Strix Group Plc (LON:KETL), the global leader in the design, manufacture and supply of kettle safety controls and other complementary water products used in temperature control, steam management and water filtration, today announced its audited results for the year ended 31 December 2019 which are in line with the market expectations.
Financial summary
| Adjusted results1 | |||
| 2019 | 2018 | Change | |
| £m | £m | %5 | |
| Revenue | 96.9 | 93.8 | +3.3% |
| Revenue – constant currency basis2 | 95.4 | 93.8 | +1.8% |
| EBITDA3 | 36.9 | 36.4 | +1.5% |
| Gross profit | 39.6 | 38.9 | +1.8% |
| Operating profit | 31.5 | 30.9 | +2.2% |
| Operating profit – excluding the acquisition of HaloSource | 33.4 | 30.9 | +8.3% |
| Profit before tax | 30.2 | 29.2 | +3.4% |
| Profit after tax | 28.9 | 28.3 | +2.1% |
| Total comprehensive income | 28.8 | 28.3 | +1.7% |
| Net debt4 | 26.3 | 27.5 | +4.1% |
| Basic earnings per share | 15.2p | 14.9p | +2.1% |
| Total dividend per share | 7.7p | 7.0p | +10.0% |
1. Adjusted results exclude exceptional items, which include share based payment transactions and 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. Revenue – constant currency basis, which is defined as 2019 revenue restated at the exchange rates prevailing in 2018, is a non-GAAP metric used by management and is not an IFRS disclosure.
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.
4. Net debt excludes the impact of IFRS 16 lease liabilities. This standard was adopted from 1 January 2019.
5. Figures are calculated from the full numbers as presented in the consolidated financial statements.
Financial highlights
· Solid performance during 2019 including a 3.3% growth in revenue driven by maintaining market value share in the regulated and less regulated markets at c.73% (2018: c.73%) and c.34% (2018: c.34%) respectively and growth in the Chinese domestic market at c.49% (2018: c.45%).
· Adjusted gross profit margin excluding the effect of HaloSource increased to 42.3% (2018: 41.5%).
· Adjusted profit before tax increased by 9.9% to £32.1m (2018: £29.2m) and adjusted EBITDA increased 5.5% to £38.3m (2018: 36.4m), excluding the newly acquired HaloSource business.
· Adjusted total comprehensive losses from the HaloSource acquisition were in line with expectations at £2.0m resulting in a 1.7% increase in Group adjusted total comprehensive income.
· Despite the capital investments made, net debt (excluding the impact of IFRS 16 lease liabilities) reduced to £26.3m, a 4.1% improvement since 31 December 2018 (£27.5m).
· The Group has available liquidity, consisting of cash and undrawn facilities, of £22.7m.
· The Group has improved its net debt (excluding the impact of IFRS 16 lease liabilities) to adjusted EBITDA ratio to 0.7x (2018: 0.8x).
· Proposed final dividend of 5.1p, resulting in total dividends of 7.7p for the full year (2018: 7.0p).
Operational highlights
· Production efficiency of core kettle products improved by 5% to 98% through the continued introduction of automation and lean initiatives.
· The U9 series continues to show strong growth with over 15 million controls sold. The new U90 automation line achieved 80% labour and 85% machine efficiency, in line with original projections.
· Intertek has awarded the Group’s Isle of Man facility a ‘Benchmark’ score for all ISO categories, the highest standard available within the scoring system which very few audited companies achieve.
· Focus on continuous improvement, automation and refinement of existing processes has delivered a 29% improvement in customer quality ppm (parts per million).
Strategic highlights
· Maintained global market value share of the kettle controls market at c.54%.
· Acquisition of specific assets from HaloSource Corporation successfully completed on 7 March 2019, adding significant R&D capabilities and commercial opportunities to the Water Category.
· Construction contract for the new factory within Zengcheng district, China, signed on the 2 September 2019 for £13.9m. Total factory project is on target to be fully operational by August 2021 and remains on budget at the previously guided £20m.
· Appointment of Richard Sells as a Non-Executive Director effective 18 March 2020. Richard brings a wealth of commercial experience to the Board which will support the Group’s growth ambitions.
· Continued focus on both safety and intellectual property actions resulting in seventeen kettles being removed from online sale and nine unsafe competitor kettles being recalled globally.
Mark Bartlett, CEO of Strix Group, commented:
“Following on from our successful results in 2018, we are pleased to report another year of solid trading performance in 2019. We continue to focus on our strategic priorities which has enabled us to retain our c.54% global market value share amidst a challenging geo-political climate.
“During the year, we have continued to execute on our organic and inorganic strategy for growth through the acquisition of HaloSource in March 2019 and the construction of a new factory in China, where we have signed a £13.9m construction contract and commenced construction.
“We remain committed to consumer safety where we continue to initiate regulatory enforcement actions to remove unsafe and poor quality products from the market. Defence of intellectual property remains a core function of our business which is important in achieving the Group’s growth potential.
“We have maintained our focus on manufacturing and production quality which has led to a 29% improvement in customer quality parts per million. The Group continues to invest in automation and lean initiatives which will further enhance production efficiency and quality.
“The Group’s high ROCE and high proportion of cash in advance payment terms limit the risk of non-payment and working capital fluctuations. This along with a robust balance sheet provide the Board with continued confidence in the Group’s future growth prospects.
“The Board are delighted to announce a proposed final dividend of 5.1p, resulting in a total dividend of 7.7p per share for 2019.
“We have been extremely proud of the response of our leaders to the unprecedented situation as a result of COVID-19, with minimal impact to date. The Group’s manufacturing operations in China have recovered with a c.100% production capacity and operational supply chain which is sufficient to meet customer demand. The Group will continue to focus on a prudent allocation of capital and be vigilant about the broader implications of COVID-19 which will include daily monitoring of consumer and brand demand. As a result, the Group is working on several strategic initiatives, including new products and efficiency measures, to minimise the impact to full year forecasts.”
