Sprue Aegis Share Discussion Threads

[3800] 06/4/2017 21:00

I don't know what was said at yesterdays meeting but I have noticed the brokers forecasts have been downgraded to EPS of 9.1p for 2017 and EPS 12p for 2018.
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[3800] 04/4/2017 12:22

unfortunetley due to ill health I will not be able to travel to london tomorrow. so will miss the presentation, one thing that hasn't been mentioned is the BRK share stake, have they indicated if they are going to sell it? If so over what time scale? I'm not sure how much clarity the management can give on future earnings but the maintained dividend is certainly a positive sign.

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[james188] 04/4/2017 08:43

I agree with your comments on the demise of the BRK Distribution Agreement, GHF - and it was inevitable that the MA would simultaneously be terminated - but we know next to nothing so far about the terms of the replacement arrangements. Albeit post year end, I had hoped for more information on these arrangements in the Finals. I am also unclear how significant the new supply agreement with a mystery Far East party is going to be. I hope that we learn more tomorrow.

[the big fella] 04/4/2017 08:15

Indeed you were and which will probably provide a decent bounce today.

[glasshalfull] 04/4/2017 08:12

SPRP (Sprue Aegis) 2016 results out



Dividend maintained providing a 5% yield. Importantly the company had no further surprises & indicate a solid start to 2017.

The company have ramped up investment in product development which augurs well for the future & lastly ... I was on the money with my previous post on the thread, namely that the BRK agreement added NIL to profit in 2016 as I speculated in my last post!!!

Kind regards,
GHF

[glaws2] 03/4/2017 07:27

Thanks GHF

[glaws2] 03/4/2017 07:27

Thanks GHF

[glasshalfull] 02/4/2017 21:18

SPRP

I've received communication from a few investors concerned in respect of Fridays announcement, and had an opportunity to speak with the company to clarify my initial assumption on Friday morning that this was indeed good news.

Sprue are releasing results on Tuesday and have a meeting scheduled with PI's on Wednesday, so plenty opportunity for investors to question the team and determine future prospects for themselves.

On Friday morning (post 1504) I speculated that this was potentially very good news. My rationale, simply that the termination of the Distribution Agreement (DA) & Supply agreement with Newell (formerly Jarden Corp) was something a few of us hoped the company would consider following Jarden's unsuccessful bid for Sprue in 2013.

If one looks back, an extension to the original DA was announced in March 2014 on improved terms. In 2014 SPRP paid a fee of £4.2m which under the terms of the agreement was to reduce to £2.9m in 2017. Do the ever decreasing fees each year potentially highlight the decreasing value SPRP were obtaining from the deal?

The RNS in 2014 also spoke of the the right for Sprue to source products at $1.62 under a 2-year price fix.

Since this time Jarden/Newall have indirectly caused disruption to SPRP through the relocation of CICAM (2015) which resulted in SPRP building up excess buffer stock. Then came the amended terms a year ago (March 2016) when they initiated product price increases to Sprue. Granted, the $ dollar strengthened, & $1.62 fix was renegotiated with both parties sharing the pain of this $ dollar strength through a rebate mechanism.

The following month came the v disappointing news concerning the battery issue with a 3rd party supplier. I'm unaware where DTL (a Jarden/Newall company) that manufactured all of Sprue's own-branded smoke alarms sits in respect of this issue, but suffice to say that following the hostile bid, increasing manufacturing costs and the battery issue that saw a halving of the shareprice & potential for reputational damage for the company - all issues considered - I'm delighted that Sprue are cutting ties with Jarden/Newall.

As I mentioned on Friday, Newell do not appear to have invested in BRK Brand range, while Sprue have have invested considerably in their fireAngel range; Home Connected technology (Intamac software acquisition); SONA (trade range) & NANO (CO sensor miniaturisation) in the intervening years. It therefore came as no surprise that the supply agreement was to be terminated as I would question the value Sprue would derive from the sale of old products. Was it a diminishing return not worthy of the annual fee? As mentioned above, I believe the distribution fee reduction year on year provides a clue.

Hopefully we will receive an update with Tuesday's results or Wednesday's meeting that provides clarification on whether the demand for these older products was diminishing or perhaps the returns (or lack of?) was not worthy of a fixed fee?

Onto the new agreements. Looks like an excellent partnership with Flex at first glance and the company confirmed a great deal of thought had gone into this partnership. They are very comfortable with the 12 month timescale for the transition of the manufacturing and supply agreement to Flex, & also the additional Far Eastern manufacturer.

Flextronics International have a $9 billion market cap & $25 billion annual revenue. They are the 2nd largest global electronics manufacturer in the world in terms of revenue.

From an initial glance at their blue chip customer base & web site, they appear to be a highly innovative company & excellent partner. Especially important as Sprue upscales into selling internet enabled products in relation to their Connected Home development of next generation products & services



In conclusion, I believe that the change from Newall to Flex is in the best interests of the company. I'd envisage that both Flex and Sprue have conducted considerable due diligence in the eventuality that Sprue and Newall were unable to agree an acceptable deal for both parties moving forward.

The fact that both Newall's termination (providing required 12 months notice) & Sprue's announcement of a deal with a global giant ( & also a Far East supply deal) occurred in the SAME RNS should mitigate fears. One might conclude - as announcement of termination & new agreements occurred at the same time - that this RNS was something of a formality & I'd imagine that both Sprue and Newall knew their partnership was coming to an end long before.

House broker Stockdale also released a brief update to confirm they viewed the news positively on the basis that it ended Sprue's obligation to pay the annual distribution fee of £2.9m & opened up more sales opportunities for the company. They retained their 250p target price.

Hopefully, Sprue's management team will be in a position to add further clarity surrounding the transition and opportunities via the result announcement & investor meetings in the coming week.

Kind regards,
GHF

[3800] 31/3/2017 09:34

the declining share price all week made me wonder if there was something us plebs didn't know about. Lets hope it turns out to be positive, it definatley adds to the uncertainty going folward.
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[speedsgh] 31/3/2017 09:06

Chairman certainly sounds confident but as we know words are cheap. Proof will of course be in the pudding & it will take some time before we will be able to judge whether this pudding lives up to its expectations.

"During this exciting new transitional period of our business development, we will continue to work closely with all of our stakeholders and believe the changes outlined today will significantly enhance shareholder value."

[james188] 31/3/2017 08:37

The company needs to provide investors with a much more detailed analysis of the operational and financial impact of these steps, both during the transitional period (which could be tricky) and afterwards. The investor presentation next week should be interesting. Standing room only.

[cockerhoop] 31/3/2017 08:06

Do DTL currently manufacture all of the SPRP own brands (except PACE sensors)?

[cockerhoop] 31/3/2017 07:56

GHF,

Certainly interesting!

I recall BRK product was a high proportion of SPRP sales, do you (or anyone) know a % figure?

So lower revenue but higher margins going forward. Obviously some risk involved with new manufacturing partners and perhaps obsolete stock issues. Certainly seems strange with the time and money invested in the new CICAM plant and agreement in 2016. Opportunities to expand to directly compete with BRK in US.

Not trying to be negative, just thinking aloud, lots of moving parts.

[pugugly] 31/3/2017 07:52

$16.79 NASDAQ: FLEX - Mar 30, 4:06 PM EDT increase0.23 (1.39%)
Flex Ltd. is an American multinational technological manufacturer. It is the second largest global electronics manufacturing services, original design manufacturer company by revenue, behind only Taiwan's Foxconn to original equipment manufacturers. Wikipedia Headquarters: Singapore
CEO: Mike McNamara (Jan 1, 2006–)
Founded: 1969
Subsidiaries: Flextronics International PA Inc, EX Flex Sdn Bhd, more


Appointed by SPRUE AEGIS 31/3/17 TO REPLACE BRK -- Production to be from a plant in Poland - Initial gut reaction Good - Inside Commmon Market - Tariff free and cut out annual fees BUT execution risk and also - more importantly - what will be the reaction from the distributors and agents.

[glaws2] 31/3/2017 07:35

GHF - it sounds, though, that Newell served notice on SPRP ?

[glasshalfull] 31/3/2017 07:21

Good news this morning.

Termination of the DA & Supply agreement with Newell (formerly Jarden Corp) was something a few of us hoped the company would consider, following their unsuccessful bid for Sprue a number of years back.

Newell had not invested in the BRK Brands while Sprue have have invested considerably in fireAngel, SONA & NANO. So no surprise on termination of the supply agreement.

Looks like an excellent partnership with Flex at first glance.

GW's statement is telling,

"Whilst the relationship between Sprue and Newell was successful, moving forwards the changes we have announced today will allow Sprue to focus more on developing its core and emerging technology strategy. With its global manufacturing footprint and extensive manufacturing experience, we believe Flex is well positioned to help Sprue expand its addressable markets beyond Europe. Combined expertise with greater independence is expected to accelerate development of new products and growth with greater control."

---

Kind regards
GHF

[robow] 16/3/2017 08:18

Results on 4th April with an investor presentation at 4.30 on the 5th for which you need to register.

[robow] 16/3/2017 08:13

Results on 4th April with an investor presentation at 4.30 for which you need to register

[greenroom78] 16/2/2017 15:55

2x 20k blocks sold today by the looks of it.

[pugugly] 16/2/2017 12:43

Short term profit taking ??

[greenroom78] 14/2/2017 16:29

I was just about to ask the same thing.

Lovely breakout and no resistance until well over 200p (except maybe the round number of 200p).

[robow] 14/2/2017 16:27

tipped somewhere?

[greenroom78] 01/2/2017 18:14

Joined you all in here today, quite like how the chart appears to be turning up with price now above 50, 100 & 200sma and all of those SMAs are turning up. Fundamentally they appear to be getting on top of last year's problems and have a decent cash pile too.

Thanks to GHF (as always) for sharing his research.

[pugugly] 24/1/2017 21:29

GHF: Thanks for updated header.

[glasshalfull] 24/1/2017 20:13

3800 - Certainly...now added to the header for future reference with update made to 2016 forecasts following the Westhouse update today.

I'd be very disappointed if EPS wasn't 30%-50% higher than the Westhouse forecast for 2018.

Kind regards,
GHF