FireAngel Safety Technology Group plc
(“FireAngel”, the “Group” or the “Company”)
Commercial agreement signed with Techem and selection of FireAngel CO Sensors
Further to its Trading Update released on 31 January 2022, FireAngel (AIM: FA.), a leading developer and supplier of home safety products, is pleased to announce the conclusion of the next significant stage of its agreement with Techem Energy Services GmbH (“Techem”), one of the leading service providers for green and smart buildings, to develop a new generation alarm primarily for the German market. Techem’s focus is on energy efficiency along the entire real estate value chain. It supports over 12 million properties in 20 countries with efficient ways of energy and water consumption and has been doing so for more than 70 years.
FireAngel first entered into a Development Agreement with Techem, which was announced on 7 April 2020, to undertake a research phase (Development Phase 1 or “DP1”) and to define and agree a development phase (“DP2”) to develop a new generation smoke alarm (“NGSA”). The NGSA will combine multiple innovative sensor technologies to produce a state-of-the-art product for installation in Techem’s customers’ properties.
The Company successfully completed the fully funded DP1 of its partnership, which was announced on 20 December 2021, and has now formally concluded the agreement with Techem for DP2, with a detailed specification. It is expected that the development period will last until the end of 2024 and the NGSA will be available for sale in H2 2024. Since DP1 concluded, work has been ongoing and paid on an informal basis pending signing the DP2 agreement. As a result, DP2 is already over 10 per cent. complete on a planned man-days basis.
Selection of FireAngel CO Sensors
Importantly, Techem has selected the FireAngel CO sensor to be incorporated exclusively into the new alarm, which is expected to significantly increase the medium-term financial opportunity for the Company. FireAngel has its own CO sensor factory in Mississauga, Canada, currently making approximately 1 million sensors per annum. Whilst minor investments will be made in due course by the Company to increase capacity and efficiency at its factory to support this opportunity, the Board believes that the Company’s existing capability and factory footprint will enable more than a doubling of throughput, which should be sufficient to cope with the planned production of the CO sensor for the NGSA. The wider FireAngel business will also benefit from these improvements in efficiency.
DP2 development will be fully funded by Techem by way of certain fixed pricing of more than £2 million, plus other external open book pricing to Techem, including the Contract Equipment Manufacturer (“CEM”) set up costs. This is in addition to the funds which have already been paid by Techem to the Company which, during DP1, amounted to just over £1 million in 2021. The goal of the commercial arrangements is that they are cash neutral to FireAngel, prior to the sales phase becoming materially cash positive in 2025.
Furthermore, the original agreement with Techem provides for payments for inclusion of existing FireAngel IP within the new development. The next of these for £279k will fall due in June 2022. The final payment for existing IP, and outside the scope of the funded development work, of £558K will come at the end of DP2, which is expected in 2024.
Once sales of the NGSA commence in H2 2024, the Company expects to earn over €5 per product comprised of the agreed royalty, manufacturing fee, service support fees and the price for each CO Sensor.
The initial forecast of nearly 7 million units of the NGSA includes a commitment from one major end customer of Techem’s. Whilst this forecast may vary in future and will depend on the precise delivery date and other factors, Techem and FireAngel will co-operate to assess the overall opportunity and work jointly on marketing the product.
The next stage in parallel with DP2 development is the CEM partner selection, which is expected to conclude in H1 of this year.
IFRS 15 treatment of initial costs and revenue
IFRS 15, which covers matching revenue recognition with contractual provisions, is expected to govern how the Company treats DP2 and the original agreement with Techem going forward. At the signing of the original agreement, a minimum royalty fee of €3 million over up to 30 months was agreed which will be charged to Techem once sales of the NGSA commence. The Company is currently completing the audit of its final results for the year ended 31 December 2021 and will comment further on IFRS 15 implications in its full year audited results announcement due to be released on 29 March 2022.
Nicolai Kuß, CSO of Techem, commented:
”Techem sees this project as a major opportunity to extend the value of its offering to our customers. I’m delighted to see how closely and co-operatively the teams in each of FireAngel and Techem are working together, and I am excited to see the continued progress.”
John Conoley, Executive Chairman of FireAngel, commented:
“This transformational partnership with Techem is of long-term value and great significance for FireAngel. This opportunity has crystallised further with the formal signing of DP2. We are pleased that the financial opportunity from late 2024 onwards is more substantial, due to the inclusion of our own CO Sensors, than previously anticipated. Techem has proved to be a committed and reliable partner and we look forward to our shared success in the future.”
– Ends –
For further information, please contact:
|FireAngel Safety Technology Group plc||024 7771 7700|
|John Conoley, Executive Chairman|
|Zoe Fox, Chief Finance Officer|
|Shore Capital (Nominated adviser and joint broker)||020 7408 4050|
|Tom Griffiths/David Coaten|
|Singer Capital Markets (Joint broker)||0207 496 3000|
|Rick Thompson/Alex Bond|
|Houston (Financial PR)||0204 529 0549|
|Kate Hoare/Joe Burgess|
Notes to Editors
About FireAngel Safety Technology Group plc
FireAngel’s mission is to protect and save lives by making innovative home safety products which are 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