FireAngel Safety Technology Group plc
Annual Report and
Accounts 2018
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Operational headlines
• On track to be an independent technology-led business with connected
propositions that complement and drive core product sales, including change
of name to FireAngel Safety Technology Group plc to more closely align the
corporate and brand structures
• End of operational relationship with the Group’s previous manufacturing
and distribution partner removes the historic obligation to pay an annual
distribution fee of £2.9 million (£0.9 million in 2018)
• Action taken in the Group’s distribution channels to move from a traditional
distributor model to more value-added reseller partnerships
• New FireAngel ranges, manufactured through our two new manufacturing
partners, have been well-received by both new and existing customers
• Signed strategically significant partner agreement with Mears to supply the
Group’s integrated connected home management system to Mears’ clients,
and becoming Mears’ preferred fire safety product provider
• Appointed as exclusive supplier of smoke and heat alarms to St Leger Homes
• Scottish legislation which came into effect since the year end demanding
greater safety standards has led to significant and ongoing contract wins in the
supply of FireAngel interconnected smoke, heat and CO alarms to a number of
Scottish housing associations
Visit our investor website for
the latest news and announcements:
www.fireangeltech.com
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FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel’s mission is to protect, save and improve our customers’ lives by making innovative, leading edge technology home safety products simple and accessible.FireAngel is one of the market leaders in the European home safety products market with its own and growing connected home products proposition. Its principal products are smoke alarms, carbon monoxide (‘CO’) alarms and accessories sold under the principal brand of FireAngel. The Group has an extensive portfolio of patented intellectual property. Barriers to entry are high with considerable costs of product certification and significant know-how required to sell home safety products.The introduction of new technologically more-advanced products and new safety legislation, together with increasing levels of awareness of the dangers of smoke and CO, continue to drive the Group’s sales. FireAngel manufactures CO sensors at its subsidiary, Pace Sensors, for use in its CO alarms. All other manufacturing and product assembly is outsourced and almost all of the Group’s product cost base is sourced in US dollars. FireAngel’s own smoke, heat and accessory products are manufactured by Flex in Poland. The Group’s own CO detectors are manufactured at Pace Technologies in China.FireAngel enjoys the leading sales footprint of any home products supplier across UK Retail and is the largest supplier to the UK’s Fire & Rescue Services (‘UK F&RS’), both of which are a strong endorsement of the quality and technical capability of our products. The Group also supplies the UK Utilities sector with British Gas and Scottish Gas as its key customers. FireAngel has a well-established but low market share of the UK Trade sector and is seeking to significantly expand this with its trade range of products. The Group also makes significant sales into Continental Europe, mainly selling in Euros through a network of independently-owned, third-party distributors.Financial headlines • Revenue £37.6 million (2017: £54.3 million)• Underlying operating loss1 £2.0 million (2017: underlying operating profit1 £4.7 million) • Operating loss £5.8 million (2017: operating profit £0.5 million)• Adjusted gross profit2 £9.7 million (2017: £18.0 million)• Adjusted gross margin2 25.7% (2017: 33.1%) • Exceptional costs totalling £3.7 million and a share-based payments charge of £0.1 million (2017: exceptional costs of £3.8 million; share-based payments charge of £0.4 million)• Underlying loss before tax3 £2.1 million (2017: underlying profit before tax3 £4.7 million)• Loss before tax £5.9 million (2017: profit before tax £0.5 million)• Basic and diluted EPS (9.8p) (2017: 1.1p)• Maintained capitalised development costs and software investment at £3.7 million (2017: £3.6 million)• Net debt at 31 December 2018 £4.4 million (2017: net cash £3.3 million). Since the year end, the Group and HSBC have agreed to move from a revolving credit facility to a more efficient invoice discounting and overdraft facility• Announcement post year end of placing and open offer to raise £6.0 million to accelerate growth• Since the year end, the Group implemented a reorganisation and restructuring programme which will yield annualised savings of approximately £0.4 million, as well as further ongoing cost-saving initiatives to ensure a more efficient and effective use of resources1 Underlying operating loss in 2018 of £2.0 million is before exceptional charges of £3.7 million and a share-based payments charge of £0.1 million (2017: underlying operating profit of £4.7 million before an exceptional charge for the BRK settlement of £3.8 million and a share-based payments charge of £0.4 million). A reconciliation of ‘alternative performance measures’ to measures prescribed in financial standards is given on page 17.2 Adjusted gross profit is stated before the BRK distribution fee of £0.9 million (2017: £2.9 million) and before the exceptional charge for the stock and disposal provision of £1.1 million (2017: exceptional charge for the BRK settlement of £3.8 million). Adjusted gross margin is adjusted gross profit as a percentage of revenue.3 Underlying loss before tax in 2018 of £2.1 million is before exceptional charges of £3.7 million and a share-based payments charge of £0.1 million (2017: underlying profit before tax of £4.7 million before an exceptional charge for the BRK settlement of £3.8 million and a share-based payments charge of £0.4 million).Contents Introduction3 Overview4 FireAngel at a glance6 Chairman’s statementStrategic review8 Group Chief Executive’s review 11 Our proprietary technology12 Corporate social responsibilityPerformance review13 Financial resultsGovernance18 Board of Directors20 Corporate governance report25 Audit Committee report27 Remuneration Committee report31 Statutory Directors’ report35 Risks and risk managementFinancial statements37 Statement of Directors’ responsibilities38 Independent auditor’s report41 Consolidated income statement41 Consolidated statement of comprehensive income42 Consolidated and company statement of financial position43 Consolidated and company cash flow statement44 Consolidated statement of changes in equity44 Company statement of changes in equity45 Notes to the financial statementsOther information69 Corporate directory69 Shareholder informationThe Strategic Report comprises the Chairman’s Statement, the Strategic Review, the Performance Review and the Risks and Risk Management sections. Introduction
FireAngel at a glance
Our business model
The FireAngel story started in 1998 when the business model was conceived by Nick Rutter, one of the two founders,
who wanted to design and sell products:
• where existing product solutions did not meet customer needs;
• which have global sales potential;
• manufactured using plastics and electronics (as this was the area most familiar to Nick); and
• which would provide an opportunity to take advantage of economies of scale of manufacture with low cost manufacturers.
After a huge amount of product testing
and validation work, the business, with
Nick as Managing Director, launched the
world’s first plug-in smoke alarm. Since that
groundbreaking design, the Company has
gradually extended its product range and
expanded to become the business it is today
with a comprehensive range of smoke, CO
and wireless products sold under its principal
FireAngel brand.
Our customer-centric approach, combined
with a comprehensive product range, world-
class third-party manufacturing capabilities
and high barriers to entry through product
certification, makes our business model robust
and defensible. In turn, this enables us to build
strong, long-lasting partnerships with key
customers to maintain and gain market share.
Over time, we want to become the European
market leader selling FireAngel branded
products of choice in each of the markets
we serve.
The product and brand advocacy we have from
supplying smoke and hearing-impaired alarms
to the UK F&RS is illustrated through strong
customer loyalty across our business. This
philosophy shapes our business model as we
continue to listen to our customers’ needs to
develop the products they want in the future.
We have an exciting pipeline of products
coming through including an enhanced range
of connected home products that incorporate
FireAngel’s unique predictive algorithm to not
just detect fires but to predict where fires are
more likely to occur.
Sourcing of our own smoke, heat and
accessory products from Flex in Poland will
enable us to concentrate our product range,
reduce lead times and leverage economies
of scale from a manufacturing facility just a
short flight away. It also allows us to bring
manufacturing closer to our core markets
with Flex’s experience helping us improve
our design for manufacture.
FireAngel’s Purpose is to protect, save & improve
our customers’ lives by making innovative, leading
edge technology simple & accessible.
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2001
First domestic smoke alarm
to utilise environmentally
friendly PET packaging
First domestic smoke
alarm to utilise SMT
1998
FireAngel established
2003
First UL Listed
rechargeable
2007
SSP launch award-
winning range of
accessory products
2009
First domestic smoke
alarm to incorporate
diagnostics
2015
Biggest wireless footprint
in the EU
2016
Launch of Wi-Safe Connect cloud
based B2B monitoring system
2014
Launch of lowest power AC
alarm in Europe
2017
Launch of NG-9B the first battery
powered natural gas alarm in Europe
2019
2018
Launch of Co-Exist product
range utilising common smart
home protocols
2012
First domestic alarm to utilise 100%
EOL smoke test in production
2010
First domestic battery smoke alarm to
utilise aerosol calibration in production
First domestic battery smoke alarm
to use multi-sensor technology
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Number 1
100+
Supplying 90% of the
UK’s Fire & Rescue Services
Registered technology
patents & further pending
Unique
In-house CO sensing
technology
Think Ahead
Think Customer
Think Team
Three
Supplier / manufacturing
partnerships
Four
Brands targeted at
different markets
Influential
Member of Industry
and Trade Associations
4
5
Scalable & Defensive
Leading
Established
Business model with high
barriers to entry
Designer & supplier of smoke, heat and CO
alarms and wireless connectivity in Europe
Third party distribution across
Europe, the Middle East and Asia
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018 Introduction
Chairman’s statement
“I am pleased to have joined FireAngel at this time. The Group
had a challenging year in 2018 and has been very active in
addressing the issues it has faced. The opportunity presented
by growing demand for connected home solutions is significant
and I look forward to contributing to the Group during this next
phase of growth.”
John Conoley - Chairman
Results
For the year to 31 December 2018, the Group’s revenue was £37.6 million (2017: £54.3 million). The Group made an underlying loss before tax1 of
£2.1 million (2017: profit of £4.7 million). After charging £3.8 million for exceptional costs and share-based payment charges (2017: £4.1 million),
the consolidated loss before tax for the year was £5.9 million (2017: profit of £0.5 million).
The adjusted gross profit2 decreased from £18.0 million to £9.7 million and represented an adjusted gross margin2 of 25.7% (2017: 33.1%).
1 Underlying loss before tax in 2018 of £2.1 million is before exceptional charges of £3.7 million and a share-based payments charge of £0.1 million
(2017: underlying profit before tax of £4.7 million before an exceptional charge for the BRK settlement of £3.8 million and a share-based payments
charge of £0.4 million).
2 Adjusted gross profit is stated before the BRK distribution fee of £0.9 million (2017: £2.9 million) and before the exceptional charge for the stock
and disposal provision of £1.1 million (2017: exceptional charge for the BRK settlement of £3.8 million). Adjusted gross margin is adjusted gross
profit as a percentage of revenue.
Net debt at 31 December 2018 was £4.4 million (2017: net cash £3.3 million). The Company has separately announced today details of a placing
and open offer to raise £6.0 million to accelerate recovery and specifically to reduce indebtedness, invest in the Connected Homes proposition
and for working capital purposes.
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Dividend
People
Consistent with the decision not to pay an
interim dividend for 2018 in light of the costs
of the BRK settlement and the Group’s
trading performance, the Board is not
recommending payment of a final dividend
for the year. The total dividend payable for
2018 is therefore nil pence per share (2017:
2.5 pence per share).
Our dividend policy will remain under review
with the Board’s desire to recommence
dividend payments when it is prudent to do so.
Board changes
There were two significant changes to the
Board during the year and subsequently.
In March 2018 the Group announced the
resignation of John Gahan, the Group
Finance Director. Zoe Fox, Finance Director
of the Group’s principal subsidiary, ran
the business’s finance function until Mike
Stilwell joined as Group Finance Director in
December 2018. I would like to thank Zoe for
her hard work and effort in performing these
dual roles for most of the year.
In June 2018 Graham Whitworth, the Group’s
Executive Chairman, indicated his intention
to step down as Executive Chairman once
a replacement Non-Executive Chairman
had been appointed. The Nominations
Committee conducted a thorough search
resulting in my appointment as Non-
Executive Chairman in January 2019.
Following my appointment, Graham has
been appointed part time Executive Director
of the Group for twelve months with a view
to becoming a Non-Executive Director on
the expiry of the twelve months. I wish
to place on record the Board’s thanks to
Graham for his outstanding contribution to
the Group on many fronts over nearly twenty
years. I am delighted he is continuing in an
executive capacity to ensure that his wealth
of knowledge and experience is not lost to
the Group. Graham’s immediate priority
will be in leading the sales team to focus, in
particular, on connected home opportunities.
2018 was a very difficult year for FireAngel.
Internal and external disruptions placed
significant pressures on employees who
responded with exceptional commitment to
the needs of our customers and I thank them
sincerely.
Brexit readiness
The Group has carefully considered the
impact of Brexit on its operations and in
preparation for this has signed an agreement
to utilise warehousing facilities in Rotterdam.
This will minimise the cost and disruption
of any likely changes to duty regimes or
operational processes.
Strategy
The ending of the relationship with BRK, and
the transition of manufacturing to Flex and
our Far East partner, has successfully reset
the direction of the Group in line with the
Board’s objectives.
Whilst acceptable production yields and
capacity have been achieved, the focus
in the short term is to continue to improve
process efficiency to reduce the costs of
production. I am confident that Flex remains
the right partner to support the Group’s
strategic objective of developing technology
which provides customers with innovative
and market-leading products and solutions.
The current pipeline for new connected
product launches planned for this year
has given the Board confidence to expect
a significant contribution to revenue from
connected solutions in 2019 and beyond.
To support this, steps have been taken to
align the Group’s focus and resources to
best achieve this ambition. The role of Nick
Rutter, the Group’s Chief Product Officer
and a founder of the business, has been
redefined to now directly focus on connected
home sales and pipeline development.
To take advantage of the technology
deliverables, the Group has also commenced
a review of the structure, processes and skills
within the business to ensure that these are
appropriate and optimally aligned to deliver
its core smoke and CO products, together
with connected propositions.
Together with its focussed investment in
product development, these changes are
expected to position the Group to meet the
growing demand for its core product and
connected solutions through its unique,
patented technologies, expertise and strong
brand. The Board fully expects connectivity
and interoperability between devices with
external monitoring and messaging to be at
the heart of medium to longer-term growth
and profitability.
Outlook
Sales in the first three months of 2019 are
ahead of the Group’s budget. Sales to the
Group’s distributor to the German market are
benefitting from the move away from bonded
sales at the end of 2018. The Group has also
announced a number of contract wins either
side of the year end linked to the requirement
for greater safety standards introduced in
the Housing (Scotland) Act, which came into
force on 1 February 2019.
The Board has already taken steps to reduce
the cost base and has identified a range
of opportunities to improve performance,
including reducing stock levels, improving
gross margin, rationalisation of sales
propositions and better operational
organisation.
Whilst the Board is disappointed with
2018’s financial performance, it remains
confident that the Group’s transition from a
pure standalone hardware safety products
supplier to a provider of connected safety
solutions will underpin strong medium to
longer-term growth and profitability.
John Conoley - Chairman
29 March 2019
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OverviewSince its admission to AIM in 2014 the Group has delivered significant profits and made good progress in meeting the objectives set by the Board. The business has consistently generated a profitable result despite the emergence in 2016 of the third-party supplied battery impedance issue for which the Company had to provide for significant warranty costs, and the settlement in May 2018 with the Group’s former manufacturing and distribution partner as part of which the Company agreed to write off unsold stock previously contracted to be purchased back by the other party.Against that background of profitability and resilience, the Board acknowledges the regrettably poor results for 2018 with the Group recording an underlying loss on its operations and incurring substantial further one-off costs. There are three main reasons for this sharp decline: 1. Lower than anticipated sales into EuropeRevenue was severely impacted by overstocking in the German trade sector. Significant purchases were made by the Group’s distributor at the end of 2017 which meant that although it continued to sell throughout 2018, this demand was fulfilled from 2017 stock, rather than from new stock purchased from the Group. In addition, the change in mix with reduced German trade sales as a proportion of total revenue led to a decline in the overall gross margin achieved.2. BRK Settlement Agreement As announced on 10 May 2018 and detailed in the Group’s Annual Report for 2017, FireAngel signed a settlement agreement (the ‘Settlement Agreement’) with BRK Brands Inc, BRK Brands Europe Limited, Jarden LLC and Detector Technology Limited (together ‘BRK’) in full and final settlement of all matters between the parties. As a result, the Group booked a £3.8 million exceptional charge in its final results for the year ended 31 December 2017.Although the charge relating to this was accounted for in the financial results for 2017, the investigations into the circumstances which led to the settlement, its negotiation and final resolution absorbed significant amounts of management time over a number of months. This proved to be a huge distraction away from execution of the Group’s strategy.Termination of the distribution agreement reduced the Group’s £2.9 million annual distribution fee commitment to BRK to £0.9 million in 2018 (which will be saved completely thereafter). However, this benefit was eroded by the sale of BRK products at reduced selling prices to clear the stock which the Company held prior to the end of the agreement. This detrimentally impacted margin and served to cannibalise sales of the Group’s own FireAngel products.3. New sourcing arrangements in the supply chainIn 2017’s Annual Report, the Company confirmed that Flex in Poland had commenced manufacture of FireAngel’s products and that a new Far East based supplier had commenced supply of alternatives to the BRK/First Alert products.Significant time and resource was invested in planning to ensure the business was ready for this transition. However, despite a thorough migration process, short-term delays in reaching production capacity and efficiency impacted both the availability of product and the product cost in the second half of the year. Fuller details of these issues and other factors affecting the year’s results are set out in the Strategic Review and Performance Review sections of this Annual Report.FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018 i
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Strategic review
Group Chief Executive’s statement
“Whilst 2018 was a very challenging year for the Group, we have made good
progress in delivering our strategy to become an independent, technology-led
business with connected propositions that complement and drive core product
sales. Recent announcements detailing a number of contract wins demonstrate
the growing strength of our connected proposition and the progress being made
within key markets. Legislative change, the heightened awareness of connected
products and our new ranges, combined with a series of self-help initiatives,
mean we are now very well placed to return the business to strong medium
to longer-term growth and profitability. To accelerate this recovery, we have
taken steps to restructure our banking facilities to better meet our needs and
announced today a placing and open offer to raise £6.0 million.”
Neil Smith - Group Chief Executive
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Revenue split between the Group’s business units and Pace Sensors is as follows:
Trade1
Retail1
UK F&RS
Utilities
Total sales in the UK
International
Pace Sensors
Total
2018
£m
12.4
8.3
4.2
2.3
27.2
8.8
1.6
37.6
2017
£m
13.7
9.3
4.5
1.9
29.4
21.9
3.0
54.3
Inc/(dec)
Inc/(dec)
Proportion
Proportion
2018
2017
£m
(1.3)
(1.0)
(0.3)
0.4
(2.2)
(13.1)
(1.4)
(16.7)
%
-9%
-11%
-7%
21%
-7%
-60%
-47%
-31%
%
33%
22%
11%
6%
72%
24%
4%
%
25%
17%
8%
4%
54%
40%
6%
100%
100%
1 From 1 January 2018, certain customers previously reported within the Retail business unit, such as Screwfix and Toolstation, are now reported
through the Trade business unit. The 2017 comparatives have been adjusted accordingly.
International
The most notable decline in revenue was
in International due to overstocking at our
German Trade distributor at the end of 2017.
Whilst they were continuing to sell through
2018 they were not buying to the expected
levels which led to a marked reduction in
the Group’s sales in the year. I am pleased
to report that sales into German trade have
returned to more normal levels in the first
months of this year with the Panasonic
battery equipped ‘P Line’ range continuing to
build brand recognition within that sector. In
addition, the Company has moved to a non-
exclusive distribution agreement in Germany
which will allow the Group to take advantage
of wider distribution networks.
Sales of CO alarms in Germany were
over 200% higher than the prior year as
consumers become more aware of the
dangers of CO poisoning and the impact of
the continued marketing focus of our strong
CO proposition. This growth has been
evident through our established German
Trade channel and through German Retail,
a new market for FireAngel, where we now
supply leading DIY retailers such as Bauhaus
and OBI.
Good progress continues to be made with
sales into Nordic and Southern European
countries, and Poland.
Reflective of the burgeoning legislative
drivers, in 2018 we won new business in
the Far East as Singapore introduced new
smoke alarm legislation requiring the fitment
of 10-year sealed-for-life smoke alarms in all
new-build properties.
The Group continues to build an exciting
pipeline of core and connected opportunities
internationally for 2019 and beyond.
UK Trade
At around a third of the Group’s revenue, the
UK Trade sector represented the highest
proportion of total sales in 2018 with income
of £12.4 million. This was down 9% on
the previous year as trade customers were
transitioned away from BRK products to new
FireAngel products. In addition, short-term
delays in the ramp up of production caused
some stock availability issues in the second
half of the year which led to demand from
some customers not being met.
We estimate the annual addressable UK
trade market is worth in excess of £100
million. We continued to make good
progress in gaining market share in 2018 with
our own FireAngel products as evidenced by
a number of significant wins:
• Mears – in September we signed a
strategically significant exclusive
partnering agreement with Mears
Limited (‘Mears’), the provider of support
services to over 700,000 properties in
the Housing and Care sectors in the UK.
Under the agreement, we will supply
the Group’s integrated connected
home management system to Mears’
clients, and become their preferred
fire safety product provider. This
partnership is a significant commercial
endorsement of the Group’s connected
home proposition which provides a
solution to both heightened duty of care
concerns within social housing and
economic operational pressures. The
subsequent announcement by Mears
in November 2018 of the acquisition
of Mitie’s social housing repairs and
maintenance business adds further
pipeline opportunities to the already very
significant number of properties managed
by Mears.
• St Leger Homes – also, in September we
were appointed as exclusive supplier of
smoke and heat alarms to St Leger Homes
which acts as housing services provider to
over 22,000 properties in partnership with
Doncaster Council.
• Scottish legislation – previously
anticipated new legislation in Scotland
came into force on 1 February 2019.
This demands greater safety standards
by requiring all homes to be fitted with
interlinked smoke alarms in the living
room or lounge and in circulation spaces
such as hallways and landings, along
with an interconnected heat alarm in the
kitchen. Homes are also required to have
a carbon monoxide alarm fitted wherever
there are fossil fuel burning appliances,
such as a gas boiler or wood burning
stove. All properties must comply with
this legislation by the end of February
2021. Our Trade team has worked closely
with stakeholders well in advance of the
legislation coming into force which has
resulted in a number of contract wins
both before and after 1 February 2019.
Recently announced wins include Queens
Cross Housing Association, River Clyde
Homes, Caledonia Housing Association,
West of Scotland Housing Association,
North View Housing Association and Link
Group, with a number of other housing
association opportunities in the pipeline.
UK Retail
Revenue from the UK Retail sector declined
by 11% to £8.3 million in 2018, primarily due
to retailers running down BRK/First Alert
stock with the re-stocking of the equivalent
new FireAngel ranges in the second half of
the year impacted by the short-term delays
in the ramp up of production which were
resolved by the year end.
The UK Retail team secured a number of
notable store and digital channel extensions
during 2018, including Tesco, Wickes, and
Robert Dyas. Sales through online platforms
continue to increase significantly and we
were delighted to secure business directly
with Amazon in August 2018. Our connected
home proposition is ideally suited to digital
channels where we can create the content in-
house that explains the product features and
user benefits of this new technology.
I am pleased to report that UK Retail sales
are in line with expected levels in the first
months of this year.
9
Introduction2018 was a very challenging year for the Group. What was planned to be a period of operational transition included a major unforeseen corporate issue in the form of the BRK legal challenge. This had a material impact on many areas of the business.Revenue was down significantly and we were disappointed to report an underlying loss for 2018. Significant management time was spent on resolving the BRK issue and in working with our new manufacturing partner to address production ramp up yields and capacity. This time should have been spent moving forward with the clear strategic aims I set out in last year’s Annual Report and which I will repeat again here.Our strategyFireAngel’s purpose is clear: to protect, save and improve our customers’ lives by making innovative, leading-edge technology simple and accessible. Our focus on customers and technology are the key attributes of our DNA and underpin our strategy for long-term growth opportunities in existing and new markets as an independent, technology-led business with connected propositions that complement and drive core product sales. This focus, combined with an increasing level of operational effectiveness, will deliver earnings growth. In June 2018 the Company changed its name to FireAngel Safety Technology Group plc demonstrating our commitment to greater simplicity and clarity to all our communications.We have moved further forward in 2018 in transforming our business through increased operational scale and geographic footprint. The move to source alternative BRK/First Alert products from a leading supplier in the Far East has gone to plan and has been well received by our customers. The commencement of manufacture of FireAngel products at our new production partner has not been without issue and consequent short-term increased costs. We remain convinced that working with this world-class manufacturer will achieve the control and certainty in support of the Group’s product roadmap which is a key part of our transition to an independent company.Our new manufacturing relationships are a key enabler in achieving the Board’s wider strategic objectives. These remain:• to build on the Group’s existing market presence by growing and extending its own FireAngel standalone and connected products; • to increase sales through new channels, markets and complementary partnerships;• to fully utilise the Group’s core proprietary technology and in-house product development capabilities in delivering market-leading innovative solutions;• to maximise the efficiencies and opportunities within a world-class manufacturing supply chain; and• to take full advantage of the growth potential of the Group’s connected homes proposition. Business unit performanceRevenue within the UK was down 7% year-on-year and International sales fell significantly by 60% predominantly due to lower sales within the German Trade market. Gross margin was also lower compared to the prior year due largely to the change in mix of sales away from the International market, and the short-term increase in product prices as a result of delays in reaching full production efficiency at the Group’s smoke and connected devices manufacturer.FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
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Strategic review
Our proprietary technology
Group Chief Executive’s statement continued
Developing technology through innovation
UK Fire and Rescue Services (‘UK
F&RS’) and Utilities
Together the UK F&RS and Utilities sectors
accounted for 17% of the Group’s revenue in
the year. The strong performance in Utilities
was due to the growth in sales to British Gas
of CO alarms in the year. This reflects the
continued growth in demand in the wider
CO market. We are very proud that over
90% of the UK F&RS choose to fit FireAngel
alarms within properties with notable new
customers won in the year including Tyne &
Wear, Avon and Devon & Somerset.
Pace Sensors
Revenue at Pace Sensors, the Group’s
manufacturer of CO sensors, represented
4% of total turnover. As anticipated, revenue
reduced in 2018 to £1.6 million as the
inventory levels were managed down to a
more appropriate level and the transition of
demand to its lower cost, NANO sensor fitted
to some of the Company’s CO alarms.
New technology and partnerships
We continued to invest in new technology
throughout 2018, capitalising £3.4 million of
development expenditure to further enhance
the Group’s connected home and wider
technology portfolio. In addition, we made
the final payment of £0.3 million to complete
the purchase of core software modules from
Intamac which will allow us to introduce a
low-cost gateway and increase our market
penetration into the B2C market.
A further £2.3 million was incurred in line
with the planned investment in tooling at the
Group’s new smoke alarm and connected
devices manufacturer.
Total capital expenditure in the year
increased to £6.0 million compared to £5.0
million in 2017. The capital investments in
technology and manufacturing capability
have been significant, but are essential to
ensure we are well set for future growth as an
independent business.
New product launches
Standalone products
73 core products and accessories were
introduced in the year from both Flex and
our manufacturing partner in the Far East
with a continued focus on added value user
benefits to which a price premium can be
attached. Over a period of time we fully
expect the demand for connected alarms
to increase and at some point sales values
to be higher than standalone, however,
it is essential we maintain our leadership
positions within standalone products through
the continued evolution of our ranges.
Connected products
The strategic partnership with Mears
announced during 2018 demonstrated
not only the market movement towards
connected solutions, but also the transition
within our business from a supplier of
standalone hardware products to a broader
safety solutions and services provider.
Under the terms of the agreement, the
Group will supply Mears with an integrated
connected home management system
(the ‘System’). FireAngel and Mears are
jointly developing the bespoke interface
required to integrate the System with Mears’
management control system. FireAngel will
charge Mears a monthly subscription fee
per connection, giving the Group a recurring
revenue stream and increased visibility of its
future revenues with Mears committing to
deliver a minimum number of connections
during the term of the minimum three-year
agreement.
The System is accessed via a wall-mounted
touchscreen tablet and will allow the tenants
of Mears’ clients’ properties to review safety
information, report service issues to, and
schedule maintenance appointments with,
Mears. The System will enable Mears’ clients
to streamline maintenance management
processes by facilitating direct interaction
with tenants when seeking to arrange
repairs and maintenance visits. Alongside
FireAngel’s Wi-Safe 2 network, the System
utilises Z-Wave wireless communication
technology, providing the potential in future
to connect with other devices and offer
additional functionality.
The System will also include FireAngel
Predict™, our unique, patented, predictive
algorithm technology. Using a combination
of the Group’s cloud-based technology
alongside its predictive algorithm, data from
properties will be gathered in real time over
the internet allowing FireAngel Predict™ to
identify those properties with an increased
risk of fire. Once these properties have been
identified, appropriate action can be taken
ahead of a potential event occurring.
This unique technology has been developed
using data from smoke alarms from past
fires in conjunction with self-learning AI
technology which will constantly refine
and improve the system in the future. It
represents significant progress in the
protection of people and properties from the
risk of fire by identifying properties with an
increased risk of fire so appropriate action
can be taken before a potential incident
occurs.
The product roadmap is the strongest
FireAngel has ever had with a mix of value-
added enhancements to our current range
as well as step change innovation, such as
the new unique FireAngel Predict™. Our
focus now is to ensure the investments made
in research and development are reflected
in increased revenues. In March 2019,
we appointed Andy Gregg as Operations
Director primarily responsible for driving
the Group’s agenda with our manufacturing
partners as well as the technical and new
product introduction teams. Andy joins
us with a track record of delivering results
having previously held senior positions within
Bentley and Aston Martin. This appointment
now enables Nick Rutter, Chief Product
Officer, to focus on the deployment and sales
of our connected home solutions.
The future
The global market for interoperable smoke
and CO detection continues to grow, with
demand in Europe forecast to be particularly
strong. Increasing government support and
initiatives over recent years have increased
levels of awareness of the dangers of both
fire and CO poisoning, and have helped
focus the thinking of those responsible
for the safety of others. At the same time
the pace of technological advancement
has increased the scope and potential
for integration into related products and
solutions.
The Group’s investment in connected
home technology has positioned it uniquely
to satisfy this emerging demand and
benefit from the recurring revenue streams
associated with the provision of such
services. Its patented proprietary solutions
are built on a solid foundation of core smoke
and CO products which incorporate years of
industry knowledge combined with the trust
of a strong brand.
I would like to thank everyone who works
so hard for FireAngel with a passion,
commitment and determination to succeed.
I would also like to thank shareholders
for their continued support as FireAngel
continues to develop and grow.
Neil Smith - Group Chief Executive
29 March 2019
Our range of products is comprehensive,
allowing the Group to tailor its smoke alarms,
CO alarms and accessories to suit its
customer needs at various price points
under the following brands:
FireAngel Pro. Mains-powered smoke and
heat alarms with a 10 year, sealed for life
lithium battery back-up. Modern design,
quick fitting, tamper-proof mounting plate
which locks the alarm head securely in place.
FireAngel. A market-leading and innovative
battery operated range of smoke and CO
alarms principally targeted at UK Retail and
UK F&RS.
AngelEye. Launched in 2012, FireAngel sells
smoke alarms and CO detectors principally
into the French market under the AngelEye
brand which has become a leading brand
targeted at the DIY channel in France.
Pace Sensors. CO sensors used within
FireAngel’s CO products are developed by
FireAngel and Pace Sensors, FireAngel’s
wholly owned subsidiary in Canada. Pace
Sensors’ CO sensors are used within all
FireAngel, AngelEye and Pace Sensors CO
detectors.
FireAngel Connect. A B2B solution that
provides ‘whole population’ monitoring.
Real time notifications for real life situations
directly into F&RS control centres. Patent
pending algorithms enable predictive
learning to protect the most vulnerable and
facilitates a proactive approach to customer
support.
This intelligent technology enables wireless communication with any other Wi-Safe 2 product. When one alarm sounds they all sound and up to 50
devices can be interlinked together. Each alarm communicates with others by continuously sending and receiving wireless signals, to constantly
monitor and communicate with the network. When any alarm detects smoke, heat, or CO, a wireless module sends a signal to all the connected
alarms ensuring a fast reaction across the network.
Enhanced Protection
Simple Connection
The Wi-Safe 2 range of products are
designed to provide an enhanced level of
fire and carbon monoxide safety for high risk
individuals such as the deaf, those with mild
to moderate hearing loss, children and people
under the influence of alcohol or drugs.
Wi-Safe 2 products can be linked together in
a matter of seconds with a simple two button
connection process. Wi-Safe 2 simplifies
installation with no need for extra wiring,
mess or fuss.
Intelligent Locate
The intelligent locate feature means on
activation, pressing the Test / Silence button
on any alarm in the network will silence all but
the initiating alarm which has sensed smoke,
heat or carbon monoxide.
10
11
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Performance review
Group financial results
“Financial performance in the year was disappointing but actions
have been taken to address this. 2018 was a year of significant
disruption and distraction for the Group.”
Mike Stilwell - Group Finance Director
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Strategic review
Corporate social responsibility
Introduction
Corporate social responsibility is integral to our success. We aspire to carry out our business activities to the highest ethical standards, act
responsibly and make a positive impact in our interactions with all our stakeholders.
Respect for people and diversity
Employee experience and satisfaction in the work place are very important to us. Operating our business in a non-discriminatory manner that
focusses on the fair treatment and respect for each other is a core value and underpins our interactions with our employees, customers and suppliers.
The Board and the human resources function are responsible for ensuring that our policies and practices reflect best practice for equality of
opportunity and long-term professional development for our employees. All senior management are responsible for ensuring that throughout the
business our work place is free from harassment and bullying and we strive to create a positive environment that is supportive, enables employees to
fulfil their maximum potential and drives our business performance.
We are committed to ensuring that within the framework of the law, FireAngel is free from discrimination on any grounds. FireAngel is an equal
opportunities employer and ensures that all applications for employment are given full and fair consideration. Every effort is made to support
employees to be successful in their careers. Our people and development policies are reviewed regularly to ensure that they are non-discriminatory
and promote equal opportunity. In particular recruitment, selection, promotion, and training and development are all monitored to ensure that all
employees have the opportunity to progress in line with their abilities.
Supporting our community
We regularly donate to various charities, including various CO and fire fighter charities. We have an established charity committee to manage our
involvement with, and support of, local and national charities. We also work closely with local universities to give presentations and support students
with their career progression including, where appropriate, work experience in the Group. In addition, a number of employees mentor MBA students
at local universities.
Health, safety and the environment
Supporting health, safety and the environment are important elements to our success. We view the standards of health and safety required by law
as being only the minimum and endeavour to follow best practice at each of our sites. The Group complies with all local legislation relevant to the
respective territories in which it operates.
To support the environment, we have a range of initiatives from recycling to encouraging staff to cycle to work through a tax-efficient cycle-to-work
scheme. We believe that we were the first company in our industry to have a smoke alarm with its own very low carbon footprint where the product
range has been specifically designed to minimise power consumption using approximately 10% of the stand-by power of a conventional alarm.
Wider stakeholder engagement
The Group conducts employee opinion surveys to receive employees’ feedback on all aspects of employment with the business. Senior managers
meet regularly with employees to update them on the Group’s performance and to discuss business-related issues.
The Group also encourages feedback from its customers through its Business Unit Directors supported by product management specialists as
required.
The Group’s marketing, product management and new product introduction teams regularly engage with customers, industry bodies and trade
associations, both directly and through social media. In addition the Group’s technical support team liaises with customers through its call centre,
social media and its website.
12
13
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018OverviewFinancial performance in the year was disappointing but actions have been taken to address this. 2018 was a year of significant disruption and distraction for the Group.Total revenue for the year fell by 31% from £54.3 million to £37.6 million resulting in an underlying operating loss1 of £2.0 million compared to an underlying operating profit1 of £4.7 million in 2017. The adjusted gross profit2 reduced from £18.0 million to £9.7 million which represented an adjusted gross margin2 of 25.7% (2017: 33.1%). The underlying loss before tax3 was £2.1 million (2017: underlying profit before tax3 of £4.7 million).1 Underlying operating loss in 2018 of £2.0 million is before exceptional charges of £3.7 million (further details of which are set out below) and a share-based payments charge of £0.1 million (2017: underlying operating profit of £4.7 million before an exceptional charge for the BRK settlement of £3.8 million and a share-based payments charge of £0.4 million).2 Adjusted gross profit is stated before the BRK distribution fee of £0.9 million (2017: £2.9 million) and before the exceptional charge for the stock and disposal provision of £1.1 million (2017: exceptional charge for the BRK settlement of £3.8 million). Adjusted gross margin is adjusted gross profit as a percentage of revenue.3 Underlying loss before tax in 2018 of £2.1 million is before exceptional charges of £3.7 million (further details of which are set out below) and a share-based payments charge of £0.1 million (2017: underlying profit before tax of £4.7 million before an exceptional charge for the BRK settlement of £3.8 million and a share-based payments charge of £0.4 million).The key reasons for the fall in revenue, adjusted gross margin and underlying operating profit were as follows: • Overstocking in the German market at the end of 2017. Revenue in the first half of the year was impacted by overstocking in the German trade sector. Significant purchases were made by the Group’s distributor at the end of 2017 which meant that although the distributor continued to sell throughout 2018, this demand was fulfilled from 2017 stock, rather than the distributor buying from the Group.• Adverse mix of sales. The reduction in higher-margin German trade sales as a proportion of total revenue led to a decline in the overall gross margin achieved. In addition the sale of BRK products at reduced selling prices to clear stock (described below) both detrimentally impacted margin and acted to cannibalise the sale of the Group’s own FireAngel products.• Short-term delays in reaching production capacity and efficiency at the Group’s new smoke and connected devices manufacturer impacted both the availability of product and the product cost in the second half of the year.• Additional provision against warranty costs. During the first half of the year a charge of £0.6 million was made to increase the FireAngel battery warranty provision, an isolated issue relating to a third-party supplier first identified in April 2016. This charge reversed a provision release in 2017 as the costs of rework at our new manufacturer are now expected to be in line with the original provision. As such, the total cost of the battery impedance issue is still forecast to be in line with the original expected value of £6.2 million.• During the year the Group booked a net gain of £0.6 million (2017: net loss of £0.3 million) within gross margin from the mark-to-market of forward contracts maturing beyond the balance sheet date which largely offset the higher sterling cost of the Group’s US dollar denominated products.Overall cash outflow in the year was £2.0 million and net debt at 31 December 2018 was £4.4 million. This compared with net cash of £3.3 million at 31 December 2017. The net movement of £7.7 million comprised a decrease in cash and cash equivalents of £2.0 million and an increase in bank debt of £5.7 million.
Performance review
Group financial results continued
Revenue by business unit
Revenue split between the Group’s business units and Pace Sensors is as follows:
Trade4
Retail4
UK F&RS
Utilities
Total sales in the UK
International
Pace Sensors
Total
2018
£m
12.4
8.3
4.2
2.3
27.2
8.8
1.6
37.6
2017
£m
13.7
9.3
4.5
1.9
29.4
21.9
3.0
54.3
Inc/(dec)
Inc/(dec)
Proportion
Proportion
2018
2017
£m
(1.3)
(1.0)
(0.3)
0.4
(2.2)
(13.1)
(1.4)
(16.7)
%
-9%
-11%
-7%
21%
-7%
-60%
-47%
-31%
%
33%
22%
11%
6%
72%
24%
4%
%
25%
17%
8%
4%
54%
40%
6%
Exceptional charges in 2018
Exceptional charges totalling £3.7 million have been made in the year as follows:
• Provision against stock and disposal costs: £1.1 million has been provided against stock originally purchased for the French market to address
demand driven by local legislative change. There may be some future upside to the Group’s performance if this stock is sold into alternative markets.
• Incremental production ramp up costs: one-off exceptional costs of £0.9 million have been incurred due to delays in reaching full production
capacity and pricing expectations at the Group’s smoke alarm and connected devices manufacturing partner.
• Restructure of distribution channels: exceptional costs of £1.7 million have been incurred in executing the Group’s previously announced strategy to
transition from a hardware safety products provider to a more integrated safety solutions provider. The Group has taken action to move from a traditional
distributor model to more value-added reseller partnerships in its German distribution channel for both its core and connected product ranges.
Result for the year
The underlying operating loss1 for the year amounted to £2.0 million compared to an underlying operating profit1 of £4.7 million in 2017. After taking
account of the exceptional charges of £3.7 million, a share-based payments charge of £0.1 million and finance charges of £0.1 million (2017: finance
income of £24,000) as a result of interest on borrowings in the year, the Group reported a loss before tax of £5.9 million (2017: profit before tax of £0.5
million).
The Group booked a tax credit of £1.4 million (2017: tax charge of £0.1 million) due largely to the recognition of tax losses and the surrender of taxable
losses for a research and development tax credit.
Basic and diluted EPS for the year was a loss of 9.8 pence per share (2017: earnings of 1.1 pence per share).
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Statement of financial position
4 From 1 January 2018, certain customers previously reported within the Retail business unit, such as Screwfix and Toolstation, are now reported
through the Trade business unit. The 2017 comparatives have been adjusted accordingly.
The most significant factor in the £16.7 million decrease in revenue was the £13.1 million deterioration in sales into the International market.
Overstocking of smoke alarms in the German trade sector in particular led to a significant reduction in the Group’s sales into this market in the year.
The Trade and Retail business units saw revenue decrease to £12.4 million and £8.3 million respectively due to an anticipated slowdown in UK sales
as customers managed discontinued inventory and the transition to new FireAngel products. Further to this, short-term delays in the ramp up of
production caused stock availability issues in the second half of the year which led to demand from some customers not being met.
Revenue at Pace Sensors, the Group’s manufacturer of CO sensors, decreased by 47% to £1.6 million due to destocking in its supply chain and the
transition of demand to its cheaper, higher-margin, nano sensor technology.
Gross profit and gross margin
The adjusted gross profit2 decreased from £18.0 million to £9.7 million and represented an adjusted gross margin2 of 25.7% (2017: 33.1%). The
reduction was largely due to the change in mix of sales away from the International market, and the short-term increase in product prices as a result of
delays in reaching full production efficiency.
During the first half of the year a charge of £0.6 million was made to increase the FireAngel battery warranty provision, an isolated issue relating to
a third-party supplier first identified in April 2016. This charge reversed a provision release in 2017 as the costs of rework at our new manufacturer
are now expected to be in line with the original provision. As such, the total cost of the battery impedance issue is still forecast to be in line with the
original expected value of £6.2 million.
The overall gross profit decreased from £11.3 million to £7.6 million and represented a gross margin of 20.3% (2017: 20.8%). As a result of the
termination of the BRK agreement, the distribution fee paid by the Group to BRK reduced to £0.9 million for the year (2017: £2.9 million). Exceptional
charges of £1.1 million were charged within cost of sales during the year (2017: £3.8 million) as explained on the following page.
Exchange rates
Sterling weakened against the euro by around 1% on average over the year. This was favourable to the sterling translation of the Group’s euro-
denominated income, albeit on significantly reduced revenue from this sector. Over the same period, sterling strengthened against the US dollar
by around 2% on average. This was favourable to the sterling translation of the Group’s US dollar-denominated component purchases, albeit on
reduced volumes due to lower sales in the year.
There was significant variation in the value of sterling against the US dollar over the year. The Group has a forward hedging policy which aims to
mitigate the risk of currency fluctuations by locking into current rates for future periods on a set percentage of expected future currency flows. Where
possible, the Group seeks to increase selling prices to offset the risk of product cost inflation as a result of unhedged fluctuations on the sterling value
of its US dollar-denominated component costs.
Overheads
The Group’s overhead costs comprise the distribution and administrative costs of running the business. Excluding the accounting charge for share-
based payments of £0.1 million (2017: £0.4 million), and the exceptional administrative costs of £2.6 million (2017: £nil) (explained on the following
page), overheads of £9.7 million were 3.5% ahead of the prior year’s £9.4 million reflecting inflationary costs in the overhead cost base. Total
overhead costs amounted to £13.4 million (2017: £10.8 million), the majority of the increase accounted for by the exceptional charge of £2.6 million.
Subsequent to the year end, the Group announced and implemented a reorganisation and restructuring programme which will yield annualised savings
of around £0.4 million, as well as further cost-saving initiatives to align its cost base to the current reduced revenue levels. The reorganisation programme
has better aligned the Group with the challenges it faces in transitioning to an independent, technology-led provider of connected safety solutions.
Exceptional charges in 2017
As announced on 10 May 2018 and detailed in the 2017 Annual Report and Accounts, the Group entered into a Settlement Agreement with BRK.
The Group recorded a £3.8 million exceptional charge in the results for the year ended 31 December 2017 as part of cost of sales. This comprised
£3.4 million to write down the value of the remaining BRK inventory to nil, provisions of £0.2 million to cover the disposal costs of certain BRK
inventory, and £0.2 million to cover the legal and professional fees incurred in respect of the dispute.
14
The net assets of the Group amounted to £22.3 million at 31 December 2018 (2017: £27.0 million) and can be summarised as follows:
Goodwill
Plant and equipment
Capitalised development costs
Purchased software costs
Non-current assets (excluding deferred tax assets)
Net cash balances
Loans and borrowings
Net (debt)/cash
Other net current assets
Net tax liabilities (including deferred tax)
Net derivative financial assets/(liabilities)
Warranty provision
Net assets
2018
2017
£m
£m
0.2
4.0
13.2
2.9
20.3
1.3
(5.7)
(4.4)
7.8
-
0.1
(1.5)
22.3
0.2
2.1
10.5
2.6
15.4
3.3
-
3.3
12.0
(1.1)
(0.4)
(2.2)
27.0
Non-current assets at 31 December 2018
amounted to £20.3 million compared with
£15.4 million at 31 December 2017. The
most significant components of this were
capitalised development costs, with a
net book value of £13.2 million, plant and
equipment (£4.0 million) and purchased
software costs (£2.9 million).
Total capital expenditure in the year increased
to £6.0 million compared to £5.0 million in
2017. Of this total, £3.4 million represented
capitalised development expenditure to
further enhance the Group’s connected home
and wider technology portfolio as described
in note 16 to the financial statements, £2.3
million for the continued planned investment
in tooling at the Group’s new smoke alarm and
connected devices manufacturer, and £0.3
million being the final payment completing
the purchase of core software modules
from Intamac which will allow the Group to
introduce a low-cost gateway and increase its
market penetration in the B2C market.
Total capital expenditure of £6.0 million (2017:
£5.0 million) compares with depreciation and
amortisation charges of £1.1 million in the year
(2017: £0.7 million).
Working capital reduced significantly by
£4.3 million to £7.7 million at 31 December
2018. Stock reduced by £2.8 million to £8.4
million (2017: £11.2 million) mainly due to the
buyback of approximately £1.0 million of 2017
manufactured stock by BRK as part of the
Settlement Agreement, and the £1.1 million
exceptional provision in the year to provide
for the costs of older French stock and stock
disposal.
Trade and other receivables reduced by £6.6
million to £10.8 million (2017: £17.4 million).
The most significant reduction was a £7.0
million fall in trade debtors to £9.6 million.
Although much of this reduction was due to
the significant decrease in sales between
years, the prior year-end balance was inflated
by an overdue debt from one customer of £1.7
million. The overdue debt at the end of 2017 is
no longer outstanding. Average debtor days
for the year increased from 72 to 89 reflecting
the change in sales mix away from customers
on the shortest credit terms of 14 days to
customers paying on 60 and 90-day payment
terms.
Trade and other payables reduced by £5.0
million to £11.5 million (2017: £16.5 million).
The most significant reductions were a £2.4
million fall in trade payables to £8.2 million
reflecting the reduced activity in the year,
and a decrease of £3.1 million in accruals
and deferred income to £1.9 million due to
the falling away of a rebate agreement on
transition to the Group’s new manufacturing
partners, together with change in rebate
pricing arrangements with a number of large
customers. Average creditor days increased
significantly to 137 days (2017: 80 days) due
to the delayed payment terms negotiated as
part of the BRK Settlement Agreement.
15
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Performance review
Group financial results continued
Net tax liabilities at 31 December 2018 amounted to £nil (2017: £1.1 million) and comprised a current tax asset of £1.2 million (2017: £0.6 million), a
current tax liability of £39,000 (2017: £15,000), deferred tax assets of £1.2 million (2017: £0.3 million) and deferred tax liabilities of £2.4 million
(2017: £2.0 million). Deferred tax assets reflect temporary timing differences in the treatment for tax and accounting of the Group’s trading losses and
share-based payments charge. Deferred tax liabilities largely reflect timing differences in the treatment of accelerated research and development tax
credits on product development costs.
The Group’s warranty provision at 31 December 2018 amounted to £1.5 million (2017: £2.2 million) of which £0.9 million is expected to be utilised
within twelve months of the balance sheet date. This comprised £1.4 million for the expected costs of replacing smoke alarm products over the next
two to three years where an issue in certain batteries provided by a third-party supplier, announced in April 2016, may cause a premature low battery
warning chirp. The remaining £0.1 million relates to the Group’s warranty obligations in relation to previously supplied BRK products. During the
year £0.6 million was charged to cost of sales within the Income Statement reversing a provision release in 2017 as the costs of rework at our new
manufacturer are now expected to be in line with the original provision.
Cash
The Group ended the year with net debt of £4.4 million at 31 December 2018 (2017: net cash £3.3 million).
The movement in net cash during the year is reflected in the Statement of Financial Position as follows:
Decrease in cash balances and net cash outflow
Drawdown of revolving credit facility
Increase in net debt
£m
2.0
5.7
7.7
The net cash outflow of £2.0 million in the year is summarised in the table below. The most significant non-operating cash flow items include
exceptional cash costs of the incremental production ramp up (described in the section ‘Exceptional charges in 2018’) and warranty costs totalling
£1.6 million, capital expenditure of £6.0 million as described above, offset by the drawdown of £5.7 million of the Group’s £7.0 million revolving credit
facility provided by HSBC UK Bank plc.
Free cash flow, defined as cash from operations after capital expenditure but before any payments in respect of non-underlying items, was an outflow
of £6.0 million (2017: £4.9 million).
Underlying operating (loss)/profit1
Depreciation and amortisation charges
Decrease/(increase) in working capital
(Increase)/decrease in fair value of derivatives
Cash from operations before non-underlying payments
Exceptional cash costs of incremental production ramp up and warranty (2017: BRK settlement and warranty)
Cash used by operations
Interest paid (net)
Taxation received
Capital expenditure
Loan drawdown
Dividends paid
Net cash flow
2018
£m
(2.0)
1.1
1.5
(0.6)
-
(1.6)
(1.6)
(0.1)
-
(6.0)
5.7
-
(2.0)
2017
£m
4.7
0.7
(5.6)
0.3
0.1
(2.8)
(2.7)
-
0.4
(5.0)
-
(3.8)
(11.1)
1 Underlying operating loss in 2018 of £2.0 million is before exceptional charges of £3.7 million and a share-based payments charge of £0.1 million
(2017: underlying operating profit of £4.7 million before an exceptional charge for the BRK settlement of £3.8 million and a share-based payments
charge of £0.4 million).
In order to fund the Group’s working capital requirement, in January 2018 it secured a £7 million committed three-year revolving credit facility with
HSBC UK Bank plc. The costs of arranging the facility amounted to £0.1 million and are being amortised on a straight-line basis over the life of the
agreement.
In line with the Board’s expectation, due to the impact of the BRK settlement and the expected reduction in sales into the prompt-paying European
market, the facility was drawn down by £5.7 million at 31 December 2018.
Since the year end, the Group’s borrowing facilities were restructured to move from a revolving credit facility to a more efficient invoice discounting
and overdraft facility.
The Company has separately announced today details of a placing and open offer to raise £6.0 million to accelerate recovery and specifically to
reduce indebtedness, invest in the Connected Homes proposition and for working capital purposes.
16
Use of non-GAAP financial performance measures
Certain disclosures and analyses set out in this Annual Report and Accounts include measures which are not defined by generally accepted
accounting principles (‘GAAP’) such as IFRS. We believe this information, along with comparable GAAP measurements, is useful to investors.
Management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating
performance. Non-GAAP measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance
with GAAP. The primary non-GAAP financial measure used by the Group is underlying operating profit.
In the following table we provide a reconciliation of this and other non-GAAP measures, as defined in the Performance Review on pages 13 to 17, to
relevant GAAP measures:
Underlying profit measures
Adjusted gross profit
Reported gross profit
BRK distribution fee
Exceptional charge for Settlement Agreement with BRK
Exceptional stock and disposal provision
Adjusted gross profit
Adjusted gross margin
Adjusted gross margin is the adjusted gross profit (as defined above) as a proportion of revenue.
Underlying operating (loss)/profit
Reported operating (loss)/profit
Share-based payments charge
Exceptional charge for Settlement Agreement with BRK
Exceptional stock and disposal provision
Exceptional incremental production ramp up costs
Exceptional restructure of distribution channels
Underlying operating (loss)/profit
Underlying (loss)/profit before tax
Reported (loss)/profit before tax
Share-based payments charge
Exceptional charge for Settlement Agreement with BRK
Exceptional stock and disposal provision
Exceptional incremental production ramp up costs
Exceptional restructure of distribution channels
Underlying (loss)/profit before tax
Free cash flow
P
e
r
f
o
r
m
a
n
c
e
r
e
v
e
w
i
2018
£m
7.6
1.0
-
1.1
9.7
2017
£m
11.3
2.9
3.8
-
18.0
2018
£m
2017
£m
(5.8)
0.1
-
1.1
0.9
1.7
0.5
0.4
3.8
-
-
-
(2.0)
4.7
2018
£m
2017
£m
(5.9)
0.1
-
1.1
0.9
1.7
0.5
0.4
3.8
-
-
-
(2.1)
4.7
The Group measures free cash flow in considering the underlying cash generated from its operations. A reconciliation of reported cash used by
operations to free cash flow is as follows:
Free cash flow
Reported cash used by operations
Capital expenditure
Payments in respect of exceptional items
Free cash flow
Net cash
2018
£m
(1.6)
(6.0)
1.6
(6.0)
2017
£m
(2.7)
(5.0)
2.8
(4.9)
Net cash is considered to be a non-GAAP measure as it is not defined in IFRS. The most directly comparable IFRS measure is the aggregate of loans
and other borrowings (current and non-current) and cash and cash equivalents. This is the calculation used by the Group to measure net cash.
Mike Stilwell - Group Finance Director
29 March 2019
17
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Governance
Board of Directors
Subsequent to the year end, on 22 January 2019, John Conoley was appointed as Non-Executive Chairman of the Group. Until this date Graham
Whitworth performed the role of Executive Chairman, moving subsequently to the role of Executive Director on John Conoley’s appointment. At the
date of this report, therefore, FireAngel’s Board of Directors comprises, in addition to the Chairman, three Independent Non-Executive Directors and
four Executive Directors. Membership of the Audit Committee, and any temporarily appointed Nominations Committee, is made up solely of certain
of the Independent Non-Executive Directors. Membership of the Remuneration Committee includes the Non-Executive Directors and, until his
change in role to Executive Director on 22 January 2019, Graham Whitworth.
The Board has the breadth and depth of skills necessary to guide the Group as it seeks to take full advantage of new opportunities and contend with
new challenges. A brief biography of each of the Directors is set out below:
Non-Executive Directors
John Conoley
Chairman
AGED 58
Executive Directors
Nick Rutter
Chief Product Officer
AGED 47
Neil Smith
Group Chief Executive
AGED 47
Nick is one of the co-founders of the business. He began his career as
Technology Director before being appointed Managing Director in 2008
and, subsequently, Chief Product Officer in 2017. Nick’s design skills
and product vision have fundamentally shaped FireAngel’s product
offering and brand strategy. Prior to co-founding the business, Nick
achieved a BA in Industrial Design from Coventry University and worked
as a product designer based in Hong Kong, designing portable audio
products for Philips. Subsequent to the year end, Nick’s role was
broadened to directly focus on connected home sales and pipeline
development.
Neil has a background as a successful senior leader with strategic
retail and brand experience gained at market-leading blue chip, multi-
channel businesses spanning Kingfisher plc (B&Q), Halfords Group
plc, Home Retail Group plc and Boots Retail Group. In addition, Neil
has extensive knowledge and success of Far East sourcing, brand
development and international retailing. He holds a degree in Business
Studies and a Diploma in Marketing.
Mike Stilwell
Group Finance Director
AGED 43
Graham Whitworth
Executive Director
AGED 65
Mike joined FireAngel in December 2018 as Group Finance Director,
after previously spending six years with AIM-listed Synectics plc, the
last four of which as Group Finance Director. Prior to this, he held senior
finance roles with the Saint-Gobain Group, Coventry Building Society
and the Caparo Group. Mike qualified as a Chartered Accountant with
KPMG and has a first-class degree in Accounting and Financial Analysis
from the University of Warwick.
Prior to investing as a seed investor in the business, Graham developed
a diverse set of international business skills from the corporate
boardroom to his own start up. Graham has worked in a number of
technology businesses, initially in engineering and then IT-based
design technology roles, where he led a number of strategic initiatives
and directed many multi-million dollar contracts with leading blue chip
companies across a diverse set of industries with ComputerVision
Corporation, a leading US CAD/CAM provider. From the late 1980s
Graham was Sales Director, Managing Director and then Executive
Vice-President, before leaving in 1997. In 1998, Graham started his
own company which he later merged with Division Plc. He became
Managing Director before disposing of the enlarged business to
Parametric Technology in 2000. Graham led the original Sprue
Aegis (now FireAngel) IPO and until February 2016 was the Group
Chief Executive and Chairman. He subsequently undertook the
role of Executive Chairman until 22 January 2019, on which date he
transitioned to the role of Executive Director.
William Payne
Senior Independent
Non-Executive Director
AGED 53
William joined the FireAngel Board in 2000 and acted as its finance
director until January 2010. He is Senior Partner at Wilkins Kennedy, a
firm of accountants. William qualified as a chartered accountant with
what is now part of KPMG in London. He was made a partner at WH
Payne & Co in 1991, prior to its merger with Wilkins Kennedy LLP in
2003, and which became part of the Cogital Group in 2018. William is
also a director of a number of companies, including Ariana Resources
plc, which is quoted on AIM.
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John was appointed as Non-Executive Chairman of the Board on 22
January 2019. He brings significant executive and non-executive
Board-level experience of both fully-listed and AIM-quoted businesses.
John began his career in the IT industry with IBM in 1983, and worked
in a range of industries in technical, sales, and marketing roles. Since
then, John has held general management and director-level roles in
small and medium-sized private and public companies. Recent public
company roles include Chief Executive Officer of Psion PLC, the fully-
listed international mobile device company, from April 2008 to October
2012 when it was sold to Motorola; and Non-Executive Director of
NetDimensions (Holdings) Limited, the AIM-quoted human capital
management software company, from October 2016 to April 2017
when it was sold to Learning Technologies plc. Current roles comprise
Executive Chairman of eServGlobal Limited (‘eServGlobal’), the AIM
and ASX quoted innovative mobile financial services company, since
April 2015 (part time since 1 January 2019) having initially joined the
board as a Non-Executive Director in May 2013; Non-Executive Director
of HomeSend SCRL, the company jointly owned by eServGlobal and
Mastercard; and Non-Executive Chairman of Parity Group plc, the AIM-
quoted professional recruitment and IT services company to which he
was appointed in April 2017.
John Shepherd
Non-Executive Director
AGED 65
Ashley Silverton
Non-Executive Director
AGED 59
John began his career at British Aerospace where he held various
systems and software engineering management positions. In 1990
he joined Smiths Industries where, as Managing Director of the
Smiths Detection division, he was responsible for building a world-
leading transport, security and military detection systems business.
Subsequently, he was appointed as Chief Executive of First Technology
Group plc where he built up a substantial gas sensor and detection
systems business prior to the company being acquired by Honeywell.
From 2008 until 2014, John served as Chief Executive of Synectics plc,
an AIM-listed leader in the design, integration, control and management
of advanced surveillance technology and networked security systems.
Ashley was appointed to the Board in February 2011. He has worked
for Brewin Dolphin and its predecessor firms for more than 25 years
and has represented Brewin Dolphin at the National Association of
Pension Funds. Having joined a City-based stockbroking partnership
after graduation, he was elected to Membership of the Stock Exchange
in 1985 and is a Fellow of the Chartered Institute for Securities
& Investment. Throughout his career, Ashley has specialised in
investment management for private clients and charities. He has served
as a committee member of the FTSE/WMA Private Investor Indices
and was previously Head of the Brewin Dolphin London office and a
member of the Advisory Board.
18
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FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018 Governance
Corporate governance report
“The Board is committed to ensuring the highest standards of
corporate governance are maintained. During 2018 FireAngel
adopted the latest Quoted Companies Alliance Corporate
Governance Code for small and mid-size quoted companies.”
John Conoley - Chairman
Introduction
The Board of FireAngel places great importance on effective corporate governance. This is reflected in our governance principles, policies and
practices. We believe that effective governance, not only in the boardroom but right across the business, ultimately supports an organisation in
improving long-term financial performance. Central to this is the Group’s culture. We work hard across the organisation to ensure that we operate
with high standards of moral and ethical behaviour and that this expectation is clear at all levels, in the way we work, in the way we reward, and in
everything we do.
We are rightly proud of our culture and the high standards with which our employees and the business acts. We also recognise that culture does not
stand still. It must evolve as the business grows and as the environment changes to ensure our behaviours remain aligned with our size, structure and
interests of our stakeholders. Culture is a continuous journey and we must invest in our people and structures to ensure this remains central to driving
behaviours as the business grows.
During the course of 2018 the business conducted a review of its corporate governance policies and procedures to ensure it was compliant with the
reporting changes that came into effect in September 2018. The Board has fully adopted, and is working towards full compliance with, the Quoted
Companies Alliance Corporate Governance Code (‘the Code’) for small and mid-size quoted companies. The extent of compliance with the ten
principles that comprise the Code, together with an explanation of any areas of non-compliance, and any steps taken or intended to move towards
full compliance, are set out below:
Principle
Deliver growth
Current
compliance
Comment and disclosures
1
2
3
4
Establish a strategy and business model
which promote long-term value for
shareholders
Full
Seek to understand and meet shareholder
needs and expectations
Full
Full
Full
Full
Full
Take into account wider stakeholder and
social responsibilities and their implications
for long-term success
Embed effective risk management,
considering both opportunities and threats,
throughout the organisation
Maintain a dynamic management framework
5
6
Maintain the Board as a well-functioning,
balanced team led by the chair
Ensure that between them the directors
have the necessary up-to-date experience,
skills and capabilities
20
The Group’s business model and strategy, together with the key risks to achieving these goals,
and mitigating actions taken, are documented in the Introduction, Strategic Review and Risks
and risk management sections of this Annual Report. These disclosures are supplemented by
information in the About Us section of our website www.fireangeltech.com.
The Group’s approach to engagement with shareholders is documented in the Investor
relations section of this Corporate governance report of this Annual Report. The success of
this engagement is measured through approval of shareholder resolutions recommended by
the Board. This is communicated in the Regulatory announcements section of the Investors
area of the Group’s website www.fireangeltech.com.
The Group’s approach and actions in relation to wider stakeholder involvement and social
responsibilities are detailed in the Corporate social responsibility section and Statutory
Directors’ report of this Annual Report.
The Group’s internal control environment and system of risk management, including the key
risks to which the Group is exposed, are documented in this Corporate governance report
and the Risks and risk management section of this Annual Report.
The role, composition and independence of the Board are documented in this Corporate
governance report of the Annual Report and supplemented by information in the Directors
section of the Investors area of our website www.fireangeltech.com.
The experience and skills of each Director are described in the Board of Directors section
of the Governance section of this Annual Report and supplemented by information in the
Directors section of the Investors area of our website www.fireangeltech.com. The roles
of the Senior Independent Non-Executive Director and the Company Secretary, together
with a description of the ongoing education of the Directors, are detailed in this Corporate
governance report of this Annual Report.
7
8
9
Evaluate board performance based on clear
and relevant objectives, seeking continuous
improvement
Partial
Promote a corporate culture that is based
on ethical values and behaviours
Full
Maintain governance structures and
processes that are fit for purpose and
support good decision-making by the board
Full
Build trust
10
Communicate how the company is
governed and is performing by maintaining
a dialogue with shareholders and other
relevant stakeholders
Full
No formal process for evaluating the Board has been undertaken during the year. However,
the understanding, effectiveness and contribution of each Director is kept under constant
review by the Chairman with each Director’s performance being reviewed before any
proposal for re-election at the Annual General Meeting. The Board will consider whether
a more structured approach is required in future with any review undertaken by the
Nominations Committee.
The promotion of the Group’s corporate culture is evident in everything the Group does. This
can be seen in our Business Model in the Introduction section of this Annual Report, in the
Corporate and social responsibility section and addressed specifically in the Chairman’s
Introduction to this Corporate governance report.
The Board structure, its committees, their roles and members, and the roles of Directors
with specific remits, are described in this Corporate governance report and in the individual
committee reports of this Annual Report. The terms of reference of the committees are
detailed in the Resources section of our website www.fireangeltech.com.
The Group’s approach and actions in relation to wider stakeholder engagement are
detailed in the Statutory Directors’ report of this Annual Report. Details of all shareholder
communications are provided on the Group’s website, including historical annual reports,
general meetings and the outcome of all general meeting votes. The Group’s regulatory RNS
and RNS Reach announcements are also listed in the Regulatory announcements section of
the Investors area of our website www.fireangeltech.com.
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The Group’s corporate governance disclosures include the Corporate Governance Report, the Audit Committee Report and the Remuneration
Committee Report.
Leadership and operation of the Board
The Board has seven to nine full meetings scheduled in a year, with attendance in person expected where possible. Occasionally, Board members
may join by telephone if other commitments prevent attendance in person. In addition, ad hoc board meetings are called to address exceptional or
administrative matters.
All Directors are expected to devote such time as is necessary for the proper performance of their duties. After taking into consideration the
availability and time commitment demanded of individual members, the Chairman was satisfied that the members of the Board were able to devote
sufficient time and resource to perform their roles for the Group.
The ‘chief operating decision making’ authority is the Board which delegates day-to-day responsibility for managing the Group to the Executive
Management Team (‘EMT’) led by the Group Chief Executive. The Group Chief Executive leads the weekly trading review meetings of the Group to
ensure operational targets are met or exceeded. Details of the EMT and trading review meetings are set out below.
The EMT is responsible for developing and implementing the strategy approved by the Board and led by the Group Chief Executive. In particular,
it is responsible for ensuring that the Group’s budget and forecasts are properly prepared, that targets are met, and for generally managing and
developing the business within the overall budget. Any changes in strategy or significant deviation from budget require explanation to, and approval
of, the Board.
The EMT typically meets weekly and comprises the four Executive Directors, with other senior managers attending as appropriate.
Three business unit directors collectively manage the Group’s five business units. They report into, and meet with, the Group Chief Executive.
Trading review meetings are also held weekly and include key managers from each of the departments across the business. Business unit reviews
are typically held once per quarter and together with the trading review meetings, this provides the forum for the Group Chief Executive to ensure
a consistent implementation of FireAngel’s business agenda across the organisation. Business unit meetings are also attended by other senior
departmental managers as required.
Subsequent to the year end, on 22 January 2019, John Conoley was appointed as Non-Executive Chairman of the Group. Until this date, Graham
Whitworth performed the role of Executive Chairman, moving subsequently to the role of Executive Director on John Conoley’s appointment.
The main responsibilities of the Chairman include:
• ensuring that the Board as a whole plays a full and constructive part in the development of strategy and overall commercial objectives;
• leadership of the Board and creating the conditions for overall Board and individual Director effectiveness;
• promoting the highest standards of integrity, behaviour, probity and corporate governance throughout the Group, particularly at Board level;
• ensuring that the performance of the Board as a whole, its Committees and individual Directors is rigorously evaluated at least once a year; and
• ensuring that there is effective and open communication with shareholders.
The main responsibilities of the Group Chief Executive include:
• day-to-day leadership and management of the business;
• chairing the trading review meetings each week;
• managing the five business units and support functions (Technical, Finance, Quality, Sales and Marketing, Human Resources, Technical Support
and Creative) to achieve as a minimum the annual trading budget approved by the Board;
• ensuring initiatives for long-term growth are championed and appropriately resourced within the Group; and
• fostering good relationships with key stakeholders.
21
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Corporate governance report continued
William Payne fulfils the roles of Senior Independent Non-Executive Director and Company Secretary of the Group. He provides a communication
channel between the Chairman and the Non-Executive Directors and is available to discuss matters with shareholders when required.
All Directors have access to the advice and services of the Company Secretary. Both the appointment and removal of the Company Secretary
are matters reserved for the Board. All Directors have the benefit of directors’ and officers’ liability insurance and are entitled to take independent
professional advice at the Group’s expense. The Directors keep their skills up-to-date through regular updates from the Group’s advisory team,
review of relevant publications, and attendance at appropriate seminars and market updates.
During 2018 the Board received external advice from its legal advisors around the defence of the patent infringement claim and eventual Settlement
Agreement with BRK.
The Board agenda
The Board’s responsibilities include:
• setting and monitoring the strategic objectives of the Group and reviewing individual management performance;
• monitoring the risks to achieving the strategic objectives;
• providing entrepreneurial leadership within a framework of prudent and effective controls for risk assessment and management;
• ensuring that appropriate resources are in place and being managed effectively for the Group to create long-term shareholder value; and
• approving annual budgets and investments in the Group’s technology roadmap.
The agenda for each Board meeting is reviewed by the Chairman to ensure that sufficient time is given to consideration of the most significant issues.
The Board receives the minutes of all Board Committee meetings at the next Board meeting following the Board Committee meeting. The culture
of the Board is such that Non-Executive Directors are encouraged to constructively challenge the performance of management through rigorous
discussion and debate in meeting the goals and objectives agreed to achieve the Group’s strategy.
Board meetings
During 2018 matters dealt with by the Board included:
• consideration of response to the BRK patent infringement claim and conclusion of the associated Settlement Agreement;
• review and monitoring of Group strategy and progress against business objectives;
• operational and financial performance of the Group;
• approval of the Group’s budget;
• approval of financial statements and dividend policy;
• risk management oversight;
• Board and senior management succession planning;
• approval of large contracts and bids;
• Audit and Remuneration Committee reports and recommendations;
• review of corporate governance matters and reporting including adoption of the new Quoted Companies Alliance Corporate Governance Code for
small and mid-size quoted companies;
• review of the Group’s plans in relation to Brexit;
• the re-appointment of RSM UK Audit LLP as external auditor, upon the recommendation of the Audit Committee; and
• reviewing the Group’s product development roadmap and technological developments in the industry.
Excluding ad hoc Board meetings for general administrative matters, the number of Board and Board Committee meetings attended in person or by
telephone is set out as follows:
JR Conoley1 - Chairman
JR Gahan
WJB Payne - Chairman of Audit and Remuneration Committees
NA Rutter
J Shepherd
AV Silverton
NC Smith
MJ Stilwell
GRA Whitworth4
Total number of meetings
Board
Audit
Committee
Remuneration
Committee
-
22
18
18
18
17
18
13
18
-
-
2
-
2
2
-
-
-
-
-
3
-
3
3
-
-
2
1. John Conoley was appointed to the Board on 22 January 2019 and was therefore ineligible to attend any meetings during 2018
2. Number of meetings eligible to attend before resignation from the Board: two
3. Number of meetings eligible to attend after appointment to the Board: one
4. Graham Whitworth was Executive Chairman throughout 2018 and changed role to Executive Director on 22 January 2019
There were around twice the usual number of Board meetings in 2018 in order to address matters which led to the BRK Settlement Agreement
detailed in the Chairman’s Statement on page 6.
The Board culture and relationships with
senior management were also considered.
On my appointment, the Non-Executive
Chairman will hold meetings with the Non-
Executive Directors without the Executive
Directors present. The Non-Executive
Directors, led by the Senior Non-Executive
Director, meet without the Chairman present
at least once annually to appraise the
Chairman’s performance.
Internal control
The Board acknowledges its responsibility for
safeguarding the investment of shareholders
and the Group’s assets. It has established
processes for identifying, evaluating and
managing the significant risks facing the
Group.
The Board has overall responsibility for
ensuring the Group maintains an adequate
system of internal control and risk
management, whilst the Audit Committee
reviews its effectiveness on behalf of the
Board. The implementation of internal control
systems is the responsibility of management.
The Group’s system of internal control is
designed to help ensure:
• the effective and efficient operation of
the Group by enabling management to
respond appropriately to significant risks to
achieving the Group’s business objectives;
• the safeguarding of assets from
inappropriate use or from loss or fraud and
ensuring that liabilities are identified and
managed;
• there is high quality of internal and external
financial reporting;
• compliance with applicable laws and
regulations and with internal policies on the
conduct of the Group’s business; and
• the ability to recover in a timely manner
from the effects of disasters or major
accidents which originate from outside the
Group’s direct control.
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Board Committees
The Group has two standing Board
Committees: an Audit Committee and a
Remuneration Committee. The roles and
activities of those Committees are included in
the respective Committee reports on pages
25 to 30.
The functions of a nominations committee are
generally undertaken by the Group Board as
a whole. It was necessary and appropriate
to temporarily appoint a nominations
sub-committee during 2018 to oversee the
specific task of recruiting a Non-Executive
Chairman. For less senior appointments,
given the size of the Group and the size and
composition of its Board, the Directors believe
it is both practical and beneficial for matters
of Board composition and recruitment, Board
performance evaluation, Executive and
Non-Executive succession planning, and
training and development, to be undertaken
by the Board as a whole. All such matters are
regularly scheduled on the Board’s agenda
and are discussed thoroughly and robustly,
incorporating the detailed perspectives and
experience of all Directors.
Directors’ conflicts of interest
Training on the Companies Act 2006 has
been given to all Directors on the provisions
within, and Directors are reminded of their
duties at each Board meeting. All Directors
maintain conflicts of interest declarations
and any planned changes in their interests,
including directorships outside the Group,
are notified to the Board. None of the
relationships declared are considered to
be of a detrimental nature to FireAngel’s
business and as such none are deemed to
impact on the independence of the Directors.
Any conflicts are declared at the first Board
meeting at which the Director becomes aware
of a potential conflict.
The beneficial interests of all Directors in the
share capital of the Company are set out on
page 32 of the Annual Report.
Effectiveness and ensuring the Board
is effective
The Board has considered the overall balance
between Executive and Non-Executive
Directors and believes that despite the
significant shareholdings in the Company
of Graham Whitworth and Nick Rutter, the
structure of the Board (from 22 January 2019),
with four Executive and four Non-Executive
Directors, ensures that there is no one
individual or interest group dominating the
decision-making process.
The independence of all Non-Executive
Directors is reviewed and evaluated annually
as part of the appraisal of each Director.
William Payne, Ashley Silverton and John
Shepherd have served on the Board for 18,
seven and three years respectively. The
Board considers each of the Non-Executive
Directors to be independent. This is because
each has different and complementary skills
and experiences which allow each issue
facing the Board to be viewed and addressed
from a variety of perspectives. Their lengths
of service have positively impacted the
effectiveness of the Board through the
knowledge of the Group, and of the home
safety products industry, their tenure has
afforded.
The Board considers that its size and
composition are appropriate and that the
balance of qualifications and experience
appropriately reflects the financial, sector
specific, technology and general international
business skills required for it to discharge its
duties and responsibilities effectively.
In advance of each meeting Board members
are provided with accurate, timely and clear
information including operational updates
and details of the financial performance and
position of the Group. In this way, informed
decisions and discussions can take place
which enable the Board to properly discharge
its duties.
Should they wish to, Non-Executive Directors
are able to influence agendas for Board
discussions and to ensure the amount of time
spent reviewing strategic and operational
issues is appropriately balanced. From time
to time, the Board meets off site to review and
discuss specific business issues.
In the event that Directors are unable to attend
a meeting or a conference call, they receive
and read the papers for consideration and
have the opportunity to relay their comments
to the Chairman.
All new Directors undertake a formal and
comprehensive induction to the Group which
is designed to develop their knowledge and
understanding of the Group’s culture and
operations. Non-Executive Directors have
regular opportunities to meet with senior
managers to ensure they have a thorough
understanding of the Group, its operations
and markets.
All Directors are expected to devote such time
as is necessary for the proper performance of
their duties. The Non-Executive Chairman’s
responsibilities approximate to one day
per week whilst the other Non-Executive
Directors’ commitment approximates to two
days per month. Executive Directors are
expected to work full time.
Performance evaluation
The Remuneration Committee regularly
reviews and evaluates the performance of
Directors and senior managers. The most
recent review concluded that the Board and
its individual members continue to operate
effectively with robust constructive challenge
from the Non-Executive Directors.
Subjects covered during the most recent
review included a general overview as to
the operation of the Board, opinions on
shareholder relationships, views on the
Board’s input into strategy discussions,
governance and compliance, risk
management and succession planning.
22
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Corporate governance report continued
Audit Committee report
During the course of its reviews of the system of internal control during the year, the Board has not identified nor been advised of any significant
failings, weaknesses or evidence of management override of controls.
On behalf of the Board, I am pleased to present the Audit Committee report for the year ended 31 December 2018, which provides information about
the Audit Committee, its principal duties, and the specific matters it has considered during the year.
The principal risks and uncertainties facing the Group, together with mitigating actions taken to address those risks, are set out on pages 35 to 36.
These reflect the risks of most concern to the Group, as considered at recent Board and Audit Committee meetings.
Given the Group’s size and complexity, it does not have a separate internal audit function. The external auditor reports to the Audit Committee (and
to the Board) on any controls which, during the course of its audit work, it has identified as requiring improvement. The Group then takes prompt
action to address any control deficiencies. The Audit Committee reviews the need for a separate internal audit function on an annual basis. Its most
recent review concluded that the reporting lines within the Group, and the level of control exercised by the management team, are both sufficiently
robust to make an internal audit function neither necessary nor cost effective at this time. The Directors have taken steps to ensure that the Group
has an appropriate control environment for its size and complexity. The management team will ensure that the internal control environment develops
appropriately with the size of the Group, with respect to the identification, evaluation and monitoring of risk.
Investor relations
The Board believes it is important to have open communications with shareholders and seeks to ensure that these are informative and transparent.
The Executive Directors make themselves available to, and expect to meet with, major institutional shareholders at least twice a year to discuss the
published financial results. The Executive Directors also attend private investor seminars and events. From time to time, where appropriate, the
Group may consult with major shareholders on any significant issues.
Members of the Board develop an understanding of the views of major shareholders through direct contact that may be initiated by the Group’s
broker or through shareholder feedback following investor roadshows, and through analysts’ and brokers’ briefings. The Group also regularly hosts
investor days at its Coventry head office and seeks investor feedback on its performance. Where voting decisions are not in line with the Group’s
expectations, the Board will engage with any dissenting major shareholders to understand and address any issues. The Company Secretary is the
main point of contact for such matters.
Whistleblowing procedures
The Board has adopted a whistleblowing policy which provides a mechanism for all employees to raise concerns to the Non-Executive Directors, in
strict confidence and without recrimination, regarding any unethical business practices, fraud, misconduct or wrongdoing. Any such incident would
be addressed confidentially by the Audit Committee. There were no whistleblowing reports during 2018 nor to the date of this report.
The Group’s Audit Committee comprises:
• William Payne, Chairman of the Committee, Senior Independent Non-Executive Director;
• John Shepherd, Independent Non-Executive Director; and
• Ashley Silverton, Independent Non-Executive Director.
All the Committee members are Independent Non-Executive Directors and have no personal or financial interests, other than as shareholders, in the
matters considered by the Committee.
The Audit Committee operates within the remit delegated by the Board, which is set out in formal terms of reference. A copy of the terms of reference
can be obtained from the Corporate Governance section within the Investors area of the Group’s website (www.fireangeltech.com).
Neither the Executive Directors nor the Chairman attend meetings other than by invitation of the Committee members. The Committee invites the
auditor to attend certain meetings.
In accordance with best practice, the Audit Committee is required to comprise at least one financially qualified member (as recognised by the
Consultative Committee of Accountancy Bodies). I am deemed by the Board to have recent and relevant financial experience as a qualified chartered
accountant with more than 30 years’ experience in the financing and management of businesses generally.
The Committee’s key objective is the provision of effective financial governance and assistance to the Board in ensuring the integrity of the Group’s
financial reporting. The Committee oversees the external audit process and reviews the Group’s risk management framework, the effectiveness of its
risk management processes and the system of internal control. Its principal duties are to:
• monitor the integrity of the financial statements of the Group and any formal announcements relating to the Group’s financial performance and
review significant financial reporting judgements contained therein;
• consider whether in its view the Annual Report taken as a whole is fair, balanced and understandable and provides the information necessary to
assess the Group’s performance, business model and strategy, the ultimate approval of which is decided by the Board;
• review the effectiveness of the Group’s financial reporting and the internal control and risk management policies and systems;
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Anti-bribery and anti-corruption policy
• review annually, the need for an internal audit function;
The Board is committed to the fundamental values of integrity, transparency and accountability. As such it seeks to prohibit bribery and corruption
in any form, whether direct or indirect. The Group aims to create and maintain a trust-based and inclusive internal culture in which bribery and
corruption is not tolerated.
The Group would cease to trade with any third party it had reasonable grounds to suspect was involved in bribery or corruption. It would not hesitate
to take legal and/or disciplinary action against employees or third parties who breach the Group’s bribery and corruption policy.
By Order of the Board
John Conoley - Chairman
29 March 2019
• make recommendations to the Board for a resolution to be put to shareholders for their approval in general meeting, on the appointment of the
external auditor and approval of its remuneration and terms of engagement;
• review the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK
professional and regulatory requirements;
• review the appropriateness of accounting policies;
• develop and implement a policy on the engagement of the external auditor to supply non-audit services, taking into account relevant guidance
regarding the provision of non-audit services by the external audit firm; and
• review the arrangements by which staff may in confidence raise concerns about possible improprieties.
Key considerations in 2018
During the year the Committee met twice and considered the following matters:
• the suitability of the Group’s accounting policies and practices;
• the half-year and full-year financial results;
• the scope and cost of the external audit;
• the auditor’s full-year report for 2017;
• the auditor’s report on the interim results for 2018;
• the evaluation of the performance and independence of RSM UK Audit LLP as the Group’s external auditor;
• the review and approval of the external auditor’s plan for 2018, which detailed the proposed audit scope and risk and governance assessment;
• the review and approval of the external auditor’s fees for 2018; and
• the internal control environment across the Group.
Significant financial statement reporting issues
The Audit Committee looks carefully at those aspects of the financial statements which require significant accounting judgements or where there
is estimation uncertainty. The Audit Committee also reviews the draft of the external Auditor’s Report on the financial statements, with particular
reference to those matters reported as carrying risks of material misstatement. The Audit Committee discusses the range of possible treatments both
with management and with the external auditor and satisfies itself that the judgements made by management are robust and should be supported.
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Audit Committee report continued
Remuneration Committee report
Internal controls
Introduction
The Board of Directors, advised by the Audit Committee, has overall responsibility for the Group’s system of internal control and for reviewing its
effectiveness. Details of the system of internal control, the principal risks facing the Group, and the strategies put in place to mitigate them, are set
out in the Risk and Risk Management section on pages 35 and 36.
Audit independence
The Audit Committee and the Board place great emphasis on the objectivity of the external auditor in its reporting to shareholders.
The Audit Partner is present at Audit Committee meetings as required to ensure full communication of matters relating to the audit. The overall
performance of the auditor is reviewed annually by the Audit Committee, taking into account the views of Committee members and senior finance
personnel covering overall quality, independence and objectivity, business understanding, technical knowledge, quality and continuity of personnel,
responsiveness and cost effectiveness. The Audit Committee also has discussions with the auditor, without management being present, on the
adequacy of controls and on any judgemental areas. The scope of the forthcoming year’s audit is discussed in advance by the Audit Committee.
Audit fees are approved by the Audit Committee.
RSM UK Audit LLP was appointed as auditor in 2001. This appointment has not been subject to a tender process since that date although, from time
to time, the Board has benchmarked the audit cost with third parties. The Committee has concluded that RSM UK Audit LLP continues to provide an
effective audit and the Committee and Board will recommend their reappointment at the 2019 Annual General Meeting.
Other than the audit, the Audit Committee is required to give prior approval of all work carried out by the auditor and its associates. Part of this review
is to determine that other potential providers of the services have been adequately considered. These controls provide the Audit Committee with
confidence in the independence of the auditor in its reporting on the audit of the Group.
Non-audit services
RSM UK Audit LLP provides non-audit services to the Group, which are governed, so as to safeguard its independence and objectivity, by the
Group’s non-audit services policy. Compliance with the policy is actively managed and an analysis of non-audit services is reviewed throughout
the year. During the year ended 31 December 2018 11% of services provided to the Group were non-audit services and related predominantly to
corporate tax advice and the preparation of claims for research and development tax credits (see note 8 to the financial statements).
By Order of the Board
William Payne - Chairman of the Audit Committee
29 March 2019
On behalf of the Board, I am pleased to present the Remuneration Committee report for the year ended 31 December 2018, which provides
information about the Remuneration Committee, the remuneration policies approved and applied by the Board, and the actual remuneration of
Directors earned during the year. The report is divided into two sections: a policy report, which sets out the approach to remuneration, and a
remuneration report, which details amounts paid to the Directors during 2018.
Basis of preparation
This report follows the principles of the Companies Act 2006. The Directors have chosen to apply these principles as best practice and in order to
provide greater transparency to shareholders. This includes details of the Committee’s policy on Directors’ remuneration, which will be put to an
advisory vote at the 2019 Annual General Meeting.
Remuneration Committee
The Group’s Remuneration Committee comprises:
• William Payne, Chairman of the Committee, Senior Independent Non-Executive Director;
• John Conoley, Chairman of FireAngel Safety Technology Group plc;
• John Shepherd, Independent Non-Executive Director; and
• Ashley Silverton, Independent Non-Executive Director.
At the date of this report the Committee members are Independent Non-Executive Directors and have no personal or financial interests, other than as
shareholders, in the matters considered by the Committee.
Graham Whitworth was a member of the Committee throughout 2018 until his change of role to Executive Director on 22 January 2019. On the same
date John Conoley was appointed to the Committee.
The Remuneration Committee operates within the remit delegated by the Board, which is set out in formal terms of reference. The remuneration of
Non-Executive Directors is a matter for the Chairman and the Executive members of the Board. No Director or manager is involved in any decision
regarding their own remuneration. A copy of the terms of reference can be obtained from the Corporate Governance section within the Investors area
of the Group’s website (www.fireangeltech.com).
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Other than Graham Whitworth’s membership of the Committee during 2018 described above, the Executive Directors do not attend meetings other
than by invitation of the Committee members and are not present at any discussion of their own remuneration.
Remuneration philosophy
The Remuneration Committee’s policy is to attract and retain individuals of the highest calibre by offering remuneration competitive with comparable
publicly quoted companies, and to drive the Group’s financial performance by providing arrangements which fairly and responsibly reward
individuals for their contribution to the success of the Group. Performance-related bonuses and long-term equity-based remuneration linked to a
demanding profit target represent a significant proportion of Executive Directors’ potential remuneration, which aligns the interests of the individuals
with those of the shareholders.
The Committee continues to seek to ensure that the remuneration of Executive Directors, as well as the wider senior management team, is sufficient
to attract, retain and motivate quality individuals. The principal duties of the Remuneration Committee are to:
• consider and make recommendations to the Board on the policy for the remuneration package of the Executive Directors;
• determine the whole remuneration package for Senior Executives;
• recommend to the Board the remuneration package for the Chairman;
• determine the terms and conditions of service contracts for Senior Executives;
• determine the design, conditions and coverage of the annual long-term incentive schemes for Senior Executives and to approve total and
individual payments under these schemes;
• determine targets for any annual and long-term incentive schemes;
• determine the issue and terms of all share-based plans available to all employees; and
• determine compensation in the event of termination of service contracts of any Senior Executive.
Remuneration policy framework
The Group is committed to achieving sustained improvements in performance. This depends crucially on the individual contributions made by
the executive team and by employees at all levels. The Board believes that an effective remuneration strategy plays an essential part in the future
success of the Group. Accordingly, the remuneration policy reflects the following broad principles:
• the remuneration of Executive Directors and senior managers reflects their responsibilities and contains incentives to deliver the Group’s
performance objectives without encouraging excessive risk taking;
• remuneration must be capable of attracting and retaining the individuals necessary for business success;
• remuneration should be based on both individual and Group performance, both in the short and long term;
• the system of remuneration should establish a close alignment of interest between senior executives and shareholders by ensuring a significant
proportion of senior executive remuneration is generated from equity-based incentives; and
• when determining remuneration, the Committee will take into account pay and employment conditions in the market.
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Remuneration Committee report continued
Details of the Directors’ emoluments are given below.
a) Remuneration
The Group has a clearly defined strategy to drive the business forward by understanding the product needs of our customers, focussing on product
innovation and working to develop market-leading positions in each of the markets we serve. Our remuneration policy supports the delivery of this
strategy and aligns the interests of Directors and shareholders. This is achieved by short-term profit-based bonus incentives and longer-term share-
based incentive plans which focus on delivering key business objectives, profitable growth and strong shareholder returns.
The Committee monitors the market competitiveness of the overall remuneration package for each member of the Group’s senior management team
in order to ensure the Group is able to retain and attract new talent as required.
Group employee considerations
The Group employs people across five countries with the majority of staff based in the UK. Inevitably remuneration arrangements differ to reflect local
markets, but a common theme applied to employees at all levels is the Group’s aim to offer competitive levels of remuneration, benefits and incentives to
attract and retain employees. At more senior levels, remuneration has a larger variable proportion dependent on the Group’s financial performance.
Shareholder views
The Committee has considered the guidance provided by shareholder advisory groups in preparing this policy and has followed this insofar as it
is appropriate in the context of the Group’s business. The Committee continues to welcome an open dialogue and input from shareholders on the
remuneration policies of the Group.
Key considerations in 2018
During the year the Committee met three times and considered the following matters:
• approval of the 2017 bonus awards and salary increases for the Executive Directors and certain senior managers;
• approval of the 2018 discretionary bonus scheme for certain senior managers and Executive Directors; and
• review of the outturn of the 2015 LTIP awards and the determination that no proportion of the awards had vested and therefore that the awards had
lapsed.
The following tables set out the key elements of the Group’s remuneration policy for Directors.
Remuneration policy for Non-Executive Directors
Element Purpose and link to strategy Operation
Maximum opportunity
Performance measures
Fees
To reward individuals for
fulfilling the relevant role
and to attract individuals
with the skills and calibre
required
The Committee makes recommendations to the
Board on the remuneration of the Non-Executive
Directors. The level of remuneration is set within a
limit approved from time to time by shareholders.
Non-Executive Directors are paid a base fee
covering Board and committee membership
Fees are set at a level appropriate for the
role and are reviewed regularly, taking into
account fees payable to Non-Executive
Directors of companies of a similar size and
complexity
Evaluation of overall
contribution to the Board
Remuneration policy for Executive Directors
Element
Purpose and link to strategy Operation
Maximum opportunity
Salary levels are set using careful
judgement, taking into account the
scope of the role and responsibilities,
performance, experience, potential,
retention issues and salaries elsewhere
in the Group and in the market place.
Judgement will be informed, but not
led, by reference to companies of
similar size and complexity. Salaries
are reviewed annually either in March
or October taking into account the
financial performance of the Group.
Salary increases are not automatic. In
exceptional circumstances, salaries
may be increased on other dates in
the year
Annual salary increases will not normally exceed
average increases for employees in other
appropriate parts of the Group. On occasion,
increases may be larger where the Committee
considers this to be necessary to align with
market rate or exceptional performance.
Circumstances where this may apply include:
growth into a role to reflect a change in scope
of role and responsibilities or where market
conditions indicate lack of competitiveness and
the Committee judges that there is a risk in relation
to attracting or retaining Executives. Where the
Committee exercises its discretion to award
increases above the average for other employees,
the resulting salary will not exceed the competitive
market range
Performance measures
Overall contribution to
the Group. Individual
performance is the
primary consideration in
setting salary alongside
overall affordability and
market competitiveness
Salary
It is essential that the
Group pays competitive
salaries to attract and
retain individuals of the
right calibre to develop
and execute the business
strategy
Benefits
Pension
To provide market
competitive benefits
sufficient to recruit and
retain
To provide market
competitive pension
arrangements sufficient to
recruit and retain
Executive Directors
JR Gahan (resigned 5 March 2018)
NA Rutter
NC Smith
MJ Stilwell (appointed 3 December 2018)
GRA Whitworth3
Non-Executive Directors
JR Conoley (appointed 22 January 2019)
WJB Payne
T Russo4 (resigned 31 March 2017)
J Shepherd
AV Silverton
Total
Salary, fees
and car
allowances
Benefits
Bonuses1
Pension2
£000
£000
£000
£000
2018
Total
£000
2017
Total
£000
31
185
236
15
218
-
42
-
39
36
802
-
3
4
-
6
-
-
-
-
-
-
-
30
-
-
-
-
-
-
-
3
18
22
1
-
-
-
-
-
-
34
206
292
16
224
-
42
-
39
36
202
202
245
-
232
-
42
-
33
36
13
30
44
889
992
1. Bonuses are paid or accrued based on the achievement of agreed personal objectives and corporate performance metrics.
2.
Pension contributions reflect pension payments into money purchase arrangements. There were no other pension payments or accrued pension benefits arising under money purchase schemes
in respect of the Directors.
3. Subsequent to the year end, on the appointment of John Conoley on 22 January 2019, Graham Whitworth’s role changed from Executive Chairman to Executive Director.
4. Tom Russo waived his non-executive director fees in the preceding year.
b) Share schemes
Directors’ interests in unvested and vested share option awards are as follows:
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2014 EMI
JR Gahan
NA Rutter
GRA Whitworth
2015 LTIP
JR Gahan
NA Rutter
NC Smith
GRA Whitworth
Number of
awards over
shares at 1
January 2018
Awards
granted in the
year
Awards
lapsed in the
year
Awards
exercised in
the year
Number of
awards over
shares at 31
December
2018
Expiry date
Exercise price
(pence)
69,445
125,000
125,000
200,000
200,000
300,000
200,000
-
-
-
-
-
-
-
(69,445)
-
-
(200,000)
(200,000)
(300,000)
(200,000)
-
-
-
-
-
-
-
-
28/4/2024
125,000
28/4/2024
125,000
28/4/2024
-
-
-
-
3/6/2025
3/6/2025
3/6/2025
3/6/2025
200
200
200
2
2
2
2
The Group has an approved Enterprise Management Incentive (‘EMI’) scheme for qualifying UK-based employees which provided for an award of
share options based on seniority. Share options vested over three years. If options remain unexercised after a period of ten years from the date of
grant, the options usually expire except in exceptional circumstances at the discretion of the Remuneration Committee. Furthermore, options are
typically forfeited if an employee leaves the Group before options have vested.
The awards issued under the 2015 LTIP failed to meet the performance criteria over the three-year vesting period and therefore lapsed during the year.
Benefits include life assurance and
medical insurance
Benefits will be market competitive taking into
account the role and the local market
None
The UK scheme rules are approved by HMRC.
New Executive Directors to the Group
are offered membership of the Group’s
defined contribution pension plan.
Pension contributions are based only
on an individual’s salary
The maximum employer contribution to
the Group’s defined contribution pension
arrangements is 10% of gross salary
None
Annual
performance
related
bonus
To incentivise and reward
execution of the business
strategy, delivery of
financial performance
targets and the Group’s
strategic plan
In line with the scheme covering other
senior members of staff, performance-
related bonuses for the Executive
Directors are based on the achievement
of specific financial targets for the
Group and agreed personal objectives
Bonus potential is capped at an appropriate level
to encourage outperformance of budgeted targets
Bonus payments are
at the discretion of
the Remuneration
Committee and take
into account the overall
financial performance
of the Group
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Remuneration Committee report continued
Statutory Directors’ report
c) Service contracts
There are no service contracts for Directors with notice periods in excess of twelve months. The notice periods under the service agreements for
Executive Directors and letters of appointment for Non-Executive Directors are as follows:
JR Conoley
WJB Payne
NA Rutter
J Shepherd
AV Silverton
NC Smith
MJ Stilwell
GRA Whitworth
Policy on exit payments
Notice period
6 months
3 months
12 months
3 months
3 months
12 months
6 months
12 months
The notice periods the Group is required to give to Executive Directors under their contracts of employment is as set out above. Payment in lieu of
notice includes the value of salary in the notice period, bonus, benefits, car allowance and pension contributions. Both mitigation and the staggering
of payments through the notice period will be considered by the Committee where appropriate, as will the funding of professional fees. Should
additional compensation matters arise, such as a settlement or compromise agreement, the Committee would exercise judgement and take into
account the specific commercial circumstances.
The Committee has the discretion to preserve incentive awards pro-rated to service. In exercising its discretion on incentive awards, the Committee
will have regard to performance, the circumstances of the Director leaving the Group and the terms of the relevant service agreement.
For share options, the rules state that unvested awards may be preserved at the Committee’s discretion according to the circumstances. In such
cases, vesting will be at the normal date, subject to the established performance conditions, and pro-rata to the duration of employment in the
performance period. In cases such as death and terminal illness, the Committee also has the discretion to vest the awards immediately.
In the event of a change of control of the Group, all share option awards may be permitted to vest in full at the discretion of the Remuneration
Committee.
Policy on new appointments
Newly appointed Executive Directors will be awarded a remuneration package which is consistent with the policy and principles as set out in this
report. Base salary may be set at a level higher or lower than previous incumbents and in certain circumstances, to facilitate the recruitment of
individuals of the required calibre, the Committee may use its discretion to make individual additional incentive awards. This level of discretion is
considered appropriate given the Group’s growth strategy.
By Order of the Board
William Payne - Chairman of the Remuneration Committee
29 March 2019
The following matters are reported by the Directors in accordance with the Companies Act 2006 requirements in force at the date of this Annual
Report.
Principal activities
The principal activities of FireAngel Safety Technology Group plc (the ‘Company’) and its subsidiary companies (the ‘Group’) are set out within the
Strategic Report, which comprises the Chairman’s Statement, the Strategic Review, the Performance Review and the Risks and Risk Management
section, on pages 6 to 17, and pages 35 and 36.
Review of business and future developments
The Consolidated Income Statement for the year ended 31 December 2018 is set out on page 41.
A review of the Group’s business activities during the year and its prospects for the future can be found in the Chairman’s Statement, the Strategic
Review and the Performance Review on pages 6 to 17. These reports, together with the Chairman’s Introduction, the Corporate Governance Report,
the Audit Committee Report and the Remuneration Committee Report, are incorporated into this report and should be read as part of this report.
Key performance indicators
The Board’s principal objective is to increase shareholder value. The Directors measure the Group’s progress in achieving this objective principally
using the following indicators (as reflected in this Annual Report):
• Sales performance. Sales are reviewed each week to assess individual business unit performance against budget and to ensure all sales
opportunities are being appropriately pursued. The Group seeks to build long term customer relationships and maximise the sales mix of its
higher margin products.
• Gross margin % (excluding the BRK distribution fee). Gross margins are reviewed each week to assess individual business unit performance and
to identify areas to improve the profitability of the Group. Different market segments have varying gross margin opportunities, depending on the
level of competition in that market and the positioning of the Group’s products and brands.
• Operating margin %. The fixed costs of the business are carefully managed to ensure that, in conjunction with the gross profit generated, the
Group can return an acceptable level of operating margin.
• Basic EPS. The Group seeks to reward its shareholders with an annual dividend.
• Net working capital. The Group seeks to proactively manage its working capital to ensure that it minimises its asset base to maximise cash flow
from which to pay dividends.
• Free cash flow. Free cash flow is cash flow from operations after the capital costs of investment in product development, to pay as dividends or
retain in the business.
• Net investment in research and development. The Group’s principal source of product differentiation is through investment in its technology base,
rather than simply price. The Board regularly reviews the Group’s product roadmap to ensure its internal investment is focussed on the right areas
and that products come to market on time.
• Product warranty returns. In addition to the financial KPIs set out above, the Group records and monitors all free-of-charge replacement products
issued to customers under the Group’s warranty procedures. Warranty returns by market and by year of manufacture are reviewed and monitored
to ensure that the pattern of warranty returns is in line with expectation.
Appropriate commentary on the key performance indicators above is set out in the Performance Review on pages 13 to 17.
Principal risks and uncertainties
Details of the principal risks and uncertainties considered by the Board to affect the Group, and the related risk mitigation actions, are given on pages
35 and 36.
Group results and dividends
The financial results for the year and financial position of the Group and the Company are as shown on pages 41 to 42 inclusive. The consolidated
loss after tax for the year was £4.5 million (2017: profit after tax of £0.5 million).
As a result of the loss reported for the year, and consistent with the decision not to pay an interim dividend (2017: 2.5 pence per share), the Directors
do not recommend payment of a final dividend for the year (2017: nil pence per share). The total dividend payable for 2018 was therefore nil pence
per share (2017: 2.5 pence per share).
Financial instruments
The Group’s financial risk management objectives and policies, including the policy for hedging future foreign exchange rate risk, are outlined in note
4. The Group does not adopt hedge accounting and all future contracts beyond the balance sheet date are marked-to-market at the balance sheet
date with the net gain or loss on those contracts taken through the income statement in the period. The net gain on foreign exchange contracts taken
to the income statement in the year amounted to £0.6 million (2017: loss of £0.3 million).
Research and development expenditure
The Group has continued to invest in research and development of both software and hardware products during the year. The people and non-
people costs of product development on specific identifiable projects are capitalised in accordance with the accounting policy set out on pages 47
and 48. General research costs undertaken in respect of the Group’s principal activities are charged through the income statement as incurred.
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Governance
Statutory Directors’ report continued
Share capital and voting rights
The Company’s issued share capital comprises a single class of ordinary shares of 2p each, with 45,905,422 shares in issue and listed on AIM of the
London Stock Exchange as at 31 December 2018. No shares were held in treasury. Details of movements in the issued share capital can be found in
note 28 to the financial statements. No securities were issued in connection with a rights issue during the year.
Each share carries the right to one vote at general meetings of the Company. Holders of the shares are entitled to receive the Company’s annual
report. They are also entitled to attend and speak at general meetings of the Company, to appoint one or more proxies or, if they are corporations,
corporate representatives, and to exercise voting rights. They have the right to ask questions at the Annual General Meeting relating to the business
of the meeting and for these to be answered, unless such answer would interfere unduly with the business of the meeting, involve the disclosure of
confidential information, if the answer has already been published on the Group’s website or if it is not in the interests of the Group or the good order
of the meeting that the question be answered.
All issued shares are fully paid up and carry no additional obligations or special rights. The full rights are set out in the Company’s Articles of
Association (the ‘Articles’), the latest copy of which can be found in the Incorporation section of the Investors area of the Group’s website at www.
fireangeltech.com. There are no restrictions on transfers of shares in the Company, or on the exercise of voting rights attached to them, other than
those which may from time to time be applicable under existing laws and regulations.
Control and share structure
Details of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital during the year, are
shown in note 28 to the financial statements. The Company has one class of ordinary share which carries no right to fixed income.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the
Articles and prevailing legislation. The Directors are not aware of any agreements between shareholders of the Company’s shares that may result in
restrictions on the transfer of securities or voting rights.
Details of employee share schemes are set out in note 30 to the financial statements. No person has any special rights of control over the Company’s
shares capital and all issued shares are fully paid.
Directors’ interests in shares
Interests of the Directors and their connected persons in the issued share capital of the Company as at 31 December 2018 were as follows:
JR Conoley
WJB Payne
NA Rutter
AV Silverton
J Shepherd
NC Smith
MJ Stilwell
GRA Whitworth
2018
Number of
shares held
2018
Interests in
share schemes
2018
Total interests
in shares
2017
Total interests
in shares
-
100,000
-
-
-
-
100,000
100,000
3,000,000
125,000
3,125,000
3,325,000
35,000
23,063
10,000
-
3,521,937
6,690,000
-
-
-
-
35,000
23,063
10,000
-
15,000
23,063
300,000
-
125,000
3,646,937
3,846,937
250,000
6,940,000
7,610,000
There has been no change in the interests of the Directors and their connected persons in the issued share capital of the Company from those set out
in the table above to 29 March 2019.
Significant shareholdings
As at the close of the market on 13 March 2019, the Company was aware of the following holdings, excluding Directors’ holdings, of 3% or more of
the Company’s total issued share capital:
BRK Brands Europe Limited
Downing LLP
Euro Credit Investments Limited
Close Asset Management Limited
Canaccord Genuity Group Inc
Jolyon William Money Esq
32
Number of
shares
% of total
voting rights
Nature of
interest
10,732,149
4,595,892
3,000,000
2,895,234
1,892,747
1,518,361
23.4
10.0
6.5
6.3
4.1
3.3
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Agreements affected by change of control
Other than some customer and supplier contracts that have an option to be terminated, the Company is not a party to any agreements which take
effect, alter or terminate upon a change of control of the Company following a takeover bid. There are no agreements between the Company and its
Directors or employees providing compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise)
that occurs because of a takeover bid.
Board of Directors
All Directors were in office throughout the year ended 31 December 2018 with the exception of the following appointments and resignations:
• John Conoley (appointed 22 January 2019)
• John Gahan (resigned 5 March 2018)
• Mike Stilwell (appointed 3 December 2018)
Following John Conoley’s appointment as Non-Executive Chairman on 22 January 2019, Graham Whitworth, the Executive Chairman throughout
2018 to that date, was appointed part-time Executive Director for twelve months with a view to becoming a Non-Executive Director of the Company
on the expiry of the twelve months.
Details and biographies of the current Directors are shown on pages 18 and 19.
The powers of the Company’s Directors and rules that apply to changes in the Directors are set out in the Company’s Articles. Any changes to the
Articles would require the consent of the Company’s shareholders.
The Board may delegate to a Director holding any executive office any of the powers, authorities and discretions exercisable by the Board for such
time and on such terms and conditions as it thinks fit. The Board may revoke or alter the terms and conditions of the delegation and may retain or
exclude the right of the Board to exercise the delegated powers, authorities or discretions collaterally with the Executive Director.
The Company’s Articles require that a minimum of one-third of the Directors must retire by rotation at each Annual General Meeting, or if their number
is not three or a multiple of three, then the number nearest to but not exceeding one-third shall retire from office, excluding Directors who are retiring
and standing for election at the first Annual General Meeting following their appointment to the Board. If the number of Directors subject to retirement
by rotation is fewer than three, one of such Directors shall retire. At the Annual General Meeting to be held on 25 June 2019, Graham Whitworth and
Nick Rutter will retire and stand for re-election. As newly appointed Directors, John Conoley and Mike Stilwell will be subject to election being the first
Annual General Meeting since they were both appointed.
The Company’s shareholders may by ordinary resolution appoint any person to be a Director. The Company must not have less than three and
no more than twelve directors holding office at any time. The Company may by ordinary resolution from time to time vary the minimum and/or the
maximum number of directors.
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Conflicts of interest
The Group has procedures in place for managing conflicts of interests. If a Director becomes aware that they, or a connected party have an interest
in an existing or proposed transaction with the Group, they should notify the Company Secretary as soon as possible. Directors have a continuing
obligation to update any changes to conflicts and the Board formally reviews any such conflicts periodically.
Directors’ and officers’ liability insurance
The Group maintains a management protection policy including directors’ and officers’ liability insurance which is reviewed annually. The insurance
covers the Directors and officers of the ultimate holding company of the Group, FireAngel Safety Technology Group plc, and its subsidiaries, against
the costs of defending themselves in civil proceedings taken against them in their capacity as a director or officer of a Group company and in respect
of damages or civil fines or penalties resulting from the unsuccessful defence of any proceedings. The indemnity was in force throughout the financial
year and is currently in force.
No indemnity is provided for the Group’s auditor.
Employment policies
Details of the Group’s policy in respect of employment and training are given in the Corporate social responsibility section on page 12.
The Group employed an average of 154 people in 2018 (2017: 147).
The Group has established employment policies that comply with current legislation and codes of practice, including in the areas of health and safety
and equal opportunities. The Group consults employees on developments and changes to take account of their views when making decisions that
may impact their interests.
The Group has in place a Diversity and Equality Policy which sets out the Group’s approach to equal opportunities and avoidance of discrimination at
work. This policy confirms the Group’s commitment to treating employees fairly and inclusively, ensuring that all decisions on recruitment, selection,
training, promotion, career opportunities, pay and other terms and conditions are based solely on objective and job-related criteria. The Group is
committed to offering employment to suitably qualified people with disabilities and making reasonable adjustments to the working environment to
accommodate their needs.
Policy on payment of suppliers
The Group’s policy during the year was to pay suppliers in accordance with agreed terms. At 31 December 2018 the Group had 103 days’ purchases
outstanding in trade payables (2017: 101 days’).
Charitable contributions
The Group made charitable contributions amounting to £622 (2017: £522) during the year. The Group has a charity committee that organises regular
events and donates money to specific charities.
33
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Governance
Statutory Directors’ report continued
Going concern
The Group’s forecasts and projections, taking account of reasonably predictable changes in trading performance (even after applying downside
sensitivities), support the conclusion that there is a reasonable expectation that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report. Even after applying downside
sensitivities, the Group is forecast to remain within its banking facilities. Accordingly, the going concern basis has been adopted in preparing the
financial information.
In determining whether the Group and Parent Company’s financial statements can be prepared on a going concern basis, the Directors considered
the Group’s business activities, together with the factors likely to affect its future development, performance and position. The review also included
the financial position of the Group, its cash flows, and borrowing facilities. The key factors considered by the Directors were:
• the implications of the current economic environment and future uncertainties around the Group’s revenues and profits by undertaking forecasts
and projections on a regular basis;
• the impact of the competitive environment within which the Group operates;
• the impact of Brexit;
• the restructuring of the Group’s borrowing facilities since the year end, to move from a revolving credit facility to a more efficient invoice
discounting and overdraft facility;
• the announcement post year end of a placing and open offer to raise £6.0 million; and
• the potential actions that could be taken in the event that revenues or gross profits are worse than expected, to ensure that operating profit and
cash flows are protected.
Annual General Meeting
The notice convening the Annual General Meeting is distributed separately to shareholders at least 20 working days before the meeting. Separate
Resolutions are proposed on each substantially separate issue. The poll results from the 2019 Annual General Meeting will be made available on the
Company’s website after the meeting.
Post balance sheet events
Information on any events occurring after the balance sheet year end is described in note 33 to the financial statements.
Auditor
RSM UK Audit LLP has indicated its willingness to continue in office and a resolution that it be reappointed as auditor will be proposed at the
forthcoming Annual General Meeting.
Statement as to disclosure of information to the auditor
The Directors who were in office on the date of approval of these financial statements have confirmed, that as far as they are aware, there is no
relevant audit information of which the Company’s auditor is unaware.
Each Director has confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that it has been communicated to the Company’s auditor.
Forward-looking statements
This report may contain certain statements about the future outlook for FireAngel Safety Technology Group plc. Although the Directors believe their
expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
Distributor
relationships
Strategic Report
The Strategic Report comprises the Chairman’s Statement, the Strategic Review, the Performance Review and the Risks and Risk Management
section, on pages 6 to 17 and pages 35 and 36.
The Strategic Report and the Directors’ Report have been approved by the Board.
By Order of the Board
Mike Stilwell - Group Finance Director
29 March 2019
Product warranty risk
Risks and risk management
Like every business, the Group faces risks undertaking its day-to-day operations and in pursuit of its longer-term objectives.
Further information on those risks and how they are managed by the Group is set out in the following pages. It is recognised that the Group is
exposed to a number of risks wider than those identified here. However, we have chosen to disclose those risks of most concern to the Board
and those that have been the subject of debate at recent Board or Audit Committee meetings. It is recognised, however, that no risk management
strategy can provide absolute assurance against loss.
Through the management of our business units, the Group has an established risk management process for identifying, assessing, evaluating and
managing significant risks whereby the Executive Directors, in conjunction with the Board and Audit Committee, seek to identify, assess and manage
risk.
The Chairman of the Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. His role is to
set the tone and influence the culture of risk management within the Group, determine the Group’s risk prioritisation and monitor and manage the
fundamental risks which the business faces through clear delegation of responsibility to each member of the Executive team.
All the Executive Directors are responsible for identifying, evaluating and mitigating risk in a timely manner, ensuring that there is an open and
receptive approach to solving risk problems in the Group, embedding risk management as part of the system of internal controls within the Group and
regularly updating the Board on the status of risks and controls where significant issues are identified.
Significant risks, which are defined with reference to magnitude of impact and likelihood of occurrence, are escalated to the Group Chief Executive
and Group Finance Director and, if appropriate, formally reviewed by the Board to assess the potential financial impact on the Group and to
determine the optimum course of action to address these risks.
Read more about how the Group manages risk in the Corporate Governance report from page 20.
The Audit Committee advises the Board of Directors on matters of risk management. It has its own report, which can be read on pages 25 and 26.
The principal risks facing the Group, and the strategies put in place to mitigate them, are described in the following table.
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Product prices from
the Group’s smoke
alarm and connected
products manufacturer
cannot be reduced
Exchange rate risk
Risk
Factors that may impact the business
Mitigation
What we are doing to minimise the risk
The relationship with the Group’s smoke alarm and connected
products manufacturer is relatively new. Whilst progress has
been made in increasing production yield and volumes, such
that output is now expected to meet forecast demand for 2019,
there remain challenges in levels of utilisation and efficiency in the
manufacturing process which is impacting product costing in the
short term.
The Group operates internationally giving rise to exposure from
changes in foreign currency exchange rates. The majority of the
components used in the manufacture of the Group’s products
are priced in US dollars. It also receives a significant proportion
of its revenues in euros from sales into Europe. Unprecedented
levels of uncertainty in global economic markets, and in particular
around the UK’s future trading relationship with the rest of the
world, has led to a prolonged weakening in the value of sterling
against both currencies.
The Group works with third party distributors of its products in
Continental Europe who own the key customer relationships
and undertake marketing support activities to drive revenue
in the markets they serve. FireAngel is dependent upon these
distributors to fulfill these roles in an effective and efficient
manner to continue to grow sales in these jurisdictions. Given
the significant concentration of sales through a small number
of distributors, FireAngel closely monitors sales by the third-
party distributors. From time to time, the Group has financially
supported its distributors with extensions to payment terms.
Each year, the number of the Group’s smoke and carbon
monoxide products in the market place increases and it is
inevitable, given the technology-content of FireAngel’s products,
that despite best efforts to produce a product with zero defects,
from time to time the Group will experience product warranty
issues. Products are designed to ‘fail safe’ so that if it is not
working, it is designed to alert the user that it requires attention.
Many products have a ten-year life and if product issues do
emerge, it is not unusual to experience the same product issues
over a number of years. If a product fails, FireAngel’s liability
is governed by the contractual agreement with its immediate
customer which may include the provision of a replacement
product.
The Group’s supply chain and technical teams are working with its
primary manufacturing partner to ensure that efficiency is improved to
reduce the future costs of production.
The Group manages this risk through the matching of foreign currency
receipts and payments, where possible, and also through a policy of
hedging using forward exchange contracts to guarantee the future
exchange rate at which chosen volumes of currency are exchanged.
FireAngel has contracts with most of its major distributors. Many
of these relationships are well established and, in some cases,
the distributor only or mainly sells FireAngel’s products. FireAngel
ensures that the contractual relationships with its customers are fair
and commercially beneficial for both parties. FireAngel monitors
outstanding credit balances owed by distributors to minimise potential
bad debt risk for the Group.
From time to time, overstocking in the distribution channel may
cause financial pressures on FireAngel and its third-party distributors
depending on the sales conditions in the relevant market. The Group
keeps in close contact with each of its distributors to monitor their sales
and market conditions to maximise the sales potential of the distributor
and FireAngel.
The Group seeks to ensure that products manufactured by its suppliers
comply with the relevant product specifications which are approved by
various test houses and regulatory bodies. If a product is not compliant,
FireAngel would potentially have a warranty claim on its supplier. Where
it becomes clear there are issues with batches of a certain product,
the Group makes specific provision to cover 100% of the estimated
warranty costs of providing free of charge replacements with a ‘no
quibble’ warranty policy. Product returns in each market are managed
by FireAngel’s in-house Technical Support team which records all
product warranty by date of manufacture. The Group also maintains
product recall insurance to mitigate the potential cost of a product
recall should one of its approved and fully certified designs be found to
be at fault. The Group had warranty provisions of £1.5 million at at 31
December 2018 (2017: £2.2 million).
34
35
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Governance
Risks and risk management continued
Risk
Factors that may impact the business
Mitigation
What we are doing to minimise the risk
Risks
following
Britain’s exit
from the EU,
‘Brexit’
The UK Parliament voted in favour of triggering Article
50, and on 29 March 2017, the UK Government
duly gave the requisite notice, initiating a two-year
process for Britain to leave the EU with the deadline for
concluding an agreement of 29 March 2019.
Competition
risk
Several home safety product companies are considered
to be direct competitors of FireAngel. These companies
vary in the relative strength of their product offering. As
competitors launch new products, our prospects may
be impacted which could either reduce or enhance
FireAngel product sales.
Changing
trends in the
market place
The introduction of connected home products and
solutions with companies seeking to connect and
monitor products in the home via the internet could
potentially reduce the popularity of FireAngel’s
standalone safety product range.
Product
defensibility
It is possible that new products and technologies may
emerge in the future as more viable alternatives to
FireAngel’s products.
Intellectual
property risk
Staff
recruitment
and retention
risk
International
trade
regulations
Health and
safety risk
Product
certification
compliance
Many of the Group’s products are protected by
intellectual property rights and the market can be
characterised as having relatively high barriers to entry in
this regard. Before introducing new products, FireAngel
carefully checks that it is not infringing the patented
technology of third parties. Potentially, third parties
could seek to copy or find a workaround to FireAngel’s
registered technology.
As with most businesses, particularly those operating
in a technical field, we are dependent on our employees
with key managerial, engineering and technical skills.
The contribution of FireAngel’s dedicated staff and
management team has been, and continues to be,
critical to the Group’s success.
The Group’s activities involve the import and export of
products. Any changes in the regulations covering such
movements might impact the Group’s trading activities.
Increasing geographical reach and continual expansion
of our customer base, particularly into Continental
Europe, exposes the Group to a potentially wider set of
regulatory restrictions. Risks associated with Brexit are
described as a separate risk within this table.
As the Group’s product range expands, the risk of
non-compliance with health and safety regulations
increases. The Group handles products with low levels
of radioactive particles in the ‘foils’ contained within
ionisation alarms which were historically sold in the
UK. Changes to product design mean that products
incorporating radioactive particles are no longer sold.
Products are required to comply with the appropriate
certification standards. If products do not comply,
certification bodies could insist on quarantining product
for further testing, rework, or, in extreme situations, a
recall.
The Board has taken steps to prepare for Britain leaving the EU on 29 March 2019. These
actions include setting up a dedicated cross-functional project team; reviewing all imports
and exports by country with visibility maps of supply routes; considering the impact of
potential changes on the Group’s strategic objectives; reviewing warehouse locations
and logistics procedures; registering for appropriate VAT and customs procedures; and
assessing the potential cash impact of tariffs and new arrangements.
The Board remains vigilant and will continue to monitor the situation and take appropriate
steps to manage the potential impact of further movements in relevant currencies and
potential changes in import duty arrangements.
The Group’s primary manufacturing partner for smoke, heat and accessory products
is based in Poland. Poland has not adopted the euro but has been a full member of the
EU since 2004. Should the import duty regime change following the UK’s exit from the
EU, the Group would review the import duty arrangements and adjust its product pricing
accordingly.
FireAngel monitors competitors’ offerings and regularly reviews competitor products. Our
continued investment in new products and technology provides a barrier to new entrants
in the market. Certification costs per product are high, estimated at approximately
£100,000 per new product. This also acts as a significant barrier to entry.
The Group is selling its own connected home solution products and is increasing its
investment in technology and products which connect to the internet. FireAngel continues
to invest in product technology to reduce the cost of connected home solutions and to
ensure that ours are the products of choice for our customers.
The Group dedicates significant resources to product research and development to keep
the business and its products at the forefront of technology. FireAngel seeks to stay
abreast of emerging market trends to position the Group to exploit and commercialise
such technologies as they appear. The Group regularly reviews other technologies to
ensure that it has the right technology and engineering capability in-house. FireAngel’s
established technical team and its know-how are a significant source of competitive
advantage for the Group.
FireAngel’s principal protection in the market lies in its business model rather than through
any specific intellectual property rights. The breadth of FireAngel’s product range and its
ability to add new products and leverage its brands across the markets it serves represents
a significant barrier to entry to competitors. FireAngel is not dependent on any one single
patent for sales. FireAngel’s products are protected by over 50 granted patents in our
major markets and we continue to register new patents to protect our IP where the Group
believes it is appropriate to do so.
FireAngel places great importance on open communication with its employees, including
regular staff updates and, where results permit, an annual staff away day. The Group
aims to offer appropriate remuneration packages and incentive arrangements in order to
mitigate this risk. We seek to create a supportive working environment and employees are
encouraged to learn and develop in their roles through personal development plans.
FireAngel closely monitors international import and export regulations and adapts its
procedures to minimise duty costs while remaining compliant.
The Group places the greatest importance on maintaining the highest standards of health
and safety compliance. FireAngel’s procedures comply with the requirements of ISO
audits and detailed records are maintained to ensure that products are correctly stored
and disposed.
In conjunction with suppliers, FireAngel seeks to ensure that all products are manufactured
in accordance with the relevant product certification standards. Detailed compliance
records are maintained for each product which is approved for sale. In addition, detailed
testing is performed on each product with traceability of key components a contractual
commitment by each of the Group’s suppliers. FireAngel works closely with the standard
review bodies to ensure that its products remain of the highest quality. Suppliers are
also audited by independent third parties to ensure that they maintain the highest quality
standards. Ensuring product certification is obtained in a timely manner helps ensure that
the Group’s sales are not impacted by issues with certification.
36
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the
AIM rules of the London Stock Exchange to prepare the Group financial statements in accordance with International Financial Reporting Standards
(‘IFRS’) as adopted by the European Union (‘EU’) and have elected under company law to prepare the Company financial statements in accordance
with IFRS as adopted by the EU.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and
the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part
of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing the Group and Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRS adopted by the EU; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the FireAngel Safety
Technology Group plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
By order of the Board
William Payne - Company Secretary
29 March 2019
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FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Independent auditor’s report
To the members of FireAngel Safety Technology Group plc
Opinion
Impairment of product development costs
We have audited the financial statements of FireAngel Safety Technology Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 December 2018 which comprise the consolidated income statement, the consolidated and company statement of financial position,
the consolidated and company cash flow statement, the consolidated statement of changes in equity, the company statement of changes in equity
and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2018 and of the
The group continues to develop new products and has unamortised capitalised product development costs of £13.1 million at the reporting date, of
which £3.5 million relates to projects where amortisation has not yet commenced. In accordance with their stated accounting policy, management
should only capitalise these costs on the basis that it is probable that the asset created will generate future economic benefits and management are
required to consider whether or not there are any indicators of impairment for each asset at each reporting date.
The recovery of these assets in future periods is dependent upon the successful completion and / or sale of each project. The potential for impairment
is one of the most significant risks of material misstatement due to the quantum of costs capitalised in respect of certain individual projects and also
due to the exercise of management judgement regarding inherently uncertain future outcomes relating to the adoption of new technologies and sales
performance. Management have explained in detail in note 3 the estimation uncertainties relevant to their impairment considerations.
group’s loss for the year then ended;
Our audit work included, but was not restricted to:
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent
of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
• obtaining and reviewing management’s assessment of all projects within capitalised product development costs;
• for projects where amortisation has commenced, we reviewed the sales and gross margin achieved on products using this technology and
comparing the gross margin achieved with unamortised capitalised costs at the reporting date to assess the period over which the capitalised
costs will be recovered; and
• for projects where amortisation has not yet commenced, we challenged management’s assessment and corroborated explanations to supporting
evidence where available.
Provisions for slow moving inventory
The group had inventory of £8.4 million at 31 December 2018. As disclosed in the accounting policies, inventories are held at the lower of cost and net
realisable value. As disclosed in note 3 and note 19, management estimate the extent to which provisions are required to cover stock obsolescence.
Given the quantum of inventory held at the balance sheet date, and the significant estimation required, the adequacy of the recorded provision is one
of the most significant risks of material misstatement.
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
Our audit work included, but was not restricted to:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s
or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and parent company
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we
identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the group and parent company financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
FireAngel warranty provisioning
The group reported a significant battery warranty issue in the financial statements for the year ended 31 December 2015 which included an
exceptional warranty cost charge of £5.5 million. The warranty provision has been subsequently utilised, and was £1.4 million at 31 December 2018.
The recorded provision is one of the most significant risks of material misstatement due to the high degree of estimation uncertainty contained within
management’s calculations of the required provision. Management have explained in detail in note 3 and note 24 the estimation uncertainties relevant
to the calculation of the warranty provision. The most significant estimates include:
• the terminal rate of product return, and
• the cost of servicing each returned unit, having regard to current inventory, purchase price and returns reworking.
Management provided us with a calculation of the warranty provision. Our audit work included, but was not restricted to:
• obtaining an understanding of the calculation methodology used by management to calculate the remaining warranty provision in light of our
understanding of the specific warranty issue and the wider business;
• challenging the appropriateness of key assumptions used in the calculations, and any changes made compared to prior periods, by comparing
them to other internal information held by management;
• comparing the actual rates of return to those anticipated when the issue was initially identified to assess the adequacy of projected terminal rates
of return and challenging management as to the reasons for any changes made to assumptions in this regard;
• assessing the calculations prepared by management in light of latest available returns information; and
• assessing the adequacy of disclosures set out in the financial statements, particularly detailing critical accounting estimates and areas of
judgement.
• obtaining and reviewing management’s provision calculation and considering the appropriateness of any judgements made thereon;
• identifying potentially obsolete or slow moving inventory with reference to historic and expected sales; and
• challenging management to demonstrate their plan to recover value from slow moving, unprovided items.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could reasonably
influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements. During planning
materiality for the group financial statements as a whole was calculated as £483,000 which was not significantly changed during the course of our
audit. Materiality for the parent company financial statements as a whole was calculated as £151,000 which was not significantly changed during
the course of our audit. We agreed with the Audit Committee that we would report to them all unadjusted differences in excess of £15,000, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit scope comprised full scope audits of FireAngel Safety Technology Group plc and its UK trading subsidiary undertaking, FireAngel Safety
Technology Limited. We performed review procedures on the other trading component of the Group, Pace Sensors Limited. Our full scope audit
work covered 96% of group revenue, 98% of group loss before taxation, and 95% of group gross assets.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the
financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
38
39
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Independent auditor’s report continued
To the members of FireAngel Safety Technology Group plc
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we
have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Michael Thornton (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
St Philips Point
Temple Row
Birmingham
B2 5AF
29 March 2019
Consolidated income statement
Consolidated income statement
Consolidated income statement
Consolidated income statement
For the year ended 31 December 2018
For the year ended 31 December 2018
For the year ended 31 December 2018
For the year ended 31 December 2018
Consolidated income statement
Consolidated income statement
For the year ended 31 December 2018
For the year ended 31 December 2018
Consolidated income statement
For the year ended 31 December 2018
Notes
Notes
Notes
Notes
Notes
Notes
2018
£000
2018
£000
2018
2018
2018
£000
£000
£000
2017
2018
£000
£000
2017
£000
2017
2017
2017
£000
£000
£000
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Cost of sales excluding BRK distribution fee and exceptional charges
Cost of sales excluding BRK distribution fee and exceptional charges
Cost of sales excluding BRK distribution fee and exceptional charges
Cost of sales excluding BRK distribution fee and exceptional charges
Cost of sales excluding BRK distribution fee and exceptional charges
Cost of sales excluding BRK distribution fee and exceptional charges
BRK distribution fee
BRK distribution fee
BRK distribution fee
BRK distribution fee
BRK distribution fee
BRK distribution fee
Exceptional charge for Settlement Agreement with BRK
Exceptional charge for Settlement Agreement with BRK
Exceptional charge for Settlement Agreement with BRK
Exceptional charge for Settlement Agreement with BRK
Exceptional charge for Settlement Agreement with BRK
Exceptional charge for Settlement Agreement with BRK
Exceptional charge for stock and disposal costs
Exceptional charge for stock and disposal costs
Exceptional charge for stock and disposal costs
Exceptional charge for stock and disposal costs
Exceptional charge for stock and disposal costs
Exceptional charge for stock and disposal costs
Total cost of sales
Total cost of sales
Total cost of sales
Total cost of sales
Total cost of sales
Total cost of sales
Gross profit
Gross profit
Gross profit
Gross profit
Gross profit
Gross profit
6
6
7
7
7
7
6
6
6
7
7
7
7
7
7
Gross margin % before BRK distribution fee and exceptional charges
Gross margin % before BRK distribution fee and exceptional charges
Gross margin % before BRK distribution fee and exceptional charges
Gross margin % before BRK distribution fee and exceptional charges
Gross margin % before BRK distribution fee and exceptional charges
Gross margin % before BRK distribution fee and exceptional charges
Distribution costs
Distribution costs
Distribution costs
Administrative expenses before share-based payments charge
Administrative expenses before share-based payments charge
Administrative expenses before share-based payments charge
Share-based payments charge
Share-based payments charge
Share-based payments charge
Exceptional charge for restructure of distribution channel and production ramp-up costs
Exceptional charge for restructure of distribution channel and production ramp-up costs
Exceptional charge for restructure of distribution channel and production ramp-up costs
Administrative expenses
Administrative expenses
Administrative expenses
Distribution costs
Distribution costs
Distribution costs
Administrative expenses before share-based payments charge
Administrative expenses before share-based payments charge
Administrative expenses before share-based payments charge
Share-based payments charge
Share-based payments charge
Share-based payments charge
Exceptional charge for restructure of distribution channel and production ramp-up costs
Exceptional charge for restructure of distribution channel and production ramp-up costs
Exceptional charge for restructure of distribution channel and production ramp-up costs
Administrative expenses
Administrative expenses
Administrative expenses
Total operating expenses
Total operating expenses
Total operating expenses
Total operating expenses
Total operating expenses
Total operating expenses
30
30
30
7
7
7
30
30
7
7
(Loss)/profit from operations before exceptional charges and share-based payments
charge
(Loss)/profit from operations before exceptional charges and share-based payments
charge
(Loss)/profit from operations before exceptional charges and share-based payments
(Loss)/profit from operations before exceptional charges and share-based payments
(Loss)/profit from operations before exceptional charges and share-based payments
charge
charge
charge
(Loss)/profit from operations before exceptional charges and share-based payments
charge
8
8
10
10
11
11
(Loss)/profit from operations
(Loss)/profit from operations
(Loss)/profit from operations
Finance (expense)/income
Finance (expense)/income
Finance (expense)/income
(Loss)/profit from operations
(Loss)/profit from operations
(Loss)/profit from operations
Finance (expense)/income
Finance (expense)/income
Finance (expense)/income
(Loss)/profit before tax
(Loss)/profit before tax
(Loss)/profit before tax
Income tax credit/(charge)
Income tax credit/(charge)
Income tax credit/(charge)
(Loss)/profit before tax
(Loss)/profit before tax
Income tax credit/(charge)
Income tax credit/(charge)
Income tax credit/(charge)
(Loss)/profit before tax
(Loss)/profit attributable to equity owners of the parent
(Loss)/profit attributable to equity owners of the parent
(Loss)/profit attributable to equity owners of the parent
(Loss)/profit attributable to equity owners of the parent
(Loss)/profit attributable to equity owners of the parent
(Loss)/profit attributable to equity owners of the parent
Earnings per share (pence)
Earnings per share (pence)
From continuing operations:
From continuing operations:
Basic
Basic
Diluted
Diluted
Earnings per share (pence)
Earnings per share (pence)
Earnings per share (pence)
Earnings per share (pence)
From continuing operations:
From continuing operations:
From continuing operations:
From continuing operations:
Basic
Basic
Basic
Basic
Diluted
Diluted
Diluted
Diluted
All amounts stated relate to continuing activities.
All amounts stated relate to continuing activities.
All amounts stated relate to continuing activities.
All amounts stated relate to continuing activities.
All amounts stated relate to continuing activities.
All amounts stated relate to continuing activities.
8
8
8
10
10
10
11
11
11
13
13
13
6
7
7
30
7
8
10
11
37,587
37,587
37,587
37,587
37,587
54,277
37,587
54,277
54,277
54,277
54,277
(27,922)
(27,922)
(27,922)
(27,922)
(27,922)
(944)
(944)
(944)
(944)
(944)
-
-
-
-
-
(1,105)
(1,105)
(1,105)
(1,105)
(1,105)
(29,971)
(29,971)
(29,971)
(29,971)
(29,971)
(36,309)
(36,309)
(36,309)
(36,309)
(27,922)
(36,309)
(2,915)
(2,915)
(2,915)
(2,915)
(944)
(2,915)
(3,777)
(3,777)
(3,777)
(3,777)
-
(3,777)
-
-
-
-
(1,105)
-
(43,001)
(43,001)
(43,001)
(43,001)
(29,971)
(43,001)
7,616
7,616
7,616
7,616
7,616
11,276
11,276
7,616
11,276
11,276
11,276
25.7%
25.7%
25.7%
25.7%
25.7%
33.1%
25.7%
33.1%
33.1%
33.1%
33.1%
(992)
(992)
(992)
(992)
(992)
(9,720)
(9,720)
(9,720)
(107)
(107)
(107)
(2,568)
(2,568)
(2,568)
(12,395)
(12,395)
(12,395)
(13,387)
(13,387)
(13,387)
(9,720)
(9,720)
(107)
(107)
(2,568)
(2,568)
(12,395)
(12,395)
(13,387)
(13,387)
(1,007)
(1,007)
(992)
(1,007)
(1,007)
(1,007)
(9,390)
(9,390)
(9,390)
(9,390)
(9,720)
(9,390)
(358)
(358)
(358)
(358)
(107)
(358)
-
-
-
-
(2,568)
-
(9,748)
(9,748)
(9,748)
(9,748)
(12,395)
(9,748)
(10,755)
(10,755)
(10,755)
(10,755)
(13,387)
(10,755)
(1,991)
(1,991)
(1,991)
(1,991)
(1,991)
4,656
(1,991)
4,656
4,656
4,656
(5,771)
(5,771)
521
(5,771)
(114)
(114)
24
(114)
(5,885)
(5,885)
545
(5,885)
1,402
1,402
(57)
1,402
(5,771)
(5,771)
(5,771)
(114)
(114)
(114)
(5,885)
(5,885)
(5,885)
1,402
1,402
1,402
(4,483)
(4,483)
(4,483)
(4,483)
(4,483)
488
(4,483)
521
521
521
24
24
24
545
545
545
(57)
(57)
(57)
488
488
488
i
l
i
4,656
F
n
a
521
n
c
a
24
s
t
a
545
t
e
m
(57)
e
n
t
s
488
13
13
13
(9.8)
(9.8)
(9.8)
(9.8)
(9.8)
(9.8)
(9.8)
(9.8)
(9.8)
(9.8)
1.1
(9.8)
1.1
(9.8)
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
Consolidated statement of comprehensive income
For the year ended 31 December 2018
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
For the year ended 31 December 2018
For the year ended 31 December 2018
For the year ended 31 December 2018
For the year ended 31 December 2018
Consolidated statement of comprehensive income
For the year ended 31 December 2018
Consolidated statement of comprehensive income
For the year ended 31 December 2018
1.
1.
1.
1.
1.
Revenuer
Revenuer
Revenuer
1.
Revenuer
Revenuer
(Loss)/profit for the year
(Loss)/profit for the year
(Loss)/profit for the year
(Loss)/profit for the year
(Loss)/profit for the year
Revenuer
(Loss)/profit for the year
Items that may be reclassified subsequently to profit and loss:
Items that may be reclassified subsequently to profit and loss:
Items that may be reclassified subsequently to profit and loss:
Items that may be reclassified subsequently to profit and loss:
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations (net of tax)
Exchange differences on translation of foreign operations (net of tax)
Exchange differences on translation of foreign operations (net of tax)
Exchange differences on translation of foreign operations (net of tax)
Exchange differences on translation of foreign operations (net of tax)
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations (net of tax)
Total comprehensive (loss)/income for the year
2018
£000
2018
£000
(4,483)
(4,483)
2018
2018
2018
£000
£000
£000
(4,483)
(4,483)
(4,483)
(67)
(67)
(4,550)
(4,550)
(67)
(67)
(67)
(4,550)
(4,550)
(4,550)
2018
£000
2017
2017
2017
£000
£000
£000
488
488
488
(4,483)
(67)
(85)
(85)
(85)
403
403
403
(4,550)
2017
£000
2017
£000
488
488
(85)
(85)
403
403
40
41
46
46
46
46
46
46
2017
£000
54,277
(36,309)
(2,915)
(3,777)
-
(43,001)
11,276
33.1%
(1,007)
(9,390)
(358)
-
(9,748)
(10,755)
4,656
521
24
545
(57)
488
1.1
1.1
2017
£000
488
(85)
403
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Consolidated and company cash flow statement
Consolidated and company statement of financial position
Consolidated and company statement of financial position
As at 31 December 2018
As at 31 December 2018
Consolidated and company statement of financial position
Consolidated and company statement of financial position
As at 31 December 2018
As at 31 December 2018
Consolidated and company cash flow statement
Consolidated and company cash flow statement
For the year ended 31 December 2018
For the year ended 31 December 2018
Consolidated and company cash flow statement
For the year ended 31 December 2018
Operating cash flow before movements in working capital
Operating cash flow before movements in working capital
Operating cash flow before movements in working capital
Net cash (used by)/generated by operating activities
Net cash (used by)/generated by operating activities
Net cash (used by)/generated by operating activities
Share-based payments charge
Provision against intercompany receivables
Cash (used by)/generated by operations
Income taxes (paid)/received
Total assets
Total assets
Total assets
21,930
21,930
32,465
42,205
42,205
48,033
15
15
16
16
16
16
17
17
Depreciation of property, plant and equipment
18
18
Amortisation and impairment of intangible assets
17
17
26
26
(Increase)/decrease in fair value of derivatives
For the year ended 31 December 2018
(Loss)/profit before tax
Finance expense/(income)
Operating (loss)/profit for the year
Adjustments for:
Movement in inventories
Movement in receivables
Movement in provisions
Movement in payables
Investing activities
Capitalised development costs
Purchased software
Non-cash movements
Goodwill
Current assets
Inventories
Current tax asset
Current liabilities
Provisions
Total liabilities
Net assets
Equity
Retained earnings
(2017: £nil).
Purchase of property, plant and equipment
Interest received
Net cash used in investing activities
Financing activities
Proceeds from issue of ordinary shares
Provisions
Net current assets
Net current assets
Net current assets
Non-current liabilities
Loans and borrowings
Deferred tax liabilities
Non-current liabilities
Loans and borrowings
Provisions
Deferred tax liabilities
Non-current liabilities
Loans and borrowings
Provisions
Deferred tax liabilities
Drawdown of loan
Dividends paid
Interest paid
Net decrease in cash and cash equivalents
Equity
Equity
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Other intangible assets
Purchased software costs
Plant and equipment
Shares in subsidiaries
Deferred tax assets
Called up share capital
Share premium account
Currency translation reserve
Retained earnings
Total equity attributable to equity holders of the
Parent Company
Non-current assets
Non-current assets
Goodwill
Goodwill
Other intangible assets
Other intangible assets
Purchased software costs
Purchased software costs
Plant and equipment
Plant and equipment
Shares in subsidiaries
Shares in subsidiaries
Deferred tax assets
Deferred tax assets
Called up share capital
Share premium account
Currency translation reserve
Retained earnings
Total equity attributable to equity holders of the
Called up share capital
Share premium account
Currency translation reserve
Current assets
Inventories
Trade and other receivables
Current tax asset
Derivative financial assets
Cash and cash equivalents
Current assets
Inventories
Trade and other receivables
Current tax asset
Derivative financial assets
Cash and cash equivalents
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Derivative financial liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Derivative financial liabilities
Derivative financial assets
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Total equity attributable to equity holders of the
Derivative financial liabilities
Trade and other receivables
(16,472)
(11,465)
(15)
(39)
(1,507)
(934)
(364)
-
15
16
16
17
18
17
26
169
13,201
2,899
4,006
-
-
8,425
10,792
1,248
214
1,251
8,425
10,792
1,248
214
1,251
11,201
17,366
625
-
3,273
(11,465)
(39)
(934)
-
Non-current assets
24
21
22
24
26
918
12,729
112
8,552
Parent Company
(7,456)
(7,456)
(2,661)
21
21
21
28
Parent Company
24
24
21
21
19
19
20
20
Total liabilities
Net assets
Net assets
(19,894)
28
28
22,311
22,311
27,014
19
20
25
25
25
-
Net cash generated by/(used in) financing activities
22,641
(21,019)
(19,894)
(5,700)
Total liabilities
(19,894)
(21,019)
(5,700)
27,014
22,311
21,793
21,793
(16,472)
(11,465)
-
(15)
-
(39)
(1,507)
(934)
-
(364)
-
-
-
-
-
-
-
-
-
-
-
-
-
(16,472)
-
(15)
-
(1,507)
-
(364)
(18,358)
-
(12,438)
(12,438)
(18,358)
(18,358)
(12,438)
-
22
22
24
24
26
26
(5,700)
(600)
(1,156)
(5,700)
(600)
(1,156)
-
(687)
(1,974)
-
(5,700)
(5,700)
(687)
(600)
-
(1,974)
(1,156)
-
(5,700)
-
-
(2,661)
(7,456)
(5,700)
(5,700)
-
-
-
-
-
-
-
(687)
-
(1,974)
-
(2,661)
(21,019)
-
22,641
27,014
918
12,729
112
8,552
918
12,729
179
13,188
918
918
918
12,729
12,729
12,729
179
112
-
13,188
8,552
8,146
918
918
12,729
12,729
-
-
8,994
8,146
918
918
12,729
12,729
-
179
8,994
13,188
169
169
10,475
13,201
2,574
2,899
2,077
4,006
-
-
273
-
169
169
-
10,475
13,201
-
2,574
-
2,899
2,077
4,006
-
-
-
149
273
-
-
-
-
-
-
-
-
-
-
149
149
-
-
-
169
-
10,475
-
2,574
-
2,077
149
-
-
273
20,275
20,275
15,568
15,568
20,275
149
149
149
149
15,568
11,201
8,425
-
17,366
10,792
27,343
625
1,248
-
-
-
214
3,273
1,251
1
-
-
22,428
27,343
-
-
-
-
64
1
-
11,201
22,428
17,366
-
625
-
-
64
3,273
32,465
21,930
27,344
48,033
42,205
27,493
27,344
22,492
22,492
32,465
27,493
22,641
22,641
48,033
Finance expense/(income)
Operating (loss)/profit for the year
Operating (loss)/profit for the year
Finance expense/(income)
-
-
-
-
149
-
Adjustments for:
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of property, plant and equipment
Amortisation and impairment of intangible assets
Amortisation and impairment of intangible assets
(Increase)/decrease in fair value of derivatives
(Increase)/decrease in fair value of derivatives
Share-based payments charge
Share-based payments charge
Provision against intercompany receivables
Provision against intercompany receivables
149
-
-
-
-
149
-
149
Movement in inventories
Movement in receivables
Movement in provisions
Movement in payables
-
27,343
Movement in inventories
-
Movement in receivables
-
Movement in provisions
1
Movement in payables
27,344
Cash (used by)/generated by operations
27,493
Income taxes (paid)/received
-
22,428
-
-
64
22,492
22,641
Cash (used by)/generated by operations
Income taxes (paid)/received
Investing activities
Capitalised development costs
Purchased software
Purchase of property, plant and equipment
Interest received
-
-
Investing activities
-
Capitalised development costs
-
Purchased software
Purchase of property, plant and equipment
Interest received
27,344
-
-
-
-
-
-
Net cash used in investing activities
Net cash used in investing activities
Financing activities
Proceeds from issue of ordinary shares
Drawdown of loan
Dividends paid
Interest paid
Financing activities
(5,700)
Proceeds from issue of ordinary shares
-
Drawdown of loan
-
Dividends paid
(5,700)
Interest paid
(5,700)
22
12
-
-
-
-
-
Net cash generated by/(used in) financing activities
Net cash generated by/(used in) financing activities
21,793
22,641
Net decrease in cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at beginning of year
918
Non-cash movements
Non-cash movements
12,729
-
8,146
Cash and cash equivalents at end of year
Cash and cash equivalents at end of year
918
12,729
-
8,994
9,492
9,492
14,107
14,107
9,492
27,344
27,344
22,492
22,492
14,107
22,492
Consolidated
Consolidated
Consolidated
Company
Company
Company
Consolidated
Consolidated
Notes
Notes
Notes
2018
£000
2018
£000
2017
£000
2017
£000
2018
2018
£000
£000
2018
£000
2017
£000
2017
£000
2017
£000
2018
£000
Notes
2017
£000
(Loss)/profit before tax
(Loss)/profit before tax
The Company has taken advantage of the exemption contained within section 408 of the Companies Act 2006 not to present its own
statement of comprehensive income. The result for the year dealt with in the financial statements of the Company was a loss of £848,000
The financial statements on pages 43 to 76 were approved and authorised for issue by the Board of Directors on 29 March 2019 and were
signed on its behalf by:
The Company has taken advantage of the exemption contained within section 408 of the Companies Act 2006 not to present its own
The Company has taken advantage of the exemption contained within section 408 of the Companies Act 2006 not to present its own
The Company has taken advantage of the exemption contained within section 408 of the Companies Act 2006 not to present its own statement of
statement of comprehensive income. The result for the year dealt with in the financial statements of the Company was a loss of £848,000
statement of comprehensive income. The result for the year dealt with in the financial statements of the Company was a loss of £848,000
comprehensive income. The result for the year dealt with in the financial statements of the Company was a loss of £848,000 (2017: £nil).
(2017: £nil).
(2017: £nil).
The financial statements on pages 41 to 68 were approved and authorised for issue by the Board of Directors on 29 March 2019 and were signed on
its behalf by:
The financial statements on pages 43 to 76 were approved and authorised for issue by the Board of Directors on 29 March 2019 and were
The financial statements on pages 43 to 76 were approved and authorised for issue by the Board of Directors on 29 March 2019 and were
signed on its behalf by:
signed on its behalf by:
Neil Smith - Group Chief Executive
Mike Stilwell - Group Finance Director
Neil Smith
Group Chief Executive
Company registered number: 3991353
Neil Smith
Neil Smith
Company registered number: 3991353
Group Chief Executive
Group Chief Executive
Company registered number: 3991353
Company registered number: 3991353
Mike Stilwell
Group Finance Director
Mike Stilwell
Group Finance Director
Mike Stilwell
Group Finance Director
22,311
22,311
27,014
27,014
22,311
21,793
21,793
22,641
22,641
27,014
21,793
22,641
42
44
44
44
43
45
45
i
Notes
F
n
a
n
c
a
2017
£000
2017
£000
2018
£000
2018
£000
Company
2018
2017
£000
£000
Company
2017
2018
£000
£000
Notes
(5,885)
(5,885)
545
114
114
(24)
(5,771)
(5,771)
521
385
689
(578)
107
-
(5,168)
2,777
6,394
(660)
(4,983)
(1,640)
(35)
271
385
465
689
277
(578)
358
107
-
-
(5,168)
1,892
2,116
2,777
(4,188)
6,394
(2,405)
(660)
(236)
(4,983)
(1,640)
(2,821)
(35)
376
545
(848)
121
(24)
521
(727)
-
271
-
465
-
277
-
358
725
-
1,892
(2)
-
2,116
(5,640)
(4,188)
-
(2,405)
-
(236)
(2,821)
(5,642)
-
376
-
(848)
-
121
-
(727)
-
-
-
-
-
-
-
-
-
725
-
(2)
-
-
2,921
(5,640)
-
-
-
-
2,921
(5,642)
-
-
-
-
-
-
-
-
-
-
-
-
2,921
-
-
2,921
-
(1,675)
(1,675)
(2,445)
(2,445)
(5,642)
2,921
(5,642)
2,921
(1,675)
(2,445)
(5,642)
2,921
Consolidated
Company
2017
£000
2018
£000
(5,885)
114
(5,771)
385
689
(578)
107
-
(5,168)
2,777
6,394
(660)
(4,983)
(1,640)
(35)
(3,415)
(2,342)
(325)
7
(6,075)
5,700
(121)
-
-
(2,171)
3,273
149
1,251
2017
£000
545
(24)
521
271
465
277
358
-
1,892
2,116
(4,188)
(2,405)
(236)
(2,821)
376
(2,670)
(1,432)
(925)
24
(5,003)
(3,670)
17
-
-
(11,101)
14,333
3,273
41
2018
£000
(848)
121
(727)
725
(2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,700
(121)
(63)
64
-
1
(5,640)
2,921
(5,642)
2,921
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,670)
17
(732)
796
-
64
45
5,579
(3,653)
5,579
(3,653)
5,579
(3,653)
5,579
(3,653)
5,579
(3,653)
5,579
(3,653)
(2,171)
3,273
149
1,251
(11,101)
(2,171)
14,333
3,273
41
149
1,251
3,273
(11,101)
(63)
64
14,333
-
41
3,273
1
(732)
(63)
796
64
-
-
64
1
(732)
796
-
64
(3,415)
(325)
(2,342)
7
(6,075)
-
22
5,700
12
-
(121)
(2,670)
(3,415)
(925)
(325)
(1,432)
(2,342)
24
7
(6,075)
(5,003)
17
-
-
5,700
(3,670)
-
-
(121)
-
(2,670)
-
(925)
-
(1,432)
-
24
(5,003)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17
-
-
5,700
(3,670)
-
12
-
(121)
-
17
5,700
-
-
(3,670)
(121)
-
22
17
-
(3,670)
-
s
t
a
t
e
m
e
n
t
s
l
i
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Consolidated statement of changes in equity
For the year ended 31 December 2018
Consolidated statement of changes in equity
Consolidated statement of changes in equity
Consolidated statement of changes in equity
Consolidated statement of changes in equity
For the year ended 31 December 2018
For the year ended 31 December 2018
Net foreign exchange losses from overseas subsidiaries
Balance at 1 January 2017
Profit for the year
Total comprehensive (loss)/income for the year
Net foreign exchange losses from overseas subsidiaries
Net foreign exchange losses from overseas subsidiaries
Transactions with owners in their capacity as owners:
For the year ended 31 December 2018
For the year ended 31 December 2018
Balance at 1 January 2017
Profit for the year
Balance at 1 January 2017
Balance at 1 January 2017
Profit for the year
Profit for the year
Dividends
Issue of shares
Dividends
Dividends
Issue of shares
Issue of shares
Net foreign exchange losses from overseas subsidiaries
Net foreign exchange losses from overseas subsidiaries
(85)
(85)
-
-
-
-
-
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income for the year
Transactions with owners in their capacity as owners:
Transactions with owners in their capacity as owners:
Transactions with owners in their capacity as owners:
Total comprehensive (loss)/income for the year
-
(85)
(85)
-
-
-
-
-
-
-
488
488
(3,670)
Transactions with owners in their capacity as owners:
Premium arising on issue of equity shares
Dividends
Dividends
-
-
-
Issue of shares
1
1
1
-
-
16
-
-
16
-
-
-
-
-
-
Total transactions with owners in their capacity as owners
Premium arising on issue of equity shares
Premium arising on issue of equity shares
Credit in relation to share-based payments
Issue of shares
Premium arising on issue of equity shares
Premium arising on issue of equity shares
16
16
-
-
-
-
Total transactions with owners in their capacity as owners
Total transactions with owners in their capacity as owners
Deferred tax charge in relation to share-based payments
Total transactions with owners in their capacity as owners
Total transactions with owners in their capacity as owners
(3,670)
1
(3,670)
16
16
1
1
-
-
Credit in relation to share-based payments
Credit in relation to share-based payments
-
-
-
-
-
-
Share
capital
£000
Share premium
account
£000
Consolidated statement of changes in equity
For the year ended 31 December 2018
Currency
Currency
translation reserve
translation reserve
£000
£000
Retained earnings
Share
Retained earnings
capital
£000
Share premium
Share premium
account
account
12,713
£000
£000
Currency
translation reserve
£000
Share
Share
capital
capital
£000
£000
Retained earnings
16,090
£000
£000
£000
Share premium
account
£000
917
264
Total
£000
Currency
translation reserve
Total
Total
29,984
£000
£000
£000
Balance at 1 January 2017
12,713
12,713
917
917
-
Profit for the year
-
-
-
-
-
-
-
-
-
264
264
(85)
-
-
(85)
488
917
16,090
16,090
-
-
488
488
488
-
-
12,713
29,984
29,984
488
(85)
488
488
403
(85)
(85)
403
403
(3,670)
-
-
-
1
(3,670)
-
(3,670)
-
-
1
-
-
-
(3,670)
-
-
358
-
16
(61)
-
358
358
(17)
(3,670)
-
(3,670)
16
1
1
(3,653)
16
16
358
16
(3,653)
(3,653)
(61)
-
-
-
358
358
(17)
(61)
(61)
27,014
(17)
(17)
264
-
(85)
(85)
-
-
-
-
-
-
-
Credit in relation to share-based payments
Credit in relation to share-based payments
Current tax charge in relation to share-based payments
Deferred tax charge in relation to share-based payments
Deferred tax charge in relation to share-based payments
Deferred tax charge in relation to share-based payments
Balance at 31 December 2017
Current tax charge in relation to share-based payments
Current tax charge in relation to share-based payments
Current tax charge in relation to share-based payments
Balance at 31 December 2017
Balance at 31 December 2017
Balance at 31 December 2017
Loss for the year
Net foreign exchange losses from overseas subsidiaries
Loss for the year
Loss for the year
Total comprehensive loss for the year
Loss for the year
Net foreign exchange losses from overseas subsidiaries
Net foreign exchange losses from overseas subsidiaries
Credit in relation to share-based payments
Net foreign exchange losses from overseas subsidiaries
Total comprehensive loss for the year
Total comprehensive loss for the year
Deferred tax charge in relation to share-based payments
Total comprehensive loss for the year
Credit in relation to share-based payments
Credit in relation to share-based payments
Credit in relation to share-based payments
Deferred tax charge in relation to share-based payments
Deferred tax charge in relation to share-based payments
Deferred tax charge in relation to share-based payments
Balance at 31 December 2018
Balance at 31 December 2018
Balance at 31 December 2018
Balance at 31 December 2018
Deferred tax charge in relation to share-based payments
(61)
(61)
13,188
Current tax charge in relation to share-based payments
(17)
(17)
-
-
12,729
-
-
-
-
918
-
-
-
-
179
-
-
-
-
Balance at 31 December 2017
12,729
12,729
918
918
918
13,188
13,188
12,729
27,014
27,014
179
(4,483)
-
(4,483)
(67)
-
Loss for the year
-
-
-
(4,483)
Net foreign exchange losses from overseas subsidiaries
-
-
107
(67)
(67)
-
-
-
-
-
-
-
-
-
-
-
-
(67)
(67)
Total comprehensive loss for the year
(260)
107
107
8,552
Deferred tax charge in relation to share-based payments
(260)
(260)
Credit in relation to share-based payments
-
-
12,729
-
-
-
-
918
-
-
-
-
112
-
-
(4,483)
-
(4,483)
-
-
-
-
-
-
(4,483)
-
(4,483)
(4,483)
-
(4,483)
(4,550)
(67)
(67)
107
(4,550)
-
(4,550)
(260)
107
107
22,311
(260)
(260)
-
-
-
-
(67)
(67)
-
-
Balance at 31 December 2018
12,729
12,729
918
918
112
112
918
8,552
8,552
12,729
22,311
22,311
112
-
-
-
-
-
-
-
-
-
-
-
-
179
179
-
(67)
-
-
(67)
-
1
-
-
-
-
Notes to the financial statements
For the year ended 31 December 2018
Retained earnings
Total
1. Principal activities
£000
£000
Share
capital
£000
Share premium
account
£000
Currency
translation reserve
£000
Retained earnings
£000
Total
£000
FireAngel Safety Technology Group plc (the ‘Company’) is registered and domiciled in England and Wales, having been incorporated under the
16,090
Companies Act, company registration number 3991353. The Company is listed on AIM. The Company’s registered office and the address of its
principal place of business is The Vanguard Centre, Sir William Lyons Road, Coventry, West Midlands, CV4 7EZ.
29,984
12,713
16,090
29,984
917
264
488
488
488
488
-
The Company and its subsidiary undertakings (the ‘Group’) are in the business of the design, sale and marketing of smoke and CO detectors and
accessories sold under the brands of FireAngel, AngelEye and Pace Sensors. The Group also operates its own CO sensor manufacturing facility in
488
Canada.
(85)
(85)
(85)
488
403
(85)
403
-
-
-
-
-
2. Summary of significant accounting policies
(3,670)
The Group has adopted the accounting policies set out below in preparation of the consolidated financial statements. All of these policies have been
applied consistently throughout the periods presented, unless otherwise stated.
(3,670)
(3,670)
(3,670)
-
-
-
-
1
Basis of preparation
-
16
-
-
16
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European
(3,670)
Union (‘IFRS’).
(3,670)
(3,653)
(3,653)
16
1
-
-
-
358
1
16
358
358
358
(61)
(61)
(17)
The preparation of financial statements requires management to exercise its judgement in the process of applying the Group’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where the Group’s assumptions and estimates are significant to the
consolidated financial statements, are disclosed in note 3.
(17)
Basis of consolidation
13,188
27,014
The consolidated financial statements of the Group incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 December each year.
27,014
13,188
12,729
(17)
(17)
(61)
(61)
918
179
-
-
-
-
-
-
-
-
-
-
-
-
Subsidiaries
(4,483)
(4,483)
-
-
-
(4,483)
(4,483)
-
-
-
107
(67)
(4,550)
Subsidiaries are entities over which the Group has power to govern the financial and operating policies so as to obtain economic benefits from their
activities. Subsidiaries are consolidated from the date on which control is obtained (the acquisition date) up until the date that control ceases.
(4,483)
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as
the fair value of the assets given, equity instruments issued, contingent consideration and liabilities incurred or assumed at the date of exchange.
(260)
Costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination
are initially measured at fair value at the acquisition date.
8,552
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by
the Group.
(4,483)
(4,550)
12,729
22,311
8,552
22,311
(260)
(260)
(260)
(67)
(67)
(67)
918
107
112
107
107
-
-
-
-
-
-
-
-
-
Intra-Group transactions, balances, and unrealised gains and losses on transactions between Group companies are eliminated on consolidation.
Going concern
In determining whether the Group and Parent Company’s financial statements can be prepared on a going concern basis, the Directors considered
the Group’s business activities, together with the factors likely to affect its future development, performance and position. The review also included
the financial position of the Group, its cash flows, and borrowing facilities.
The key factors considered by the Directors were:
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
49
-
1
-
-
-
Company statement of changes in equity
Company statement of changes in equity
For the year ended 31 December 2018
For the year ended 31 December 2018
Company statement of changes in equity
Company statement of changes in equity
Company statement of changes in equity
For the year ended 31 December 2018
For the year ended 31 December 2018
For the year ended 31 December 2018
Total comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Transactions with owners in their capacity as owners:
Balance at 1 January 2017
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends
Issue of shares
Balance at 1 January 2017
Balance at 1 January 2017
Profit for the year
Profit for the year
Dividends
Dividends
Issue of shares
Issue of shares
Premium arising on issue of equity shares
Premium arising on issue of equity shares
Total transactions with owners in their capacity as owners
Total transactions with owners in their capacity as owners
Premium arising on issue of equity shares
Total transactions with owners in their capacity as owners
Dividends
Issue of shares
Balance at 31 December 2017
Balance at 31 December 2017
Balance at 31 December 2017
Loss for the year
Loss for the year
Total comprehensive loss for the year
Total comprehensive loss for the year
Loss for the year
Total comprehensive loss for the year
Balance at 31 December 2018
Balance at 31 December 2018
Balance at 31 December 2018
Consolidated statement of changes in equity
Retained
Share
Company statement of changes in equity
For the year ended 31 December 2018
For the year ended 31 December 2018
capital
capital
earnings
earnings
Share
Share
Share
£000
£000
premium
premium
Share
Share
account
account
£000
£000
Balance at 1 January 2017
917
917
12,713
12,713
Profit for the year
Net foreign exchange losses from overseas subsidiaries
Total comprehensive (loss)/income for the year
Transactions with owners in their capacity as owners:
Premium arising on issue of equity shares
918
918
12,729
12,729
Total transactions with owners in their capacity as owners
Credit in relation to share-based payments
Deferred tax charge in relation to share-based payments
Retained
Retained
£000
£000
12,663
12,663
-
-
-
-
(3,669)
(3,669)
-
-
-
-
(3,669)
(3,669)
8,994
8,994
(848)
(848)
(848)
(848)
-
-
-
-
-
-
-
-
16
16
16
16
-
-
-
-
Total
Total
capital
Share
£000
£000
£000
26,293
917
26,293
-
-
-
-
-
-
(3,669)
-
(3,669)
1
1
1
-
16
16
(3,652)
(3,652)
1
22,641
918
22,641
(848)
-
(848)
(848)
-
(848)
12,713
49
49
-
-
-
-
16
16
12,729
-
-
-
-
-
-
-
-
1
1
-
-
1
1
-
-
-
-
Current tax charge in relation to share-based payments
918
918
Balance at 31 December 2017
12,729
12,729
8,146
8,146
21,793
918
21,793
12,729
premium
Share
account
£000
49
Total
and projections on a regular basis;
• the implications of the current economic environment and future uncertainties around the Group’s revenues and profits by undertaking forecasts
earnings
Retained
• the impact of the competitive environment within which the Group operates;
£000
£000
• the impact of Brexit;
26,293
• the restructuring of the Group’s borrowing facilities since the year end, to move from a revolving credit facility to more efficient invoice discounting
Currency
translation reserve
Share
£000
Share premium
account
£000
Share
capital
£000
Retained
£000
Retained earnings
Total
£000
Share
29,984
12,713
16,090
12,663
917
264
49
-
and overdraft facility;
-
-
-
(3,669)
-
-
(3,669)
8,994
(3,669)
1
16
(3,652)
22,641
• the announcement post year end of a placing and open offer to raise £6.0 million; and
• the potential actions that could be taken in the event that revenues or gross profits are worse than expected, to ensure that operating profit and
(85)
(85)
-
-
-
-
(85)
488
403
cash flows are protected.
-
-
-
488
488
The Group’s review of forecasts and projections in trading performance (even after applying downside sensitivities), support the conclusion that
there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable
future, a period of not less than twelve months from the date of this report. Even after applying downside sensitivities, the Company is forecast to
remain within its banking facilities.
(3,670)
(3,670)
1
1
-
-
-
-
-
-
Consequently, at the date of this report, the Directors have a reasonable expectation that the Group and Parent Company have adequate resources
16
to continue in business for the foreseeable future. Accordingly, the financial statements have been prepared on the going concern basis.
(3,670)
(3,653)
1
-
16
-
-
16
(848)
(848)
8,146
(848)
(848)
21,793
-
-
-
-
-
-
-
-
-
358
(61)
(17)
358
(61)
(17)
918
12,729
179
13,188
27,014
44
Loss for the year
Net foreign exchange losses from overseas subsidiaries
Total comprehensive loss for the year
Credit in relation to share-based payments
Deferred tax charge in relation to share-based payments
Balance at 31 December 2018
-
-
-
-
-
-
-
-
-
-
918
12,729
-
(67)
(67)
-
-
112
(4,483)
-
(4,483)
107
(260)
8,552
45
(4,483)
(67)
(4,550)
107
(260)
22,311
Company statement of changes in equity
For the year ended 31 December 2018
50
50
50
Share
Share
Retained
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FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Notes to the financial statements continued
For the year ended 31 December 2018
Changes in accounting policies and disclosures
New standards, amendments and interpretations adopted by the Group
The following new standards and amended standards, none of which have had a material impact on these financial statements, are mandatory and
relevant to the Group for the first time for the financial period commencing 1 January 2018:
• IFRS 15: Revenue from contracts with customers
• IFRS 9: Financial Instruments
• Amendments to IFRS 2: Classification and measurement of share-based payment transactions
• IFRIC 22: Foreign currency transactions and advance consideration
• Annual improvements 2014-2016 (effective 1 January 2019)
IFRS 15 supersedes IAS 18, and is effective for periods beginning on or after 1 January 2018. IFRS 15 has been adopted by the Group and introduces
a five-step model for determining if and when revenue should be recognised based on the performance obligations of customer contracts. The
Group has completed a review of its principle customer contracts and concluded that the recognition of revenue is not affected by the adoption of
IFRS 15 for the vast majority of sales and has not had a material impact on the financial statements.
The Group has also carefully investigated the treatment of warranties provided to consumers under the new IFRS 15 by reviewing all variations
of products sold since 2010 and the respective warranty spans and warranty type (service or assurance). The Directors have concluded that all
warranties are assurance type and therefore there is no separate warranty performance obligation and therefore there is no change to recorded
revenue.
IFRS 9 replaces IAS 39 and is effective for periods beginning on or after 1 January 2018. IFRS 9 specifies how an entity should classify and measure
financial assets, financial liabilities, and some contracts to buy or sell non-financial items. It introduces an expected credit loss model on impairment
that replaces the incurred loss impairment model used in IAS 39. The expected credit loss model is forward-looking and eliminates the requirement
for objective evidence of impairment before credit losses are recognised.
The Group has adopted the simplified approach to recognise any possible impairment in respect of trade receivables. The Group has considered a
range of information, including historic trade receivable losses and current market conditions and has determined that it is not materially impacted by
its adoption. The Group regularly reviews the credit limits it offers existing customers and conducts further credit checks where it deems necessary.
The Company’s group receivables represent trading balances and interest free amounts advanced to other group companies with no fixed
repayment dates. The Company determines that credit risk has increased significantly when:
• there are significant actual or expected changes in the operating results of the group entity, including declining revenues profitability or liquidity
management problems; or
• there are existing or forecast adverse changes to the business, financial or economic conditions that may impact the group entity’s ability to meet
its debt obligations; and
• the group entity is unable to rely on the support of other group entities to meet its debt obligations.
The Directors have concluded there is an impairment to the Company’s group balance as there is considered a 5% chance of not recovering this
through future cash flows.
Accounting standards in issue but not yet effective
At the date of authorisation of these financial statements the following standards and interpretations, which have not been applied in these financial
statements and which are considered potentially relevant, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
• IFRS 16: Leases (effective 1 January 2019)
• IFRIC 23: Uncertainty over income tax treatments (effective 1 January 2019)
• Annual improvements 2015-2017 (effective 1 January 2019)
IFRS 16 ‘Leases’ will impact the financial statements and the relevant disclosures as the Group has operating leases that are to be recorded and
identified separately on the face of the Consolidated Statement of Financial Position. The Group is still in the process of quantifying the impact and
deciding on which transitional exemptions it will take. Given the relatively low level of operating lease commitments of the Group, the adoption of
IFRS 16 in 2019 is expected to slightly increase the Group’s reported operating profit (compared to current reporting requirements) whilst the implicit
interest cost of the leases will go ‘below the line’ as part of ‘interest’. The balance sheet will also reflect increased right of use assets, broadly offset by
leasing liabilities. The Directors will provide further guidance on the adoption of this standard in due course.
Revenue recognition – warranty obligations
The Group has adopted IFRS 15 in these financial statements. IFRS 15 provides guidance on the treatment of warranties provided on the sale of
goods. The Group sells products with warranties ranging from one year to ten years.
The longer-term warranties are usually applicable to products with either long-term sealed batteries or sealed CO sensors that degrade over time.
The performance of either the battery or the sensor for the warranted period of time is integral to the overall performance of the product and is a key
feature of the product at the point of sale.
The Directors have carefully considered the guidance within IFRS 15 as to whether these warranties are assurance type or service type. Assurance
warranties solely warrant that the product will function as sold, whilst service warranties provide a higher level or assurance. Assurance warranties
are not separate performance obligations, whilst service warranties are considered separate performance obligations and revenue attributes to the
service element should be spread over the service period.
In light of the IFRS 15 guidance, and on the basis that the majority of warranties provided by the Group solely warrant that the product will operate as
sold, the Directors have concluded that these warranties are assurance type warranties and do not represent a separate performance obligation.
Interest income
Interest income is accrued on a time-apportioned basis, by reference to the principal outstanding and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
Accounting for discretionary payments made to customers
The Group made discretionary payments in total amounting to £0.6 million to certain UK retailers in respect of maintaining the ongoing relationship
with these customers and to secure promotional activities during the year (2017: £0.4 million). Such costs are taken to the income statement in the
year to which they relate and are recorded in administrative expenses.
Goodwill
Goodwill arising on consolidation represents the excess of the consideration transferred and the fair value of any previous interest in the acquired
entity over the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is
separately disclosed.
Goodwill is recognised as an asset and reviewed for impairment at least annually. It is allocated to cash generating units which represent the Group’s
investment in each country of operation. Impairment losses are recognised immediately in profit or loss and are not subsequently reversed.
Other intangibles assets - internally generated intangible assets
Expenditure on research activities is recognised through the income statement as incurred.
Expenditure arising from the Group’s development of future products is capitalised only if all the following conditions are met:
• an asset is created that can be identified;
• it is probable that the asset created will generate future economic benefits;
• the development cost of the asset can be measured reliably;
• the Group has the intention to complete the asset and the ability and intention to use or sell it;
• the product or process is technically and commercially feasible; and
• sufficient resources are available to complete the development and to either sell or use the asset.
Where these criteria have not been achieved, development expenditure is recognised through the income statement in the period in which it is
incurred.
Development expenditure is written off, except where the Directors are satisfied as to the innovative nature and technical, commercial and financial
viability of clearly defined projects whose outcome can be assessed with reasonable certainty. In such cases, identifiable people and non-people
costs by product/technology are capitalised and carried forward to be amortised over the expected life of the product over which the Group is
expected to benefit from sales of such products. The Group adopts the units of production method for all product development costs (excluding
readying Flex and the Far East based supplier) which the Board believes can be forecast reliably.
The Directors estimate that the useful economic life of these various intangible assets is between seven and fifteen years. Further details of each
product/technology are outlined in note 16 to the financial statements.
Directly attributable costs in bringing our manufacturing assets in to use at Flex and our Far East based supplier have been amortised using a straight-
line method as the Board believes this is the most appropriate given the forecasted production. These assets are being amortised over five years.
Provision is made immediately for any impairment in the carrying value of the intangible asset.
Other intangible assets - Intamac development software
The Directors anticipate that the adoption of the other remaining standards and interpretations in future periods will have no material impact on the
recognition and measurement of assets, liabilities and the associated performance of the Group or the Company when the relevant standards and
interpretations come into effect.
During 2018, the Group paid Intamac £0.3 million as the final instalment for the source code and development rights to software developed by
Intamac to enable its customers to connect and monitor FireAngel’s whole range of wireless products over the internet. This brought the total
consideration paid to £2.9 million.
Revenue recognition
Revenue is recognised when revenue and associated costs can be measured reliably and future economic benefits are probable. Revenue is
measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of rebates
and settlement discounts, VAT and other sales related taxes.
Sales of goods are recognised when the risks and rewards of ownership have been transferred to the customer. For the majority of customers this
is when goods are delivered and title has passed. For others it is when goods are delivered for shipment by our contract manufacturers, depending
upon the terms and conditions of the sales contract as to when the risks and rewards of ownership are transferred.
Using its patent pending technology, FireAngel has the ability to use the data it collects from Connected Homes products to not only detect fires, but
using an advanced algorithm, to identify properties at elevated risk of experiencing a fire in the future.
Other intangibles - computer software
Software capitalised is amortised at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its
estimated useful life of four years.
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Notes to the financial statements
For the year ended 31 December 2018
Plant, equipment and tooling
All plant, equipment, tooling, fixtures and fittings, motor vehicles and office equipment are stated at cost less accumulated depreciation and any
recognised impairment loss.
Subsequent costs, including replacement parts and major inspections, are capitalised only when it is probable that such costs will generate future
economic benefits. Any replaced parts are derecognised. All other costs of repairs and maintenance are charged to through the income statement
as incurred.
Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated
useful lives, using the straight-line method, on the following bases:
Manufacturing tooling
Fixtures and fittings
Motor vehicles
Office equipment
5 years
4 years
4 years
3 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in the Income Statement.
Significant investment has been made in manufacturing tooling at Flex, the Group’s manufacturing partner for smoke alarms and connected
products, throughout 2018. The Group considered it appropriate to depreciate these assets over five years. Regular reviews will be conducted to
ensure that any obsolete assets are appropriately recognised in the financial statements.
Impairment of plant and equipment and intangible assets
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. Intangible assets with an indefinite useful life and other intangible assets not yet
available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where
the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset (or cash-generating unit) for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss
immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation
increase.
Operating leases
Rentals payable under operating leases are expensed on a straight-line basis over the term of the relevant lease. Benefits received and receivable as
an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
Functional and presentation currency
Items included in the financial information of each of the Group’s entities are measured using the currency of the primary economic environment in
which the entity operates (‘the functional currency’). The consolidated financial statements are presented in sterling, which is the functional currency
of the Group and the Group’s presentational currency.
Foreign currency transaction and balances
Foreign currency transactions are translated at the exchange rate prevailing on the date of the transaction. At each reporting date, monetary assets
and liabilities that are denominated in foreign currencies are retranslated at the exchange rate prevailing at the reporting date. Non-monetary assets
and liabilities carried at values that are denominated in foreign currencies are translated at the rates prevailing at the date when the values were
determined. Gains and losses arising on retranslation are included in the income statement for the period, except for exchange differences on non-
monetary assets and liabilities, which are recognised directly in other comprehensive income when the changes in fair value are recognised directly in
other comprehensive income.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated into the Group’s presentational currency at exchange
rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period. All resulting exchange
differences are recognised in other comprehensive income. All exchange differences arising, if any, are transferred to the Group’s foreign exchange
reserve and are recognised as income or as expenses in the period in which the operation is disposed of, or when control, significant influence or joint
control is lost.
The Group has elected to treat goodwill and fair value adjustments arising on acquisitions before the date of transition to IFRS as sterling
denominated assets and liabilities.
Retirement benefit costs
For defined contribution schemes the amount charged through the income statement in respect of pension costs and other post retirement contributions
is the contribution payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either
accruals or prepayments in the balance sheet.
Taxation
The tax expense represents the sum of the current tax expense and deferred tax expense.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported through the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amount of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates
that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited through the income statement, except when
it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity, or items charged or credited directly to
other comprehensive income, in which case the deferred tax is also recognised in other comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised when the Group has become a party to the contractual provisions of the instrument.
a) Financial assets
The Group previously categorised its financial assets in the following categories: at fair value through profit and loss, loans and receivables, and
available for sale. With the adoption of IFRS 9 the Group categorises its financial assets as: fair value through profit and loss or at amortised cost. The
classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at
initial recognition.
Financial assets include:
• Trade receivables
• Cash and cash equivalents
b) Trade receivables
Trade receivables are initially measured at their transaction value and are subsequently measured at amortised cost. IFRS 9 introduces a new expected
credit loss model which increases the information that the Group has to consider when determining its expectations of impairment. Under this new
model any expectations of future events must be considered which will result in the earlier recognition of larger impairments. Under the old standard
(IAS 39), an entity only considered impairments that arose as a result of incurred loss events. The effects of any possible future loss events cannot be
considered, even if they are expected.
c) Borrowings
Group borrowings, namely bank loans, are initially recognised at fair value and are subsequently carried at amortised cost. Fees paid on the arrangement
of the loan facility are recognised as transaction costs and spread over the life of the arrangement.
d) Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss are financial assets held for trading. Assets in this category are classified as current assets if
expected to be settled within twelve months, otherwise they are classified as non-current.
e) Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
An equity instrument is any contract that gives a residual interest in the assets of the Group after deducting all its liabilities.
Derivative financial liabilities are measured at fair value through profit and loss; all other financial liabilities are measured at amortised cost.
f) Recognition and measurement
Gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit and loss’ category are presented in the income
statement within ‘Cost of sales’ in the period in which they arise as these are in relation to the purchase of goods.
g) Impairment of financial assets
The Group and Company recognise an impairment loss on financial assets using the expected credit loss model by assessing the probability that the
counterparty will be unable to settle their contractual cash flow at the contractual due dates.
The likelihood of default and expected recoverable amounts are assessed using reasonable and supportive past and forward-looking information that is
available without undue cost. The output of the expected credit loss model is a probability-weighted amount determined from a range of outcomes.
Previously the Group assessed at the end of each reporting period whether there was objective evidence that a financial asset or group of financial
assets is impaired and made a provision when a loss event had occurred.
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Notes to the financial statements continued
For the year ended 31 December 2018
Inventories
Inventories are stated at the lower of historical cost and net realisable value. Cost comprises direct material cost and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the
first-in-first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less all estimated costs to
completion and selling costs to be incurred.
Full recoverability of overdue debts
IFRS 9 introduces an expected credit loss model on impairment that replaces the incurred loss impairment model used in IAS 39. The credit loss
model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised.
The Group has considered a range of information, including historic trade receivable losses and current market conditions and has determined that it
is not materially affected by its adoption. The Group regularly reviews the credit limits it offers existing customers and conducts further credit checks
where it deems appropriate.
Forward currency derivatives
The Group enters into derivative foreign currency forward contracts which are classified as financial instruments at fair value through profit and loss.
They are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Fair
value gains and losses are recognised in profit and loss.
The Group does not have right of offset between such derivatives, and so all derivatives that are financial assets are shown separately from all
derivatives that are financial liabilities, at each period end.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short-term deposits held by the Group with maturities of less than three
months.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade
payables are classified as current liabilities if payment is due within one year.
Provisions
Provisions for product warranty claims, are recognised when the Group has a present obligation as a result of a past event which it is probable will
result in an outflow of economic benefits that can be reliably estimated.
Where the effect of the time value of money is material, the provision is based on the present value of future outflows, discounted at the pre-tax
discount rate that reflects the risks specific to the liability. The increase in the provision due to passage of time is recognised as interest expense.
Equity instruments
Equity instruments issued by the Company are recorded at fair value on initial recognition net of transaction costs.
Share-based payment transactions
The Group issues equity-settled share options to certain employees. Equity-settled share-based payments are measured at fair value at the date
of grant by reference to the fair value of the equity instruments granted. The fair value determined at the grant date of equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of instruments that will eventually
vest with a corresponding adjustment to equity. Fair value is measured by use of the Black-Scholes model. The expected life used in the model has
been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.
Non-vesting and market vesting conditions are taken into account when estimating the fair value of the option at grant date. Service and non-market
vesting conditions are taken into account by adjusting the number of options expected to vest at each reporting date.
Options over the Company’s shares granted to employees of subsidiaries are recognised as a capital contribution by the Company to the
subsidiaries.
Cancelled or settled options are accounted for as an acceleration of vesting. The unrecognised grant date fair value is recognised through the
income statement in the year that the options are cancelled or settled.
Where the terms of the options are modified and the modification increases the fair value or number of equity instruments granted measured
immediately before and after the modification, the incremental fair value is spread over the remaining vesting period.
Operating segments
IFRS 8 requires the presentation of segmental information in relation to the Group in the Annual Report on the same basis as information reported to
the Board. The Board is considered to be the chief operating decision maker for the purposes of resource allocation. Assessment of performance is
based wholly on the overall activities of the Group. The Board considers that there are no separately identifiable business segments that are engaged
in providing individual products or services, or a group of related products and services, that are subject to risks and returns that are different to the
core business. The adoption of IFRS 8 has not had any impact on the financial performance or financial position of the Group.
3. Critical accounting estimates and areas of judgement
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom
equal the related actual results. The estimates and assumptions at the end of the accounting period that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Warranty provision for FireAngel products
In April 2016, the Group identified an issue in relation to certain batteries supplied by a third-party supplier that may cause a premature low battery
warning chirp in certain of its smoke alarm models sold in the UK and in Continental Europe. The Board is keen to stress that this is not a safety critical
issue.
As a result of the battery issue, to support the Group’s customer service obligations, the Board increased the Group’s total warranty provisions as at 31
December 2015 to £6.8 million and has continued to provide replacement products in line with the Group’s contractual obligations. The Group’s total
warranty provision as at 31 December 2018 reduced to £1.5 million as a result of utilisation during the year.
The expected terminal rate of return percentage for each year of production for each market was estimated by FireAngel’s Technical team and remains
within our original expectations.
To prevent the issue happening again, FireAngel’s supplier has introduced additional screening processes on the production line prior to the battery
being fitted into finished smoke alarms.
The Group has also reviewed its returns processes to reduce the cost of servicing product returns and have identified a number of significant
improvements that will reduce the cost of servicing the warranty in the field going forwards.
With specific reference to FireAngel products, the determination of the amount of the provision, which reflects the Board’s best estimate of resolving
these issues, requires the exercise of significant judgement. It is necessary, therefore, to form a view on matters which are inherently uncertain, such as
the returns profile over time, the final return rate, whether the return rate of each year of production will be similar, whether the return rates from different
sales channels will vary and the average cost of redress.
There is a greater degree of uncertainty in assessing these factors when an issue is first identified. Consequently, the continued appropriateness of
the underlying assumptions will be reviewed on an ongoing basis against actual experience and other relevant evidence, and adjustment made to the
provision over time as required.
The provision relates mainly to the high impedance battery issue and is most sensitive to the assumption regarding the final return percentage rate. For
reference, a 10% increase in the estimated final return rate, with no further improvement for each subsequent year of affected production, would result
in an increase in the provision of approximately £0.5 million. The Board is not aware of any other major warranty issues but has continued to expense
FireAngel warranty at approximately 2% of sales in the year.
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets (including goodwill) to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-
generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and other intangible assets not yet available for use are tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately through the income statement, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
During 2018, the Group recognised a £30,000 impairment charge upon review of its capitalised intangible product development costs.
The Board notes that the Group has a significant value of intangible assets on the balance sheet at the year end. Connected home intangible assets with
a net book value £0.6 million are not being depreciated as they are currently being developed for sale. Connected home intangible assets with a net book
value of £4.9 million are being depreciated. The Board expects that in future, the vast majority of products sold will in some way be connected (through
Wi-safe 2, Z-wave or Zigbee technology) and given that the Group already has a connected home solutions product offering which is working, the Board
believes that the carrying value of connected homes solutions intangibles is not impaired. This assumption will be reviewed over time.
Amortisation of intangible assets
The Group amortises its intangible product development costs using the ‘units of production’ method. This methodology is intended to ensure that the
amortisation charge of product development costs more closely correlates to the gross profit generated on the sale of products which incorporate the
Group’s technology. Essentially, the units of production methodology more closely matches the consumption of the economic benefit of the Group’s
technology. Determining the units of production amortisation requires estimates relating to the future sales of products which may or may not be borne
out in the future. Judgement is required in determining when amortisation should begin for certain assets.
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Notes to the financial statements continued
For the year ended 31 December 2018
Inventory provision
The Group reviews each stock keeping unit (‘SKU’) on a line-by-line basis taking into account sales and gross margins achieved on every SKU over the
past 24 months and the expected sales of each SKU over the next twelve months (and beyond) and the likely gross margin thereon.
Discontinued SKUs are fully provided for (at 100% of the cost) as future sales are very unlikely. In addition, where stock is identified as being slow-
moving, a 10% provision is typically booked against the cost of the stock. The Group’s stock provisioning policy reviews unit sales and margins on each
line of stock and considers what sales are likely to be achieved in the future, and at what margin, before determining if a stock provision is required.
Historically, on eventual sale of slow-moving SKUs, the Group has not experienced any material issues where the net realisable value of stock ultimately
transpires to be less than the book value of the stock (plus associated rework costs). Moreover, where stock has been identified as slow-moving, ten-
year life products are typically reworked into seven-year or five-year product packaging and sold as such still at a positive net margin. Even after rework
costs, the net realisable value of slow-moving SKUs typically exceeds the combined product and rework costs. The Group is fortunate that products
are certified to common European standards (and certain country standards) and many products are saleable in markets other than the original market
destination.
The inventory provision at 31 December 2018 amounted £2.3 million (2017: £3.7 million) and comprised £1.4 million provided against the value of
remaining BRK stock pending its disposal in 2019, and £0.9 million against the value of older stock manufactured for the French market.
4. Financial risk management
The Group’s operations expose it to a variety of financial risks that include the effects of changes in market prices including foreign exchange rate risk,
credit risk and liquidity risk. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of
the Group by monitoring these risks and taking appropriate action where necessary.
Liquidity risk
Management’s objective is to meet its liabilities as they fall due whilst maintaining sufficient headroom to enable the Board to react to unexpected
changes in market conditions. Management monitors its cash flows through the preparation of forecasts on a monthly basis. Cash forecasts are based
on historic trading levels, expected settlement of supplier balances and collection of trade receivables as they fall due. Subject to unforeseen adverse
trading conditions, the cash flows from operations are not expected to change significantly from the level of underlying business performance.
Maturity analysis
The table below analyses the Group’s financial liabilities on a contractual gross undiscounted cash flow basis into maturity groupings based on amounts
outstanding at the reporting date up to the contractual maturity date.
2018
Trade payables
Other payables
Loans and borrowings
Financial liabilities
2017
Trade payables
Other payables
Derivative financial liabilities
Financial liabilities
Within 6
months
£000
6 months -
1 year
£000
8,220
1,869
-
10,089
10,583
4,968
364
15,915
-
-
-
-
-
-
-
-
1 to 5
years
£000
-
-
5,700
5,700
-
-
-
-
Over 5
years
£000
-
-
-
-
-
-
-
-
Total
£000
8,220
1,869
5,700
15,789
10,583
4,968
364
15,915
The table below analyses the Group’s financial assets held for managing liquidity risk which are considered to be readily saleable or are expected to
generate cash inflows to meet cash outflows on financial liabilities.
2018
Cash at bank and on hand
Trade receivables and other debtors
Derivative financial assets
Financial assets
2017
Cash at bank and on hand
Trade receivables and other debtors
Financial assets
52
Within 6
months
£000
6 months -
1 year
£000
1 to 5
years
£000
Over 5
years
£000
1,251
10,269
214
11,734
3,273
16,927
20,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£000
1,251
10,269
214
11,734
3,273
16,927
20,200
The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed on the previous
page through effective cash management. In addition, in January 2018, the Group entered into a committed £7 million revolving credit facility with HSBC
UK Bank plc and maintained a £1 million committed invoice discounting facility secured on UK trade debtors which can be accessed as required.
Since the year end, the Group’s borrowing facilities were restructured to move from a revolving credit facility to a more efficient invoice discounting and
overdraft facility.
On the same date as the approval of this Annual Report and financial statements, the Group announced details of a placing and open offer to raise £6.0
million to accelerate recovery and specifically to reduce indebtedness, invest in the Connected Homes proposition and for working capital purposes.
Foreign currency risk
The Group operates in a number of markets across the world and is exposed to foreign exchange risk arising from various currency exposures in
particular, with respect to the US dollar and euro. The Group is exposed to foreign currency risk arising from recognised assets and liabilities as well
as commitments arising from future trading transactions. Management has set up a policy to manage foreign exchange risk by entering into forward
exchange contracts.
Sensitivity analysis
The Group derived the following sensitivities based on the forward rates readily available for the US dollar and euro. Management believe that these
most closely reflect the probable performance of the various economies in which the Group’s financial assets and liabilities are located.
The approximate impact on the Group’s operating result in 2019 from a one cent change in the value of the US dollar and euro against sterling on a full
year basis is approximately £0.2 million and £0.1 million respectively.
Interest rate risk
The Group regularly reviews its exposure to fluctuations in underlying interest rates and will take appropriate action if required to minimise the impact on
the performance and financial position of the Group.
Credit risk
Group credit risk predominantly arises from trade receivables and cash and cash equivalents. The Company’s credit risk arises solely from amounts
receivable from subsidiary undertakings.
Credit exposure is managed on a Group basis. External credit ratings are obtained for new customers and the Group policy is to assess the credit quality
of each customer internally before accepting any terms of trade. Internal procedures take into account the customer’s financial position as well as their
reputation within the industry and past payment experience where relevant.
Cash and cash equivalents and derivative financial instruments are all held with an AA- rated bank, HSBC UK Bank plc.
The Group’s maximum exposure to credit risk relating to its financial assets is equivalent to their carrying value as disclosed below. All financial assets
have a fair value which is equal to their carrying value.
Maximum exposure to credit risk
Trade receivables and other debtors
Cash and cash equivalents
2018
£000
2017
£000
10,269
1,251
11,520
16,927
3,273
20,200
The Group did not have any financial instruments that would mitigate the credit exposure arising from the financial assets designated at fair value through
profit or loss in either the current or the preceding financial year.
The Company’s credit risk arises exclusively through its intercompany balances which stand at £27.3 million (2017: £22.4 million). For the Company,
impairment losses on financial assets measured at amortised cost relate solely to amounts due from fellow group companies and total £725,000 at 31
December 2018 (2017: £nil). The impairment loss recorded against amounts due from fellow group companies is calculated based on lifetime expected
credit losses.
5. Capital management
The Group’s main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade profitably in the
foreseeable future and cash is managed on a conservative basis.
The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates by monitoring its cash balances on
a daily basis.
The Group considers its capital to include called up share capital, share premium, currency translation reserve and retained earnings.
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Notes to the financial statements continued
For the year ended 31 December 2018
6. Revenue and segmental reporting
FireAngel sells and distributes home safety products and accessories in the UK, Continental Europe and certain other countries and undertakes
manufacturing activities in Canada. Its major customers are based throughout the UK, Continental Europe and in a number of other countries outside
Continental Europe. Financial information is reported to the Board on a consolidated basis with revenue and operating profit stated for the Group.
The Board considers that there are no identifiable business segments that are engaged in providing individual products or services or a group of related
products and services that are subject to risks and returns that are different to the core business of the home safety products market in Europe.
Revenue and gross profit for each of the Group’s business units are reviewed by the Board and rolled up into consolidated financial information with non-
business unit costs included to arrive at the results that investors see. Business unit reporting to the Board generally excludes information on overheads
by business and other income statement information, which is all reported on a consolidated basis. Assets and liabilities are also generally reported to
the Board on a consolidated basis.
7. Exceptional charges
Within cost of sales
Exceptional charge for BRK Settlement Agreement (note a)
Provision against stock and disposal costs (note b)
Within administrative expenses
Incremental production ramp up costs (note c)
Restructure of distribution channels (note d)
Total exceptional charges
2018
£000
-
1,105
1,105
928
1,640
2,568
3,673
2017
£000
3,777
-
3,777
-
-
-
3,777
All assets are consolidated on a Group basis and reported as such to the Board.
Revenue from continuing operations
Business Units:
International
Trade
Retail
Fire & Rescue Services
Utilities
Pace Sensors
2018
Revenue
£000
2017
Revenue
£000
8,756
12,433
8,281
4,208
2,259
1,650
21,907
13,688
9,290
4,506
1,850
3,036
Total revenue from external customers
37,587
54,277
All business units earn revenue from the sale of smoke alarms and CO detectors and accessories to end customers. Pace Sensors earns revenue from
the manufacture and sale of CO sensors to a third-party CO detector assembler based in China.
As set out in the Group’s Annual Report and Accounts for the year ended 31 December 2017, from 1 January 2018, certain customers previously
reported within the Retail business unit, such as Screwfix and Toolstation, are now reported through the Trade business unit. The 2017 sales
comparatives have been adjusted accordingly.
For 2018, revenues of approximately £4.5 million were derived from one external customer (2017: £10.0 million from one external customer), which
individually contributed over 10% of total revenue of the Group. These revenues are attributable to the UK Trade business unit in 2018 (2017:
International). An analysis of the Group’s revenue is as follows:
2018
£000
2017
£000
27,181
8,456
1,950
37,587
29,362
20,474
4,441
54,277
2018
£000
2017
£000
20,159
116
20,275
15,108
187
15,295
Continuing operations:
United Kingdom
Continental Europe
Rest of World
Non-current assets, excluding deferred tax assets, for UK and overseas territories are as follows:
Continuing operations:
UK
Canada
Non-current assets
54
a. As announced on 10 May 2018 and detailed in the Group’s Annual Report for 2017, FireAngel signed a Settlement Agreement with BRK Brands Inc, BRK Brands Europe Limited, Jarden LLC and
Detector Technology Limited (together ‘BRK’) in full and final settlement of all matters between the parties. As a result, the Group recorded a £3.8 million exceptional charge in the results for the year
ended 31 December 2017.
b. £1.1 million has been provided against stock originally purchased for the French market to address demand driven by local legislative change.
c. One-off exceptional costs of £0.9 million have been incurred due to delays in reaching full production capacity and pricing expectations at the Group’s smoke alarm and connected devices
manufacturing partner.
d. Exceptional costs of £1.7 million have been incurred in executing the Group’s previously announced strategy to transition from a hardware safety products provider to a more integrated safety solutions
provider. The Group has taken action to move from a traditional distributor model to more value-added reseller partnerships in its German distribution channel for both its core and connected product
ranges.
8. Profit from operations
The following table analyses the nature of expenses:
Staff costs (see note 9)
Depreciation, amortisation and impairment (see notes 16 and 17)
Premises costs
Cost of inventories recognised as an expense
Inventory provision booked in year
BRK distribution fee
Distribution costs
Marketing and trade contributions
Professional fees excluding Non-Executive Directors
Research and development costs
Exceptional items excluding staff costs (see note 7)
Other net expenses/costs
Total cost of sales, distribution costs and administrative expenses
Profit from operations has been arrived at after charging:
Net foreign exchange losses excluding foreign currency forward transactions
Research and development costs
Amortisation and impairment of intangible assets
Depreciation on owned assets
Rentals under operating leases
Amounts payable to RSM UK Audit LLP and its associates in respect of both audit and non-audit
services are set out below:
Fees payable to the Company’s auditor and their associates for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and their associates for other services to the Group;
The audit of the Company’s subsidiaries
Other audit related services
Total audit fees
Taxation services
Accounting services
Total non-audit fees
2018
£000
5,677
1,074
1,206
2017
£000
5,306
736
1,127
25,692
34,316
(40)
944
992
965
718
260
3,350
2,520
43,358
2018
£000
21
260
689
385
386
2018
£000
30
61
37
128
23
13
36
(261)
2,915
1,007
1,028
701
306
3,777
2,798
53,756
2017
£000
184
306
465
271
425
2017
£000
30
103
37
170
20
-
20
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Notes to the financial statements continued
For the year ended 31 December 2018
9. Staff costs
The average monthly number of employees (including Executive Directors) within the Group was as follows:
Pace Sensors manufacturing
Technology
Administration
Sales and marketing
Executive and Non-Executive Directors
Warehousing
The aggregate remuneration for the above persons comprised:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
Total remuneration
Less: capitalised product development costs
Total remuneration charged to Income Statement
10. Finance (expense)/income
Interest (expense)/income on bank balance
11. Income tax
Current tax
UK corporation tax (credit)/charge
UK – adjustments in respect of prior periods charge/(credit)
Foreign tax charge
Deferred tax (note 26)
Origination and reversal of temporary differences
Income tax (credit)/charge
The weighted average applicable tax rate was 24% (2017: 10%). The tax credit for 2018 is largely due to enhanced research and development tax relief
at a rate of 230% and operating losses in the year of £5.9 million.
Tax losses are, where possible, realised during the year through surrender for research and development tax credits.
Legislation to reduce the main rate of corporation tax to 17% from 1 April 2020 has been enacted. The deferred tax balances have been calculated at
17% where they are expected to be surrendered.
The income tax charged to equity during the year was as follows:
Current tax
Share options – exercised in the year
Deferred tax
Share-based payments
Total income tax charge
12. Dividends
2018
£000
-
(260)
(260)
2017
£000
(17)
(61)
(78)
As a result of the loss reported for the year, and consistent with the decision not to pay an interim dividend (2017: 2.5 pence per share), the Directors do
not recommend payment of a final dividend for the year (2017: nil pence per share). The total dividend payable for 2018 was therefore nil pence per share
(2017: 2.5 pence per share).
The Group’s dividend policy will remain under constant review with the Board’s desire to recommence dividend payments when it is prudent to do so.
13. Earnings per share
Earnings from continuing operations
Earnings for the purposes of basic and diluted earnings per share (profit for the year attributable to owners of the parent)
Number of shares
Weighted average number of ordinary shares – basic calculation
Dilutive potential ordinary shares from share options
Weighted average number of ordinary shares – diluted calculation
Basic earnings per share
Diluted earnings per share
2018
£000
(4,483)
‘000
2017
£000
488
‘000
45,905
45,905
30
30
45,935
45,935
2018
pence
(9.8)
(9.8)
2017
pence
1.1
1.1
Basic EPS is calculated by dividing the earnings attributable to ordinary owners of the parent by the weighted average number of shares outstanding
during the period.
Diluted EPS is calculated on the same basis as basic EPS but with a further adjustment to the number of weighted average shares in issue to reflect the
effect of all potentially dilutive share options. The number of potentially dilutive share options is derived from the number of share options and awards
granted to employees and Directors where the exercise price is less than the average market price of the Company’s ordinary shares during the period.
Under IFRS no allowance is made for the dilutive impact of share options which reduce a loss per share. The basic and diluted EPS measures are
therefore the same for the year ended 31 December 2018.
2018
Number
2017
Number
27
42
49
27
6
3
37
38
33
29
7
3
154
147
2018
£000
6,338
614
213
107
7,272
(1,595)
5,677
2018
£000
(114)
2018
£000
(685)
61
27
(597)
(805)
(1,402)
2017
£000
6,036
690
174
358
7,258
(1,952)
5,306
2017
£000
24
2017
£000
(624)
(332)
190
(766)
823
57
Domestic income tax is calculated at 19.00% (2017: 19.25%) of the estimated assessable profit or loss for the year.
The tax credit for the year can be reconciled to the profit per the consolidated income statement as follows:
(Loss)/profit before tax
Tax at the domestic income tax rate of 19.00% (2017: 19.25%)
Tax effect of expenses that are not deductible in determining taxable profit
Effect of allowance for capitalised development expenditure
Adjustments in respect of prior periods
Impact of foreign tax rates
Other adjustments
2018
£000
(5,885)
(1,118)
13
(295)
(69)
1
66
%
2017
£000
%
545
105
13
(359)
108
53
137
Tax (credit)/charge and effective tax rate for the year
(1,402)
24%
57
10%
14. Financial instruments
2018 Financial assets
Trade receivables and other debtors
Cash and cash equivalents
Derivative financial assets
Total
2017 Financial assets
Trade receivables and other debtors
Cash and cash equivalents
Total
56
Assets at fair
value through
profit and loss
£000
Financial
assets at
amortised cost
£000
-
1,251
214
1,465
10,269
-
-
10,269
Assets at fair
value through
profit and loss
£000
-
3,273
3,273
Loans and
receivables
£000
16,927
-
16,927
Total
£000
10,269
1,251
214
11,734
Total
£000
16,927
3,273
20,200
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Notes to the financial statements continued
For the year ended 31 December 2018
2018 Financial liabilities
Trade payables
Other payables
Loans and borrowings
Derivative financial liabilities
Total
2017 Financial liabilities
Trade payables
Other payables
Derivative financial liabilities
Total
Liabilities at fair
value through
profit and loss
£000
Financial
liabilities held at
amortised cost
£000
Total
£000
8,220
1,869
5,700
-
8,220
1,869
5,700
-
15,789
15,789
-
-
-
-
-
Liabilities at fair
value through
profit and loss
£000
Financial
liabilities held at
amortised cost
£000
-
-
364
364
10,583
4,968
-
15,551
Total
£000
10,583
4,968
364
15,915
Pursuant to IFRS 9 the 2018 disclosure headings have been updated to reflect the latest framework. The 2017 disclosure remains under the previous
headings.
At 31 December 2018 the Company held financial assets held at amortised cost in the form of intercompany balances to the value of £27.3 million
(2017: £22.4 million). At the same date the Company had a financial liability held at amortised cost in the form of borrowings to the value of £5.7
million (2017: £nil).
Credit risk management
The Groups exposure to credit risk is limited to the carrying amount of financial assets
recognised at the balance sheet date, which are set out below.
Trade receivables
2018
£000
10,792
10,792
2017
£000
17,366
17,366
The Group has applied the IFRS 9 simplified approach in measuring the lifetime expected credit losses for trade receivables. The credit loss provision
has been calculated using a provision matrix based on the Group’s historic default rates over the expected life of the asset and is adjusted where
needed for forward looking estimates. The expected losses are based on the experience over the past 12 months with trade receivables grouped
together on similar credit risk and aging.
Group impairment test
During the year and at 31 December 2018, the market capitalisation of the Group was lower than Group net assets. IAS 36, Impairment of Assets,
states that this circumstance may be an indicator of impairment and accordingly the Directors’ have performed an impairment test on the primary cash
generating unit of the group (being FireAngel Safety Technology Limited). The test did not indicate any such impairment and the key disclosures relating
to the test are set out below.
The carrying amount of the cash generating unit assets and liabilities at 31 December 2018 amounted to £27.9 million. The recoverable amount of the
cash generating unit is determined based on a value-in-use calculation which uses cash flow projections based on financial budgets and business plans
approved by the Directors covering a two-year period. Cash flows beyond that period have been extrapolated using a steady 2.0% per annum growth
rate, which the Directors consider to be specific to the business and does not exceed the UK long-term average growth rate.
The key assumptions used in the cash flow projections are a terminal value applied after five years assuming a 7.5 times multiple and pre-tax weighted
average cost of capital of 15.3%. The other key assumptions have been assigned values by the Directors using estimates based on past experience and
expectations of future performance.
The Directors believe that, based on the sensitivity analysis performed, any reasonably possible change in the key assumptions on which the recoverable
amounts are based would not cause the Group’s net asset value to exceed the recoverable amount. As a result, there is no impairment in the period
(2017: no impairment).
16. Other intangible assets
Cost
At 1 January 2017
Additions
At 31 December 2017
Additions
Disposals
At 31 December 2018
Amortisation
At 1 January 2017
Amortisation for the year
At 31 December 2017
Amortisation for the year
Impairment for the year
Disposals
At 31 December 2018
Carrying amount
At 31 December 2017
At 31 December 2018
Product
development
costs
£000
Purchased
software
costs
£000
Computer
software
costs
£000
10,273
2,601
12,874
3,387
(280)
15,981
2,062
430
2,492
617
30
(280)
2,859
1,649
925
2,574
325
-
2,899
-
-
-
-
-
-
-
10,382
13,122
2,574
2,899
319
68
387
28
-
415
259
35
294
42
-
-
336
93
79
Total
£000
12,241
3,594
15,835
3,740
(280)
19,295
2,321
465
2,786
659
30
(280)
3,195
13,049
16,100
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As at 31 December 2018 a credit loss provision of £10,000 (2017: nil) is against the exposure of potential bad debts.
15. Goodwill
Cost and carrying value of goodwill at 31 December 2018 and 2017
£000
169
The amortisation charge of £659,000 (2017: £465,000) and impairment charge of £30,000 (2017: nil) have been recognised within administrative
expenses. A number of fully-amortised technologies with cost and amortisation of £280,000 have been disposed of in the year as the technology has
now been superseded and is no longer used within our current product range. A summary of intangible costs as at 31 December 2018 is shown in the
table which follows.
The recoverable amount of each cash-generating unit has been determined at each year end, based on value in use calculations. These calculations
use post-tax cash flow projections from the Group’s five-year strategy plan.
Except as outlined below, intangible assets are typically amortised over seven to 15 years depending on the Group’s assessment of the likely period of
time over which the benefit from the technology is expected to be realised.
If necessary, cash flows beyond the budgeted five-year period are extrapolated using the estimated growth rate per the table below.
Carrying value of goodwill (£000)
The key assumptions applied in the calculations were:
Gross margin (%)
Growth rate (%)
Discount rate (%)
Pace Sensors
169
32
2.5
10
Gross margin over the next five years has been estimated based on past performance of each product line taking into account the anticipated
changes in sales mix and future trading conditions. The sales mix takes into account estimated future revenue from current customers. It has been
assumed that overhead costs and asset replacement will continue at the same levels as in the current year as there are no expansion or restructuring
projects in the Board’s plans in the short term. Cash flow has been derived from future earnings based on assumptions that key suppliers will be paid
within agreed credit periods and that customers will continue to take pay on time. Stock holding levels will continue to be monitored to ensure that
sufficient levels are retained to meet demand.
58
In 2018, the Group incurred costs of approximately £0.9 million (2017: £0.8 million) in readying Flex to produce FireAngel products and in readying the Far
East based supplier to produce replacements to the BRK range of products. These costs are directly attributable to bringing our manufacturing assets in
to use and as such have been included within intangible assets and are being amortised over five years.
Many of the products to be produced by Flex were being made in China but now have changes in components, or suppliers, or a change in design to
improve the manufacturing process. The transition of manufacturing to Flex has been a considerable undertaking which has involved a substantial
proportion of the Group’s Technical team in close collaboration with Flex.
Impairment review
During 2018, the Group recorded a £30,000 impairment charge (2017: nil) against projects where it was deemed not commercially viable to continue.
Some of the costs incurred were able to be allocated to future projects where these will benefit from the technology or tooling.
As part of the impairment review, the Group compares the net book value of each intangible asset with the gross profit which is expected to be derived
from the sale of products over the next one to five years that use the relevant intangible asset. The purpose of this review is to ensure that the value of
the intangible asset is likely to be recovered within the foreseeable future. In many cases, the expected gross profit over the next two to three years from
the sale of products that use the intangible asset is materially greater than the net book value of the individual intangible asset on the balance sheet. This
provides significant comfort that the carrying value of the intangible is supportable and, therefore, is not impaired.
Assessing the potential sales of products such as the Group’s Connected Home Solution technology is inherently more difficult than products where the
run rate of sales is already well known and the pattern of sales is established. The Board expects that the take up of Connected Home Solution products
will increase over time as the technology gradually becomes mainstream. Predicting exactly what year this is likely to happen is difficult to assess but the
general market trend of an increased rate of take up is clearly evident.
59
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-
)
0
8
2
(
7
1
1
,
2
5
9
5
,
1
2
1
7
,
3
0
8
8
,
8
1
2
9
4
,
2
)
0
8
2
(
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1
6
0
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5
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,
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%
0
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-
)
0
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Projects being amortised
The following is a high-level summary of the projects being amortised which are set out in the previous table:
Connected Home Solutions
Connected Home Solutions products connect a range of FireAngel’s own products through its interface gateway technology to the internet. This
technology is key to FireAngel continuing to win new contracts such as the Mears partner agreement.
During 2019 the Group has redeveloped its FireAngel Connect B2B offering to incorporate a new range of Amazon Web Services (‘AWS’) technologies
which make the system more scalable. In addition, significant development has been undertaken to develop a B2C offering, which includes new
gateway products, end mobile user apps and web interfaces.
The total net book value at 31 December 2018 of projects being amortised with Connected Home Solutions technology amounted to approximately £4.9
million (2017: £1.8 million) which includes £2.9 million incurred to purchase core software modules from Intamac.
Wi-safe 2
Wi-safe 2 (including products using Wi-safe 2 capabilities) are an enhancement and development on the Group’s Wi-safe I technology with a combined
net book value of approximately £1.8 million at 31 December 2018 (2017: £1.5 million). Wi-safe 2 is a core piece of technology which is expected to
underpin a number of key products and accessories going forward, including the Group’s product offering in the Connected Homes arena.
Nano
Nano is the Group’s miniaturised CO sensor developed by FireAngel’s wholly-owned subsidiary in Canada, Pace Sensors. The Nano went into
production into finished CO detectors in November 2016. The net book value of Nano technology was approximately £1.4 million at 31 December
2018 (2017: £1.3 million) and represents the costs incurred in the development of the CO sensor and the final development of finished CO products that
incorporate the sensor.
Mains-powered products
Mains-powered products include the FireAngel Spec and FireAngel Pro ranges which at 31 December 2018 had a net book value of approximately £1.1
million (2017: £ 1.2 million).
Smoke-sensing products
The net book value at 31 December 2018 of non mains-powered smoke-sensing products (being heat and optical products) was approximately £1.1
million (2017: £1.0 million). This category includes all FireAngel’s own-branded developed products.
Manufacturing setup costs
The net book value of the manufacturing setup costs at 31 December 2018 was approximately £1.6 million (2017: £0.8 million within Future projects), and
includes costs incurred by the Group’s Technical and Project Management teams in preparing Flex to produce FireAngel products and in preparing the
Far East based supplier to produce replacements to the BRK range. Such costs have been included within intangible assets and are being amortised
over five years.
Other projects
The net book value of other projects at 31 December 2018 amounted to approximately £0.6 million (2017: £0.4 million). This includes FireAngel’s 10-year
life CO alarm and the British Gas developed CO alarm.
Projects not currently being amortised
Product development costs and other intangible assets not yet available for use are regularly tested for impairment. This assessment includes
consideration of the likely cost of completing the project, the time to market and an assessment of the potential sales and gross profit opportunity using
the relevant technology.
Future projects
Future projects have a combined net book value of approximately £2.9 million at 31 December 2018 (2017: £3.5 million). This includes the major project
development activities of the Group, including ‘Gen5’ costs of £1.5 million. Gen5 is the next generation of smoke, heat, CO and combined alarms. Gen5
will be a common platform across all product types and will allow FireAngel to develop new products using ‘bookshelf’ technologies developed as part
of this project. As well as standalone smoke, heat and CO alarms, combination alarms utilise all three of these sensing methods in a single product that
can use CO and heat to augment smoke measurements to improve the rapid detection of fires, while further reducing the incidence of false alarms.
Gen5 also provides enhanced data logging of events and the ability for wireless diagnostic downloads to a smartphone, enabling service technicians to
easily access diagnostic data on the alarm without the need to remove it from the base. The Group has also invested £0.6 million in developing its mains-
powered Wi-safe 2 CO alarm which is expected to be rolled out in the second half of 2019. In addition, a total of £1 million has been capitalised in relation
to a number of smaller product developments.
Connected Homes
Connected Homes technology which is not currently in use includes approximately £0.6 million at 31 December 2018 (2017: £2.2 million) in total of
specific product development costs. The Group continues to invest in its FireAngel Connected B2B & B2C offerings which includes new gateway
products, end mobile user apps and web interfaces.
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Notes to the financial statements continued
For the year ended 31 December 2018
17. Plant and equipment
Tooling
£000
Office
equipment
£000
Motor
vehicles
£000
Fixtures &
fittings
£000
Cost
At 1 January 2017
Additions
Disposals
At 31 December 2017
Additions
Disposals
At 31 December 2018
Accumulated depreciation
At 1 January 2017
Depreciation charge for the year
Effect of exchange rates
At 31 December 2017
Depreciation charge for the year
Disposals
At 31 December 2018
Net book value
At 31 December 2017
At 31 December 2018
-
1,382
-
1,382
2,288
-
3,670
-
-
-
-
156
-
156
1,382
3,514
1,352
48
-
1,400
51
(38)
1,413
727
219
4
950
179
(10)
1,119
450
294
5
7
-
12
-
(5)
7
5
2
-
7
2
(5)
4
5
3
431
1
-
432
3
-
435
140
51
1
192
48
-
240
240
195
Total
£000
1,788
1,438
-
3,226
2,342
(43)
5,525
872
272
5
1,149
385
(15)
1,519
2,077
4,006
The total depreciation expense of £385,000 (2017: £272,000) has been charged to administrative expenses.
Depreciation of tooling at the Group’s supplier, Flex, commenced in 2018 as it was brought into use during the year. The Group purchased approximately
£2.3 million of tooling and capital equipment at Flex over the course of 2018.
There are no material capital commitments at the balance sheet date.
18. Shares in subsidiaries
Company
Cost
At 1 January 2018 and 31 December 2018
Accumulated impairment
At 1 January 2018 and 31 December 2018
At 1 January 2018 and 31 December 2018
Shares
£000
149
-
149
Total
£000
149
-
149
The Group has two non-trading companies, AngelEye Corporation and AngelEye Incorporated, both registered in North America. The Company’s
subsidiaries as at 31 December 2018 are as follows:
FireAngel Safety Technology Limited
Pace Sensors Limited
AngelEye Corporation
AngelEye Incorporated
Registered
office (see
footnote)
Place of
incorporation
(or registration)
and operation
Proportion
of ownership
interest %
Proportion of
voting power
held %
1
2
3
4
UK
Canada
Canada
USA
100
100
100
100
100
100
100
100
Principal activity
Distribution of smoke and CO alarms
Manufacture of CO sensors
Non-trading
Non-trading
1. Vanguard Centre, Sir William Lyons Road, Coventry, CV4 7EZ, UK
2. 3-3165 Unity Dr., Mississauga, ON, L5L 4L4, Canada
3. 82 Bilbermar Drive, Richmond Hill, ON, L4S 1C1, Canada
4. The Corporation Trust Company, 1209 Orange Street, Wilmington, DE, 19801
The results of all subsidiary undertakings are included in the consolidated accounts.
FireAngel Safety Technology Group plc has a direct holding in FireAngel Safety Technology Limited, AngelEye Corporation and AngelEye Incorporated.
It has an indirect holding in Pace Sensors Limited, via AngelEye Incorporated.
19. Inventories
Raw materials
Work-in-progress
Finished goods
Total gross inventories
Inventory provisions
Total net inventories
Group
2018
£000
131
562
10,102
10,795
(2,370)
8,425
Group
2017
£000
229
494
14,130
14,853
(3,652)
11,201
Company
2018
£000
Company
2017
£000
-
-
-
-
-
-
-
-
-
-
-
-
Pace Sensors Limited, the Group’s wholly-owned subsidiary in Canada, manufactures CO Sensors for use in the Group’s CO detectors. The CO
sensors are shipped to Pace Technologies, an independent third-party supplier based in China, for assembly into finished CO detectors, which are then
purchased by the Group in the UK. The Group does not maintain a provision for unrealised profit in CO sensors within finished CO detector stock, as
CO sensors are sold to an independent third party, Pace Technologies, before being acquired as finished CO detector products and put into stock by the
Group.
Of the exceptional charge of £1.1 million booked in cost of sales in 2018 (see note 7), £0.8 million relates to a provision against surplus French stock
which was originally purchased to supply demand driven by a local legislative change. The majority of the balance of the provision relates to BRK stock
yet to be disposed of at the year end.
20. Financial assets
Trade receivables and other debtors
Cash and cash equivalents
Derivative financial assets
Maximum exposure to credit risk
Group
2018
£000
10,269
1,251
214
11,734
Group
2017
£000
16,927
3,273
-
Company
2018
£000
Company
2017
£000
27,343
22,428
1
-
64
-
20,200
27,344
22,492
The Directors are of the opinion that whilst there are significant concentrations of credit risk, customer payments are closely scrutinised to ensure debts
are paid on time and credit limits are reasonably adhered to.
The fair value of the financial assets is not considered to be materially different from their carrying value.
Trade and other receivables for the Company represents balances owed to it by fellow Group undertakings.
Trade and other receivables comprise:
Trade receivables
Amounts due from fellow group companies
Other debtors
Prepayments
Trade and other receivables
Group
2018
£000
9,589
-
680
523
Group
2017
£000
16,634
-
293
439
Company
2018
£000
Company
2017
£000
-
-
27,343
22,428
-
-
-
-
10,792
17,366
27,343
22,428
The average credit period taken on sale of goods is 89 days (2017: 72 days).
An impairment review has been undertaken at the year end to assess whether the carrying amount of financial assets is deemed recoverable. Following
the review, there are no financial assets that are impaired and all debts past due are recoverable. As at 31 December 2018 there was an overdue debt
from one customer of £0.1 million which the Board expects to be repaid before 30 June 2019.
The primary credit risk relates to customers which potentially may be unable to settle their debts with the Group.
Domestic trade debtors are pledged as security to the Group’s bankers as part of the Group’s banking facilities. The domestic trade debtor balance at 31
December 2018 was £7.8 million (31 December 2017: £8.9 million).
The Group believes that all major debtor balances will ultimately be recoverable based on a review of past payment history and the current financial
status of customers and the ongoing relationship with the Group. Credit limits are kept under review to ensure customers are not exceeding agreed
terms.
At 31 December 2018 £7.8 million (2017: £8.9 million) of trade receivables were denominated in sterling, £0.8 million (2017: £2.4 million) in US dollars and
£1.0 million (2017: £5.3 million) in euros.
At 31 December 2018, an overdrawn amount of £1.1 million (2017: cash balance of £1.1 million) was denominated in sterling, cash of £2.3 million (2017:
£2.0 million) in US dollars, cash of £0.2 million (2017: £0.1 million) in Canadian dollars and an overdrawn amount of £0.1 million (2017: cash balance of
£0.1 million) in euros.
At the year end, all other financial assets held were denominated in sterling.
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Notes to the financial statements continued
The total warranty provision is classified between less than one year and greater than one year as follows:
For the year ended 31 December 2018
21. Derivative financial instruments
Assets
Foreign currency forward contracts
Liabilities
Foreign currency forward contracts
2018
£000
214
-
2017
£000
-
(364)
Derivative financial instruments are classified between current and non-current based on the date of their maturity. They are measured at their fair value.
The maturity of all forward contracts at each year end was less than twelve months, and therefore all contracts are classified as current.
The notional principal amounts of the outstanding foreign currency forward contracts at 31 December 2018 were US $8.1 million (2017: US $6.1 million),
sterling of £nil (2017: £1.3 million) and euro of €nil (2017: €nil).
Current provision
Non-current provision
Total warranty provisions
Review of warranty provision
In assessing the adequacy of the warranty provision, it is necessary to form a view on matters which are inherently uncertain, such as the returns profile
over time, the final return rate, whether the product return rates of each year of production will be similar, whether the return rates from different sales
channels will vary and the average cost of redress.
There is a greater degree of uncertainty in assessing these factors when an issue is first identified although with the known battery warranty issue (which
represents the majority of the provision) the Board has considerably more experience of the returns rates having monitored product returns by year of
manufacture by market for several years. Consequently, the continued appropriateness of the underlying assumptions is reviewed on an ongoing basis
against actual experience and other relevant evidence and adjustment made to the provision over time as required.
2018
£000
934
600
1,534
2017
£000
1,507
687
2,194
Gains and losses on foreign currency forward contracts are recognised within cost of sales each month, as the forward contract are utilised to mitigate
foreign currency risk associated with product sales and purchases in currencies other than the Group’s sterling functional currency.
The Board notes that, in total, the expected terminal rate of product returns is still in line with expectation, although returns in Germany are higher, and
returns in the UK are lower than originally expected.
22. Loans and borrowings
In January 2018 the Group entered into a three-year committed revolving credit facility for £7 million with HSBC UK Bank plc to provide additional
financial headroom. The costs of arranging the facility amounting to £0.1 million in total are being amortised over the life of the facility and is secured by a
floating charge over the assets of the Group.
As at 31 December 2018 the Group had drawn down £5.7 million of this facility. The Group has operated within its banking facilities throughout the year.
As at the 31 December 2018 the Group also has an invoice discounting facility with HSBC with agreed credit terms of £1 million, at the year end, none of
which was utilised.
Since the year end, the Group’s borrowing facilities were restructured to move from a revolving credit facility to a more efficient invoice discounting and
overdraft facility.
On the same date as the approval of this Annual Report and financial statements, the Group announced details of a placing and open offer to raise £6.0
million to accelerate recovery and specifically to reduce indebtedness, invest in the Connected Homes proposition and for working capital purposes.
23. Fair value disclosures
The total net gain on forward contracts recognised in the income statement for the year ended 31 December 2018 was £0.6 million (2017: loss of £0.3
million) and is included within cost of sales.
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2)
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3)
The following table presents the Group’s financial assets and liabilities that are measured at fair value at the last two year ends. All assets and liabilities
measured are valued at level 2.
Level 2
Assets
Foreign currency forward contracts
Liabilities
Foreign currency forward contracts
24. Provisions
At 1 January 2017
(Release)/charge in year
Utilisation in year
At 31 December 2017
Charge in year
Utilisation in year
At 31 December 2018
64
2018
£000
214
-
FireAngel
warranty
provisions
£000
BRK Brands
warranty
provisions
£000
4,333
(581)
(1,835)
1,917
581
(1,098)
1,400
260
245
(228)
277
30
(173)
134
2017
£000
-
(364)
Total
£000
4,593
(336)
(2,063)
2,194
611
(1,271)
1,534
25. Trade and other payables
Trade payables
Accruals and deferred income
Other tax and social security
Group
2018
£000
8,220
1,868
1,377
11,465
Group
2017
£000
10,583
4,968
921
16,472
Company
2018
£000
Company
2017
£000
-
-
-
-
-
-
-
-
At 31 December 2018, £1.2 million (2017: £8.0 million) of payables were denominated in sterling, £0.2 million (2017: £0.2 million) in euros and £6.8 million
(2017: £2.4 million) in US dollars. Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The
average credit period taken for trade purchases is 137 days (2017: 80 days). This is unusually high due to the delayed payment terms negotiated as part
of the BRK Settlement Agreement.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
26. Deferred tax
Deferred tax liabilities
Deferred tax assets
Net position at 31 December
The movement in the year in the Group’s net deferred tax position was as follows:
At 1 January
Credit/(charge) to income for the year
Charge to equity for the year
At 31 December
The following are the major deferred tax liabilities and assets recognised by the Group and
the movements thereon during the period:
Deferred tax liabilities
At 1 January 2018
Charge/(credit) to income for the year
At 31 December 2018
Deferred tax assets
At 1 January 2018
Credit/(charge) to income for the year
Charge to equity for the year
At 31 December 2018
2018
£000
(2,404)
1,248
(1,156)
2018
£000
(1,701)
805
(260)
2017
£000
(1,974)
273
(1,701)
2017
£000
(944)
(696)
(61)
(1,156)
(1,701)
Derivative
financial
instruments
£000
Non-current
asset timing
differences
£000
44
(6)
38
1,930
436
2,366
Deferred
tax losses
£000
Derivative
financial
instruments
£000
Share-based
payments
£000
-
1,241
-
1,241
-
(6)
-
(6)
273
-
(260)
13
Total
£000
1,974
430
2,404
Total
£000
273
1,235
(260)
1,248
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Notes to the financial statements continued
For the year ended 31 December 2018
27. Retirement benefits - defined contribution plan
The Group operates a defined contribution retirement benefit plan. The assets of the scheme are held separately from those of the Group in an
independently-administered fund. The pension cost charge of £0.2 million (2017: £0.2 million) represents contributions payable by the Group to the fund
for the year. Contributions amounting to £24,000 (2017: £22,000) were payable at the year end.
28. Called up share capital
Authorised:
100,000,000 ordinary shares of 2p each
Ordinary shares in issue:
As at 1 January
Issue of shares in respect of share options exercised
As at 31 December
Issued and fully paid ordinary shares of 2p each:
As at 1 January
Issue of shares in respect of share options exercised
As at 31 December
Company
2018
Number
‘000
Company
2017
Number
‘000
45,905
45,855
-
50
45,905
45,905
£000
918
-
918
£000
917
1
918
The Company has one class of ordinary share which carries no right to fixed income.
29. Reserves
Share premium account
The share premium account represents the excess of consideration received for shares issued above their nominal value net of transaction costs.
Currency translation reserve
The currency translation reserve represents the exchange gains and losses that have arisen on the retranslation of overseas operations.
Retained earnings
Retained earnings represents the cumulative profit and loss net of distributions to owners.
The loss for the financial year dealt with in the Company was £848,000 (2017: £nil). As allowed under Section 408 of the Companies Act 2006, a separate
profit and loss account has not been presented for the Company.
30. Share-based payments
Outstanding at 1 January
Exercised during the year
Expired or lapsed during the year
Outstanding at 31 December
Details of the share options outstanding at the end of the year are as follows:
Options
‘000
Weighted
average
exercise price
1,902
-
(1,218)
684
99p
-
46p
191p
Options
‘000
1,952
(50)
-
1,902
Weighted
average
exercise price
97p
35p
-
99p
Outstanding at
start of year
Exercised during
the year
Lapsed during
the year
Expired during
the year
Outstanding at
end of year
Expiry date
Exercise price
319,445
900,000
607,614
45,000
30,000
1,902,059
-
-
-
-
-
-
(69,445)
-
250,000
28/04/2024
-
-
-
-
(900,000)
-
03/06/2025
(203,891)
(45,000)
403,723
28/04/2024
-
03/06/2025
-
30,000
03/06/2020
(69,445)
(1,148,891)
683,723
200p
2p
200p
2p
2p
Grant date
Directors’ share options
25/04/2014
03/06/2015
Employee share options
25/04/2014
03/06/2015
03/06/2015
66
The 2015 LTIP did not satisfy the performance target within the agreed time and has therefore not met the criteria needed to exercise the shares.
As at 31 December 2018, a total of 683,723 options were outstanding which had an average exercise price of 191p, and a weighted average remaining
contractual life of 5.2 years.
2014 EMI share options award
The Company has an approved EMI scheme for qualifying UK-based employees which provided for an award of share options based on seniority.
Share options vest over three years. If options remain unexercised after a period of ten years from the date of grant, the options usually expire except in
exceptional circumstances at the discretion of the Board.
On 30 April 2014, the Company granted 1.46 million employee share options under the EMI scheme at an exercise price of £2.00 per share. The share
options vested evenly over three years and are exercisable for ten years from the date of grant.
31. Operating lease arrangements
The minimum lease payments under non-cancellable operating lease rentals are in aggregate as follows:
2018
£000
2017
£000
Amounts due:
Within one year
Between one and five years
More than five years
Total lease payments
Operating lease payments represent rentals payable by the Group principally for its offices and warehouse.
The operating lease expenditure charged to the income statement during the year is disclosed in note 8 of the financial statements.
32. Related party transactions
Balances and transactions between the Company and its subsidiaries:
Loans and borrowings (principal amount)
Loans and borrowings (interest and amortised bank charges)
Cash transfer
Total transactions between Company and subsidiaries
325
303
-
628
385
467
33
885
2018
£000
5,700
(120)
60
5,640
Newell Brands, through its subsidiary BRK Brands Europe Limited, holds a significant proportion of the Company’s ordinary shares (23.4% as at 31
December 2018). Up to 31 March 2018, Newell represented the single largest supplier to the Group supplying all the Group’s smoke alarms, heat alarms
and accessories from DTL. Since 31 March 2018, products which were being acquired from DTL are now sourced directly from Flex in Poland and a Far
East Asia based supplier. Purchases between related parties are made under contractual arrangements negotiated on an arm’s length basis.
During the year, Group companies entered into the following transactions with Newell Brands
which is not a member of the Group:
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The remuneration of the key management personnel of the Group, together with the Non-Executive Directors, is set out below.
Details of individual Directors’ remuneration are given in the remuneration section of the Remuneration Committee report set out on page 29.
Distribution agreement fee
Dividends payable
Amounts owed to related parties at year end
Remuneration of key management personnel
Remuneration of key management personnel
Aggregate emoluments
Company pension contributions
Sums paid for Non-Executive Directors’ services
Share-based payments
Total remuneration
The remuneration in respect of the highest paid Director was:
Emoluments
Defined pension contributions
Newell Brands
2018
£000
-
4,540
944
-
-
2017
£000
-
23,521
2,915
859
6,839
2017
£000
1,398
146
111
358
2018
£000
1,400
74
117
107
1,698
2,013
2018
£000
270
22
292
2017
£000
224
21
245
67
The share-based payments charge of £107,000 (2017: £358,000), included in the Consolidated Income Statement within administrative expenses,
relates to the 2015 Long Term Incentive Plan nominal cost options awarded on 3 June 2015.
Sales of goods in year
A summary of the change in options is set out below:
2018
2017
Net purchases of goods in year including engineering fees
FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
Notes to the financial statements continued
For the year ended 31 December 2018
Other information
Corporate directory
Share-based payments
During 2014, three Executive Directors were granted a total of 375,000 share options under the equity-settled share option plan. These options had an
exercise price of £2.00 per share and had an expected life of ten years. The share options vested evenly over a period of three years and the charge is
taken to the income statement as the share-based payment charge. The element of the share-based payment charge relating to the Directors is nil as
these reached the end of the vesting period in the prior year.
During 2015, four Executive Directors were awarded 900,000 share options in total under the new LTIP share option plan. These options had an exercise
price of the nominal cost of the shares at 2 pence per share and had an expected life of ten years. The share options vest following a performance period
of three years and are subject to the achievement of total FireAngel shareholder return targets. The element of the share-based payment charge relating
to this award is £106,647.
Wilkins Kennedy
William Payne, a Non-Executive Director of the Company, is a partner of Wilkins Kennedy, which is the firm that provides his services. During the period
Wilkins Kennedy were paid £42,000 (2017: £42,000) for the provision of William Payne’s services as a Non-Executive Director and £9,775 (2017: £11,713)
for accounting and management services. At the year end the Company owed Wilkins Kennedy £nil (2017: £nil).
33. Post balance sheet events
Since the year end, the Group’s borrowing facilities were restructured to move from a revolving credit facility to a more efficient invoice discounting and
overdraft facility.
On the same date as the approval of this Annual Report and financial statements, the Group announced details of a placing and open offer to raise £6.0
million to accelerate recovery and specifically to reduce indebtedness, invest in the Connected Homes proposition and for working capital purposes.
REGISTERED NUMBER
3991353
COMPANY SECRETARY
WJB Payne
REGISTERED OFFICE
Vanguard Centre
Sir William Lyons Road
Coventry
CV4 7EZ
AUDITOR
RSM UK AUDIT LLP
Chartered Accountants
St Philips Point
Temple Row
Birmingham B2 5AF
BANKER
HSBC UK Bank plc
3 Rivergate
Temple Quay
Bristol
BS1 6ER
SOLICITORS
Pinsent Masons
30 Crown Place
London
EC2A 4ES
NOMINATED ADVISOR AND BROKER
Stockdale Securities Limited
100 Wood Street
London
EC2V 7AN
REGISTRAR
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Shareholder information
SHAREHOLDER ENQUIRIES
INVESTOR RELATIONS
FINANCIAL CALENDAR
Any shareholder with enquiries should, in the
first instance, contact our registrar, Neville
Registrar, using the address above.
SHARE PRICE INFORMATION
London Stock Exchange AIM symbol: FA.
Information on the Company’s major
shareholders is available in the Share Details
section of the Investors area of the FireAngel
Safety Technology Group plc website at www.
fireangeltech.com.
Vanguard Centre
Sir William Lyons Road
Coventry
CV4 7EZ
Telephone: 024 7771 7700
Email: info@fireangeltech.com
Website: www.fireangeltech.com
Financial year end - 31 December 2018
Full year results announced - 29 March 2019
Annual General Meeting - 25 June 2019
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FireAngel Safety Technology Group plc Annual Report and Accounts 2018FireAngel Safety Technology Group plc Annual Report and Accounts 2018
For any further enquires please contact us:
www.fireangeltech.com
info@fireangeltech.com
024 7771 7700