ANNUAL REPORTS
AND ACCOUNTS 2020
FireAngel Safety Technology Group plc
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FireAngel’s mission is to protect and save lives by making
innovative, leading-edge technology home safety products
which are simple and accessible.
FireAngel is one of the market leaders in the European home safety products market with its growing proprietary 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 certifi cation
and signifi cant 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 smoke, heat and accessory products are
manufactured by Flex in Poland. Other ranges of smoke products are sourced from a leading supplier in the Far East. The Group’s 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 as its key customer. FireAngel has a well-established but low market share of the UK Trade sector and
is seeking to signifi cantly expand this with its range of trade products. The Group also makes signifi cant sales into Continental Europe, mainly
selling in euros through a network of independently-owned, third-party distributors.
Financial headlines
• Revenue £39.9 million (2019: £45.5 million)
• Underlying LBITDA1 £1.2 million (2019: EBITDA £0.2 million)
• Underlying operating loss2 £5.4 million (2019: underlying operating loss2 £3.8
million)
• Operating loss £9.0 million (2019: operating loss £10.7 million)
• Adjusted gross profi t3 £7.9 million (2019: £8.7 million)
• Adjusted gross margin3 19.8% (2019: 19.0%)
• Gross margin 15.9% (2019: 9.6%)
• Non-underlying items totalling £3.6 million before tax (2019: £6.9 million)
• Underlying loss before tax4 £5.7 million (2019: underlying loss before tax4 £4.1
million)
• Loss before tax £9.3 million (2019: loss before tax £11.0 million)
• Basic and diluted EPS (7.7p) (2019: (14.0p))
• Capitalised product development spend of £2.5 million (2019: £2.9 million)
• Fundraising of £6.1 million (gross) in April 2020 and secured a £3.2 million loan
under the Coronavirus Large Business Interruption Loan Scheme in June 2020
• Net debt (before lease obligations) at 31 December 2020 £3.7 million (cash £1.5
million, invoice discounting drawdowns £2.5million, CLBILS loan £2.6 million)
(2019: net debt (before lease obligations) £4.9 million)
• Post year end fundraise of £9.0 million (net of expenses) and refi nancing of
Coronavirus Large Business Interruption Loan Scheme in to Coronavirus
Business Interruption Loan Scheme to generate an additional £1.7 million of
cash.
1 Underlying LBITDA in 2020 of £1.2 million is loss before tax before depreciation and amortisation, fi nance
costs, unrealised mark-to-market losses and non-underlying items (2019: underlying EBITDA of £0.2 million).
2 Underlying operating loss in 2020 of £5.4 million is before non-underlying items (2019: underlying operating
loss of £3.8 million before non-underlying items). A reconciliation of ‘alternative performance measures’ to
measures prescribed in fi nancial standards is given in the Performance Review section.
3 Adjusted gross profi t is stated before non-underlying items. Adjusted gross margin is adjusted gross profi t as
a percentage of revenue.
4 Underlying loss before tax in 2020 of £5.7 million is before non-underlying items (2019: underlying loss before
tax of £4.1 million before non-underlying items; for comparative purposes the underlying loss before tax
includes the impact of changing to a more appropriate amortisation approach of £0.9 million in 2019).
Operational headlines
• Encouraging start to the year, before the full impact of COVID-19 measures
took effect, with revenue and gross profi t in the fi rst quarter of 2020 slightly
below budget and gross margin ahead of Q1 2019 and in line with budget
• Material initial purchase order in excess of £1.0 million received for the Group’s
fi rst large-scale connected homes technology rollout with fi rst installations in
the year, representing an important endorsement of our strategy
• While trials and existing commercial discussions around connected homes
were impacted by COVID-19, new opportunities and enquiries about trials
have since gained momentum
• Lockdown period has facilitated an increased focus on operational
improvements and longer-term planning to refi ne the Group’s future business
model
• Signifi cant reshaping of the FireAngel Board over the last two years has aligned
its skills to future challenges and opportunities
• Group is now an independent, technology-led business and has begun
monetising its investment made in connected technology
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Contents
Introduction
3 Overview
4 FireAngel at a glance
Strategic review
6 Executive Chairman’s statement
8 Our proprietary technology
9 Corporate social responsibility
Performance review
10 Group fi nancial results
Governance
16 Section 172 Companies Act statement
18 Risks and risk management
22 Board of Directors and Company Secretary
24 Corporate governance report
29 Audit Committee report
31 Remuneration Committee report
35 Statutory Directors’ report
Financial statements
40 Statement of Directors’ responsibilities
41 Independent auditor’s report
46 Consolidated income statement
46 Consolidated statement of comprehensive
income
47 Consolidated and Company statement of
fi nancial position
48 Consolidated and Company cash fl ow
statement
49 Consolidated statement of changes in equity
49 Company statement of changes in equity
50 Notes to the fi nancial statements
Other information
76 Corporate directory
76 Shareholder information
The Statutory Strategic Report comprises the
Strategic Review, the Performance Review, the
Section 172 Companies Act Statement and the
Risks and Risk Management sections.
Visit our investor website for
the latest news and announcements:
www.fi reangeltech.com
FireAngel Safety Technology Group plc
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
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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 had 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 fi rst
plug-in smoke alarm. Since that ground-
breaking 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
certifi cation, make 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.
Sourcing of our own smoke, heat and
accessory products from Flex in Poland has
enabled us to consolidate our product range,
reduce lead times and leverage economies of
scale from a manufacturing facility just a short
fl ight away. It has also allowed us to bring
manufacturing closer to our core markets.
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.
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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
2018
Launch of Co-Exist product
range utilising common smart
home protocols
2019
Launch of B2C Smart
Alarm Range - FireAngel
Pro Connected
2021
2020
Largest IoT roll-out of
it’s kind with FireAngel
Connected being installed
into 17,000 properties at
Ealing Council
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
FireAngel’s mission is to protect and save lives by
making innovative, leading-edge technology home
safety products which are simple and accessible.
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Number 1
100+
Supplying over 90% of the
UK’s Fire & Rescue Services
Registered technology
patents & further pending
Unique
In-house CO sensing
technology
Three
Supplier / manufacturing
partnerships
Six
Brands targeted at
different markets
Infl uential
Member of Industry
and Trade Associations
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
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FireAngel Safety Technology Group plc
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
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Strategic review
Executive Chairman’s statement
“The impact of COVID-19 held the Company back from achieving
what would almost certainly have been a signifi cantly improved
performance in 2020. However, our compelling proposition through
our unique technology remains intact and our strategic ambition
remains unaltered, and we have entered 2021 even more strongly than
we ended 2020.”
John Conoley - Executive Chairman
Overview
The Group entered 2020 with positive momentum against its strategic priorities,
including strong growth, an increasing higher-value pipeline and initial progression on gross margin performance.
including strong growth, an increasing higher-value pipeline and initial progression on gross margin performance.
Undoubtedly, the onset of the COVID-19 pandemic and resultant government restrictions have signifi cantly disrupted this journey, as it has for
so many companies and of course for so many individuals. Nevertheless, it was encouraging to see a recovery in performance in the second half
of the fi nancial year, with the operational progress made providing a strong platform for further improvement in this fi nancial year. Sales in the
second half of 2020 were £23.4 million (59%) compared to fi rst half sales of £16.5 million (41%). The Group has made a good start to 2021 and the
UK Government’s roadmap out of lockdown gives us clarity and confi dence in our plans for the year ahead and beyond.
The overriding priority of the Group is to return to profi tability and to become cash generative. This can be achieved through a combination
of enacting a gross margin improvement plan, delivering our next generation of CO alarms together with the roll out of our connected homes
technology, whilst maintaining our leading position in the Retail markets we serve and in our increasing Trade business in the UK and Europe.
Financial performance
The global COVID-19 pandemic has been a worrying time for all our staff and their families, as it has for everybody, and yet it is pleasing that the
Group adjusted quickly in terms of its working practices and its fi nances. It benefi tted from strong support from its bank, and from a resultant
CLBILS loan to support the business through the fi rst lockdown. Following the year end, in March 2021 we secured further funding from our
bank with the Coronavirus Large Business Interruption Loan Scheme (CLBILS) loan refi nanced and increased through a Coronavirus Business
Interruption Loan Scheme (CBILS) loan as the impact of the pandemic had been to reduce our annual revenue below the £45 million threshold
used in the large company scheme.
The revenue outturn for 2020 was £39.9 million reduced from £45.5 million in the prior year. Whilst the Board was satisfi ed with the revenue
performance given the challenging market backdrop, our plans to improve margin during 2020 were undermined. The benefi ts from a range
of planned internal improvements came through much more slowly than anticipated, with less impact than planned and this was further
compounded by reduced sales volumes. Many of the newer or growing revenue streams from Trade and social housing that the Group aimed to
pursue became temporarily unfeasible during lockdown as a result of the impact of restrictions, with customers and business partners focussed
on their own important priorities due to COVID-19.
However, the improvements we have made are not lost, and the market opportunity, in particular, in Connected Homes technology is
undiminished and indeed strengthened by the growing regulatory tailwinds. Our task now, is to regain momentum and deliver our Connected
Homes strategy, targeting new types of business while continuing to improve margins.
Margin improvement
The overriding planned output of our activity in 2021, 2022 and 2023 is to improve our gross margin signifi cantly year-on-year. We will do this by
leveraging our differentiation, which includes our pioneering Connected Homes technology and our data opportunity, further details of which are
set out below. The three key strands to achieve this are:
- Commercialising our existing investment in connected technology;
- Migrating to higher value activities and cut out lower value, lower impact activities; and
- Streamlining our value chain of end-to-end administrative and production activities
There remains signifi cant opportunity in all three of these areas, and we spent a lot of otherwise lost time in lockdown refi ning our plans as to how
we will deliver against this priority.
Commercialising Connected Homes technology
Commercialising our signifi cant investment made in Connected Homes technology means selling more connected alarms, while learning what
part data generation could play in adding a new and exciting layer to our future activities and revenue. We saw an increase in our online sales over
the course of 2020, a shift that we expect to be permanent, as buying habits continue to evolve.
Commercialising also means re-establishing the momentum we had achieved in the form of trials and potential sales of large opportunities,
particularly in social housing which was unavoidably lost during the pandemic. In the early months of 2021, we are already gaining traction and
have seen results again with our Connected Homes proposition. This technology will make many people and properties safer.
Moreover, there is an extra level to our PredictTM product, which enables the gathering of data from those alarms and the ability to manage fi re
risks through a dashboard. A highlight in our performance in 2020 was the receipt of a purchase order on behalf of Ealing Council, the fi rst phase
of which is valued at approximately £1.0 million of revenue. Whilst the rollout was inevitably delayed signifi cantly due to the winter lockdown,
however it has now begun.
Higher value activities
Migrating to higher value activities is closely allied with the value chain, details of which are set out below. As part of this focus, we have reviewed
the economic potential of our SKUs. Some of our lower value alarms are uneconomic and pull development, maintenance and people costs into
an area where we cannot command suffi cient gross margin. This has led us to reduce our SKUs to, what will at the end of 2021, be a reduction of
a third. Most of that reduction is in SKUs with little sales volume, but high complexity to the business and supply chain. Several of the SKUs can
be made economic by partnering with an existing high-quality technology partner with relevant technology and adding our brand and external
design. This will drive much better margin on a subset of our product range and maintain range coverage, without the continual overhead of
designing from scratch and maintaining.
Looking further out, our design philosophy has changed. A redesign of our higher value product lines will enable the use of automation in the
factory. This in turn will improve yields and quality, and allow the refresh of components. Given the past investment in research, this is much more
of a design exercise and opens the door to fl exibility in the factory environment and crucially a signifi cant opportunity in margin improvement in
2023 onwards.
We can then focus our direct costs on our differentiated and connected technology, which is higher value, has higher margin potential and
crucially is fundamental to our longer term Connected Homes strategy, opening the door to technology and commercial partnerships.
In April 2021, an example of our emphasis on higher value activities was the signing of a long term partnership agreement with a German energy
and effi ciency service provider (the “Partner”) to provide a fully funded research and development programme for a new generation smoke alarm.
Pursuant to the terms of the agreement, the Partner will fund the development phase of the next generation smoke alarm. In addition, FireAngel
will receive a fee of £1.4 million for use of its background IP during the development phase. Thereafter, once production of the next generation
smoke alarm has commenced, a royalty fee per product will be payable to FireAngel with a multi-million volume fee agreed for the initial 30
months. Manufacturing of the next generation smoke alarm is expected to commence in early 2024. It is forecast that 7 million new devices will
be produced with a minimum of 3.5 million expected to be produced in the fi rst 2.5 years and that during the life of the partnership, the Company
should earn up to €21 million in royalty, management and support fees.
Value chain
Outlook
The planned value chain improvements are primarily small-scale, but
numerous initiatives are underway, intended to make the business
more effi cient, as previously communicated in part through the Gross
Margin Improvement programme.
Together these many small projects will enable a smoother, more
joined-up, end-to-end, process, from conception to production to
service.
For the slightly longer term, we are redesigning and repackaging our
mainstream ranges to enable a longer component lifecycle and by
designing for automated manufacture. The expected upside from
this refresh will potentially be in the range of £2-£4 million per year
from part-way through 2023. This project will focus on development
and modernisation, building on existing IP and research, yet taking
opportunities to add new components or functionality as required.
Implementation of modern Product Lifecycle management techniques
will enable us to control this process far more effectively than it has
done historically.
Management team
The Group continued to evolve its Board and management structure
including making key senior appointments in the business. Mike
Stilwell, our Group Financial Director, left the business at the start of
2021, and we were delighted to welcome Jon Kempster who joined the
Board as Interim Chief Finance Offi cer in December 2020. Jon brings
a wealth of valuable expertise to the Group, working alongside Zoe
Fox, our experienced Finance Director. John Shepherd and Ashley
Silverton stepped down as Non-Executive Directors after long service,
while Glenn Collinson joined as a Non-Executive Director in summer
2020, bringing his signifi cant technology and growth experience to
the Board. I thank Mike, John and Ashley for their time and effort with
FireAngel. I am pleased to announce that with effect from 30 April 2021,
Jon has agreed to become a Non-Executive Director of the Company
and that Zoe will be appointed as Chief Financial Offi cer with effect
from the same date.
As outlined above, the start to 2021 has been encouraging. The Group
has returned to growth and although obvious uncertainties have still
tempered the overall performance, sales in the fi rst quarter were ahead
of the same period in 2020. We were pleased to secure additional new
funds from our bank under the Government backed loan schemes. In
addition, we have today announced an equity fund raising to raise £9.0
million (net of costs) and provide the necessary funds to deliver the
strategic goals we have set out. Together these will secure the future
of the Group and provide the foundation for a return to profi tability and
cash generation.
We are delighted to have begun the rollout of our Connected Homes
alarms with Ealing Council. The contract includes generating safety
data from alarms installed in properties to allow analysis and risk
management for the fi rst time, demonstrating the benefi ts and potential
of FireAngel PredictTM.
As set out above, earlier this month, we announced a partnership
with a German energy and effi ciency service provider, which is further
vindication of the hard work of the past year and more. As well as being
a fantastic and transformational opportunity for the Group it is early
testament of our progress towards higher value activities.
There is now a clearer path out of the COVID-19 related restrictions,
and while some uncertainty remains, the Board is targeting improved
performance and sales growth in 2021 versus 2020. Our compelling
proposition to protect and save lives with innovative, cutting-edge
home safety technology remains intact. Our strategic ambition to
achieve this through margin improvement and a focus on investing in
Connected Homes technology remains unaltered, supported further by
legislative direction in our favour.
I thank all our shareholders for their support, and all our colleagues
here at FireAngel for toughing their way through 2020. We are looking
forward to growing the business in 2021 and beyond.
John Conoley - Executive Chairman
30 April 2021
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FireAngel Safety Technology Group plc
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Annual Report and Accounts 2020
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Strategic review
Our proprietary technology
Our range of products is comprehensive,
allowing the Group to tailor its smoke and CO
alarms and accessories to suit its customers’
needs at various price points under the
following brands:
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.
FireAngel Specifi cation and FireAngel Pro.
Our ranges of smoke, heat and CO alarms
which feature Smart RF technology which
enables all devices to connect wirelessly,
signifi cantly removing the time-consuming
requirement for wiring, channelling or
trunking. These are the only alarms with
proven low carbon footprints producing on
average 95 per cent. less carbon dioxide
compared with other leading mains-powered
alarms. These ranges allow their connectivity
to be upgraded to communicate information
outside the property by installing a FireAngel
Connect Gateway. The system features
‘FireAngel PredictTM’, patented technology to
identify and highlight dangerous patterns of
behaviour that increase fi re risk. A network
including a FireAngel Connect Gateway
can provide real-time fi re and CO safety
notifi cations via remote monitoring of the
alarms for more accurate risk management.
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.
Enhanced Protection
Simple Connection
The Wi-Safe 2 range of products are designed
to provide an enhanced level of fi re and CO
safety for high risk individuals such as the
deaf, those with mild to moderate hearing
loss, children and people under the infl uence
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 simplifi es
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 CO.
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 workplace 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 Company’s human resources function are responsible for ensuring that our policies and practices refl ect 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 workplace is free from harassment and bullying and we strive to create a positive environment that is supportive, enables employees to
fulfi l 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 a number of CO and fi re fi ghter 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.
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-effi cient cycle-to-work
scheme. We believe that we were the fi rst company in our industry to have a smoke alarm with its own very low carbon footprint where the product
range has been specifi cally 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.
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Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
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Performance review
Group fi nancial results
“Despite a strong start to the year, lockdown restrictions to control the
spread of COVID-19 have directly and materially impacted revenue
and progress towards profi t recovery.”
Jon Kempster - Interim Chief Financial Offi cer
Overview
2020 was dominated by the impact of COVID-19 lockdown restrictions. Despite a strong start to the year, which augured well for full year
performance, revenue and the Group’s profi t recovery programme were materially and directly impacted by UK and international measures to
control the spread of COVID-19.
Underlying Group performance
2020
2019
Revenue
Cost of sales
Gross profi t
Operating expenses
Other operating income
Loss from operations
Add back:
Mark-to-market losses
Depreciation and amortisation
Underlying (LBITDA)/EBITDA
Before non-underlying
items
£m
Non-underlying
items
£m
-
(1.7)
(1.7)
(1.9)
-
(3.6)
39.9
(32.0)
7.9
(13.6)
0.3
(5.4)
0.3
3.9
(1.2)
Total
£m
39.9
(33.7)
6.2
(15.5)
0.3
(9.0)
Before non-
underlying items
£m
Non-underlying
items
£m
-
(4.3)
(4.3)
(2.6)
-
(6.9)
45.5
(36.8)
8.7
(12.5)
-
(3.8)
0.6
3.4
0.2
Total
£m
45.5
(41.1)
4.4
(15.1)
-
(10.7)
Total revenue for the year decreased by 12% from £45.5 million to £39.9 million resulting in an underlying LBITDA1 of £1.2 million compared with
underlying EBITDA of £0.2 million in 2019. The adjusted gross profi t2 was £7.9 million (2019: £8.7 million), which represented an adjusted gross
margin2 of 19.8% (2019: 19.0%). The underlying operating loss3 was £5.4 million compared to a loss of £3.8 million in 2019. The underlying loss
before tax4 was £5.7 million (2019: underlying loss before tax £4.1 million).
1 Underlying LBITDA in 2020 of £1.2 million is loss before tax before depreciation and amortisation, fi nance costs, unrealised mark-to-market
losses and non-underlying items (2019: underlying EBITDA of £0.2 million).
2 Adjusted gross profi t is stated before non-underlying items. Adjusted gross margin is adjusted gross profi t as a percentage of revenue.
3 Underlying operating loss in 2020 of £5.4 million is before non-underlying items (2019: underlying operating loss of £3.8 million before non-
underlying items)
4 Underlying loss before tax in 2020 of £5.7 million is before non-underlying items (2019: underlying loss before tax of £4.1 million before non-
underlying items; for comparative purposes the underlying loss before tax includes the impact of changing to a more appropriate amortisation
approach of £0.9 million in 2019).
The key drivers for changes in revenue and adjusted gross margin are detailed in the Executive Chairman’s statement.
Overall cash outfl ow in the year was £0.6 million (2019: infl ow of £0.8 million) and net debt (before lease obligations) at 31 December 2020 was
£3.7 million. This compared with net debt (before lease obligations) of £4.9 million at 31 December 2019. The net movement of £1.2 million
comprised a decrease in cash and cash equivalents of £0.6 million, which included the net proceeds received from the equity fund raise of £5.5m
in the year. There was a net decrease in bank debt of £1.8 million through repayment of £4.4 million under the invoice discounting facility and net
drawdown of £2.6 million of loans under the Coronavirus Large Business Interruption Loan Scheme (‘CLBILS’).
10
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Income statement
Revenue by business unit
Revenue split between the Group’s business units and Pace Sensors is as follows:
2020
2019
UK Trade
UK Retail
UK F&RS
UK Utilities & Leisure
Total sales in the UK
International
Pace Sensors
Total revenue
2020
£m
7.5
16.6
2.9
1.4
28.4
9.2
2.3
39.9
2019
£m
7.5
18.3
4.7
2.2
32.7
11.1
1.7
45.5
Inc/(dec)
£m
Inc/(dec)
%
Proportion
%
Proportion
%
-
(1.7)
(1.8)
(0.8)
(4.3)
(1.9)
0.6
(5.6)
-
(9%)
(38%)
(36%)
(13%)
(17%)
35%
(12%)
19%
42%
7%
3%
71%
23%
6%
17%
40%
10%
5%
72%
24%
4%
100%
100%
From 1 January 2020, certain customers previously reported within the UK Trade business unit are now reported through the UK Retail and UK Utilities
business units. The 2019 comparatives have been adjusted accordingly, further details of which can be found in note 6 to the fi nancial statements.
Overall, the Group’s revenue fell by 12% to £39.9 million. The £5.6 million reduction in sales was largely due to the impact of COVID-19 lockdown restrictions
on customer demand despite an encouraging start to the year before restrictions applied. These reductions were seen across all of the Group’s business
units with the exception of UK Trade and Pace Sensors. Signifi cant improvements in demand in UK Retail and, in particular, UK Trade were seen in the
second half of the year as initial lockdown restrictions were lifted and it was pleasing to see the UK Trade and Pace Sensors business units actually improving
sales performance compared with 2019.
Revenue at Pace Sensors, the Group’s manufacturer of CO sensors, increased to £2.3 million as demand grew for its CO sensor technology.
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Gross profi t and gross margin
Adjusted gross profi t2 decreased to £7.9 million
and represented an improved adjusted gross
margin2 of 19.8% (2019: 19.0%).
During the year, overall gross profi t was
impacted by a number of non-underlying
items charged to cost of sales. Firstly, the
legacy FireAngel battery warranty provision
was increased by £1.2 million refl ecting
an increase in the terminal volume of units
expected to be impacted. In addition, £0.3
million was expensed in relation to the
settlement of warranty issues with certain
distributors. Secondly, a net provision of £0.2
million was made against certain lines of stock
and associated disposal costs as a result of
a thorough review of product lines and future
development plans. Non-underlying items
impacting gross profi t in the prior year amounted
to £4.3 million. Further details are given below.
The overall gross profi t increased from £4.4
million to £6.2 million, largely due to the
reduction in non-underlying items to £1.7 million
(2019: £4.3 million) described above, and
represented a gross margin of 15.5% (2019:
9.6%).
Exchange rates
Although on average over the course of the
year the value of sterling against the US dollar
and euro remained largely the same as the
average for 2019, there was signifi cant variation
throughout the course of 2020 due largely to
COVID-19 and Brexit-related uncertainty. The
Group has a forward hedging policy, which aims
to mitigate the risk of currency fl uctuations by
locking into current rates for future periods on
a set percentage of expected future currency
fl ows. The strengthening of sterling against the
US dollar towards the end of 2020 increased the
committed sterling cost of forward contracts
entered into in accordance with the Group’s
policy to hedge future US dollar purchase
requirements. This mark-to-market increase in
sterling cost is required to be recognised in cost
of sales for the year and, to the extent that this
was not mitigated by the retranslation of other
US dollar denominated monetary items, had
a £0.3 million detrimental impact on the gross
margin for the year, although not as signifi cant
as the £0.6 million impact in the prior year.
Overheads
The Group’s overhead costs comprise the
distribution and administrative costs of running
the business. Excluding non-underlying
items totalling £1.9 million (2019: £2.6 million),
further details of which are given below, and
depreciation and amortisation of £3.9 million
(2019: £3.4 million), overheads of £9.7 million
were 6.5% higher than the prior year’s £9.1
million, due largely to the full impact of the
investment in people to improve processes
across the organisation.
Total overhead costs amounted to £15.5 million
(2019: £15.1 million).
Non-underlying items in 2020
Non-underlying costs totalling £3.6 million were
incurred in the year as follows:
Within cost of sales:
• Provision for warranty costs: the FireAngel
battery warranty provision, an isolated
historical issue relating to a third-party
supplier fi rst identifi ed in April 2016, was
increased by £1.2 million to refl ect an increase
in the terminal volume of units expected to
be impacted by the issue based on the level
of returns currently being seen; in addition,
an amount of £0.3 million was expensed in
relation to the settlement of warranty issues
with certain distributors
• Stock impairment and disposal costs: £0.2
million net was provided in the year as a result
of a further review of product lines and future
development plans in line with the Group’s
strategy to become a more technology-led
connected home solutions provider. This
comprised gross impairment charges of £0.4
million offset by proceeds of £0.2 million from
stock previously impaired.
Within operating expenses:
• Intangible capitalised development assets of
£1.4 million were impaired during the year as
a result of a thorough review of product lines
and future development costs.
• Tangible assets of £0.2 million were impaired
during the year as a result of a thorough review
of tooling required for ongoing product lines.
• Restructuring costs of £0.1 million were
incurred in the year.
• Share-based payment charges of £0.2 million
were incurred during the year.
Non-underlying items in 2019
Non-underlying costs totalling £6.9 million were
incurred in the prior year as follows:
Within cost of sales:
• Provision for warranty costs: during the year,
the FireAngel battery warranty provision was
increased by £1.4 million as lower rework
yields and higher product costs compared to
those originally anticipated when the provision
was estimated three years ago, were leading
to increased costs of supplying replacement
products. In addition, a charge of £1.2 million
was made largely to refl ect an increase in
the terminal volume of units expected to be
impacted by the issue based on the level of
returns being seen.
• Stock impairment and disposal costs: £1.7
million was provided in the year as a result
of a thorough review of product lines and
future development plans in line with the
Group’s evolved strategy to become a more
technology-led connected home solutions
provider.
Within operating expenses:
• Restructuring and certain fundraising costs of
£0.7 million were incurred in the year.
• Intangible capitalised development assets of
£1.8 million were impaired during the year as
a result of a thorough review of product lines
and future development costs.
• Share-based payment charges of £37,000
were incurred during the year.
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
11
Performance review
Group fi nancial results continued
Result for the year
During 2019, the Board concluded that the ‘straight line’ method of amortisation for the Group’s connected homes capitalised development costs
was more appropriate than the ‘units of production’ method given the diffi culty in accurately predicting the timing of the take up of its connected
homes technology. However, as a result of the temporary loss of momentum in demand for the Group’s connected homes technology due to
COVID-19, this has resulted in a mismatch of income from connected technology with the amortisation of costs associated with its development. A
more representative measure of the Group’s underlying performance is therefore its earnings before the impact of depreciation and amortisation. The
Group’s underlying LBITDA1 for the year amounted to £1.2 million compared with underlying EBITDA of £0.2 million in 2019.
The underlying operating loss3 for the year amounted to £5.4 million compared to an underlying operating loss3 of £3.8 million in 2019. After taking
account of non-underlying items of £3.6 million and fi nance charges of £0.3 million as a result of interest on borrowings in the year, the Group reported
a loss before tax of £9.3 million (2019: loss before tax £11.0 million).
The Group booked a tax credit of £0.6 million (2019: tax credit of £1.6 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 7.7 pence per share (2019: loss of 14.0 pence per share).
Statement of fi nancial position
The net assets of the Group amounted to £14.2 million at 31 December 2020 (2019: £17.2 million)
and can be summarised as follows:
2020
2019
Goodwill
Plant and equipment
Capitalised development costs
Purchased software costs
Non-current assets
Net cash balances
Loans and borrowings
Net debt
Lease liabilities
Net working capital
Net tax asset (including deferred tax)
Net derivative fi nancial liabilities
Warranty provision
Net assets
£m
0.2
4.3
11.7
2.0
18.2
1.5
(5.2)
(3.7)
(1.4)
3.8
0.7
(0.7)
(2.7)
14.2
£m
0.2
5.3
12.6
2.5
20.6
2.1
(7.0)
(4.9)
(1.5)
6.2
0.7
(0.4)
(3.5)
17.2
Non-current assets at 31 December 2020 amounted to £18.2 million compared with £20.6 million at 31 December 2019. The most signifi cant
components of this were capitalised development costs, with a net book value of £11.7 million, plant and equipment (£4.3 million) and purchased
software costs (£2.0 million). Capitalised development assets of £1.4 million were impaired during the year as a result of a thorough review of product
lines and future development costs. Plant and equipment assets of £0.2 million were impaired as a result of a thorough review of tooling required for
ongoing product lines.
Total capital expenditure (excluding right of use assets) decreased to £2.8 million compared to £3.7 million in 2019. Of this total, £2.6 million
represented capitalised development expenditure to further enhance the Group’s connected homes and wider technology portfolio as described in
note 17 to the fi nancial statements.
Total capital expenditure of £3.1 million (2019: £4.7 million) compares with depreciation, amortisation and impairment charges totalling £5.4 million in
the year (2019: £5.2 million).
Working capital reduced signifi cantly by £2.4 million to £3.8 million at 31 December 2020. Stock increased by £0.3 million to £6.6 million (2019: £6.3
million) as much of the excess stock from procurement commitments made at the beginning of 2020 was sold through in the second half of the year.
A non-underlying charge of £0.2 million was made to provide for the cost of older stock and its disposal as a result of a further review of product lines.
Trade and other receivables decreased by £2.0 million to £10.1 million (2019: £12.1 million) as a result of reduced revenue in the year with average
debtor days increasing from 59 to 62 due to a higher proportion of sale going through our Retail business unit.
Trade and other payables increased by £0.6 million to £12.8 million (2019: £12.2 million). Average creditor days reduced to 72 days (2019: 76 days).
Net tax assets at 31 December 2020 amounted to £0.7 million (2019: £0.7 million) and comprised a current tax asset of £0.7 million (2019: £0.7
million), deferred tax assets of £2.4 million (2019: £2.4 million) and deferred tax liabilities of £2.4 million (2019: £2.4 million). Deferred tax assets refl ect
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 refl ect timing differences in the treatment of accelerated research and development tax credits on product development costs.
The Group’s warranty provision at 31 December 2020 amounted to £2.7 million (2019: £3.5 million) of which £1.5 million is expected to be utilised
within twelve months of the balance sheet date. This provision predominantly covers the expected costs of replacing smoke alarm products over
the next three to four 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 provision has been revised and increased this year and in prior years as experience has helped refi ne estimates and
assumptions used and as such the amounts provided are the best estimate of the ongoing liability (refer to note 3)
Cash
The Group ended the year with net debt (before lease obligations) of £3.7 million at 31 December 2020 (2019: net debt (before lease obligations) £4.9
million). The movement in net debt (before lease obligations) during the year is refl ected in the statement of fi nancial position as follows:
Increase in cash balances and net cash infl ow
Drawdown of invoice discounting facility
Repayment of revolving credit facility
Increase in net debt (before lease obligations)
£m
0.6
(4.4)
2.6
(1.2)
The net cash outfl ow of £0.6 million in the year is summarised in the table below. The most signifi cant non-operating cash fl ow items include the
costs of the warranty provision and other non-underlying items totalling £2.3 million, capital expenditure of £2.8 million as described above, and the
cash fl ows in relation to the fundraising described below.
On 8 April 2020, the Group raised £6.1 million (gross) through the issue of 50,623,480 new ordinary shares of 2p nominal value at an issue price of 12p
per share. Share issue expenses amounted to £0.6 million. In June 2020, the Group secured funding of £3.2 million through the CLBILS, which was
drawn down in August 2020. Funding through the invoice discounting facility reduced by £4.4 million in the year due both to the alternative funding
secured through the CLBILS and reduced debtor levels as a result of COVID-19 impacted sales.
Following the year end, the Company’s existing CLBILS loan which at the end of March 2021 had reduced to £2.0m was refi nanced by a new
Coronavirus Business Interruption Loan Scheme (CBILS) loan of £3.2 million, together with a Receivables Finance CBILS of £0.5m. In addition, the
Group maintained the existing Invoice Discounting Facility of £7.5 million. In addition, the Company has today announced an equity fund raising to
raise £9.0 million (net of costs) and provide the necessary funds to deliver the strategic goals we have set out elsewhere in this report.
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Underlying operating loss1
Depreciation and amortisation charges
(Increase)/decrease in working capital
Decrease/(increase) in fair value of derivatives
Cash (used by)/from operations before non-underlying payments
Cash cost of warranty provision and other non-underlying items
Cash used by operations
Interest paid (net)
Taxation received
Capital expenditure
Proceeds from share issue (net)
Drawdown of invoice fi nance
Drawdown of loan
Repayment of loan
Loan restructuring costs
Lease payments
Net cash fl ow
2020
£m
(5.4)
3.9
2.1
0.3
0.9
(2.3)
(1.4)
(0.3)
0.7
(2.8)
5.5
(4.4)
3.2
(0.6)
-
(0.5)
(0.6)
2019
£m
(3.8)
3.4
(0.4)
0.6
(0.2)
(2.4)
(2.6)
(0.4)
1.2
(3.7)
5.5
7.0
1.3
(7.0)
(0.2)
(0.3)
0.8
1 Underlying operating loss in 2020 of £5.4 million is before non-underlying items (2019: underlying operating loss of £3.8 million before non-
underlying items).
Use of non-GAAP fi nancial performance measures
Certain disclosures and analyses set out in this Annual Report and Accounts include measures, which are not defi ned by generally accepted
accounting principles (‘GAAP’) under international accounting standards in conformity with the Companies Act 2006. We believe this information,
along with comparable GAAP measurements, is useful to investors. Management uses these fi nancial measures, along with the most directly
comparable GAAP fi nancial measures, in evaluating our operating performance. Non-GAAP measures should not be considered in isolation from, or
as a substitute for, fi nancial information presented in compliance with GAAP.
In the following table we provide a reconciliation of this and other non-GAAP measures, as defi ned in the
Performance Review on pages 10 to 13, to relevant GAAP measures:
Adjusted gross profi t
Reported gross profi t
Non-underlying items:
- Provision for warranty costs
- Provision against stock and disposal costs
Adjusted gross profi t
2020
£m
6.2
1.5
0.2
7.9
2019
£m
4.4
2.6
1.7
8.7
12
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
13
Net cash
Net cash is considered to be a non-GAAP measure as it is not defi ned 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.
Dividends
As a result of the loss reported for the year, and consistent with the decision not to pay an interim dividend (2019: nil pence per share), the Directors
do not recommend payment of a fi nal dividend for the year (2019: nil pence per share). The total dividend payable for 2020 is therefore nil pence per
share (2019: nil pence per share).
Post balance sheet events
The gradual relaxation of the lockdown in the UK is welcomed and we are hopeful that normal trading patterns will emerge. We are especially keen
to see continued traction in our connected homes opportunities. The ongoing impact of COVID-19 is described in detail in the Executive Chairman’s
statement and within the Going Concern accounting policy.
We have refi nanced our existing Coronavirus loans with our bank as the impact of Coronavirus and the lockdowns continued beyond that envisaged
originally. We have also announced a long term partnership agreement with a German energy effi ciency service provider to provide a fully funded
research and development programme for a new generation smoke alarm which will lead in to a manufacturing and supply relationship in due course.
Today the Company announced an equity fundraising to raise £9.0 million (net of costs) in order to support the growth and strategic ambition of the
Group.
Jon Kempster - Interim Chief Financial Offi cer
30 April 2021
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Performance review
Group fi nancial results continued
Adjusted gross margin percentage
Adjusted gross margin percentage is the adjusted gross profi t (as defi ned on previous page) as a proportion of revenue.
Underlying operating loss
Reported operating loss
Non-underlying items:
- Provision for warranty costs
- Provision against stock and disposal costs (net)
- Restructuring costs
- Impairment of intangible assets
- Impairment of tangible assets
- Share-based payments charge
Underlying operating loss
Underlying loss before tax
Reported loss before tax
Non-underlying items:
- Provision for warranty costs
- Provision against stock and disposal costs (net)
- Restructuring costs
- Impairment of intangible assets
- Impairment of tangible assets
- Share-based payments charge
Underlying loss before tax
Underlying (LBITDA)/EBITDA
Reported loss before tax
Finance costs
Depreciation and amortisation
Decrease in fair value of derivatives
Non-underlying items:
- Provision for warranty costs
- Provision against stock and disposal costs (net)
- Restructuring costs
- Impairment of intangible assets
- Impairment of tangible assets
- Share-based payments charge
Underlying loss before tax
2020
£m
(9.0)
1.5
0.2
0.1
1.4
0.2
0.2
(5.4)
2020
£m
(9.3)
1.5
0.2
0.1
1.4
0.2
0.2
(5.7)
2020
£m
(9.3)
0.3
3.9
0.3
1.5
0.2
0.1
1.4
0.2
0.2
(1.2)
2019
£m
(10.7)
2.6
1.7
0.7
1.8
-
0.1
(3.8)
2019
£m
(11.0)
2.6
1.7
0.7
1.8
-
0.1
(4.1)
2019
£m
(11.0)
0.3
3.4
0.6
2.6
1.7
0.7
1.8
-
0.1
0.2
14
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
15
Performance review
Section 172 Companies Act statement
The following disclosure describes how the Directors have had regard to the matters set out in section 172(1)(a) to (f) and forms the Directors’
statement required under section 414CZA of the Companies Act 2006.
Who was
engaged?
Investors
The Company’s
major shareholders
are set out on page
37 of the Statutory
Directors’ Report.
Why were they engaged?
How were they engaged?
The Board believes it is important
to have open communications with
shareholders to continue to access
capital to ensure the long-term success
of the business.
Through its engagement activities the
Board seeks to:
• broaden the investor base to
encourage long-term support and
increased liquidity in the market for
the Company’s shares
• obtain investor buy-in into the
Group’s strategic objectives and how
they are executed
The Board’s approach to investor
engagement is detailed in the Corporate
Governance Report on page 24 to 25.
Key interactions included through:
• Physical and virtual meetings with
major institutional investors
• In September 2020, for the fi rst time,
the Executive Directors delivered a live
investor presentation of the Company’s
2020 interim results via the Investor
Meet Company platform. This allowed
the Directors to address questions from
its shareholders submitted pre-event
and during the live presentation
• One-to-one investor meetings with the
Executive Chairman and Chair of the
Audit and Remuneration Committees
Suppliers
The Group has a
limited number
of international
suppliers who
manufacture
products designed
by the Group.
Workforce
The Group
employs staff with
key managerial,
engineering and
technical skills.
With all its production outsourced, the
performance of the Group’s suppliers is
crucial to the continued success of the
business.
In some cases production of the
Group’s products represents a
signifi cant proportion of the supplier’s
total output. It is therefore vital that the
Group engages with these suppliers to
ensure the continuity of supply in the
longer term.
The global impact of COVID-19 on both
the availability and cost of products
meant that close co-operation with
key suppliers was crucial to ensure
continuity of supply and appropriate
credit terms in the face of uncertain
demand.
The contribution of the Group’s
dedicated staff and management
team is critical to the Group’s success.
Should the Group be unable to attract
new employees, or retain existing staff,
this could have a material adverse
effect on the Group’s ability to grow or
maintain its business.
The Board’s duty to ensure a
safe working environment for the
Company’s employees is its top
priority and continues to be the fi rst
consideration in all decisions made
during the COVID-19 pandemic.
Key interactions included through:
• Regular operational workshops held
virtually between key staff at the Group’s
Coventry facilities and the suppliers’
manufacturing facilities
• Presentation of strategic and product
roadmaps
• Sharing detailed COVID-19 impact
assessments including variation in
expected demand through reforecasts,
production and delivery issues and
COVID-19 risk assessments
The Group’s approach to workforce
engagement is detailed in the Corporate
social responsibility section of the
Strategic Review report on page 9.
Key interactions included through:
• Regular communication, guidance
and feedback throughout the COVID-19
pandemic as to measures being taken
to ensure a safe working environment,
recommended working practices and the
fi nancial impact on the Company
• Company Briefi ng Updates delivered
throughout the year by the Executive
Chairman
• Presentation of the Group’s strategic
and fi ve-year plan to its senior
management team in Q4 2020
What was discussed and what were the
outcomes and actions?
The Directors regularly engage with investors through the
cycle of presentations linked to results announcements
during which the topics of strategy, governance and
performance are discussed.
In addition to this, specifi c matters on which the Board
engaged and the outcomes and actions that followed,
included:
• Mitigation against the impact of COVID-19: the
Directors discussed with certain major institutional
shareholders the impact of COVID-19 on the
Company’s fi nancial position and agreed proposed
actions to conserve cash and protect the fi nancial
result
• Long-Term Incentive Plan considerations: feedback
and input around the quantum and performance criteria
of an annual LTIP award to John Conoley and planned
closure of the share matching scheme was sought from
certain major institutional shareholders
• Board appointments: feedback and input was provided
by certain major institutional shareholders around the
appointment of an interim Chief Financial Offi cer and a
Non-Executive Director
• Fundraising in April 2020: certain existing shareholders
were consulted as to their appetite for participating
in a fundraising in March 2020, the outcome of which
was a full placing of the fundraising amount subject to
clawback under the open offer
• Close sharing of quality data led to improvements
to production processes which reduced waste and
increased yields through improved quality
• Collaboratively sharing the impact of COVID-19
disruption on forecast demand, capacity and cash
fl ows led to mutually agreed changes to production and
delivery schedules and temporary extensions to payment
terms and conditions
• Discussions around safe working practices and
attendance at the workplace led to a number of changes
to the workplace environment to ensure the safety of
employees and those visiting our sites. As a result, IT
equipment was provided to those working from home to
ensure they could continue to work in a safe way
• Employee responses to the Company Briefi ng Updates
helped focus future briefi ngs on specifi c areas of current
product development and feature sets, future strategy
and remuneration policies
Customers
The Group has
customers of
varying size across
its divisions both
in the UK and
internationally.
The Group is dependent upon its
customers and distribution channels
to sell and promote its products in its
chosen markets.
The Group’s products form part
of range strategies and long-
term rollout plans for many of its
customers. Customer feedback and
communication is therefore vital to
ensure that the Group’s products
evolve as part of a planned, thought-
through strategy such that supply
meets future demand.
Key interactions included through:
• Key customers and industry groups provided feedback
• Regular account management
meetings with key customers during
2020
• Sharing detailed COVID-19 impact
assessments including variation in
expected demand through reforecasts,
production and delivery issues and
COVID-19 risk assessments
on proposed future range strategies and evolving
feature sets which impacted the Group’s connected
homes technology product design and market
positioning plans
• Customer feedback on future demand as a result of
COVID-19 lockdown restrictions allowed the Company
to assess the impact on funding available through
its invoice discounting facility and consequently to
apply for additional funding to mitigate the short-term
shortfall
Lenders
The Group has
access to debt
fi nance through
its banking
relationships.
In addition to equity funding, the Group
uses debt fi nance to provide short-term
funds.
The Group must demonstrate the
future viability of the business in order
to ensure that debt fi nance continues
to be available at acceptable rates of
interest.
The impact of COVID-19 lockdown
restrictions led to an immediate and
material reduction in sales and debtors,
with a corresponding reduction in
funding available through the Group’s
invoice discounting facility.
Key interactions included through:
• The Group discussed with its primary lender the
• Input into the Group’s fundraising plans
in April 2020
• Applying for and securing a
Coronavirus Large Business
Interruption Loan Scheme (‘CLBILS’)
loan for £3.2 million to replace the
temporary reduction in funding
available through the Group’s invoice
discounting facility
• Performance review meetings
throughout the year including
presentation of the Group’s budget for
the year ahead
• Independent audit of the Group’s
compliance with the terms of the
invoice discounting facility
intention to raise £6.1 million through a placing and
open offer
• The Group discussed the impact of COVID-19
lockdown restrictions on demand and short-term
funding with its primary lender which led to it securing a
CLBILS loan of £3.2 million in June 2020
• The Group discussed with its primary lender the
contractual relationships expected to be in place
during the delivery of its connected homes technology
and whether this would meet the criteria to be funded
through the Group’s existing invoice discounting
facility. This discussion informed the choice of
contractual relationships and terms in connected
homes contract negotiations
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The impact of the Company’s operations on the Community and the Environment
The Directors appreciate that collaboration with some of our customers provides the Group with a unique insight into the community. Our work with
the Fire & Rescue Services is targeted to assist the Service protect some of the most vulnerable members of society. Aligned to this our connected
homes technology is being purchased by social housing groups in order to assist in protecting life and property. It also reduces unnecessary
maintenance visits and so has the wider environmental benefi ts that comes from accessing data remotely and taking the necessary action when
required.
Principal decisions
Principal decisions are defi ned as those material to both the Group and any of its key stakeholder groups. In making the following principal decisions
the Board considered the outcome from its stakeholder engagement as well as the need to maintain a reputation for high standards of business
conduct and the need to act fairly between the members of the Company. The standards expected of a listed public company provide an excellent
framework for governance and behaviours which are taken very seriously and endorsed by the Board and senior Executive management. The
Board Executives have regular contact with our various stakeholders including our shareholders, bank, suppliers and customers. We have through
COVID-19 undertaken regular communications to employees as many have been remote working since the fi rst lockdown in March 2020. This
has been very important to maintain a positive dialogue and to recognise that all employees are vital in assisting the Group deliver the strategic
transformation that had begun and represents the future of the Group.
Principal decision 1: Fundraising in April 2020
In March 2020, the Board concluded that it was in the best interests of the Company, and was most likely to promote its success, for it to enter into a
fundraising process to raise £6.1 million (gross). In particular, the Board considered its engagement with certain major institutional shareholders and
its lender in assessing the quantum and method of fundraising. Further details of the fundraising are given in note 29 to the fi nancial statements.
Principal decision 2:
Throughout 2020 the Board closely monitored and reacted to the emerging impact of COVID-19 and consequent lockdown restrictions. The most
signifi cant decisions taken by the Board in this area involved employee safety and fi nancial management.
The Board quickly implemented safe working practices to ensure the safety of the Company’s workforce including working from home where
possible and the establishment of COVID-secure policies in the workplace. In addition, in order to maintain the fi nancial stability of the Company
the Board took action to conserve cash and protect the fi nancial result. This involved a range of measures which reduced planned expenditure by
placing 15% of the UK workforce on furlough for a number of weeks and limited headcount reductions through reassessment of certain R&D project
deliverables. The Board and senior management team agreed to take salary reductions for a number of months and cash was conserved through
deferral of payments, such as VAT and payroll taxes, as well as arrangements with landlords and suppliers. The Board took steps to mitigate the
impact on funding of the temporary reduction in sales in the period by securing a £3.2 million CLBILS loan.
Zoe Fox - Company Secretary
30 April 2021
16
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
17
Governance
Risks and risk management
Product
warranty
risk
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 identifi ed 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
signifi cant 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 infl uence 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 signifi cant issues are identifi ed.
Signifi cant risks, which are defi ned with reference to magnitude of impact and likelihood of occurrence, are escalated to the Executive Chairman and Group
Finance Director and, if appropriate, formally reviewed by the Board to assess the potential fi nancial 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 Goverance Report from page 18 to 21.
Exchange
rate risk
The Audit Committee advises the Board of Directors on matters of risk management. It has its own report, which can be read on pages 29 to 30.
The principal risks facing the Group, and the strategies put in place to mitigate them, are described in the following table.
Risk
Factors that may impact the business
Mitigation
What we are doing to minimise the risk
The impact of
COVID-19
COVID-19 signifi cantly impacted demand for the Group’s core products during
2020 and has continued to do so in the fi rst months of 2021 as new lockdown
restrictions were imposed. The increasing momentum of interest in the Group’s
connected homes technology has been temporarily held back.
The Board continues to believe that the medium and long-term prospects for the
Group’s unique technology are strong. It is encouraged by online sales resilience,
the increasing shift to online fulfi lment in our Retail business and interest returning
to our connected homes proposition as evidenced by a growing funnel of
opportunities.
Inevitably uncertainty remains around the continuing impact of COVID-19 although
sentiment has recently improved as vaccines are being rolled out across the UK and
globally.
Throughout 2020, the Board took mitigating actions to conserve
cash and protect profi t, whilst maintaining capability. These
included placing a number of employees on furlough, further
headcount savings through a reassessment of R&D project
deliverables, and Board and senior management pay reductions.
To conserve cash, the Group took advantage of the Government’s
tax payment deferral arrangements and secured a CLBILS loan to
offset the temporary reduction in availability of funding through the
Group’s invoice discounting facility.
In December 2020, the Group successfully negotiated with its
bank a revised repayment schedule due under the CLBILS loan
in order to aid cashfl ows due to the continuing uncertainties
caused by COVID-19 and their impact on the business, which
are continuing into 2021. In March 2021 the Group refi nanced
its existing CLBILS loan to a combined CBILS and receivables
fi nance CBILS to provide further headroom and to support the
revenue growth expected in 2021. Further details can be found in
the post balance sheet events in note 33.
Whilst the Group’s supply chain and technical teams are working
with its primary manufacturing partner to ensure that effi ciency
is improved to reduce the future costs of production, and whilst
all new products are designed to be manufactured in the most
effi cient way, if such challenges remain in the longer term, this may
have a material adverse effect on the operating results, business,
fi nancial condition and prospects of the Group.
The relationship with the Group’s primary smoke alarm and connected products
manufacturer is relatively new. Whilst satisfactory progress has been made in
increasing production yield and volumes, there remain challenges in levels of
utilisation and effi ciency in the manufacturing process which is impacting product
costing in the short term.
Product
prices from
the Group’s
primary smoke
alarm and
connected
products
manufacturer
cannot be
reduced
Inability to
multi-source
production
Due to the high complexity and certifi cation requirements of the Group’s products,
it is not practical to multi-source production across a number of suppliers. This
weakens the Group’s negotiating position with its existing suppliers and increases
the concentration risk associated with a sole source of supply.
Although the Group is addressing this in the future through
modularity of product design, there is a heightened risk in the short
term of supply disruption and higher prices with single-source
supplier relationships.
Each year, the number of the Group’s smoke and CO products in the
market increases and it is inevitable, given the technology-content of
the Group’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, the Group’s liability is governed by the
contractual agreement with its immediate customer which may
include the provision of a replacement product. If the defect relates
to the design of the product, the Group has insurance in place against
potential claims but not the cost of replacing products in the market.
A manufacturing defect may not be covered by the Group’s suppliers’
insurance in all circumstances. The cost to the Group of any product
issued with a design defect would extend beyond the cost of any
specifi c claims brought against it, including potentially swapping
products out in the market or in the worst case, a product recall. The
cost of potentially replacing defective units already distributed and
the reputational impact that could occur at product, brand and Group
level would be signifi cant. As at 31 December 2020, a provision of
£2.7 million is recognised against the FireAngel battery warranty
provision, a historical legacy issue relating to a third-party supplier.
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. The Group also receives a signifi cant 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.
Working
capital and
liquidity risk
Recent poor fi nancial results may lead to reduced credit terms being
offered by suppliers. The requirement to pay suppliers earlier than
anticipated could put short term pressure on the Group’s cash fl ows,
lead to the deferral of investment decisions and in the worst case
have a material adverse effect on its fi nancial condition.
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 the Group’s
standalone safety product range.
It is possible that new products and technologies may emerge in the
future as more viable alternatives to the Group’s products.
The Group seeks to ensure that products manufactured by its suppliers comply
with the relevant product specifi cations which are approved by various test houses
and regulatory bodies. If a product is not compliant, the Group 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 specifi c 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 the
Group’s in-house Technical Support team which records all product warranty by
date of manufacture.
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, however, if such levels of uncertainty continue
and the value of sterling against the US dollar remains depressed, this may have a
material adverse effect on the operating results, business, fi nancial condition and
prospects of the Group.
The Group maintains regular communications with its suppliers around the size
and timing of payment runs and routinely updates on the Group’s performance as
part of scheduled account management meetings.
The Group is selling its own connected home solutions products and is increasing
its investment in technology and products which connect to the internet. The
Group continues to invest in product technology to reduce the cost of connected
home solutions and to ensure that they are the products of choice for the Group’s
customers.
The Group dedicates signifi cant resources to product research and development
to keep the business and its products at the forefront of technology. The Group
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.
However, there can be no guarantees that new products, modifi cations or services
will be successfully developed or, if developed, successfully sold to customers.
This could affect the Group’s future revenues and profi ts.
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Competition
risk
Several home safety product companies are considered to be direct
competitors of the Group. These companies vary in the relative
strength of their product offering. As competitors launch new
products, the Group’s prospects may be impacted which could either
reduce or enhance the Group’s product sales.
The Group monitors competitors’ offerings and regularly reviews competitor
products. The Group’s continued investment in new products and technology
provides a barrier to new entrants in the market. Certifi cation costs per product are
high at approximately £100,000 per new product. This also acts as a signifi cant
barrier to entry.
The Group, in part to mitigate against this competitive threat, continues to
commit signifi cant resources to research and development, as it has done since
foundation. It cannot, however, be guaranteed that the Group will be able to
succeed in developing new products that can compete head-on with competitors’
products.
18
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
19
Governance
Risks and risk management continued
Risk
Factors that may impact the business
Mitigation
What we are doing to minimise the risk
Intellectual
property risk
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, the Group carefully checks
that it is not infringing the patented technology of third
parties. Potentially, third parties could seek to copy or fi nd
a workaround to the Group’s registered technology.
The Group’s principal protection in the market lies in its business model and patented
intellectual property rights. The breadth of the Group’s product range and its ability to add
new products and leverage its brands across the markets it serves represents a signifi cant
barrier to entry to competitors. The Group is not dependent on any one single patent for sales.
The Group’s products are protected by over 50 granted patents in its major markets and the
Group continues to register new patents to protect its intellectual property where the Group
believes it is appropriate to do so.
Notwithstanding this, any failure to protect or successfully defend the Group’s intellectual
property may result in another party copying or otherwise obtaining and using its proprietary
technology or other intellectual property without authorisation. There may not be adequate
protection for the intellectual property in every country in which the Group’s products are
sold and policing unauthorised use of proprietary information is diffi cult and expensive. The
Group cannot guarantee that it will be able to detect and prevent infringement of its intellectual
property but would vigorously defend its intellectual property if it believed it was being
infringed.
Any misappropriation of the Group’s intellectual property could have a material adverse
impact on the Group’s business and its operating results. Furthermore, the Group may need
to take legal action to enforce its intellectual property, to protect trade secrets or to determine
the validity or scope of the proprietary rights of others which may result in substantial costs
and the diversion of resources and management attention and there can be no guarantee as
to the outcome of any such litigation.
The Group is not aware of any third party that has any claim over the intellectual property of
the Group, however, if it was proven that part of the Group’s intellectual property was in fact
owned by a third party, this could lead to the removal of certain functionality from the Group’s
products or for certain products to be removed from the market altogether. Any legal action
resulting from such claims would likely be time-consuming and expensive. In either case
the business, fi nancial condition and results of operations may be materially and adversely
affected.
The Group 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 the Group’s
products. The Group ensures that the contractual relationships with its customers are fair and
commercially benefi cial for both parties and 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 fi nancial pressures on the Group 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 the Group.
In conjunction with suppliers, the Group seeks to ensure that all products are manufactured
in accordance with the relevant product certifi cation 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. The Group 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 certifi cation is obtained in a timely manner helps ensure that the Group’s sales are not
impacted by issues with certifi cation.
The Board took steps to prepare for the end of the transition period. These actions included
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.
Given the major economic markets in which the Group operates, although some administrative
disruption is expected to increase costs marginally in the short term, once these processes are
bedded in it is not expected there will be any detrimental long-term impact to the Group as a
result of the UK’s exit from the European Union.
Distributor
relationships
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. The Group is
dependent upon these distributors to fulfi l these roles in
an effective and effi cient manner to continue to grow sales
in these jurisdictions. Given the signifi cant concentration
of sales through a small number of distributors, the Group
closely monitors sales by the third-party distributors.
From time to time, the Group has fi nancially supported its
distributors with extensions to payment terms.
Product
certifi cation
compliance
Products are required to comply with the appropriate
certifi cation standards. If products do not comply,
certifi cation bodies could insist on quarantining product
for further testing, rework, or, in extreme situations, a recall.
This could affect the Group’s future revenues and profi ts.
Risks
following
the UK’s
exit from the
European
Union
The Brexit transition period ended on 1 January 2021 and
the terms of a new trading arrangement between the UK
and EU came into force.
Although increased trade tariffs have largely been avoided,
there is a risk of short-term disruption and cost increases
due to the additional administrative procedures which now
apply and that will inevitably take a period of time to bed in.
Staff
recruitment
and
retention
risk
International
trade
regulations
Health and
safety risk
As with most businesses, particularly those operating
in a technical fi eld, the Group is dependent on engaging
employees with key managerial, engineering and technical
skills. The contribution of the Group’s dedicated staff and
management team has been, and continues to be, critical
to the Group’s success. Should the Group be unable to
attract new employees, or retain existing employees, this
could have a material adverse effect on the Group’s ability
to grow or maintain its business.
The Group’s development and prospects are somewhat
dependent upon the continued services and performance
of its Directors, senior management and other key
personnel. The loss of the services of any of the Directors,
senior management or key personnel or a substantial
number of talented employees, could cause disruption
which could have a material adverse effect on the Group’s
business, fi nancial condition and results of operations until
suitable replacements are found.
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
the Group’s 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. If the Group
is unable to comply with, or react quickly enough to, any
new regulation introduced, or changes made to existing
regulations, it may lose customers, fi nd it more diffi cult to
win new customers or, in the worst case, lose the ability
to distribute products into certain jurisdictions resulting in
lost sales and profi ts.
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.
The Group 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 and seeks to create a supportive working environment where employees are encouraged
to learn and develop in their roles through personal development plans.
The Group 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. The Group’s procedures comply with the requirements of ISO audits and
detailed records are maintained to ensure that products are correctly stored and disposed.
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The Statutory Strategic Report comprises the Strategic Review, the Performance Review, the Section 172 Companies Act Statement and the Risks
and Risk Management section, on pages 18 to 21. The Statutory Strategic Report has been approved by the Board.
By Order of the Board
Zoe Fox - Company Secretary
30 April 2021
20
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
21
Governance
Board of Directors and Company Secretary
At the date of this report, FireAngel’s Board of Directors comprises three Non-Executive Directors and two Executive Directors, including the
Executive Chairman. Membership of the Audit and Remuneration Committees is made up solely of certain of the Independent Non-Executive
Directors.
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 current Directors is set out below:
Non-Executive Directors
Glenn Collinson
Independent Non-
Executive Director
AGED 57
Simon Herrick
Senior Independent
Non-Executive Director
AGED 57
Executive Directors
John Conoley
Executive Chairman
AGED 60
Jon Kempster
Interim Chief Financial
Offi cer
AGED 58
John was appointed as Non-Executive Chairman of the Board on 22 January
2019. With effect from 1 August 2019, following the resignation of the Group
Chief Executive, John was appointed Executive Chairman. He brings
signifi cant 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 Offi cer 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. John is also Non-Executive Chairman of Wameja Limited,
the AIM and ASX quoted innovative mobile fi nancial services company, and
related to that role John serves as a Non-Executive Director of HomeSend
SCRL, the company jointly owned by Wameja Limited and Mastercard.
Jon was appointed as Interim Chief Financial Offi cer on 17 December
2020. He is currently a Non-Executive Director and Chair of the Audit
Committee at Ted Baker plc, Redcentric plc, Serinus Energy plc and
Bonhill Group plc and a Trustee of the Delta plc pension scheme. Jon’s
career has included Board positions at Delta plc, Fii Group plc, Frasers
Group plc, Linden plc, Low & Bonar plc, Utilitywise plc and Wincanton
plc. He qualifi ed as a Chartered Accountant with Price Waterhouse in
1990 and has a BA (Hons) in Business Studies from the University of
Liverpool. Jon will fi nish as Interim CFO and be appointed as a Non-
Executive Director of the Company with effect from 30 April 2021.
Company Secretary
Zoe Fox
Company Secretary
AGED 48
Zoe was appointed as Company Secretary in 2019. She is Finance
Director of the Group’s principal subsidiary, a role which she has held
since 2010. Prior to this she held the Finance Director position in BRK
Brands Europe Limited, part of the Jarden Corporation. Zoe qualifi ed
as an Accountant in 2004 and has a degree from the University of South
Bank, London. Zoe will be appointed as Chief Financial Offi cer with
effect from 30 April 2021.
22
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Glenn joined FireAngel’s Board on 1 August 2020. He started his
career at Racal and worked for Motorola and Texas Instruments before
co-founding Cambridge Silicon Radio in 1998. There he served as an
executive director and helped grow the company from a concept to a
$3 billion market capitalisation entity in 2006 (as CSR Plc) and one of
the biggest players in the Bluetooth market. Since leaving CSR in 2007,
he has held a number of non-executive directorships in UK and French
companies – both public and private – that specialise in technology. He
is a member of the Institute of Engineering and Technology and holds an
MSc in electronics as well as an MBA from Cranfi eld University. Glenn
sits on the Board’s Audit and Remuneration Committees.
Simon joined the FireAngel Board on 24 September 2019. He has
signifi cant experience in senior fi nance and operational roles including
as Chief Financial Offi cer of Debenhams plc, Chief Executive Offi cer
and Chief Financial Offi cer of Northern Foods plc, Chief Financial
Offi cer of Darty plc and Chief Financial Offi cer at PA Consulting Limited.
Simon has most recently pursued a plural career and is a Non-Executive
Director of Ramsdens Holdings plc, Biome Technologies plc, Christie’s
Group plc and has undertaken a number of consultancy projects in
a broad range of companies and sectors, most recently as Interim
Chief Executive Offi cer of Blancco Technology Group PLC. Simon is a
Fellow of The Institute of Chartered Accountants in England and Wales
having qualifi ed at Price Waterhouse in London and holds an MBA from
Durham University. Simon chairs the Board’s Audit and Remuneration
Committees and succeeded John Shepherd as the Company’s Senior
Independent Non-Executive Director on 1 August 2020.
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Graham Whitworth
Non-Executive Director
AGED 67
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 2015 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. On 27 May 2020, Graham
became a Non-Executive Director of the company and continues to
have Business Development responsibilities, in particular working to
exploit FireAngel’s strong IP portfolio globally.
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
23
Governance
Corporate governance report
“The Board remains committed to ensuring the highest standards of
corporate governance are maintained. During 2020 the Board once
again reviewed the extent of compliance with the Quoted Companies
Alliance Corporate Governance Code for small and mid-size quoted
companies with the aim to move to full compliance in due course.”
John Conoley - Executive Chairman
Introduction
The Board of FireAngel places great importance on effective corporate governance. This is refl ected 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 fi nancial 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 2018 the Board conducted its fi rst review of the Company’s 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.
Build trust
10
The extent of compliance with the ten principles that comprise the Code was most recently reviewed by the Board on 15 January 2021. The results
of this review, together with an explanation of any areas of non-compliance, and any steps taken or intended to be taken 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
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.fi reangeltech.com.
Seek to understand and meet shareholder
needs and expectations
Full
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.fi reangeltech.com.
Take into account wider stakeholder and
social responsibilities and their implications
for long-term success
Full
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.
Embed effective risk management,
considering both opportunities and threats,
throughout the organisation
Full
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.
Maintain a dynamic management framework
5
6
7
8
9
Maintain the Board as a
well-functioning, balanced
team led by the chair
Partial
The role, composition and independence of the Board are documented in this Corporate governance report of this
Annual Report and supplemented by information in the Directors section of the Investors area of our website www.
fi reangeltech.com.
The Board recognises that the primary responsibility of the chair is to lead the Board effectively and to oversee the
adoption, delivery and communication of the Group’s corporate governance model. There should be adequate
separation from the day-to-day business to be able to make independent decisions. The chair should not normally
also fulfi l the role of chief executive. This separation of roles existed in the Group from John Conoley’s appointment
as Non-Executive Chairman on 22 January 2019 until his appointment as Executive Chairman on 1 August 2019
after the departure of the Chief Executive. The Nominations Committee considered carefully the appropriateness
of the joint role and concluded that John’s skillset and experience were well matched to the current requirements
of the Group as it transitioned to become a provider of safety-critical connected home solutions. The joint role,
discussed beforehand with major shareholders, is expected to be short to medium term in tenure until the Group
has moved further in its transition described above, at which point it is the intention to appoint a Chief Executive with
skills appropriate for the challenges of the transitioned business. In addition, Board independence and structure,
particularly with more recent changes in composition, are considered to be suffi ciently robust to ensure that
independent decisions can be made despite increased day-to-day involvement by the chair.
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.fi reangeltech.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.
Given the continued changes in Board composition during 2020, it was again concluded that a formal process for
evaluating the Board would be undertaken by the Nominations Committee when new structures and relationships
had been established. 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 Nominations Committee was run in conjunction with the board
meetings but will in future be a standalone meeting.
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 specifi cally 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 specifi c 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.fi reangeltech.com.
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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.fi reangeltech.com. In line with the Group’s commitment to ensuring
appropriate communication structures are in place for all sections of its shareholder base, the Executive Directors
for the fi rst time delivered a live investor presentation of its 2020 interim results via the Investor Meet Company
platform in September 2020.
This allowed the Directors to address questions from its shareholders submitted pre-event and during the live
presentation.
Full
Partial
Full
Full
Full
Ensure that between
them the directors have
the necessary up-to-date
experience, skills and
capabilities
Evaluate board
performance based
on clear and relevant
objectives, seeking
continuous improvement
Promote a corporate
culture that is based
on ethical values and
behaviours
Maintain governance
structures and processes
that are fi t for purpose and
support good decision-
making by the board
Communicate how the
company is governed
and is performing by
maintaining a dialogue with
shareholders and other
relevant stakeholders
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 ten full meetings scheduled in a year, with attendance in person expected where possible, although meetings during 2020 have largely
been held via video conference due to COVID-19 restrictions. In more normal times, Board members may occasionally 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 satisfi ed that the members of the Board were able to devote
suffi cient 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 Executive Chairman. The Executive Chairman leads the weekly trading review and senior leadership 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 Executive Chairman. 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 signifi cant deviation from budget require explanation to, and approval
of, the Board.
The EMT typically meets weekly and comprises the two Executive Directors, with other senior managers attending as appropriate.
24
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
25
Governance
Corporate governance report continued
Three business unit directors collectively manage the Group’s fi ve business units. They report into, and meet with, the Executive Chairman.
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 Executive Chairman 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.
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 benefi t of directors’ and offi cers’ 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.
On 1 August 2020, Simon Herrick succeeded John Shepherd as Senior Independent Non-Executive Director of the Group following John’s
resignation from the Board. Simon provides a communication channel between the Chairman and the Non-Executive Directors and is available to
discuss matters with shareholders when required.
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 suffi cient time is given to consideration of the most signifi cant 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 2020 matters dealt with by the Board included:
• approval of the Group’s equity fundraising documentation in March
• consideration of Audit and Remuneration Committee reports and
2020;
recommendations;
• reviewing the Group’s response to COVID-19 including approval of
• review of corporate governance matters and reporting including a
documentation around the Group’s CLBILS facility;
• review and monitoring of Group strategy and progress against
business objectives;
• operational and fi nancial performance of the Group;
• approval of the Group’s budget;
• approval of fi nancial statements and dividend policy;
• risk management oversight;
• Board and senior management succession planning;
• approval of large contracts and bids;
review of compliance with the Quoted Companies Alliance Corporate
Governance Code for small and mid-size quoted companies, fi rst
adopted during 2018;
• 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
• review of 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 during 2020 attended in person or by video conference or telephone is set out
as follows:
JR Conoley1 - Executive Chairman
G Collinson2
SE Herrick - Chairman of Audit and Remuneration Committees
J Kempster3
NA Rutter4
J Shepherd5
AV Silverton6
MJ Stilwell
GRA Whitworth
1. Number of Remuneration Committee meetings eligible to attend: 2
2. Number of meetings eligible to attend after appointment, Board: 4; Audit Committee: 1; Remuneration Committee: 2
3. Number of meetings eligible to attend after appointment, Board: nil
4. Number of meetings eligible to attend before resignation, Board: 3
5. Number of meetings eligible to attend before resignation, Board: 9; Audit Committee: 2; Remuneration Committee: 1
6. Number of meetings eligible to attend before resignation, Board: 9; Audit Committee: 2; Remuneration Committee: 1
26
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
Total number of meetings
Board
Audit
Committee
Remuneration
Committee
13
4
12
-
3
8
8
13
13
-
1
3
-
-
2
2
-
-
2
2
3
-
-
1
1
-
-
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 29 to 33.
The functions of a nominations committee are
generally undertaken by the Group Board as
a whole. Given the size of the Group and the
size and composition of its Board, the Directors
believe it is both practical and benefi cial 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 unless it is necessary and appropriate
for a separate nominations committee to be
established for the most senior appointments.
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’ confl icts 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 confl icts
of interest declarations and any planned changes
in their interests, including directorships outside
the Group, are notifi ed 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 confl icts are
declared at the fi rst Board meeting at which the
Director becomes aware of a potential confl ict.
The benefi cial interests of all Directors in the
share capital of the Company are set out on page
37 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 the structure of the Board,
with two Executive and three 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. Simon Herrick
and Glenn Collinson have served on the Board
between one and two years and less than one
year respectively and are both considered
independent. Graham Whitworth has served
on the Board as a Non-Executive Director for
less than one year. The Board does not view
Graham Whitworth as independent as he had
served in executive roles within the Company.
Each Non-Executive Directors has different and
complementary skills and experiences which
allow each issue facing the Board to be viewed
and addressed from a variety of perspectives.
The Board considers that its size and
composition are appropriate and that the
balance of qualifi cations and experience
appropriately refl ects the fi nancial, sector
specifi c, 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 fi nancial 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 infl uence 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 specifi c 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. With the exception of Graham
Whitworth, whose time commitment is longer,
the Non-Executive Directors’ commitment
approximates to two days per month. Executive
Directors are expected to work full time. On 17
December 2020, Jon Kempster joined as Interim
Chief Financial Offi cer and works part time. A
process commenced following the year end to
fi nd a full time replacement and culminated today
in the announcement of Zoe Fox’s appointment
as Chief Financial Offi cer with effect from 30 April
2021 when Jon Kempster will be appointed as a
Non-Executive Director of the Company.
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. The Board culture and relationships
with senior management were also considered.
Where required, the Executive Chairman holds
meetings with the Non-Executive Directors
without the other 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.
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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
signifi cant 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 effi cient operation of the
Group by enabling management to respond
appropriately to signifi cant 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 identifi ed and managed;
• there is high quality of internal and external
fi nancial 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.
The Directors believe the internal control
environment is generally adequate and
appropriate given the size and complexity of the
Group.
The principal risks and uncertainties facing the
Group, together with mitigating actions taken to
address those risks, are set out on pages 18 to
21. These refl ect 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 identifi ed
as requiring improvement. The Group then
takes prompt action to address any control
defi ciencies. 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 suffi ciently 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 identifi cation, evaluation and
monitoring of risk.
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
27
Governance
Corporate governance report continued
Audit Committee report
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 per year to discuss the
published fi nancial results. In line with the Company’s commitment to ensuring appropriate communication structures are in place for all sections
of its shareholder base, the Executive Directors for the fi rst time delivered a live investor presentation of its 2020 interim results via the Investor Meet
Company platform in September 2020. This allowed the Directors to address questions from its shareholders submitted pre-event and during the live
presentation.
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 signifi cant 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’ briefi ngs. The Group also regularly hosts
investor days at its Coventry head offi ce 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 Senior Independent Non-
Executive Director 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 confi dence and without recrimination, regarding any unethical business practices, fraud, misconduct or wrongdoing. Any such incident would
be addressed confi dentially by the Audit Committee. There were no whistleblowing reports during 2020 nor to the date of this report.
Anti-bribery and anti-corruption policy
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 - Executive Chairman
30 April 2021
On behalf of the Board, I am pleased to present the Audit Committee report for the year ended 31 December 2020, which provides information about
the Audit Committee, its principal duties, and the specifi c matters it has considered during the year.
The Group’s Audit Committee comprises:
• Simon Herrick, Chairman of the Committee, Senior Independent Non-Executive Director; and
• From 1 August 2020, Glenn Collinson, Independent Non-Executive Director.
All the Committee members are Independent Non-Executive Directors and have no personal or fi nancial 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.fi reangeltech.com).
Neither the Chairman nor any other Executive Director 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 fi nancially qualifi ed member (as recognised by the
Consultative Committee of Accountancy Bodies). I am deemed by the Board to have recent and relevant fi nancial experience as a qualifi ed chartered
accountant with extensive experience in the fi nancing and management of businesses generally.
The Committee’s key objective is the provision of effective fi nancial governance and assistance to the Board in ensuring the integrity of the Group’s
fi nancial 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 fi nancial statements of the Group and any formal announcements relating to the Group’s fi nancial performance and
review signifi cant fi nancial 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 fi nancial reporting and the internal control and risk management policies and systems;
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• review annually, the need for an internal audit function;
• 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 fi rm; and
• review the arrangements by which staff may in confi dence raise concerns about possible improprieties.
Key considerations in 2020
During the year the Committee met three times and considered the following matters:
• the suitability of the Group’s accounting policies and practices;
• the half-year and full-year fi nancial results, including the appropriateness of using the going concern concept;
• the scope and cost of the external audit;
• the auditor’s report for 2019;
• 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 2020, which detailed the proposed audit scope and risk and governance assessment;
• the review and approval of the external auditor’s fees for 2020; and
• the internal control environment across the Group.
Signifi cant fi nancial statement reporting issues
The Audit Committee looks carefully at those aspects of the fi nancial statements which require signifi cant accounting judgements or where there
is estimation uncertainty. The Audit Committee also reviews the draft of the external Auditor’s Report on the fi nancial 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 satisfi es itself that the judgements made by management are robust and should be supported.
28
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
29
Governance
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 18 to 21 .
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 fi nance
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 2021 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
confi dence 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. Due to the change in Ethical Standards during 2020 RSM resigned from providing the Group with corporation tax services. However, they have
continued to provide services relating to VAT advice. During the year ended 31 December 2020, 4 per cent. of services provided to the Group were
non-audit services and related predominantly to VAT advice (see note 8 to the fi nancial statements).
By Order of the Board
Simon Herrick - Chairman of the Audit Committee
30 April 2021
On behalf of the Board, I am pleased to present the Remuneration Committee report for the year ended 31 December 2020, 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 2020.
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 2021 Annual General Meeting.
Remuneration Committee
The Group’s Remuneration Committee comprises:
• Simon Herrick, Chairman of the Committee, Senior Independent Non-Executive Director; and
• From 1 August 2020, Glenn Collinson, Independent Non-Executive Director.
All the Committee members are Independent Non-Executive Directors and have no personal or fi nancial interests, other than as shareholders, in the
matters considered by 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 other Executive member 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.fi reangeltech.com).
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
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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 fi nancial 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 profi t target represent a signifi cant 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 suffi cient
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 refl ects the following broad principles:
• the remuneration of Executive Directors and senior managers refl ects 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 signifi cant
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.
The Group has a clearly defi ned 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 profi t-based bonus incentives and longer-term share-
based incentive plans which focus on delivering key business objectives, profi table 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.
30
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Annual Report and Accounts 2020
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31
Governance
Remuneration Committee report continued
Group employee considerations
The Group employs people across fi ve countries with the majority of staff based in the UK. Inevitably remuneration arrangements differ to refl ect
local markets, but a common theme applied to employees at all levels is the Group’s aim to offer competitive levels of remuneration, benefi ts and
incentives to attract and retain employees. At more senior levels, remuneration has a larger variable proportion dependent on the Group’s fi nancial
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 2020
During the year the Committee met three times and considered the following matters:
• approval of a share matching scheme as part of long-term incentive arrangements for all employees;
• consideration of the terms and conditions for Executive Director and Non-Executive Director appointments; and
• approval of the performance criteria and share option awards under the FireAngel Safety Technology Group 2015 Long-Term Incentive Plan.
The following tables set out the key elements of the Group’s remuneration policy for Directors.
Element Purpose and link to strategy Operation
Maximum opportunity
Performance measures
Fees
To reward individuals for
fulfi lling 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
Details of the Directors’ emoluments are given below.
a) Remuneration
Executive Directors
JR Conoley3
J Kempster (appointed 17 December 2020)
NA Rutter (resigned 5 February 2020)
NC Smith (resigned 31 July 2019)
MJ Stilwell (resigned 17 December 2020)
Non-Executive Directors
G Collinson (appointed 1 August 2020)
SE Herrick (appointed 24 September 2019)
WJB Payne (resigned 24 September 2019)
J Shepherd (resigned 1 August 2020)
AV Silverton (resigned 30 June 2020)
GRA Whitworth4
Total
Salary, fees
and car
allowances
Benefi ts
Bonuses1
Pension
allowance2
£000
£000
£000
£000
237
6
18
-
176
15
35
-
18
17
171
693
2
-
-
-
3
-
-
-
-
-
6
11
-
-
-
-
-
-
-
-
-
-
-
-
14
-
2
-
15
-
-
-
-
-
-
31
2020
Total
£000
253
6
20
-
194
15
35
-
18
17
177
735
2019
Total
£000
140
-
210
153
199
-
10
31
36
36
227
1,042
1. Bonuses are paid or accrued based on the achievement of agreed personal objectives and corporate performance metrics.
2. Pension allowance includes both contributions to the Group’s defi ned contribution pension scheme and cash payments in lieu of contributions.
3.
John Conoley was appointed as Non-Executive Chairman of the Board on 22 January 2019. With effect from 1 August 2019, following the resignation of the Group Chief Executive, John was
appointed Executive Chairman.
4. On 27 May 2020, Graham Whitworth’s role changed from Executive Director to Non-Executive Director of the Board.
b) Share schemes
Directors’ interests in unvested and vested share option awards are as follows:
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Element
Salary
Purpose and link to
strategy
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
To provide market
competitive benefi ts
suffi cient to recruit and
retain
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 fi nancial
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 refl ect 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
Benefi ts include life assurance and medical
insurance
Benefi ts will be market competitive taking into
account the role and the local market
None
2014 EMI
GRA Whitworth
2015 LTIP
JR Conoley
MJ Stilwell
JR Conoley
Share matching scheme
JR Conoley
JR Conoley
JR Conoley
Awards
granted in the
year
Awards
lapsed in the
year
Awards
exercised in
the year
Number of
awards over
shares at 1
January 2020
125,000
1,500,000
750,000
-
-
-
-
-
750,000
-
-
-
-
5,000,000
281,514
25,000
49,660
-
-
-
-
Number of
awards over
shares at 31
December
2020
Expiry date
Exercise price
(pence)
125,000
28/4/2024
200
1,500,000
-
2/8/2029
2/8/2029
5,000,000
30/11/2030
281,514
25,000
1/6/2030
3/7/2030
49,660
18/12/2030
2
2
2
2
2
2
-
-
-
-
-
-
-
To provide market
competitive pension
arrangements suffi cient
to recruit and retain
New Executive Directors to the Company are
offered membership of the Group’s defi ned
contribution pension plan. Pension contributions
are based only on an individual’s salary
The maximum employer contribution to
the Group’s defi ned contribution pension
arrangements is 10% of gross salary
None
To incentivise and
reward execution of
the business strategy,
delivery of fi nancial
performance targets
and the Group’s
strategic plan
To incentivise and
reward execution of
the business strategy,
delivery of fi nancial
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 specifi c fi nancial targets for the
Group and agreed personal objectives
Bonus potential is capped at an appropriate
level to encourage outperformance of budgeted
targets
Under the Long-Term Incentive Plan, selected
employees are entitled to exercise an option to
receive a certain number of shares at any time
after a three-year vesting period, at a cost to the
employee of the nominal value of the shares. The
number of shares awarded at the end of the three-
year period is dependent on the achievement of
certain performance criteria.
Value of shares at time of vesting less nominal
value.
Bonus payments are
at the discretion of
the Remuneration
Committee and
take into account
the overall fi nancial
performance of the
Group
Vesting of
the awards is
dependent on
achievement of total
shareholder return
on a pro-rata basis.
Further information on the Group’s share schemes are given in note 31 of the fi nancial statements.
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:
G Collinson
JR Conoley
SE Herrick
J Kempster
GRA Whitworth
* Graham’s contract expires on 29 January 2022 and can be extended by mutual consent.
Notice period
3 months
6 months
3 months
1 month
*
Benefi ts
Pension
Annual
performance
related
bonus
Share
Schemes
32
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Annual Report and Accounts 2020
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Annual Report and Accounts 2020
33
Governance
Remuneration Committee report continued
Statutory Directors’ report
Policy on exit payments
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, benefi ts, 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 specifi c 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
Simon Herrick - Chairman of the Remuneration Committee
30 April 2021
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
Statutory Strategic Report, which comprises the Strategic Review, the Performance Review, the Section 172 Companies Act Statement and the
Risks and Risk Management section, on pages 6 to 21.
Review of business and future developments
The consolidated income statement for the year ended 31 December 2020 is set out on page 46.
A review of the Group’s business activities during the year and its prospects for the future can be found in the Strategic Review and the Performance
Review on pages 6 to 15. 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 refl ected 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 percentage. Gross margins are reviewed each week to assess individual business unit performance and to identify areas to
improve the profi tability 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.
• Adjusted gross margin percentage. The adjusted gross margin of the Group is measured to understand underlying business performance
before the impact of non-underlying items.
• Operating result. The fi xed costs of the business are carefully managed to ensure that, in conjunction with the gross profi t generated, the Group
can return an acceptable operating result.
• Underlying operating result. The operating performance of the Group before the impact of non-underlying items is monitored to better
understand the underlying trends in operating results.
• Underlying EBITDA. The underlying cash generation of the business is measured through operational cash fl ows represented by underlying
EBITDA.
• Basic EPS. The Group seeks to reward its shareholders with an annual dividend where possible.
• Net working capital. The Group seeks to proactively manage its working capital to ensure that it minimises its asset base to maximise cash fl ow
from which to pay dividends.
• 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.
Commentary on the key performance indicators above is set out in the Performance Review on pages 10 to 15.
Streamlined Energy and Carbon Reporting (SECR)
The group appreciates its responsibility to ensure operating activities are undertaken in an environmentally conscious manner. Therefore, the group
ensures all relevant environmental legislation is compiled with and, where possible exceeded. Actions and initiatives have been implemented to
reduce energy consumption such as video conferencing.
SECR regulations came into force 1 April 2019, requiring companies to disclose UK energy use and greenhouse gas emissions.
Details of the group SECR results have been reported in the tables below.
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Energy consumption used to calculate emissions
Gas (kWh)
Electricity (kWh)
Transport fuels (kWh)
Total energy consumption
2020
kWh
217,335
193,007
182,198
592,540
34
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Annual Report and Accounts 2020
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Annual Report and Accounts 2020
35
Governance
Statutory Directors’ report continued
Business Carbon Footprint
Emissions from combustion of gas (Scope 1)
Emissions from other activities the company owns or controls including operation of facilities (Scope 1)
Emissions from purchased electricity (Scope 2)
Emissions from business travel in rental cars or employee-owned vehicles where company is responsible for purchasing of the fuel (Scope 3)
Emissions from other activities (Scope 3): Transport – other
Total gross Scope 1, Scope 2 & Scope 3 emissions
Total gross GHG emissions per unit turnover/revenue (tCO2e/£M)
Total gross GHG emissions tCO2e by FTE – Full time equivalent employees (tCO2e/FTE)
2020
tCO2e
40.0
6.1
45.0
41.3
3.9
136.3
3.42
1.12
Scope 1: Direct Greenhouse Gas emissions are emissions issued from sources directly controlled by FireAngel, such as stationary combustion
equipment used for building heating.
Scope 2: Indirect Energy Emissions are emissions issued from electricity production, or from the imported heat or vapor consumed in the buildings
and equipment operation, provided by an external entity (sources out of the organizational boundaries).
Scope 3: Other indirect Greenhouse Gas emissions are emissions issued from FireAngel activities but from sources controlled by external
enterprises, such as waste disposal (transport and processing) and the transportation means of employees.
Principal risks and uncertainties
Control and share structure
Details of the issued share capital, together with details of the movements in the Company’s issued share capital during the year, are shown in note 29
to the fi nancial statements. The Company has one class of ordinary share which carries no right to fi xed income.
There are no specifi c 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 31 to the fi nancial statements. No person has any special rights of control over the Company’s
share 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 2020 were as follows:
G Collinson
JR Conoley
SE Herrick
J Kempster
GRA Whitworth
NA Rutter (resigned 5 February 2020)
J Shepherd (resigned 1 August 2020)
AV Silverton (resigned 30 June 2020)
MJ Stilwell (resigned 17 December 2020)
2020
Number of
shares held
2020
Interests in
share schemes
2020
Total interests
in shares
2019
Total interests
in shares
-
-
-
-
424,355
6,856,174
7,280,529
1,568,181
-
-
-
-
-
-
-
-
3,560,398
125,000
3,685,398
3,685,398
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4,175,000
237,497
100,000
805,538
3,984,753
6,981,174
10,965,927
10,571,614
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
18 to 21.
Since the year end to 28 April 2021, the interests of the Directors and their connected persons in the issued share capital of the Company have
changed as follows:
Group results and dividends
The fi nancial results for the year and fi nancial position of the Group and the Company are as shown on pages 46 and 49. The consolidated loss after
tax for the year was £8.7 million (2019: loss after tax of £9.4 million).
As a result of the loss reported for the year, and consistent with the decision not to pay an interim dividend (2019: nil pence per share), the Directors do
not recommend payment of a fi nal dividend for the year (2019: nil pence per share). The total dividend payable for 2020 was therefore nil pence per
share (2019: nil pence per share).
Financial instruments
The Group’s fi nancial risk management objectives and policies, including the policy for hedging future foreign exchange rate risk, are outlined in note
4 to the fi nancial statements. 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.
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 specifi c identifi able projects are capitalised in accordance with the accounting policy set out on page 50 to
57. General research costs undertaken in respect of the Group’s principal activities are charged through the income statement as incurred.
Share capital and voting rights
The Company’s issued share capital comprises a single class of ordinary shares of 2p each, with 126,558,845 shares in issue and listed on AIM of the
London Stock Exchange as at 31 December 2020. No shares were held in treasury. Details of movements in the issued share capital can be found in
note 29 to the fi nancial statements.
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
confi dential 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.
fi reangeltech.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.
G Collinson
JR Conoley
SE Herrick
J Kempster
GRA Whitworth
Signifi cant shareholdings
As at 28 April 2021, the Company was aware of the following holdings, excluding holdings of
Directors and their connected persons, of 3% or more of the Company’s total issued share capital:
Newell Rubbermaid UK Services Limited
Downing LLP
BGF Investment Management Limited
Canaccord Genuity Group Inc
Nick Rutter
Number of
shares held
Interests in
share schemes
Total interests
in shares
-
-
-
424,355
6,856,174
7,280,529
-
-
-
-
-
-
3,636,542
125,000
3,761,542
4,060,897
6,981,174
11,042,071
Number of
shares
% of total
voting rights
Nature of
interest
29,582,205
23,645,248
14,638,098
12,982,500
4,102,107
23.4
18.7
11.6
10.3
3.2
Direct
Indirect
Indirect
Indirect
Direct
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Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
37
Governance
Statutory Directors’ report continued
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 offi ce or employment (whether through resignation, purported redundancy or otherwise)
that occurs because of a takeover bid.
Board of Directors
All Directors were in offi ce throughout the year ended 31 December 2020 with the exception of the following appointments and resignations during
the year:
• Glenn Collinson (appointed 1 August 2020)
• Jon Kempster (appointed 17 December 2020)
• Nick Rutter (resigned 5 February 2020)
• John Shepherd (resigned 1 August 2020)
• Ashley Silverton (resigned 30 June 2020)
• Mike Stilwell (resigned 17 December 2020)
Details and biographies of the current Directors and Company Secretary are shown on page 22 to 23.
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 offi ce any of the powers, authorities and discretions exercisable by the Board for such
time and on such terms and conditions as it thinks fi t. 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 offi ce, excluding Directors who are retiring
and standing for election at the fi rst 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 forthcoming Annual General Meeting, Graham Whitworth will retire and stand
for re-election. As newly appointed Directors, Glenn Collinson, Jon Kempster and Zoe Fox will be subject to election being the fi rst Annual General
Meeting since they were appointed.
The Company’s shareholders may by ordinary resolution appoint any person to be a Director. The Company must not have less than two directors
holding offi ce at any time. The Company may by ordinary resolution from time to time vary the minimum and/or the maximum number of directors.
Confl icts of interest
The Group has procedures in place for managing confl icts 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 confl icts and the Board formally reviews any such confl icts periodically.
Directors’ and offi cers’ liability insurance
The Group maintains a management protection policy including directors’ and offi cers’ liability insurance which is reviewed annually. The insurance
covers the Directors and offi cers 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 offi cer of a Group company and in respect
of damages or civil fi nes or penalties resulting from the unsuccessful defence of any proceedings. The indemnity was in force throughout the fi nancial
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 9.
The Group employed an average of 153 people in 2020 (2019: 149).
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 confi rms 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 qualifi ed 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 2020, the Group had 72 days’ purchases
outstanding in trade payables (2019: 76 days’).
Going concern
Post balance sheet events
Information on any events occurring after the balance sheet date is
described in note 33 to the fi nancial statements.
Auditor
RSM UK Audit LLP has indicated its willingness to continue in offi ce
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 offi ce on the date of approval of these
fi nancial statements have confi rmed, that as far as they are aware,
there is no relevant audit information of which the Company’s auditor is
unaware.
Each Director has confi rmed 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 infl uenced by factors that
could cause actual outcomes and results to be materially different.
Directors Report
The Directors Report comprises the Board of Directors and Company
Secretary, Corporate governance report, Audit Committee report,
Remuneration Committee report and the Statutory Directors’ report, on
pages 22 to 34.
The Directors’ Report have been approved by the Board.
By Order of the Board
Zoe Fox - Company Secretary
30 April 2021
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In determining whether the Group and Parent Company’s fi nancial
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 Directors prepared cash fl ow forecasts for the period ending 31
December 2022 which considered the fi nancial position of the Group,
its cash fl ows, borrowing facilities and fi nancial covenants thereon.
The Board regularly reviews revenue, profi tability and cash fl ow
forecasts across the short, medium and longer term. A number of
downside sensitised scenarios are modelled and considered to create
a wide range of possible outcomes, the assumptions behind which are
robustly challenged. The Board compares actual performance against
budgets and forecasts and reviews variances to continually refi ne and
improve forecasting ability from which to make effective decisions.
The Group has been loss making in recent years and absorbed cash.
The Group raised equity funding in 2020 and secured support from
its bank through the government backed loan schemes. The impact
of COVID-19 has been material as the Group was starting to see
improvements in its underlying trading activity levels in early 2020
and especially important was the traction it was receiving from social
housing Groups on the deployment of its connected homes alarms
strategy which the group had invested in. The pandemic brought about
a reduction in sales of core product through the traditional retail and
trade channels and at the same time saw the deferral of any connected
homes roll out as other priorities took precedent. The Group has used
the lockdown periods to shape the business for the delivery of Gross
margin improvement alongside capitalising on the resurfaced interest
in our connected homes technology. The Group is very focused on
this path and a major thrust will be the design and production of new
products that lend themselves to more automated production and easy
update and refresh cycles.
Based on the cash fl ow forecasts, the Group is anticipated to absorb
cash in 2021 and to be close to cash neutral in 2022 and as such
has successfully achieved increased committed loans through
the government backed COVID loan schemes. These facilities by
themselves do not however provide the group with the necessary
cash to deliver the strategy and return the group to profi tability and
cash generative activity levels. On 30 April 2021 the Directors have
announced an equity raise of £9.0m (net of expenses) in order to provide
the group with the resources to meet its liabilities as they fall due over
the period of the cash fl ow forecast. Accordingly, the full year accounts
for 2020 have been prepared on the going concern basis.
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. Details of the resolutions passed at the 2021 Annual General
Meeting will be made available on the Company’s website after the
meeting.
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39
Financial statements
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Statutory Strategic Report, the Directors’ Report and the fi nancial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Company fi nancial statements for each fi nancial year. The Directors have elected
under company law and the AIM rules of the London Stock Exchange to prepare the Group fi nancial statements in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and to prepare the company fi nancial statements in
accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law.
The fi nancial statements are required by law and international accounting standards in conformity with the requirements of the Companies Act 2006
to present fairly the fi nancial position of the Group and the Company and the fi nancial performance of the Group. The Companies Act 2006 provides
in relation to such fi nancial statements that references in the relevant part of that Act to fi nancial statements giving a true and fair view are references
to their achieving a fair presentation.
Under company law the Directors must not approve the fi nancial statements unless they are satisfi ed that they give a true and fair view of the state of
affairs of the Group and the Company and of the profi t or loss of the Group for that period.
In preparing the Group and Company fi nancial 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 international accounting standards in conformity with the requirements of the
Companies Act 2006; and
• prepare the fi nancial 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 suffi cient to show and explain the Group’s and the Company’s
transactions and disclose with reasonable accuracy at any time the fi nancial position of the Group and the Company and enable them to ensure that
the fi nancial 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 fi nancial information included on the FireAngel Safety
Technology Group plc website.
Legislation in the United Kingdom governing the preparation and dissemination of fi nancial statements may differ from legislation in other
jurisdictions.
By order of the Board
Zoe Fox - Company Secretary
30 April 2021
Independent auditor’s report
TO THE MEMBERS OF FIREANGEL SAFETY TECHNOLOGY GROUP PLC
Opinion
We have audited the fi nancial statements of FireAngel Safety Technology Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 December 2020 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the
consolidated and company statements of fi nancial position, the consolidated and company cash fl ow statements, the consolidated statement of
changes in equity, the company statement of changes in equity and the notes to the fi nancial statements, including signifi cant accounting policies.
The fi nancial reporting framework that has been applied in their preparation is applicable law and International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and, as regards the parent company fi nancial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
• the fi nancial 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 2020 and of the
group’s loss for the year then ended;
• the group fi nancial statements have been properly prepared in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006;
• the parent company fi nancial statements have been properly prepared in accordance with International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and as applied in accordance with the Companies Act 2006; and
• the fi nancial 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 fi nancial 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 fi nancial statements in the UK,
including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfi lled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the fi nancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
fi nancial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the
going concern basis of accounting is set out below in our Key Audit Matter entitled “Going Concern”.
Based on the work we have performed, we have not identifi ed any material uncertainties relating to events or conditions that, individually or
collectively, may cast signifi cant doubt on the group’s or the parent company’s ability to continue as a going concern for a period of at least twelve
months from when the fi nancial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Summary of our audit approach
Key audit matters
Group
• FireAngel warranty provisioning
•
Impairment of product development costs
• Going concern
Parent Company
•
Impairment of intercompany receivables
Materiality
Group
• Overall materiality: £400,000 (2019: £461,000)
• Performance materiality: £300,000 (2019: £346,000)
Parent Company
• Overall materiality: £200,000 (2019: £225,000)
• Performance materiality: £150,000 (2019: £168,000)
Scope
Our audit procedures covered 94% of revenue, 95% of total assets and 98% of loss before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most signifi cance in our audit of the group and parent company
fi nancial statements of the current period and include the most signifi cant assessed risks of material misstatement (whether or not due to fraud) we
identifi ed, 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 fi nancial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Independent auditor’s report continued
FireAngel warranty provisioning
Key audit matter description
How the matter was addressed
in the audit
The group reported a signifi cant battery warranty issue in the fi nancial statements for the year ended 31 December 2015 which remains
ongoing. The warranty provision at 31 December 2020 of £2.7 million is stated after recording an additional exceptional warranty charge
in the 2020 income statement of £1.2m. The recorded provision is one of the most signifi cant 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 25 the estimation uncertainties relevant to the calculation of the warranty provision. Management
have explained the exceptional charge of £1.2 million in note 7.
The most signifi cant estimate is the terminal rate of product return over the ten year warranty period for each year of production and for
each end market.
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 warranty provision in light of our
understanding of the specifi c warranty issue, the wider business, and the changes to assumptions from those previously applied.
• Challenging the appropriateness of the key assumptions used in the calculations, and the changes made compared to prior periods,
by comparing them to other internal information held by management and considering whether any changes were indicators of
possible management bias.
• Comparing the actual rates of return to those anticipated when the issue was initially identifi ed 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.
• Developing our own estimate of the warranty provision required at 31 December 2020.
• Considering the adequacy of disclosures and whether they were in accordance with the appliable fi nancial reporting framework.
Key observations
Based on the results of the audit procedures outlined above, management increased the reported provision by £0.2m.
Impairment of product development costs
Key audit matter description
The group continues to develop new products and has unamortised capitalised product development costs of £13.8 million at the
reporting date, of which £5.8 million relates to projects where amortisation has not yet commenced. In accordance with their stated
accounting policy, management only capitalise these costs on the basis that it is probable that the asset created will generate future
economic benefi ts and management are required to consider whether or not there are any indicators of impairment for each asset at each
reporting date. As a result of these considerations, the group has recorded an impairment charge of £1.4 million as disclosed in note 7.
The recovery of these assets in future periods is dependent upon the successful completion and/or product sales from each project. The
potential for impairment is one of the most signifi cant 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 future sales performance.
Management have explained the estimation uncertainties relevant to their impairment considerations in note 3, and detailed analysis of the
amounts capitalised is set out in note 17.
How the matter was addressed
in the audit
Our audit work included, but was not restricted to:
• Discussing product development expenditure during the year with management to understand progress and to identify areas of
greater potential risk.
• Obtaining and reviewing management’s impairment assessment for all projects within capitalised product development costs and
performing audit work as follows:
o
For projects where amortisation has not yet commenced, we challenged management’s assessment, corroborated explanations
to supporting evidence where available including key assumptions relating to future revenue and considered any contradictory
evidence.
For projects where amortisation has commenced, we reviewed the sales and margin achieved on products using this technology
and compared the margins achieved with unamortised capitalised costs at the reporting date to assess the period over which the
capitalised costs will be recovered.
o
• Reperforming management’s impairment calculations and assessing whether the impairment in the period was accurately
calculated.
• Considering the adequacy of disclosures and whether they are in accordance with the applicable fi nancial reporting framework.
Impairment of intercompany receivables (parent company only)
Key audit matter description
As 31 December 2020 the parent company statement of fi nancial position includes amounts owed by subsidiary undertaking of £29.9
million. The loan is interest free and repayable on demand. The subsidiary undertaking does not have suffi cient liquid assets to make
repayment should the parent company demand repayment.
How the matter was addressed
in the audit
Due to the size of the balance owned by the subsidiary undertaking and the degree of judgement and estimation needed to calculate
an appropriate expected credit loss provision this matter is one of the most signifi cant risks of a material misstatement for the parent
company
At 31 December 2020, the gross amount owed by subsidiary undertakings was £33.3 million and the ECL recorded was £3.5 million as
detailed in notes 3 and 21.
We obtained management’s calculation of the ECL and the underlying calculations prepared to support the carrying value of the
balance and performed work as follows:
• Assessed the reasonableness of the recovery scenarios considered by management and the probabilities assigned thereon.
• Reviewed and challenged the assumptions and estimates utilised in the model.
• Recalculated the computation of the ECL.
• Considered the adequacy of disclosures and whether they were in accordance with the applicable fi nancial reporting framework.
Key observations
We have no observations to report.
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 fi nancial statements as a whole, could reasonably
infl uence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements. Based on our
professional judgement, we determined materiality as follows:
Group
Overall materiality
£400,000 (2019: £461,000)
Basis for determining overall materiality
4.3% of loss before tax
Parent company
£200,000 (2019: £225,000)
0.6% of net assets
Rationale for benchmark applied
Loss before tax is considered the most appropriate
benchmark for users of the fi nancial statements.
Net assets are considered to be the most appropriate benchmark
for the parent company as it is primarily a holding company.
Performance materiality
£300,000 (2019: £346,000)
Basis for determining performance
materiality
75% of overall materiality
£150,000 (2019: £168,000)
75% of overall materiality
Reporting of misstatements to the Audit
Committee
Misstatements in excess of £20,000 and misstatements
below that threshold that, in our view, warranted reporting
on qualitative grounds.
Misstatements in excess of £10,000 and misstatements below
that threshold that, in our view, warranted reporting on qualitative
grounds.
An overview of the scope of our audit
The group consists of three components, located in the United Kingdom and Canada. The coverage achieved by our audit procedures was:
Number of components
Revenue
Total assets
Loss before tax
Full scope audit
Total
2
2
94%
94%
95%
95%
98%
98%
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Key observations
We have no observations to report.
Analytical procedures at group level were performed for the remaining component.
Going concern
Key audit matter description
It is the responsibility of the directors to form an opinion on whether the going concern basis of accounting is appropriate and to identify
and disclose any material uncertainties that may cast signifi cant doubt on the group’s or parent company’s ability to continue as a going
concern.
When planning our current year audit we identifi ed a signifi cant risk that there may be material uncertainties regarding the availability of
funds required to meet the group’s operational cash requirements and to deliver the group’s strategy.
The directors have set out their assessment in relation to going concern in the summary of signifi cant accounting policies in note 2.
How the matter was addressed
in the audit
Our audit work included, but was not restricted to:
• Obtaining and reviewing the cash fl ow forecasts prepared by management for the period to 31 December 2022.
• Checking the mathematical accuracy of the cash fl ow forecasts.
•
•
•
Reviewing the cashfl ow forecasts in light of our understanding of the business to identify and challenge the key assumptions therein,
to assess the level of cash headroom and to assess likely fi nancial covenant compliance.
Considering the impact of management’s sensitivities on the forecast cash fl ows and covenant compliance (including downside
scenarios relating to revenue and gross margins).
Adjusting the cashfl ow forecasts for our own sensitivities to consider the combined effect of the scenarios considered by
management together with reverse stress testing of the cash fl ow forecasts.
• Reviewing the key terms of banking facilities and equity fundraise commitments.
•
Review of the disclosures within the fi nancial statements to assess whether they accurately refl ect management’s assessment of
going concern, including any uncertainties.
Key observations
We have no observations to report.
Other information
The other information comprises the information included in the annual
report, other than the fi nancial statements and our auditor’s report thereon.
The directors are responsible for the other information contained within the
annual report. Our opinion on the fi nancial 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.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the fi nancial
statements or our knowledge obtained in the course of 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 this gives rise to a material misstatement in the fi nancial
statements themselves. 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
for the fi nancial year for which the fi nancial statements are prepared is
consistent with the fi nancial statements; and
• the Strategic Report and the Directors’ Report have been prepared in
accordance with applicable legal requirements.
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 identifi ed 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 fi nancial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specifi ed by law are not
made; or
In our opinion, based on the work undertaken in the course of the audit:
• we have not received all the information and explanations we require for
• the information given in the Strategic Report and the Directors’ Report
our audit.
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Annual Report and Accounts 2020
43
A further description of our responsibilities for the audit of the fi nancial 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
30 April 2021
Independent auditor’s report continued
Responsibilities of directors
As explained more fully in the Statement of
directors’ responsibilities, the directors are
responsible for the preparation of the fi nancial
statements and for being satisfi ed that they
give a true and fair view, and for such internal
control as the directors determine is necessary
to enable the preparation of fi nancial statements
that are free from material misstatement,
whether due to fraud or error.
In preparing the fi nancial 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 fi nancial statements
Our objectives are to obtain reasonable
assurance about whether the fi nancial
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 infl uence the economic decisions
of users taken on the basis of these fi nancial
statements.
The extent to which the audit was
considered capable of detecting
irregularities, including fraud
Irregularities are instances of non-compliance
with laws and regulations. The objectives of
our audit are to obtain suffi cient appropriate
audit evidence regarding compliance with
laws and regulations that have a direct effect
on the determination of material amounts
and disclosures in the fi nancial statements,
to perform audit procedures to help identify
instances of non-compliance with other laws
and regulations that may have a material effect
on the fi nancial statements, and to respond
appropriately to identifi ed or suspected non-
compliance with laws and regulations identifi ed
during the audit.
In relation to fraud, the objectives of our audit
are to identify and assess the risk of material
misstatement of the fi nancial statements due
to fraud, to obtain suffi cient appropriate audit
evidence regarding the assessed risks of
material misstatement due to fraud through
designing and implementing appropriate
The most signifi cant laws and regulations were determined as follows:
responses and to respond appropriately to fraud
or suspected fraud identifi ed during the audit.
However, it is the primary responsibility of
management, with the oversight of those
charged with governance, to ensure that the
entity’s operations are conducted in accordance
with the provisions of laws and regulations and
for the prevention and detection of fraud.
In identifying and assessing risks of material
misstatement in respect of irregularities,
including fraud, the group audit engagement
team:
• obtained an understanding of the nature of
the industry and sector, including the legal
and regulatory framework that the group
and parent company operate in and how the
group and parent company are complying
with the legal and regulatory framework;
• inquired of management, and those
charged with governance, about their own
identifi cation and assessment of the risks
of irregularities, including any known actual,
suspected or alleged instances of fraud;
• discussed matters about non-compliance
with laws and regulations and how fraud
might occur including assessment of how
and where the fi nancial statements may be
susceptible to fraud.
Legislation / Regulation
Additional audit procedures performed by the audit engagement team included:
International accounting standards
inconformity with the Companies Act
2006
Tax compliance regulations
• Review of the fi nancial statement disclosures and testing to supporting documentation;
• Completion of disclosure checklists to identify areas of non-compliance
• Inspection of advice received from external tax advisors
• Inspection of correspondence with local tax authorities
• Consideration of whether any matter identifi ed during the audit required reporting to an appropriate authority outside the entity
Product certifi cation requirements
•
Inquiry of management and those charged with governance.
The areas that we identifi ed as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit engagement team:
Revenue recognition
• Use of data analytics and substantive testing to test assertions over revenue (including cut-off) and to identify and investigate
any transactions outside of the normal revenue cycle
Impairment of product development
costs
• The audit procedures performed in relation to impairment of product development costs are documented in the key audit
matter section of our audit report.
Management override of controls
• Testing the appropriateness of journal entries and other adjustments;
• Assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
• Evaluating the business rationale of any signifi cant transactions that are unusual or outside the normal course of business.
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Consolidated
Company
Consolidated income statement
For the year ended 31 December 2020
2020
2019
Before non-
underlying
items
Non-underlying
items (note 7)
Total
£000
39,928
Before non-
underlying
items
Non-
underlying
items (note 7)
Total
£000
45,486
£000
£000
-
45,486
Revenue
Cost of sales
Gross profi t
Operating expenses
Other operating income
Loss from operations
Finance costs
Loss before tax
Income tax credit
Loss attributable to equity owners of the Parent
Basic earnings per share
Diluted earnings per share
£000
39,928
(32,032)
7,896
(13,606)
291
(5,419)
(278)
(5,697)
630
(5,067)
Note
6
8
8
9
8
11
12
14
14
£000
-
(1,717)
(1,717)
(1,924)
-
(3,641)
-
(3,641)
-
(33,749)
(36,821)
6,179
8,665
(15,530)
(12,461)
291
(9,060)
(278)
(9,338)
630
-
(3,796)
(312)
(4,108)
548
(3,641)
(8,708)
(3,560)
(7.7)
(7.7)
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Loss for the year
Items that may be reclassifi ed subsequently to profi t and loss:
Exchange differences on translation of foreign operations (net of tax)
Total comprehensive loss for the year
(4,308)
(4,308)
(2,608)
-
(41,129)
4,357
(15,069)
-
(6,916)
(10,712)
-
(312)
(6,916)
(11,024)
1,056
(5,860)
2020
£000
(8,708)
(22)
(8,730)
1,604
(9,420)
(14.0)
(14.0)
2019
£000
(9,420)
31
(9,389)
Consolidated and Company
statement of fi nancial position
As at 31 December 2020
Non-current assets
Goodwill
Other intangible assets
Purchased software costs
Property, plant and equipment
Shares in subsidiaries
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax asset
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Provisions
Invoice discounting facilities
Loans and borrowings
Derivative fi nancial liabilities
Net current (liabilities)/assets
Non-current liabilities
Loans and borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Currency translation reserve
Retained earnings
Total equity attributable to equity holders of the Parent Company
Note
16
17
17
18
19
27
20
21
26
23
25
23
23
22
23
23
25
27
29
2020
£000
169
11,738
2,059
4,263
-
-
2019
£000
169
12,560
2,492
5,323
-
-
18,229
20,544
6,558
10,071
711
1,466
18,806
37,035
6,304
12,073
729
2,062
21,168
41,712
(12,834)
(12,150)
(348)
-
(1,496)
(6,985)
-
(429)
(21,408)
(440)
(32)
(1,491)
(2,539)
(2,600)
(693)
(20,629)
(1,823)
(23)
(941)
(1,254)
-
(2,218)
(22,847)
14,188
2,531
22,104
121
(10,568)
14,188
2020
£000
-
-
-
-
392
-
392
-
29,857
-
2
29,859
30,251
-
-
-
-
-
-
-
2019
£000
-
-
-
-
149
-
149
-
25,947
-
4
25,951
26,100
-
-
-
-
-
-
-
-
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
(240)
29,859
25,951
-
(1,131)
(1,997)
-
(3,128)
(24,536)
17,176
1,519
17,617
143
(2,103)
17,176
-
-
-
-
-
-
-
-
-
-
-
-
30,251
26,100
2,531
22,104
-
5,616
30,251
1,519
17,617
-
6,964
26,100
46
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
47
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 fi nancial statements of the Company was a loss of £1,591,000 (2019: loss of
£1,182,000). The fi nancial statements on pages 46 to 49 were approved and authorised for issue by the Board of Directors on 30 April 2021 and were
signed on its behalf by:
John Conoley - Executive Chairman Jon Kempster -Interim Chief Financial Offi cer
Company registered number: 3991353
1,586
1,155
Net foreign exchange gains from overseas subsidiaries
Consolidated and Company cash fl ow statement
For the year ended 31 December 2020
Consolidated statement of changes in equity
For the year ended 31 December 2020
Share capital
Share premium
account
Currency
translation
reserve
Note
7
7
Loss before tax
Finance expense
Operating loss for the year
Adjustments for:
Depreciation of property, plant and equipment, and right-of-use assets
Amortisation of intangible assets
Loss on disposal of non-current assets
Non-underlying items
Cash fl ow relating to non-underlying items
Decrease in fair value of derivatives
Provision against intercompany receivables
Operating cash fl ow before movements in working capital
Movement in inventories
Movement in receivables
Movement in provisions
Movement in payables
Cash (used in)/generated by operations
Income taxes received
Net cash (used in)/generated by operating activities
Investing activities
Capitalised development costs
Purchase of property, plant and equipment
Interest received
Net cash used in investing activities
(2,831)
(3,722)
Financing activities
Repayment of loan
Drawdown of loan
(Repayment) / Drawdown of invoice fi nance
Loan restructuring costs
Proceeds from issue of ordinary shares (net of expenses)
Repayment of lease obligations
Interest paid
Net cash generated by/(used in) fi nancing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Non-cash movements – foreign exchange
Cash and cash equivalents at end of year
23
(600)
3,223
(4,445)
-
5,499
(381)
(278)
3,018
(577)
2,062
(19)
1,466
(7,000)
1,300
6,985
(209)
5,488
(307)
(382)
5,875
784
1,251
27
2,062
Consolidated
Company
2020
£000
2019
£000
2020
£000
(9,338)
(11,024)
(1,591)
278
312
5
(9,060)
(10,712)
(1,586)
1,429
2,482
-
3,641
(2,287)
264
-
(3,531)
(479)
1,911
(28)
683
(1,444)
680
(764)
(2,554)
(277)
-
1,267
2,105
16
6,916
(2,346)
643
-
(2,111)
418
(106)
520
(2,560)
1,191
(1,369)
(2,882)
(841)
1
(1,281)
(5,496)
-
-
-
-
-
-
-
-
-
-
(5,496)
-
(5,496)
-
-
-
-
-
-
-
5,499
-
(5)
5,494
(2)
4
-
2
2019
£000
(1,182)
18
(1,164)
-
-
-
-
-
-
(9)
-
242
-
-
233
-
233
-
-
-
-
(7,000)
1,300
-
-
5,488
-
(18)
(230)
3
1
-
4
Balance at 1 January 2019
Loss for the year
Net foreign exchange gains from overseas subsidiaries
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of equity shares
Premium arising on issue of equity shares
Share issue expenses
Total transactions with owners in their capacity as owners
Credit in relation to share-based payments
£000
918
-
-
-
601
-
-
601
-
£000
12,729
-
-
-
-
5,400
(512)
4,888
-
Balance at 31 December 2019
1,519
17,617
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of equity shares
Premium arising on issue of equity shares
Share issue expenses
Credit in relation to share-based payments
Total transactions with owners in their capacity as owners
Balance at 31 December 2020
-
-
-
1,012
-
-
-
1,012
2,531
-
-
-
-
5,062
(575)
-
4,487
22,104
Retained
earnings
£000
7,280
(9,420)
-
(9,420)
-
-
-
-
37
(2,103)
(8,708)
-
(8,708)
-
-
-
243
243
Total
£000
21,039
(9,420)
31
(9,389)
601
5,400
(512)
5,489
37
17,176
(8,708)
(22)
(8,730)
1,012
5,062
(575)
243
5,742
£000
112
-
31
31
-
-
-
-
-
143
-
(22)
(22)
-
-
-
-
-
i
F
n
a
n
c
a
i
l
121
(10,568)
14,188
Company statement of changes in equity
For the year ended 31 December 2020
Share capital
Share premium
account
Retained earnings
Balance at 1 January 2019
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of equity shares
Premium arising on issue of equity shares
Share issue expenses
Total transactions with owners in their capacity as owners
Balance at 31 December 2019
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of equity shares
Premium arising on issue of equity shares
Share issue expenses
Credit in relation to share-based payments
Total transactions with owners in their capacity as owners
Balance at 31 December 2020
£000
918
-
-
601
-
-
601
1,519
-
-
1,012
-
-
-
1,012
2,531
£000
12,729
-
-
-
5,400
(512)
4,888
17,617
-
-
-
5,062
(575)
-
4,487
22,104
£000
8,146
(1,182)
(1,182)
-
-
-
-
6,964
(1,591)
(1,591)
-
-
-
243
243
5,616
s
t
a
t
e
m
e
n
t
s
Total
£000
21,793
(1,182)
(1,182)
601
5,400
(512)
5,489
26,100
(1,591)
(1,591)
1,012
5,062
(575)
243
5,742
30,251
48
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
49
Accounting standards in issue but not yet effective
At the date of authorisation of these fi nancial statements the following standards and interpretations, which have not been applied in these fi nancial
statements and which are considered potentially relevant, were in issue but not yet effective:
• Use of UK-adopted international accounting standards (IAS) instead of EU adopted IAS
• IFRS 9, IAS 39, IFRS 7, IFRS 4 & IFRS 16 Interest Rate Benchmark Reform – Phase 2
The Directors anticipate that the adoption of the amendments to standards 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.
Revenue recognition
Revenue is recognised when revenue and associated costs can be measured reliably and future economic benefi ts 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.
Revenue recognition – warranty obligations
IFRS 15 ‘Revenue from customer contracts’ provides guidance on the treatment of warranties provided on the sale of goods. The Group sells
products with warranties ranging from one 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 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 of 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.
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.
Government Grants
The Group has received grant funding from the UK and Canadian Governments. Government income is recognised within other income in profi t or
loss on a systematic basis over the periods in which the Group recognises costs for which the grants are intended to compensate.
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 fi nancial asset to that asset’s net carrying amount.
Accounting for discretionary payments made to customers
The Group made discretionary payments in total amounting to £0.5 million (2019: £0.4 million) to certain UK retailers in respect of maintaining the
ongoing relationship with these customers and to secure promotional activities during the year. Such costs are taken to the income statement in the
year to which they relate and are recorded in operating expenses.
Notes to the fi nancial statements
For the year ended 31 December 2020
1. Principal activities
FireAngel Safety Technology Group plc (the ‘Company’) is registered and domiciled in England and Wales, having been incorporated under the
Companies Act, company registration number 3991353. The Company is listed on the Alternative Investment Market (‘AIM’) of the London Stock
Exchanges. The Company’s registered offi ce and the address of its principal place of business is The Vanguard Centre, Sir William Lyons Road,
Coventry, West Midlands, CV4 7EZ.
The Company and its subsidiary undertakings (the ‘Group’) are in the business of the design, sale and marketing of smoke, heat and CO alarms and
accessories sold under the brands of FireAngel, FireAngel Pro and Specifi cation, AngelEye and Pace Sensors. The Group also operates its own CO
sensor manufacturing facility in Canada.
2. Summary of signifi cant accounting policies
The Group has adopted the accounting policies set out below in preparation of the consolidated fi nancial statements. All of these policies have been
applied consistently throughout the periods presented.
Basis of preparation
These consolidated fi nancial statements are prepared in accordance with international accounting standards in conformity with the Companies Act
2006 (‘IFRS’). The fi nancial statements are presented in thousands (£’000) unless otherwise indicated.
The preparation of fi nancial 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 signifi cant to the
consolidated fi nancial statements, are disclosed in note 3.
Basis of consolidation
The consolidated fi nancial statements of the Group incorporate the fi nancial statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 December each year.
Subsidiaries
Subsidiaries are entities over which the Group has power to govern the fi nancial and operating policies so as to obtain economic benefi ts from their
activities. Subsidiaries are consolidated from the date on which control is obtained (the acquisition date) up until the date that control ceases.
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.
Costs directly attributable to the acquisition are expensed as incurred. Identifi able assets acquired and liabilities assumed in a business combination
are initially measured at fair value at the acquisition date.
Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring the accounting policies used into line with those used by
the Group.
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 fi nancial 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 Directors prepared
cash fl ow forecasts for the period ending 31 December 2022 which considered the fi nancial position of the Group, its cash fl ows, borrowing facilities
and fi nancial covenants thereon.
The Board regularly reviews revenue, profi tability and cash fl ow forecasts across the short, medium and longer term. A number of downside
sensitised scenarios are modelled and considered to create a wide range of possible outcomes, the assumptions behind which are robustly
challenged. The Board compares actual performance against budgets and forecasts and reviews variances to continually refi ne and improve
forecasting ability from which to make effective decisions.
The Group has been loss making in recent years and absorbed cash. The Group raised equity funding in 2020 and secured support from its bank
through the government backed loan schemes. The impact of COVID-19 has been material as the Group was starting to see improvements in
its underlying trading activity levels in early 2020 and especially important was the traction it was receiving from social housing Groups on the
deployment of its connected homes alarms strategy which the group had invested in. The pandemic brought about a reduction in sales of core
product through the traditional retail and trade channels and at the same time saw the deferral of any connected homes roll out as other priorities took
precedent. The Group has used the lockdown periods to shape the business for the delivery of Gross margin improvement alongside capitalising
on the resurfaced interest in our connected homes technology. The Group is very focused on this path and a major thrust will be the design and
production of new products that lend themselves to more automated production and easy update and refresh cycles.
Based on the cash fl ow forecasts, the Group is anticipated to absorb cash in 2021 and to be close to cash neutral in 2022 and as such has
successfully achieved increased committed loans through the government backed COVID loan schemes. These facilities by themselves do not
however provide the group with the necessary cash to deliver the strategy and return the group to profi tability and cash generative activity levels.
On 30 April 2021 the Directors have announced an equity raise of £9.0m (net of expenses) in order to provide the group with the resources to meet
its liabilities as they fall due over the period of the cash fl ow forecast. Accordingly, the full year accounts for 2020 have been prepared on the going
concern basis.
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 fi nancial statements, are mandatory and
relevant to the Group for the fi rst time for the fi nancial period commencing 1 January 2020:
• IFRS 3 Business Combinations
• Amendments to IAS 1 and IAS 8: Defi nition of Material
50
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
51
i
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c
a
i
l
s
t
a
t
e
m
e
n
t
s
Notes to the fi nancial statements continued
For the year ended 31 December 2020
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 identifi able 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 profi t 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 identifi ed;
• it is probable that the asset created will generate future economic benefi ts;
• 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
• suffi cient 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 satisfi ed as to the innovative nature and technical, commercial and fi nancial
viability of clearly defi ned projects whose outcome can be assessed with reasonable certainty. In such cases, identifi able 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 benefi t from sales of such products.
The Directors estimate that the useful economic lives of these various intangible assets are between seven and 15 years. Amortisation commences
from the date of fi rst sale of the related product. Intangible assets are described in note 17 to the fi nancial statements.
Directly attributable costs in bringing the Group’s 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 most appropriate given forecast production volumes. These assets are being amortised over fi ve
years.
Other intangible assets - 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.
Plant, equipment and tooling
All plant, equipment, tooling, fi xtures and fi ttings, motor vehicles, offi ce equipment and right-of-use assets are stated at cost less accumulated
depreciation and any recognised impairment loss. A right-of-use asset is recognised at commencement of the lease and initially measured at the
amount of the lease liability, plus any incremental costs of obtaining the lease and any lease payments made at or before the leased asset is available
for use by the Group. The right-of-use asset is subsequently measured at cost less accumulated depreciation and any accumulated impairment
losses. Right-of-use assets are depreciated on a straight-line basis over the lease term.
Subsequent costs, including replacement parts and major inspections, are capitalised only when it is probable that such costs will generate future
economic benefi ts. Any replaced parts are derecognised. All other costs of repairs and maintenance are charged 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
5 years
Fixtures and fi ttings
4 years
Motor vehicles
Offi ce equipment
4 years
3 years
Right-of-use assets
over the period of the lease
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.
Investment made in manufacturing tooling at Flex, the Group’s primary manufacturing partner for smoke alarms and connected products, is
depreciated over fi ve years. Regular reviews are conducted to ensure that any obsolete assets are appropriately recognised in the fi nancial
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 indefi nite 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 fl ows 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 fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time
value of money and the risks specifi c to the asset (or cash-generating unit) for which the estimates of future cash fl ows 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 profi t 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.
Leases
On commencement of a contract which gives the Group the right to use assets for a period of time in exchange for consideration, the Group
recognises a right-of-use asset and a lease liability unless the lease qualifi es as a ‘short-term’ lease (where the term is twelve months or less with no
option to purchase the lease asset) or a ‘low-value’ lease (where the underlying asset is £4,000 or less when new).
The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the interest rate implicit in the
lease, or the incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined. The lease term is the non-cancellable
period of the lease plus extension periods that the Group is reasonably certain to exercise and termination periods that the Group is reasonably
certain not to exercise. Lease payments include fi xed payments, less any lease incentives receivable, variable lease payments dependent on an
index or a rate and any residual value guarantees.
The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced for
lease payments. Interest on the lease liability is recognised in profi t or loss. Variable lease payments not included in the measurement of the lease
liability as they are not dependent on an index or rate, are recognised in profi t or loss in the period in which the event or condition that triggers those
payments occurs.
Functional and presentation currency
Items included in the fi nancial 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 fi nancial 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, signifi cant infl uence 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 benefi t costs
For defi ned 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 statement of fi nancial position.
Taxation
The tax expense represents the sum of the current tax expense and deferred tax expense.
52
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
53
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m
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s
Notes to the fi nancial statements continued
For the year ended 31 December 2020
Current tax
The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from accounting profi t 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 or asset 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 fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, 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 profi ts 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 profi t nor the accounting profi t.
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. Tax assets and liabilities are offset when
there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority,
and the Group intends to settle its tax assets and liabilities on a net basis.
Financial instruments
Financial assets and fi nancial liabilities are recognised when the Group has become a party to the contractual provisions of the instrument.
a) Financial assets
The Group categorises its fi nancial assets as: fair value through profi t and loss or at amortised cost. The classifi cation depends on the purpose for which
the fi nancial assets were acquired. Management determines the classifi cation of its fi nancial assets at initial recognition.
Financial assets include ‘trade receivables’ and ‘cash and cash equivalents’.
b) Trade receivables
Trade receivables are initially measured at their transaction value and are subsequently measured at amortised cost. Under IFRS 9 the expected credit
loss model requires the Group to consider expectations of future events when determining its expectations of impairment.
c) Borrowings
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 profi t and loss.
The Group does not have the right of offset between such derivatives, and so all derivatives that are fi nancial assets are shown separately from all
derivatives that are fi nancial 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 classifi ed 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 outfl ow of economic benefi ts 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 outfl ows, discounted at the pre-tax discount
rate that refl ects the risks specifi c to the liability. The increase in the provision due to passage of time is recognised as an 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.
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 Chief Operating Decision Maker (‘CODM’) has been determined to be the Executive Chairman as he is primarily responsible for the allocation
of resources and the assessment of the performance. Assessment of performance is based wholly on the overall activities of the Group. The Board
considers that there are no separately identifi able 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.
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.
Non-underlying items
d) Financial assets at fair value through profi t and loss
Financial assets at fair value through profi t and loss are fi nancial assets held for trading. Assets in this category are classifi ed as current assets if
expected to be settled within twelve months, otherwise they are classifi ed as non-current. The only assets/liabilities currently held in this category are
forward currency derivatives (described further below) and cash and cash equivalents.
e) Financial liabilities and equity
Financial liabilities and equity instruments are classifi ed 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 fi nancial liabilities are measured at fair value through profi t and loss; all other fi nancial liabilities are measured at amortised cost.
f) Recognition and measurement
The Group discloses certain fi nancial information both including and excluding non-underlying items. The presentation of information excluding non-
underlying items allows a better understanding of the underlying trading performance of the Group and provides consistency with the Group’s internal
management reporting. Non-underlying items are identifi ed by virtue of their size, nature or incidence and the Directors consider that these items should
be separately identifi ed so as to facilitate comparison with prior periods and to assess the underlying trends in the fi nancial performance of the Group.
3. Critical accounting estimates and areas of judgement
Impacting the Group
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 defi nition, seldom
equal the related actual results. The estimates and assumptions at the end of the accounting period that have a signifi cant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.
Gains and losses arising from changes in the fair value of the ‘fi nancial assets at fair value through profi t and loss’ category are presented in the income
statement within ‘Cost of sales’ in the period in which they arise as these assets relate to the purchase of goods.
Warranty provision for FireAngel products
g) Impairment of fi nancial assets
The Group and Company recognise an impairment loss on fi nancial assets using the expected credit loss model by assessing the probability that the
counterparty will be unable to settle their contractual cash fl ow 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.
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 fi rst-in
fi rst-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. The Group’s approach to inventory provisioning is described in note 20.
Forward currency derivatives
The Group enters into derivative foreign currency forward contracts which are classifi ed as fi nancial instruments at fair value through profi t and loss.
In April 2016, the Group identifi ed a non-safety critical 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. As a result, 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 for affected products manufactured between
2012 and 2018 as at 31 December 2020 increased to £2.7 million as explained below.
With specifi c reference to FireAngel products, the determination of the amount of the provision, which refl ects the Board’s best estimate of resolving
these issues, requires the exercise of signifi cant judgement. It is necessary, therefore, to form a view on matters which are inherently uncertain, such
as the returns profi le over time, the fi nal 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 fi rst
identifi ed. 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.
54
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Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
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Notes to the fi nancial statements continued
For the year ended 31 December 2020
Impacting the Company only
Recoverability of intercompany receivables
The provision relates mainly to the high impedance battery issue and is most sensitive to the assumption regarding the fi nal return percentage rate. The
expected terminal rate of return percentage for each year of production for each market was estimated by FireAngel’s Technical team.
During the year, the FireAngel battery warranty provision was increased by £1.2 million to refl ect an increase in the terminal volume of units expected to
be impacted by the issue based on the level of returns currently being seen. Due to the introduction of various product design changes, units produced
at the Company’s manufacturing partner in Poland since April 2018 should not be affected by these historic issues.
To prevent the issue happening again, various product design changes were implemented at both the supplier of the batteries and to the fi rmware
used in fi nished products when manufactured at the Group’s primary smoke alarm and connected devices manufacturing partner. The Group has also
reviewed its returns processes to reduce the cost of servicing product returns and has identifi ed a number of signifi cant improvements that will reduce
the cost of servicing the warranty in the fi eld going forwards.
Impairment of non-fi nancial 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 identifi ed, 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 identifi ed.
Intangible assets with indefi nite 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.
Amounts owed by subsidiary undertakings represent interest-free loans made to the Company’s main subsidiary undertaking. The gross loan advanced
by the Company is £33.3 million.
In accordance with IFRS 9 ‘Financial Instruments’, as the subsidiary undertaking cannot repay the loan at the reporting date, the Company has made
an assessment of expected credit losses. Having considered multiple scenarios on the manner, timing, quantum and probability of recovery of the
receivables, a lifetime expected credit loss (‘ECL’) of £3.5 million has been provided.
The calculation of the allowance for lifetime expected credit losses requires a signifi cant degree of estimation and judgment, in particular determining
the probability-weighted likely outcome for each scenario considered. The Directors’ assessment of ECL included repayment through future cash fl ows
over time (which are inherently diffi cult to forecast for the Company given the timing of take up of its connected homes technology) and also the amount
that could be realised through an immediate sale of the subsidiary undertaking. The Directors’ assessment of repayment through future cash fl ows
included a scenario where the loan was not recovered in full. The provision is sensitive to the key assumptions inherent in the calculation.
The carrying value of amounts owed by subsidiary undertakings at 31 December 2020, net of provisions, was £29.9 million (2019: £25.9 million) and is
disclosed in note 21 to the fi nancial statements.
4. Financial risk management
The Group’s operations expose it to a variety of fi nancial 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 fi nancial 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 suffi cient headroom to enable the Board to react to unexpected
changes in market conditions. Management monitors its cash fl ows through the preparation of forecasts on a weekly and 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 fl ows from operations are not expected to change signifi cantly from the level of underlying business performance.
As we have disclosed elsewhere in this report the adoption of the going concern basis is predicated on a planned equity fund raise to be undertaken in
the current year. Full disclosure around this can be found in the Going Concern disclosures on page 50.
During 2020, the Group recognised an impairment charge of £1.4 million against its capitalised intangible product development costs after a thorough
review of product lines and future development costs (see note 17).
Maturity analysis
The Board notes that the Group has a signifi cant value of intangible assets on the balance sheet at the year end. Connected homes intangible assets
with a net book value of £1.5 million are not yet being amortised as they are currently being developed for sale. Connected home intangible assets with
a net book value of £4.5 million are being amortised. 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 homes technology product offering which is
working, the Board believes that the carrying value of connected homes technology intangibles is not impaired. In reaching this conclusion, the Board
also acknowledges the losses incurred by the Group over the past three years and the heightened risk of impairment that this leads to.
At times during the year 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, details of which are given in note 16, did not indicate any such impairment.
Deferred tax recognition
At 31 December 2020 there is a deferred tax asset of £1,869,602 which has not been recognised as the timing of utilisation is uncertain. Deferred tax
assets should only be recognised where they are more likely than not to be realised. Whilst the Group expects a return to profi tability in the future, the
generous deduction available for research and development expenditure means that it is likely to be several years before these losses will need to be
accessed.
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 against (at 100% of the cost) as future sales are very unlikely. In addition, where stock is identifi ed 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 the level of sales 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 identifi ed as slow-moving, ten-
year life products are typically reworked into seven-year or fi ve-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 certifi ed 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 2020 amounted to £0.6 million (2019: £2.4 million). An amount of £0.4 million was provided in the year as a
result of a thorough review of product lines and future development plans in line with the Group’s evolved strategy to become a more technology-led
connected home solutions provider, offset by proceeds of £0.2 million from stock previously impaired.
56
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Annual Report and Accounts 2020
The table below analyses the Group’s fi nancial liabilities on a contractual gross undiscounted cash fl ow basis into maturity groupings based on amounts
outstanding at the reporting date up to the contractual maturity date.
2020
Trade payables
Loans and borrowings
Other payables
Lease liabilities
Derivative fi nancial liabilities
Financial liabilities
2019
Trade payables
Loans and borrowings
Other payables
Lease liabilities
Derivative fi nancial liabilities
Financial liabilities
Within 6 months
£000
6 months to 1 year
£000
1 to 5 years
£000
Over 5 years
£000
7,032
3,439
3,654
247
587
14,959
£000
7,355
6,985
3,282
174
401
18,197
-
1,700
-
252
106
2,058
-
23
-
1,001
-
1,024
-
-
-
-
-
-
£000
£000
£000
-
-
-
174
28
202
-
-
-
1,131
-
1,131
-
-
-
-
-
-
Total
£000
7,032
5,162
3,654
1,500
693
18,041
£000
7,355
6,985
3,282
1,479
429
19,530
The table below analyses the Group’s fi nancial assets held for managing liquidity risk which are considered to be readily saleable or are expected to
generate cash infl ows to meet cash outfl ows on fi nancial liabilities.
2020
Trade receivables and other debtors
Cash and cash equivalents
Financial assets
2019
Trade receivables and other debtors
Cash and cash equivalents
Financial assets
Within 6 months
£000
6 months to 1 year
£000
1 to 5 years
£000
Over 5 years
£000
9,430
1,466
10,896
£000
11,270
2,062
13,332
-
-
-
-
-
-
-
-
-
£000
£000
£000
-
-
-
-
-
-
-
-
-
Total
£000
9,430
1,466
10,896
£000
11,270
2,062
13,332
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
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Notes to the fi nancial statements continued
For the year ended 31 December 2020
The Group would normally expect that suffi cient cash is generated in the operating cycle to meet the contractual cash fl ows as disclosed above through
effective cash management. In addition, the Group maintained a £7.5 million invoice discounting facility, of which £2.5 million was drawn down at the
year end, with HSBC UK Bank plc secured on UK and international trade debtors which can be accessed as required.
On 26 March 2021 the Group announced it had refi nanced its existing Coronavirus Large Business Interruption Loan Scheme (‘CLBILS’). As the Group’s
revenue dropped below £45.0 million, the CLBILS (which reduced to £2.0 million at the end of March 2021) have been refi nanced under the Coronavirus
Business Interruption Loan Scheme (“CBILS”) with HSBC UK. The new loan of, in aggregate, £3.7 million (“New Loan”) comprises a CBILS loan of £3.2
million and an additional Receivables Finance CBILS of £0.5 million. The New Loan, which will be used to pay off the balance of the CLBILS, has a term
of 6 years with the fi rst year being free of interest and capital repayments and an interest rate thereafter of 3.99 per cent. over the Bank of England’s base
rate.
Today the Company announced an equity fundraising of £9.0 million (net of expenses).
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 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 believes that these
most closely refl ect the probable performance of the various economies in which the Group’s fi nancial assets and liabilities are located.
The approximate impact on the Group’s operating result in 2021 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 fl uctuations in underlying interest rates and will take appropriate action if required to minimise the impact on
the performance and fi nancial 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’s 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 fi nancial position as well as
their reputation within the industry and past payment experience where relevant.
Cash and cash equivalents and derivative fi nancial instruments are all held with an AA- rated bank, HSBC UK Bank plc.
The Group’s maximum exposure to credit risk relating to its fi nancial assets is equivalent to their carrying value as disclosed below. All fi nancial 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
2020
£000
9,430
1,466
10,896
2019
£000
11,270
2,062
13,332
The Group did not have any fi nancial instruments that would mitigate the credit exposure arising from the fi nancial assets designated at fair value through
profi t or loss in either the current or the preceding fi nancial year.
The Company’s credit risk arises exclusively through its intercompany balances which stand at £29.9 million (2019: £25.9 million). For the Company,
impairment losses on fi nancial assets measured at amortised cost relate solely to amounts due from fellow group companies and total £3.5 million at 31
December 2020 (2019: £1.9 million). 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 profi tably 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 account, currency translation reserve and retained earnings.
6. Revenue and segmental reporting
The Group 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 profi t stated for the Group.
IFRS 8 requires operating segments to be determined based on the Group’s internal reporting to the Chief Operating Decision Maker (‘CODM’). The
CODM has been determined to be the Executive Chairman as he is primarily responsible for the allocation of resources and the assessment of the
performance.
Based on the information on which strategic and operating decisions are made, the CODM considers that there are no identifi able 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 profi t for each of the Group’s business units are reviewed by the Board and rolled up into consolidated fi nancial 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.
Revenue from continuing operations
Business Units:
UK Trade
UK Retail
UK Fire & Rescue Services
UK Utilities
International
Pace Sensors
Total revenue from external customers
2020
£000
2019 Restated
£000
7,560
16,603
2,875
1,363
9,198
2,329
39,928
7,452
18,317
4,718
2,173
11,140
1,686
45,486
All business units earn revenue from the sale of smoke, heat and CO alarms 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 of 1 January 2020, the business has reassigned a number of customers to different business units. Two large customers with a combined revenue of
£7.1m in 2019 which were previously reported within the Trade business unit are now reporting through the Retail business unit. The Utilities business
unit gained two customers with a combined revenue of £0.7m in 2019 which were previously reported within the Trade business unit. The 2019 sales
comparatives have been adjusted accordingly.
For 2020, revenues of approximately £9.4 million were derived from two external customers (2019: £5.5 million from one external customer), which
individually contributed over 10% of total revenue of the Group. These revenues are attributable to the UK Retail business unit. An analysis of the
Group’s revenue is as follows:
Continuing operations:
UK
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
7. Non-underlying items
Within cost of sales
Provision for warranty costs (note a)
Commercial distributer settlements (note b)
Provision against stock and disposal costs (note c)
Within operating expenses
Restructuring and fundraising costs (note d)
Impairment of intangible assets (note e)
Impairment of tangible assets (note f)
Share-based payment charges
Total non-underlying items
2020
£000
28,400
8,961
2,567
39,928
2020
£000
18,050
179
18,229
2020
£000
1,168
324
225
1,717
77
1,416
188
243
1,924
3,641
2019
£000
32,660
10,677
2,149
45,486
2019
£000
20,362
182
20,544
2019
£000
2,605
-
1,703
4,308
746
1,825
-
37
2,608
6,916
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Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
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Notes to the fi nancial statements continued
For the year ended 31 December 2020
a. During the year, the FireAngel battery warranty provision, an isolated legacy issue relating to a third-party supplier fi rst identifi ed in April 2016, was
increased by £1.2 million. The additional provision was made to refl ect an increase in the terminal volume of units expected to be impacted by the issue
based on the level of returns being seen. The total cash impact of the warranty provision in 2020 was £1.9 million.
b. Customer settlements relating to the battery impedance totalled £0.3m for the year. As at 31 December 2020 the Group had paid £0.2 million of these
settlements.
c. Stock impairment and disposal costs of £0.2 million were provided in the year as a result of a thorough review of product lines and future development
plans in line with the Group’s evolved strategy to become a more technology-led connected home solutions provider. In the prior year, £1.7 million was
provided. The cash impact in 2020 relating to stock disposal costs equated to £0.1 million.
d. Restructuring and certain fundraising costs of £0.1 million were incurred and paid in the year. In the prior year, £0.7 million was provided.
e. Intangible capitalised development assets of £1.4 million were impaired during the year as a result of a thorough review of product lines and future
development costs. In the prior year, £1.8 million was provided.
f. Tangible assets of £0.2 million were impaired during the year as a result of a thorough review of tooling required for ongoing product lines. In the prior
year nil was provided.
8. Loss from operations
The following table analyses the nature of expenses:
Staff costs (note 10)
Depreciation, amortisation and impairment (notes 17 and 18)
- Owned assets
- Right-of-use assets
Premises costs
Cost of inventories recognised as an expense
Inventory provision recorded in year, excluding non-underlying charges
Distribution costs
Marketing and trade contributions
Professional fees, excluding Non-Executive Directors
Research and development costs
Non-underlying items excluding staff costs (note 7)
Foreign exchange revaluations and mark-to-mark movements
Other net expenses/costs
Total cost of sales and operating expenses
2020
£000
6,005
3,424
395
841
27,928
112
977
953
890
283
3,398
717
3,356
49,279
2019 Restated
£000
5,465
3,065
307
879
33,190
33
920
728
540
270
6,879*
405
3,517*
56,198
*The 2019 share based payment charge of £37,000 has been moved out of non-underlying items excluding staff costs and in to other net expenses.
Loss from operations has been arrived at after charging:
Net foreign exchange losses/ (gains) excluding foreign currency forward transactions
Research and development costs
Amortisation and impairment of intangible assets
Depreciation of owned assets
Depreciation on right-of-use assets
2020
£000
477
283
3,898
1,033
396
2019 Restated
£000
(210)
270
3,730
958
307*
*The 2019 depreciation on right-of-use assets has been restated from £354,000 to £307,000. The previous fi gure contained both depreciation and
interest on right -of-use assets.
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
9. Other operating income
2020
£000
36
73
-
109
5
-
5
2019
£000
32
66
-
98
32
7
39
Furlough payments of £0.1m were received under the UK Government’s Coronavirus Job Retention Scheme and £0.2 million under the Canadian
Emergency Wage Subsidy. The scheme enabled employers to retain staff despite the economic impact of COVID-19 through government grants relating
to wage subsidies. As per the accounting policies adopted, the grant received was recognised in the profi t and loss in ‘other income’ as the related
salaries for the furloughed employees were recognised.
10. Staff costs
The average monthly number of employees (including Executive and Non-Executive Directors) within
the Group was as follows:
Manufacturing (Pace Sensors)
Technology
Administration
Sales and marketing
Executive and Non-Executive Directors
Warehousing
The aggregate remuneration for the above persons (excluding Non-Executive Directors) comprised:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
Total remuneration
Less: Capitalised product development costs
Less: Staff costs in prepayments
Total remuneration charged to the income statement
2020
Number
2019
Number
26
40
49
26
7
5
23
40
48
27
7
4
153
149
2020
£000
6,612
613
224
243
7,692
(1,687)
-
6,005
2019
£000
6,341
598
214
37
7,190
(1,635)
(90)
5,465
60
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
61
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t
s
Notes to the fi nancial statements continued
For the year ended 31 December 2020
11. Finance costs
Interest expense on bank balance
Lease liability interest expense
Total fi nance costs
12. Income tax
Current tax
UK corporation tax credit
UK – adjustments in respect of prior periods (credit)/charge
Foreign tax charge
Deferred tax (note 27)
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Income tax credit
Domestic income tax is calculated at 19.00% (2019: 19.00%) of the estimated assessable profi t or loss for the year.
2020
£000
(227)
(51)
(278)
2020
£000
(711)
(49)
130
(630)
-
-
(630)
2019
£000
(265)
(47)
(312)
2019
£000
(707)
(47)
46
(708)
(1,024)
128
(1,604)
13. Dividends
As a result of the loss reported for the year, and consistent with the decision not to pay an interim dividend (2019: nil pence per share), the Directors do
not recommend payment of a fi nal dividend for the year (2019: nil pence per share). The total dividend payable for 2020 is therefore nil pence per share
(2019: nil pence per share).
14. Earnings per share
Earnings from continuing operations
Earnings for the purposes of basic and diluted earnings per share (loss 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
2020
£000
(8,708)
‘000
112,865
-
112,865
2020
pence
(7.7)
(7.7)
2019
£000
(9,420)
‘000
67,219
-
67,219
2019
pence
(14.0)
(14.0)
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 refl ect 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 2020.
%
15. Financial instruments
2020 Financial assets
Trade receivables and other debtors
Cash and cash equivalents
Total
2019 Financial assets
Trade receivables and other debtors
Cash and cash equivalents
Total
Assets at fair
value through
profi t and loss
£000
Financial
assets at
amortised cost
£000
-
1,466
1,466
9,430
-
9,430
Assets at fair
value through
profi t and loss
£000
Financial
assets at
amortised cost
£000
-
2,062
2,062
11,270
-
11,270
Total
£000
9,430
1,466
10,896
Total
£000
11,270
2,062
13,332
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
The tax credit for the year can be reconciled to the profi t per the consolidated income
statement as follows:
Loss before tax
Tax at the domestic income tax rate of 19.00% (2019: 19.00%)
Tax effect of expenses that are not deductible in determining taxable profi t
Effect of allowance for capitalised development expenditure
Adjustments in respect of prior periods
Deferred tax not recognised
Impact of foreign tax rates
Difference in current and deferred tax rates
Other adjustments
Tax credit and effective tax rate for the year
%
2020
£000
(9,338)
(1,774)
52
(306)
(49)
1,428
59
-
(40)
2019
£000
(11,024)
(2,095)
60
(305)
81
437
23
168
27
(630)
7%
(1,604)
15%
The weighted average applicable tax rate was 7% (2019: 15%). The tax credit for 2020 is largely due to enhanced research and development tax relief at
a rate of 230% and operating losses in the year of £9.3 million.
Tax losses are, where possible, realised during the year through surrender for research and development tax credits.
At 31 December 2020 there is a deferred tax asset of £1,869,602 which has not been recognised as the timing of utilisation is uncertain. Deferred tax
assets should only be recognised where they are more likely than not to be realised. Whilst the Group expects a return to profi tability in the future, the
generous deduction available for research and development expenditure means that it is likely to be several years before these losses will need to be
accessed.
The income tax charged to equity during the year was as follows:
Deferred tax
Share-based payments
Income tax charge
2020
£000
-
-
2019
£000
-
-
62
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
63
Notes to the fi nancial statements continued
For the year ended 31 December 2020
2020 Financial liabilities
Trade payables
Loans and borrowings
Other payables
Lease liabilities
Derivative fi nancial liabilities
Total
2019 Financial liabilities
Trade payables
Loans and borrowings
Other payables
Lease liabilities
Derivative fi nancial liabilities
Total
Group impairment test
At times during the year, 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 2020 amounted to £17.9 million. The recoverable amount of the
cash-generating unit is determined based on a value-in-use calculation which uses cash fl ow projections based on fi nancial budgets and business plans
approved by the Directors covering a four-year period. Cash fl ows beyond that period have been extrapolated using a steady 2.0% per annum growth
rate, which the Directors consider to be specifi c to the business and does not exceed the UK long-term average growth rate.
The key inputs to the cash fl ow forecasts are:
• forecasted changes in revenue taking into account future expectations of revenue streams and sales mix linked to the Board’s strategic plans;
• forecasted changes in gross margin taking into account expected improvements in production effi ciencies and sales mix;
• future anticipated capital expenditure; and
• requirements for working capital based on revenue growth.
Total
£000
7,355
6,985
3,282
1,479
429
The key assumptions used in the cash fl ow projections are a terminal value applied after fi ve years assuming a 7.5 times multiple and pre-tax weighted
average cost of capital of 15.3% cross-referenced to comparable companies operating within the sector. The other key assumptions have been
assigned values by the Directors using estimates based on past experience and expectations of future performance.
Based on these assumptions, the value-in-use calculation amounted to £54.1 million compared with the carrying amount of £17.9 million. The Directors
believe that, based on the sensitivity analysis performed and described below, 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 (2019: no impairment).
In assessing the impact on the value-in-use calculation of changes in the assumptions used, the Directors considered the following sensitivities:
• a restriction in the gross margin in 2023 and thereafter to that expected to be achieved in 2022;
19,101
19,530
• an increase in overheads in 2022 and in each year thereafter;
Liabilities at fair
value through
profi t and loss
£000
Financial
liabilities held at
amortised cost
£000
Total
£000
7,032
5,162
3,654
1,381
693
17,229
17,922
7,032
5,162
3,654
1,381
-
7,355
6,985
3,282
1,479
-
-
-
-
-
693
693
-
-
-
-
429
429
Liabilities at fair
value through
profi t and loss
£000
Financial
liabilities held at
amortised cost
£000
At 31 December 2020 the Company held fi nancial assets held at amortised cost in the form of intercompany balances to the value of £29.9 million
(2019: £25.9 million). At the same date the Company had a fi nancial liability held at amortised cost in the form of borrowings to the value of £nil (2019:
£nil).
Credit risk management
The Group’s exposure to credit risk is limited to the carrying amount of fi nancial assets recognised at the balance sheet date, which are set out below.
Trade and other receivables
2020
£000
9,430
9,430
2019
£000
11,270
11,270
The Group has applied the IFRS 9 simplifi ed 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 twelve months with trade receivables grouped
together on similar credit risk and aging.
As at 31 December 2020 a credit loss provision of £66,000 (2019: £7,000) was held against the exposure of potential bad debts.
16. Goodwill
Cost and carrying value
Cost and carrying value of goodwill at 31 December 2020 and 2019
The goodwill above relates solely to Pace Sensors.
£000
169
64
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
• an increase in capital expenditure in 2022 and in each year thereafter; and
• an increase in working capital required as a percentage of revenue in 2021 and maintained thereafter.
In performing this sensitivity analysis, the Directors noted the signifi cant headroom of the value-in-use calculation compared with the carrying value in
each of the scenarios above.
17. Other intangible assets
Cost
At 1 January 2019
Additions
At 31 December 2019
Additions
Disposals
At 31 December 2020
Amortisation
At 1 January 2019
Amortisation for the year
Impairment for the year
At 31 December 2019
Amortisation for the year
Impairment for the year
Disposals
At 31 December 2020
Carrying amount
At 31 December 2019
At 31 December 2020
Product
development
costs
£000
Purchased
software
costs
£000
Computer
software
costs
£000
15,981
2,867
18,848
2,519
(1,597)
19,770
2,859
1,660
1,825
6,344
1,925
1,416
(1,597)
8,088
12,504
11,682
2,899
-
2,899
-
-
2,899
-
407
-
407
433
-
-
840
2,492
2,059
415
15
430
35
(141)
324
336
38
-
374
35
-
(141)
268
56
56
Total
£000
19,295
2,882
22,177
2,554
(1,738)
22,993
3,195
2,105
1,825
7,125
2,393
1,416
(1,738)
9,196
15,052
13,797
The amortisation charge of £2,393,000 (2019: £2,105,000) and impairment charge of £1,416,000 (2019: £1,825,000) have been recognised within
operating expenses.
The Group disposed of £1.6 million of product development assets, £1.4 million of which had a net book value of zero at 31st December 2019 and £0.2
million which was impaired in 2020. These disposals were against technologies which are no longer in use within the business and do not appear on the
Group’s strategic roadmap in the future. There was nil cash value with regards to these disposals.
A summary of intangible costs as at 31 December 2020 is given in the table which follows.
Except as outlined below, intangible assets are typically amortised over seven to twelve years depending on the Group’s assessment of the likely period
of time over which the benefi t from the technology is expected to be realised.
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
65
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Notes to the fi nancial statements continued
For the year ended 31 December 2020
Impairment review
During 2020, the Group recorded an impairment charge of £1.4 million (2019: £1.8 million) against projects which were no longer considered to be
commercially viable after a thorough review of product lines.
As part of the impairment review, the Group compared the net book value of each intangible asset with the discounted cash fl ows which are expected to
be derived from the sale of products over the next one to fi ve years that use the relevant intangible asset. The review was based on a discounted cash
fl ow model using a pre-tax discount rate of 12% and included associated overhead costs. 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 profi t 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 signifi cant comfort that the carrying value of the intangible is recoverable and, therefore, is not impaired.
Assessing the potential sales of products such as the Group’s connected homes technology is inherently more diffi cult 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 homes technology products will
increase over time as the technology becomes mainstream, and is pleased with the good progress made in securing the Group’s fi rst material purchase
order during the year and in trials currently underway.
Projects being amortised
Projects not currently being
amortised
Connected
homes
£000
Wi-Safe 2
£000
Nano
£000
Mains-
powered
£000
Smoke-
sensing
products
£000
Manu-
facturing
setup costs
£000
Other
£000
Total
£000
Future
projects
£000
Connected
homes
£000
Total
£000
Grand
Total
£000
Cost
At 1 January 2020
Projects amortised in
2020
Disposals
Technical costs
capitalised
Employment costs
capitalised
Total additions
At 31 December 2020
Amortisation
At 1 January 2020
Charge
Impairment
Disposals
5,013
1,035
-
64
335
399
6,447
1,098
849
-
-
1,923
1,599
1,280
2,064
2,024
1,998
15,901
3,762
2,084
5,846
21,747
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(88)
-
-
-
-
-
386
-
386
-
1,035
-
(1,035)
(1,035)
-
(758)
(846)
-
-
-
450
335
785
(206)
83
628
711
(545)
(751)
(1,597)
299
382
832
724
1,352
1,687
1,023
1,734
2,519
1,923
1,599
1,280
1,976
2,410
1,240
16,875
4,267
1,527
5,794
22,669
836
203
489
-
300
153
-
-
327
134
-
-
1,326
139
428
(88)
508
794
320
86
2,358
179
1,416
-
(758)
(846)
1,562
5,957
249
545
794
-
-
(206)
43
-
-
-
-
6,751
2,358
1,416
(545)
(751)
(1,597)
-
43
8,928
At 31 December 2020
1,947
1,528
453
461
1,805
1,622
1,069
8,885
Wi-Safe 2
Wi-Safe 2 is the Group’s primary protocol that allows its interconnected alarms to communicate with one another. This is a core element of the Groups
wider Connected Homes strategy.
Nano
Developed in house by FireAngel’s wholly-owned subsidiary in Canada, Pace Sensors, the Nano went into production into fi nished CO detectors in
November 2016. This new generation of sensor is incorporated within the Group’s new Gen5 CO detectors range which are due to be released in late
2021.
Mains-powered products
Mains-powered products include FireAngel Specifi cation and FireAngel Pro ranges which were relaunched in 2019 and complete the Group’s product
suite.
Smoke-sensing products
This consists of FireAngel’s own-brand heat and optical product ranges.
Manufacturing setup costs
These are the costs incurred by the Group’s Technical and Project Management teams in preparing its Polish manufacturing partner to produce
FireAngel products and in preparing the Group’s Far East based supplier to produce replacements to the BRK range. Such costs have been included
within intangible assets and are being amortised over fi ve years.
Other projects
This includes FireAngel’s 10-year life CO alarm as well as well as internally developed testing equipment.
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 costs of completing the project, the time to market and an assessment of the potential sales and gross profi t opportunity using
the relevant technology.
Future projects
Gen 5 and Gen 6 are the next generation of the Group’s smoke, heat, CO and combined alarms. These new technologies will be a common platform
across all product types and will allow the Group 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 fi res, while further reducing the incidence of false alarms. They also provide 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. Gen 5 CO alarms are expected to be released in late 2021.
Connected homes technology
The Group continues to invest in its FireAngel Connected B2B and B2C offerings which include new gateway products, end mobile user apps and web
interfaces.
i
F
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n
c
a
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l
s
t
a
t
e
m
e
n
t
s
Carrying amount
At 1 January 2020
At 31 December 2020
3,915
4,500
1,087
1,299
395
1,146
% of total
33%
3%
8%
*Analysed in more detail on the following pages.
Projects being amortised
953
819
6%
738
171
1%
1,516
788
6%
436
171
1%
9,944
7,990
58%
*3,513
*4,224
31%
1,539
5,052
1,527
5,751
11%
42%
14,996
13,741
100%
The following is a high-level summary of the projects being amortised which are set out in the table above.
Connected homes technology
This technology connects FireAngel’s alarms to the cloud via its interface gateway technologies. Access to the cloud removes the need for social
landlords to access properties for maintenance as well as providing risk analysis on a property by property basis via the Group’s intuitive dashboards.
During 2020 the Group has continued to develop its B2B offering and successfully completed a number of trials with social housing bodies around
the UK. This technology is key to the Group’s growth in sales in the year, particularly in UK Trade and UK Retail, and is the cornerstone of the ongoing
trials with a number of UK Housing Associations. During 2020 an IoT rollout partnership was commenced with Ealing Council with signifi cant other
opportunities in the pipeline for 2021. This includes £2.1 million of purchased core software modules from Intamac.
66
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
67
Notes to the fi nancial statements continued
For the year ended 31 December 2020
18. Property, plant and equipment
Tooling
£000
Offi ce
equipment
£000
Motor
vehicles
£000
Fixtures &
fi ttings
£000
Right-of-use
assets
£000
Cost
At 1 January 2019
Additions
Disposals
At 31 December 2019
Additions
Disposals
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Depreciation charge for the year
Disposals
Effect of exchange rates
At 31 December 2019
Depreciation charge for the year
Impairment
Disposals
Reclassifi cation
Effect of exchange rates
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
3,670
724
(15)
4,379
155
(283)
4,251
156
789
-
-
945
874
188
(283)
-
-
1,413
89
(5)
1,497
117
(235)
1,379
1,119
122
(2)
-
1,239
124
-
(235)
31
4
1,724
1,163
3,434
2,527
258
216
7
-
-
7
-
-
7
4
2
-
-
6
1
-
-
-
-
7
1
-
435
28
(55)
408
5
(66)
347
240
47
(22)
(4)
261
34
-
(66)
(31)
-
198
147
149
The total depreciation expense of £1,429,000 (2019: £1,267,000) has been charged to operating expenses.
There are no material capital commitments at the balance sheet date.
The following table breaks down the net book value of right-of-use assets by category:
Carrying amount of right-of-use assets by category:
Land and buildings
Plant and machinery
Vehicles
768
1,022
-
1,790
283
(19)
2,054
-
307
-
-
307
396
-
(19)
-
(1)
683
1,483
1,371
2020
£000
1,303
39
28
Total
£000
6,293
1,863
(75)
8,081
560
(603)
8,038
1,519
1,267
(24)
(4)
2,758
1,429
188
(603)
-
3
3,775
5,323
4,263
2019
£000
1,464
11
8
Total carrying amount presented within property, plant and equipment
1,370
1,483
The following depreciation and interest have been charged to profi t and lost in the period:
Depreciation charge for the year included in operating expenses
Land and buildings
Plant and machinery
Vehicles
Total depreciation charge on leased assets
Interest expense for the year recognised in fi nance costs
Land and buildings
Plant and machinery
Vehicles
Total interest expense on lease liabilities
68
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
2019
£000
284
8
15
307
2020
£000
375
6
15
396
2020
£000
49
1
1
51
19. Shares in subsidiaries
Company
Cost
At 31 December
Accumulated impairment
At 31 December
Net book value
2020
£000
392
-
392
2019
£000
149
-
149
The share-based payments in 2020 totalling £243,232 were issued from the parent company. These related to the 2015 Long-Term Incentive Plan
nominal cost options awarded on 2 August 2019 and 30 November 2020, and option awards under the Company’s share matching scheme since May
2020.
The Group has two non-trading subsidiary companies, AngelEye Corporation and AngelEye Incorporated, both registered in North America. The
Company’s subsidiaries as at 31 December 2020 were as follows:
Name of subsidiary
FireAngel Safety Technology Limited
Pace Sensors Limited
AngelEye Corporation
AngelEye Incorporated
Registered
offi ce (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, USA
The results of all subsidiary undertakings are included in the consolidated accounts.
FireAngel Safety Technology Group plc has direct holdings in FireAngel Safety Technology Limited, AngelEye Corporation and AngelEye Incorporated. It
has an indirect holding in Pace Sensors Limited, via AngelEye Corporation.
Company impairment test
As part of the Group impairment test detailed in note 16, the Directors considered the need to impair the carrying value of the Company’s shares in its
subsidiaries. In common with the conclusion reached in the Group impairment test, no impairment was considered necessary in the period (2019: no
impairment).
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
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For the year ended 31 December 2020
In accordance with IFRS 9 ‘Financial Instruments’, as the subsidiary undertaking cannot repay the loan at the reporting date, the Company
has made an assessment of expected credit losses. Having considered multiple scenarios on the manner, timing, quantum and probability of
recovery on the receivables, a lifetime expected credit loss of £3.5 million has been provided. Further details are given in note 3.
The carrying value of amounts owed by subsidiary undertakings at 31 December 2020, net of provisions, was £29.9 million (2019: £25.9 million).
20. Inventories
Raw materials
Work-in-progress
Finished goods
Total gross inventories
Inventory provisions
Total net inventories
Group
2020
£000
133
267
6,790
7,190
(632)
6,558
Group
2019
£000
126
265
8,310
8,701
(2,397)
6,304
Company
2020
£000
Company
2019
£000
-
-
-
-
-
-
-
-
-
-
-
-
Pace Sensors Limited, the Group’s wholly owned subsidiary in Canada, manufactures CO sensors for use in the Group’s CO alarms. The CO sensors are
shipped to Pace Technologies, an independent third-party supplier based in China, for assembly into fi nished CO alarms, which are then purchased by
the Group in the UK. The Group does not maintain a provision for unrealised profi t in CO sensors within fi nished CO alarm stock, as CO sensors are sold
to an independent third party, Pace Technologies, before being acquired as fi nished CO alarm products and put into stock by the Group.
Stock impairment and disposal costs of £0.2 million were provided in the year as a result of a thorough review of product lines and future development
plans in line with the Group’s evolved strategy to become a more technology-led connected home solutions provider (2019: £1.7 million).
The inventory provision has decreased by £1.8m due to writing off £2.0m of stock that was provided for in previous periods coupled with the 2020 charge
of £0.2m detailed in note 7.
21. Financial assets
Trade receivables and other debtors
Cash and cash equivalents
Derivative fi nancial assets
Maximum exposure to credit risk
Group
2020
£000
9,430
1,466
-
Group
2019
£000
11,270
2,062
-
Company
2020
£000
Company
2019
£000
29,857
25,947
2
-
4
-
10,896
13,332
29,859
25,951
Maturity analysis of lease liabilities:
Land and buildings
Plant and machinery
Vehicles
Total lease liabilities
The Directors are of the opinion that whilst there are signifi cant 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 fi nancial 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
2020
£000
9,309
-
380
382
10,071
Group
2019
£000
10,316
Company
2020
£000
Company
2019
£000
-
-
-
29,857
25,947
1,307
450
12,073
-
-
-
-
29,857
25,947
The primary credit risk relates to customers which potentially may be unable to settle their debts with the Group. The average credit period taken on sale
of goods is 62 days (2019: 59 days). As at 31 December 2020 a credit loss provision of £66,000 (2019: £7,000) was held against the exposure of potential
bad debts.
The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade
receivables the Group considers any change in the credit quality of the receivable from the date credit was granted up to the reporting date. Factors
considered include a review of past payment history and the current fi nancial status of customers and the ongoing relationship with the Group. Credit
limits are kept under review to ensure customers are not exceeding agreed terms.
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 2020 was £7.3 million (2019: £7.9 million).
At 31 December 2020 £7.3 million (2019: £8.0 million) of trade receivables were denominated in sterling, £1.0million (2019: £0.5 million) in US dollars and
£1.0 million (2019: £1.8 million) in euros.
At 31 December 2020, cash of nil (2019: cash of £1.6 million) was denominated in sterling, a balance of £1.4 million (2019: overdrawn balance of £0.8
million) in US dollars, cash of £0.1 million (2019: cash of £0.1 million) in Canadian dollars and an overdrawn balance of £0.1 million (2019: cash of £1.2
million) in euros.
At the year end, all other fi nancial assets held were denominated in sterling.
Amounts owed by fellow group companies represent interest-free loans made to the Company’s main subsidiary undertaking. The gross loan advanced
by the Company is £33.3 million.
22. Derivative fi nancial instruments
Assets
Foreign currency forward contracts
Liabilities
Foreign currency forward contracts
2020
£000
-
693
2019
£000
-
429
Derivative fi nancial instruments are classifi ed 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 classifi ed as current.
The notional principal amounts of the outstanding foreign currency forward contracts at 31 December 2020 were US $15.5 million (2019: US $14.7
million), sterling of £nil million (2019: £3.6 million) and euro of €nil (2019: €nil).
Gains and losses on foreign currency forward contracts are recognised within cost of sales each month, as the forward contracts are utilised to mitigate
foreign currency risk associated with product sales and purchases in currencies other than the Group’s sterling functional currency.
23. Loans and borrowings
Bank term loan
Invoice discounting facilities
Group
2020
£000
2,623
2,539
Group
2019
£000
-
6,985
Company
2020
£000
Company
2019
£000
-
-
-
-
During the year, to fund the temporary increase in working capital due to COVID-19 the Company secured a £3.2 million loan under the Coronavirus
Large Business Interruption Loan Scheme, £0.9 million was repayable in instalments throughout 2020 and the balance of £2.3 million was repayable in
instalments in 2021. In December 2020, the Group agreed with the lender to amend the repayments so that £0.6 million was repaid in 2020 and £2.6
million was repayable in instalments in 2021. On 26 March 2021 the Group announced the refi nancing of this loan, further details can be found in note 33.
At 31 December 2020, the Group had the following lease liabilities
totalling £1.4 million:
Within 6
months
£000
6 months to
1 year
£000
1 to 5 years
£000
Over 5 years
£000
Total at 31
December 2020
£000
207
1
7
215
211
8
6
225
899
26
16
941
-
-
-
-
1,317
35
29
1,381
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24. Fair value disclosures
The total net loss on forward contracts recognised in the income statement for the year ended 31 December 2020 was £0.3 million (2019: loss of £0.6
million) and is included within cost of sales.
The table below analyses fi nancial instruments carried at fair value, by valuation method. The different levels have been defi ned 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 fi nancial 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
25. Provisions
At 1 January 2019
Charge in year
Utilisation in year
At 31 December 2019
Charge in year
Utilisation in year
At 31 December 2020
2020
£000
-
693
FireAngel
warranty
provisions
£000
BRK Brands
warranty
provisions
£000
2,932
2,605
(2,072)
3,465
1,167
(1,887)
2,745
134
-
(106)
28
-
(28)
-
2019
£000
-
429
Total
£000
3,066
2,605
(2,178)
3,493
1,167
(1,915)
2,745
70
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
71
Notes to the fi nancial statements continued
For the year ended 31 December 2020
The total warranty provision is classifi ed between less than one year and greater than one year as follows:
Current provision
Non-current provision
Total warranty provisions
Review of warranty provision
2020
£000
1,491
1,254
2,745
2019
£000
1,496
1,997
3,493
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 profi le
over time, the fi nal 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 fi rst identifi ed 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.
During the year, the FireAngel battery warranty provision was increased by £1.2 million to refl ect an increase in the terminal volume of units expected to
be impacted by the issue based on the level of returns currently being seen.
26. Trade and other payables
Trade payables
Accruals and deferred income
Other tax and social security
Group
2020
£000
7,033
3,654
2,147
Group
2019
£000
7,355
3,282
1,513
12,834
12,150
Company
2020
£000
Company
2019
£000
-
-
-
-
-
-
-
-
At 31 December 2020, £0.6 million (2019: £0.5 million) of payables were denominated in sterling, £0.2 million (2019: £0.2 million) in euros and £6.2 million
(2019: £6.6 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 72 days (2019: 76 days).
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
27. 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 to income 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 2020
Credit/ (charge) to income for the year
At 31 December 2020
2020
£000
(2,415)
2,415
-
2020
£000
-
-
-
Derivative
fi nancial
instruments
£000
Non-current
asset timing
differences
£000
32
(10)
22
2,332
61
2,393
2019
£000
(2,364)
2,364
-
2019
£000
(896)
896
-
Total
£000
2,364
51
2,415
Deferred tax assets
At 1 January 2020
Credit to income for the year
At 31 December 2020
Deferred
tax losses
£000
Derivative
fi nancial
instruments
£000
Share-based
payments
£000
2,354
17
2,371
1
-
1
9
34
43
Total
£000
2,364
51
2,415
As at 31 December 2020, there is an unrecognised net deferred tax asset of £1,869,602. This has not been recognised due to uncertainty as to when
the asset will be utilised by the Group. Whilst the Group expects a return to profi tability in the future, the generous deduction available for research and
development expenditure means that it is likely to be several years before these losses will need to be accessed.
28. Retirement benefi ts - defi ned contribution plan
The Group operates a defi ned contribution retirement benefi t 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 (2019: £0.2 million) represents contributions payable by the Group to the fund
for the year. Contributions amounting to £40,000 (2019: £nil) were payable at the year end.
29. Called up share capital
Ordinary shares in issue:
As at 1 January
Issue of shares in respect of capital raise
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 capital raise
Issue of shares in respect of share options exercised
As at 31 December
Company
2020
Number
‘000
75,935
50,623
-
Company
2019
Number
‘000
45,905
30,000
30
126,558
75,935
£000
1,519
1,012
-
2,531
£000
918
600
1
1,519
The Company has one class of ordinary share which carries no right to fi xed income.
On 8 April 2020, the Company raised £6.1 million (gross) through the issue of 50,623,480 new ordinary shares of 2p nominal value each at an issue price
of 12p per share. The premium on issue was 10p per share amounting to £5.1 million. This was credited to the share premium account. Share issue
expenses amounted to £0.6 million. These were debited to the share premium account.
30. 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 profi t and loss net of distributions to owners.
The loss for the fi nancial year dealt with in the Company was £1,591,000 (2019: loss of £1,182,000). As permitted under Section 408 of the Companies
Act 2006, a separate profi t and loss account has not been presented for the Company.
31. Share-based payments
The share-based payments charge of £243,232 (2019: £37,000), included in the consolidated income statement within operating expenses, relates to
the 2015 Long-Term Incentive Plan nominal cost options awarded on 2 August 2019 and 30 November 2020, and option awards under the Company’s
share matching scheme since May 2020.
Outstanding at 1 January
Exercised during the year
Granted during the year
Expired or lapsed during the year
Outstanding at 31 December
2020
2019
Options
‘000
3,968
-
6,190
(870)
9,288
Weighted
average
exercise price
Options
‘000
Weighted
average
exercise price
30p
-
2p
3p
14p
684
(30)
3,400
(86)
3,968
99p
2p
2p
200p
30p
72
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
73
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Notes to the fi nancial statements continued
For the year ended 31 December 2020
Details of the share options outstanding at the end of the year are as follows:
Grant date
Outstanding at
start of the year
Recategorised
during the year
Exercised
during the year
Lapsed during
the year
Granted during
the year
Outstanding at
end of the year
Expiry date
Exercise price
Options under LTIPs
Directors’ share options
25/04/2014
02/08/2019
30/11/2020
Employee share options
25/04/2014
02/08/2019
Options under
LTIPs
250,000
(125,000)
2,500,000
(250,000)
-
-
317,612
125,000
900,000
250,000
3,967,612
Options under share matching scheme
Directors’ share options
01/06/2020
03/07/2020
18/12/2020
Employee share options
01/06/2020
19/06/2020
03/07/2020
Options under
share matching
scheme
Total options
-
-
-
-
-
-
-
3,967,612
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(750,000)
-
-
125,000
28/04/2024
200p
1,500,000
02/08/2029
-
5,000,000
5,000,000
30/11/2030
(5,500)
(115,000)
-
-
437,112
28/04/2024
1,035,000
02/08/2029
(870,500)
5,000,000
8,097,112
-
-
-
-
-
-
-
281,514
281,514
01/06/2030
25,000
49,660
239,838
544,904
25,000
03/07/2030
49,660
18/12/2030
239,838
01/06/2030
544,904
19/06/2030
49,473
49,473
03/07/2030
1,190,389
1,190,389
(870,500)
6,190,389
9,287,501
2p
2p
200p
2p
2p
2p
2p
2p
2p
2p
As at 31 December 2020, a total of 9,287,501 options were outstanding which had an average exercise price of 14p, and a weighted average remaining
contractual life of 9.1 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 awards over 1.46 million shares 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.
2019 share options award
On 2 August 2019, the Company granted awards over a total of 3.4 million shares under its 2015 Long-Term Incentive Plan (‘LTIP’). Under the LTIP,
selected employees are entitled to exercise an option to receive a certain number of shares at any time after a three-year vesting period, at a cost to the
employee of the nominal value of the shares. The number of shares awarded at the end of the three-year period is dependent on the achievement of
certain performance criteria.
Vesting of the LTIP awards is dependent on achievement of total shareholder return (‘TSR’). If TSR on Shares is 200% or more at the end of three years
following the award, all of the shares awarded will vest. If TSR is 100%, then 25% of the awarded shares will vest. Between these points the number of
shares that vest will be pro-rata. If TSR is less than 100% then no shares will vest.
2020 share options award
On 30 November 2020, the Company granted an annual award over 5 million shares under its 2015 Long-Term Incentive Plan (‘LTIP’) to the Executive
Chairman, John Conoley. Under the LTIP, he is entitled to exercise an option to receive shares at any time after a three-year vesting period, at a cost to
the employee of the nominal value of the shares. The number of shares awarded at the end of the three-year period is dependent on the achievement of
certain performance criteria.
74
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Annual Report and Accounts 2020
Vesting of the LTIP awards is dependent on achievement of total shareholder return (‘TSR’). If TSR on Shares is 300% or more at the end of three years
following the award, all of the shares awarded will vest. If TSR is 100%, then 25% of the awarded shares will vest. Between these points the number of
shares that vest will be pro-rata. If TSR is less than 100% then no shares will vest.
The fair value of these options was determined using a monte-carlo model and principal input assumptions into that model include the exercise price
2p, expected volatility of 60.0%, option life 3.5 years. Volatility was determined with reference to the movement in the Company share price over 5 years
starting from November 2015.
Employee share matching scheme
In May 2020, the Board implemented an employee share-matching incentive scheme. The scheme awards options to acquire shares at nominal
value on a one-for-one basis with any shares acquired in the market by the employee, their spouse or civil partner, subject to the discretion of the
Board’s Remuneration Committee. There is no vesting period or performance criteria for the options under the scheme, therefore the option to acquire
shares vests immediately and becomes fully exercisable. It is the Board’s intention to close the share matching scheme shortly after the release of the
Company’s audited fi nal results for the year ended 31 December 2020.
32. Related party transactions
Balances and transactions between the Company and its subsidiaries were as follows:
Drawdown of loans and borrowings (principal amount)
Repayment of loans and borrowings (principal amount)
Impairment of intercompany loan (IFRS 9)
Cash transfer
Total transactions between Company and subsidiaries
Remuneration of key management personnel
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.
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
Defi ned pension contributions
Share-based payments
2020
£000
-
-
(1,586)
5,496
3,910
2020
£000
1,009
69
205
157
2019
£000
1,300
(7,000)
(1,155)
5,459
(1,396)
2019
£000
1,319
74
113
37
1,440
1,543
2020
£000
239
14
253
2019
£000
227
-
227
During 2020, the Company granted awards over 5 million shares in total to one Executive Directors under its 2015 LTIP. These options have an exercise
price of the nominal cost of the shares of 2 pence per share and have 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 shareholder return targets. The element of the share-based payment charge relating to
the Director is £92,834.
33. Post balance sheet events
On 26 March 2021 the Group announced it had refi nanced its existing Coronavirus Large Business Interruption Loan Scheme (‘CLBILS’). As the Group’s
revenue dropped below £45.0 million, the CLBILS (which reduced to £2.0 million at the end of March 2021) have been refi nanced under the Coronavirus
Business Interruption Loan Scheme (“CBILS”) with HSBC UK. The new loan of, in aggregate, £3.7 million (“New Loan”) comprises a CBILS loan of £3.2
million and an additional Receivables Finance CBILS of £0.5 million. The New Loan, which will be used to pay off the balance of the CLBILS, has a term
of 6 years with the fi rst year being free of interest and capital repayments and an interest rate thereafter of 3.99 per cent. over the Bank of England’s base
rate.
On 7 April 2021 the Group announced it had signed a long term strategic partnership agreement with a German energy effi ciency service provider (the
“Partner”) to provide a fully funded research and development programme for a new generation smoke alarm. This next generation alarm will offer
additional, innovative safety and environmental features to meet the increased demands of landlords as well as tenants. Both parties will have the
right to use any foreground IP resulting from development of the new smoke alarm. Pursuant to the terms of the agreement, the Partner will fund the
development phase of the next generation smoke alarm. In addition, FireAngel will receive a fee of £1.4 million for use of its background IP during the
development phase. Thereafter, once production of the next generation smoke alarm has commenced, a royalty fee per product will be payable to
FireAngel with a multi-million volume fee agreed for the initial 30 months. Manufacturing of the next generation smoke alarm is expected to commence in
early 2024. It is forecast that 7 million new devices will be produced with a minimum of 3.5 million expected to be produced in the fi rst 2.5 years and that
during the life of the partnership, the Company should earn up to €21 million in royalty, management and support fees.
On 30 April 2021 the Company announced an equity fundraising of £9.0 million (net of expenses) in order to provide the Group with the resources to
deliver the strategy and return to profi tability.
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
75
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Other information
Corporate directory
REGISTERED NUMBER
3991353
COMPANY SECRETARY
Mrs ZA Fox
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
SOLICITORS
Pinsent Masons
30 Crown Place
London
EC2A 4ES
NOMINATED ADVISOR AND BROKER
Shore Capital & Corporate Limited
Cassini House
57-58 St James’s Street
London
SW1A 1LD
REGISTRAR
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
BANKER
HSBC UK Bank plc
3 Rivergate
Temple Quay
Bristol
BS1 6ER
Shareholder information
SHAREHOLDER ENQUIRIES
SHARE PRICE INFORMATION
INVESTOR RELATIONS
Any shareholder with enquiries should, in the
fi rst instance, contact the Company’s registrar,
Neville Registrar, using the address provided in
the Corporate directory.
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.fi reangeltech.com.
Vanguard Centre
Sir William Lyons Road
Coventry
CV4 7EZ
Telephone: 024 7771 7700
Email: info@fi reangeltech.com
Website: www.fi reangeltech.com
FINANCIAL CALENDAR
Financial year end - 31 December 2020
Full year results announced - 30 April 2021
Annual General Meeting - 16 June 2021
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FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
FireAngel Safety Technology Group plc
Annual Report and Accounts 2020
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www.fireangeltech.com
info@fireangeltech.com
024 7771 7700