TIDMKETL
RNS Number : 8103Z
Strix Group PLC
23 September 2020
23 September 2020
Strix Group Plc
("Strix" or the "Group")
Interim results for the 6 months ended 30 JuNE 2020
'Another resilient trading performance'
Strix (AIM: KETL), the AIM listed global leader in the design,
manufacture and supply of kettle safety controls and other
complementary water temperature management components, is pleased
to announce its unaudited interim results for the six months ended
30 June 2020.
FINANCIAL SUMMARY
Adjusted results(1)
---------------------------
H1 2020 H1 2019 Change
-------- -------- -------
GBPm GBPm %(3)
Revenue 34.7 43.9 -21.0%
Gross profit 13.8 16.7 -17.6%
EBITDA(2) 13.6 14.9 -8.6%
Operating profit 10.6 12.2 -12.5%
Profit before tax 10.1 11.5 -12.5%
Profit after tax 9.8 10.9 -9.6%
Net debt 36.9 33.4 +10.5%
Net cash generated from operating
activities 8.3 10.9 -23.8%
Basic earnings per share 4.9p 5.7p -14.0%
Diluted earnings per share 4.9p 5.4p -9.3%
Interim dividend per share 2.6p 2.6p 0%
1. Adjusted results exclude exceptional items, which include
share based payment transactions, other reorganisation and
strategic project costs. Adjusted results are non-GAAP metrics used
by management and are not an IFRS disclosure. A table which shows
both Adjusted and Reported results is included in the Chief
Financial Officer's review.
2. EBITDA, which is defined as earnings before finance costs,
tax, depreciation and amortisation, is a non-GAAP metric used by
management and is not an IFRS disclosure.
3. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
4. Adjusted net debt excludes lease liabilities recognised in accordance with IFRS 16.
FINANCIAL HIGHLIGHTS
-- Gross profit margin increased to 39.7% (H1 2019: 37.9%) due
to cost efficiency measures in excess of GBP3m delivered during
H1
-- Adjusted net debt in line with expectations at GBP36.9m
following additional drawdown in 2020 (H1 2019: GBP33.4m), 1.08x
EBITDA calculated on a trailing twelve month basis
-- Net cash generated from operating activities decreased to
GBP8.3m (H1 2019: GBP10.9m) due to reduction of sales in H1
-- Refinancing of existing revolving credit facility, increasing
headroom to GBP23.1m, negotiated with favourable terms in line with
our previous facility
-- Interim dividend payment of 2.6p (H1 2019: 2.6p) per share to
be paid on 30 October 2020 reflecting Board's confidence in current
trading
-- Adjusted profit after tax decreased by only 9.6% versus a top
line decrease of 21% following stringent cost efficiency measures
in H1
FULL YEAR OUTLOOK
-- Another solid performance with profitability remaining flat
versus prior year, supported by record sales in Q3 based on
replenishment of pipe-line stock and the normal seasonal uplift
-- Aqua Optima business showing full year forecasted double
digit growth ahead of 2019, with sales in the UK, Europe, Far East
and Latin America all contributing to strong performance
-- 14 new products ready to be launched by the end of 2020
-- New Factory progressing well in Guangzhou, remaining on
target to be fully operational by August 2021
-- The Board remains committed to delivering a full year dividend of 7.7p in line with 2019
STRATEGIC HIGHLIGHTS
-- Acquisition of Laica S.p.A, an Italian company focussed on
water purification and the sale of small household appliances for
personal health and wellness. The Acquisition is subject to
approval from the Council of Ministers in Italy
-- Global market share stable despite global pandemic and imposed lockdowns
-- Continued focus on both safety and intellectual property
actions resulting in a further kettle being withdrawn from sale and
an additional website takedown
-- Strengthened senior management team to support our strategic
initiatives with particular emphasis on people development and
commercialisation of new products
-- Successfully launched established Halopure technology into
sterilisation applications within both Farming (livestock drinking
systems) and Dentistry markets to further diversify category
OPERATIONAL HIGHLIGHTS
-- Continued investment in automation with a further 3 lines
becoming fully automated in H1 2020 on budget and ahead of
schedule
-- New U90 automation line achieved 85% mass production
efficiency (in line with original projections)
-- Strix received "Best Co-operation Award" at the annual Supor Supplier Conference
-- Maintained "Benchmark" status following latest ISO audits
Mark Bartlett, Chief Executive Officer of Strix Group plc,
said:
"The first half of 2020 has been an extraordinary period with
substantial economic challenges inflicted by the COVID-19 pandemic.
I am immensely appreciative of the efforts of our people during
these uncertain times, who have continued to work diligently to
support not only our customers, but also our local Communities and
Governments.
"Strix has delivered a solid trading performance in H1 given the
continued headwinds faced as a result of the global pandemic. Our
performance shows the resilience of our business model, which
benefits from geographical and product diversification, and is
strengthened further by our prudent control of our balance sheet.
Whilst Kettle control volumes were dampened during H1 in line with
scenario planning, anticipated record sales in Q3 are expected to
contribute to the full year forecasted performance.
"We have managed our margins with continued focus on operational
enhancements and cost improvements in our core business whilst
remaining on track with key strategic projects. These include the
construction of our new facility in China, integration of assets
acquired from HaloSource in 2019, maintained focus on new product
development and the acquisition of Laica S.p.A on 22(nd) September
2020. Our latest acquisition will enhance our geographical coverage
and product portfolio significantly.
"Given the Board's confidence in the future outlook and with
profitability remaining on track to achieve a flat performance year
on year, an interim dividend of 2.6p will be paid on 30 October in
line with our 2019 interim dividend.
For further enquiries, please contact:
Strix Group Plc
Mark Bartlett, CEO +44 (0) 1624 829
Raudres Wong, CFO 829
Zeus Capital Limited (Nominated Adviser and
Joint Broker)
Nick Cowles / Jamie Peel / Jordan Warburton +44 (0) 20 3829
(Corporate Finance) 5000
Stifel Nicolaus Europe Limited (Joint Broker) +44 (0) 20 7710
Matthew Blawat / Francis North 7600
IFC Advisory Limited (Financial PR and IR) +44 (0) 20 3934
Graham Herring / Tim Metcalfe / Florence Chandler 6630
Analyst Meeting
A briefing for analysts will be held via zoom at 09:30hrs on 23
September 2020. Analyst interested in attending the presentation
should contact Florence Chandler at IFC Advisory (
florence.chandler@investor-focus.co.uk ). Strix Group Plc's interim
results for 2020 are available at www.strixplc.com .
About Strix Group Plc
Isle of Man based Strix, is a global leader in the design,
manufacture and supply of kettle safety controls and other
components and devices involving water heating and temperature
control, steam management and water filtration.
Strix's core product range comprises a variety of safety
controls for small domestic appliances, primarily kettles. Kettle
safety controls require precision engineering and intricate
knowledge of material properties in order to repeatedly function
correctly. Strix has built up market leading capability and
know-how in this field since being founded in 1982.
Strix is listed on the Alternative Investment Market of the
London Stock Exchange (AIM: KETL).
Cautionary Statement
Certain statements included or incorporated by reference within
this announcement may constitute "forward-looking statements" in
respect of the Group's operations, performance, prospects and / or
financial condition. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such
words and words of similar meaning as "anticipates", "aims", "due",
"could", "may", "will", "should", "expects", "believes", "intends",
"plans", "potential", "targets", "goal" or "estimates". By their
nature, forward-looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may
differ materially from those expressed or implied by those
statements. Accordingly, no assurance can be given that any
particular expectation will be met and reliance should not be
placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. No responsibility or
obligation is accepted to update or revise any forward-looking
statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a
profit forecast. This announcement does not constitute or form part
of any offer or invitation to sell, or any solicitation of any
offer to purchase any shares or other securities in the Company,
nor shall it or any part of it or the fact of its distribution form
the basis of, or be
relied on in connection with, any contract or commitment or
investment decisions relating thereto, nor does it constitute a
recommendation regarding the shares or other securities of the
Company. Past performance cannot be relied upon as a guide to
future performance and persons needing advice should consult an
independent financial adviser. Statements in this announcement
reflect the knowledge and information available at the time of its
preparation. Liability arising from anything in this announcement
shall be governed by Isle of Man law. Nothing in this announcement
shall exclude any liability under applicable laws that cannot be
excluded in accordance with such laws.
Chief Executive's Review
In the first six months of 2020 we have delivered a solid
trading performance given the unprecedented trading environment.
This is a tribute to our colleagues around the globe, who have
demonstrated their dedication and adaptability to unparalleled
change in their daily working environment arising from the COVID-19
pandemic.
The Group reported revenue of GBP34.7m, a decline of 21.0%
versus the same period in prior year (H1 2019: GBP43.9m) in line
with our COVID-19 scenario planning expectations.
Adjusted EBITDA was GBP13.6m (H1 2019: GBP14.9m), a decrease of
just 8.6% on H1 2019 as a result of lower sales, partially offset
by reduced variable overheads. The Group's core focus at the height
of the crisis was the conservation of its ongoing cash flow,
resulting in the identification of in excess of GBP3.0m cost
efficiency measures. Implemented initiatives, some of which were
temporary, have enabled us to maintain our high cash generation.
Given our positive trading position and strong balance sheet we
have been able to continue with our capital allocation model,
allowing us to progress with strategic capex investment and
acquisitions.
Adjusted profit after tax fell by 9.6% to GBP9.8m (H1 2019:
GBP10.9m) the biggest contributor to this was low sales in Q1 as a
direct result of global lockdowns and reduced production.
The Group's adjusted net debt position has increased by 10.5% to
GBP36.9m (H1 2019: GBP33.4m), which is approximately GBP6 million
lower than budgeted for this financial year as a result of the cash
conservation and efficiency measures. Following completion of the
new GBP60.0m revolving credit facility, total committed debt at
30(th) June amounted to GBP49.0m, giving combined cash and facility
headroom of c.GBP23.1m delivering enhanced liquidity levels.
Given the Group's H1 2020 performance, a strong Q3 order book
and the Board's confidence in the continued strength of cash
generation, the Board has declared an interim dividend of 2.6p,
payable on 30(th) October 2020 to shareholders on the register as
at 9(th) October 2020.
The Group has experienced a marked recovery with a solid
performance in June through August and a strong order book for
September which underpins its confidence for adjusted profit after
tax for the full year to be in line with the previous financial
year assuming no significant increase in further lockdown
restrictions being imposed or unforeseen macroeconomic shocks.
Kettle control volume sales
The COVID-19 pandemic disrupted both supply and demand in the
Global Kettle market during H1. The pandemic's initial impact was
supply side with disruptions affecting China based factories, where
more than 90% of kettles are manufactured, as a result of the
mandatory local lockdowns and an extended Chinese New Year period.
Key factories were back in operation by early March showing
increased demand from the China domestic market but the pandemic
ultimately caused an overall volume drop in market demand of c.20%
in 2020 Q1 versus 2019 Q1. Export volume demand in the West
dampened through to mid-May due to lockdowns, with demand actively
picking up as lockdowns were eased and supply chains
replenished.
We have experienced a strong recovery moving into Q3 in line
with our scenario planning. Q3 sales from kettle controls are
expected to increase by 26% year on year to a record figure of
approximately GBP24m.
The China domestic market was the first to be hit by COVID-19
but also the first to come out of lockdown. The China market's
online presence resulted in an uptick in online sales during the
pandemic through major platforms such as JD.com and Alibaba. In
store recovery, where Strix products are more prominent, was
slower, resulting in a reduction in H1 volume demand of 10% year on
year with Q3 sales remaining slightly depressed.
The fundamental effect of the pandemic on the Regulated market
led to supply side disruption in Q1. Lockdowns in mid-March
contributed to a year on year volume drop of c.25% underperforming
the overall market. In spite of over eight weeks of lockdowns, 2020
Q2 resulted in slight growth versus 2019 Q2, driven predominantly
by the replenishment of the supply chain and the accelerated shift
to ecommerce sales. Online sales grew in excess of 50% during the
lockdowns and are continuing to show strong growth through to Q3.
Overall in H1, the Regulated market performed slightly better than
the overall market, down c.10% volume year on year, with Strix
maintaining its value share of the sector and continuing to trade
strongly into Q3 as per our original scenario planning.
The Less Regulated market, whilst still posting a year on year
volume reduction of over 10% during Q1, was the strongest
performing market sector. As the pandemic took hold, Q2 performance
weakened by c.20% in 2020 versus Q2 2019, resulting in H1 being
c.15% down year on year. South Africa, a strong market for Strix's
immersed controls, was particularly impacted in H1 resulting in a
drop in immersed sales offsetting some of the share gains made by
Strix's newer, low cost range of underfloor controls.
Water Category
Despite the external pressures imposed by the global pandemic,
the water category has continued to develop its product base and
progressed towards our category growth aspirations. During H1,
revenue grew by c.2% with a further acceleration of growth into
Q3.
Whilst traditional High Street business has suffered, our
multi-channel approach has seen the Aqua Optima business grow year
on year, with sales in the UK, Europe, Far East and Latin America
all contributing to a strong performance .
Appliance sales have been at the forefront of this success; The
Lumi Chiller has featured in popular UK publications and
subsequently delivered record 'sales out' figures across our retail
partners. The Mark IV Evolve+ filter has been rolled out across our
distribution base and shows increased market compatibility in the
UK & EU, delivering increased sales versus its Mark II
predecessor.
The business is well placed for further growth in the 2(nd) half
of the year with increased revenue forecasted in the 'trade brand'
segment as key new listings gain momentum. We will also build on
the success of Lumi with the launch of the Aurora beverage station
under Aqua Optima brand in Q4. Aurora is a great example of Strix's
mission to bring solutions to consumer needs combining our patented
"true boil" technology & water filtration expertise. Aurora
will offer chilled, filtered, variable temperature and "boiled
water on demand".
Performance of the assets acquired from HaloSource in the period
has been in line with the Group's expectations. The astrea product
has received significant interest from multiple parties with
ongoing discussions with a leading global brand and a prominent
North American home shopping network. Extending the life and
performance of the astrea ONE filter for the US market, and a new
plastic astrea ONE bottle (set to launch in H2), gives greater
access to a younger and more price sensitive consumer. The Group
continues to explore new distribution channels, and is currently in
the final stages of commercialising a 'survival bottle' to open up
the fishing & hunting retailer market. The Group continues to
seek further opportunities to enter into agreements which will
drive future profitability.
The recent acquisition of Laica, subject to approval from the
Council of Ministers in Italy, will further enhance the Groups
position within the water filtration market and accelerate the
roadmap of new products for this growth category.
Appliances
The Group has continued to work on growing its appliances
category with selected brand partners. In the Hot Water on Demand
category, the new Aurora Instant Flow Heater/Chiller appliance is
now undergoing development trials at the OEM, and tooling for the
Duality project is underway with a US Brand signed-up to launch. In
the Baby Care category, incremental projects are in the design
phase with a leading baby care brand in both Asia and North America
providing a more global reach in this growth market segment.
H1 has seen the acceleration of Strix Global Brand partnerships
on new innovative project launches. Within 2020 there are already
over 10 agreements in place within the appliances and baby care
categories for exciting new launches across all regions.
New Product Development (NPD)
New product development remains a fundamental driver in the
Group's core business strategy, with specific focus on the
identification of cross category opportunities. Throughout 2020,
the Group continues to make significant headway with our product
development roadmap remaining on target to be ready to launch 14
new products by the year end, in line with our original
objectives.
The Group has re-focused its commercialisation strategy in 2020,
optimising cross category synergies within both our higher value
small domestic appliance and water categories.
Our patented Instant Flow Heater (IFH) technology is gaining
positive demand and will see significant new launches in the coming
12 months across multiple brands globally with key launches in
EMEA, Asia and North America. Additionally, our Lumi water chiller
has also seen accelerated success with sales volume increases in
excess of 1,200%.
Filter development has seen further opportunities with three new
products being launched to the Group's non wavering safety and
quality standards. In 2020, the Group has started to introduce the
Aqua Optima brand to North America with plans for a comprehensive
filter, pitcher and appliance range, positioned to take advantage
of the growing "Value Chic" segment in the US.
Following the successful launch of the U9 Series during 2017,
the Group has successfully produced over seven million controls.
The Group continues to develop this series with new variants
launched to target the smaller size and split switch kettle
appliances to further enhance the portfolio of "best in class"
controls. The U6 series control for electronic kettles has
subsequently shipped over 0.5 million sets since its launch, which
has been supported by targeted IP actions.
The Group will continue to focus its highly skilled engineering
resource towards enhancing our core technologies and innovating
into new commercial markets.
Operations
Strix remains committed to delivering high quality sustainable
products in a sustainable business environment with 2020 seeing
further emphasis of our actions and opportunities in this
direction. Driven by our key sustainable development goals (SDG's),
the Group has evolved the existing management structure to fully
integrate sustainability into the core business model. Emphasis of
this progression is seen with the new China facility which will aid
our SDG's fourfold; improved efficiency levels, product flows,
automation, and increased opportunities to minimise our carbon
emissions footprint.
Following the ISO surveillance audit, the Group's Isle of Man
facility once again achieved the highest rating from Intertek -
'Benchmark' for all categories. The Board is proud to be one of the
few audited companies to achieve and maintain this standard which
highlights our continued focus on operational and environmental
excellence and covers management, internal audits, corrective
action, continuous improvement, operational control, governance and
effective management of resources.
Strix continues to develop its automation lines in China with
three completed production lines becoming fully automated in H1
2020 and a further two lines planned for H2 2020. The Group is also
consistently achieving efficiencies in excess of 85% for the
recently introduced U90 series line, with head count and cycle
times below budget and a control produced every c.1.8 seconds.
Commodity prices for key materials (silver, copper and hybrid
plastics) have been periodically secured at or below budget
pricing, in line with the Group's purchasing policy and appropriate
stocks have been secured to prevent any potential logistics
disruption resulting from BREXIT and the pandemic during 2020.
Dividend Policy
The Board remains committed to its progressive dividend policy,
which is to maintain the dividend in line with future underlying
earnings from a base of 7.7p for the 2020 financial year. The Group
has consistently achieved strong cash conversion which will
underpin this dividend alongside continued investment in the
Group's asset base to deliver future profitable growth and support
expansion into new areas which are aligned to the core competencies
of the Group.
The dividend policy of the Company provides the flexibility to
continue to invest in the Group's growth strategy and to take
advantage of investment opportunities.
Future strategy
Strix will continue to develop a culture of achievement within
the Group, with a strategy focused on driving shareholder value and
employee engagement. As part of this strategy, the Group continues
to broaden its senior management, engineering and commercial teams
through strategic recruitment whilst further developing existing
resources with training and development programmes aligned to
Strix's wider growth objectives.
The Group will also continue to increase its focus on new
product development and core technologies to enhance the product
portfolio within the Small Domestic Appliance ("SDA") & Water
categories. In particular, Strix will develop and launch both
disruptive and innovative products to provide consumer and
environmental benefits within the hot water on demand category to
enhance functionality and value, as well as a range of filtration
technologies to differentiate our existing portfolio and expand our
addressable markets. In line with this strategy, the Group recently
secured a number of collaborations with national and global brands
in both the water dispense and water filtration categories,
leveraging on its extensive relationships with brands and retailers
worldwide.
Strix continues to actively seek opportunities that will add
value across the Group through niche acquisitions or technologies.
Acquisitions are subject to strict financial criteria and
consistent with the Group's capital allocation priorities, to
further enhance the Group's growth potential within the water and
appliance categories.
Within Operations, the Group will continue to drive efficiency
and process improvements with an ongoing commitment to lean
manufacturing and further automation of appropriate production
lines as volume dictates. Progress on the new manufacturing
facility in China remains on track, both on budget and timeframe
with the facility expected to be fully operational by August 2021
and will provide additional capacity to realise the Group's growth
potential. The additional capacity will enable more efficient
process flows as well as the ability to in-source additional
products and further increase automation.
Outlook
Following the Group's solid performance in H1, notwithstanding
COVID-19 impacts, our commitment towards key strategic projects
remains resolute and continues to assist in delivering our
long-term growth aspirations.
Our internal investment strategy focuses on the enhancement of
our operations, reinforcing our overall business strategy. New
additions to our senior management team, bolster the investment in
our people and the commercialisation of new products that provide
true consumer benefit.
Dedication to improving the Group's sustainability and
productivity has seen continued investment in automation, assisting
in the mitigation of future risk surrounding rising wage costs and
further disruptions resulting from imposed lockdowns.
Our core kettle market remains stable, maintaining our market
leading value share despite the effects of the pandemic, ongoing
trade tensions between the US and China, and the pending impact of
Brexit. The acquisition of HaloSource in 2019, and our most recent
acquisition of Laica S.p.A in 2020, strengthens our water category
and widens our global reach.
The Group has experienced a marked recovery with a solid
performance in June through August and a strong order book for
September which underpins its confidence for adjusted profit after
tax for the full year to be in line with the previous financial
year assuming no significant increase in further lockdown
restrictions being imposed or unforeseen macroeconomic shocks.
Mark Bartlett
Chief Executive
23 September 2020
Financial Review
Adjusted results(1) Reported results
H1 2020 H1 2019 Change H1 2020 H1 2019 Change
GBPm GBPm %(2) GBPm GBPm %(2)
-------- -------- ------- -------- -------
Revenue 34.7 43.9 -21.0% 34.7 43.9 -21.0%
Gross profit 13.8 16.7 -17.6% 13.8 16.7 -17.6%
Distribution costs (2.1) (2.6) -17.3% (2.1) (2.6) -17.3%
Administrative
costs (1.4) (2.3) -37.1% (3.9) (6.2) -37.0%
Operating profit 10.6 12.2 -12.5% 8.1 8.2 -0.6%
EBITDA(3) 13.6 14.9 -8.6% 11.1 10.9 +1.8%
Profit before
tax 10.1 11.5 -12.5% 7.5 7.5 +0.6%
Profit after tax 9.8 10.9 -9.6% 7.3 6.9 +6.3%
Net cash generated
from operating
activities 8.3 10.9 -23.8% 8.3 10.9 -23.8%
1. Adjusted results exclude exceptional items, which include
share-based payment transactions, other reorganisation and
strategic project costs. Adjusted results are non-GAAP metrics used
by management and are not an IFRS disclosure.
2. Figures are calculated from the full numbers as presented in
the condensed interim consolidated financial statements.
3. EBITDA, which is defined as earnings before finance costs,
tax, depreciation and amortisation, is a non-GAAP metric used by
management and is not an IFRS disclosure.
Financial performance
Revenue declined 21.0% to GBP34.7m (H1 2019: GBP43.9m) a
reduction in line with the Group's scenario planning. Lower H1
profits were mainly attributable to lower sales of Kettle Controls,
however due to the successful implementation of a range of
efficiency measures and the management of our highly variable cost
base, gross profit margin increased to 39.7% (H1 2019: 37.9%).
The Group generated an adjusted EBITDA of GBP13.6m, a decrease
of 8.6% (H1 2019: GBP14.9m). Shortfall in H1 revenue is mitigated
by GBP1.3m reduction in administration and distribution expenses
due to cost efficiency initiatives, allowing EBITDA to arrive
favourably at gross profit level. Reported EBITDA increased 1.8% to
GBP11.1m (H1 2019: GBP10.9m) largely driven by lower share based
payment costs (H1 2020: GBP1.0m, H1 2019: GBP3.1m).
Costs
The Group's key focus at the peak of the pandemic was the
preservation of our ongoing cash position. Cost of sales decreased
by 23.3% to GBP20.9m (H1 2019: GBP27.3m), predominantly driven by
lower throughput leading to GBP3.9m reduction in material costs and
GBP0.9m in labour costs. Distribution expenses reduced by GBP0.4m,
including reductions in advertising, travel, and sales tooling
costs. Administration overhead costs are GBP0.8m lower than in the
prior year due to a reduction in monthly salary costs linked to
bonus accruals and headcount.
Cash flow
Net cash generated from operating activities reduced to GBP8.3m
(H1 2019: GBP10.9m) predominately due to reduction in sales.
Working capital movement was maintained at prior year's level
despite the softened macro-climate.
Cash flows for investing activities have increased by GBP0.3m
from H1 2019. Major capital projects included the ongoing
construction of Strix's new factory and the implementation of a new
ERP system. The Group's capital expenditure plans have been
re-phased, due to the drop in H1 demand, including deferment of
automation lines and GBP3.0m factory construction costs, which have
no impact on the construction completion date. The factory
construction project's budget has remained on track at
c.GBP20m.
Cash flows for financing activities included GBP0.7m of interest
(H1 2019: GBP0.6m) and GBP0.5m new revolving credit facility loan
arrangement fees.
Balance Sheet
Non-current assets increased to GBP37.0m (2019: GBP32.6m).
Capital expenditure on land and factory in the first half year was
GBP3.1m (H1 2019: GBP1.8m), with GBP3.0m re-phased to 2021 to
preserve the Group's cash levels. Intangible assets have increased
GBP2.3m largely due to the development of more new products and the
new ERP system.
Current assets decreased slightly to GBP31.4m (2019: GBP32.5m).
Trade debtor and prepayments reduced GBP1.0m in H1 to GBP8.3m
(2019: GBP9.3m) where the reduction in sales levels have driven the
decrease in debtors and with no change to the debtor's terms.
Current liabilities decreased to GBP18.3m (2019: GBP21.2m), trade
creditors and accruals dropped to GBP15.2m (2019: GBP17.7m), the
year on year reduction driven by lower H1 trading activities and
tightening of supply chain.
Net debt
The Group's net debt position as at 30(th) June 2020 increased
to GBP36.9m (2019: GBP33.4m), GBP5.9m lower than budgeted for the
financial year. Completion of the new GBP60m revolving credit
facility in May 2020, with RBS International Limited and Bank of
China, has improved the Group's financial flexibility for the
medium term. Following the refinancing of the facility, total
committed debt facilities at 30th June amounted to GBP49.0m, giving
a liquidity pool of GBP23.1m at H1. Net debt equated to 1.08 times
trailing twelve months' EBITDA, which compares favourably to our
debt covenant of 2.50 times. This places Strix in a strong position
allowing us to emerge from the challenges of the pandemic,
well-positioned.
To support the acquisition of Laica, the new facility will be
extended to GBP80m with the addition of a third bank, the Bank of
Ireland. The terms remain favourable for a five-year period.
Dividend
The Board is pleased to declare an interim dividend of 2.6p (H1
2019: 2.6p) per ordinary share. This interim dividend will be paid
on 30(th) October 2020 to shareholders on the Register at the close
of business on 9(th) October 2020. The ordinary shares will become
ex-dividend on 8(th) October 2020. We remain committed to paying a
total dividend which will equate to 7.7p per share for the full
financial year. Whilst the consolidated accounts show a deficit,
significant reserves exist on the balance sheet of the dividend
paying entity, Strix Group Plc.
Raudres Wong
Chief Financial Officer
23 September 2020
Condensed INTERIM consolidated statement of comprehensive
income
for the period ended 30 June 2020 (unaudited)
(unaudited) (unaudited)
Period Period
ended ended
30 June 30 June
2020 2019
Note GBP000s GBP000s
------------------------------------------------ ---- ----------- -----------
Revenue 7 34,712 43,930
------------------------------------------------ ---- ----------- -----------
Cost of sales - before exceptional items (20,948) (27,188)
Cost of sales - exceptional items 6 - (65)
------------------------------------------------ ---- ----------- -----------
Cost of sales (20,948) (27,253)
------------------------------------------------ ---- ----------- -----------
Gross profit 13,764 16,677
------------------------------------------------ ---- ----------- -----------
Distribution costs (2,121) (2,565)
------------------------------------------------ ---- ----------- -----------
Administrative expenses - before exceptional
items (1,416) (2,251)
Administrative expenses - exceptional items 6 (2,517) (3,989)
------------------------------------------------ ---- ----------- -----------
Administrative expenses (3,933) (6,240)
Other operating income 402 266
------------------------------------------------ ---- ----------- -----------
Operating profit 8,112 8,138
Analysed as:
------------------------------------------------ ---- ----------- -----------
Adjusted EBITDA (1) 13,589 14,909
Amortisation 8 (748) (688)
Depreciation (excluding Right-of-use asset) 9 (1,491) (1,401)
Right-of-use asset depreciation 9 (721) (628)
Exceptional items 6 (2,517) (4,054)
------------------------------------------------ ---- ----------- -----------
Operating profit 8,112 8,138
Finance costs 5 (585) (677)
Finance income 8 11
------------------------------------------------ ---- ----------- -----------
Profit before taxation 7,535 7,472
Income tax expense (217) (607)
------------------------------------------------ ---- ----------- -----------
Profit after taxation 7,318 6,865
Other comprehensive income:
Net foreign currency translation adjustments 134 -
Total comprehensive income 7,452 6,865
------------------------------------------------ ---- ----------- -----------
Earnings per share (pence)
------------------------------------------------ ---- ----------- -----------
Basic 6 3.7 3.6
Diluted 6 3.6 3.4
------------------------------------------------ ---- ----------- -----------
1. Adjusted EBITDA, which is defined as profit before finance
costs, tax, royalty charges, depreciation, amortisation and
exceptional items, is a non-GAAP metric used by management and is
not an IFRS disclosure.
Condensed INTERIM consolidated balance sheet
as at 30 June 2020 (unaudited)
(unaudited) (audited)
30 June 31 December
2020 2019
Note GBP000s GBP000s
------------------------------- ----- ----------- -------------------------
Non-current assets
Intangible assets 8 9,365 7,068
Property, plant and equipment 9 27,636 25,525
Total non-current assets 37,001 32,593
------------------------------- ----- ----------- -------------------------
Current assets
Inventories 10 10,991 9,497
Trade and other receivables 12 8,279 9,333
Cash and cash equivalents 12,103 13,658
Total current assets 31,373 32,488
------------------------------- ----- ----------- -------------------------
Total assets 68,374 65,081
------------------------------- ----- ----------- -------------------------
Equity and liabilities
Equity
Share capital 1,989 1,900
Share-based payment reserve 13,543 13,063
Accumulated deficit (16,726) (14,052)
------------------------------- ----- ----------- -------------------------
Total deficit (1,194) 911
Current liabilities
Trade and other payables 13 15,191 17,773
Future lease liabilities 17 1,589 1,508
Current income tax liabilities 13 1,471 1,929
Total current liabilities 18,251 21,210
------------------------------- ----- ----------- -------------------------
Non-current liabilities
Future lease liabilities 17 2,258 2,960
Borrowings 14 49,000 40,000
Post-employment benefits 59 -
Total non-current liabilities 51,317 42,960
------------------------------- ----- ----------- -------------------------
Total liabilities 69,568 64,170
------------------------------- ----- ----------- -------------------------
Total equity and liabilities 68,374 65,081
------------------------------- ----- ----------- -------------------------
Condensed INTERIM consolidated statement of changes in
equity
as at 30 June 2020 (unaudited)
Share-based
Share payment Accumulated Total
capital reserve deficit deficit
(unaudited) GBP000s GBP000s GBP000s GBP000s
--------- ------------ ------------ ---------
Balance at 1 January 2019 1,900 6,904 (21,180) (12,376)
------------------------------------------- --------- ------------ ------------ ---------
Transition to IFRS 16 (270) (270)
------------------------------------------- --------- ------------ ------------ ---------
Balance at 1 January 2019 (as adjusted) 1,900 6,904 (21,450) (12,646)
------------------------------------------- --------- ------------ ------------ ---------
Profit for the period - - 6,865 6,865
------------------------------------------- --------- ------------ ------------ ---------
Other comprehensive expense - - - -
------------------------------------------- --------- ------------ ------------ ---------
Total comprehensive income for the
period - - 6,865 6,865
------------------------------------------- --------- ------------ ------------ ---------
Transactions with owners recognised
directly in equity:
Dividends paid (note 16) - - (8,930) (8,930)
Share-based payment transactions - 3,053 - 3,053
------------------------------------------- --------- ------------ ------------ ---------
Total transactions with owners recognised
directly in equity - 3,053 (8,930) (5,877)
------------------------------------------- --------- ------------ ------------ ---------
Balance at 30 June 2019 1,900 9,957 (23,515) (11,658)
------------------------------------------- --------- ------------ ------------ ---------
(unaudited)
------------------------------------------- --------- ------------ ------------ ---------
Balance at 1 January 2020 1,900 13,063 (14,052) 911
------------------------------------------- --------- ------------ ------------ ---------
Profit for the period - - 7,318 7,318
------------------------------------------- --------- ------------ ------------ ---------
Other comprehensive income - - 134 134
------------------------------------------- --------- ------------ ------------ ---------
Total comprehensive income for the
period - - 7,452 7,452
------------------------------------------- --------- ------------ ------------ ---------
Transactions with owners recognised
directly in equity:
Dividends paid (note 16) - - (10,126) (10,126)
Share-based payment transactions 89 480 - 569
------------------------------------------- --------- ------------ ------------ ---------
Total transactions with owners recognised
directly in equity 89 480 (10,126) (9,557)
------------------------------------------- --------- ------------ ------------ ---------
Other transactions recognised directly - - - -
in equity
------------------------------------------- --------- ------------ ------------ ---------
Balance at 30 June 2020 1,989 13,543 (16,726) (1,194)
------------------------------------------- --------- ------------ ------------ ---------
Condensed INTERIM consolidated cash flow statement
for the PERIOD ended 30 June 2020 (unaudited)
(unaudited) (unaudited)
Period Period
ended ended
30 June 30 June
2020 2019
Note GBP000s GBP000s
--------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Cash generated from operations 18a 8,988 11,272
Tax paid (676) (359)
--------------------------------------------------- ----- ------------ ------------
Net cash generated from operating activities 8,312 10,913
--------------------------------------------------- ----- ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment 9 (4,294) (4,646)
Capitalised development costs 8 (1,231) (900)
Purchase of HaloSource Inc. assets - (953)
Purchase of intangibles 8 (1,458) (253)
Proceeds on sale of property, plant and equipment - 2
Finance income 7 11
--------------------------------------------------- ----- ------------ ------------
Net cash used in investing activities (6,976) (6,739)
--------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Drawdowns under credit facility 18b 9,000 1,000
Finance costs paid (691) (556)
Principal elements of lease payments (800) (600)
Transaction costs related to borrowings (480) -
Dividends paid 16 (10,126) (8,930)
--------------------------------------------------- ----- ------------ ------------
Net cash used in financing activities (3,097) (9,086)
--------------------------------------------------- ----- ------------ ------------
Net decrease in cash and cash equivalents (1,761) (4,912)
Cash and cash equivalents at the beginning
of the period 13,658 13,521
Effects of foreign exchange on cash and cash
equivalents 206 (17)
--------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at the end of the
period 12,103 8,592
--------------------------------------------------- ----- ------------ ------------
Notes to the condensed INTERIM cONSOLIDATED financial
statements
for the PERIOD ended 30 June 2020 (unaudited)
1. General information
Strix Group Plc ('the Company') was incorporated and registered
in the Isle of Man on 12 July 2017 as a company limited by shares
under the Isle of Man Companies Act 2006 with the name Steam Plc
and with the registered number 014963V. The Company changed its
name to Strix Group Plc on 24 July 2017. The address of its
registered office is Forrest House, Ronaldsway, Isle of Man, IM9
2RG.
The Company's shares were admitted to trading on AIM, a market
operated by the London Stock Exchange on 8 August 2017.
The principal activities of Strix Group Plc and its subsidiaries
(together 'the Group') are the design, manufacture and supply of
kettle safety controls and other components and devices involving
water heating and temperature control, steam management and water
filtration.
These condensed interim consolidated financial statements
('interim financial statements') were approved for issue on 23
September 2020. The interim report will be available 23 September
on the Group's website www.strixplc.com and from the registered
office. These interim financial statements are unaudited.
2. Principle accounting policies
The Group's principle accounting policies, all of which have
been applied consistently to all of the periods presented, are set
out below.
Basis of preparation
The Group's annual financial statements are prepared in
accordance with International Financial Reporting Standards
('IFRS') and International Financial Reporting Standards
Interpretation Committee ('IFRS IC') as adopted by the European
Union.
These interim financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting". They do not
include all the information required for a complete set of
financial statements prepared in accordance with International
Financial Reporting Standards as adopted by the European Union.
However, explanatory notes are included to explain events and
transactions that are significant to an understanding of the
changes in the Group's financial position and performance since the
last annual consolidated financial statements as at and for the
year ended 31 December 2019. These interim financial statements
should be read in conjunction with the last annual consolidated
financial statements as at and for the year ended 31 December
2019.
The preparation of Group financial statements in conformity with
IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process
of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements, are disclosed in note 3.
Accounting policies
The interim financial statements have been prepared in
accordance with the accounting policies set out in the Group's
Annual Report and Accounts for the year ended 31 December 2019,
which is available at www.strixplc.com .
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and all of its subsidiary undertakings.
Subsidiaries are fully consolidated from the date on which control
commences and are deconsolidated from the date that control ceases.
The financial statements of all Group companies are adjusted, where
necessary, to ensure the use of consistent accounting policies.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control
exists when the Group is exposed to or has the rights to variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Transactions eliminated on consolidation
Intra-group balances and any gains and losses or income and
expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date with the assets and liabilities
of a subsidiary being measured at their fair values. Any excess of
the cost of acquisition over the fair values of the identifiable
net assets acquired is recognised as goodwill. The Group measures
goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non-controlling interests
in the acquiree; plus
-- if the business combination is achieved in stages, the
fair value of the pre-existing interest in the acquiree;
less
-- the fair value of the identifiable assets acquired and
liabilities assumed.
Transaction costs that the Group incurs in connection with a
business combination are expensed as incurred.
The Group recognises any non-controlling interest in the
acquired entity on an acquisition-by-acquisition basis either at
fair value or at the non-controlling interest's proportionate share
of the acquired entity's net identifiable assets.
Standards, amendments and interpretations which are not
effective or early adopted:
At the date of approval of the interim financial statements,
there are no new standards and interpretations which are relevant
to the Group which were in issue but not yet effective.
Going concern
These interim financial statements have been prepared on the
going concern basis.
The Directors acknowledge that the Group is in a net liability
position, as a consequence of the group reorganisation and the
Company's admission to AIM which occurred during 2017 which
included the distributions made to the former shareholders funded
in part by a revolving credit facility (see note 14). In assessing
the Group's going concern status, the Directors have made
additional enquiries as to the appropriateness of continuing to
adopt the going concern basis. In making this assessment they have
considered:
-- the strong historic trading performance of the Group;
-- the current and past profitability of the Group;
-- budgets and cash flow forecasts for the period to December
2021;
-- the current financial position of the Group, including
its cash and cash equivalents balances of GBP12.1m (YE
2019: GBP13.7m);
-- the availability of further funding should this be required
(including the headroom of GBP11.0m (2019: GBP9.0m)
on the revolving credit facility and the access to the
AIM market afforded by the admission to AIM);
-- the current and past ability of the Group to meet its
debt covenants;
-- the low liquidity risk the Group is exposed to; and
-- the Group operates within a sector that is experiencing
relatively stable demand for its products.
Based on these considerations, the Directors have concluded that
there is a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future. The key entities in the Group have traded
profitably for a long period of time. As a result, the Directors
continue to adopt the going concern basis of accounting in
preparing the interim financial statements and there are no
material uncertainties about the Group's ability to continue as a
going concern.
As a Company the dividend-paying entity, Strix Group Plc, has
sufficient reserves from which to make distributions to
shareholders, although the retained reserves of the Group show a
deficit.
EBITDA and adjusted EBITDA - non-GAAP performance measures
Earnings before interest, taxation, depreciation and
amortisation ('EBITDA') and adjusted EBITDA are non-GAAP measures
used by management to assess the operating performance of the
Group. EBITDA is defined as profit before finance costs, finance
income, taxation, depreciation and amortisation. Exceptional items
are excluded from EBITDA to calculate adjusted EBITDA.
The Directors primarily use the adjusted EBITDA measure when
making decisions about the Group's activities. As these are
non-GAAP measures, EBITDA and adjusted EBITDA measures used by
other entities may not be calculated in the same way and hence are
not directly comparable.
Seasonality of operations
The Group's revenue and profit after tax is subject to a degree
of seasonality due primarily to the occurrence of the Chinese New
Year public holiday during the first half of the year ('H1'), when
the Group's major customers and suppliers based in China cease
operations for a period. In the financial year ended 31 December
2019, 45.3% (2018: 45.7%) of the Group's revenue and 31.9% (2018:
36.6%) of the Group's profit after tax accumulated in H1.
Foreign currency translation
Functional and presentational currency
Items included in the financial information of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The functional currency of the Company, and most
entities within the Group, is Sterling. This is also the Group's
presentational currency. The functional currency of the following
subsidiaries are currencies other than Sterling: Strix Hong Kong,
which is the Hong Kong dollar; Strix USA, which is the United
States Dollar; and HaloSource Shanghai, which is the Chinese
Renminbi.
Transactions and balances
Foreign currency balances are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the condensed interim
consolidated statement of comprehensive income within cost of
sales.
Group companies
The results and financial position of Strix Hong Kong, Strix USA
and HaloSource Shanghai are translated into the presentation
currency as follows:
-- assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet, or historic rates for certain line items;
-- income and expenses for each condensed interim consolidated
statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation
of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses
are translated at the dates of the transactions), and
-- all resulting exchange differences are recognised in
the condensed interim consolidated statement of comprehensive
income.
Leases
Leases in which a significant portion of the risks and rewards
of ownership were not transferred to the Group as lessee were
classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were
charged to the statement of comprehensive income on a straight-line
basis over the period of the lease.
The leasing activities of the Group and how these are accounted
for
The Group leases office space, workshops, warehouses and factory
space. Rental contracts are typically made for periods of 3 - 10
years, but may have extension options. Lease terms are negotiated
on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants,
but leased assets may not be used as security for borrowing
purposes.
Leases are recognised as a right-of-use assets and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated
between the liability, finance costs and foreign exchange (where
the lease is denominated in a foreign currency). The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight line basis.
Measurement of future lease liabilities
Assets and liabilities arising from a lease are initially
measured on a present value basis. Future lease liabilities include
the net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments),
less any lease incentives receivable
-- variable lease payments that are based on an index or
a rate
-- amounts expected to be payable by the lessee under residual
value guarantees
-- the exercise price of a purchase option if the lessee
is reasonably certain to exercise that options, and
-- the payment of penalties for terminating the lease, if
the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Measurement of right-of-use assets
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability
-- any lease payments made at or before the commencement
date less any lease incentives received
-- any initial direct costs, and
-- restoration costs
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise
primarily IT equipment.
Extension and termination options
Extension and termination options are included in a number of
property leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts.
3. Critical accounting judgements and estimates
The preparation of these interim financial statements under IFRS
requires the Directors to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors including expectations of future
events that are believed to be reasonable under the
circumstances.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty are the same
as those that applied to the Group's Annual Report and Accounts for
the year ended 31 December 2019.
4. Segmental reporting
Management has determined the operating segments based on the
operating reports reviewed by the Board of Directors that are used
to assess both performance and strategic decisions. Management has
identified that the Board of Directors is the chief operating
decision maker in accordance with the requirements of IFRS 8
'Operating segments'. The Group's activities consist of the design,
manufacture and sale of thermostatic controls, cordless interfaces,
and other products such as water jugs and filters, primarily to
Original Equipment Manufacturers ('OEMs') based in China. The
Group's activities are managed as one entity and management have
consequently determined that there is only one operating
segment.
Products and services
Revenue is generated by the Group on the sale of thermostatic
controls, cordless interfaces, and other products such as water
jugs and filters. Whilst under IFRS 8 there is only one segment,
the information used to prepare the condensed interim consolidated
financial statements is disaggregated into three product families,
being 'Kettle controls', 'Water Category' and 'Other'. 'Other'
relates to new technology products and other appliances which do
not fit into 'Kettle controls' or 'Water Category'. An analysis of
revenue by product family is provided in note 7. 'Water Category'
includes the activities of 'Aqua Optima'.
Geographical
A geographical analysis of revenue from external customers has
not been presented, as the OEMs to whom sales are made are
primarily based in China.
5. finance costs
Period Period
ended ended
--------------------------
30 June 30 June
2020 2019
--------------------------
GBP000s GBP000s
-------------------------- -------- --------
Letter of credit charges 51 26
Lease liability interest 53 44
Borrowing costs 481 607
-------------------------- -------- --------
Total finance costs 585 677
-------------------------- -------- --------
Further information about the Group's borrowings is provided in
note 14.
6. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data.
Period Period
ended ended
30 June 30 June
2020 2019
Earnings (GBP000s)
Earnings for the purpose of basic and diluted
earnings per share 7,318 6,865
---------------------------------------------------- -------- --------
Number of shares (000s)
Weighted average number of shares for the purposes
of basic earnings per share 198,878 190,000
Weighted average dilutive effect of conditional
share awards 2,872 10,679
---------------------------------------------------- -------- --------
Weighted average number of shares for the purposes
of diluted earnings per share (000s) 201,750 200,679
---------------------------------------------------- -------- --------
Earnings per ordinary share (pence)
Basic earnings per ordinary share 3.7 3.6
Diluted earnings per ordinary share 3.6 3.4
---------------------------------------------------- -------- --------
Adjusted earnings per ordinary share (pence)
(1)
Basic adjusted earnings per ordinary share 4.9 5.7
Diluted adjusted earnings per ordinary share 4.9 5.4
---------------------------------------------------- -------- --------
The calculation of basic and diluted adjusted earnings per share
is based on the following data:
Period Period
ended ended
-----------------------------------
30 June 30 June
2020 2019
-----------------------------------
GBP000s GBP000s
----------------------------------- -------- --------
Profit for the year 7,318 6,865
----------------------------------- -------- --------
Add back:
Share-based payments 1,030 3,053
COVID-19 net exceptional costs(2) 456 -
Strategic projects 673 936
Reorganisation costs 358 65
----------------------------------- -------- --------
Adjusted earnings (1) 9,835 10,919
----------------------------------- -------- --------
(1. Adjusted results exclude exceptional items, including
share-based payments. Adjusted results are non-GAAP metrics used by
management and are not an IFRS disclosure.)
(2. COVID-19 net exceptional costs include certain employment
costs and Government support grants.)
The denominators used to calculate both basic and adjusted
earnings per share are the same as those shown above for both basic
and diluted earnings per share. GBP662,000 of the GBP673,000 of
'Strategic projects' relate to the acquisition of Laica S.p.A in
September 2020.
7. REVENUE
The following table shows a disaggregation of revenue into
categories by product line:
Period Period
ended ended
-----------------
30 June 30 June
2020 2019
-----------------
GBP000s GBP000s
----------------- --------------- ----------------
Kettle controls 29,132 38,408
Water Category 5,039 4,964
Other 541 558
----------------- --------------- ----------------
Total revenue 34,712 43,930
----------------- --------------- ----------------
8. Intangible assetS
2020
---------------------------------------------------------------------------
Intangible
Assets
Development Intellectual under
costs Software Property Construction Goodwill Total
------------ --------- ------------- -------------- --------- --------
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 9,837 922 488 - 384 11,631
Accumulated amortisation and
impairment (4,006) (540) (17) - - (4,563)
------------------------------ ------------ --------- ------------- -------------- --------- --------
Net book value 5,831 382 471 - 384 7,068
------------------------------ ------------ --------- ------------- -------------- --------- --------
Period ended 30 June
Additions 1,418 27 70 564 - 2,079
Transfers in/(out) - 23 - 1,131 - 1,154
Amortisation charges (626) (113) (9) - - (748)
Exchange differences (170) (5) (22) 9 - (188)
Closing net book value 6,453 314 510 1,704 384 9,365
------------------------------ ------------ --------- ------------- -------------- --------- --------
At 30 June
Cost 11,085 967 536 1,704 384 14,676
Accumulated amortisation and
impairment (4,632) (653) (26) - - (5,311)
Net book value 6,453 314 510 1,704 384 9,365
------------------------------ ------------ --------- ------------- -------------- --------- --------
All amortisation charges have been treated as an expense, and
allocated to cost of sales GBP696,000 (H1 2019: GBP633,000) and
administrative expenses GBP52,000 (H1 2019: GBP55,000) in the
condensed interim consolidated statement of comprehensive
income.
There were no reversals of prior year impairments during the
year. During the period, GBP1,131,000 of assets under construction
were transferred in.
2019
-----------------------------------------------------------
Development Intellectual
costs Software Property Goodwill Total
------------ --------- ------------- --------- --------
GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 12,886 579 - - 13,465
Accumulated amortisation and impairment (8,324) (337) - - (8,661)
----------------------------------------- ------------ --------- ------------- --------- --------
Net book value 4,562 242 - - 4,804
----------------------------------------- ------------ --------- ------------- --------- --------
Period ended 30 June
Additions 900 240 - - 1,140
HaloSource acquisition - - 316 384 700
Amortisation charges (585) (103) - - (688)
Exchange differences - - 12 - 12
Closing net book value 4,877 379 328 384 5,968
----------------------------------------- ------------ --------- ------------- --------- --------
At 30 June
Cost 10,957 1,262 328 384 12,931
Accumulated amortisation and impairment (6,080) (883) - - (6,963)
Net book value 4,877 379 328 384 5,968
----------------------------------------- ------------ --------- ------------- --------- --------
All amortisation charges have been treated as an expense, and
charged to cost of sales (GBP633,000) and administrative expenses
(GBP55,000) in the condensed interim consolidated statement of
comprehensive income.
There were no reversals of prior year impairments during the
comparative period.
9. Property, plant and equipment
2020
------------------------------------------------------------------------------------------------------
Fixtures,
Plant fittings Land Assets
& & Motor Production & Right-of-use under
machinery equipment vehicles tools Buildings assets construction Total
---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 21,924 4,126 130 13,298 1,996 5,386 8,569 55,429
Accumulated
depreciation (14,444) (2,935) (67) (11,291) (33) (1,135) - (29,904)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Net book
value 7,480 1,191 64 2,007 1,963 4,251 8,569 25,525
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Period ended
30
June
Additions 1,935 111 - 571 7 203 2,787 5,614
Transfers (36) (43) - 56 - - (1,131) (1,154)
Disposals - - - - - - - -
Depreciation
charge (612) (387) (16) (426) (50) (721) - (2,212)
Exchange
differences 11 (21) - (7) - (79) (41) (137)
-------------- ---------- ----------- ---------
Closing net
book
value 8,778 851 48 2,201 1,920 3,654 10,184 27,636
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
At 30 June
Cost 23,834 4,173 130 13,918 2,003 5,509 10,184 59,751
Accumulated
depreciation (15,056) (3,322) (83) (11,717) (83) (1,856) - (32,117)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Net book
value 8,778 851 48 2,201 1,920 3,654 10,184 27,636
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Depreciation charges are allocated to cost of sales
(GBP1,757,000), distribution costs (GBP61,000), and administrative
expenses (GBP394,000) in the condensed interim consolidated
statement of comprehensive income.
2019
------------------------------------------------------------------------------------------------------
Fixtures,
Plant fittings Land Assets
& & Motor Production & Right-of-use under
machinery equipment vehicles tools Buildings assets construction Total
---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 20,624 3,673 141 13,484 - - 1,889 39,811
Accumulated
depreciation (14,695) (2,595) (51) (11,377) - - - (28,718)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Net book
value 5,929 1,078 90 2,107 - - 1,889 11,093
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Period ended
30
June
Additions - 502 - - 1,720 4,794 2,016 9,032
HaloSource
acquisition 135 93 1 49 - - 23 301
Transfers 409 59 - 44 - - (512) -
Disposals (9) - - - - - - (9)
Depreciation
charge (532) (365) (12) (492) (6) (622) - (2,029)
Exchange
differences (4) (35) (1) - - (4) - (44)
-------------- ---------- ----------- ---------
Closing net
book
value 5,928 1,332 78 1,708 1,714 4,168 3,416 18,344
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
At 30 June
Cost 21,160 4,326 142 13,577 1,720 4,794 3,416 49,135
Accumulated
depreciation (15,232) (2,994) (64) (11,869) (6) (626) - (30,791)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Net book
value 5,928 1,332 78 1,708 1,714 4,168 3,416 18,344
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Depreciation charges are allocated to cost of sales
(GBP1,584,000), distribution costs (GBP212,000), and administrative
expenses (GBP233,000) in the condensed interim consolidated
statement of comprehensive income.
10. Inventories
30 June 31 December
2020 2019
-------------------------------------
GBP000s GBP000s
------------------------------------- -------- ------------
Raw materials and consumables 6,372 5,071
Finished goods and goods in transit 4,619 4,426
------------------------------------- -------- ------------
10,991 9,497
------------------------------------- -------- ------------
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP12,189,000 (H1 2019: GBP 16,738,000 ).
The charge for impaired inventories was GBP129,000 (H1 2019:
GBP442,000). There were no reversals of previous write-downs.
11. PRINCIPAL SUBSIDIARY UNDERTAKINGS OF THE GROUP
A list of all subsidiary undertakings controlled by the Group,
which are all included in the interim financial statements, is set
out below.
Country % of ordinary % of ordinary
Nature of of shares held shares held
Subsidiary business incorporation by the Company by the Group
% %
Holding
Sula Ltd company IOM 100 100
Manufacture
and sale
Strix Ltd of products IOM - 100
Strix Manufacture
Guangzhou and sale
Ltd of products China - 100
Group's sale
and
Strix (U.K.) distribution
Ltd centre UK - 100
Sale and
Strix Hong distribution
Kong Ltd of products Hong Kong - 100
Construction
of
Strix (China) manufacturing
Ltd facility China - 100
HaloSource
Water
Purification Manufacturing
Technology and
(Shanghai) sales of
Co. Ltd products China - 100
Research and
development,
sales, and
Strix (USA), distribution
Inc. of products USA - 100
12. Trade and other receivables
30 31 December
June 2019
2020
GBP000s GBP000s
-------------------------------------- -------- ------------
Amounts falling due within one year:
Trade receivables 3,002 4,286
Trade receivables past due 315 502
Loss allowance - (50)
-------------------------------------- -------- ------------
Trade receivables - net 3,317 4,738
-------------------------------------- -------- ------------
Prepayments 1,339 1,042
Advance purchase of commodities 2,364 2,174
Other receivables 1,259 1,379
-------------------------------------- -------- ------------
8,279 9,333
-------------------------------------- -------- ------------
Trade and other receivables are all current and any fair value
difference is not material.
The amount of trade receivables past due is not material,
therefore an aging analysis has not been presented (2019:
same).
The advance purchase of commodities relates to a payment in
advance to secure the purchase of certain key commodities at an
agreed price to mitigate the commodity price risk.
GBP822,000 of prepayments were capitalised in 2017 in relation
to transaction costs for non-current borrowings put in place as
part of the Group reorganisation and admission to trading on AIM.
At 30 June 2020 increased to GBP790,000 (2019: GBP506,000) due to
the renewal of the revolving credit facility, these transaction
costs were included within prepayments.
Other receivables include government grants due of GBP208,000
(2019: GBP201,000). There were no unfulfilled conditions in
relation to these grants at the period end, although if the Group
ceases to operate or leaves the Isle of Man within 10 years from
the date of the last grant payment, funds may be reclaimed.
Movement on the Group's provision for impairment of trade
receivables and the inputs and estimation technique used to
calculate expected credit losses have not been disclosed on the
basis the amounts are not material.
13. Trade and other payables
30 June 31 December
2020 2019
------------------------------------
GBP000s GBP000s
------------------------------------ -------- ------------
Trade payables 5,658 6,779
Current income tax liabilities 1,471 1,929
Social security and other taxes 148 98
Other liabilities 5,161 5,620
Payments in advance from customers 1,343 1,286
Accrued expenses 2,881 3,990
------------------------------------ -------- ------------
16,662 19,702
------------------------------------ -------- ------------
The fair value of financial liabilities approximates their
carrying value due to short maturities.
14. Borrowings
30 June 31 December
2020 2019
------------------------
GBP000s GBP000s
------------------------ -------- ------------
Non-current bank loans 49,000 40,000
------------------------ -------- ------------
Term and debt repayment schedule
Currency Interest rate Maturity 30 June
date 2020 carrying
value
(GBP000s)
LIBOR +1.50%
Revolving credit facility GBP - 2.85% 27-May-25 49,000
--------------------------- ---------- --------------- ----------- ---------------
On 27 May 2020, the Company entered into an agreement with RBS
International Limited and Bank of China in respect of a revolving
credit facility of GBP60,000,000.
All amounts become immediately repayable and undrawn amounts
cease to be available for drawdown in the event of a third party
gaining control of the Company. The Company and its subsidiaries,
Strix Limited and Sula Limited, have entered into the agreement as
guarantors, guaranteeing the obligations of the borrowers under the
agreement.
The agreement contains representations and warranties which are
usual for an agreement of this nature. The agreement also provides
for the payment of a commitment fee, agency fee and arrangement
fee, contains certain undertakings, guarantees and covenants
(including financial covenants) and provides for certain events of
default. During the period to 30 June 2020, the Group has not
breached any of the financial covenants contained within the
agreement.
Interest applied to the loan is calculated as the sum of the
margin and LIBOR (or EURIBOR for any loan denominated in Euros).
The margin is a calculated based on the Group's leverage as
follows:
Leverage Annualised
margin %
-------------------------------------------------- -----------
Greater than or equal to 2.5x 2.85%
Less than 2.5x but greater than or equal to 2.0x 2.50%
Less than 2.0x but greater than or equal to 1.5x 2.20%
Less than 1.5x but greater than or equal to 1.0x 2.00%
Less than 1.0x 1.50%
15. CAPITAL Commitments
30 June 31 December
2020 2019
----------------------------------------------------------
GBP000s GBP000s
---------------------------------------------------------- -------- ------------
Contracted for but not provided in the interim financial
statements: Property, plant and equipment 7,688 12,559
---------------------------------------------------------- -------- ------------
Construction of new factory
The above commitments include capital expenditure of
GBP6,163,165 (2019: GBP10,472,000) relating to the construction of
a new factory in Zengcheng district, China.
16. Dividends
The following amounts were recognised as distributions in the
period:
Period Period
ended ended
-------------------------------------------------
30 June 30 June
2020 2019
-------------------------------------------------
GBP000s GBP000s
------------------------------------------------- -------- --------
Final 2019 dividend of 5.1p per share (H1 2019:
4.7p) 10,126 8,930
------------------------------------------------- -------- --------
Total dividends recognised in the period 10,126 8,930
------------------------------------------------- -------- --------
In addition to the above dividend, since the end of the period
the Directors have approved the payment of an interim dividend of
2.6p per share. The aggregate amount of the interim dividend
expected to be paid on 30 October 2020 out of retained earnings at
30 June 2020, but not recognised as a liability at the period end,
is GBP5,171,000. The payment of this dividend will not have any tax
consequences for the Group.
17. FUTURE LEASE LIABILITIES
The table below shows the split of future leases payable between
current and non-current in the condensed interim consolidated
balance sheet:
30 June 31 December
2020 2019
---------------------------------------------------
GBP000s GBP000s
--------------------------------------------------- --------- ------------
Current future lease liabilities (due within 12
months) 1,589 1,508
Non-current future lease liabilities (due in more
than 12 months) 2,258 2,960
--------------------------------------------------- --------- ------------
Total Future Lease Liabilities payable 3,847 4,468
--------------------------------------------------- --------- ------------
The Group adopted IFRS 16 from 1 January 2019.
18. Cash flow statement notes
a) Cash generated from operations
Period Period
ended ended
-----------------------------------------------------
30 June 30 June
2020 2019
-----------------------------------------------------
GBP000s GBP000s
----------------------------------------------------- -------- --------
Cash flows from operating activities
Operating profit 8,112 8,138
Adjustments for:
Depreciation of property, plant and equipment
9 1,491 1,401
Depreciation of right-of-use assets 9 721 628
Amortisation of intangible assets 8 748 688
Loss/(profit) on disposal of property, plant
and equipment - 6
Pension contributions made 59 (19)
Share based payment transactions 678 3,053
Net exchange differences (61) 13
----------------------------------------------------- -------- --------
11,748 13,908
Changes in working capital:
(Increase)/ decrease in inventories (1,674) (269)
(Increase)/ decrease in trade and other receivables 1,235 (4,053)
Increase / (decrease) in trade and other payables (2,321) 1,686
----------------------------------------------------- -------- --------
Cash generated from operations 8,988 11,272
----------------------------------------------------- -------- --------
b) Movement in net debt
Non-cash movements
-------------------------------------------------
At 1 January Cash Currency At 30
2020 flows movements June 2020
GBP000s GBP000s GBP000s GBP000s
------------- -------- ----------- -----------
Non-current borrowings (40,000) (9,000) - (49,000)
Lease Liabilities (4,468) 800 (179) (3,847)
---------------------------------- ------------- -------- ----------- -----------
Total liabilities from financing
activities (44,468) (8,200) (179) (52,847)
---------------------------------- ------------- -------- ----------- -----------
Cash and cash equivalents 13,658 (1,761) 206 12,103
---------------------------------- ------------- -------- ----------- -----------
Net debt (30,810) (9,961) 27 (40,744)
---------------------------------- ------------- -------- ----------- -----------
19. RELATED PARTY TRANSACTIONS
Key management compensation
The following table details the aggregate compensation paid in
respect of key management, which includes the Directors and the
members of the Trading Board, representing members of the senior
management team from all key departments of the Group.
Period Period
ended ended
---------------------------------------------------
30 June 30 June
2020 2019
---------------------------------------------------
GBP000s GBP000s
--------------------------------------------------- -------- --------
Salaries and other short-term employment benefits 806 885
Post-employment benefits 81 74
Termination 48 -
Share-based payment transactions 820 2,125
--------------------------------------------------- -------- --------
1,755 3,084
--------------------------------------------------- -------- --------
There are no defined benefit schemes for key management.
20. Post balance sheet events
The Group has entered into a conditional agreement to acquire
the entire share capital of Laica S.p.A for an initial
consideration of EUR19.6 million, comprising EUR11.6 million in
cash and EUR8.0 million in Strix ordinary shares, with up to a
further EUR12.0 million payable in cash subject to certain
conditions being met, including threshold financial targets for the
financial years ending 31 December 2021 and 2022.
The Group has no other post balance sheet events to
disclose.
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IR LTMJTMTATTJM
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