FireAngel Safety Technology Group – chance to buy into a company before it starts to turn a profit
On Tuesday of next week (21st June) a small technology company will be holding its AGM.
That £20.37m capitalised enterprise is now at a very important stage in its development.
After years of operating losses, the Coventry-based FireAngel Safety Technology Group (LON:FA.) is now on the verge of turning into significant profitability.
At next week’s AGM John Conoley, the group’s Executive Chairman, is sure to be sounding very positive about the company’s current year and its future prospects.
Especially so considering the number of recently announced progressive developments made by the security and protection services company.
It has taken time
FireAngel started in 1998, orginally under its old name of Sprue Aegis, and after a huge amount of product testing and validation work, the business launched the world’s first plug-in smoke alarm.
The company, which floated on AIM in 2014, changed its name in 2018.
That ground-breaking design was gradually extended to the current comprehensive product range of smoke, carbon monoxide (CO) and wireless products sold under its principal FireAngel brand.
It sells its products through distributors and retailers to the retail, trade, DIY, fire and rescue service, and utilities markets.
The company’s market leading smoke detectors, carbon monoxide detectors and other home safety products make it one of Europe’s leading suppliers.
Forefront of technology
It is at the forefront of safety-critical connected homes technology, which is very important for housing authorities, landlords and homeowners alike.
Its ranges of smoke, heat and CO alarms feature Smart Radio Frequency (RF) technology enabling all devices to connect wirelessly, significantly removing the time-consuming requirement for wiring, channelling or trunking.
A feature is that these are the only alarms with proven low-carbon footprints producing on average 95% less carbon dioxide compared with other leading mains-powered alarms.
The group has over 100 registered technology Patents and with others pending.
The group’s brands
It has 6 brands which the company targets at different markets.
FireAngel is the UK’s no 1 retail brand and is the choice of over 90% of the UK’s Fire and Rescue Services.
FireAngel Connected is the solution for landlords preparing UK social housing for the future with remote monitoring, scalable networks and actionable insight and data.
FireAngel Specification offers the option to interlink multiple alarms and create a hybrid network of battery and mains-powered devices, the Specification product range is supporting the UK Trade market with adaptable protection.
FireAngel ProConnected gives UK homeowners the ablity to monitor and manage their safety network on the go with easy testing through their mobile device or via Just Ask Alexa!
AngelEye, which was launched in 2012, is a leading brand in smoke and CO alarms in the French DIY market.
And finally, Pace Sensors is FireAngel’s wholly owned subsidiary in Canada. Pace Sensors’ CO sensors are used within all FireAngel, AngelEye and Pace Sensors’ CO detectors.
Being Connected is the future
The ranges allow their connectivity to be upgraded to communicate information outside the property by installing a FireAngel Connect Gateway.
The system features a patented technology to identify and highlight dangerous patterns of behaviour that increase fire risk.
It is very hopeful of scoring well as its looks to commercialise the group’s investment in its ‘Connected’ technology.
The group is also working with other significant companies to develop products on their behalf, using the FireAngel technology.
The Techem Contract
One such deal is that with Techem Energy Services GmbH, a milestone of which was declared in early May.
Techem is one of the leading service providers for ‘green’ and ‘smart’ buildings, for which FireAngel is developing a new generation alarm primarily for the German market.
Boss John Conoley is excited about this important project for Techem – which focuses upon energy efficiency along the real estate value chain, with the German company supporting 12 million properties in 20 countries.
At the beginning of this month the group launched a new German website, at the time Conoley stated that
“Germany continues to be a growing opportunity for FireAngel, with over ten million devices sold into the country to date. Our connected product offering is well respected and fitted by both homeowners and installation and maintenance specialists, and we expect this to continue to develop as we move through the next few years, with the new website playing a crucial role in this growth.”
The site has been designed to offer an enhanced user experience to both professional and end users. It provides key guidance around local legislation and regulations, and details which of FireAngel’s solutions provides the correct, compliant level of protection.
European market holds big potential
In the last trading year to end December 2021 some 68.7% of the group’s £43.5m turnover was through sales into the UK market, while 27.2% went into the Continental European marketplace, with the balance going to the Rest of the World.
It is the group’s aim to become the European market leader selling FireAngel branded products of choice in each of the markets that it serves.
The company, which has well established third-party distributors across Continental Europe, is currently Number 1 in 4 out of its 5 key segments in Europe.
Good professional investor support
With some 181m shares in issue there are some notable institutional holders on the group’s share register.
Largest holder is BRK Brands (UK) with 23.4%, Downing Ventures, with 16.4% of the equity, followed by Canaccord Genuity Wealth with 11.6% and BGF Investment Management holding 10.1%.
Other bigger holders include Killik & Co, KW Investment Management, Hargreaves Lansdown Stockbrokers, Scotia McLeod ITF Euro Credit Investments and Euro Credit Investments.
Two of the group’s directors have useful positions, Nick Rutter, one of the co-founders, has 2.31% and Graham Whitworth holds 2.11%.
Recent Trading and Estimates
Last year the group was a real victim of the Covid-19 hassles and suffered from component shortages across the board.
The year to end December 2021 showed sales up from £39.9m to £43.5m, which helped to significantly reduce its operating losses down from the £5.7m adjusted figure for 2020 to a lower loss of £3.5m.
The shortages led to just 4.3m FireAngel products being sold, the group has sold over 80m units to date.
This year has already started well, with the visibility of its key components coming into proper supply, whilst the demand for the group’s products has been growing at a pace.
There is even a current order backlog of some 1.3m units to work upon.
However, we already know that the company has aimed at a much higher gross margin for the current year, with the target of 30% plus against 23.2% last year.
Conoley has already stated that the group will be EBITDA positive in 2022, so the profits are just around the corner.
Analyst Rob Sanders at the group’s brokers, Shore Capital, has current year estimates of £54.3m sales, leading to an almost miniscule £0.3m loss.
For 2023 he goes for £61.4m sales, £2.8m of profits, and earnings of 1.4p per share.
Going into 2024, when Techem’s new alarm product will be developed and into manufacture, Sanders looks for nearly £70m of sales, a 67% improved profit of £4.7m,
which would be worth 2.4p per share in earnings.
The 2025 year should prove to be significantly up on those estimates.
Looking at the shares
Apparently, there is no doubt that this ‘tiddler’ is now firmly on track to evolve as a highly profitable technology company.
We can expect more items of good news to come from the group over the next year or so, in which time I believe that estimates will be upgraded.
The shares were up to 27.2p in April last year, before the shortages became evident.
The lowest level was 10.10p in March this year, before the 2021 results were announced and the series of good news items took them up to 17.20p early last month.
The recent market rout now gives investors the opportunity to get aboard and participate as the group progresses swiftly ahead in sales, profits and share price.
At the current 11.25p the shares look extremely attractive for ‘penny stock’ investors prepared to take a year’s view.
A doubling in price in that period may well get underway after next week’s AGM, so we await a positive Trading Statement from the company.