TIDMKETL
RNS Number : 1382N
Strix Group PLC
21 September 2023
21 September 2023
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR
Strix Group Plc
("Strix", the "Group" or the "Company")
Interim results for the six months ended 30 June 2023
Financial Summary (1)
H1 2023 H1 2022 Change
(23 -
22)
-------- -------- -------
GBPm GBPm %(4)
Revenue 65.2 50.7 +28.6%
Gross profit 23.9 19.5 +22.6%
EBITDA(2) 15.6 15.9 -1.9%
Operating profit 11.8 12.9 -8.5%
Profit before tax 6.8 11.6 -41.4%
Profit after tax 5.7 11.6 -50.9%
Net debt(3) 93.1 61.3 +51.9%
Net cash generated from operating
activities 13.1 9.9 +32.3%
Basic earnings per share (pence) 2.6 5.6 -53.6%
Diluted earnings per share
(pence) 2.6 5.5 -52.7%
Interim dividend per share
(pence) 0.9 2.75 -67.3%
1. Adjusted results exclude adjusting items, which include
share-based payment transactions, COVID-19 related costs, 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. 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. Net debt excludes the impact of IFRS 16 lease liabilities,
pension liabilities, deferred tax liabilities and earn-out
provisions on satisfaction of performance conditions and providing
post-combination services.
4. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
Financial Highlights
-- The Group reported revenue of GBP65.2m, an increase of
28.6% versus the same period in prior year mainly as
a result of the first time inclusion of Billi revenues
-- of GBP21.5m which helped to fully offset a reduction
in organic sales, particularly in kettle controls.
Adjusted EBITDA was GBP15.6m, a decrease of 1.9% versus
the same period in prior year.
-- Adjusted PAT was GBP5.7m , a decrease of 50.9% versus
the same period in prior year (GBP11.9m) mainly attributable
to interest and finance fee costs due to an increase
in the net debt to fund the Billi acquisition and a higher
interest rates environment.
-- Net debt increased to GBP93.1m (FY 2022: GBP87.4m) due
to the strategic acquisition of Billi . This represents
a n et debt/adjusted EBITDA ratio ( calculated on a trailing
twelve-month basis) of 2.66 x.
-- Basic earnings per share and adjusted diluted earnings
per share were 2.6p (2022: 5.6p) and 2.6p (2021: 5.5p)
-- respectively.
Given the increase in net debt due to the strategic acquisition
of Billi, and with the high interest rates environment,
the Board continues to take precautions to balance the
capital allocation priorities and as a result the Board
is declaring an interim dividend of 0.9p per share (HY
2022: 2.75p).
Strategic Highlights
-- Transformational acquisition of Billi which has a successful
history of growth, with double digit revenue CAGR over
the past five years and is highly cash generative, delivering
-- historic cash conversion of c.88%.
Group Strategic Business Objectives ("SBO's") to be delivered
by the end of FY 2026.
New divisional reporting structure to better position
the Group in delivering on its New SBO's:
* Group revenue from GBP107m to GBP206m and Group gross
profit from GBP42m to GBP80m by end of 2026.
* Kettle controls - profitably grow Control revenue
from GBP68m to GBP88m by 2026, delivering a gross
profit in excess of 40% through the introduction of
innovative new products focused on sustainability,
safety and convenience.
* Billi - leverage the new product development and
expand the geographical distribution in both
residential and commercial markets to deliver GBP58m
of revenue with a gross profit in excess of 45% by
2026.
* Consumer Goods - Grow consumer goods business beyond
market growth through innovation, world class
sourcing and commercial excellence, delivering
revenue of GBP60m and gross profit in excess of 30%.
Operational Highlights
-- Acquisition of Billi continues to be successfully integrated
in line with plan to achieve the identified operational
-- benefits, as the business opens up new sales channels
for Strix.
-- Direct labour efficiency improved by 3.5% in H1 2023
against H1 2022 and indirect labour efficiency improved
-- by 11% via various lean approaches.
Quality performance of customer returns improved by 19%
-- and product built on the automation lines remained at
zero return.
Surveillance audits to ISO 9001:2015, ISO 14001:2015,
-- & ISO 45001:2018 have been passed with outstanding rating
for all the areas.
-- Added a new line in the Vicenza, Italy facility to deliver
an anti-bacterial filter, replacing a third party sourced
product and completing 100% in-sourcing of all water
filter products in the range.
Pipeline of new product launches through 2023 including
an integrated tap in Billi, the digital water filter
kettle and Aurora coffee appliance.
Perfect Pour jug has been awarded the Highly Commended
accolade in the Sustainability category by Housewares
Magazine.
Mark Bartlett, Chief Executive Officer of Strix Group plc,
said:
"The continued macro headwinds have resulted in a reduction in
demand in kettle controls in the key export regulated markets of UK
and Germany during H1 and a slower than anticipated recovery.
Whilst recent order rates are tracking in a positive direction, we
now anticipate the path to a return of normalised growth to take
longer and for there to be a decrease in the short term revenues
within this category. The Group's second half of the year is always
stronger than the first and weighted to Q4 driven by the
replenishment of stock and normal seasonal uplift, the performance
required in Q4 to achieve the full year outcome is lower than in
2022 and 2021.
"Given the increase in net debt due to the strategic acquisition
of Billi, and with the high interest rates environment, the Board
continues to take precautions to balance the capital allocation
priorities. To be prudent, the Board has decided to prioritise the
reduction of debt with a clear plan to net debt / EBITDA to below
1.5x over the medium term.
"Despite the short term headwinds, Strix is also announcing
Strategic Business Objectives which will deliver group revenue of
GBP206m and gross profit of GBP80m by the end of FY 2026 reflecting
the attractiveness of the underlying markets that it operates
within."
CEO's report:
Financial performance
The Group reported revenue of GBP65.2m, an increase of 28.6%
versus the same period in prior year mainly as a result of the
first time inclusion of Billi revenues which helped to fully offset
a reduction in organic sales, particularly with the kettle controls
category.
Adjusted gross profit increased by 22.6% to GBP23.9m (H1 2022:
GBP19.5m), in line with increased revenues as described above. This
increase is mainly attributable to the Billi inclusion of GBP10.0m,
and also slightly from the water category, however partially offset
by a decrease in adjusted gross profits for kettle controls of
GBP4.3m (28.6% decrease) and marginally by appliances category.
Adjusted gross profit margin in H1 2023 was 36.7% (H1 2022:
38.4%), showing a margin dilution of 1.7% compared to same period
last year. This dilution is mainly due to the under-absorption of
fixed manufacturing overhead costs as production volume has reduced
to align to the softening of sales volume. Costs optimisation
evaluation and measures are in place to ensure skilled labour is
maintained for medium term recovery, while streamlining
non-critical spending to adopt a balanced approach to manage this
softening in the H1 period. This decline was partially offset by
the addition of Billi which made a positive contribution to
margins, decreases in commodity prices, and a positive impact from
the LAICA sub-group consumer goods.
Adjusted profit before tax was GBP6.8m (H1 2022: GBP11.6m), a
decrease of GBP4.8m (41.4% decrease) compared to the same period
last year. This is attributable mainly to interest and finance fee
costs which had an adverse variance in the current H1 period of
GBP3.7m compared to the same period last year due to an increase in
the net debt to fund the Billi acquisition and a higher interest
rates environment.
Adjusted profit after tax was GBP5.7m (H1 2022: GBP11.6m), a
GBP5.9m adverse variance compared to the same period last year. T
ax expense for the current period was GBP1.1m , primarily relating
to the tax liability from Billi of GBP0.8m recognised in the Group
being the first year of acquisition. The balance of GBP0.3m relates
to tax expense in the organic business.
As anticipated, the Group's net debt increased to GBP93.1m (FY
2022: GBP87.4m). This represents a n et debt/adjusted EBITDA ratio
( calculated on a trailing twelve-month basis) of 2.66 x which
complies with the Company's debt covenant threshold of 2.75
times.
Given the increase in net debt due to the strategic acquisition
of Billi, and with the high interest rates environment, the Board
continues to take precautions to balance the capital allocation
priorities. To be prudent, the Board has decided to prioritise the
reduction of debt for the rest of the current year with a clear
plan to reduce net debt / EBITDA to below 1.5x over the medium
term. The Board is therefore declaring an interim dividend in FY
2023 of 0.9p per share (HY 2022: 2.75p).
New divisional reporting structure
To better position the Group in delivering on its new Strategic
Business Objectives, Strix has established a new divisional
reporting structure to capitalise on attractive growth
opportunities in its end markets during this next phase of
growth.
Three divisions have been identified from a product perspective,
namely: kettle controls, premium filtration systems (primarily
Billi products), and consumer goods (made up of water products and
appliances).
Kettle control category
The kettle controls revenue decreased by 17.2% to GBP28.9m (H1
2022: GBP34.8m).
In line with international government sanctions, Strix's key
global brands remain exited from Russia (a significant market) and
Strix also stopped trading directly with Russian brands. It is
worth noting that excluding the affected regions, Strix's market
share in Kettle Controls remained at c. 56%.
The kettle market has experienced continued macro headwinds
which have resulted in a reduction in demand in the key export
regulated markets of UK and Germany during H1 and a slower than
anticipated recovery.
Whilst recent order rates are tracking in a positive direction,
evident from an increase in sales in Q2, this remains in smaller
quantities than expected as customers continue to manage their cash
balances prudently in key regulated export markets. Strix now
anticipates the path to a return of normalised growth to take
longer and for there to be a decrease in the short term revenues
within this category.
Strix has also continued to focus product development on
opportunities and design improvements in a sustainable way to
reduce the overall manufactured product footprint that will further
strengthen Strix's position and support its market share
aspirations.
Overview of strategic rationale of the acquisition of Billi
Billi has a successful history of growth, with double digit
revenue CAGR over the past five years and is highly cash
generative, delivering cash conversion of c.88%.
The acquisition materially changes the earnings profile of the
Group. It adds well developed and premium products in the high
growth and strategically important hot tap market and increases
Strix's position and portfolio of water dispenser systems. The
Board expects Strix's existing technology, resource and expertise
can be used to further enhance Billi's new product development
roadmap.
Efficiencies were identified across Billi's product lifecycle
and will be enhanced utilising Strix's Chinese operation to improve
procurement, insourcing of certain key parts, and consolidation of
the marketing group.
There are also opportunities for further organic growth. These
include residential sales, new product development particularly in
sparkling, internationalising Billi's revenue stream through
Strix's global footprint, cross selling Strix products into
commercial applications and growing aftermarket sales.
Progress since completion of Billi
The acquisition of Billi continues to be successfully integrated
in line with plan to achieve the identified operational benefits,
as the business opened up new sales channels for Strix.
New flagship OmniOne product (offering boiling, chilled and
sparkling water for commercial and residential applications) was
successfully launched in Q2. This will be a major opportunity for
all markets and an order has already been secured and fulfilled
from one of Australia's largest listed companies .
Strong progress has been made at Billi UK to exit the
Transitional Services Agreement ("TSA") on time on 31 August 2023.
Australian TSA with Culligan exited on time and without incident on
31 May 2023. Good progress has also been made with new sites
identified as Strix procures smaller storage locations in New South
Wales, Western Australia and South Australia and the New Showroom
in London (Farringdon) has been opened. The head office in
Wolverhampton has already been established and Strix continues to
integrate Strix and Billi employees during Q4.
Distributors in Singapore, Hong Kong and China have been
re-signed and new distributors in the UAE and Qatar have been
secured.
Consumer goods division
Overall, the consumer goods division reported a decline in
revenue of 6.3% to GBP14.9m in H1 2023 (H1 2022: GBP15.9m), driven
primarily by softening of the appliances category market, however
partially offset by improved water category revenues.
Despite a decline in appliance sales, Strix's Aqua Optima brand
showed resilience as the Group continues to explore opportunities
through geographical expansion, with continued expansion across
Europe and North America, Strix/LAICA cross selling, and new
innovative product launches.
Other notable achievements included:-
* Aqua Optima Aurora Hot and Cold Water Dispenser has
been granted the Highly Commended award in the Best
Smart Innovation - Small Domestic Appliances category
at the prestigious Innovative Electrical Retailing
(IER) Awards.
* Perfect Pour jug has been awarded the Highly
Commended accolade in the Sustainability category by
Housewares Magazine. This prestigious recognition is
a testament to our dedication to promoting
sustainable living and reducing single-use plastic
waste.
* Successful launch of Strix innovations under the
LAICA brand with the launch of the Dual Flo range.
This newly launched product utilises superior, energy
efficient technology and is believed to be the only
combined kettle and one cup hot water dispenser.
* On boarded three new online market place launches as
the Group continues to expand its online presence
which has seen the number of marketplace shipments
across the Group double in H1 2023.
* LAICA Water Filter Variable Temperature Kettle and
Ultrasonic Humidifier all successfully launched.
Overall, the water category reported a growth in revenue of 2.3%
to GBP10.5m in H1 2023 (H1 2022: GBP10.3m) .
Both Aqua Optima & LAICA water brands have seen growth year
on year due to initial geographical expansion via Amazon sales
outperforming the private label business.
Strix now manufactures the majority of its filters in house in
two locations freeing the Group from 3(rd) party risk, whilst
allowing a new level of flexibility to offer our customers.
Key growth initiatives for the category will be geographic
expansion (cross selling existing LAICA & Aqua Optima products
into new territories), coffee filtration expertise and using
private label water supply as a way to open doors into large
retailers for other categories.
Strategic Business Objectives (SBOs)
Alongside the interim results, Strix is announcing Strategic
Business Objectives ("SBO's") to be delivered by the end of FY
2026.
In summary:-
-- Group revenue from GBP107m to GBP206m and Group gross profit
from GBP42m to GBP80m by end of FY 2026.
-- Kettle controls - profitably grow Control revenue from GBP68m
to GBP88m by 2026, delivering a gross profit in excess of 40%
through the introduction of innovative new products focused on
sustainability, safety and convenience.
-- Billi - leverage the new product development and expand the
geographical distribution in both residential and commercial
markets to deliver GBP58m of revenue with a gross profit in excess
of 45% by 2026.
-- Consumer Goods - grow consumer goods business beyond market
growth through innovation, world class sourcing and commercial
excellence, delivering revenue of GBP60m and gross profit in excess
of 30%.
-- Geographical Expansion - Become a true global presence with a
market leading position in our chosen fields of SDA, Water
Filtration and multi-functional hot tap solutions - EMEA, APAC, NAM
& LATAM.
-- Talent and Skills - Right People, Right place, Right Skills,
motivated and engaged to deliver strategic objectives.
-- Technology - Develop the leading, innovative technology in
the fields of water heating, safety control systems and water
treatment of drinking water to support the business growth.
The Strix management will host a capital markets day after the
interim results analyst presentation to provide more context.
Barriers to entry and d efence of intellectual property
Strix constantly assesses the risks posed by competitive threats
which drives its determination to constantly evolve its innovative
technologies in a sustainable way by investing in its portfolio of
intellectual property to protect its new products.
The Group actively monitors the markets in which it operates for
violation of its intellectual property rights. Strix has unique
relationships with its brands, OEMs and retailers and provides its
support across the value chain and throughout the product
lifecycle, including product design and advice on specification and
manufacturing solutions. These value-added services and existing
strong relationships ensure brands, OEMs and retailers continue to
rely on Strix's components and support.
Strix remains committed to consumer safety and continues to
prompt regulatory enforcement authorities to remove unsafe and poor
quality products from its major markets. Nine such actions were
undertaken in 2021 resulting in product recalls and withdrawal of
kettles from Bulgaria. Defence of intellectual property and
regulatory enforcement remain core activities of its business and
there have now been 66 in total since 2017 until the end of 2021,
with 4 further regulatory and 3 intellectual property actions
conducted in 2022.
Sustainability
Strix core products are associated with the consumption of
critical resources, primarily electricity and water, hence Strix's
drive for continual improvement has aligned it with a
sustainability led agenda. Recent years have seen an increase in
the emphasis and broadening of the scope of its sustainability
agenda. This was highlighted by the adoption of a wide range of
KPIs and associated targets in 2021.
One of the most challenging and differentiating goals was to
achieve Scope 1&2 net zero by 2023. Key elements have been put
in place with long term renewable power contracts for all key
facilities and head office along with investment in solar capacity.
Indeed, Strix now expects its own renewable sources to generate
around 10% of the Group's total energy requirements. As a
consequence, the Group started 2023 in-line with its net zero
agenda. This is increasingly important as its customers look to
assess their own emissions footprint, of which Strix forms part of
their Scope 3 inventory. Strix's position as a leader in low
emissions therefore offers a potential commercial advantage over
its competition. Efforts are being expanded into analysing its own
Scope 3 inventory in 2023 to fully embrace its extended emissions
chain. This leads to additional constructive conversation with
suppliers and customers including re-assessment of operational and
supply chain practices. The Group's sustainability agenda is
sympathetic to changing consumer trends and hence is key for
driving the roadmap and pace of new product development.
The Group's sustainability strategy and adopted KPIs are
generating greater emphasis and efforts on a broad range of
aspects. Employee training has been a focus with significant
increase in training hours assisted by adoption of a more
structured approach, including Kallidus e-learning system and a new
training management structure in China. Health & Safety
continues to be a top priority with the three year average trend
continuing in a positive direction. The Company values its
employees and their contribution and looks to develop their
wellbeing reflected in improved facilities offered by the new
Chinese facility, whilst the West has seen changes in the working
week, which has also increased holiday entitlement, and the
introduction of two charity days a year.
Strix's sustainability agenda for 2023 remains high on the
agenda as it delivers on its Scope 1&2 targets, analyses its
Scope 3 emissions and continues to focus on its other KPIs. The
pace and delivery of these goals reflects the strong employee ethos
and commitment to the agenda.
Dividend policy
Given the increase in net debt due to the strategic acquisition
of Billi, and with the high interest rates environment, the Board
continues to take precautions to balance the capital allocation
priorities. To be prudent, the Board has decided to prioritise the
reduction of debt for the rest of the current year.
Therefore, the Board is declaring an interim dividend in FY 2023
of 0.9p per share (HY 2022: 2.75p).
The interim dividend will be paid on 29 December 2023 to
shareholders on the register on 17 November 2023 and the shares
will trade ex-dividend from 16 November 2023.
Going forward the Group will implement a payout ratio of 30% of
adjusted profit after tax which will enable sustainable returns to
be delivered to our shareholders. Over the medium term, Strix has a
clear plan to reduce net debt / EBITDA to below 1.5x and will then
have the ability to return excess capital to shareholders subject
to their future requirements and the prevailing macro
environment.
Financial Position
Strix is focused on its highly cash generative operating model
and the management team will prioritise integration and unlocking
anticipated revenue and cost synergies following the acquisition of
Billi.
Over the past few years, Strix has made significant investments
in acquisitions, a new factory and working capital. A primary
driver of the increased adjusting items (formerly exceptional
items) is due to the number of acquisitions and one-off costs
relating to capital expenditures.
There will be no further M&A activity or investment into new
factory builds, with significantly reduced capex and working
capital over the medium term. Capital allocation decisions will
prioritise debt reduction and free cash flow generation with a
clear plan to net debt / EBITDA to below 1.5x over the medium
term.
Outlook
In light of the continued macro headwinds which have resulted in
a reduction in demand in kettle controls in the key export
regulated markets of UK and Germany during H1 and a slower than
anticipated recovery, the Group now anticipates Q3 adjusted profit
after tax of GBP6.5m and for the full year to be in excess of
GBP21m.
Whilst recent order rates are tracking in a positive direction,
evident from an increase in sales in Q2 this remains in smaller
quantities than expected as customers continue to manage their cash
balances prudently in key regulated export markets. Strix now
anticipates the path to a return of normalised growth to take
longer and for there to be a decrease in the short term revenues
within this category.
The Group's second half of the year is always stronger than the
first and weighted to Q4 driven by the replenishment of stock and
normal seasonal uplift, the performance required in Q4 to achieve
the full year outcome is lower than in 2022 and 2021.
Despite the short term headwinds, Strix is also announcing
Strategic Business Objectives which in summary will deliver group
revenue of GBP206m and gross profit of GBP80m by the end of FY 2026
reflecting the attractiveness of the underlying markets that it
operates within.
Alongside this, Strix continues to implement a range of
strategic initiatives to minimise the impact of the headwinds it is
facing, which includes an internal streamlining programme and a
focus on the reduction of inventory in order to maximise cash
generation for the Group.
Also, the successful integration of Billi will propel Strix into
a new growth phase, further diversifying into these new areas
whilst continuing to focus on the core Kettle Controls business
with strong potential for greater top line growth and improved
margins going forward.
Chief Financial Officer's Review
Adjusted results (1) Reported results
--------------------------- ---------------------------
H1 2023 H1 2022 Change H1 2023 H1 2022 Change
(23 (23 -
- 22) 22)
-------- -------- ------- -------- -------- ---------
GBPm GBPm %(4) GBPm GBPm %(4)
Revenue 65.2 50.7 +28.6% 65.2 50.7 +28.6%
Gross profit 23.9 19.5 +22.6% 23.9 19.0 +25.8%
EBITDA (2) 15.6 15.9 -1.9% 13.7 12.2 +12.3%
Operating profit 11.8 12.9 -8.5% 9.9 9.1 +8.8%
Profit before tax 6.8 11.6 -41.4% 4.9 7.9 -38.0%
Profit after tax 5.7 11.6 -50.9% 3.8 7.8 -51.3%
Net debt (3) 93.1 61.3 +51.9% 93.1 61.3 +51.9%
Net cash generated from
operating activities 13.1 9.9 +32.3% 13.1 9.9 +32.3%
Basic earnings per share
(pence) 2.6 5.6 -53.6% 1.8 3.8 -52.6%
Diluted earnings per share
(pence) 2.6 5.5 -52.7% 1.7 3.7 -54.1%
Interim dividend per share
(pence) 0.9 2.75 -67.3% 0.9 2.75 -67.3%
1. Adjusted results exclude adjusted items, which include
share-based payment transactions, COVID-19 related costs, 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. 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. Net debt excludes the impact of IFRS 16 lease liabilities,
pension liabilities, deferred tax liabilities and earn-out
provisions on satisfaction of performance conditions and providing
post-combination services.
4. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
Financial performance
Revenues in the first half increased by 28.6% to GBP65.2m (H1
2022: GBP50.7m), mainly as a result of the first time inclusion of
Billi revenues of GBP21.5m, which helped to fully offset a
reduction in organic sales, particularly of kettle controls.
The kettle controls revenue decreased by 17.2% to GBP28.9m (H1
2022: GBP34.8m), with the cost of living crisis and the
Russia/Ukraine conflict being the key negative drivers in regulated
markets. In line with international government sanctions, our key
global brands remain exited from Russia (a significant market) and
Strix also stopped trading directly with Russian brands. Despite
the decrease in revenues however, recent incoming order rates are
tracking in a positive direction, evident from a surge in sales in
Q2.
The Group's consumer goods division continues to show resilience
particularly in the water category with noticeable growth in
European and North American territories as a result of continued
online market place launches.
Adjusted gross profit increased by 22.6% to GBP23.9m (H1 2022:
GBP19.5m), mainly attributable to the Billi inclusion of GBP10.0m,
but was partially offset by a decrease in adjusted gross profits
for kettle controls of GBP4.3m (28.6% decrease) and slightly by
appliances category. Reported gross profits increased by 25.8% to
GBP23.9m (H1 2022: GBP19.0m).
Adjusted gross profit margin in H1 2023 was 36.7% (H1 2022:
38.4%), showing a margin dilution of 1.7% compared to same period
last year. This dilution is mainly due to under absorption of fixed
manufacturing costs on a per unit of volume basis, as a result of a
lower kettle controls production volume. Costs optimisation
evaluation and measures are in place to ensure skilled labour are
maintained for medium term recovery, while streamlining
non-critical spending to adopt a balanced approach to manage this
softened in the current H1 period. This decline was partially
offset by addition of Billi group which made a positive
contribution to margins, decreases in commodity prices, and a
positive impact from the LAICA sub-group consumer goods.
Adjusted EBITDA is defined as profit before depreciation,
amortisation, finance costs, finance income, taxation, and
adjusting items including share based payments. Adjusted EBITDA was
GBP15.6m (H1 2022: GBP15.9m), showing a small decrease of 1.9%
compared to the same period last year. The Billi acquisition
provides significant income growth in H1 2023 (GBP21.5m net sales,
GBP5.2m adjusted EBITDA), however the underlying Strix organic
business shows significant decrease to H1 2023 (GBP6.9m net sales
decrease, GBP5.5m adjusted EBITDA decrease), with kettle controls
revenues being the main driver, showing a GBP6.0m decrease vs H1
2022.
Adjusted EBITDA margin in H1 2023 was 23.9% (H1 2022: 31.4%),
representing a margin dilution of 7.4%, which is largely due to
lower kettle controls volume. Billi had a positive impact of
GBP5.2m adjusted EBITDA with a strong margin of 24.0% which is in
line with IM targets. Distribution and administration costs in the
organic business decreased marginally by GBP0.1m (circa 2.0%).
These overheads are discussed in detail in the Costs section
below.
Adjusted operating profits decreased by 8.5% to GBP11.8m (H1
2022: GBP12.9m), a decrease of GBP1.1m. Depreciation and
amortisation costs are deducted from adjusted EBITDA to arrive at
the adjusted operating profits. These have remained relatively
constant for the organic business compared the same period last
year. The decrease in adjusted operating profits was mainly due to
Billi contributing GBP0.5m of depreciation and amortisation costs
in the current period. The remainder of the decrease in adjusted
EBITDA is mainly due to lower sales volumes in the organic business
and reduction in adjusted gross profits as explained above.
Adjusted profit before tax was GBP6.8m (H1 2022: GBP11.6m), a
decrease of GBP4.8m (41.4% decrease) compared to the same period
last year. This is attributable mainly to interest and finance fee
costs which had an adverse variance in the current H1 period of
GBP3.7m compared to the same period last year due to an increase in
the net debt to fund the Billi acquisition and a higher interest
rates environment.
Adjusted profit after tax was GBP5.7m (H1 2022: GBP11.6m), a
GBP5.9m adverse variance compared to the same period last year. T
ax expense for the current period was GBP1.1m , primarily relating
to the tax liability from Billi of GBP0.8m recognised in the Group
being first year of acquisition. The balance GBP0.3m relates to tax
expense in the organic business.
Costs
Costs in H1 2023 increased across the board compared to the
prior year, mainly due to the inclusion of Billi in the current
year, however decreased marginally in the organic business.
Cost of sales (excluding adjusting items) increased by 32.4% to
GBP41.3m (H1 2022: GBP31.2m), with Billi contributing GBP11.5m of
cost of sales. Excluding Billi's impact the total cost of sales for
the Group stands at GBP29.8m in H1 2023 vs GBP31.2m in H1 2022,
falling by GBP1.4m (4.5% decline).
This fall on total cost of sales in the organic business was
primarily driven by total material cost of sales going down from
GBP20.2m in H1 2022 to GBP17.7m in H1 2023, down by 12.4%, largely
in line with lower sales vs a comparative H1 2022 period in the
organic business. The Group continues to take measures to reduce
costs, increase efficiencies, while balancing the cost impact due
to the short term decline in sales volume to ensure our operation
capabilities is well prepared for a rebound.
Sales and Distributions costs increased by 11.3% to GBP5.0m (H1
2022: GBP4.5m) mainly due to the inclusion of Billi costs in the
current year of GBP0.6m . The Group's organic (excluding Billi)
outward carriage and freight outward costs were lower by 9% or
GBP0.1m (GBP1.1m in H1 2023 vs GBP1.2m H1 2022) in line with
decrease in sales. This decrease in carriage and freight outward
costs was offset by an increase in advertising and promotion costs
of 9.1% or GBP0.1m (GBP1.2m in H1 2023 vs GBP1.1m in H1 2022).
Advertising and promotion costs are spent mainly on consumer goods
products, comprising of water and appliances products. Increase in
advertising and promotion can be attributable to an increase in
water product sales.
Administration costs (excluding adjusting items) increased by
GBP4.6m or 173.7% to GBP7.3m (H1 2022: GBP2.7m), predominantly due
to the inclusion of Billi's admin costs of GBP4.5m. Excluding the
impact of Billi, administration costs fell by 1.0% as part of the
Group's restructuring programme.
Adjusted items included Exceptional costs and Acquisitions
purchase price allocation amortization costs from LAICA and Billi
(both are non-cash and are pure accounting valuations). This will
allow like-to-like comparisons of the Group's normalised results.
Exceptional costs incurred in H1 has reduced by 50% to GBP1.9m (H1
2022: GBP3.8m). They were largely due to post Billi acquisition
costs relating to legal and tax due diligence, with a small portion
was due to restructuring.
Cash flow
Cash flows from operating activities showed a modest improvement
of GBP3.2m (32.3% improvement) from the same period last year. This
is mainly due to the improvement in the changes of net working
capital (GBP4.3m improvement), however partially offset by increase
in tax-related cash outflows.
Movements in net working capital showed a significant decrease
in cash outflows compared to the prior year. Net working capital
cash flows in the current period resulted in cash inflow of GBP0.1m
(H1 2022: GBP4.2m cash outflow). Excluding the impact of Billi, net
working capital cash inflows in the organic business significantly
improved to GBP1.8m cash inflows compared to GBP4.2m cash outflows
in the same period last year. Billi's net working capital cash
outflows of GBP1.7m in the current period hence offset the cash
inflows from the organic business, as the Group invested more in
its newest subsidiary to meet forecasted customer demand in H2.
Net working capital movements are broken down as follows:
Inventory : Overall cash flows relating to inventory
significantly improved to GBP0.1m cash outflows vs GBP4.2m cash
outflows in the same period last year. The organic business
recognised no material change in cash flows as the Group optimised
inventory levels to align to H2 sales forecasts, with Billi
contributing a cash outflow of GBP0.2m as the Group slightly
increased Billi's stock levels at period-end to match our sales
planning and forecasting in H2.
Debtors: The Group recognised cash outflows in current period
from debtors of GBP0.8m (H1 2022: GBP2.7m cash outflows), with the
organic business contributing GBP1.6m cash inflows compared to
GBP2.7m outflows in the same period last year. Billi's recognised
GBP2.4m cash outflows as the Group invests further in expanding
Billi's customer base in its first year of operations
post-acquisition.
Creditors: Cash flows improved significantly from creditors to
GBP1.0m cash inflows in the currently period vs GBP2.7m cash
outflows in the same period last year, with Billi contributing
GBP0.9m cash inflows as their creditor books were aligned to the
Group working capital improvement plans as mentioned above. The
organic business's creditor cash inflows of GBP0.2m in the current
period compared well to GBP2.7m cash outflows from the same period
last year, again in line with the Group's working capital
management reduction plans.
Tax-related cash outflows were at GBP1.3m mainly due to Billi
tax payments made in Australia and New Zealand.
Cash outflows for investing activities increased in the current
period (H1 2023: GBP12.9m) compared to the same period last year
(H1 2022: GBP6.4m) mainly due to LAICA-related earn-out costs which
were settled at the beginning of the current year, and an increase
in capital expenditures due to the further investments in
capitalised development costs. This was partially offset by cash
inflows received from the vendor shareholders of Billi as
consideration refunded as a result of net debt and working capital
adjustments on opening balances at acquisition.
Cash outflows for financing activities increased by GBP3.4m
compared to the same period prior year. It is largely due to
finance costs paid significantly increased due to an increase in
the net debt to fund the Billi acquisition in a higher interest
rate environment.
Balance Sheet
Property, plant and equipment decreased to GBP46.3m (FY 2022:
GBP47.4m), mainly due to depreciation charges of GBP2.6m (H1 2022:
GBP2.0m). This was partially offset by net additions of GBP1.5m
towards plant and machinery and production tooling for continued
improvement of automation and production efficiencies, and an
increase of fixtures, fittings, equipment (including computer
hardware) to support Billi operations.
Intangible assets slightly increased to GBP74.0m (FY 2022:
GBP73.4m) reflecting a net increase of GBP0.6m. Notable net
additions to intangible assets were relating to capitalised
development costs from new product development projects of circa
GBP2.4m, and computer software and other intangible asset additions
of circa GBP0.5m. The total amortisation charges were GBP1.2m (H1
2022: GBP1.1m), and foreign currency movements of GBP1.0m were
recognised on translation of intangible assets denominated in
foreign currencies.
Net working capital, which includes inventories, trade and other
receivables, and trade and other payables (including tax
liabilities, but excluding short-term portions of long-term
liabilities), increased to GBP28.5m (FY 2022: GBP27.6m), an
increase on GBP0.9m. This was mainly due to Billi's net working
capital increase of GBP1.6m as the Group invests further in
expanding Billi's working capital in its first year of operations
post-acquisition. Excluding Billi, net working capital decreased by
GBP0.7m as the Group continues to prudently manage working capital
demands as discussed in the cash flow section above.
Non-current liabilities (including short-term portions)
decreased to GBP130.6m (FY 2022: GBP141.6m), a decrease of
GBP11.3m, which is mainly driven by reductions of LAICA-related
earn-outs paid at the beginning of the current year, and repayments
made in the current year towards the term loan of the
Billi-acquisition-related revolving credit facility.
Net debt
The Group's net debt position as at 30 June 2023 increased to
GBP93.1m (FY 2022: GBP87.4m).
Total committed debt facilities at 30 June 2023 amounted to
GBP115.5m (excluding loan arrangement fees which are included in
borrowings), giving a liquidity pool of GBP21.4m. Net debt equated
to 2.66 times trailing twelve months' EBITDA as at 30 June 2023,
which complies with our debt covenant threshold of 2.75 times.
Dividend
Given the increase in net debt due to the strategic acquisition
of Billi, and with the high interest rates environment, the Board
continues to take precautions to balance the capital allocation
priorities. To be prudent, the Board has decided to prioritise the
reduction of debt for the rest of the current year.
Therefore, the Board is declaring an interim dividend in FY 2023
of 0.9p per share (HY 2022: 2.75p).
Condensed INTERIM consolidated statement of comprehensive
income
for the period ended 30 June 2023 (unaudited)
(unaudited) (unaudited)
Period Period
ended ended
30 June 30 June
2023 2022
Note GBP000s GBP000s
-------------------------------------------- ----- ------------ ------------
Revenue 7 65,218 50,694
--------------------------------------------- ----- ------------ ------------
Cost of sales - before adjusting items (41,280) (31,207)
Cost of sales - adjusting items 6 (66) (468)
--------------------------------------------- ----- ------------ ------------
Cost of sales (41,346) (31,675)
--------------------------------------------- ----- ------------ ------------
Gross profit 23,872 19,019
--------------------------------------------- ----- ------------ ------------
Distribution costs (5,017) (4,508)
--------------------------------------------- ----- ------------ ------------
Administrative expenses - before adjusting
items (7,307) (2,668)
Administrative expenses - adjusting items 6 (1,829) (3,288)
--------------------------------------------- ----- ------------ ------------
Administrative expenses (9,136) (5,956)
Share of (losses) from joint ventures (25) (10)
Other operating income 207 587
--------------------------------------------- ----- ------------ ------------
Operating profit 9,901 9,132
Analysed as:
-------------------------------------------- ----- ------------ ------------
Adjusted EBITDA (1) 15,632 15,941
Amortisation 8 (1,231) (1,062)
Depreciation (excluding Right-of-use
asset depreciation) 9 (1,998) (1,512)
Right-of-use asset depreciation 9 (607) (479)
Adjusting items 6 (1,895) (3,756)
--------------------------------------------- ----- ------------ ------------
Operating profit 9,901 9,132
Finance costs 5 (5,032) (1,262)
Finance income 67 5
--------------------------------------------- ----- ------------ ------------
Profit before taxation 4,936 7,875
Income tax expense (1,109) (43)
--------------------------------------------- ----- ------------ ------------
Profit after taxation 3,827 7,832
--------------------------------------------- ----- ------------ ------------
Other comprehensive income:
Exchange differences on translation
of foreign operations (971) 678
--------------------------------------------- ----- ------------ ------------
Total comprehensive income 2,856 8,510
--------------------------------------------- ----- ------------ ------------
Profit for the period attributable to:
Equity holders of the Company 3,856 7,770
Non-controlling interests (29) 62
--------------------------------------------- ----- ------------ ------------
3,827 7,832
-------------------------------------------- ----- ------------ ------------
Total comprehensive income for the period
attributable to:
Equity holders of the Company 2,900 8,424
Non-controlling interests (44) 86
--------------------------------------------- ----- ------------ ------------
2,856 8,510
Earnings per share (pence)
-------------------------------------------- ----- ------------ ------------
Basic 6 1.8 3.8
Diluted 6 1.7 3.7
--------------------------------------------- ----- ------------ ------------
1. Adjusted EBITDA, which is defined as profit before finance
costs, tax, royalty charges, depreciation, amortisation and
adjusting items, is a non-GAAP metric used by management and is not
an IFRS disclosure.
Condensed INTERIM consolidated balance sheet
as at 30 June 2023 (unaudited)
(unaudited) (audited)
As at As at
30 June 31 December
Note 2023 2022
ASSETS GBP000s GBP000s
----------------------------------- ----- ------------ -------------
Non-current assets
Intangible assets 8 74,010 73,374
Property, plant and equipment 9 46,295 47,364
Investments in joint ventures (12) 19
Net investments in finance leases 11 16
Total non-current assets 120,304 120,773
----------------------------------- ----- ------------ -------------
Current assets
Inventories 10 28,534 27,702
Trade and other receivables 12 27,322 29,791
Current income tax receivable 443 497
Cash and cash equivalents 21,431 30,443
----------------------------------- ----- ------------ -------------
Total current assets 77,730 88,433
Total assets 198,034 209,206
----------------------------------- ----- ------------ -------------
EQUITY AND LIABILITIES
----------------------------------- ----- ------------ -------------
Equity
Share capital and share premium 23,642 23,861
Share based payment reserve 272 202
Retained earnings 15,325 12,479
Non-controlling interests 663 707
Total equity 39,902 37,249
Current liabilities
Trade and other payables 13 27,333 29,963
Borrowings 14 14,638 14,734
Future lease liabilities 17 911 1,069
Contingent consideration - 7,532
Current income tax liabilities 13 509 444
Total current liabilities 43,391 53,742
----------------------------------- ----- ------------ -------------
Non-current liabilities
Future lease liabilities 17 2,814 2,819
Deferred tax liability 11,206 11,387
Borrowings 14 99,877 103,092
Post-employment benefits 844 917
----------------------------------- ----- ------------ -------------
Total non-current liabilities 114,741 118,215
----------------------------------- ----- ------------ -------------
Total liabilities 158,132 171,957
Total equity and liabilities 198,034 209,206
----------------------------------- ----- ------------ -------------
Condensed INTERIM consolidated statement of changes in
equity
as at 30 June 2023 (unaudited)
Share Share-based Retained Total Non-controlling Total
capital payment earnings equity interests equity
and share reserve attributable
premium to owners
(unaudited) GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
----------- ------------ ---------- -------------- ---------------- ---------
Balance at 1 January
2022 13,139 2,039 10,146 25,324 681 26,005
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Profit for the period - - 7,770 7,770 62 7,832
Other comprehensive
income - - 654 654 24 678
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Total comprehensive
income for the period - - 8,424 8,424 86 8,510
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Dividends paid (note
16) - - (11,601) (11,601) - (11,601)
Transfers between reserves 7 (1,210) 1,203 - - -
Share-based payment
transactions - 572 - 572 - 572
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Total transactions
with owners recognised
directly in equity 7 (638) (10,398) (11,029) - (11,029)
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Other transactions
recognised directly
in equity (note 11) - (52) 59 7 - 7
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Balance at 30 June
2022 13,146 1,349 8,231 22,726 767 23,493
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
(unaudited)
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Balance at 1 January
2023 23,861 202 12,479 36,542 707 37,249
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Profit for the period - - 3,856 3,856 (29) 3,827
Other comprehensive
income - - (956) (956) (15) (971)
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Total comprehensive
income for the period - - 2,900 2,900 (44) 2,856
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Dividends paid (note - - - - - -
16)
Transfers between reserves - (47) 10 (37) - (37)
Transaction costs (219) - - (219) - (219)
Share-based payment
transactions - 86 - 86 - 86
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Total transactions
with owners recognised
directly in equity (219) 39 10 (170) - (170)
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Other transactions
recognised directly
in equity (note 11) - 31 (64) (33) - (33)
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Balance at 30 June
2023 23,642 272 15,325 39,239 663 39,902
---------------------------- ----------- ------------ ---------- -------------- ---------------- ---------
Condensed INTERIM consolidated cash flow statement
for the PERIOD ended 30 June 2023 (unaudited)
(unaudited) (unaudited)
Period Period
ended ended
30 June 30 June
2023 2022
Note GBP000s GBP000s
---------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Cash generated from operations 18(a) 14,443 9,759
Tax received / (paid) (1,327) 96
---------------------------------------------------- ------ ------------ ------------
Net cash generated from operating activities 13,116 9,855
---------------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment 9 (1,982) (2,954)
Capitalised development costs 8 (4,103) (1,643)
Earnout payments regarding the acquisition of
LAICA (7,499) (1,671)
Consideration refunded regarding the acquisition 1,046 -
of Billi
Purchase of other intangibles 8 (463) (175)
Finance income 65 5
---------------------------------------------------- ------ ------------ ------------
Net cash used in investing activities (12,936) (6,438)
---------------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
(Repayments) / Drawdowns of non-current borrowings 18(b) (3,661) 8,543
Finance costs paid (4,358) (1,638)
Principal elements of lease payments (489) (401)
Dividends paid 16 - (11,601)
---------------------------------------------------- ------ ------------ ------------
Net cash used in financing activities (8,508) (5,097)
---------------------------------------------------- ------ ------------ ------------
Net decrease in cash and cash equivalents (8,328) (1,680)
Cash and cash equivalents at the beginning of
the period 30,443 19,670
Effects of foreign exchange on cash and cash
equivalents (684) 147
---------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at the end of the
period 21,431 18,137
---------------------------------------------------- ------ ------------ ------------
Notes to the condensed INTERIM cONSOLIDATED financial
statements
for the PERIOD ended 30 June 2023 (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 registered number
014963V. 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, water
filtration and small household appliances for personal health and
wellness.
These condensed interim consolidated financial statements
('interim financial statements') were approved for issue on 20
September 2023. The interim report will be available 21 September
2023 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 its financial
performance compared with the comparative periods ended 31 December
2022 and 30 June 2022 respectively. These interim financial
statements should be read in conjunction with the last annual
consolidated financial statements as at 31 December 2022 and the
comparative interim results for the period ended 30 June 2022.
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 interim 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 2022,
which is available at www.strixplc.com .
Basis of consolidation
The interim 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.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. Consolidation of subsidiaries
ceases from the date that control also ceases.
Non-controlling interests in the results and equity of
subsidiaries are shown separately in the consolidated statement of
comprehensive income, consolidated statement of changes in equity
and the consolidated statement of financial position,
respectively.
Joint ventures
Joint ventures are joint arrangements of which the Group has
joint control, with rights to the net assets of those arrangements.
Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing
control. Interests in joint ventures are accounted for using the
equity method of accounting (detailed below) after being recognised
at cost in the consolidated statement of financial position.
Equity method of accounting
Under the equity method of accounting, investments in joint
ventures are initially recognised at cost and adjusted thereafter
to recognise the Group's share of the post-acquisition profits or
losses from the joint arrangement in profit or loss, and the
Group's share of movements in other comprehensive income of the
joint arrangement in other comprehensive income. Dividends received
from joint ventures are recognised as a reduction in the carrying
amount of the investment.
Unrealised gains on transactions between the Group and its joint
ventures are eliminated to the extent of the Group's interest in
these entities.
The carrying amount of equity-accounted investments is tested
for impairment in accordance with the impairment of assets policy
as described below in this note.
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 interim 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 recognized as goodwill. The Group measures
goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognized 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.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling interest
in the acquired entity on an acquisition-by-acquisition basis at
the non-controlling interest's proportionate share of the fair
value of the acquired entity's net identifiable assets. Transaction
costs that the Group incurs in connection with a business
combination are expensed as incurred.
If the initial accounting for a business combination is
preliminary by the end of the reporting period in which the
business combination occurs, provisional amounts are reported.
Those provisional amounts are adjusted during the measurement
period, or additional assets or liabilities recognised
retrospectively to reflect the new information obtained about facts
and circumstances that existed as at the acquisition date, and if
known, would have affected the measurement of assets and
liabilities recognised at that date. Contingent consideration is
classified either as equity or a financial liability. Amounts
classified as a financial liability are subsequently remeasured to
fair value, with changes in fair value recognised in profit or
loss
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 have made enquiries to assess 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
2023;
-- the current financial position of the Group, including
its cash and cash equivalents balances of GBP21.4m (YE
2022: GBP30.4m);
-- the availability of further funding should this be required
(with a liquidity pool of GBP22.4m (YE 2022: GBP31.6m)
on the revolving credit facility and the access to the
AIM market afforded by the Company's 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.
EBITDA and adjusted EBITDA - non-GAAP performance measures
Earnings before interest, taxation, depreciation and
amortization ('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 amortization. Adjusting 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
2022, 42% (FY 2021: 46%) of the Group's revenue and 37% (FY 2021:
37%) 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 interim financial statements are presented in
Sterling, which is Strix Group Plc's functional and presentation
currency.
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 recognized in the condensed interim
consolidated statement of comprehensive income within cost of
sales.
Group companies
The results and financial position of foreign operations that
have a functional currency different from the presentation currency
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 are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are 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 recognized 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 readily determined,
which is generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to the consolidated statement of
comprehensive income over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period.
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
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis
Payments associated with short-term leases and leases of
low-value assets are recognized 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 maximize
operational flexibility in terms of managing contracts.
Lease income
Lease income from operating leases where the Group is a lessor,
and where substantially all the risks and rewards associated with
the leased asset remain with the Group, is recognised in other
income on a straight-line basis over the lease term.
Property, plant and equipment
Initial recognition and measurement
Items of property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Cost includes the
original purchase price of the asset and the costs attributable to
bringing the asset to its working condition for its intended use.
When parts of an item of property, plant and equipment have
different useful lives, the components are accounted for as
separate items.
Subsequent costs are included in the asset's carrying amount or
recognized as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying value of the replaced part is derecognised.
All other repairs and maintenance are charged to profit or loss
during the reporting period in which they are incurred.
Subsequent measurement
Depreciation is calculated using the straight-line method to
allocate the cost of the assets, net of any residual values, over
their estimated useful lives.
The useful lives are shown below:
Asset class Estimate
* Plant and machinery 3-25 years
* Point of use dispensers 4-10 years
* Fixtures, fittings and equipment 2-10 years
* Motor vehicles unchanged
* Production tools 1-10 years
* Right-of-use assets unchanged
* Land and buildings unchanged
The Group manufactures some of its production tools and
equipment. The costs of construction are included within a separate
category within property, plant and equipment ("assets under
construction") until the tools and equipment are ready for use at
which point the costs are transferred to the relevant asset
category and depreciated. Any items that are scrapped are written
off to the consolidated statement of comprehensive income.
The assets' residual values and useful lives are reviewed at the
end of each reporting period.
Fixtures, fittings and other equipment includes computer
hardware.
Derecognition
Property, plant and equipment assets are derecognised on
disposal, or when no future economic benefits are expected from use
or disposal. Gains or losses arising from derecognition of
property, plant and equipment, measured as the difference between
net disposal proceeds and the carrying amount of the asset, are
recognised in the consolidated statement of comprehensive income on
derecognition.
Impairment
Tangible assets that are subject to depreciation are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in
use.
Intangible assets
Initial recognition and measurement
The Group's intangible assets relate to goodwill, capitalised
development costs, intellectual property, customer relationships,
brands and computer software. Goodwill is the excess of the
consideration paid over the fair value of the identifiable assets,
liabilities and contingent liabilities in a business combination
and relates to assets which are not capable of being individually
identified and separately recognised. Goodwill acquired is
allocated to those cash-generating units ("CGUs") expected to
benefit from the business combination in which the goodwill arose.
Goodwill is measured at cost less any accumulated impairment losses
and is held in the functional currency of the acquired entity to
which it relates and remeasured at the closing exchange rate at the
end of each reporting period, with the movement taken through other
comprehensive income. The CGUs represent the lowest level within
the Group at which goodwill is monitored for internal management
purposes.
Capitalised development costs are recorded as intangible assets
and amortised from the point at which the asset is ready for use.
Internal costs that are incurred during the development of
significant and separately identifiable new products and
manufacturing techniques for use in the business are capitalised
when the following criteria are met:
-- it is technically feasible to complete the project so that it will be available for use;
-- management intends to complete the project and use or sell it;
-- it can be demonstrated how the project will develop probable future economic benefits;
-- adequate technical, financial, and other resources to
complete the project and to use or sell the project output are
available; and
-- expenditure attributable to the project during its development can be reliably measured.
Capitalised development costs include employee, travel and other
directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Refer to note 6(a) for details.
Intellectual property is capitalised where it is probable that
future economic benefits associated with the patent will flow to
the Group, and the cost can be measured reliably. The costs of
renewing and maintaining patents are expensed in the consolidated
statement of comprehensive income as they are incurred.
Customer relationships, intellectual property and brands are
recognised on acquisitions where it is probable that future
economic benefits will flow to the Group.
Computer software is only capitalised when it is probable that
future economic benefits associated with the software will flow to
the Group, and the cost of the software can be measured reliably.
Computer software that is integral to an item of property, plant
and equipment is included as part of the cost of the asset
recognised in property, plant and equipment.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred.
Subsequent measurement
The Group amortises intangible assets with a limited useful life
using the straight-line method.
Asset class Estimate
* Capitalised development costs 2-10 years
* Intellectual property unchanged
* Technology and software unchanged
* Customer relationships unchanged
* Brands unchanged
* Goodwill unchanged
Brands have an indefinite useful life because there is no
foreseeable limit on the period during which the Group expects to
consume the future economic benefits embodied in the asset.
The LAICA brand has been trading since inception and has been a
well recognisable brand amongst the Group's trading partners, and
the Group does not foresee a time limit by when these partnerships
will cease.
The Billi brand is a well-established and competitive brand,
being one of the top 2 brands in the Australian and New Zealand
industries, and well recognised in the United Kingdom among
residential and commercial clientele. The Group does not foresee a
time limit by when this market presence will cease.
Amortisation is charged to the consolidated statement of
comprehensive income on a straight-line basis over the estimated
useful lives above.
Derecognition
Intangible assets are derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains
or losses arising from derecognition of intangible assets, measured
as the difference between the net disposal proceeds and the
carrying amount of the asset, and are recognised in the
consolidated statement of comprehensive income when the asset is
derecognised. Where a subsidiary is sold, any goodwill arising on
acquisition, net of any impairment, is included in determining the
profit or loss arising on disposal.
Impairment
Intangible assets that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in
use.
Goodwill and intangible assets that have an indefinite useful
life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs of disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash-generating units). Non-financial assets other than
goodwill that suffered an impairment are reviewed for possible
reversal of the impairment at the end of each reporting period.
Intangible assets with indefinite useful lives impairment
assessments
Intangible assets with indefinite useful lives arising on
business combinations are allocated to the relevant CGU and are
treated as the foreign operation's assets.
Impairment reviews are performed at least annually, or more
frequently if there are indicators that goodwill might be impaired.
The Group has assessed the carrying values of goodwill and brands
to determine whether any amounts have been impaired. The
recoverable amount of the underlying CGU was based on a value in
use model where future cashflows were discounted using a weighted
average cost of capital as the discount rate with terminal values
calculated applying a long-term growth rate. In determining the
recoverable amount, the Group considered several sources of
estimation uncertainty and made certain assumptions or judgements
about the future. Future events could cause the assumptions used in
the impairment review to change with an impact on the results and
net position of the group.
3. Critical accounting judgements and estimates
In the application of the Group's accounting policies, which are
described in Note 2, the directors are required to make judgements
(other than those involving estimations) that have a significant
impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates. There is no change in applying
accounting policies for critical accounting estimates and
judgements from the prior year.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
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 2022.
Alternative performance measures (APMs) - Adjusting items
Management and the Board consider the quantitative and
qualitative factors in classifying items as adjusting items and
exercise judgement in determining the adjustments to apply to IFRS
measures. This assessment covers the nature of the item, cause of
occurrence, frequency, predictability of occurrence of the item or
related event, and the scale of the impact of that item on reported
performance.
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, dispensers, jugs and filters, primarily to
Original Equipment Manufacturers ("OEMs"), commercial and
residential customers based in China, Italy, Australia, New Zealand
and the United Kingdom.
The Board of Directors has identified 3 reportable segments from
a product perspective, namely: kettle controls, premium filtration
systems (primarily Billi products), and consumer goods (made up of
water products and appliances).
The Board of Directors primarily uses a measure of gross profit
to assess the performance of the operating segments, broken down
into revenue and cost of sales for each respective segment which is
reported to them on a monthly basis. Information about segment
revenue, cost of sales and gross profit is disclosed below.
Reported Results
Period ended 30 June 2023
(GBP000s)
Kettle Premium Consumer Total
controls filtration goods
systems
Revenue 28,819 21,468 14,931 65,218
Cost of sales (18,127) (11,515) (11,704) (41,346)
Gross profit 10,692 9,953 3,227 23,872
========== ============ ========= =========
Period ended 30 June 2022
(GBP000s)
Kettle Premium Consumer Total
controls filtration goods
systems
Revenue 34,802 - 15,892 50,694
Cost of sales (20,218) - (11,457) (31,675)
Gross profit 14,584 - 4,435 19,019
---------- ------------ --------- ---------
Adjusted Results
Period ended 30 June 2023
(GBP000s)
Kettle Premium Consumer Total
controls filtration goods
systems
Revenue 28,819 21,468 14,931 65,218
Cost of sales (18,099) (11,518) (11,678) (41,295)
Gross profit 10,720 9,950 3,253 23,923
========== ============ ========= =========
Period ended 30 June 2022
(GBP000s)
Kettle Premium Consumer Total
controls filtration goods
systems
Revenue 34,802 - 15,892 50,694
Cost of sales (19,797) - (11,410) (31,207)
Gross profit 15,005 - 4,482 19,487
========== ============ ========= =========
Assets and liabilities
No analysis of the assets and liabilities of each operating
segment is provided to the Board of Directors as part of monthly
management reporting. Therefore, no analysis of segmented assets or
liabilities is disclosed in this note.
Non-current assets (i) attributed to country of domicile and
(ii) attributable to all other foreign countries
A geographical analysis of revenue from external customers has
not been presented, as the OEMs and major customers to whom the
majority of sales are made are primarily based in China, Italy,
Australia and the United Kingdom.
In accordance with IFRS 8, the following table discloses the
non-current assets located in both the Company's country of
domicile (the Isle of Man) and foreign countries, primarily China,
Italy Australia, New Zealand, and the United Kingdom where Group's
main principle operating subsidiaries are domiciled.
30 June 31 December
2023 2022
GBP000s GBP000s
---------------------------------------------- -------- ------------
Country of domicile
Intangible assets 12,804 11,354
Property, plant and equipment 2,815 3,151
---------------------------------------------- -------- ------------
Total country of domicile non-current assets 15,619 14,505
---------------------------------------------- -------- ------------
Foreign countries
Intangible assets 61,205 62,020
Property, plant and equipment 43,480 44,213
---------------------------------------------- -------- ------------
Total foreign non-current assets 104,685 106,233
---------------------------------------------- -------- ------------
Total non-current assets 120,304 120,738
---------------------------------------------- -------- ------------
Major customers
In the first half of 2023, there was one major customer which
individually accounted for at least 10% of total revenues (H1 2022:
one customer). The revenues relating to this customer in 6 months
ended 30 June 2023 was GBP6,937,000 (H1 2022: GBP7,204,000).
5. finance costs
Period Period
ended ended
30 June 30 June
2023 2022
GBP000s GBP000s
-------------------------- --------- ---------
Letter of credit charges 92 36
Lease liability interest 75 42
Borrowing costs 4,865 1,184
-------------------------- --------- ---------
Total finance costs 5,032 1,262
-------------------------- --------- ---------
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
2023 2022
Earnings (GBP000s)
Earnings for the purpose of basic and diluted
earnings per share 3,856 7,770
---------------------------------------------------- --------- ---------
Number of shares (000s)
Weighted average number of shares for the purposes
of basic earnings per share 218,712 206,960
Weighted average dilutive effect of conditional
share awards 2,578 2,796
---------------------------------------------------- --------- ---------
Weighted average number of shares for the
purposes of diluted earnings per share (000s) 221,290 209,756
---------------------------------------------------- --------- ---------
Earnings per ordinary share (pence)
Basic earnings per ordinary share 1.8 3.8
Diluted earnings per ordinary share 1.7 3.7
---------------------------------------------------- --------- ---------
Adjusted earnings per ordinary share (pence)
(1)
Basic adjusted earnings per ordinary share 2.6 5.6
Diluted adjusted earnings per ordinary share 2.6 5.5
---------------------------------------------------- --------- ---------
The calculation of basic and diluted adjusted earnings per share
is based on the following data:
Period Period
ended ended
30 June 30 June
2023 2022
GBP000s GBP000s
-------------------------------------------- --------- ---------
Profit for the period 3,856 7,770
-------------------------------------------- --------- ---------
Add back adjusting items in cost of sales:
COVID-19 net adjusting items(2) - 172
Land and factory - 30
Restructuring 66 266
--------- ---------
66 468
--------- ---------
Add back adjusting items in administrative
expenses:
COVID-19 net adjusting items(2) - 356
Restructuring 39 260
Mergers and acquisitions 1,704 1,937
Disaster recovery - 163
Share based payments 86 572
--------- ---------
1,829 3,288
-------------------------------------------- --------- ---------
Total adjusting items 1,895 3,756
-------------------------------------------- --------- ---------
Adjusted earnings (1) 5,751 11,526
-------------------------------------------- --------- ---------
(1. Adjusted results exclude adjusting items, including
share-based payments. Adjusted results are non-GAAP metrics used by
management and are not an IFRS disclosure.)
(2. COVID-19 net adjusting items included consumables, certain
employment costs and Government support grants in the comparative
period.)
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.
7. REVENUE
The following table shows a disaggregation of revenue into
categories by division:
Period Period
ended ended
30 June 30 June
2023 2022
GBP000s GBP000s
---------------------------- --------- ---------
Kettle controls 28,819 34,802
Premium filtration systems 21,468 -
Consumer goods 14,931 15,892
---------------------------- --------- ---------
Total revenue 65,218 50,694
---------------------------- --------- ---------
8. Intangible assetS
For the period ended 30 June 2023
-------------------------------------------------------------------------------------------------------------
Development Software Intellectual Customer Brands Goodwill Intangible Total
Costs Property relationships assets
under
construction
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 19,428 4,452 1,482 18,549 19,785 20,067 103 83,866
Accumulated
amortization/impairment (7,716) (1,817) (256) (703) - - - (10,492)
------------------------------- -------------- --------- ------------- ---------------- -------- ----------- --------------- ---------
Net book value 11,712 2,635 1,226 17,846 19,785 20,067 103 73,374
------------------------------- -------------- --------- ------------- ---------------- -------- ----------- --------------- ---------
Period ended
30 June
Additions 4,103 114 207 - - - 142 4,566
Transfers (1,356) 5 37 70 - - (26) (1,269)
Disposals (314) (4) - - - - - (318)
Amortisation charges (748) (318) (60) (104) - - - (1,231)
Exchange differences (208) 84 (8) 72 (556) (488) (9) (1,112)
------------------------------- -------------- --------- ------------- ---------------- -------- ----------- --------------- ---------
Closing net book value 13,189 2,516 1,403 17,884 19,229 19,579 210 74,010
------------------------------- -------------- --------- ------------- ---------------- -------- ----------- --------------- ---------
At 30 June
Cost 21,713 4,574 4,930 18,399 19,229 20,011 210 89,065
Accumulated
amortisation/impairment (8,523) (2,059) (3,527) (515) - (431) - (15,055)
------------------------------- -------------- --------- ------------- ---------------- -------- ----------- --------------- ---------
Net book value 13,189 2,516 1,403 17,884 19,229 19,579 210 74,010
------------------------------- -------------- --------- ------------- ---------------- -------- ----------- --------------- ---------
All amortisation charges have been treated as an expense, and
allocated to cost of sales GBP1,036,000 (H1 2022: GBP884,000) and
administrative expenses GBP194,000 (H1 2022: GBP178,000) in the
condensed interim consolidated statement of comprehensive income.
There were no reversals of prior year impairments during the period
(H1 2022: none).
For the period ended 30 June 2022
----------------------------------------------------------------------------------------------------
Intangible
assets
Development Intellectual under Customer Brand
costs Software Property construction relationships name Goodwill Total
------------ --------- ------------- ------------- -------------- -------- --------- --------
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 15,971 4,186 1,128 66 2,232 6,174 8,736 38,493
Accumulated
amortization/impairment (6,565) (1,153) (111) - (196) - - (8,025)
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
Net book value 9,406 3,033 1,017 66 2,036 6,174 8,736 30,468
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
Period ended 30
June
Additions 1,645 - 187 4 - - - 1,836
Transfers - 73 (17) (70) - - - (14)
Amortisation charges (600) (305) (56) - (101) - - (1,062)
Exchange differences 136 3 41 - 49 154 208 591
------------ --------- ------------- ------------- -------------- -------- --------- --------
Closing net book
value 10,587 2,804 1,172 - 1,984 6,328 8,944 31,819
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
At 30 June
Cost 17,769 4,263 1,623 - 2,292 6,328 8,944 41,219
Accumulated
amortisation/impairment (7,182) (1,459) (451) - (308) - - (9,400)
------------ --------- ------------- ------------- -------------- -------- --------- --------
Net book value 10,587 2,804 1,172 - 1,984 6,328 8,944 31,819
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
All amortisation charges have been treated as an expense, and
allocated to cost of sales GBP884,000 (H1 2021: GBP826,000) and
administrative expenses GBP178,000 (H1 2021: GBP126,000) in the
condensed interim consolidated statement of comprehensive income.
There were no reversals of prior year impairments during the period
(H1 2021: none).
9. Property, plant and equipment
For the period ended 30 June 2023
---------------------------------------------------------------------------------------------------------------------------------
Plant Fixtures, Motor Production Land Right-of-use *Point Assets Total
& machinery fittings vehicles tools & Buildings assets of use under
& equipment dispensers construction
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January
Cost 29,988 8,124 375 13,693 20,690 8,678 1,430 2,247 85,225
Accumulated
depreciation (15,775) (4,604) (331) (11,049) (978) (5,053) (71) - (37,861)
-------------- -------------- ------------- ------------ -------------- ------------ -------------- ----------- ------------- ----------
Net book
value 14,213 3,520 44 2,644 19,712 3,625 1,359 2247 47,364
-------------- -------------- ------------- ------------ -------------- ------------ -------------- ----------- ------------- ----------
Period ended 30 June
Additions 485 366 6 509 81 611 66 1,036 3,160
Transfers 108 47 10 - 39 - - (1,549) (1,345)
Disposals (26) (139) (17) (7) - (19) - (12) (220)
Depreciation
charge for
the
period (820) (483) 4 (312) (225) (607) (162) - (2,605)
Exchange
differences 39 66 1 16 (5) (169) 125 (132) (59)
-------------- -------------- ------------- ------------ -------------- ------------ -------------- ----------- ------------- ----------
Closing net
book value 13,999 3,377 48 2,850 19,602 3,441 1,388 1,590 46,295
-------------- -------------- ------------- ------------ -------------- ------------ -------------- ----------- ------------- ----------
At 30 June
Cost 30,274 8,035 320 14,308 20,360 8,934 1,617 1,647 85,495
Accumulated
depreciation (16,275) (4,658) (271) (11,458) (758) (5,493) (229) (57) (39,200)
-------------- -------------- ------------- ------------ -------------- ------------ -------------- ----------- ------------- ----------
Net book
value 13,999 3,377 48 2,850 19,602 3,441 1,388 1,590 46,295
-------------- -------------- ------------- ------------ -------------- ------------ -------------- ----------- ------------- ----------
Depreciation charges are allocated to cost of sales GBP1,973,000
(H1 2022: GBP1,575,000), distribution costs GBP95,000 (H1 2022:
GBP44,000), and administrative expenses GBP538,000 (H1 2022:
GBP373,000) in the condensed interim consolidated statement of
comprehensive income.
For the period ended 30 June 2022
------------------------------------------------------------------------------------------------------
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 22,750 4,367 137 14,013 3,737 6,533 16,751 68,288
Accumulated
depreciation (12,686) (3,428) (95) (12,140) (129) (2,605) - (31,083)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Net book
value 10,064 939 42 1,873 3,608 3,928 16,751 37,205
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Period ended
30 June
Additions 2,533 379 1 260 - 1,443 5,111 9,727
Disposals (1,331) (110) (1) (68) (1,882) (319) (39) (3,750)
Depreciation
charge (998) (342) (14) (368) (50) (808) - (2,580)
Exchange
differences (39) (6) (1) 1 (30) (77) (3) (155)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Closing net
book value 10,229 860 27 1,698 1,646 4,167 21,820 40,447
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
At 30 June
Cost 18,193 3,750 108 13,373 1,514 6,872 21,820 65,630
Accumulated
depreciation (7,964) (2,890) (81) (11,675) 132 (2,705) - (25,183)
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Net book
value 10,229 860 27 1,698 1,646 4,167 21,820 40,447
-------------- ---------- ----------- ---------- ----------- ----------- ------------- ------------- ---------
Depreciation charges are allocated to cost of sales GBP1,575,000
(H1 2021: (GBP2,196,000)), distribution costs GBP44,000 (H1 2021:
(GBP46,000)), and administrative expenses GBP373,000 (H1 2021:
(GBP338,000)) in the condensed interim consolidated statement of
comprehensive income.
10. Inventories
30 June 31 December
2023 2022
GBP000s GBP000s
------------------------------------- -------- ------------
Raw materials and consumables 13,214 11,242
Finished goods and goods in transit 15,320 16,460
------------------------------------- -------- ------------
28,534 27,702
------------------------------------- -------- ------------
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP24,639,000 (H1 2022: GBP22,446,000).
The charge for impaired inventories was GBPNIL (H1 2022: GBPNIL).
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,
and existing joint arrangements the Group is currently part of,
which are all included in the consolidated financial statements, is
set out below
% of
ordinary
shares
held
Country by the Nature
Name of entity Nature of business of incorporation Group of shareholding
Sula Limited Holding company IOM 100 Subsidiary
Strix Limited Manufacture and sale IOM 100 Subsidiary
of products
Strix Guangzhou Dormant company China 100 Subsidiary
Limited
Strix (U.K.) Holding company and United Kingdom 100 Subsidiary
Limited group's sale and distribution
center
Strix Hong Kong Sale and distribution Hong Kong 100 Subsidiary
Limited of products
Strix (China) Manufacture and sale China 100 Subsidiary
Limited of products
HaloSource Water Manufacture and sales China 100 Subsidiary
Purification of products
Technology (Shanghai)
Co. Limited
Strix (USA), Research and development, USA 100 Subsidiary
Inc. sales, and distribution
of products
LAICA S.p.A. Manufacture and sales Italy 100 Subsidiary
of products
LAICA Iberia Sale and distribution Spain 100 Subsidiary
Distribution of products
S.L.
LAICA International Sale and distribution Taiwan 67 Subsidiary
Corp. of products
Taiwan LAICA Sale and distribution Taiwan 67 Subsidiary
Corp. of products
Foshan Yilai Sale and distribution China 45 Joint venture
Life Electric of products
Appliances Co.
Limited.
LAICA Brand House Holding and licensing Hong Kong 45 Joint venture
Limited of trademarks
Strix Australia Holding company Australia 100 Subsidiary
Pty Limited
Billi UK Limited Manufacture and sale United Kingdom 100 Subsidiary
of products
Billi Australia Manufacture and sale Australia 100 Subsidiary
Pty Limited of products
Billi New Zealand Manufacture and sale New Zealand 100 Subsidiary
Limited of products
Billi R&D Limited Research and development Australia 100 Subsidiary
Billi Financial Financial Services Australia 100 Subsidiary
Services Limited
----------------------- ------------------------------- ------------------ ---------- -----------------
Group restrictions
Cash and cash equivalents held in China are subject to local
exchange control regulations. These regulations provide for
restrictions on exporting capital from those countries, other than
through normal dividends. The carrying amount of the cash and cash
equivalents included within the interim financial statements to
which these restrictions apply is GBP1,430,000 (FY 2022:
GBP3,568,000). There are no other restrictions on the Group's
ability to access or use the assets and settle the liabilities of
the Group's subsidiaries.
12. Trade and other receivables
30 June 31 December
2023 2022
GBP000s GBP000s
-------------------------------------- -------- ------------
Amounts falling due within one year:
Trade receivables 18,960 19,547
Loss allowance (198) (158)
-------------------------------------- -------- ------------
Trade receivables - net 18,762 19,389
-------------------------------------- -------- ------------
Prepayments 1,654 2,335
Advance purchases of commodities 2,629 2,344
VAT receivables 2,222 1,279
Tax receivables 443 497
Other receivables 2,055 4,444
-------------------------------------- -------- ------------
27,765 30,288
-------------------------------------- -------- ------------
Trade and other receivables carrying values are considered to be
equivalent to their fair values.
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.
13. Trade and other payables
30 June 31 December
2023 2022
GBP000s GBP000s
------------------------------------ -------- ------------
Trade payables 12,541 10,010
Current income tax liabilities 509 444
Social security and other taxes 290 368
Other liabilities 7,979 11,447
Payments in advance from customers 2,448 2,270
Accrued expenses 4,075 5,868
------------------------------------ -------- ------------
27,842 30,407
------------------------------------ -------- ------------
The fair value of financial liabilities approximates their
carrying value due to short maturities.
14. Borrowings
30 June 31 December
2023 2022
GBP000s GBP000s
------------------------ -------- ------------
Current bank loans 14,638 14,734
Non-current bank loans 99,877 103,092
------------------------ -------- ------------
The current bank loans comprise of current portion of term loan
explained in detail below and small individual short-term
arrangements for financing purchases and optimizing cash flows
within the Italian subsidiary and were entered into by LAICA S.p.A.
prior to acquisition by the Group.
Current and non-current borrowings are shown net of loan
arrangement fees of GBP1,023,000 (2022: GBP956,000) and
GBP1,399,000 (2022: GBP422,000) respectively.
Term and debt repayment schedule for long-term borrowings
Currency Interest Maturity 30 June 31 December
rate Date 2023 carrying 2022
value (GBP000s) carrying
value (GBP000s)
Revolving Credit SONIA + 2.15%
Facility GBP to 4% 25-Oct-25 77,578 80,000
SONIA + 2.15%
Term loan GBP to 4% 30-Nov-25 35,455 39,000
EURIBOR 6M
Unicredit facility EUR + 1,2% 28-Jun-24 86 133
Banco BPM EUR 1.45% 30-Nov-23 75 167
Banca Monte dei
Paschi di Siena EUR 2.95% 30-Jul-23 414 -
Intesa San Paolo EUR 3.73% 30-Jul-23 120 -
Intesa San Paolo EUR 4.22% 31-Aug-23 297 -
Banco BPM EUR 3.83% 31-Oct-23 488 -
IRS on bank loans EUR 3 (4)
Credito Emiliano EUR 1.10% 04-Jan-23 - 221
Banco BPM EUR 1.69% 03-Jan-23 - 112
Banco BPM EUR 1.69% 03-Jan-23 - 54
Banco BPM EUR 1.00% 28-Feb-23 - 432
BNP Paribas EUR 0.79% 03-Feb-23 - 436
114,516 120,552
------------------------------- -------------- ---------- ----------------- -----------------
Towards the end of the prior year, the existing revolving credit
facility ('RCF') agreement was further refinanced and amended on 25
October 2022 as follows:
New lenders - Barclays Bank Plc and HSBC Bank Plc came on board
as new lenders under the restated agreement.
Revolving credit facility (Facility B) - This relates to the RCF
of GBP80,000,000. The termination date has been revised to three
years after the fourth restatement date, 25 October 2025, with an
option to extend the term initially by twelve months and a further
twelve months thereafter. The purpose of the extended facility was
to finance the acquisition of LAICA as well as other significant
capital projects including the new factory in China and ongoing
working capital needs of the Group. Under the amended agreement,
the purpose of the RCF remains the same. As at 30 June 2023, the
total facility available is GBP80,000,000 (31 December 2022:
GBP80,000,000).
Term loan (Facility A) - The Company obtained further funding on
30 November 2022 in the form of a three-year term loan of
GBP49,000,000 payable initially by a lump sum of GBP10,000,000
followed by eleven fixed repayments thereafter with the first
quarterly repayment of GBP3,545,000 which was paid on 31 March
2023. The purpose of the term loan was to finance the acquisition
of Billi. The GBP10m repayment was made towards the term loan on 30
November 2022. As at 30 June 2023, the outstanding balance on the
term loan is GBP35,454,000 (31 December 2022: GBP39,000,000).
Interest applied to the revolving credit facility and term loan
is calculated as the sum of the margin and SONIA. The margin under
the amended agreement was 3.5% until 31 March 2023, and then 2.85%
from 1 April 2023 to 30 June 2023, and thereafter margin will be
dependent on the net leverage of the Group based on the following
table:
Leverage Facility Facility
A Margin B Margin
% p.a. % p.a.
Greater than or equal to 3.0:1 4.00 4.00
================ ==========
Less than 3.0:1 but greater than or equal
to 2.5:1 3.50 3.50
================ ==========
Less than 2.5:1 but greater than or equal
to 2.0:1 2.85 2.85
================ ==========
Less than 2.0:1 but greater than or equal
to 1.5:1 2.35 2.35
================ ==========
Less than 1.5:1 but greater than or equal
to 1.0:1 2.15 2.15
================ ==========
Less than 1.0:1 2.00 2.00
================ ==========
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 material
subsidiaries have entered into the agreement as guarantors,
guaranteeing the obligations of the borrowers under the agreement
(2022: same).
Transactions costs amounting to GBP135,000 in H1 2023 (FY 2022:
GBP2,324,000) were incurred as part of refinancing and amending the
RCF agreement, and were capitalised and are being amortised over
the period of three years.
The various agreements contain representations and warranties
which are usual for an agreement of this nature. The agreement also
provided 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 2023, the Group has not breached any of
the financial covenants contained within the agreements (2022:
same)
The fair values of the borrowings are not materially different
from their carrying amounts, since the interest payable on those
borrowings is either close to current market rates or the
borrowings are of a short-term nature.
15. CAPITAL Commitments
30 June 31 December
2023 2022
GBP000s GBP000s
------------------------------------------------------ -------- ------------
Contracted for but not provided in the interim
financial statements: Property, plant and equipment 677 695
------------------------------------------------------ -------- ------------
The above commitments include capital expenditure of GBP527,000
(2022: GBP256,000) relating to plant and machinery and production
equipment for the factory in China .
16. Dividends
The following amounts were recognized as distributions in the
period:
Period Period
ended ended
30 June 30 June
2023 2022
GBP000s GBP000s
-------------------------------------------- ---------- ---------
Final 2022 dividend of 3.25p per share (H1
2022: 5.60p) - 11,601
-------------------------------------------- ---------- ---------
Total dividends recognized in the period - 11,601
-------------------------------------------- ---------- ---------
The aggregate amount of GBP7.1m for the proposed final dividend
for year ended 31 December 2022 was paid on 11 August 2023 out of
retained earnings at 31 December 2022. The payment of this dividend
had no tax consequences for the Group.
In addition to the above dividend, since the end of the period
the Directors have approved the payment of an interim dividend of
0.9p per share. The aggregate amount of the interim dividend
expected to be paid on 29th December 2023 out of retained earnings
at 30 June 2023, but not recognised as a liability at the period
end, is GBP1,968,398.10. 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
2023 2021
GBP000s GBP000s
---------------------------------------------- --------- ------------
Current future lease liabilities (due within
12 months) 911 1,069
Non-current future lease liabilities (due in
more than 12 months) 2,814 2,819
---------------------------------------------- --------- ------------
Total future lease liabilities payable 3,725 3,888
---------------------------------------------- --------- ------------
18. Cash flow statement notes
a) Cash generated from operations
Period Period
ended ended
30 June 30 June
2023 2022
GBP000s GBP000s
----------------------------------------- --------- ---------
Cash flows from operating activities
Operating profit 9,900 9,132
Adjustments for:
Depreciation of property, plant and
equipment (note 9) 1,998 1,512
Depreciation of right-of-use assets
(note 9) 607 479
Amortisation of intangible assets (note
8) 1,231 1,062
Share of losses from joint ventures 25 10
(Profit)/loss on disposal of property,
plant and equipment (6) 40
Other non-cash flow items (14) 1,243
Share based payment transactions 86 572
Net exchange differences 488 (128)
------------------------------------------ --------- ---------
14,315 13,922
Changes in working capital:
Increase in inventories (147) (4,223)
(Increase) / Decrease in trade and
other receivables (769) 2,722
Decrease / (Increase) in trade and
other payables 1,044 (2,662)
------------------------------------------ --------- ---------
Cash generated from operations 14,443 9,759
------------------------------------------ --------- ---------
b) Movement in net debt
Non-cash movements
---------- -------- ------------------------ ----------
At 1 Cash Currency Other At 30
January flows movements movements June
2023 2023
GBP000s GBP000s GBP000s GBP000s GBP000s
---------- -------- ----------- ----------- ----------
Borrowings, net of loan arrangement
fees (117,826) 3,661 - (350) (114,515)
Lease liabilities (3,888) 489 - (326) (3,725)
------------------------------------- ---------- -------- ----------- ----------- ----------
Total liabilities from financing
activities (121,714) 4,150 - (676) (118,240)
------------------------------------- ---------- -------- ----------- ----------- ----------
Cash and cash equivalents 30,443 (8,327) (684) - 21,432
------------------------------------- ---------- -------- ----------- ----------- ----------
Net debt (91,271) (4,177) (684) (676) (96,808)
------------------------------------- ---------- -------- ----------- ----------- ----------
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 Operational Board, representing members of the
senior management team from all key departments of the Group.
Period Period
ended ended
30 June 30 June
2023 2022
GBP000s GBP000s
--------------------------------------------------- --------- ---------
Salaries and other short-term employment benefits 1,045 1,003
Post-employment benefits 88 93
Termination - 74
Share-based payment transactions - 450
--------------------------------------------------- --------- ---------
1,133 1,620
--------------------------------------------------- --------- ---------
There are no defined benefit schemes for key management.
20. Post balance sheet events
The Group does not have any material events after the reporting
period to disclose.
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END
IR URUUROAUKUUR
(END) Dow Jones Newswires
September 21, 2023 02:00 ET (06:00 GMT)
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