15th May 2018 12:08
LONDON (Alliance News) - Shares in Sprue Aegis PLC shed a quarter of their value Tuesday after it reported sales in 2018 were 20% lower than in 2017 and as it also reported that 2017 profit fell after the termination of a significant distribution and manufacturing relationship.
Shares in Sprue Aegis were 25% lower at 99.25 pence on Tuesday.
In 2017, pretax profit at the fire protection products maker narrowed to GBP545,000 from GBP1.6 million the year prior. This was after revenue fell to GBP54.3 million from GBP57.1 million the year before.
Profit performance suffered despite being helped by a fall in cost of sales to GBP36.3 million from GBP40.8 million.
The hit to profit was chiefly due to a GBP3.8 million charge associated with the settlement agreement with BRK Brands Europe Ltd.
In late March, Newell Brands Inc - which now owns BRK and Jarden Corp - decided to terminate its distribution agreement with Sprue Aegis as well as its manufacturing agreement with the company. This resulted in a delay to its results.
Sprue Aegis expected its 2018 cash flow to be affected by around GBP3.8 million as a result of the BRK termination.
"We worked throughout 2017 to put in place the fundamental building blocks to install an independent supply chain and to position the company as a dynamic, technology-led growth business," Sprue Aegis Executive Chairman Graham Whitworth said. "We are pleased with what we achieved last year."
Whitworth added: "Whilst the board believes that manufacturing Sprue's products at Flex, Poland, plus the investment into technology building blocks will open up growth opportunities, and is the right move for the group strategically, in the short term, this has impacted the group's trading as management has been focused on the transition plan, and latterly, on settling the dispute with BRK amicably."
In 2018, revenue over the four month to the end of April has been 20% lower. This is "primarily because of lower sales into Germany due mainly to overstocking."
"With disruption from the transition to the new FireAngel range, new product introductions and lower than anticipated sales into Germany in H1 2018 due mainly to overstocking, the board expects that the group will report an operating loss for H1 2018," Whitworth added. "In addition, the group's sales and operating profit for the full year are likely to be significantly below the most recent market expectations. The company's 2018 results will be more heavily weighted towards H2 than has been the case in recent years as we install new FireAngel retail ranges, potential new sales emerge and sales into Germany are expected to recover."
Despite this, Sprue Aegis expects results in 2019 to "improve significantly".