FireAngel (FA.) – AGM Statement
It isn’t only the ticker of this company that is colourful – they have recently suffered multiple manufacturing issues, cancellation of a distribution contract and legal action (edit: more accurately: a contractual dispute). This has precipitated management change and a March rescue fund raising.
Today they provide an update on trading during the majority of their first half, indicating that “overall” it is currently slightly ahead of budget after strong growth in UK trade revenue. Shareholders may be concerned about profitability given that trade has traditionally been lower margin than retail, with the strong growth of higher-margin interconnected alarms still from a low base. Conspicuously absent is any comment on Germany where sales have been volatile in the past with many hoping for a rebound driven by their replacement cycle.
Although they mention a focus on continuing “operational improvements and margin enhancement”, there is no explicit mention of progress at the Flex manufacturing facility that has suffered from ramp-up delays, and, more recently, high costs.
Perhaps some will be relieved by the lack of bad news from this accident-prone company. Personally, after having spent a considerable amount of time over the past couple of days reviewing FireAngel’s history I am underwhelmed by the short-term investment case. I will be putting the questions implied above and others to the board in person at the AGM. If you have any questions you would like me to ask then please leave them in comments below.
I have small position.
Mears Group (MER) – H1 Trading Update
Mears provide support services to the Housing and Care sectors in the UK. Notably they recently signed a contract with FireAngel to provide connected alarms. They carry some debt and suffered significant cash outflow over the past two years, but are in the process of derisking their business model. They look an interesting prospect in themselves. No position.
Gear4mustic (G4M) – FY Results
Paul Scott will doubtless cover this later here, but perhaps my opinion will be different. Many investors will be pleased with revenue growth of 48%. I am pleased by their restatement of the need, and their confidence in their ability, to improve margins while maintaining strong revenue growth. However, I do not share their confidence at this stage.
A return to 2017 operating margins of 4.7% and ROCE of 20% would put them on a PE of 10 with acceptable quality metrics. If they can do this and continue to grow at even a third of their recent rate then the shares look good value. I have a minimal holding that I might be tempted to sell in order to tidy up my portfolio.