The alarm has passed at Sprue Aegis

Sprue designs and develops own-brand smoke and carbon-monoxide (CO) alarms and outsources manufacturing. It also distributes these products internationally along with other third-party products. A year ago its share price halved after it identified that some of its smoke alarms were giving a premature low-battery warning signal. The potential damage, particularly from a reputational perspective, could have been devastating, but management acted quickly and decisively to provide redress to customers and shore-up confidence by switching the problem batteries to ones supplied by highly regarded brand Panasonic.

The issue resulted in Sprue putting in place a £6.8m warranty provision to ring-fence the impact on the future profits. Last year £2.2m of the provision was used with the rest of the cash impact expected over the next four to five years. This exacerbated several other 2016 hits, notably: an anticipated sharp contraction in French sales following a regulation-driven surge in 2015; dollar-driven input cost increases (an ongoing problem); and product certification delays in Germany.

But there are now reasons hope for improvements. German demand rose strongly during the second half - up 162 per cent - and is expected to be buoyed over coming years as new home-safety regulation is rolled out on a staggered regional basis. Demand in the UK is also strong.

What's more, Newell Brands, which manufactures for Sprue as well as supplying it with its products for distribution (for a £2.9m annual fee paid by Sprue) has given notice on both agreements with termination set for end of March next year. Sprue was clearly ready for Newell's move as it immediately announced it would link with US multinational Flex to manufacture its own products in Poland - a location nearer its key markets - and enter into a supply agreement with a leading manufacturer based in the Far East to replace the Newell products. Sprue believes the new arrangements will allow it to significantly increase scale and value.

As well as regulatory-driven growth and increases to the current low level of CO alarm use in Europe, the 'internet of things' provides Sprue with a potentially large opportunity. The move into remotely-monitored smart devices will be aided by last year's £2.8m acquisition of source code with development rights from Intamac Systems. Smart alarms also opens up highly lucrative opportunities from public housing associations and municipal bodies.