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STRIX GROUP PLC ORD 1P

Strix Group PLC ‘Another resilient trading performance’

Strix Group PLC (LON:KETL), the AIM listed global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, has today announced its unaudited interim results for the six months ended 30 June 2019.

Mark Bartlett, Chief Executive Officer of Strix Group plc, said:

“Strix has achieved another solid performance despite continued challenges presented by the macro-economic environment. In particular, maintenance of the Group’s market share in the Regulated and Less Regulated markets, combined with modest growth in China, demonstrates the strength and resilience of our core business model.

“We have maintained our margins due to continued focus on operational enhancements and cost improvements in our core products whilst remaining on track with key strategic projects. These include the construction of the new facility in China and the integration of the assets acquired from HaloSource in March 2019. We have made further progress toward our strategic objectives and continue to invest in the growth of our business, funded by our existing resources.

“With the acquisition of HaloSource, we have strengthened the Water Category which includes Aqua Optima, Astrea, and HaloPure. This provides us with the right blend of products to deliver success in this growing category and, together with our investment in R&D capabilities, we have the right ingredients to create and commercialise exciting new innovative products within the Water Category. These include working closely with AquaShield to develop a Philips co-branded Astrea one filtration bottle; the launch of the Zwilling Water Dispenser in April 2019 into the hot water appliance market; discussions with a major Asian mother & baby brand to bring new and innovative products to the market; and a collaboration with Mr Coffee to launch a new single serve coffee appliance in the North American market during September 2019 using our patented Hot Cup Technology.

“The Board is confident with the future outlook and profitability remains in line with full year market expectations. As a Board, we have committed to increase the full year dividend by 10% to 7.7p per share, an indication of our confidence in achieving the Group’s business objectives for 2019.” 

FINANCIAL SUMMARY

 Adjusted results1
 H1 2019H1 2018Change
 £m£m%3
Revenue43.942.9+2.5%
Gross profit16.716.3+2.5%
EBITDA214.914.8+0.7%
Operating profit12.211.9+2.1%
Profit before tax11.511.0+4.6%
Profit after tax10.910.6+2.6%
Net debt33.437.9+11.9%4
Net cash generated from operating activities10.915.2-28.4%5
Basic earnings per share5.7p5.6p+2.6% 
Diluted earnings per share5.4p5.3p+1.8%
Interim dividend per share2.6p2.3p+13.0% 

1.        Adjusted results exclude exceptional items, which include share based payment transactions. 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.        Movement partially driven by cash outflows in relation to the HaloSource acquisition and the new manufacturing facility.

5.        Movement partially driven by working capital movements and exceptional costs relating to the HaloSource acquisition.

FINANCIAL HIGHLIGHTS

· Adjusted profit before tax increased by 4.6% to £11.5m (H1 2018: £11.0m), driven by lower interest charges being incurred as a result of an improved leverage ratio and a lower average outstanding facility balance

· Net cash generated from operating activities decreased to £10.9m (H1 2018: £15.2m), driven by working capital movements and exceptional costs relating to the HaloSource acquisition

· Net debt in line with expectations at £33.4m (H1 2018: £37.9m)

· Interim dividend increased by 13% to 2.6p (H1 2018: 2.3p) per share to be paid on 25 October 2019

· Group average selling price was strong at c. 3% above H1, 2018 due to positive geographical and product mix, supported by a price increase implemented in Q4, 2018, primarily to cover an increase in the cost of hybrid plastics

FULL YEAR OUTLOOK

· A solid performance and profitability remains in line with full year market expectations

· Kettle control volumes were flat during H1 and anticipated to grow c.3% for the full year due to the commercial contracts and incremental specifications secured during year to date

· Average selling price for the full year is anticipated to be c.2% down on prior year (0% excluding ancillary products such as, China healthy eating kettles, milk frother and cerves, etc.), better than CAGR, driven by increased sales into China and the Less Regulated markets

· Aqua Optima is expected to recover from the slow start to the year with further expansion of trade brands sales into Europe and the launch of new products into the China domestic market

· New factory on track with the land secured and contractor engaged on a fixed priced contract in line with project plan

· The Board remains committed to delivering a 10% increase in the full year dividend to 7.7p (2018: 7.0p)

· Cash generation remains healthy with prudent capital allocations on four core priorities; progressive dividend, new factory construction, strategic acquisition, focused capital expenditures, with Net debt to EBITDA ratio modestly increased to 1.0 – 1.1x at year end

STRATEGIC HIGHLIGHTS

· Global market share maintained within each segment despite macro-economic headwinds

· Acquisition of specific assets from HaloSource Corporation successfully completed on 7 March 2019, adding significant R&D capabilities to the Water Category and providing additional adjacent technologies

· 50-year land use rights secured for £1.7m in Zengcheng District of Guangzhou, China in order to build the new manufacturing facility, which will be fully operational by August 2021

· Appointment of a Chief Commercial Officer to expedite commercialisation of new products and technologies to support the next phase of the Group’s growth

· Commercial agreement secured for the recently acquired Astrea product to be launched globally under the Philips brand. The product was launched at the IFA exhibition in Germany in September 2019

· Continued focus on both safety and intellectual property actions resulting in ten internet brands being removed from sale and three unsafe competitor kettles being recalled within Europe

· New single serve coffee system was launched in the US market in collaboration with Mr. Coffee, a major household name in the US, opening further opportunities within the US beverage sector

OPERATIONAL HIGHLIGHTS

· More than one million “Perfect Prep” units have now been sold, highlighting the success of this innovative product which uses Strix’s technology

· U9 series continues to show strong growth with almost five million controls sold

· Continuous focus on automation with the Evolve mk4 water filter line becoming fully automated in H2 2019 and the U90 series line consistently achieving 80%+ efficiency

· 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

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.