LONDON (ShareCast) - (ShareCast News) - Home safety products supplier Sprue Aegis posted a trading update on Tuesday, ahead of the release of its audited final results for the year ended 31 December, which it said are expected to be in line with market expectations.
The AIM-traded company said sales are expected to be approximately £57.1m, down significantly from £88.3m, with operating profit - post a £0.2m restructuring charge - expected to be about £2.1m, dropping from £12.8m.

It said it delivered an improved performance in the second half with an estimated H2 operating profit* of £3.0m, compared to an operating loss of £0.9m before a share-based payments charge in the first half.

The reduction in sales was mainly driven by significantly lower demand in France, the board claimed.

However, sales into Germany recovered strongly in 2016, up 52% on 2015, primarily underpinned by the launch of new FireAngel products in H2 2016.

Due to the phased introduction of smoke alarm regulation in further states in Germany and the timing of the commencement of product replacement cycles, the board said it expects the German market will continue to provide significant growth opportunities for the group.

Since the EU referendum, Sprue said it has seen significant product cost inflation due to the weakness of sterling against the dollar, which was only partially offset by the strength of the euro against sterling.

FireAngel product returns and FireAngel warranty costs in 2016 remained in line with the board's expectations.

Sprue expensed a core level of FireAngel warranty costs equivalent to approximately 1% of expected 2016 sales, and released part of the FireAngel warranty provision to offset warranty expense above that core level.

In 2016, the board increased the stock provision by £0.5m to £0.7m, primarily in relation to French stock.

Net of provisions, stock at 31 December had reduced by 15% to approximately £13.3m.

The company's balance sheet remained strong with £14.3m of cash at the year end, though that was down from £22.4m, and it maintained its no-debt status.

Sprue said it expects to announce its final results for the year ended 31 December in late March.

"We are pleased to report good progress across the group," said executive chairman Graham Whitworth.

"The team worked effectively to address the key challenges which is reflected in the stronger performance in H2 2016."

Whitworth said the functionality of home safety products was continuing to evolve, and its R&D team was working to ensure the group maintains its 'best in class' reputation.

"We are well placed to capitalise on emerging opportunities including sales of connected home products."

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE