Fireangel Safety Technol... Share Discussion Threads

[simon gordon] 29/7/2018 20:44

Here's what "kiss of death" Downing have to say in their latest newsletter:

FireAngel (prev. Sprue Aegis)

We announced in our last letter that we had been building a position in FireAngel. We had been doing so on the basis of a market over reaction to litigation concerns and the stock write off (both discussed in length in the last letter). All of our valuation scenarios pointed to a wider margin of safety as the market cap had eroded by around £30 million which was more than our adjustments indicated would be prudent.

Unfortunately, what we failed to take account of was a drop off in trading in the German market. Alongside the litigation prospect, management seemed to drop the ball on trading and as a result the numbers and outlook were poorer than we had expected. Followers of this business will have become used to recurring trading issues over the last few years – all of a different nature but collectively disruptive to the creation of long term shareholder value. Evidently, we hadn’t discounted enough management’s ability to navigate trading difficulties going forwards and this led to us investing initially at a higher level than the shares currently trade.

In these situations we revisit our investment case for evidence of why we should continue to own the business. We commented before that there are legislative drivers, improving margins, and market growth, all of which should make this a viable long term investment. All of these assumptions still stand and we still believe that these should lead to profitable operations and an attractive long term investment. These attributes are hard to replicate and give the business a position of strength within the sector.

In our view, issues have arisen through the failure of management to professionalise processes and systems to a standard commensurate of a business of this size. It has been announced that the current executive chairman (Graham Whitworth) is to step aside on the appointment of a new chairman. We have great respect for Graham as one of the founders of the business which has grown revenues by over seven times in ten years. We believe that the opportunity to bring in a new chairman will help to address what we perceive to be the operational challenges of the business, the support of Graham will aid this process.

Clearly, this is a year of great change for the business. Our initial investment has not performed well, but at current levels the shares look attractive if the business can achieve a new level of free cash flow from which to grow. We believe that there are tangible growth opportunities and large contracts to be won in a number of regions which would transform the earnings of the business. However, there is a great deal of execution risk in this, alongside a transitioning management team, and we must ensure that we have the appropriate controls and assurances in place and that we understand the dynamics well enough before we commit further capital. If we cannot gain these then we will exit the position at a loss and reinvest the proceeds in a better opportunity. Watch this space.

[pj 1] 29/7/2018 19:12

The CEO appears to have had a torrid time here since being appointed. Whilst on one hand you could argue that a turnaround from this level would show the (expected) strength of character and management skill investors would expect, on the other you could argue that a change at this level could in itself be a catalyst to better times. (of which I often monitor)

Maybe the BoD hoped the resignation of the previous FD would be that catalyst? Who knows?

Very simplistically I currently await a more positive chart, I have no clue how to currently value it.

[glasshalfull] 27/7/2018 14:42

Excellent & very reasonable points Verisonal & CC2014. Wouldn’t argue with anything in your respective posts.

TBF & I have been around the block and know the company well, with an investment timeline stretching back 11 years as you’ll observe in my header update to this company board. So, while I recognise the tough time they are currently going through I do see distinct similarities with the SPRP/ FA. I initially reviewed & invested in way back in 2007.

The market are currently unforgiving due to the issues I highlighted in the header, where they’ve come unstuck in recent years. Again, can’t argue with that.

While the profits generated will ultimately reflect the valuation here, I also envisage that the brand, market penetration, product certifications, iP (over 100+ patents) & the c.£15m investment over the last few years in a new product range & in software would be worth far in excess of the market cap to any suitor. I acknowledge that’s scant consolation to any investors at the current time as they observe their investment suffer death by a thousand cuts.

I added a modest amount today and will continue to add incrementally. It may be too soon, but I believe the risk/reward basis of an investment here is weighted in my favour looking out 12/18 months for signs of improving sales & new technology penetration in the Home Connected space. If these deals come through & we see a resumption of growth in Germany, then I believe the share price will be significantly higher in this timeframe. However, also makes sense for investors to watch & wait for positive news or results.

Kind regards,
GHF

[verisonal] 27/7/2018 12:08

I too have a watching brief here, and while I think that 3-4 million profit would satisfy a market cap of 30 million, rather below your figures CC, I don't think this company is all about numbers.

Let's be blunt, despite the fine words in the header, which I am not in any way knocking, clearly a superbly researched, thought out and written piece infact, the market has watched in horror recent years of blundering and mismanagement on an appalling scale, in my opinion.

That it is cleaned up now and the kitchen sink results have passed, won't yet be enough for the institutional investors the company needs. The new team will have to prove, as TBF says that they can not only up the order book, but back it up with strong results and a strengthened balance sheet, before the money men once again can place their trust and more importantly their funds into the company.

As such I think it will be a long haul, but the key thing is it is achievable, the spadework has now largely been done.

That is why I am watching. As TBF again says, if it drops further then we can buy cheaper, if it does start to recover on the back of orders, we have the surety of a potentially core investment, albeit at a higher price.

I'm not in any way trying to deramp, and would even say if I was holding now, I certainly would personally ride out whatever period of uncertainty remains, and not be a seller.

[cc2014] 27/7/2018 11:54

Thanks BF. I'm watching and waiting as I think there's good money to be made here at some point. Timing the entry is difficult as it is not unreasonable to suggest that if things go their way this may gap up strongly on a decent piece of news and I may miss out.

So, I'm not a buyer yet but there's enough here for me to keep watching as the story is likely to pan out one way or another over the next year.

[the big fella] 27/7/2018 10:27

Cc - I agree to a certain extent, however they have had the huge settlement with BRK plus no longer hav to pay them the license fee which is another 3 mil a year (this will be earnings enhancing in itself as the sales associated with this deal had fallen off a cliff). The share price falls as there is considerable uncertainty around earnings this and next year. However they have developed a product suite over the last few years that they believe to be leading edge. They now need to go sell it. If they do then the share price will sort things out for itself. The timing of which is unknown however when I last spoke with the company they confirmed they are very active in this respect ( although if they hadn’t said that I would have been hugely surprised). In hindsight I have reinvested too early as clearly there is a seller happy to get out at any price. I will look to average down as I only have half the number of shares I want but will demonstrate a modicum of patience. If they fall further I get them cheaper. If they announce contracts I pay a bit more but have sight of the green shoots. Enough of my ramblings.

[tiswas] 27/7/2018 09:23

Hmm, someone desperate to get out, 30k at 3p below the bid.

Are we due a trading update anytime soon?

[mr hangman] 19/7/2018 11:20

I really don't know what us shareholders have done wrong, to deserve this

[the big fella] 19/7/2018 11:02

Possibly although I suspect BRK would only be interested at a knockdown price.
The key to this share is landing some high margin home connected contracts. Once they get the first one under their belt they will follow like sheep.
The share price will then take care of itself.

[tiswas] 19/7/2018 10:41

I suppose if they are not interested in bidding it is a handy sized stake to place with someone who might be?

[the big fella] 19/7/2018 10:40

Who knows. Maybe this was all part of their cunning plan, trash the share price and then stick in a cheeky 120 bid.

[tiswas] 19/7/2018 10:29

GHF

BRK Brands Europe Ltd 23.2%
LION NOMINEES LIMITED 6.9%
AURORA NOMINEES LIMITED 6.1%
ROCK (NOMINEES) LIMITED 5.4%
CHASE NOMINEES LIMITED 3.4%

Any thoughts as to how BRK will exit their shareholding? If the new Fireangel technology is any good would they be interested in bidding at this bombed out price?

Thanks

Tis

[eastbourne1982] 18/7/2018 22:04

..... and so it keeps going lower and lower, people selling at 65p now.

No position but watching.

[fillipe] 09/7/2018 11:26

Just seen it and thanks.

DERR - to read up on.... before the 23rd inst.

f

[balcony] 09/7/2018 07:05

Director buy,Only 10k but its a start

[fillipe] 07/7/2018 15:21

Hi, balcony,

Do forgive my posting here, but just a heads-up for you with AOR, perchance you are not already informed.



My guess is the above article is likely to be well received, so take care with any early Monday spiking. There's already a 400p broker tp on AOR and it's also worth a look-see back a few years, at an AOR chart, to see just how high(!).

I'm away on holiday Tuesday onwards.

f

[montyg368] 04/7/2018 19:02

I have confidence in this stock, it's got a lot of potential.

[balcony] 04/7/2018 17:46

Not sure if im correct but i think one of the posters reduced his holding due to a personal problem,Maybe leaving this cheap stock.

[bamboo2] 04/7/2018 17:31

tiwas and balcony, thanks for the replies. It is a shame I was unable to buy at today's low. Perhaps I will be buy tomorrow.

[balcony] 04/7/2018 14:55

also just paid 71.33 for 10k

[tiswas] 04/7/2018 14:42

just paid 71.33 via idealing for a very small top up despite level 2 saying 69/75 so stock around.