Home safety products firm predicts return to profit

Graham Whitworth, executive chairman of Sprue Aegis

Home safety products supplier Sprue has said it anticipates a return to first half profitability after seeing an improvement in sales during the first six months of its year.

In a first half trading update, the Coventry company said it expected to report sales of approximately £26m (H1 2016: £25.9m) and operating profit of approximately £1.5m (H1 2016: operating loss of £0.9m before share-based payments charge) – although this is before a share-based payments charge of £0.2m (H1 2016: £0.3m).

“The strong return to profitability has been achieved through a significant improvement in gross margin and a net reduction in overheads,” said the company.

In an encouraging statement to investors, it added it remained well positioned to deliver full year adjusted operating profit in line with market expectations.

The company said the new manufacturing and distribution arrangements it announced in March were continuing to progress well and the board believed these would strengthen the group’s offering in key markets across Europe.

The board said the measures would also greatly enhance the group’s ability to accelerate growth and maximise shareholder value in the medium to longer term.

The firm is slowly recovering after a traumatic 2015 and a difficult start to 2016 during which full year sales were down from £88.3m to £57.1m, with adjusted operating profit falling to £2.2m (2015: £12.8m).

The fall in sales was primarily due to reduced demand in France (post- implementation of new smoke alarm legislation in 2015) and delays in product certification in Germany.

Nevertheless, the business was much stronger in the second half of the year with total sales in Germany and UK Retail significantly ahead of the previous year. This trend has continued into the first half.

The company said it would update further when it issued its interim results on September 25.

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