Home safety company sounds alarm on 2016 profits

HOME safety products supplier Sprue Aegis has sounded a precautionary warning alarm of its own by announcing it now thinks its 2016 profits will be lower than expected.

The Coventry-based company has agreed to amend its deal with its key supplier DTL. The changes have retrospectively come into effect from January 1, and the company now forecasts its operating profit for 2016 will be slightly below market expectations at around £8.3m.

Shares fell more than 10% in early trading, and were close to an 18-month low.

Sprue has agreed to accept “modest product price increases” to reflect a share of the incremental costs incurred by DTL following “significant investment” in its high technology manufacturing facility and the effects of increases in Chinese labour costs.

It has also agreed to “share equally” the impact of Sterling’s depreciation against the US Dollar from a previously fixed rate of GBP/US Dollar 1.62 exchange rate, and agreed to an annual retrospective foreign exchange rate rebate mechanism.

Graham Whitworth, executive chairman of Sprue, said: “Despite the product on-cost, this is an important agreement for the Group with its key supplier DTL.

“The new terms allow Sprue to share equitably the impact of changes in production volumes and movements in the GBP/US Dollar exchange rate with DTL whilst ensuring its key supplier has the capacity and an appropriate investment base to deliver the products to support Sprue’s strategic plan.”

DTL is owned by Jarden Corporation, which is also a substantial shareholder in Sprue.