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SPRP Sprue Aegis

77.00
0.00 (0.00%)
18 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Sprue Aegis LSE:SPRP London Ordinary Share GB0030508757 ORD 2P
  Price Change % Change Share Price Shares Traded Last Trade
  0.00 0.00% 77.00 0.00 00:00:00
Bid Price Offer Price High Price Low Price Open Price
75.00 79.00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
  -
Last Trade Time Trade Type Trade Size Trade Price Currency
- O 0 77.00 GBX

Sprue Aegis (SPRP) Latest News

Sprue Aegis News

Date Time Source Headline
10/7/202306:00RNSNONFireAngel Safety Technology Group Fifth Development Milestone with Techem..

Sprue Aegis (SPRP) Discussions and Chat

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Sprue Aegis (SPRP) Top Chat Posts

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Posted at 02/6/2018 14:22 by glasshalfull
Thanks for the response.

I believe you are incorrect in your assumptions pireric. There has been significant legislative drivers (landlords, retrofit, France) & I envisage further regulation both country & market specific that will drive growth throughout Sprues various markets. So, ultimately it may not matter if consumers care or not. Legislatively they will require to adhere.

As for recurring, well their battery operated range have a 10-year replacement cycle & they have moved into the trade market in recent years. What about legislative requirements for new builds?

In respect of brand loyalty, it’s more the investment & innovation undertaken by Sprue that will be the catalyst here. The development of FireAngel Connect & Predict are in response to the direction of the market. SPRP is changing from a supplier of hardware to a tech provider (note name change proposal). The software will enhance the protection of people & properties from risk of fire. They’ve spent years developing cloud-based tech & acquired predictive algorithm to monitor data in real time to identify properties at an increased risk of fire.

This tech should command far higher margins & meets the needs of Regional Govts, Local Authorities, Care Home providers, etc. The orders here are in the range of hundreds of thousands...a different market entirely from one where Joe or Josephine Bloggs pops down to B&Q to replace his/her alarm they’ve had for 10 years.

Should also mention that SPRP have exclusivity with Screwfix, B&Q & Tesco’s. They are expanding from 83 Tesco stores to 900. So as far as brand loyalty is concerned, FireAngel may be the only one available to consumers in many instances.

Kind regards
GHF
Posted at 15/5/2018 08:49 by the big fella
Unfortunately it has all gone horribly wrong for them. Just been one disaster after another. One step forward and 2 back. I can’t see the share price recovering for a while yet.Real shame
Posted at 15/5/2018 06:39 by simon gordon
That's a car crash RNS.

Share price looks stuffed for at least 12 months. Credibility in the knackers yard.

They gotta hope that they don't do a DIA when moving manufacturing.
Posted at 10/5/2018 17:23 by glasshalfull
Good evening everyone.

Relieved for holders that SPRP can now draw a line under this latest BRK/ Newall episode & wash their hands of them. In retrospect the extension entered into March 2014 to extend the DA with BRK was a mistake, especially in light of BRK’s failed bid for SPRP in 2013. Hindsight is a wonderful thing!

The important point about today’s release was for Sprue to break free from BRK rather than ramp up a legal fight over any alleged infringements. Also to be remembered that when SPRP were selling BRK goods they were doing so with the blessing of the BRK appointed NED Ashley Silverton on the board of SPRP (appointed 01.03.2011 - see RNS). Therefore despite SPRP taking a £3.8m hit, they are now free from the considerable distractions that the BRK action would have made.

I thought the RNS poorly worded & the plethora of emails and messages I’ve received from investors today has also seen them question the £11m outstanding balance of payments. The company have clarified the position with me & confirmed this was simply a wrap up of all outstanding monies due to BRK under the previous DA. You may recall that SPRP received goods on 90 day landed credit terms, so this was monies owed for stock in Q1 & final instalment payment of the DA...so not an £11m hit to SPRP as many PI’s feared and saw the shareprice marked down at the open as a result of this woolly RNS.

On the £11m payables to Newall, this compares to £7.7m at the end of FY16 & £11.2m at the end of FY15 to give some context.

Also important to note that Sprue DID NOT require the £3m which was drawn down & pleased to see this repaid in full.

All said I was delighted that mention was made that both businesses can now move on, “without the risk of legal claims” & with this firmly behind them I bought back in this morning. Almost 40% wiped off the share price since John Gahan left & BRK terminated the DA 8 days early.

Hopefully the company will be able to press the “reset” button on the announcement of results Tuesday & I think the current price a compelling entry point.

So essentially SPRP is an 11-year hold for me...with a 3-week sabbatical.

:-)

Kind regards,
GHF

EDIT : Edited post to include this - On the £11m payables to Newall, this compares to £7.7m at the end of FY16 & £11.2m at the end of FY15.
Posted at 10/5/2018 14:53 by harrogate
That is pretty understandable. I was very close but feel that the settlement means they can move on and the share price is now down over 65% since the warranty issue came out in early 2016 and if the dividend is 8p and the increased margin flows through from Flex it is pretty fairly priced. They are in the last chance saloon and need a good experienced FD asap
Posted at 10/5/2018 07:40 by harrogate
There seems little doubt that SPRP breached the agreement and have been ambushed by BRK - after all they have 2 board members so have planned this stock issue for a good while. Pretty poor management by SPRP on this and the way the FD left and the way that they did the loan drawdown which was not needed. Having said all that if the slate is now clean and they have transitioned to flex smoothly this is still a very decent business and it will now be about what they do about the dividend - It must be cut but to what.
Posted at 19/4/2018 19:48 by glasshalfull
Evening everyone,

I agree with many of the points raised by posters here today. Until SPRP are able to clarify the cash position & reach a resolution or compromise then I feel the share price will only come under further pressure.

Main questions for me: -

(1) New FLEX & Far East distribution networks undoubtedly required ramp up in WC (previously they had a 90 day landed agreement through the DA). I’d hope this large WC requirement a one off. However, the £3m drawdown caught us all by surprise & I too thought they had a sufficient buffer with £10m net cash per last results?

(2) Will the dividend be maintained? All depends on Q1.

(3) BRK & SPRP continue discussions & we can only hope that a settlement is agreed, as I wouldn’t welcome a prolonged legal battle over the DA stock or, even more importantly, any further litigation surrounding any alleged breach. Let’s hope they can reach agreement to place a line under all of this rather than the beginning of claim & counter claim.

(4) Why have Newall engaged in this manner? What is their ultimate goal? Is this the prelude in a further attempt to acquire Sprue or simply a partner scorned that is employing a scorched earth policy?

(5) I now question the resignation of John Gahan. It appears highly coincidental that it occurred just weeks prior to the shenanigans of Newall???

Needless to say I have reduced my holding significantly & it is no longer a material position.

With the battery issue in 2016 I loaded up substantially, recognising that although a scesmic event it appeared that they were able to contain. This time round ... well, I’ve ansolutely no idea on the likely outcome!!! Preservation of capital is my main concern.

Pity that these events now preclude Sprue from attending Mello 2018. I have a great deal of respect for the Sprue team & it’s been an exciting & ultimately rewarding journey for the last 11 years. Just hope that GW and team are able to resolve sooner rather than later.

Kind regards
GHF



EDIT - Altered a few typos. Still on hols using phone with predictive text playing havoc. Also, forgot to mention that Stockdale have also suspended forecasts until conclusion of the DA issue.
Posted at 19/4/2018 07:34 by the big fella
Glaws - agreed. The one thing they musn't do is take their eye off current trading. They have managed to trade their way through previous set backs and I have no doubt they will get through this. But it will not be without pain. Just looking at the share price valuation there will certainly be a big whole in the numbers that were announced in the guidance. Fortunately the market values based on a forward PE these days!
Posted at 23/4/2017 08:02 by glasshalfull
SPRP

What doesn't kill you makes you stronger

Sprue suffered a tumultuous 2016. They were impacted at the beginning of 2016 when Newall altered their supply terms and the subsequent sterling depreciation impact of moving from a fixed supply of products priced at $1.62 to a different metric that resulted in an significant increase in product costs.

Then came the triple-whammy profit warning that included an update on a premature low-battery signal in a number of their smoke alarms which resulted in Sprue making a £6.8m warranty provision & adopting Panasonic batteries. We also had a dramatic fall in French sales that followed on from the one-off legislative benefit & spike in sales in 2015. As well as French weakness, H1 2016 was also impacted by Germany sales due to product certification delays as they moved over to the Panasonic batteries.

Background to my investment

This was a far cry from their excellent track record of revenue and profit growth in previous year. Between 2006-2012 revenues grew at a compound annual growth rate (CAGR) rate of 49%, with PBT growing at a CAGR of 33% between 2007-2012.

Sure, investors experienced a bumpy ride in 2012 as the company were hit with a few issues (currency impact and legacy warranty claim) which resulted in Jarden (now known as Newall) making an opportunistic bid of 90p for the company that I and many other investors helped the company rebuff. Jarden /Newall only received 1.26% acceptance in the end! Yes, 1% ... the decimal point is not in the wrong place.

Sprue moved to AIM in the wake of this & then came the significant share price appreciation during 2014/15 as the company delivered 60% EPS growth in both 2013 & 2014, & the market finally woke up to the massive opportunity in France which many of us had known for years & which the company duly delivered on.

The share price rose from 15p to 355p in a period of 8 years.

Shares fall back to earth....

After these highs & then 2015's "ahead of profit" announcements on 3 occasions, 2016 proved to be a massive disappointment as previously documented with over 65% wiped off its value from high point in 2015 to low of 2016.

I've reiterated my belief in the company for over a decade now & a search of this bulletin board at the top of the investment thread will provide details of my posts & rationale on an investment here. Goodness knows I've written enough on the company through the years!

I'd like to think that I don't suffer confirmation bias in relation to Sprue...although that's open to interpretation (I can hear a few of you chuckle ;-)
I mentioned yesterday that ALL considered posts are welcome, irrespective of whether it's a holder, lurker or knocker of a company. Helps evaluation of an investment case. Sure most investors would agree.

Notwithstanding the share price falling considerably last year, I and many other investors have been richly rewarded with our original investments appreciating significantly. In my case from an initial c.20p purchase price and where we have enjoyed the impressive dividend payments that ramped up significantly over the years.

An investor always requires to reassess ones investments. A year ago, on 18th April 2016, £100m or 54% was wiped off the share price. I like many others took a significant hit. At the time I had a fairly concentrated portfolio & as Sprue was my largest holding this was quite a setback...on paper.

I speculated at the time (on this investment thread) that an EV of £34m appeared low given their track record &, while acknowledging that they had a number of hurdles to overcome, I felt confident in the ability of management & staff to turn this round. So while I may have "cut 'n run" in many other circumstance, my respect & belief in management & the investment case actually found me adding considerably to my holding. What did I say about confirmation bias???!!!

As mentioned, I continually reassess all my investments, and Sprue is no different. I have spoken with the company on numerous occasions following the 2016 triple profit-warning. While acknowledging that a number of events were outwith their control, mistakes were made. Hindsight is a wonderful thing. There are plenty of armchair CEO's on the bulletin boards!!!

Looking back, I believe that events have galvanised management & staff and sense that they are out to prove the doubters wrong.

Time of course will tell if this proves to be the case, but their H2 2016 performance and solid start to 2017 augur well. They have developed an "underpromise, overdeliver" mentality and I believe that Sprue's move to a product & service offering will ultimately find them increasing both turnover & margin...and this will translate into growing earnings while the market may afford it a higher multiple at the same time.

If they can deliver recurring revenues via the Home Connected rollout then I'm sure they will eventually command a higher valuation metric.

Essentially over the next 12/36 months I'm hoping for a double whammy of,

Higher multiple (High PER) x (Growing) EPS = Materially higher share price

Fears & Assumptions

Now onto Leadings fears & assumptions that were articulated well in post 1521 & reason for my latest update on the company.

I've reproduced each point in turn with my own comment/view below. Remember these are my own views, nothing more....and please.... DYOR!

Here goes.

- - - -
The company doesn't seem to be in charge of its own destiny. It relies on increasing government regulation to drive sales, rather than the merits of its own products, which is a weak position to be in.
- - - -

Yes, there are many legislative drivers in play across the UK & Europe and the undoubted increased legislative requirements have driven sales for the company through the years. Look at France in 2015.

This is only partly true though.

Unfortunately the other drivers of sales are when the media reports on lives lost through fires or CO poisoning that ultimately could have been saved through the purchase & installation of a smoke or CO alarm.

I think Sprue would argue that they are involved in numerous promotional activities & campaigns to drive awareness of the benefits of smoke & CO alarms. Project Shout is a case in point, as they drove increased sales of CO alarms from a very low base through raising awareness of the dangers. The success of this campaign in the U.K. has led them to support similar style campaigns in other European markets with further planned this year.

Worth reminding that Sprue enjoy being the largest supplier in 4 markets (EMEA / U.K. Retail / U.K. Fire & Rescue and U.K. Utilities & Leisure) & are attempting to increase their share of the U.K. Trade through development of their SONA range over last few years.

Recent results also reported that they had launched their products into Poland.

I'd say they enjoy a recurring revenue of sort, where their installed base require to replace their smoke and CO alarms at end of battery life (10 year replacement cycle) & also the retrofit opportunities in the large German market that I've mentioned on numerous occasions (see post 1318).

Extract:-

"North Rhine is required to ensure mandatory retrofitting of smoke alarms in all residences by 31.12.2016. This is the largest German State with 22% of the entire population (18m) & the difference here in comparison to France is the requirement for an alarm in EACH bedroom of a property alongside an alarm in all children's rooms. Also a requirement to install an alarm in the hallway of each property. Whereas, in France the requirement is only for 1 alarm per floor (think this translates to 1.6 alarms per property).

Alongside the legislative requirement for North Rhine, we have Bavaria (12m residents) with a legislative requirement in similar terms by 31.12.2017. So, 30 million residents (37% of the German population) encompassing 10 million homes...with the 10m homes estimated to require 3/4 alarms per household over the next couple of years.

Therefore, this provides an expectation for double or triple the amount of smoke alarms per property in comparison to that experienced in France.

So, I don't think they are in a weak position although legislative drivers clearly help. I also don't think the legislation in place is going to disappear anytime soon for relatively inexpensive products that save lives.

- - - -
The internet of things obviously offers opportunities, which it is trying to address, but there are others with deep pockets playing here.
- - - -

Can't argue with that!

Sprue have been developing products and software for a couple of years now with sales of connected home products underway in the UK and Germany.

They have however now made first sales & as the 2016 result announcement mentioned, this enables customers to remotely monitor their connected devices from a smartphone, tablet or inter-operate with other products/devices. This extends Sprue's core offering and opens up the potential for them to sell both products AND services which they hope will deliver recurring revenues in the future.

I've mentioned previously on this thread some of the instances where I foresee this developing ...go back to Nov 2014 and post 947 for the section I wrote on "Home Connected Trial" with my initial thoughts.

Extract: -

Sprue's Wi-Safe 2 wireless technology enables two-way communication between alarms and other wireless devices. Potential applications for Wi-Safe 2 are likely to increase due to the requirement to provide solutions to the assisted care segment of the market which is ever increasing. It's far more cost effective providing technology to monitor a persons wellbeing than provide increased provision through home visits. I would also envisage the opportunity where their technology could also act as a barometer in cases where persons suffering from a particular healthcare issue may start to show signs of degeneration or regression e.g. Dementia sufferers could significantly benefit through improved reporting of alarm/sensor activation of a "near miss" incident, such as burning toast leading to an alarm activation & developing trend or regression becoming apparent at an early stage.

Sprue's Wi-Safe 2 technology allows up to 50 alarms to be inter-linked in a single meshed wireless network meaning that, if any alarm in this network is triggered, all other linked alarms will sound. This would therefore provide an earlier & wider warning of a fire. It can also be linked to other compatible devices such as Sprue's strobe & vibrating pads.

I'd imagine that now Sprue have launched "FireAngel Wi-Safe Connect" in Germany & the U.K. we'll learn further about market opportunities/customers as this develops, such as the snippet below highlighting Sprue's recent engagement with Fire & Rescue over assisted living technology for fire safety.



- - - -
The change in distribution appears to have been driven by Newell/BRK rather than by Sprue.
- - - -

I've posted a detailed update on this fairly recently (post 1512).

In summary, I don't believe this to be the case following discussion with the company, but rather a mutual decision. A number of investors have highlighted the fact that Newall terminated rather than Sprue. Again, I have spoken with Sprue at length on this, and they presented to a number of investors during recent weeks, highlighting this as a non-issue. The fact that Sprue announced a partnership with Flex on the same day as the termination RNS should confirm this to be the case, as both Flex and Sprue would have undertaken considerable due diligence prior to signing any agreement.

Remember, after deducting Newall's DA distribution fee, this resulted in NIL gross profit to Sprue in 2016 versus £4.6m gross profit the previous year. In other words, Newall's lack of investment in the BRK brands mean that the DA was no longer profitable to Sprue & had run its course. All IMHO.

- - - -
The change in distribution arrangements is probably positive for the company in the very long term, but in the short to medium term gives rise to various problems. The first is what to do about Newell stock. A provision will no doubt be required, but how large will it be? Stock levels are anyway too high by the company's own admission.
- - - -

Again, having spoken at length with the company, I understand that no provisioning is required. I'd envisage that any of Newall's stock will simply cede to Newall on 31.03.2018. It's not as if Sprue can sell any BFK, First Alert or Dicon products after this date, although I'm sure this will be discussed between both companies amongst many other aspects to ensure an orderly transition.

In my discussion with Sprue, they mentioned that they are comfortable that stock levels will return to historic levels. Again, it should be remembered that the Newall / CICAM move precipitated the significant increase in stock levels & that this further impacted Sprue as French demand dropped off significantly around the same time as they were preparing the buffer stock.

Yes, stock levels are too high, but I'm hopeful that future announcements by the company will confirm that stock levels are returning to normal.

- - - -
Secondly, there are operational risks in bedding in the new manufacturing arrangements.
- - - -

Agreed....but they have announced the move 12 months prior to it occurring. Remember that Flex are the 2nd largest global electronic manufacturer & I'm sure experienced in managing transitions such as this. The Sprue team are very comfortable with the 12 month timescale for the transition of manufacturing and supply & I'm sure both teams will be working productively to ensure its success.

The Flex plant in Tczew, Poland already has the requisite accreditation. It's closer to Sprues end-market and especially their large customer base in Germany. Also, now far easier for Sprue's team to visit than travelling all the way to China.

The agreement with Flex also open up opportunities for Sprue, "to expand its addressable market".

- - - -
Thirdly, what will Newell do about their shareholding? They are the largest shareholder with 23.4% and have just lost their Board representation. Presumably they wish to divest their holding, so there is a massive overhang.
- - - -

This is out of Sprue's hands although I'm sure that its in the interests of both Newall and Sprue to place this with institutional investors (II's).

I have previously spoken with II's concerning Sprue (at company presentations) and know that the size of Newall's holding had previously put some off, while in some other cases II's couldn't gain a material stake in Sprue given the lack of available stock. Funnily enough, I discussed this very subject with Lord John Lee at Mello Derby in 2014.

Anyway, I'm hopeful on an orderly transition of the holding. There simply isn't the liquidity in the stock for them to dump volume into the market, especially a holding of 23%.

- - - -
The dividend is uncovered by earnings (2016 EPS 4.0p, DPS 8.0p). Forecast EPS for 2017 is 9p so the dividend is barely covered and I suspect that you won't see 9p anyway for the reasons set out above.
- - - -

Indeed, it is currently uncovered.

Sprue's executive team took the decision to maintain the dividend in light of the prospects of the company moving forward from 2016 issues.

Personally I took it as a positive & managements confidence in the future. Investors had suffered significantly with the share price drop so I found it reassuring that they felt confidence in maintaining the dividend which suggested that the issues encountered were surmountable and would be relatively short lived.

While its true that the dividend is currently uncovered, Stockdale have indicated that the dividend will rise to 9p this year and 10p in 2018. Against this they have forecast EPS of 9.1p EPS for this year and 12.0p for next. So only just covered in the current year if forecasts prove correct.

With net cash of £14.3m they can certainly afford to maintain the dividend as much of the investment has been made via last years software acquisition alongside the considerable product development they've undertaken in recent years. If stock levels normalise then this should also prove a boost to cashflow & net cash.

I would be absolutely astonished (and disappointed) if they were to cancel the 9p dividend for 2017. The company will have consulted with their brokers before this figure was issued, but again it's different opinions that make a market.

- - - -
You can also question the capitalisation policies for R&D spend and particularly the amortisation periods the company is adopting which look rather long to me.
- - - -

Yes, but in Note 6 of 2016 results they explain the multiple investments made in recent years, although I agree this is open to interpretation & ones own views on capitalisation.

They have been developing the next generation of products & iP over recent years and I'm certain will have taken guidance from auditors on amortilisation timeframe in light of regulatory guidance.

For example, they have only scratched the surface with their SONA trade range that has underwent considerable investment while the NANO had £1.4m spent on its development. Their result announcement indicated they had invested £5.4m in product development during the last 2 years.

Phew! Made it to the end.

Conclusion

Sprue announced during recent presentations that they are rationalising their product range. With the BRK brands returning to Newall it makes sense to ensure that they focus on the well regarded FireAngel brand...it should also assist them with inventory, marketing & of course has the added potential of improving cash management.

The recent result announcement listed their brands as FireAngel, FireAngel Pro, FireAngel Spec, AngelEye and FireAngel Connect.

So, in conclusion I still believe that Sprue's growth ambitions are achievable. They have a fantastic brand in FireAngel & are the market leaders in a number of sectors. I also believe that Stockdales guidance will prove to be conservative & hopeful that Sprue will continue to win a considerable share of the German retrofit & replacement market that is now available to them as their first smoke alarms were sold into Germany in 2006/07.

Hopefully they will also begin to make traction in the U.K.Trade market. I had hoped to see an uplift in their revenues given their investment in SONA last year, especially as its at higher margin to the likes of retail, but 2016 results revealed that revenue was static at £7m...and they've a potential £50m market to aim for in the U.K.

I'm also positive on them delivering new revenue streams from their Home Connected product during the next 12/18 months.

It is important that Sprue have products that cater for the various market segment & pleasingly a number of the current opportunities in the replacement cycle are for higher margin products & this plays into Sprues core strength of product innovation and development of iP for years now.

While there are a number of uncertainties as Leading indicated, Sprue have already dealt with quite a few over recent years & I'm sure will be presented with more in the future.

Investor Chronicle agree (kiss of death ;-) & gave the company a main buy recommendation in the 14th April issue.

IC conclude,

"We think the dark clouds that settled over Sprue in 2016 are already moving on and see plenty of reason for optimism. Discounting cash equivalent to 31p, the shares trade at just 14 times forecast earnings. The dividend is attractive, and while presently not supported by earnings, it is forecast to be 1.7 times covered by 2019 based on an 11p payout. BUY for the recovery and long-term growth prospects."

What doesn't kill you makes you stronger
(or so it goes ;-)

After 2016, I certainly hope so in the case of Sprue.

Kind regards,
GHF
Posted at 13/6/2016 22:03 by melody9999
I think the SPRP share price is likely to remain firm in spite of increased risk of Brexit because weak holders will have sold following the recent battery revelations.
Sprue Aegis share price data is direct from the London Stock Exchange

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