Sprue Aegis Share Discussion Threads

[bozzy_s] 18/4/2016 16:25

Some familiar and friendly faces on here. This strikes me as possibly a little overdone for what would hopefully be a one-off issue, with potentially some of the costs reclaimable from battery suppliers.

Genuine issues flagged such as possible BREXIT, overstocking by customers, make it a risky play at this price. But with cash in the bank, no debt, profitable history, dividend history, I'm a speculative buyer at 125p. If FY dividend is maintained at 8p and outlook is ok, we could see 150p sometime in 2016.

[pugugly] 18/4/2016 16:14

Forget the battery problem - It can be worked round (imo) Of far greater concern is that the sales boost was caused by legislation in France - As a result the French market was heavily over supplied - not just by Sprue Aegis but by competitors as well leaving the whole market overstocked -

This overhang could be around for a long time given that the claimed replacement cycle is in excess of 5 years [I am looking at a First Alert packaging which claims 8 years]

What is not clear (imo) is what is the natural level of ongoing business - I suspect significantly less than current forecasts given the apparent unknown level of pipeline stock.

I certainly have been unable to find any indication of this in any of the announcements - If anyone has a handle on the level it would be appreciated.

[tsmith2] 18/4/2016 16:12

Has the selling been overdone? Possibly, still around £25mn in cash, showed allow it to ride out blip or two?Will be interesting to see late reporter trades. Suspect may be an II selling down residual interest, there was one that had about 1m that it seemed to be selling

[thomasthetank1] 18/4/2016 14:36

Read Stockdale Securities's note on SPRUE AEGIS, out this morning, by visiting hxxps://www.research-tree.com/companies/uk/electrical_and_electronic_equipment/sprue_aegis_plc
"As a consequence of recently identifying an issue with certain batteries supplied by a third party supplier, Sprue has substantially increased its warranty provision at 31 December 2015 to £6.8m (from £1.3m previously and £0.9m in 2014). As this will largely be an operating expense, Sprue now expects adj. EBIT for 2015 to be £7.3m rather than the £12.1m it had previously guided. However, until the final audited results are released next week we are suspending our forecasts, target price and recommendation…;"

[tsmith2] 18/4/2016 12:38

Paul Scott has done a good write up on these..avoid

[pally12] 18/4/2016 12:32

There seems to be alot of buys showing as sells just bought 12072 showing as sell

[gnnmartin] 18/4/2016 12:19

Sprue has moved over the last 3 months from a company that looked to be confidently growing without any stumbles to one that is stumbling and possibly not growing, and most of the move happened this morning.

The battery issue is unfortunate, but as post 1354 points out, not without precedence. The tightening of the supply terms in March indicated that Sprue are less masters of their product than I thought. The oversupply in France shows Sprue are less able to track their market than one would wish and perhaps expect. But for me the real disappointment is Germany, which Sprue had been suggesting would take up the slack from France but is now suffering weaker sales.

Like all holders, I guess, I wish I had cashed in a few at £3. I doubt I'll sell any now.

[speedsgh] 18/4/2016 12:04

Would expect Jarden Corporation/Newell Rubbermaid will be watching today's SPRP news/share price decline with interest. Might be an opportune time for them to make a renewed play for Sprue?

[eastbourne1982] 18/4/2016 10:51

This is staying on my watchlist however I don't see it as a compelling value buy at over £1.

[its the oxman] 18/4/2016 10:39

Institutional holders will want to cut positions here but who will buy? Small investors hoping for a bounce are unlikely to be able to soak up the supply. Tricky.

[rcturner2] 18/4/2016 10:18

As in "I can't think how to respond to this comment, but I'll red thumb the comment as that is better than nothing".

[eastbourne1982] 18/4/2016 10:17

I find it amusing that someone keeps giving the thumbs down to comments, if you disagree that is fair enough but what do you actually disagree with ? Waits for another thumbs down !!

[eastbourne1982] 18/4/2016 10:04

I don't think the battery issue is the main cause for the fall today, the trading statement was horrible and could have caused a 40% drop in these markets.

[eastbourne1982] 18/4/2016 09:46

If this is going to be making 2 - 3 million a year and there is circa 20 million in the bank the business is worth 40 - 50 million at a push, I don't see any reason to buy today despite the huge fall.

[phowdo] 18/4/2016 09:46

Battery problems are hardly anything new for these lot...

Quoting my own post (on CRs thread) from a year ago...
"
phowdo - 27 Apr 2015 - 09:08:41 - 199667 of 224854
SPRP - had some FireAngel smoke detectors fitted by the fire brigade - sealed battery meant to last for 10yrs yet both failed just after 2 years. A common experience apparently.
...
"

[pj 1] 18/4/2016 09:17

extader. I have no specific knowledge of Sprue's products but I think the problem is more complicated than just changing the battery after 3 years rather than 6 (10?). Packaging, data protection sheets, legalities, compliance issues etc all also carry a cost.

Often, and again based soley on own experience, the best course of action with any major quality issue is to remove any defect or suspect items from the production and logistics lines. These lines are then re-quantifies with new stock which is tested to the revised standards. The rework is dealt with in isolation and kept away from the new lines, until complete. Once the scale of costs etc is known then these, or part of these, will be attempted to be reclaimed from the supplier in question. That takes time, hence SPRP putting their own house in order via warranty costs etc, as that is a seperate issue to them claiming any damages. They also have to keep their own customers happy during this time.

Unfortunately many manufacturers with quality issues never isolate the problem once known, compounding the problem.

[rcturner2] 18/4/2016 09:11

I'll be perfectly frank, if this halved from here, I would not be at all surprised.

[zoolook] 18/4/2016 09:07

Yes wouldn't buy on a PE of 35 if I didn't think that this was a temporary situation and that a spike back up to previous performance was likely.

[extrader] 18/4/2016 09:06

Hi PJ 1,

From a manufacturing background, how much of an issue is it if the customer has to change batteries after 3 years instead of after the 6 years that are warranted (if I've understood the issue correctly) ?

It's not as though these fixes sound very complicated and alarms have to be tested/inspected pretty regularly anyway, no ?

ATB

[rcturner2] 18/4/2016 08:57

The way the statement is worded certainly seems to imply that Sprue is shouldering the cost. Why else the huge increase in the warranty provision?

I have not questioned their integrity.

[pj 1] 18/4/2016 08:54

RCT. How do you know SPRP is shouldering the cost? Some things take time.

I had worked in manufacturing for 15 years, re-work is never easy and alot of other questions open up. But to question managements integrity after years of success is below he belt imo

[rcturner2] 18/4/2016 08:51

zoolook, they are forecasting £2m profit

even after the 40% fall the market cap is £70m

so even on the management forecast, the PE is 35

I do not understand why private investors are so attracted to businesses that are failing

[rcturner2] 18/4/2016 08:48

I cannot possibly invest back in here as I now have zero confidence in the management. Quite how they could have a supply management structure that allows something like this to happen I don't know. Why is Sprue shouldering the cost for example? If the battery manufacturer is at fault, where are they in all this? What is the insurance situation?

[zoolook] 18/4/2016 08:47

Fall looks well overdone. I've bought more. Still forecast to be profitable for year. Money in bank, no debt. Stumbles to be expected in a growing company - maybe not this many but that has thrown up a buying opportunity IMO operational issues temporary rather than permanent though self- inflicted