TIDMKETL
RNS Number : 0654A
Strix Group PLC
21 September 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
21 September 2022
Strix Group Plc
("Strix", the "Group" or the "Company")
Interim results for the six months ended 30 June 2022
Despite the challenging m acroeconomic and geopolitical
environment, the Company has
delivered a robust performance across its three product
categories and made progress towards medium-term targets
Financial Summary
Adjusted results(1)
----------------------------------------------
H1 2022 H1 2021 H1 2020 Change Change
(22 - (22 -
21) 20)
-------- -------- -------- ------- -------
GBPm GBPm GBPm %(5) %(5)
Revenue 50.7 54.7 34.7 -7.3% 46.1%
Gross profit 19.5 20.5 13.8 -4.9% 41.3%
EBITDA(2) 15.9 17.4 13.6 -8.6% 17.6%
Operating profit 12.9 13.9 10.6 -7.2% 21.7%
Profit before tax 11.6 13.2 10.1 -12.1% 14.9%
Profit after tax 11.6 12.3 9.8 -5.7% 18.4%
Profit after tax
(excluding accounting estimates
changes)(3) 10.7 12.3 9.8 -13.0% +9.2%
Net debt(4) 61.3 46.0 36.9 33.3% 66.1%
Net cash generated from operating
activities 9.9 13.5 8.3 -26.7% 19.3%
Basic earnings per share (pence) 5.6 6.0 4.9 -6.7% 14.3%
Diluted earnings per share
(pence) 5.5 5.9 4.9 -6.8% 12.2%
Interim dividend per share
(pence) 2.75 2.75 2.6 0.0% 5.8%
1. Adjusted results exclude exceptional items, which include
share based payment transactions, 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. Accounting estimate changes relate to the reassessment of
useful lives performed in the current period of various assets
within the group, particularly relating to production and
development processes.
4. Net debt excludes the impact of IFRS 16 lease liabilities,
pension liabilities, deferred tax liabilities and earn-out
provisions on satisfaction of performance conditions.
5. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
Financial Highlights
-- The Group reported revenue of GBP50.7m, a decrease of 7.3%
versus the same period in prior year and an increase of
15.5% versus the same period in pre-COVID 2019 as revenues
were adversely impacted by the ongoing conflict in Ukraine
on certain peripheral geographies.
-- Adjusted gross profit margin was 38.5% (2021: 37.5%) driven
by the Group's ability to manage costs and to flex variable
overheads in line with sales performance.
-- Adjusted profit after tax was GBP11.6m (2021: GBP12.3m),
representing a 5.7% decrease compared to the same period
last year and an increase of 6.4% versus the comparable
period in pre-COVID 2019.
-- Net debt increased to GBP61.3m (FY 2021: GBP51.2m) as a
result of further drawdowns to fund net working capital,
capital expenditure and employment earn-out payments. This
represents a net debt/adjusted EBITDA ratio (calculated
on a trailing twelve month basis) of 1.6x.
-- The Group has significant liquidity providing financial
flexibility to continue to deploy capital consistent with
its allocation of capital priorities and is focused on investing
in compelling growth opportunities.
-- Adjusted basic earnings per share and adjusted diluted earnings
per share were 5.6p (H1 2021: 6.0p) and 5.5p (H1 2021: 5.9p)
respectively.
-- The Board is maintaining an interim dividend of 2.75p per
share (2021: 2.75p).
Strategic Highlights
-- On track to deliver medium-term targets to double the Group's
revenues primarily through growth in its water and appliances
categories.
-- Successfully implemented further product price increases
across the full kettle controls range and water categories
(the most recent was with effect from 1 May 2022).
-- Maintained market leading market share position of 56% of
the global kettle controls market by value.
-- Strong recognition for Strix domestic appliances. Aurora
achieved the Quiet Mark award, Housewares' Sustainable Product
of the Year and nominated for Best New Product: Small Domestic
Appliance at the ERT Awards. The Visione induction kettle
was awarded both the German Design Award 2022 and the Red
Dot design award.
Operational Highlights
-- Production efficiency of core kettle products improved with
77% of all assembly lines now fully automated.
-- In the appliances category, there has been some promising
signs of consumer market penetration of product ranges.
-- In the water category, new distribution and private label
contracts have been secured with reputable distributors,
retailers and brands.
-- The sustainability agenda for 2022/23 remains high on the
agenda as the Company delivers on Scope 1&2 targets, analyse
Scope 3 emissions and continue to focus on other KPIs.
-- New Strix.com website launched demonstrating the Company's
vision of the future.
Mark Bartlett, Chief Executive Officer of Strix Group plc,
said:
" Despite the challenging macroeconomic and geopolitical
environment, Strix has delivered a robust performance across its
three product categories and remains on track to deliver
medium-term targets to double the Group's revenues primarily
through growth in its water and appliances categories .
The macro headwinds have resulted in a reduction in demand in
the kettle control category in the key export markets but
offsetting this has been a recent improvement in trading conditions
within China which has already started to come through. In the
appliances category, there has been some promising signs of
consumer market penetration of product ranges and in the water
category, new distribution and private label contracts have been
secured with reputable distributors, retailers and brands.
The Group remains in a strong financial position and given
strength of its cash generation, the Board declares an interim
dividend that is in line with last year."
For further enquiries, please contact:
Strix Group Plc Tel: +44 (0) 1624
829829
Mark Bartlett, CEO
Raudres Wong, CFO
Zeus Capital Limited (NOMAD and Joint Broker) +44 (0) 20 3829 5000
Nick Cowles / Jamie Peel / Jordan Warburton
(Investment Banking)
Stifel Nicolaus Europe Limited (Joint Broker) +44 (0) 20 7710 7600
Matthew Blawat / Francis North
IFC Advisory Limited (Financial PR and IR) +44 (0) 20 3934 6630
Graham Herring / Tim Metcalfe / Florence Chandler
Market Abuse Regulation (EU) NO. 596/2014
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of the Company is Raudres Wong, CFO.
CEO's report:
Introduction
In the first half of 2022, despite the challenging m
acroeconomic and geopolitical environment, Strix has delivered a
robust trading performance across the three product categories;
kettle controls, water, and appliances.
This performance demonstrates the resilience of Strix's business
model, which benefits from geographical and product diversification
and is strengthened further by the Group's high cash generation and
prudent control of its balance sheet.
In addition, the Group has made solid progress against its
medium-term target to double Group revenues primarily through
organic growth in its water and appliances categories.
Financial performance
The Group reported revenues that decreased by 7.3% to GBP50.7m
(H1 2021 GBP54.7m). As stated in the pre-close trading update
released in July, revenues have been adversely impacted by the
ongoing conflict in Ukraine on certain peripheral geographies,
resulting in a decrease for the kettle controls category.
Despite this and the challenging macroeconomic and geopolitical
environment, the water category showed an improvement against the
same period last year reflecting the success of the performance
from online market place launches as Strix continues to expand its
online presence. The appliances category also saw a slight increase
compared to the prior comparative period as the Group started to
show promising signs of consumer market penetration for its Aurora
and Dual Flo product ranges.
Adjusted gross profit margin in H1 2022 was 38.5%, showing a
margin improvement of 1.0% compared to the same period last year.
This emanates from the Group's continued resilience to manage costs
in light of decreases in revenues and our ability to flex variable
overheads in line with sales performance. The main reasons behind
the margin improvement were market growth in the appliance
category, favourable foreign currency movements which had positive
impacts on products priced in foreign currencies, efficiencies
realised from automation of production lines, the use of lean
production processes and in-sourcing, and price increases
implemented in the latter part of the first half of this year
across the full kettle controls range and the water category which
partially covered cost increases in direct labour wage costs,
commodity and inward freight costs.
The Group's net debt position, excluding earn-out provisions, as
at 30 June 2022 increased to GBP61.3m (FY 2021: GBP51.2m) as a
result of further drawdowns to fund net working capital, capital
expenditure and employment earn-out payments. This represents a n
et debt/adjusted EBITDA ratio ( calculated on a trailing twelve
month basis) of 1.6 x.
Strix has a highly cash generative model which incorporates a
high return on capital employed (ROCE) and a high proportion of
cash in advance payment terms limits risk of non-payment and
working capital fluctuations. The Group is in a strong financial
position with significant liquidity providing flexibility to
continue to deploy capital consistent with its allocation of
capital priorities. It is focused on investing in compelling growth
opportunities, in particular on new product development and
attractive acquisition opportunities that support the medium-term
growth ambition of the Group.
Given the confidence in the continued strength of its cash
generation of the Group, the Board declares an interim dividend of
2.75p per share (H1 2021: 2.75p) .
Kettle control category
Overall, the kettle control category reported a decrease in
revenue of 11.7% to GBP34.8m in H1 2022.
Previously, the Group has indicated it had no direct sales into
Russia and any products sold into that region are typically from a
Chinese based OEM which equated to total revenues of circa GBP3m in
2021. However, as outlined in its trading update in July, certain
peripheral geographies have been adversely impacted by the ongoing
conflict in the Ukraine and it is estimated that this will now
represent total revenues of circa GBP5m - GBP7m across the Group
for 2022.
Whilst macroeconomic and geopolitical uncertainty looks set to
continue in the near term, historically during recessions, whilst
"distress" purchasing maintains there is a softening in
"discretionary" purchases by consumers and due to the supply chain
bull whip effect, we experience an undershoot entering a recession
and a overshoot exiting a recession.
The recessionary fears manifested during H1, with the Regulated
market showing 15% declines versus 2021 YTD with key markets of UK
and Europe being closer to down 20%, whilst Less Regulated was down
over 10% as certain peripheral geographies were significantly
impacted by the conflict in Ukraine.
The Kettle Safety Controls category is a very resilient business
and despite the significant number of headwinds, it has maintained
its market leading position of 56% of the global kettle controls
market by value .
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.
Continuous improvement initiatives in manufacturing, measurement
and testing processes also remain a key focus to enhance product
performance to help customers improve their sustainability
ambitions, product quality and reduce costs. Production efficiency
of core kettle products improved with 77% of all assembly lines now
fully automated.
Appliance category
Overall, the appliance category reported growth in revenue of
6.5% to GBP5.6m in H1 2022 as we started to show promising signs of
consumer market penetration for our Aurora and Dual Flo product
ranges.
Strix seeks to use its technology and innovation expertise to
develop adjacent products to solve problems in tangential markets
in a sustainable way. The Group looks to develop products offering
meaningful benefits to customers which can then be commercialised
through existing relationships with experienced and trusted OEM's
and consumer appliance specialists.
Within the Appliance category, Aurora ( Strix's Instant Flow
Heater technology, delivering auto-dispensed hot, boiled, and
chilled filtered water at the touch of a button) is now starting to
show signs of penetrating consumer markets across the world. The
Aurora Hot was launched in Q4 2021 and is selling well on Amazon,
while the Aurora Chilled was launched in Q2 2022. The Aurora has
recently been awarded the Quiet Mark award, which is a prestigious
industry accreditation aimed at encouraging companies worldwide to
prioritise noise reduction within product design and it was also
awarded the honour of Housewares' Sustainable Product of the Year.
It has also been nominated for Best New Product: Small Domestic
Appliance at the upcoming distinguished ERT Awards.
Dual Flo (w hich combines Strix's technology with LAICA's
classic Italian design and is believed to be the UK's only combined
kettle and one cup hot water dispenser with an innovative, energy
saving facility) was launched in April in the UK and July in Europe
and is selling well on Amazon under the LAICA brand.
The Visione induction kettle has recently been awarded both the
German Design Award 2022 and the Red Dot design award, two
prestigious awards in the industry. Following a successful crowd
funding campaign to understand consumer feedback and enable final
improvements the Visione will be fully launched in UK and European
markets in Q4 2022.
Baby Brezza launched a steriliser dryer with Strix's patented
technology in USA in August achieving strong consumer reviews with
4.5 out of 5 star reviews in the first month of launch online. It
will be rolled out in traditional retail from October.
Water category
Overall, the water category reported a growth in revenue of 2.9%
to GBP10.3m in 1H 2022 reflecting the success of its performance
from online market place launches as Strix continues to expand its
online presence.
T he water category has also made strong progress in line with
the Group's international growth aspirations and issues experienced
as a result of Brexit have also been successfully overcome by
utilising LAICA as the European base, as well as a resumption of
sales through online channels such as Amazon EU in the key markets
of France, Germany, Italy and Spain.
In addition, online market place launches of the Aqua Optima and
LAICA products have been secured on platforms such as , eBay, OnBuy
and B&Q and Strix plans to have a further five prior to year
end as the Group continues to expand its online presence. This has
been enabled through a partnership with an online marketplace
agency and a new logistics provider to offer direct to consumer
deliveries across the UK. This will be rolled out in Europe next
year.
In addition to key range extensions within the UK and Europe,
new contracts have been secured for key distributors across Europe,
Canada, USA and China which will support the growth ambition during
H2 and beyond. Additionally in the US, Strix has a signed up a
further three sales representative groups providing national
coverage and an infrastructure that has enabled it to obtain a
major listing with Sam's Club for LAICA products .
In H2, it is planned that Aqua Optima products will be
cross-sold into a number of LAICA's key European markets (Italy,
Czech Republic, Slovakia, Romania and Hungary) and LAICA products
will be cross-sold into a number of Aqua Optima's key markets (UK
Netherlands, Poland, Ukraine and Israel) .
Also Perfect Pour, a new patented design for water filtration
jugs and dispensers will be launched in H2 across the UK and Europe
and is an example of an innovative product that has been wholly
designed and manufactured by Strix. North America launch will be in
Q2 2023.
Operations review
The new factory within Zengcheng district in Guangzhou, China,
is now fully operational and will double the Group's current
manufacturing capacity enabling it to grow the business and deliver
its stated medium term strategy. Efficiencies and further
in-sourcing arising from the new manufacturing facility are
expected to have a positive effect on margins.
Strix's manufacturing operations have not been materially
affected by the evolving COVID-19 situation in China. The proactive
approach to minimise potential supply chain disruption by
increasing levels of finished stock means that the Group is well
positioned to benefit from any improvement in consumer demand in H2
which it is monitoring closely.
Barriers to entry and d efence of intellectual property
Strix constantly assesses the risks posed by competitive threats
and sees the real benefits of market disruption 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 its 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 3 further actions initiated in H1 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 is 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 along with investment in solar capacity, including
further investment in 2022. Indeed, Strix now expects its own
renewable sources to generate around 10% of the Group's total
energy requirements. 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 2022/23 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, including elements such
as modes of transportation of goods.
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 2022/23 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.
An update of our KPIs are set out in the sustainability report
available on the Strix website.
Dividend policy
Given the confidence in the continued strength of its cash
generation of the Group, the Board declares an interim dividend of
2.75p per share (2021: 2.75p) .
The interim dividend will be paid on 28 October 2022 to
shareholders on the register at 7 October 2022 and the shares will
trade ex-dividend from 6 October 2022.
Financial Position
Strix is in a strong financial position with significant
liquidity providing flexibility to continue to deploy capital
consistent with its allocation of capital priorities and is focused
on investing in compelling growth opportunities, in particular on a
new product development and commercialisation strategy that
supports the medium-term growth ambition of the Group.
The Company also continues to seek the acquisition of
technologies that will add further strategic value across the Group
and has a buoyant pipeline of opportunities it is tracking closely.
Following the successful integration of LAICA, the Group is now
actively considering a number of potential acquisition targets.
Exceptional costs decreased to GBP3.8m (H1 2021: GBP4.8m). With
the completion of the new manufacturing plant in China last year,
there were no factory-related exceptional costs incurred in the
current period as compared to the prior comparative period.
Exceptional costs incurred in the current period mainly related to
the accrual of the employment earn-out costs payable in 2023 to
vendor shareholders of LAICA per the supplemental consulting
agreement signed at acquisition. Other exceptional items include
reorganisation costs relating to internal restructuring.
Net working capital which includes inventories, trade and other
receivables, and trade and other payables (including tax
liabilities, excluding short-term portions of long-term
liabilities) increased to GBP23.6m (FY 2021: GBP18.0m), an increase
on GBP5.6m. The main driver behind this is an increase inventory
levels by GBP4.2m. Stock is traditionally built up in the first
half of the year due to seasonality, with the second half of the
year historically proving to be stronger than the first half,
therefore it is anticipated that stock levels will start to clear
down towards the later part of the year due to increased demand.
Other drivers for the increase in net working capital were
decreases in trade and other payables of GBP4.1m mainly due to
payments made to suppliers, partially offset by decreases in trade
and other receivables of GBP2.7m due to VAT receipts from the
Chinese government relating to the construction and completion of
the new factory in China last year.
Outlook
Macroeconomic and geopolitical uncertainty looks set to continue
in the near term, presenting our markets with challenges over the
next 12 months.
In light of the significant and well-publicised macro headwinds
which have resulted in a reduction in demand in the key export
markets, adjusted profit after tax consensus for the full year is
anticipated to be in range of GBP 27m to GBP29m. This is based on
an improvement in trading conditions within China which has already
started to come through, t he second half of the year always having
been seasonally stronger than the first, t he kettle safety
controls category being a very resilient business, some promising
signs of consumer market penetration of our product ranges and the
recent success of online market place launches.
Alongside this, Strix has successfully implemented further
product price increases across the full kettle controls range and
water categories (the most recent was with effect from 1 May 2022).
Strix has previously benefitted from its ability to adjust its
highly variable cost base and it will be implementing a further
range of efficiency measures and strategic initiatives to manage
costs during this period in order to minimise the impact of the
challenging operating environment and ongoing cost inflation .
Disposable incomes continue to be squeezed by rising inflation
and interest rates, but crucially Strix do not yet know how policy
makers will respond to this. Strix will be in a better position to
judge how next year's performance might be influenced by the market
backdrop later this year.
The Group remains on track to deliver medium-term targets to
double the Group's revenues primarily through growth in its water
and appliances categories.
Chief financial officer's review
Adjusted results (1) Reported results
---------------------------------------- ------------------------------------------
H1 H1 H1 Change Change H1 H1 H1 Change Change
2022 2021 2020 (22 - (22 - 2022 2021 2020 (22 - (22
21) 20) 21) - 20)
------ ------ ------ ------- ------ ------ ------ ------- -------
GBPm GBPm GBPm %(5) %(5) GBPm GBPm GBPm %(5) %(5)
Revenue 50.7 54.7 34.7 -7.3% +46.1% 50.7 54.7 34.7 -7.3% +46.1%
Gross profit 19.5 20.5 13.8 -4.9% +41.3% 19.0 18.2 13.8 +4.4% +37.7%
EBITDA (2) 15.9 17.4 13.6 -8.6% +16.9% 12.2 12.7 11.1 -3.9% +9.9%
Operating profit 12.9 13.9 10.6 -7.2% +21.7% 9.1 9.1 8.1 0.0% +12.3%
Profit before
tax 11.6 13.2 10.1 -12.1% +14.9% 7.9 8.5 7.5 -7.1% +5.3%
Profit after
tax 11.6 12.3 9.8 -5.7% +18.4% 7.8 7.6 7.3 +2.6% +6.8%
Profit after
tax
(excluding accounting
estimates changes)(3) 10.7 12.3 9.8 -13.0% +9.2% 6.9 7.6 7.3 -9.2% -5.5%
Net debt (4) 61.3 46.0 36.9 +33.3% +66.1% 61.3 46.0 36.9 +33.3% +66.1%
Net cash generated
from operating
activities 9.9 13.5 8.3 -26.7% +19.3% 9.9 13.5 8.3 -26.7% +19.3%
Basic earnings
per share (pence) 5.6 6.0 4.9 -6.7% +14.3% 3.8 3.7 3.7 +2.7% +2.7%
Diluted earnings
per share (pence) 5.5 5.9 4.9 -6.8% +12.2% 3.7 3.6 3.6 +2.8% +2.8%
Interim dividend
per share (pence) 2.75 2.75 2.6 0.0% +5.8% 2.75 2.75 2.6 0.0% +5.8%
1. Adjusted results exclude exceptional items, which include
share-based payment transactions, other reorganisation and
strategic project costs. Adjusted results are non-GAAP metrics used
by management and are not an IFRS disclosure.
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. Accounting estimate changes relate to the reassessment of
useful lives performed in the current period of various assets
within the group, particularly relating to production and
development processes. Refer to notes 2, 8 and 9 of the
consolidated financial statements.
4. Net debt excludes the impact of IFRS 16 lease liabilities,
pension liabilities, deferred tax liabilities and earn-out
provisions on satisfaction of performance conditions.
5. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
Financial performance
Revenues decreased by 7.3% to GBP50.7m (H1 2021 GBP54.7m),
mainly due to a drop in sales within our kettle controls category.
As stated previously in our pre-close trading update released in
July, revenues have been adversely impacted by the ongoing conflict
in Ukraine, resulting in a decrease of c.GBP4.6m (11.7% decrease)
for kettle controls. Despite the drop in overall sales, the water
category showed an improvement from same period last year
reflecting the success of our performance from online market place
launches as Strix continues to expand its online presence. The
appliances category also saw a slight increase in revenues compared
to the prior comparative period as we started to show promising
signs of consumer market penetration for our Aurora and Dual Flo
product ranges. Revenue increased by 46.1% above H1 2020
levels.
Adjusted gross profit decreased by 4.9% to GBP19.5m (H1 2021:
GBP20.5m), in most part due to the impact of revenues for kettle
controls falling as described above, resulting in a 10.3% decrease
from H1 2021. The decrease was slightly offset by increases for
both the water and appliances categories of GBP0.1m (3.1% increase)
and GBP0.7m (53.3% increase) respectively, reflective of the
increases in sales in these categories as described above. Reported
gross profits increased by 4.4% to GBP19.0m (H1 2021:
GBP18.2m).
Adjusted gross profit margin in H1 2022 was 38.5% (H1 2021:
37.5%), showing a margin improvement of 1.0% compared to the same
period last year. This improvement in margins emanates from the
Group's continued resilience to manage costs in light of decreases
in revenues and our ability to flex variable overheads in line with
sales performance. The main reasons behind the margin improvement
were market growth in the appliance category, favourable foreign
currency movements, efficiencies realised from automation of
production lines, the use of lean production processes and
in-sourcing, and prices increases implemented in the later part of
the first half of this year across our full kettle controls range
and the water category which partially covered off any cost
increases in direct labour wage costs, commodity and inward freight
costs.
Adjusted EBITDA was GBP15.9m (H1 2021: GBP17.4m), showing a
decrease of 8.6% compared to the same period last year. The
decrease is directly attributable to the decrease in revenues as
described above. Adjusted EBITDA is defined as profit before
depreciation, amortisation, finance costs, finance income,
taxation, and exceptional items including share based payments.
Reported EBITDA decreased by 3.9% to GBP12.2m (H1 2021:
GBP12.7m).
Adjusted EBITDA margin in H1 2022 was 31.4% (H1 2021: 31.8%),
representing a small dilution of 0.4%.
Offsetting the improvement in adjusted gross profit margins
described above were various factors which then contributed to the
dilution of adjusted EBITDA margins. These include, amongst others,
investment in resources bench strength in the commercial area to
meet medium-term targets, higher advertising and promotional costs
as the Group continued to further promote water and appliances
products in the market, and the optimisation of our supply chains
in order to improve on commercial performance and deliver on
customer value.
Adjusted operating profits decreased by 7.2% to GBP12.9m (H1
2021: GBP13.9m), showing a decrease of GBP1.0m, attributable mainly
to the drop in revenues. Reported operating profits remained static
at GBP9.1m (H1 2021: GBP9.1m) after deducting exceptional costs of
GBP3.8m (H1 2021: GBP4.8m) which decreased mainly due to reasons
described in the "Costs" section further below. Excluding the
impact of the change in accounting estimates described in the
paragraph below, adjusted operating profits in H1 2022 were
GBP12.0m (H1 2021: GBP13.9m).
Adjusted operating profit margins remained unchanged comparing
to the same period last year, sitting at 25.4% (H1 2021: 25.4%).
Partial reasoning for a static adjusted operating profit margin
position is due to accounting estimates changes made during the
period relating to the reassessment of the useful lives of certain
production and other assets which resulted in lower depreciation
charges of GBP0.9m being recognised in the current period compared
to the same period last year. Refer to notes 2, 8 and 9 of the
consolidated financial statements below for full disclosures of the
change in accounting estimates.
Adjusted profit before tax was GBP11.6m (H1 2021: GBP13.2m), a
decrease of GBP1.6m (12.1% decrease) from the same period last
year. Incremental finance costs of GBP0.6m were recognised due to
an increase in the net debt (H1 2022: GBP1.3m; H1 2021: GBP0.7m).
Reported profit before tax was GBP7.9m (H1 2021: GBP8.5m).
Adjusted profit after tax was GBP11.6m (H1 2021: GBP12.3m), a
decrease of GBP0.7m (5.7% decrease). The tax expense decreased in
the current year mainly due to certain tax incentive credits
granted in Italy during the current period, and continued adoption
of certain tax measures in China with the move of operations to the
new factory last year. Reported profit after tax was GBP7.8m (H1
2021: GBP7.6m). The effective tax rate on adjusted profit before
tax in FY 2021 was 0.04% (H1 2021: 6.8%%). Excluding the impact of
the change in accounting estimates described above, adjusted profit
after tax in H1 2022 was GBP10.7m (H1 2021: GBP12.3m).
Costs
Costs in the current period decreased overall compared to the
same period last year period in line with the decrease in
revenues.
Cost of sales (excluding exceptional costs) decreased to
GBP31.2m (H1 2021: GBP34.2m), directly attributable to the decrease
in revenues, however with an incremental (positive) effect on gross
margins mainly due to the impact of foreign currency exchange
movements, price increases implemented on our products in the
current period, market share gains in our appliances category, and
efficiencies realised from use of automation, lean production
processes and in-sourcing.
Distributions costs increased to GBP4.5m (H1 2020: GBP3.9m)
mainly due to higher outward carriage and freight costs, higher
payroll costs for sales and marketing staff, and increased
advertising and promotional costs as we continue our drive to
expand our reach in the market for our water and appliance
products.
Administration costs (excluding exceptional costs) were GBP2.7m
(H1 2021: GBP3.0m). Savings were realised as management implemented
various cost saving and restructuring initiatives.
Exceptional costs decreased to GBP3.8m (H1 2021: GBP4.8m). With
the completion of the new manufacturing plant in China last year,
there were no material factory-related exceptional costs incurred
in the current period. Exceptional costs incurred in the current
period mainly related to the accrual of the employment earn-out
costs payable in 2023 to vendor shareholders of LAICA per the
supplemental consulting agreement signed at acquisition. Other
exceptional items include reorganisation costs relating to internal
restructuring.
Cash flow
Net cash generated from operating activities decreased to
GBP9.9m (H1 2021: GBP13.5m) mainly due to movements in net working
capital, which showed an outflow of GBP4.2m in H1 2022 compared to
an outflow of GBP0.4m in H1 2021. The decrease in cash flows from
net working capital were mainly due to increases in stocks held at
period-end as a result of increased finished stocks holding to
minimize potential supply chain disruption along with slower demand
than anticipated in the first half, however diligent measures were
put in place to optimise our supply chains, manufacturing and
in-sourcing in the second half of the year to match our sales
planning and forecasting. Concerted efforts were exercised to
collect c.GBP4.0m VAT outstanding from the FY 2021 year-end to help
to counter the adverse effects from stocks holdings.
Cash outflows for investing activities have decreased by GBP3.8m
from the same period last year as capital expenditure incurred in
H1 2021 associated with the construction and completion of the new
factory did not recur.
Cash flows for financing activities increased compared to the
prior comparative period, mainly driven by higher finance costs of
GBP1.7m (H1 2021: GBP0.3m) paid in line with an increase in the net
debt.
Balance Sheet
Property, plant and equipment decreased slightly to GBP42.4m (FY
2021: GBP42.8m), a net decrease of GBP0.4m. This net decrease was
as a result of additions of GBP2.1m mainly of plant and machinery
and production tooling as the Group further enhances its production
lines to gain efficiencies and in-sourcing capabilities, partially
offset by depreciation charges of GBP2.0m and write-off of assets
(mainly right of use assets) of circa GBP0.5m due to streamlining
of offices overseas.
Intangible assets increased to GBP31.9m (FY 2021: GBP30.5m)
reflecting a net increase of GBP1.4m. The net increase is due to
additions of circa GBP1.9m, the majority of which are capitalised
development costs from new product development projects of circa
GBP1.6m. The total amortisation charge was GBP1.1m (H1 2021:
GBP1.0m), and foreign currency movements of GBP0.6m were recognised
on translation of intangible assets recognised on acquisition of
LAICA which are dominated in Euro.
Net working capital which includes inventories, trade and other
receivables, and trade and other payables (including tax
liabilities, excluding short-term portions of long-term
liabilities) increased to GBP23.6m (FY 2021: GBP18.0m), an increase
on GBP5.6m. The main driver behind this is an increase in inventory
levels by GBP4.2m as a result of increased holding to minimize
potential supply chain disruption in China and slower demand than
planned. Other drivers for the increase in net working capital were
decreases in trade and other payables of GBP4.1m mainly due to
payments made to suppliers, partially offset by decreases in trade
and other receivables of GBP2.7m due to VAT receipts from the
Chinese government relating to the construction and completion of
the new factory in China last year.
Non-current liabilities (including short-term portions)
increased to GBP92.5m (FY 2021: GBP85.0m), an increase of GBP7.6m,
which is mainly driven by the further drawdowns in the period from
the revolving credit facility to fund net working capital, capital
expenditure and the employment earn-out payments made at the
beginning of the year to the vendor shareholders of LAICA.
Net debt
The Group's net debt position, excluding earn-out provisions, as
at 30 June 2022 increased to GBP61.3m (FY 2021: GBP51.2m).
Total committed debt facilities at 30 June 2022 amounted to
GBP79.5m, giving a liquidity pool of GBP18.7m. Net debt equated to
1.6 times trailing twelve months' EBITDA, which compares favourably
to our debt covenant of 2.50 times. This continues to underpin the
Group's strong cash generation ability.
Dividend
The Board declares an interim dividend to 2.75p per share (H1
2021: 2.75p) to reiterate our intention to continue with a
progressive dividend policy linked to underlying earnings,
highlighting our confidence in the continued strength of cash
generation.
The interim dividend will be paid on 28 October 2022 to
shareholders on the register at 7 October 2022 and the shares will
trade ex-dividend from 6 October 2022.
Condensed INTERIM consolidated statement of comprehensive
income
for the period ended 30 June 2022 (unaudited)
(unaudited) (unaudited)
Period Period
ended ended
30 June 30 June
2022 2021
Note GBP000s GBP000s
--------------------------------------- ----- ------------ ------------
Revenue 7 50,694 54,666
---------------------------------------- ----- ------------ ------------
Cost of sales - before exceptional
items (31,207) (34,206)
Cost of sales - exceptional items 6 (468) (2,280)
---------------------------------------- ----- ------------ ------------
Cost of sales (31,675) (36,486)
---------------------------------------- ----- ------------ ------------
Gross profit 19,019 18,180
---------------------------------------- ----- ------------ ------------
Distribution costs (4,508) (3,949)
---------------------------------------- ----- ------------ ------------
Administrative expenses - before
exceptional items (2,668) (2,950)
Administrative expenses - exceptional
items 6 (3,288) (2,476)
---------------------------------------- ----- ------------ ------------
Administrative expenses (5,956) (5,426)
Share of (losses) from joint ventures (10) (10)
Other operating income 587 355
---------------------------------------- ----- ------------ ------------
Operating profit 9,132 9,150
Analysed as:
--------------------------------------- ----- ------------ ------------
Adjusted EBITDA (1) 15,941 17,438
Amortisation 8 (1,062) (952)
Depreciation (excluding Right-of-use
asset depreciation) 9 (1,512) (1,772)
Right-of-use asset depreciation 9 (479) (808)
Exceptional items 6 (3,756) (4,756)
---------------------------------------- ----- ------------ ------------
Operating profit 9,132 9,150
Finance costs 5 (1,262) (686)
Finance income 5 6
---------------------------------------- ----- ------------ ------------
Profit before taxation 7,875 8,470
Income tax expense (43) (893)
---------------------------------------- ----- ------------ ------------
Profit after taxation 7,832 7,577
---------------------------------------- ----- ------------
Other comprehensive income:
Exchange differences on translation
of foreign operations 678 (388)
---------------------------------------- ----- ------------
Total comprehensive income 8,510 7,189
---------------------------------------- ----- ------------ ------------
Profit for the period attributable
to:
Equity holders of the Company 7,770 7,526
Non-controlling interests 62 51
---------------------------------------- ----- ------------ ------------
7,832 7,577
--------------------------------------- ----- ------------ ------------
Total comprehensive income for
the period attributable to:
Equity holders of the Company 8,424 6,993
Non-controlling interests 86 196
---------------------------------------- ----- ------------ ------------
8,510 7,189
Earnings per share (pence)
--------------------------------------- ----- ------------ ------------
Basic 6 3.8 3.7
Diluted 6 3.7 3.6
---------------------------------------- ----- ------------ ------------
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.
Condensed INTERIM consolidated balance sheet
as at 30 June 2022 (unaudited)
(unaudited) (unaudited)
As at As at
30 June 31 December
Note 2022 2021
ASSETS GBP000s GBP000s
----------------------------------- ----- ------------ -------------
Non-current assets
Intangible assets 8 31,819 30,468
Property, plant and equipment 9 42,379 42,763
Investments in joint ventures 33 28
Net investments in finance leases 17 15
Total non-current assets 74,248 73,274
----------------------------------- ----- ------------ -------------
Current assets
Inventories 10 24,245 20,022
Trade and other receivables 12 22,786 25,511
Cash and cash equivalents 18,137 19,670
----------------------------------- ----- ------------ -------------
Total current assets 65,168 65,203
Total assets 139,416 138,477
----------------------------------- ----- ------------ -------------
EQUITY AND LIABILITIES
----------------------------------- ----- ------------ -------------
Equity
Share capital and share premium 13,146 13,139
Share based payment reserve 1,349 2,039
Retained earnings 8,231 10,146
Non-controlling interests 767 681
Total equity 23,493 26,005
Current liabilities
Trade and other payables 13 21,604 25,886
Borrowings 14 1,747 1,064
Future lease liabilities 17 563 773
Contingent consideration 5,760 6,082
Current income tax liabilities 13 1,805 1,631
Total current liabilities 31,479 35,436
----------------------------------- ----- ------------ -------------
Non-current liabilities
Future lease liabilities 17 1,864 2,598
Deferred tax liability 2,334 2,303
Borrowings 14 77,738 69,782
Contingent consideration 1,507 1,382
Post-employment benefits 1,001 971
----------------------------------- ----- ------------ -------------
Total non-current liabilities 84,444 77,036
----------------------------------- ----- ------------ -------------
Total liabilities 115,923 112,472
Total equity and liabilities 139,416 138,477
----------------------------------- ----- ------------ -------------
Condensed INTERIM consolidated statement of changes in
equity
as at 30 June 2022 (unaudited)
Share Share-based Retained Total Non-controlling Total
capital payment (deficit)/ equity interests equity
and reserve earnings attributable
share to owners
premium
(unaudited) GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
--------- ------------ ------------ -------------- ---------------- ---------
Balance at 1 January 2021 13,130 1,913 6,290 21,333 716 22,049
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Profit for the period - - 7,526 7,526 51 7,577
Other comprehensive loss - - (533) (533) 145 (388)
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Total comprehensive income for
the period - - 6,993 6,993 196 7,189
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Dividends paid (note 16) - - (10,831) (10,831) - (10,831)
Transfers between reserves 8 (975) 967 - - -
Share-based payment transactions - 487 - 487 - 487
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Total transactions with owners
recognised directly in equity 8 (488) (9,864) (10,344) - (10,344)
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Other transactions recognised
directly in equity - - 1,016 1,016 - 1,016
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Balance at 30 June 2021 13,138 1,425 4,435 18,998 912 19,910
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
(unaudited)
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
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
---------------------------------- --------- ------------ ------------ -------------- ---------------- ---------
Condensed INTERIM consolidated cash flow statement
for the PERIOD ended 30 June 2022 (unaudited)
(unaudited) (unaudited)
Period Period
ended ended
30 June 30 June
2022 2021
Note GBP000s GBP000s
--------------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Cash generated from operations 18(a) 9,759 14,620
Tax received / (paid) 96 (1,109)
--------------------------------------------------- ------ ------------ ------------
Net cash generated from operating activities 9,855 13,511
--------------------------------------------------- ------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (2,954) (8,137)
Capitalised development costs 8 (1,643) (1,529)
Consideration paid in relation to the purchase
of LAICA S.p.A (1,671) (1,605)
Purchase of intangibles 8 (175) (627)
Proceeds on sale of property, plant and
equipment 9 - 1,750
Finance income 5 6
--------------------------------------------------- ------ ------------ ------------
Net cash used in investing activities (6,438) (10,142)
--------------------------------------------------- ------ ------------ ------------
Cash flows from financing activities
Drawdowns and new loans of non-current borrowings 18(b) 8,543 8,697
Finance costs paid (1,638) (271)
Principal elements of lease payments (401) (855)
Dividends paid 16 (11,601) (10,831)
--------------------------------------------------- ------ ------------ ------------
Net cash used in financing activities (5,097) (3,260)
--------------------------------------------------- ------ ------------ ------------
Net (decrease) / increase in cash and cash
equivalents (1,680) 109
Cash and cash equivalents at the beginning
of the period 19,670 15,446
Effects of foreign exchange on cash and
cash equivalents 147 (146)
--------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at the end of
the period 18,137 15,409
--------------------------------------------------- ------ ------------ ------------
Notes to the condensed INTERIM cONSOLIDATED financial
statements
for the PERIOD ended 30 June 2022 (unaudited)
1. General information
Strix Group Plc ('the Company') is incorporated and registered
in the Isle of Man as a company limited by shares under the Isle of
Man Companies Act 2006 with the registered number 014963V. The
address of the Company's registered office is Forrest House,
Ronaldsway, Isle of Man, IM9 2RG.
The Company's shares trade on AIM, a market operated by the
London Stock Exchange.
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.
These condensed interim consolidated financial statements
('interim financial statements') were approved for issue on 20
September 2022. The interim report will be available 21 September
2022 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
2021 and 30 June 2021 respectively. These interim financial
statements should be read in conjunction with the last annual
consolidated financial statements as at 31 December 2021 and the
comparative interim results for the period ended 30 June 2021.
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 2021,
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.
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 recognised as goodwill. The Group measures
goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised 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.
Transaction costs that the Group incurs in connection with a
business combination are expensed as incurred.
The Group recognises any non-controlling interest in the
acquired entity on an acquisition-by-acquisition basis either at
fair value or at the non-controlling interest's proportionate share
of the acquired entity's net identifiable assets.
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 GBP18.1m (YE
2021: GBP19.7m);
-- the availability of further funding should this be required
(with a liquidity pool of GBP19.0m (YE 2021: GBP29.0m)
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.
As a Company, the dividend-paying entity, Strix Group Plc, has
sufficient reserves from which to make distributions to
shareholders.
EBITDA and adjusted EBITDA - non-GAAP performance measures
Earnings before interest, taxation, depreciation and
amortisation ('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 amortisation. Exceptional 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
2021, 46% (FY 2020: 36%) of the Group's revenue and 37% (FY 2020:
30%) 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 recognised 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 recognised 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 determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
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
Payments associated with short-term leases and leases of
low-value assets are recognised 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 maximise
operational flexibility in terms of managing contracts.
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
recognised 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.
At the beginning of the year, Management reassessed the
accounting estimate in relation to the economic useful lives of
certain property, plant and equipment. The reassessment was
performed in light of the Group's historical usage of the assets,
condition of the assets at the time of the assessment, technical
and or commercial factors as well as legal and contractual terms
where applicable. Based on the reassessment, the assets' useful
lives were extended to appropriately reflect Management's expected
use of the assets. The revision to the accounting estimate has been
effected prospectively as from the beginning of the current year.
Note 9 details the financial impact of the change in the useful
lives of these assets.
The revised useful lives are shown below:
Asset class Previous estimate Revised estimate
* Plant and machinery 3-10 years 3-25 years
* Fixtures, fittings and equipment 2-5 years 2-10 years
* Motor vehicles 3-5 years unchanged
* Production tools 1-5 years 1-10 years
2-8 years (based on
* Right-of-use assets the lease term) unchanged
* Land and buildings 50 years 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.
At the beginning of the year, Management reassessed the
accounting estimate in relation to the economic useful lives of
certain intangible assets. The reassessment was performed in light
of the Group's historical realisation of the economic benefits from
the intangible assets, technical and or commercial factors as well
as legal and contractual terms where applicable. Based on the
reassessment, the assets' useful lives were extended to
appropriately reflect Management's expected realisation of the
economic benefits from the intangible assets. The revision to the
accounting estimate has been effected prospectively as from the
beginning of the current year. Note 8 details the financial impact
of the change in the useful lives of these assets.
The revised useful lives are shown below:
Asset class Previous estimate Revised estimate
* Capitalised development costs 2-5 years 2-10 years
Lower of useful or
* Intellectual property legal life unchanged
* Technology and software 2-10 years unchanged
* Customer relationships 10-13 years unchanged
Indefinite useful
* Brands life unchanged
Indefinite useful
* Goodwill life 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.
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
The preparation of these interim financial statements under IFRS
requires the Directors to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors including expectations of future
events that are believed to be reasonable under the
circumstances.
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 2021.
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 jugs and filters, primarily to
Original Equipment Manufacturers ("OEMs") based in China.
The Board of Directors has identified 3 reportable segments from
a product perspective, namely: kettle controls, water category 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
2022
(GBP000s)
Kettle Water
controls Category Appliances Total
Revenue 34,802 10,265 5,627 50,694
Cost of sales (20,218) (7,734) (3,723) (31,675)
Gross profit 14,584 2,531 1,904 19,019
========== ========== =========== =========
Period ended 30 June 2021
(GBP000s)
Kettle Water
controls Category Appliances Total
Revenue 39,407 9,978 5,281 54,666
Cost of sales (24,679) (7,747) (4,060) (36,486)
---------- ---------- ----------- ---------
Gross profit 14,728 2,231 1,221 18,180
========== ========== =========== =========
Adjusted Results
Periodended30June2022
(GBP000s)
Kettle Water
controls Category Appliances Total
Revenue 34,802 10,265 5,627 50,694
Cost of sales (19,797) (7,710) (3,700) (31,207)
Adjusted gross profit 15,005 2,555 1,927 19,487
========== ========== =========== =========
Periodended30June2021
(GBP000s)
Kettle Water
controls Category Appliances Total
Revenue 39,407 9,978 5,281 54,666
Cost of sales (22,628) (7,555) (4,023) (34,206)
Adjusted gross profit 16,779 2,243 1,604 20,460
========== ========== =========== =========
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 to whom the majority of sales are
made are primarily based in China.
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
and Italy, where two of the Group's principle subsidiaries are
domiciled.
30 June 31 December
2022 2021
GBP000s GBP000s
---------------------------------------------- -------- ------------
Country of domicile
Intangible assets 10,503 9,756
Property, plant and equipment 3,122 2,742
---------------------------------------------- -------- ------------
Total country of domicile non-current assets 13,625 12,498
---------------------------------------------- -------- ------------
Foreign countries
Intangible assets 21,316 20,712
Property, plant and equipment 39,257 40,021
---------------------------------------------- -------- ------------
Total foreign non-current assets 60,573 60,733
---------------------------------------------- -------- ------------
Total non-current assets 74,198 73,231
---------------------------------------------- -------- ------------
Major customers
In the first half of 2022, there was one major customer which
individually accounted for at least 10% of total revenues (2021:
two customers). The revenues relating to this customer in 6 months
ended 30 June 2022 was GBP7,204,000 (2021: GBP6,624,000 and
GBP4,598,000).
5. finance costs
Period Period
ended ended
30 June 30 June
2022 2021
GBP000s GBP000s
-------------------------- --------- ---------
Letter of credit charges 36 43
Lease liability interest 42 51
Borrowing costs 1,184 592
-------------------------- --------- ---------
Total finance costs 1,262 686
-------------------------- --------- ---------
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
2022 2021
Earnings (GBP000s)
Earnings for the purpose of basic and diluted
earnings per share 7,770 7,526
---------------------------------------------------- --------- ---------
Number of shares (000s)
Weighted average number of shares for the purposes
of basic earnings per share 206,960 206,041
Weighted average dilutive effect of conditional
share awards 2,796 3,487
---------------------------------------------------- --------- ---------
Weighted average number of shares for the
purposes of diluted earnings per share (000s) 209,756 209,528
---------------------------------------------------- --------- ---------
Earnings per ordinary share (pence)
Basic earnings per ordinary share 3.8 3.7
Diluted earnings per ordinary share 3.7 3.6
---------------------------------------------------- --------- ---------
Adjusted earnings per ordinary share (pence)
(1)
Basic adjusted earnings per ordinary share 5.6 6.0
Diluted adjusted earnings per ordinary share 5.5 5.9
---------------------------------------------------- --------- ---------
The calculation of basic and diluted adjusted earnings per share
is based on the following data:
Period Period
ended ended
30 June 30 June
2022 2021
GBP000s GBP000s
---------------------------------------------- --------- ---------
Profit for the period 7,770 7,526
---------------------------------------------- --------- ---------
Add back exceptional items in cost of sales:
COVID-19 net exceptional costs(2) 172 115
Land and factory 30 2,158
Restructuring 266 7
--------- ---------
468 2,280
--------- ---------
Add back exceptional items in administrative
expenses:
COVID-19 net exceptional costs(2) 356 216
Land and factory costs - 257
Restructuring 260 59
Mergers and acquisitions 1,937 1,295
Disaster recovery 163 -
Share based payments 572 649
--------- ---------
3,288 2,476
---------------------------------------------- --------- ---------
Total exceptional items 3,756 4,756
---------------------------------------------- --------- ---------
Adjusted earnings (1) 11,526 12,282
---------------------------------------------- --------- ---------
(1. Adjusted results exclude exceptional items, including
share-based payments. Adjusted results are non-GAAP metrics used by
management and are not an IFRS disclosure.)
(2. COVID-19 net exceptional costs include consumables, certain
employment costs and Government support grants.)
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 product line:
Period Period
ended ended
30 June 30 June
2022 2021
GBP000s GBP000s
----------------- --------- ---------
Kettle controls 34,802 39,407
Water Category 10,265 9,978
Appliances 5,627 5,281
----------------- --------- ---------
Total revenue 50,694 54,666
----------------- --------- ---------
8. Intangible assetS
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 38,943
Accumulated
amortisation/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).
Effect of change in accounting estimate
As highlighted in Note 2, Management revised the useful lives of
certain assets at the beginning of the year. As part of this
assessment, the useful lives of capitalised development costs were
reassessed and extended with the resulting impact being a decrease
of GBP395,000 in the amortisation charged to the condensed interim
consolidated statement of comprehensive income for the current H1
period and an expected decrease of GBP694,000 for the full year
2022. Going forward, the amortisation charges will be in line with
the revised useful life.
For the period ended 30 June 2021
----------------------------------------------------------------------------------------------------
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 12,346 3,286 834 - 2,406 6,643 9,906 35,421
Accumulated
amortisation/impairment (4,999) (710) (64) - - - - (5,773)
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
Net book value 7,347 2,576 770 - 2,406 6,643 9,906 29,648
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
Period ended 30
June
Additions 1,529 286 119 222 - - - 2,156
Downstream merger
of Strix Italy S.R.L.
into LAICA S.p.A.
(below and note
11) - - - - - - 997 997
Disposals (cost) - (44) (19) - - - - (63)
Disposals (accumulated
depreciation) - 44 28 - - - - 72
Amortisation charges (610) (226) (13) - (103) - - (952)
Exchange differences (19) - (17) - (114) (329) 162 (317)
------------ --------- ------------- ------------- -------------- -------- --------- --------
Closing net book
value 8,247 2,636 868 222 2,189 6,314 11,065 31,541
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
At 30 June
Cost 13,856 3,528 917 222 2,292 6,314 11,065 38,194
Accumulated
amortisation/impairment (5,609) (892) (49) - (103) - - (6,653)
------------ --------- ------------- ------------- -------------- -------- --------- --------
Net book value 8,247 2,636 868 222 2,189 6,314 11,065 31,541
------------------------- ------------ --------- ------------- ------------- -------------- -------- --------- --------
All amortisation charges have been treated as an expense, and
allocated to cost of sales GBP826,000 (H1 2020: GBP696,000) and
administrative expenses GBP126,000 (H1 2020: GBP52,000) in the
condensed interim consolidated statement of comprehensive income.
There were no reversals of prior year impairments during the period
(H1 2020: none).
As a result of the downstream merger detailed in note 11,
goodwill has been revalued resulting in an increase of GBP997,000
reclassified from pre-merger retained profits impacted by foreign
exchange differences from the depreciation of the EUR currency.
9. Property, plant and equipment
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 26,093 5,833 218 12,829 20,541 6,450 2,176 74,140
Accumulated
depreciation (13,812) (3,084) (185) (10,564) (529) (3,203) - (31,377)
--------------- ---------- ---------- ---------- ----------- ----------- ------------- ------------- ---------
Net book value 12,281 2,749 33 2,265 20,012 3,247 2,176 42,763
--------------- ---------- ---------- ---------- ----------- ----------- ------------- ------------- ---------
Period ended
30 June
Additions - - 23 - - - 2,099 2,122
Transfers 1,129 534 - 727 3 - (2,381) 12
Disposals
(cost) (69) (135) - - - (666) - (870)
Disposals
(accumulated
depreciation) 33 82 - - - 119 - 234
Depreciation
charge (679) (393) (12) (217) (211) (479) - (1,991)
Exchange
differences 20 10 1 - - 76 2 109
--------------- ---------- ---------- ---------- ----------- ----------- ------------- ------------- ---------
Closing net
book value 12,715 2,847 45 2,775 19,804 2,297 1,896 42,379
--------------- ---------- ---------- ---------- ----------- ----------- ------------- ------------- ---------
At 30 June
Cost 27,279 6,298 243 13,558 20,555 5,982 1,896 75,811
Accumulated
depreciation (14,564) (3,451) (198) (10,783) (751) (3,685) - (33,432)
--------------- ---------- ---------- ---------- ----------- ----------- ------------- ------------- ---------
Net book value 12,715 2,847 45 2,775 19,804 2,297 1,896 42,379
--------------- ---------- ---------- ---------- ----------- ----------- ------------- ------------- ---------
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.
Effect of change in accounting estimate
As highlighted in Note 2, Management revised the useful lives of
certain assets at the beginning of the year. As part of this
assessment, the useful lives of fixtures and fittings, plant and
machinery and production tools were reassessed and extended with
the resulting impact being a decrease of GBP546,000 in the
depreciation charged to the condensed interim consolidated
statement of comprehensive income for the current H1 period and an
expected decrease of GBP1,098,000 for the full year 2022. Going
forward, the depreciation charges will be in line with the revised
useful lives.
For the period ended 30 June 2021
-----------------------------------------------------------------------------------------------------
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
(cost) (7,051) (990) (29) (901) (2,193) (1,027) (39) (12,230)
Disposals
(accumulated
depreciation) 5,720 880 28 833 311 708 - 8,480
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 GBP2,196,000
(H1 2020: (GBP1,757,000)), distribution costs GBP46,000 (H1 2020:
(GBP61,000)), and administrative expenses GBP338,000 (H1 2020:
(GBP394,000)) in the condensed interim consolidated statement of
comprehensive income.
Included in disposals during the period were assets with a net
book value of GBP1,678,000 that were scrapped for GBPNIL due to the
move from the old to the new manufacturing plant in China, and land
and buildings with a net book value of GBP1,882,000 in the Group's
subsidiary LAICA International Corp. disposed of in a sale and
leaseback arrangement in line with the acquisition agreement for
GBP1,750,000.
10. Inventories
30 June 31 December
2022 2021
GBP000s GBP000s
------------------------------------- -------- ------------
Raw materials and consumables 12,901 12,139
Finished goods and goods in transit 11,344 7,883
------------------------------------- -------- ------------
24,245 20,022
------------------------------------- -------- ------------
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP22,446,000 (H1 2021: GBP23,816,000).
The charge for impaired inventories was GBPNIL (H1 2021:
GBP157,000). 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,
which are all included in the interim 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 Manufacture and sale China 100 Subsidiary
Limited of products
Strix (U.K.) Limited Group's sale and distribution UK 100 Subsidiary
centre
Strix Hong Kong Sale and distribution Hong Kong 100 Subsidiary
Limited of products
Strix (China) Limited Manufacture and sale China 100 Subsidiary
of products
HaloSource Water Manufacture and sales China 100 Subsidiary
Purification Technology of products
(Shanghai) Co.
Limited
Strix (USA), Inc. Research and development, USA 100 Subsidiary
sales, and distribution
of products
LAICA S.p.A. Manufacture and sales Italy 100 Subsidiary
of products
LAICA Iberia Distribution Sale and distribution Spain 100 Subsidiary
S.L. of products
LAICA International Sale and distribution Taiwan 67 Subsidiary
Corp. of products
Taiwan LAICA Corp. Sale and distribution Taiwan 67 Subsidiary
of products
Foshan Yilai Life Sale and distribution China 45 Joint venture
Electric Appliances of products
Co. Limited.
LAICA Brand House Holding and licensing Hong Kong 45 Joint venture
Limited of trademarks
-------------------------- ------------------------------ ------------------ ---------- -----------------
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 assets
included within the interim financial statements to which these
restrictions apply is GBP4,247,000 (FY 2021: GBP3,681,000). 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
2022 2021
GBP000s GBP000s
-------------------------------------- -------- ------------
Amounts falling due within one year:
Trade receivables 16,270 13,451
Loss allowance (47) (104)
-------------------------------------- -------- ------------
Trade receivables - net 16,223 13,347
-------------------------------------- -------- ------------
Prepayments 508 496
Advance purchases of commodities 3,025 5,389
VAT receivables 1,722 5,261
Other receivables 1,308 1,018
-------------------------------------- -------- ------------
22,786 25,511
-------------------------------------- -------- ------------
Trade and other receivables are all current and any fair value
difference is not material.
The amount of trade receivables past due is not material,
therefore an aging analysis has not been presented (2020:
same).
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.
Movement on the Group's provision for impairment of trade
receivables and the inputs and estimation technique used to
calculate expected credit losses have not been disclosed on the
basis the amounts are not material.
13. Trade and other payables
30 June 31 December
2022 2021
GBP000s GBP000s
------------------------------------ -------- ------------
Trade payables 9,783 11,060
Current income tax liabilities 1,805 1,631
Social security and other taxes 337 352
Other liabilities 5,211 7,742
Payments in advance from customers 3,099 1,936
Accrued expenses 3,174 4,796
23,409 27,517
------------------------------------ -------- ------------
The fair value of financial liabilities approximates their
carrying value due to short maturities.
14. Borrowings
30 June 31 December
2022 2021
GBP000s GBP000s
------------------------ -------- ------------
Current bank loans 1,747 1,064
Non-current bank loans 77,738 69,782
------------------------ -------- ------------
All of the current bank loans comprise of small individual
short-term arrangements for financing purchases and optimising 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 GBP181,000 (2021: GBP181,000) and GBP422,000
(2021: GBP513,000), respectively.
Term and debt repayment schedule for long-term borrowings
Currency Interest rate Maturity date 30 June 2022 31 December 2021
carrying value carrying value
(GBP000s) (GBP000s)
Revolving credit SONIA +1.50% to +
facility GBP 2.85% 27-May-25 77,397 69,306
EURIBOR +1.10% to +
UniCredit facility EUR 3.60% 28-Jun-24 172 210
EURIBOR +1.10% to +
Banco BPM EUR 3.60% 30-Nov-23 251 329
BNP Paribas EUR 0.15% 01-Jul-22 322 -
Banca Monte dei
Paschi di Siena EUR 0.25% 31-Aug-22 341 -
Banca Monte dei
Paschi di Siena EUR 0.35% 31-Oct-22 305 -
Banco BPM EUR 0.18% 30-Sep-22 318 -
Credito Emiliano EUR 0.18% 31-Jul-22 379 -
BNP Paribas EUR 0.18% 30-Apr-22 - 172
Banca Monte dei
Paschi di Siena EUR 0.18% 31-Jan-22 - 425
Banco BPM EUR 0.18% 31-Mar-22 - 404
--------------------- --------------------
79,485 70,846
--------------------- --------------------
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. During 2020, the Company refinanced this by entering
into an agreement with The Royal Bank of Scotland Plc (as agent),
along with the Bank of China (UK) Limited and the Bank of Ireland
in respect of a revolving credit facility of GBP80,000,000, with
materially the same terms and covenants as the existing facility.
As at 30 June 2022, the total facilities available are
GBP80,000,000 (30 June 2021: GBP80,000,000).
Under the amended agreement, the initial drawdowns totalling
GBP50,000,000 allowed for the refinancing of the original revolving
credit facility as well as to fund the acquisition of LAICA.
Further drawdowns were made during 2021 and 2022 for financing
working capital, capital expenditure, and additional consideration
transferred and employment earn-out paid to the vendor shareholders
of LAICA.
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
(2021: same).
Transactions costs amounting to GBP875,000 incurred as part of
the new debt financing facility were capitalised in 2020 and are
being amortised over the period of the 5-year facility.
The various agreements contain 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 2022, the Group has not breached any of
the financial covenants contained within the agreements (2021:
same).
Interest applied to the revolving credit facility is calculated
as the sum of the margin and LIBOR, and after 31 December 2021
LIBOR has been replaced by SONIA. An amendment to the facility
agreement was signed during the 2021 year for the transition from
LIBOR to SONIA. The margin is a calculated based on the Group's
leverage as follows:
Leverage Annualised margin
--------------------------------------------- ------------------
Greater than or equal to 2.5x 2.85%
Less than 2.5x but greater than or equal to
2.0x 2.50%
Less than 2.0x but greater than or equal to
1.5x 2.20%
Less than 1.5x but greater than or equal to
1.0x 2.00%
Less than 1.0x 1.50%
At 30 June 2022, the margin applied was 2.20% (31 Dec 2021:
2.00%).
15. CAPITAL Commitments
30 June 31 December
2022 2021
GBP000s GBP000s
------------------------------------------------------ -------- ------------
Contracted for but not provided in the interim
financial statements: Property, plant and equipment 2,592 2,001
------------------------------------------------------ -------- ------------
Construction of new factory
The above commitments include capital expenditure of GBP56,000
(2021: GBP1,639,000) relating to the construction of a new factory
in Zengcheng district, China, with other commitments relating to
capital expenditure of production assets .
16. Dividends
The following amounts were recognised as distributions in the
period:
Period Period
ended ended
30 June 30 June
2022 2021
GBP000s GBP000s
-------------------------------------------- --------- ---------
Final 2021 dividend of 5.60p per share (H1
2020: 5.25p) 11,601 10,831
-------------------------------------------- --------- ---------
Total dividends recognised in the period 11,601 10,831
-------------------------------------------- --------- ---------
In addition to the above dividend, since the end of the period
the Directors have approved the payment of an interim dividend of
2.75p per share. The aggregate amount of the interim dividend
expected to be paid on 28th October 2022 out of retained earnings
at 30 June 2022, but not recognised as a liability at the period
end, is GBP5,704,000. 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
2022 2021
GBP000s GBP000s
---------------------------------------------- --------- ------------
Current future lease liabilities (due within
12 months) 563 773
Non-current future lease liabilities (due in
more than 12 months) 1,864 2,598
---------------------------------------------- --------- ------------
Total Future Lease Liabilities payable 2,427 3,371
---------------------------------------------- --------- ------------
18. Cash flow statement notes
a) Cash generated from operations
Period Period
ended ended
30 June 30 June
2022 2021
GBP000s GBP000s
----------------------------------------------- --------- ---------
Cash flows from operating activities
Operating profit 9,132 9,150
Adjustments for:
Depreciation of property, plant and equipment
(note 9) 1,512 1,772
Depreciation of right-of-use assets (note
9) 479 808
Amortisation of intangible assets (note
8) 1,062 952
Share of losses from joint ventures 10 10
Loss/(profit) on disposal of property,
plant and equipment 40 1,678
Other non-cash flow items 1,243 420
Share based payment transactions 572 649
Net exchange differences (128) (411)
------------------------------------------------ --------- ---------
13,922 15,028
Changes in working capital:
(Increase) in inventories (4,223) (4,222)
Decrease / (increase) in trade and other
receivables 2,722 (718)
(Increase) / decrease in trade and other
payables (2,662) 4,532
------------------------------------------------ --------- ---------
Cash generated from operations 9,759 14,620
------------------------------------------------ --------- ---------
b) Movement in net debt
Non-cash movements
--------- -------- ------------------------ ---------
At 1 Cash Currency Other At 30
January flows movements movements June
2022 2022
GBP000s GBP000s GBP000s GBP000s GBP000s
--------- -------- ----------- ----------- ---------
Borrowings, net of loan
arrangement fees (70,846) (8,543) - (96) (79,485)
Lease Liabilities (3,371) 401 - 543 (2,427)
--------------------------- --------- -------- ----------- ----------- ---------
Total liabilities from
financing activities (74,217) (8,142) - 447 (81,912)
--------------------------- --------- -------- ----------- ----------- ---------
Cash and cash equivalents 19,670 (1,680) 147 - 18,137
--------------------------- --------- -------- ----------- ----------- ---------
Net debt (54,547) (9,822) 147 447 (63,775)
--------------------------- --------- -------- ----------- ----------- ---------
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 Trading Board, representing members of the senior
management team from all key departments of the Group.
Period Period
ended ended
30 June 30 June
2022 2021
GBP000s GBP000s
--------------------------------------------------- --------- ---------
Salaries and other short-term employment benefits 1,003 1,208
Post-employment benefits 93 84
Termination 74 -
Share-based payment transactions 450 440
--------------------------------------------------- --------- ---------
1,620 1,732
--------------------------------------------------- --------- ---------
There are no defined benefit schemes for key management.
20. Post balance sheet events
The Group has no post balance sheet events to disclose.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR UROARUBUKUUR
(END) Dow Jones Newswires
September 21, 2022 02:02 ET (06:02 GMT)
Strix (LSE:KETL)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Strix (LSE:KETL)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
