TIDMKETL
RNS Number : 5244I
Strix Group PLC
22 March 2018
22 March 2018
Strix Group Plc
("Strix", the "Group" or the "Company")
Preliminary results for the year ended 31 December 2017
Strix Group Plc (AIM: KETL), the AIM listed global leader in the
design, manufacture and supply of kettle safety controls and other
components and devices, is pleased to announce its preliminary
results for the year ended 31 December 2017.
These results cover the 12 month period, which includes the
Company's admission to trading on the AIM market of the London
Stock Exchange ("AIM") on 8 August 2017.
Financial Summary
Adjusted results(1) Reported results
------------------------ ---------------------
2017 2016 Change 2017 2016 Change
------ ------ -------- ----- ----- -------
GBPm GBPm % GBPm GBPm %
Revenue 91.3 88.7 +2.9% 91.3 88.7 +2.9%
EBITDA(2) 35.1 33.5 +4.8% 32.2 30.9 +4.2%
Operating profit 29.1 26.9 +8.2% 26.2 24.3 +7.8%
Profit before
tax 28.3 26.8 +5.6% 25.4 24.3 +4.5%
Profit after
tax 27.5 24.7 +11.3% 24.6 22.2 +10.8%
Net debt(3) 45.9 n/a 45.9 n/a
Basic earnings
per share(3) 14.5 n/a 13.0 n/a
Final dividend
per share 1.9p nil 1.9p nil
1. Adjusted results exclude royalty charges and exceptional
items, which include share based payment transactions. Adjusted
results are non-GAAP metrics used by management and are not an IFRS
disclosure
2. EBITDA, which is defined as profit before finance costs, tax,
royalty charges, depreciation and amortisation, is a non-GAAP
metric used by management and is not an IFRS disclosure
3. 2016 net debt and earnings per share are not comparable,
being pre-IPO when a different capital structure was in place
Highlights
-- Strong performance delivered in first period
as a quoted company, with results in line
with market expectations
-- Revenues of GBP91.3m (2016: GBP88.7m),
an increase of 2.9%
-- Adjusted EBITDA(1) of GBP35.1m (2016: GBP33.5
m), an increase of 4.8%
-- Adjusted profit before tax(2) of GBP28.3m
(2016: GBP26.8m), an increase of 5.6%
-- Adjusted basic earnings per share(3) of
14.5p
-- Net cash generated from operating activities
GBP33.8m (2016: GBP32.0m), an increase
of GBP1.8m or 5.6%
-- Net debt at year end of GBP45.9m, a significantly
improved position resulting in a net debt/adjusted
EBITDA ratio of 1.3x
-- Launch of U9 series controls providing
cost competitive, best in class safety
controls
-- Installation of automated production line
for U9 series allowing a 15% increase in
throughput
-- Successful admission to trading on AIM
on 8 August 2017
-- Proposed final dividend of 1.9p, with total
dividends of 2.9p for the five month period
from IPO to 31 December 2017
1 Adjusted EBITDA, which is defined as profit before finance
costs, tax, royalty charges, depreciation, amortisation, and
exceptional items, is a non-GAAP metric used by management and is
not an IFRS disclosure
2 Adjusted profit before tax, which is defined as profit before
tax, royalty charges, and exceptional items, is a non-GAAP metric
used by management and is not an IFRS disclosure
3 Adjusted earnings per share, which is defined as earnings per
share adjusted to exclude royalty charges and exceptional items, is
a non-GAAP metric used by management and is not an IFRS
disclosure
Mark Bartlett, CEO of Strix Group Plc, commented: "Trading
during 2017 was strong and I am pleased to report that we have seen
a healthy start to the current year. We remain focused on
delivering another year of growth in line with market
expectations.
Our IPO during the year was a great success and we look forward
to our life as a public company. Strix has continued to enhance its
market leading position by continuing to implement its strategy,
with the successful launch of a new range of "best in class"
controls designed to deliver competitive, high quality products
across all market segments. The Company is strongly positioned to
continue to capitalise on the growth of the global kettle market
and we look forward to working to realise the full potential of the
Company as a listed group."
For further enquiries, please contact:
Strix Group Plc
Mark Bartlett (CEO) 01624 829
Raudres Wong (CFO) 829
Zeus Capital Limited (Nominated
Adviser)
Nick Cowles / Jamie Peel / Jordan
Warburton (Corporate Finance)
Dominic King (Corporate Broking) 020 3829 5000
IFC Advisory Limited (Financial
PR & IR)
Graham Herring / Tim Metcalfe /
Heather Armstrong / Miles Nolan 020 3934 6630
About Strix Group Plc
Isle of Man based Strix, is a global leader in the design,
manufacture and supply of kettle safety controls and other
components and devices involving water heating and temperature
control, steam management and water filtration.
Strix's core product range comprises a variety of safety
controls for small domestic appliances, primarily kettles. Kettle
safety controls require precision engineering and intricate
knowledge of material properties in order to repeatedly function
correctly. Strix has built up market leading capability and
know-how in this field since being founded in 1982.
Chairman's statement
Introduction
It is my pleasure to present the first annual results of Strix
Group Plc as a listed company. I am delighted to have joined the
Company as Chairman at such an exciting stage in its continued
development, with the transition of the Company from private to
public ownership.
The Group, subsequent to its admission to trading on AIM on 8
August 2017, will continue to pursue its passion for innovation, as
well as continuing to develop and manufacture the high quality,
safe and reliable products for which it is renowned across the
world.
The Group has produced another strong year, with record revenues
and a growth rate that is a result of the hard work and dedication
of all of our people. These results are testament to our business
model, which has been designed to maintain our position as a global
leader in our core markets, whilst positioning Strix for continued
growth into the future.
Results
The Group has delivered positive results, showing growth in our
key metrics, which demonstrates the strength of our underlying
business. This performance was achieved on top of an extremely busy
year, in which the management team also successfully completed a
GBP190m capital raising and admission to trading on AIM, which
delivered an exit for our previous shareholders.
Revenue for the year reached GBP91.3m, 2.9% growth on 2016,
whilst gross margin increased by 1.2% to 40.7%. Adjusted EBITDA was
GBP35.1m, an increase of 4.8% on 2016. Cash generation remains
strong, with GBP33.8m net cash generated from operating activities,
compared with GBP32.0m in 2016.
Dividend
The board of directors of the Company ("Board") is proposing a
final dividend of 1.9p per share following the 1p maiden interim
dividend paid in November 2017. The final dividend will be paid on
1 June 2018 to shareholders on the register at 4 May 2018 and the
shares will trade ex-dividend from 3 May 2018. This will bring the
full year dividend to 2.9p, equating approximately to a 7.0p
dividend for the year on a pro rata basis, based on the Company
having been trading on AIM for approximately five months of our
financial year. The Board intend to maintain a progressive dividend
policy.
Our People
It was an honour to join the Board as Interim Chairman ahead of
the IPO and to then be appointed on a permanent basis on 6 March
2018. I also perform the roles of Remuneration and Nominations
Committee Chairman. Working alongside me is non-executive director
Mark Kirkland, who also acts as Chairman of the Board's Audit
Committee.
I am privileged to be working with our two executive directors,
Mark Bartlett, Chief Executive Officer and Raudres Wong, Chief
Financial Officer, who I would like to thank for their dedication
and hard work in leading the Company through our recent IPO and
positioning us for ongoing success.
The Company performance in 2017 is testament to the dedication
and professionalism of our people. We have a healthy combination of
long serving and new employees who have responded well to life as
an AIM listed company and are looking forward to contributing to
the ongoing success of the Company under public ownership.
I would like to take this opportunity to thank all of our people
for their significant contribution to the Group's success.
Future Outlook
Strix has made an encouraging start to life as a public company.
The Group's prospects are encouraging and we have experienced a
positive start to 2018, which gives me confidence that the outlook
for the Group remains positive. The Board will continue to work
with the executive and management teams in 2018 to deliver on our
strategy to create value for our shareholders.
The Group will host its first Annual General Meeting since its
admission to trading on AIM on 24 May 2018 at our registered office
at Forrest House on the Isle of Man, to which I welcome all of our
shareholders.
Gary Lamb
Chairman
22 March 2018
Chief Executive Officer's review
Introduction
I am delighted to present Strix Group Plc's first annual results
to shareholders following its admission to trading on AIM in August
2017. The Group has delivered a positive set of results, in line
with market expectations and with a particularly strong cash flow
performance which supports our progressive dividend policy. Strix
has continued to enhance its market position by continuing to
implement its strategy, with the successful launch of a new range
of "best in class" controls designed to deliver competitive, high
quality products across all market segments. In November 2017,
Strix celebrated the sale of its 2 billionth product, a significant
milestone which highlights our global market position.
Financial Performance
Our financial performance continues to demonstrate positive
results with increases against prior year in revenues (up 2.9%) and
adjusted EBITDA (up 4.8%), with gross margins also increasing by
1.2% to 40.7% due to positive changes in product mix. Adjusted
profit before tax showed an increase of GBP1.5m, up 5.6% (2016:
GBP26.8m).
Cash conversion remains particularly strong with net cash
generated from operating activities increasing by 5.6% to GBP33.8m
(2016: GBP32.0m). Our continued ability to generate significant
cash inflows will support our progressive dividend policy and has
allowed us to reduce our net debt since the drawdown of the new
revolving credit facility in August 2017, which has decreased by
GBP4.8m to GBP56.0m.
Market Review
The Group continues to hold a strong global market share of
c.38% with all segments showing a stable position. It is estimated
that the global market grew c.5% to c.182m appliances with global
penetration of c.35% allowing for continued growth. The overall
Regulated market volume growth was estimated at c.5% to c.50m
appliances with Strix securing c.6% growth and maintaining a market
share of c.61%. The c.5% regulated market volume growth is
particularly strong given a historic 5 year compound annual growth
rate ("CAGR") of c.1% and was driven by particularly strong
performance in Western Europe which posted c.9% growth versus a
c.4% CAGR. In North America, Strix has gained c.12% share during
the last two years to hold c.75% market share with the overall
household penetration increasing to just c.13%.
The China market for core kettle controls is estimated to have
declined slightly over the prior year (by c.6%) to c.44m
appliances. This decline in China is set against a backdrop of
experiencing exceptional growth in 2016, with Strix maintaining a
share of c.50%. The China domestic market has seen an increase in
electronic multi-cooker appliances and Strix will launch a revised
control in H2 to secure a share of this growth opportunity whilst
continuing to defend its existing patented technology. The Less
Regulated markets are estimated to have grown by c.12% during the
year to c.88m appliances compared to the historic CAGR of c.8% with
Strix securing c.16% growth following a strong performance in South
America and the Commonwealth of Independent States ("CIS"),
increasing its share in this segment to c.19%. The electronic
control segment, an area where Strix holds patents on its EK3
control, continued to show significant importance with growth at
c.54% over prior year and Strix holds c.67% share.
Aqua Optima has also seen some significant growth with the UK
share growing by over 100% from c.6% to c.12% with significant
incremental contracts secured with major retailers including Tesco
and Boots.
Operations Review
Lean and continuous improvement initiatives have been a key
focus both within operations and throughout the organisation. This
focus led to a further 7% improvement in production efficiency and
secured significant reductions to our customer defect PPM (parts
per million) rate, achieving a record low level for the Group. We
continued to execute on our strategy for production automation,
with the first truly automated line for the new U9 series installed
and commissioned during H2 2017. We will continue to execute on
this strategy going forward to further increase our capacity,
quality control and reliability whilst continuing to optimise
costs. With the continued volume growth in both our core business
and Aqua Optima, coupled with some exciting opportunities being
explored with our mature technologies, we will consider
accelerating investment to further expand our operations facility
in China, in order to maximise these opportunities for the
future.
Product Review
The key product focus during 2017 within our core segment has
been the development and launch of the new range of U9 series
controls, designed to provide "best in class" products to compete
across all market segments. The full range of controls was launched
during 2017 and provided a complete portfolio of products to
address market needs across all segments. This received a very
positive response from our customers globally with c.50 new
appliances currently specified for launch during 2018 representing
an estimated annualised volume of c.3m appliances.
In addition to our core kettle controls, we also launched a
number of new products which included the turbo toaster which uses
Strix patented technology, two new single dispense Hot Cup
appliances and the Aqua Optima filter kettle. More recently, 2018
has also seen the launch of the new baby formula system from Tommee
Tippee in the UK with further expansion planned within this segment
from additional geographies.
Following our admission to trading on AIM there has been renewed
focus and investment into our patented, mature technologies within
the hot water on demand category and we continue to use our strong
relationships with key OEMs, brands and retailers, coupled with
consumer research, to increase the focus on innovative products for
the future.
Safety
Safety awareness and associated actions within the market
continue to be a key focus, protecting the market from unsafe or
poor quality products. During 2017, we have maintained active
relationships with market surveillance authorities which led to the
formal recall of two competing products in Germany, fitted with
copy controls and the removal from shelves of c.20 appliances
globally. We have also secured amendments to enhance the
international safety standards for cordless connectors, further
raising the bar for copyist products within regulated markets. The
electronic control segment received significant focus given its
growth and the expansion of multi cookers within China. Legal
actions have been initiated in relation to c.20 appliances within
China that infringe our intellectual property rights. We will
continue to defend our intellectual property rights, following on
from the success of our previous legal actions.
Board Composition
I am delighted that, as of 6 March 2018, Gary Lamb was appointed
as Chairman of Strix Group Plc following his position as interim
Chairman at the time of our admission to trading on AIM. Gary has
brought a wealth of experience to the Board based on his current
position as CEO of Manx Telecom Plc, in addition to his knowledge
of AIM and his relationships on the Isle of Man. His history with
Strix has allowed him to be an excellent sounding board on current
and future initiatives, and I look forward to working closely with
him and the Board to realise the full potential of Strix going
forward.
Strategy
Our strategy is centred on a culture of achievement, developing
and empowering our employees to deliver our corporate objectives.
The overall strategy is based on "four Ps":
-- People
-- Process re-engineering
-- Products
-- Performance
We have developed a fully integrated HR strategy that will drive
employee engagement and development. We have a very experienced and
dedicated workforce within Strix and I am confident we can
successfully grow the value of the Company with their continued
support and commitment.
Trading and Outlook
Trading during the second half of 2017, following our admission
to trading on AIM, was strong and I am pleased to report that we
have seen a healthy start to the current year. We remain focused on
delivering another year of growth in line with market
expectations.
I would like to take this opportunity to thank all our employees
across the globe for their commitment and hard work during what was
an exceptionally busy year with the transition to AIM and for the
support from the new Board as we work to realise the full potential
of the Company as a listed group.
Mark Bartlett
Chief Executive Officer
22 March 2018
Chief Financial Officer's review
Financial Performance
Revenue for 2017 has risen by 2.9% to GBP91.3m, reflecting
Strix's global market share. Due to improvements in automation and
other measures undertaken to reduce manufacturing costs, gross
profit increased by GBP2.1m (6.1%). The increase in gross profit
margin from 39.5% in 2016 to 40.7% in 2017 was due to a shift in
sales towards some of our higher margin products.
Adjusted EBITDA increased to GBP35.1m from GBP33.5m,
representing a 4.8% increase, which was in line with market
expectations. Adjusted EBITDA is defined as profit before
depreciation, amortisation, net finance expense, taxation, royalty
charges, and exceptional items that included the share based
payment transactions.
Administration costs (excluding exceptional costs) were GBP2.7m
in 2017 against GBP2.5m in 2016. The increase resulted from
additional costs incurred in expanding certain group support
functions following Strix's admission to trading on AIM.
Adjusted operating profit showed an increase of GBP2.2m to
GBP29.1m (2016: GBP26.9m), representing an 8.2% increase due to
lower depreciation and amortisation of capitalised development
costs being reported (2017: GBP6.1m; 2016: GBP6.6m). The Group's
reported operating profit was GBP26.2m (2016: GBP24.3m) which
represents an increase of 7.8%.
Adjusted profit before tax increased to GBP28.3m (2016:
GBP26.8m). Interest was not reported in the comparison to 2016 as a
result of the re-organisation of the Group that took place in
August 2017 prior to the Company's admission to trading on AIM.
Interest of GBP0.6m was reported in 2017 for the 5 months period
post IPO. The Group's profit before tax was GBP25.4m (2016:
GBP24.3m).
Adjusted profit after tax increased to GBP27.5m (2016:
GBP24.7m), an increase of 11.3%. The Group's profit after tax was
GBP24.6m (2016: GBP22.2m).
Adjusted diluted earnings were 14.2p. Reported diluted earnings
per share were 12.7p. Basic earnings per share were reported at
13.0p, and adjusted for exceptional costs were 14.5p.
Capital expenditure and capitalised development costs
Tangible assets have additions to net book value of GBP3.9m
(excluding assets under construction) in 2017, compared to GBP2.7m
in 2016. This includes GBP1.9m (2016: GBP1.4m) of plant and
machinery, GBP0.9m (2016: GBP0.3m) of fixtures and fittings, and
GBP1.0m (2016: GBP1.0m) of production tools. This investment
demonstrates Strix's continued investment in its manufacturing and
development assets.
The net book value of intangible assets decreased by GBP1.2m to
GBP5.2m (2016: GBP6.4m). This primarily related to amortisation of
existing assets, although GBP0.1m of impairment charges were also
recorded in the year (2016: nil). New development costs of GBP1.7m
were capitalised in 2017 (2016: GBP1.4m) primarily due to more new
products qualifying for capitalisation, and a further GBP0.3m
(2016: GBP0.1m) was spent on software.
Share based payments
The Group awarded a number of one off share options as part of
the admission to trading on AIM to incentivise and reward a number
of our employees. For more senior employees, these awards are
subject to certain performance conditions. The total charge
incurred in the consolidated income statement in 2017 for share
based payments was GBP2.0m (2016: nil). This charge was applied on
a pro-rata basis from the grant date in 2017, therefore will be
higher in 2018 and 2019. The charge will be normalised from 2020
once the IPO share options have fully vested.
Foreign Exchange
The Group is broadly naturally hedged against movements in the
USD and RMB as it both generates revenues and incurs costs in these
currencies. The impact of foreign exchange in 2017 is a loss of
GBP0.2m (2016: gain of GBP0.1m) despite significant currency
fluctuations in 2017, which is equivalent to only 0.2% of
revenue.
Taxation
During 2016, the Group's Chinese subsidiary paid additional tax
of GBP1.1m following a benchmarking assessment by the Chinese tax
authorities relating to contract processing businesses in the years
2009 to 2014. To be prudent, potential additional liabilities for
2015 to 2017 of GBP0.8m (calculated on the same basis as the tax
enquiry) were accrued in 2016 and 2017. The effective tax rate is
equivalent to 3.1% of the Group's profit before tax.
Balance Sheet
Property, plant and equipment increased to GBP9.4m (2016:
GBP7.9m). Capital additions (excluding assets under construction)
were GBP3.9m (2016: GBP2.7m) with increased emphasis on automation
and initial investment in the new product lines in 2017.
Depreciation of GBP3.0m was in line with expectations (2016:
GBP3.6m). Net intangible assets (comprising capitalised development
costs and software) decreased in line with expectations to GBP5.2m
(2016: GBP6.4m) as a result of some major capitalised costs
reaching the end of their amortisation periods.
Current assets increased to GBP26.5m as compared to 2016 of
GBP25.2m after excluding former group company related party
balances. Inventories held at the end of the period increased to
GBP9.2m (2016: GBP8.6m) as a result of increased holding of some
longer lead time raw materials. Trade and other receivables
increased to GBP7.2m (2016: GBP5.7m) due to a mix of customers'
payment terms and higher trading results.
Current liabilities increased to GBP17.3m from 2016 of GBP15.2m
after excluding former group company related party balances as a
result of higher trading activities.
Whilst the consolidated accounts show a retained deficit,
significant reserves exist on the balance sheet of the dividend
paying entity, Strix Group Plc.
Cash flow and net debt
The decrease in cash and cash equivalents over the year was
GBP0.8m. This was primarily a result of additional cash outflows
incurred as part of the admission to trading on AIM and the
payments made to the former group company related parties as part
of the exit by the Group's previous ownership. Net cash generated
from operating activities were up GBP1.8m in 2017 to GBP33.8m
(2016: GBP32.0m) with net cash used in investing activities up
GBP1.3m to GBP6.0m due to increased investment in both tangible and
intangible assets.
We expect net debt and leverage to progressively reduce during
2018 driven by the Group's strong underlying cash generation,
including utilising surplus funds to make debt repayments.
The Group has in place a revolving credit facility of GBP70.0m
of which GBP56.0m (2016: nil) remains drawn on the facility as at
31 December 2017. The Net debt to adjusted EBITDA ratio at 31
December 2017 was 1.3x.
Dividend
The Directors propose a final dividend of 1.9p per ordinary
share to give a total for the year of 2.9p. No dividend was paid in
2016.
The final dividend will be paid on 1 June 2018 to shareholders
on the register on 4 May 2018. The total dividend payment for 2017
equates to GBP5.5m, including the GBP1.9m interim payment made in
November 2017.
Raudres Wong
Chief Financial Officer
22 March 2018
Consolidated statement of comprehensive income
for the year ended 31 December 2017
2017 2016
Note GBP000s GBP000s
-------------------------------------- --------- --------- ---------
Revenue 91,263 88,653
-------------------------------------- --------- --------- ---------
Cost of sales - before exceptional
items (54,071) (53,581)
Cost of sales - exceptional
items 2 (23) (35)
-------------------------------------- --------- --------- ---------
Cost of sales (54,094) (53,616)
Gross profit 37,169 35,037
Distribution costs (5,790) (5,994)
-------------------------------------- --------- --------- ---------
Administrative expenses
- before exceptional items (2,682) (2,522)
Administrative expenses
- exceptional items 2 (2,862) (2,508)
Administrative expenses (5,544) (5,030)
Other operating income 342 313
-------------------------------------- --------- --------- ---------
Operating profit 26,177 24,326
Analysed as:
-------------------------------------- --------- --------- ---------
Adjusted EBITDA(1) 35,117 33,473
Amortisation 2 (3,032) (2,966)
Depreciation 2 (3,023) (3,638)
Royalties to former group
company related parties 2 - (1,838)
Other exceptional items 2 (2,885) (705)
-------------------------------------- --------- --------- ---------
Operating profit 26,177 24,326
Net finance costs 3, 4 (758) (48)
Profit before taxation 25,419 24,278
Income tax expense 5 (787) (2,103)
-------------------------------------- --------- --------- ---------
Profit for the year 24,632 22,175
-------------------------------------- --------- --------- ---------
Items that will never be
reclassified to profit or
loss:
Re-measurement of pension
scheme obligations (8) (100)
-------------------------------------- --------- --------- ---------
Total comprehensive income
for the year 24,624 22,075
-------------------------------------- --------- --------- ---------
Earnings per share (pence)
Basic 6 13.0 n/a
Diluted 6 12.7 n/a
-------------------------------------- --------- --------- ---------
Adjusted earnings per share
(pence)(2)
Basic 6 14.5 n/a
Diluted 6 14.2 n/a
-------------------------------------- --------- --------- ---------
Note 1: Adjusted EBITDA, which is defined as profit before
finance costs, tax, royalty charges, depreciation, amortisation,
and exceptional items, is a non-GAAP metric used by management and
is not an IFRS disclosure
Note 2: Adjusted earnings, which is defined as earnings per
share adjusted to exclude royalty charges and exceptional items, is
a non-GAAP metric used by management and is not an IFRS
disclosure
Consolidated balance sheet
as at 31 December 2017
2017 2016
Note GBP000s GBP000s
---------------------------------- ----- --------- ----------
Non-current assets
Intangible assets 5,179 6,380
Property, plant and equipment 9,378 7,919
Total non-current assets 14,557 14,299
---------------------------------- ----- --------- ----------
Current assets
Inventories 9,165 8,560
Trade and other receivables 7,195 5,650
Receivables due from former
group company related parties - 370,835
Cash and cash equivalents 10,111 10,959
---------------------------------- ----- --------- ----------
Total current assets 26,471 396,004
---------------------------------- ----- --------- ----------
Total assets 41,028 410,303
---------------------------------- ----- --------- ----------
Current liabilities
Trade and other payables (16,164) (14,289)
Current income tax liabilities (1,103) (843)
Payables due to former group
company related parties - (144,586)
Derivative financial instruments - (42)
Total current liabilities (17,267) (159,760)
---------------------------------- ----- --------- ----------
Non-current liabilities
Borrowings 7 (56,000) -
Post-employment benefits (225) (249)
---------------------------------- ----- --------- ----------
Total non-current liabilities (56,225) (249)
---------------------------------- ----- --------- ----------
Total liabilities (73,492) (160,009)
---------------------------------- ----- --------- ----------
Net (liabilities)/assets (32,464) 250,294
---------------------------------- ----- --------- ----------
Equity
Share capital 1,900 2
Share based payment reserve 2,042 -
Other reserves - 1,793
Retained (deficit)/earnings (36,406) 248,499
---------------------------------- ----- --------- ----------
Total (deficit)/equity (32,464) 250,294
---------------------------------- ----- --------- ----------
Consolidated statement of changes in equity
for the year ended 31 December 2017
Share Share Other Retained Total
capital based reserves (deficit)/ (deficit)/
payment earnings equity
reserve
GBP000s GBP000s GBP000s GBP000s GBP000s
------------------------------- --------- --------- ---------- ------------ ------------
Balance at 1 January
2016 2 - 1,793 226,424 228,219
------------------------------- --------- --------- ---------- ------------ ------------
Profit for the year - - - 22,175 22,175
Items that will never
be reclassified to
profit or loss:
Re-measurement of
pension scheme obligations - - - (100) (100)
Total comprehensive
income for the year - - - 22,075 22,075
------------------------------- --------- --------- ---------- ------------ ------------
Balance at 31 December
2016 2 - 1,793 248,499 250,294
------------------------------- --------- --------- ---------- ------------ ------------
Balance at 1 January
2017 2 - 1,793 248,499 250,294
------------------------------- --------- --------- ---------- ------------ ------------
Profit for the year - - - 24,632 24,632
Items that will never
be reclassified to
profit or loss:
Re-measurement of
pension scheme obligations - - - (8) (8)
Total comprehensive
income for the year - - - 24,624 24,624
------------------------------- --------- --------- ---------- ------------ ------------
Transactions with
owners:
Dividends paid (note
8) - - - (1,900) (1,900)
Share based payment
transactions - 2,042 - - 2,042
Group reorganisation
(note 1) - - 190,000 (673,707) (483,707)
Issue of shares (note
1) 1,900 - 188,100 (13,817) 176,183
Capital reduction (2) - (379,893) 379,895 -
Total transactions
with owners 1,898 2,042 (1,793) (309,529) (307,382)
------------------------------- --------- --------- ---------- ------------ ------------
Balance at 31 December
2017 1,900 2,042 - (36,406) (32,464)
------------------------------- --------- --------- ---------- ------------ ------------
Consolidated cash flow statement
for the year ended 31 December 2017
2017 2016
Note GBP000s GBP000s
------------------------------------ ----- ---------- ---------
Cash flows from operating
activities
Operating profit 26,177 24,326
Adjustments for:
Depreciation of property,
plant and equipment 3,023 3,638
Amortisation of intangible
assets 3,032 2,966
Impairment of intangible
assets 148 25
Profit on disposal of property,
plant and equipment (4) (3)
Pension contributions made (38) (38)
Movement in derivative financial
instruments (42) 36
Share based payment transactions 2,042 -
Net exchange differences 201 (55)
------------------------------------ ----- ---------- ---------
34,539 30,895
Changes in working capital:
(Increase)/decrease in inventories (595) 1,731
(Increase)/decrease in trade
and other receivables (532) 1,718
Increase/(decrease) in trade
and other payables 936 (897)
Cash generated from operations 34,348 33,447
Tax paid (527) (1,466)
------------------------------------ ----- ---------- ---------
Net cash generated from
operating activities 33,821 31,981
------------------------------------ ----- ---------- ---------
Cash flows from investing
activities
Purchase of property, plant
and equipment (4,013) (3,148)
Capitalised development
costs (1,688) (1,445)
Purchase of software (291) (146)
Proceeds on sale of property,
plant and equipment 10 3
Net cash used in investing
activities (5,982) (4,736)
------------------------------------ ----- ---------- ---------
Cash flows from financing
activities
Transactions with former (257,457) -
group company related parties
Proceeds of borrowings 7 60,774 -
Repayments of borrowings 7 (4,774) (27,194)
Net proceeds from issuance 176,183 -
of shares
Transaction costs related
to borrowings 7 (822) -
Dividends paid 8 (1,900) -
Finance costs paid (464) (56)
Finance income 6 8
Net cash used in financing
activities (28,454) (27,242)
------------------------------------ ----- ---------- ---------
Net (decrease)/increase
in cash and cash equivalents (615) 3
------------------------------------ ----- ---------- ---------
Cash and cash equivalents
at the beginning of the
year 10,959 10,175
------------------------------------ ----- ---------- ---------
Effects of foreign exchange
on cash and cash equivalents (233) 781
------------------------------------ ----- ---------- ---------
Cash and cash equivalents
at the end of the year 10,111 10,959
------------------------------------ ----- ---------- ---------
Notes to the preliminary announcement
for the year ended 31 December 2017
1. GENERAL INFORMATION
Strix Group Plc ("the Company") was incorporated and registered
in the Isle of Man on 12 July 2017 as a company limited by shares
under the Isle of Man Companies Act 2006 with the name Steam Plc
and with the registered number 014693V. The Company changed its
name to Strix Group Plc on 24 July 2017. The address of its
registered office is Forrest House, Ronaldsway, Isle of Man, IM9
2RG.
The principal activities of Strix Group Plc and its subsidiaries
(together "the Group") are the design, manufacture and supply of
kettle safety controls and other components and devices involving
water heating and temperature control, steam management and water
filtration.
Initial public offering ("IPO")
The Company's shares were admitted to trading on AIM, a market
operated by the London Stock Exchange on 8 August 2017. These Group
financial statements are the Company's first subsequent to its
admission to AIM and followed a Group reorganisation to facilitate
the IPO.
Group reorganisation
The Group financial statements have been prepared under the
merger method of accounting principles because the transaction
under which the Company became the holding company of Sula Limited
("Sula" and the "Sula Group") was a Group reconstruction with no
change in the ultimate ownership of the Sula Group. All the
shareholdings in Sula were exchanged via a share-for-share transfer
on 8 August 2017. The Company did not actively trade at that
time.
The result of the application of the capital reorganisation is
to present the financial statements as if the Company had always
owned the Sula Group.
2. EXPENSES BY NATURE
2017 2016
GBP000s GBP000s
Employee benefit expense 15,397 15,050
Depreciation charges 3,023 3,638
Amortisation and impairment
charges 3,180 2,991
Operating lease payments 1,152 1,079
Exceptional items - reorganisation
costs 23 35
- exit costs 820 670
- royalties to former group
company related parties - 1,838
- share based payment transactions 2,042 -
Foreign exchange losses/(gains) 201 (55)
Research and development expenditure totalled GBP3,549,000
(2016: GBP3,318,000), with GBP1,688,000 (2016: GBP1,445,000) of
these costs being capitalised during the year.
Exceptional items
The reorganisation costs are in relation to the transfer of
operations to China and Hong Kong, and the expansion of the senior
management unit within China and Hong Kong.
The exit costs were incurred by the Group relating to a
potential sale of the Group under the previous ownership
structure.
Royalties to former group company related parties represent
amounts payable to sister group companies under the old group
structure, which did not continue as part of the group
restructuring and IPO transactions. These costs were included
within administrative expenses in the comparative period.
As part of the admission to trading on AIM in August 2017, the
Group granted a total of 9,131,505 share options to employees of
the Group, including 5,700,000 options granted to the executive
directors (the CEO and CFO), with a further 510,000 options granted
to the COO. All of the options granted are subject to service
conditions, being continued employment with the Group until the end
of the vesting period. The share options granted to the executive
directors and senior staff also include certain performance
conditions which must be met, based on predetermined earnings per
share, dividend pay-out, and share price targets for the three
financial years 2017 to 2019. Once vested, the options remain
exercisable until the 10 year anniversary of the award date. All of
the options are granted under the plan for no consideration and
carry no voting rights.
A further GBP13,817,000 of costs incurred in relation to the IPO
have been debited to equity in accordance with IAS 32.
3. FINANCE COSTS
2017 2016
GBP000s GBP000s
Letter of credit charges 66 49
Pension scheme interest 6 7
Borrowing costs 692 -
------- ---------
764 56
======= =========
4. FINANCE INCOME
2017 2016
GBP000s GBP000s
Interest income 6 8
======= =========
5. TAXATION
Analysis of charge in year 2017 2016
GBP000s GBP000s
Current tax (overseas)
Current tax on overseas profits
for the year 793 803
Adjustments in respect of
prior years - overseas (6) 1,300
------- ---------
Total tax charge 787 2,103
======= =========
Overseas tax relates primarily to tax payable by the Group's
subsidiary in China. During 2016, the Group's Chinese subsidiary
paid additional tax of GBP1.1m following a benchmarking assessment
by the Chinese tax authorities relating to contract processing
businesses in the years 2009 to 2014. The potential additional
liabilities for 2015 to 2017 calculated on the same basis of
GBP0.8m were accrued in 2016 and 2017 to be prudent, but in line
with the basis of the tax enquiry.
As the most significant subsidiary in the Group is based on the
Isle of Man, this is considered to represent the most relevant
standard rate for the Group. The tax assessed for the year is
higher than the standard rate of income tax in the Isle of Man of
0% (2016: 0%). The differences are explained below.
2017 2016
GBP000s GBP000s
Profit on ordinary activities
before tax 25,419 24,278
------- ---------
Profit on ordinary activities - -
multiplied by the rate of
corporation tax in the Isle
of Man of 0% (2016: 0%)
Impact of higher overseas
tax rate 793 803
Adjustments in respect of
prior years - overseas (6) 1,300
Total taxation charge 787 2,103
======= =========
The Company is subject to Isle of Man income tax on profits at
the rate of 0% (2016: 0%). Based on the Company's current
activities, the Company is not expected to have any future Isle of
Man tax liability.
6. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based
on the following data. No earnings per share figure can be
calculated for 2016, when a different capital structure was in
place.
2017
-------------------------------- ----------
Earnings (GBP000s)
Earnings for the purposes
of basic and diluted earnings
per share 24,632
-------------------------------- ----------
Number of shares (000s)
Weighted average number
of shares for the purposes
of basic earnings per share 190,000
Weighted average dilutive -
effect of share consideration
Weighted average dilutive
effect of conditional share
awards 3,587
-------------------------------- ----------
Weighted average number
of shares for the purposes
of diluted earnings per
share 193,587
-------------------------------- ----------
Earnings per ordinary share
(pence)
Basic earnings per ordinary
share 13.0
Diluted earnings per ordinary
share 12.7
-------------------------------- ----------
Adjusted earnings per ordinary
share (pence)
Basic adjusted earnings
per ordinary share 14.5
Diluted adjusted earnings
per ordinary share 14.2
-------------------------------- ----------
The calculation of basic and diluted adjusted earnings per share
is based on the following data:
2017
GBP000s
---------------------------------- ---------
Profit for the year 24,632
---------------------------------- ---------
Add back:
Reorganisation costs 23
Exit costs 820
Royalties to former group -
company related parties
Share based payment transactions 2,042
Adjusted earnings 27,517
---------------------------------- ---------
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. BORROWINGS
2017 2016
GBP000s GBP000s
Non-current bank loans (56,000) -
======== =========
Term and debt repayment schedule
2017 carrying
Interest Maturity value
Currency rate date (GBP000s)
LIBOR
+
Revolving 1.50% 27 July
credit facility GBP - 2.50% 2022 (56,000)
On 27 July 2017, the Company entered into an agreement with The
Royal Bank of Scotland Plc (as agent), and the Royal Bank of
Scotland International Limited and HSBC Bank Plc (as original
lenders) in respect of a revolving credit facility of
GBP70,000,000.
The proceeds of the first drawdown of GBP60,774,000 were used to
(among other things) repay previously existing banking facilities
prior to the group reorganisation and admission to trading on AIM,
to pay fees, costs and expenses in relation to the process and to
fund the distribution paid to former group company related parties.
Additional amounts may be drawn under the agreement for financing
working capital and for general corporate purposes of the
Group.
All amounts become immediately repayable and undrawn amounts
cease to be available for drawdown in the event of a third party
gaining control of the Company. The Company and its subsidiaries,
Strix Limited and Sula Limited, have entered into the agreement as
guarantors, guaranteeing the obligations of the borrowers under the
agreement.
Transaction costs incurred as part of the debt financing
amounting to GBP822,000 have been capitalised in 2017 and are being
amortised over the period of the facility.
The agreement contains representations and warranties which are
usual for an agreement of this nature. The agreement also provides
for the payment of a commitment fee, agency fee and arrangement
fee, contains certain undertakings, guarantees and covenants
(including financial covenants) and provides for certain events of
default. During 2017, the Group has not breached any of the
financial covenants contained within the agreement.
The Group's only other interest-bearing borrowing is a finance
lease liability which is not considered material for separate
disclosure.
8. DIVIDENDS
The following amounts were recognised as distributions in the
year:
2017 2016
GBP000s GBP000s
Interim 2017 dividend of
1.0p per share (2016: nil) 1,900 -
------- ---------
Total dividends recognised
in the year 1,900 -
======= =========
In addition to the above dividends, since year end the directors
have proposed the payment of a final dividend of 2.9 p per share
(2016: nil). The aggregate amount of the proposed final dividend
expected to be paid on 1 June 2018 out of retained earnings at 31
December 2017, but not recognised as a liability at year end, is
shown in the table below. The payment of this dividend will not
have any tax consequences for the Group.
2017 2016
------- ---------
GBP000s GBP000s
Final 2017 dividend of 1.9p
per share (2016: nil) 3,610 -
------- ---------
Total dividends proposed
but not recognised in the
year 3,610 -
======= =========
9. ANNUAL REPORT AND ACCOUNTS
The financial information set out in the preliminary
announcement does not constitute the Group's statutory accounts for
the year ended 31 December 2017 or 31 December 2016. The Group's
Annual Report and Accounts for the financial year ended 31 December
2017 will be available on the Company's website (www.strixplc.com)
in due course, at which time a notification will be sent to
shareholders.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFETVAILFIT
(END) Dow Jones Newswires
March 22, 2018 03:01 ET (07:01 GMT)
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