Fire Angel Safety Technology Group (LON:FA.) shares sank after it sounded the alarm over rapid revenue growth that was causing “stress” to a business that was “not yet efficient enough to benefit from that growth”.
Bookending the year with another profit warning after beginning 2019 in similar style, the AIM-listed fire safety company said it expects annual revenues of between £44.5mln and £45mln in the calendar year, with an underlying operating loss amounting to between £2.6mln and £2.9mln.
The smoke alarm maker, which has been looking to shift towards becoming a technology-led provider of 'connected home' safety products, had been guiding to a profitable second half.
But it said the rapid 20% sales growth this year had “stressed the company's processes from production right through to customer fulfilment”, saying that “this has had the effect of repeatedly shaving small amounts of both revenue and margin from the full year achievement”.
Another issue was the sales mix in the final quarter of 2019, where there has been lower revenue from Europe and trade business, partly offset by lower-margin retail business, which led to additional costs from reworking certain stock lines and more costly freight charges.
Still seeing “significant” opportunity to improve profit margins, the board reduced its 2020 underlying operating profit outlook but left its 2021 market guidance intact.
John Conoley, executive chairman, called it “disappointing for everyone to have missed the profitability target after so much hard work”.
“We are strongly focussed on gross margin, EBITDA and operational cash generation in 2020 and beyond, and our current experiences with connected technology field trials underpin our optimism for future profitable growth,” he added.
Shares lost a quarter of their value, down 25% at 9.5p in mid-morning trading on Monday.