Smoke alarm firm says sorry to shareholders after meltdown
COVENTRY-based smoke alarm supplier Sprue Aegis has issued an apology to shareholders after the firm’s shares went into meltdown following a profit warning due to warranty issues with its devices.
The company’s shares went into freefall earlier this month when it issued the profit warning and added that it had had to increase the group’s warranty provision by £5.5m.
On April 15 the firm’s shares stood at 274p but this fell by more than half the following day and has yet to recover. At close of trading yesterday the price stood at 122.5p.
The company said it had identified a problem with certain batteries supplied by a third party supplier that may cause a premature low battery warning chirp in certain of its smoke alarm models sold in the UK and in Continental Europe.
The board said it was keen to stress that this is not a safety critical issue.
The problem is that most modern smoke alarms are sealed and are sold with a guaranteed lifespan. If the batteries don’t last as long as claimed then the devices are not worth as much.
Sprue is now worried about an increase in warranty claims due to the battery problems.
To support the company’s customer service obligations, the board has proposed to increase the group’s warranty provision as at December 31, 2015 by £5.5m to £6.8m (2014: £0.9m).
Consequently, the company said it now expected its operating profit for the year ended December 31, 2015 to be approximately £7.3m compared to the previously announced £12.1m.
In the firm’s full year results statement today, executive chairman Graham Whitworth said: “I apologise to all stakeholders for the impact the battery warranty issue is having and wish to reassure all customers that we will meet all of our customer service obligations to replace products that exhibit a premature end of life battery warning.
“We have included in these financial results what we consider to be a conservative assessment of the potential liability and we will trade our way through the potential disruption and will support our customers.”
He said the firm had introduced additional screening processes on the production line at CICAM, its principal supplier, prior to the battery being fitted into the finished smoke alarms to prevent the problem happening again.
The problems overshadowed what had, until earlier this month, been a promising year for the firm with revenues up by a record 35% to £88.3m (2014: £65.6m). Operating profit increased to £12.8m (2014: £10.4m).
The firm is hoping the situation will improve in the second half.
