Sprue Aegis’ sales fall, notes cost inflation

Sprue Aegis reports lower sales for the FY, also noting significantly lower demand in France and significant cost inflation following UK’s decision to quit the EU in June 2016.

The company said it sees its FY results in line with market views.

Sales for the year were expected to be about £57.1m, from £88.3m. Operating profit, after a £0.2m restructuring charge, was seen at about £2.1m, from £12.8m.

The Group delivered an improved performance in the second half with an estimated H2 2016 operating profit of £3.0m, versus and operating loss of £0.9m before share based payments charge.

Sprue said the drop in sales was mainly driven by significantly lower demand in France.

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

“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 expects the German market will continue to provide significant growth opportunities for the Group,” the company added.

“Since the EU referendum, the Group has seen significant product cost inflation due to the weakness of Sterling against the US Dollar, which was only partially offset by the strength of the Euro against Sterling.”

Sprue added that FireAngel product returns and FireAngel warranty costs in 2016 were in line with the Board’s expectations. It expensed a core level of FireAngel warranty costs equivalent to approximately 1.0% 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, versus £0.2m at Dec. 31, 2015, primarily in relation to French stock, as previously announced.

Net of provisions, stock at 31 December 2016 had reduced by 15% to about £13.3m, from £15.6m in 2015.

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