remains in close contact with its bank, HSBC, who continue to be supportive. We are reviewing with them the possibilities of securing a Coronavirus Large Business Interruption Loan as a further measure of prudence.
Update on connected trials
As previously announced, trials of FireAngel’s connected home products, including FireAngel PredictTM, have been ongoing and have been well received. On 23 March 2020, the Company announced that it was close to signing a contract with a local authority for a large connected rollout using FireAngel Pro Connect and FireAngel PredictTM. While commercial discussions have now been concluded and training for installers is planned in May 2020, subject to lockdown restrictions, with product rollout planned at the start of June 2020, the inevitable disruption caused by the COVID-19 lockdown measures has delayed contractual sign off. Further trials have been completed with two other significant connected opportunities which have now entered commercial discussions, albeit, for obvious reasons, at a slower pace. Some further opportunities have in the past few weeks in fact become firmer despite the impact of COVID-19. Further updates will be announced as appropriate.
Due to uncertainty around COVID-19 and timing of when restrictions will be lifted, the Board has decided to withdraw the Company’s market guidance given that it is too early to substantiate or vary it with any certainty.
Publication of audited results for 2019 and AGM arrangements
Given the uncertainty around the duration and impact of measures to address COVID-19, the Board has decided to delay the publication of the Company’s audited Report and Accounts for the year ended 31 December 2019 (the “Year”) in order to more fully assess the impact of current and future lockdown measures. The Company expects currently to publish its audited statutory accounts for the Year during May 2020 and will provide guidance as to the format and timing of its AGM at that time. A further announcement will be made in due course.
John Conoley, Executive Chairman of FireAngel, said: “I believe that FireAngel is much better positioned to weather the COVID-19 storm than so many other companies. We recently completed a fundraising of a net £5.5 million at an ideal time, for reasons that remain unchanged. Our market fundamentals are intact, and indeed future opportunities have crept forward even during the lockdown. Our management reaction is a proportionate one therefore, in terms of cost cutting and cash conservation, whilst retaining capability for a fast rebound in revenue. The Company is capable of executing such a rebound, once conditions begin to improve. FireAngel remains very much open for business.”
For further information, please contact:
FireAngel Safety Technology Group plc 024 7771 7700
John Conoley, Executive Chairman
Mike Stilwell, Group Finance Director
Shore Capital (Nominated adviser and broker) 020 7408 4050
Notes to Editors
About FireAngel Safety Technology Group plc
FireAngel’s mission is to protect, save and improve our customers’ lives by making innovative, leading-edge technology simple and accessible. FireAngel is one of the market leaders in the European home safety products market.
FireAngel’s principal products are connected smoke alarms, CO alarms, heat alarms and accessories. The Company has an extensive portfolio of patented intellectual property in Europe, the US and other selected territories. Products are sold under FireAngel’s leading brands of FireAngel, FireAngel Pro, FireAngel Specification and AngelEye.
For further product information, please visit: www.fireangeltech.com