[source: FireAngel]
FireAngel (FA. ) - the supplier of home safety solutions - saw its shares jump 10% after it reported trading results ahead of its internal forecast for the six months ended 30 June 2022.
The company said demand continued to be driven by alarm regulations in the half, leading to a 15% increase in sales YoY to £25.6m. In addition, its underlying loss before tax (LBT) is expected to be substantially better than the company's previous internal budget at £1.6m, similar to the loss of £1.5m in last year's corresponding period.
Trading improved substantially in the second quarter as the supply chain disruptions that had dragged in Q1 began to improve. As a result, FireAngel sold around 1.4m units compared to 1m in Q1, with 581K products sold in June 2022 alone.
As of 30 June 2022, FireAngel had £0.7m in cash and £4.5m in debt, while its undrawn IDF facility had capacity of £4.1m. Net debt was, again, materially lower than had been budgeted for, and the company expects that to improve further in the second half due to anticipated positive cash flow.
FireAngel also commented on product development. It said it had made significant progress on the development of a next generation smoke alarm alongside partner Techem Gmbh. The project is now 27% complete, and a contracted payment of £279K was made by Techem in June for use of FireAngel's pre-existing IP within the project. The process has begun to select a manufacturing partner.
"As a result of strong momentum coming into H2 2022, ahead of the typically stronger second half of the year and eased supply chain restrictions, the Board expects the Company to meet full year market expectations, primarily as a result of the strong foundations laid in the Period and in the second half of last year. The precise progress will be determined partly by the current variability of inflation and foreign exchange rates, in particular USD/GBP." the company concluded in its statement.
Unaudited interim results for the period are expected in late September 2022.
View from Vox:
FireAngel's gross margin (GM) improvement plan has been effective in mitigating lower availability of high-margin products and strong input price pressures during the period. The 21.9% gross margin was lower than the 23.5% for the same period last year, but that's strong result under the circumstances.
The company's mitigations against inflation and volatile input prices began to have a significant effect in mid-Q2 2022, delivering a GM of 26% in June 2022. This is a notable improvement over H1 2021 performance and sets the stage for a strong second half.
The aforementioned mitigations include changes in price and sales mix, introducing new entry- and mid-level product lines, and a currency hedging policy with a focus on the GBP/USD exchange rate. Prior to these actions taking effect, FireAngel had to absorb £1.7m of input price variance in the first half.
Additionally, the company has made progress on improving its supply chain, outsourcing production of certain entry and mid-tier products to China. This move has already improved margins, with 380K units shipping to customers in only 3 months. Supply is expected to improve further as shortages of key components began to ease significantly in Q2.
CEO John Conoley gave a fair summary of H1 performance and forecast: "Despite all challenges so far, management action has preserved Company progress in the half, and we are still on track to meet our full year market expectations. The Board continues to expect a materially positive EBITDA performance for FY2022, along with a cash generative second half, thanks to strong product demand driven in part by continued regulation."
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