TIDMKETL
RNS Number : 8163T
Strix Group PLC
23 July 2020
23 July 2020
Strix Group Plc
("Strix" or the "Group")
Pre-Close Trading Update and Notice of Results
Strix Group Plc (AIM: KETL), the global leader in the design,
manufacture and supply of kettle safety controls and other
complementary water temperature management components, is pleased
to announce the following trading update for the six month period
ended 30 June 2020.
-- Resilient H1 performance with marked recovery and solid performance in June
-- Strong order book visibility for July and August
-- Continued to prudently invest in compelling growth opportunities
-- On track to deliver 14 new products this year
-- External construction of new manufacturing operations in China now complete
-- Group expects to report full year adjusted profit after tax
in line with the previous financial year (GBP28.9m)
Current trading
Trading has held up well despite the unprecedented global
macroeconomic disruption caused by the COVID-19 pandemic and the
continued uncertainty. The Group has started to see signs of a
bounce-back with a solid performance for June and a strong order
book for July and August as lockdown conditions have begun to ease
globally. First half net sales were down 21% versus last year which
was in line with scenario planning.
As previously noted in the AGM Statement, Strix has successfully
implemented a range of efficiency measures and strategic
initiatives to manage its highly variable cost base and cash
resources prudently. This will generate immediate savings to
mitigate the impact of the pandemic on full year profit forecasts.
Whilst the disruption arising from this situation still remains
unclear, following improved demand within the export market, and
assuming no significant increase in further lockdown restrictions
being imposed or unforeseen macroeconomic shocks, the Group expects
to report full year adjusted profit after tax in line with the
previous financial year.
Financial position
The business remains highly cash generative and maintains a
strong balance sheet. As at 30 June 2020, net debt was GBP36.9
million, approximately GBP6 million lower than budgeted for this
financial year, having successfully implemented a range of
efficiency measures and strategic initiatives. Following completion
of the GBP60 million revolving credit facility with RBS
International Limited and Bank of China in May, the Group has
improved financial flexibility for the medium term. This places
Strix in a strong position and enables a disciplined approach to
investment, so that it can emerge from this crisis well-positioned
for a market recovery.
Projected full year capital expenditure will reduce by
approximately GBP4 million against budget for this financial year
and will be deferred to 2021 without any delays to key projects
that would fundamentally affect the business or the new facilities
in China. External construction of the factory and warehouse is now
complete and remains on schedule to be fully operational by August
2021 as originally planned.
Kettle Safety Controls
The initial reaction to the COVID-19 pandemic on the kettle
supply chain caused supply side disruption as factories in China,
where more than 90% of kettles are manufactured, were faced with
mandatory local lockdowns and an extended Chinese New Year holiday
period. However, by early March the key factories were back in
operation, and those focused on production for the China domestic
market have experienced a sharp bounce-back in demand. Following Q1
where output was more than 27% down on 2019 levels, China's overall
performance for H1 was down circa 9% and the accelerating trend of
recovery is anticipated to continue in H2.
Export markets lagged the China domestic market, in some cases
by up to three months. This coupled with the earlier supply side
disruption, resulted in H1 being down more than 15% on 2019 export
levels. However, signs of the anticipated bounce-back are now
starting to come through with a solid performance in June and a
strong order book in place for July and August. The Group remains
cautiously optimistic about consumption and demand for our products
as the rest of the world continues to gradually exit lockdown
restrictions. The global macro-economic environment has begun to
show signs of improvement, particularly in China where GDP grew
3.2% year-on-year in Q2 with growth expected to continue throughout
the year.
Throughout this volatile period, Strix has managed to maintain
its market leading position in both the China domestic and export
markets for kettle controls, continuing to grow the number of
specifications using its latest U9 and Electronic platform
ranges.
Water Filtration
The Water Category has grown 6% globally during the period
year-on-year. Aqua Optima remains in a strong position to capture
further growth in H2 when market sentiment improves as a result of
its share of the tradebrand segment and increased distribution in
both Europe and China.
HaloSource, has now been successfully integrated into the Group
and the trading performance of the assets acquired has been in line
with the Group's expectations. The focus now is on capturing the
medium-term opportunities by entering into commercial agreements
which will drive future profitability. The Astrea product has
received significant interest from a number of parties and has
secured further distribution with major retail listings in North
America as well as a leading home shopping networks feature.
The Group also benefitted from utilising the HaloPure technology
to create a disinfection facility at the Guangzhou factory to
provide a safe and healthy working environment for its employees
during the pandemic and new contracts have been secured for
specific sterilization applications in both the farming and medical
segments.
Appliances
The Group has continued to work on growing its appliances
category with selected brand partners. In the Hot Water on Demand
category, the new Aurora Instant Flow Heater/Chiller appliance is
now undergoing development trials at the OEM, and tooling for the
Duality project is underway with a US Brand signed-up to launch. In
the Baby Care category, incremental projects are in the design
phase with a leading baby care brand in both Asia and North America
providing a more global reach in this growth market segment.
H1 has seen the acceleration of Strix Global Brand partnerships
on new innovative project launches. Within 2021 there are already
over 10 agreements in place within the appliances and baby care
categories for exciting new launches across all regions.
Operational, New Product, Corporate Progress and Management
The project to relocate Strix's existing manufacturing
operations in China has continued to make positive progress in line
with the project schedule, and the Group is pleased to report that
the external construction is now complete and remains on schedule
to complete all internal work by the end of January 2021, and to be
fully operational by August 2021 as originally planned.
Strix has continued to make significant strides in its product
development roadmap and remains on target to release 14 new
products this year, the majority of which will be launched during
the second half of the year in line with the original schedule. Key
projects include Duality, poultry drinking systems, Aurora, as well
as new filters and Astrea bottles.
In addition to its investment for growth initiatives, the Board
continues to invest in strengthening its management in line with
its strategy and explore strategically compelling acquisition
opportunities, subject to strict financial criteria and consistent
with its capital allocation priorities, to further enhance the
Group's growth potential within the water and appliance
categories.
Outlook and Notice of Interim Results
Despite the impact on the global economy, the Group is robust
and as a market leader with an unrivalled global footprint remains
confident in future prospects. Following the implementation of
efficiency measures and strategic initiatives, the Group is in a
strong position to continue to invest in compelling growth
opportunities and is well placed to benefit from the acceleration
in demand and emerge as a stronger business once COVID-19 passes as
well as the second half weighted seasonality of the business.
The Company has started to see signs of a marked recovery with a
solid performance in June and a strong order book for July and
August which underpins its confidence for adjusted profit after tax
for the full year to be in line with the previous financial year
assuming no significant increase in further lockdown restrictions
being imposed or unforeseen macroeconomic shocks.
The Group will be announcing its interim results for the six
month period ended 30 June 2020 on 23 September 2020.
Mark Bartlett, Chief Executive Officer, said:
"Strix has delivered a resilient performance in the first half
which is testament to the robustness of the business. It has now
started to see signs of a marked recovery with a solid performance
in June and visibility of a strong order book for July and August
as lockdown conditions have begun to ease globally. This makes us
cautiously optimistic about the demand for our products in the
second half and is consistent with improving global macro-economic
forecast trends.
During this period, we have successfully implemented a range of
efficiency measures and strategic initiatives to mitigate the
impact of the pandemic on the full year profit forecast which we
now expect to be in line with the previous financial year assuming
no significant increase in further lockdown restrictions being
imposed. This has been done whilst continuing to invest in
compelling growth opportunities and we remain on track to deliver
14 new products this year, as well as the new manufacturing
operations in China becoming fully operational in August 2021. This
will ensure that Strix emerges from this crisis well-positioned to
capitalise on a market recovery and an anticipated acceleration in
demand."
For further enquiries, please contact:
Strix Group Plc
Mark Bartlett, CEO
Raudres Wong, CFO +44 (0) 1624 829829
Zeus Capital Limited (Nominated Advisor
and Joint Broker)
Nick Cowles / Jamie Peel / Jordan Warburton
(Corporate Finance) +44 (0) 20 3829 5000
Stifel Nicolaus Europe Limited (Joint Broker)
Matthew Blawat / Francis North +44 (0) 20 7710 7600
IFC Advisory Limited (Financial PR and
IR)
Graham Herring / Tim Metcalfe / Florence
Chandler +44 (0) 20 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.
Strix is admitted to trading on the Alternative Investment
Market of the London Stock Exchange (AIM: KETL).
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END
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