Although it has just slumped very rapidly this share having reviewed its financial position, new product and sales plan taking it to market I think there is good value at this price.
The skeletons are out of the closet now and it should get stronger
" Investors would do well to consider what "normal" means after smoke and carbon monoxide alarm supplier LSE:SPRP:Sprue Aegis promised trading would return to normal in 2017.Full-year results in the year to December 2015 were anything but normal. ..."
Read Stockdale Securities's note on SPRUE AEGIS, out this morning, by visiting https://www.research-tree.com/company/GB0030508757
"Sprues 2015 final results have been overshadowed by the £5.5m warranty provision and knock-on impact on our 2016 and 2017 profit forecasts. Sprue is testing a replacement battery in the alarms it is targeting for the German market where legislation has been passed requiring some 10m homes to have smoke alarms by end 2017. On the back of the lower profit forecasts, our DCF-derived TP is now 200p (previously 400p) but we restart our Buy rating, given the strong net cash position, dividend and long-term growth potential ..."
If I remember correctly, the main part of their output which they buy from a US company and distribute in agreed territories eg Europe. The manufacturing plant recently changed to a new facility in China - from another one in China. I seem to remember there was some uncertainty at the time about whether the move would go smoothly, and I think it did.
If we all sold those shares which were influenced by manufacturing in China we would probably have nothing in our portfolios! I think the problemn is with investing in Chinese companies on our stock exchanges.
Yes, quite agree smilingmickey1. It is indeed surprising that the battery component supplier is not paying for the problem they have created but has effectively passed on the cost of their mistake to Sprue. Surely Sprue should be explaining to shareholders how they plan to recover this cost? I think this is symptomatic of the underlying problem which is that Sprue is not in control of its own business and that its Chinese suppliers can do what they like with impunity. I think you are effectively investing in a Chinese business if you invest in Sprue and Chinese businesses do not have a good record on AIM so I have sold.
A double whammy. Poor results this year gone - 2015 - as a result of the battery issue, and poor results next year - 2016 - as a result of poor sales. Don't know when the bottom will be reached for this one because there will now be a confidence issue both for consumers but also particularly for distributors who don't want to be bothered with issues with sales from their outlets on behalf of the manufacturer. When you have a problem you take something back to where you bought it, don't you? They talk about new products etc but their competitive edge is not that great, and they have this strange relationship with the main US supplier of many of their products, with manufacturing facilities mainly in China.
A really difficult one to value this going forward. May have much further to fall yet.
All is not well with spruce. We have gone from triumph to disaster in a very short period.
I exited theses shares a short while ago (at a loss) with concerns about the big price increases they would be incurring as a result of sterling and euro weakness v dollar but avoided the big drop today.
However the latest rns indicates more deep seated problems. One has to ask why the battery component supplier who supplied the defective products are not sharing the cost problem.
Sales seem to have collapsed. Maybe there will be some write down in stock values to come.
Read Stockdale Securities's note on SPRUE AEGIS, out this morning, by visiting https://www.research-tree.com/companies/uk/electrical_and_electronic_equipment/sprue_aegis_plc
"As a consequence of recently identifying an issue with certain batteries supplied by a third party supplier, Sprue has substantially increased its warranty provision at 31 December 2015 to £6.8m (from £1.3m previously and £0.9m in 2014). As this will largely be an operating expense, Sprue now expects adj. EBIT for 2015 to be £7.3m rather than the £12.1m it had previously guided. However, until the final audited results are released next week we are suspending our forecasts, target price and recommendation "
Sprue (AIM: SPRP), one of Europe's leading home safety products suppliers, announces that the Company has recently identified an issue in 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 is keen to stress that this is not a safety critical issue.
As a result, to support the Company's customer service obligations, the Board proposes to increase the Group's warranty provision as at 31 December 2015 by £5.5m to £6.8m (2014: £0.9m). Consequently, further to the Company's trading update released on 20 January 2016, the Board now expects the Company's operating profit* for the year ended 31 December 2015 to be approximately £7.3m compared to the previously announced expected operating profit* of £12.1m.
Yes, 260p may be wishful thinking, but chart looks pretty negative, and prices often overshoot. As a long term investment 300p is attractive if you consider 50p per share cash, and 2014 eps approx 18p. I'm not sure you can rely on 2015 earnings if it was a bumper year, due to the sales into France being driven by new legislation. Overall this is great company. I am only short term negative on it.
My cash comparison was year on year. There is an increase of £6.5 million cash despite an increase in inventory holding value of £7.3 million.
Second half sales for 2015 were higher than first half 2014 but below the levels experienced when they were meeting the French requirement in late 2014/early 2015, suggesting underlying growth of sales.
I guess my point is that one can envisage an increase in their cash holdings in 2016 given the planned inventory reduction even if sales are not as strong as 2015. The current divi is well covered and the Company will be awash with cash if it does not make an acquisition.
Would be lucky to get some at 260p before the results are published IHMO.
Net cash was actually down from 29m as of 2015 interim. Cash went to increase stock in anticipation of moving one of their factories in china, which occurred ahead of schedule, and without problems. Cash still good at 22m. Stock should normalise at 2016 year end.
Possibility of a special divi, or maybe an acquistion but not guaranteed.
Problem is 2015 was a bumper year given the sales in France which they have said have softened. Interims are probably going to state a decrease in EPS, as 2016 trades inbetween 2014 and 2015 figures, and they have suggested 2016 sales will be H2 weighted, which adds some risk to holding this for the interim. I would like to see it back at 2.60.
Sprue will have a large cash pile when it reports it's end year results.
Company advised it is Looking for acquisitions at the right price. Could be a big divi hike if nothing transpires as the major shareholders will be pressurising the board if the cash continues to accumulate.
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