Interim results

RNS Number : 5242M
Strix Group PLC
22 September 2021
 

22 September 2021

Strix Group Plc

 

("Strix", the "Group" or the "Company")

 

Interim results for the six months ended 30 June 2021

 

"P ositive trends and momentum in H1 provides confidence for full year"

 

Financial Summary

 

 

Adjusted results 1

 

H1 2021

H1 2020

H1 2019

Change

(21 - 20)

Change

(21 - 19)

 

£m

£m

£m

%4

%4

Revenue

54.7

34.7

43.9

57.6%

24.6%

Gross profit

20.5

13.8

16.7

48.6%

22.8%

EBITDA 2

17.4

13.6

14.9

27.9%

16.8%

Operating profit

13.9

10.6

12.2

31.1%

13.9%

Profit before tax

13.2

10.1

11.5

30.7%

14.8%

Profit after tax

12.3

9.8

10.9

25.5%

12.8%

Net debt 3

46.0

36.9

33.4

24.7%

37.7%

Net cash generated from operating activities

13.5

8.3

10.9

62.7%

23.9%

Basic earnings per share (pence)

6.0

4.9

5.7

22.4%

5.3%

Diluted earnings per share (pence)

5.9

4.9

5.4

2.0%

-7.4%

Total dividend per share (pence)

2.75

2.6

2.6

5.8%

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 (including IFRS 16 ROU depreciation) and amortisation, is a non-GAAP metric used by management and is not an IFRS disclosure.

3.  Net debt excludes the impact of IFRS 16 lease liabilities, pension liabilities, deferred tax liabilities and earn-out provisions on satisfaction of performance conditions. Net debt including earn-out provisions was £51.6m.

4.  Figures are calculated from the full numbers as presented in the consolidated financial statements.

Financial Highlights

 

The Group reported revenue of £54.7m, a significant increase of 57.6%,versus the same period in prior year and an increase of 24.6% versus the same period in 2019. This was driven by both organic growth and the acquisition of LAICA which has delivered strong revenue growth over the period as the Group bounced back to higher than pre-pandemic levels.

Adjusted EBITDA increased to £17.4m (2020: £13.6m), representing a 27.9% increase same period in prior year and an increase of 16.8% versus the same period in 2019. Adjusted EBITDA margin in H1 was 31.8% (H1 2020: 39.2%), as a result of LAICA's inclusion alongside a number of factors including higher outward carriage and freight costs, advertising and promotional costs and payroll costs as the Group strengthened its management team in line with its strategic objectives.

Net debt (excluding the impact of IFRS 16 lease liabilities) has increased to £46.0m (H1 2020: £36.9m) to  fund the LAICA acquisition,  continued  investment in compelling growth opportunities as well as the new manufacturing operations in China. This represents a n et debt/adjusted EBITDA ratio ( calculated on a trailing twelve month basis) of 1.1x.

Strong free cash flow generation with unique working capital cycle. Operating free cash flow (before financing and tax and exceptional factory capex) to EBITDA conversion of 82%.

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 6.0p (H1 2020: 4.9p) and 5.9p (H1 2020: 4.9p) respectively.

The Board declares an increase in the interim dividend to 2.75p per share (H1 2020: 2.6p).

Confident of delivering 2021 full year results in line with market expectations.

 

 Strategic Highlights

 

Remains on track to deliver medium-term targets to double the Group's revenues over a five year period primarily through organic growth in its water and appliances categories.

Expanded global market share by a further 1% by value of the kettle controls market.

Acquisition of LAICA continues to be successfully integrated in line with plan to achieve the identified benefits and the trading performance has been strong over the period delivering greater than 20% revenue growth.

New manufacturing operations within Zengcheng district in Guangzhou, China are now fully operational and were delivered on time and to budget and all was executed during a global pandemic.

The HaloPure technology is gaining wider recognition by the market and, in addition to securing two further contracts, the Group has reached an agreement with a leading global company of poultry feeding systems to mutually promote the product and the Group is confident it will secure 10 systems this financial year, which demonstrates the continued focus on commercialising this important product.

Continue to invest in strengthening its management team in line with its strategic objectives and has recruited a new Chief Technology Officer with significant expertise in project planning and the successful implementation of commercialisation strategies to bring high quality and innovative new products to market in a timely and cost effective manner.

 

Operational Highlights

 

Production efficiency of core kettle products improved with 73% of all assembly lines now fully automated.

Launching of sustainability report and "Sustainable. Innovative. Dependable." strategy.

Industry leading and ambitious decarbonisation target - scope 1 & 2 net zero by the end of 2023 demonstrates commitment to sustainability agenda.

Continued compliance with a range of international standards, solidifying the quality and safety of our products and internal processes (ISO9001, ISO14001, ISO45001, ISO50001, ISO17025, ISO13485).

Defence of intellectual property and regulatory enforcement remain core activities of our business and there have now been 66 in total since 2017.

 

 

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

 

"Strix has experienced positive trends and momentum in H1 2021 and achieved significant revenue growth compared to the COVID-affected prior year and remains confident that it will deliver revenue growth of circa 30% for the Group in 2021.

 

We are benefiting from being a world leading innovative and sustainable technology business and our continued focus on efficiency measures and strategic initiatives enables us to continue to prudently invest in compelling growth opportunities.

 

Today represents an important milestone for the Group, as we are launching our "Sustainable. Innovative. Dependable." strategy. The next few years will see significant planning and project execution as we look to advance our KPIs and set ever ambitious goals but this is a critical aspect of Strix's mission to innovate safety and design for a sustainable future.

 

Our strong balance sheet and low leverage provides financial flexibility for the medium term deploy capital consistent with allocation of capital priorities.

 

Strix remains confident of delivering 2021 full year results in line with market expectations and executing on the medium-term strategy to deliver against its five year targets.

 

The Group reaffirms its commitment to its increasing dividend, in line with its progressive dividend policy that is linked to underlying earnings, which reflects the Board's confidence in the outlook for the Group."

 

 

For further enquiries, please contact:

 

 

Strix Group Plc

Mark Bartlett, CEO

Raudres Wong, CFO

+44 (0) 1624 829829

 

 

 

Zeus Capital Limited (Nominated Advisor and Joint Broker)

Nick Cowles / Jamie Peel / Jordan Warburton (Corporate Finance)

 

+44 (0) 20 3829 5000

 

 

 

 

 

Stifel Nicolaus Europe Limited (Joint Broker)

Matthew Blawat / Francis North

 

+44 (0) 20 7710 7600

 

 

 

IFC Advisory Limited (Financial PR and IR)

Graham Herring / Tim Metcalfe / Florence Chandler

 

+44 (0) 20 3934 6630

 

 

 

 

ABOUT STRIX GROUP PLC

 

Isle of Man based Strix, is a global leader in the design, manufacture and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration.

 

Strix's core product range comprises a variety of safety controls for small domestic appliances, primarily kettles. Kettle safety controls require precision engineering and intricate knowledge of material properties in order to repeatedly function correctly. Strix has built up market leading capability and know-how in this field since being founded in 1982.

 

Strix's ordinary shares are admitted to trading on the AIM Market of the London Stock Exchange (AIM: KETL).

 

 

CEO's report:  

 

Introduction

 

In the first six months of 2021 we have delivered a solid trading performance which has strengthened the Group's position across its 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.

 

The Group has expanded its market leading value share of the global kettle controls market whilst significantly expanding the size of its water category through both organic growth and the strategically compelling acquisition of LAICA which has delivered strong revenue growth over the period.

 

In addition, the Group's medium-term strategies were refreshed at the Capital Markets Day hosted in November 2020 outlining a path to double Group revenues over a five year period primarily through organic growth in its water and appliances categories and strong progress is being made to deliver against those targets.

 

Financial performance

 

In the first six months of 2021, we have delivered a solid trading performance which is a tribute to our people during these uncertain times, who have continued to work diligently to support not only our customers, but also our local Communities and Governments.

 

The Group reported revenue of £54.7m, a significant increase of 57.6%,versus the same period in prior year and an increase of 24.6% versus the same period in 2019. This was driven by the inclusion of LAICA revenues and organic growth as the Group bounced back to higher than pre-pandemic levels.

 

Adjusted EBITDA increased to £17.4m (2020: £13.6m), representing a 27.9% increase same period in prior year and an increase of 16.8% versus the same period in 2019. Adjusted EBITDA margin in H1 was 31.8% (H1 2020: 39.2%), as a result of LAICA's inclusion alongside a number of factors including higher outward carriage and freight costs, advertising and promotional costs and payroll costs as the Group strengthened its management team in line with its strategic objectives.

 

Strix's has a highly cash generative model which incorporates a high ROCE and a high proportion of cash in advance payment terms limits risk of non-payment and working capital fluctuations.

 

Net debt (excluding the impact of IFRS 16 lease liabilities and Laica's earn out provisions) has increased to £46.0m (H1 2020: £36.9m) to  fund the LAICA acquisition,  continued  investment in compelling growth opportunities as well as the new manufacturing operations in China. This represents a n et debt/adjusted EBITDA calculated on a trailing twelve month basis ratio of 1.1x.


This places Strix in a financially strong position and with a disciplined approach to investment, will emerge from the pandemic poised to continue to benefit from a sustained market recovery which is starting to take place.

 

Given the Group's performance in H1 2021 and confidence in the continued strength of its cash generation the Board reiterates its intention to implement a progressive dividend policy that is linked to underlying earnings at the full year. Therefore, the Board declares an increase in the interim dividend to 2.75p per share (H1 2020: 2.6p).

 

New product development

 

New product development remains a fundamental driver in the Group's core business strategy, with specific focus on the identification of cross category opportunities. The Group has made significant headway having delivered on the targets outlined in the product development roadmap with the launch of multiple new products. The Group has also re-focused its commercialisation strategy, optimising cross category synergies within both our higher value appliance and water categories.

 

In the water category, the sales of its new products are accelerating with additional product launches from LAICA that have already been implemented during the period.

 

The Group also continues to see many of the new appliances starting to penetrate the consumer markets across the world. 

 

The Aurora appliance was launched on Amazon under the Aqua Optima brand in June in the UK and across key European markets (Italy, France, Germany and Spain) in September. This has reached number 5 on the hot water dispenser category on Amazon within one month of launch and 83% of reviews across the UK retail landscape are above 4 stars (out of 5). A version incorporating Strix's technology has already been launched in Asia with a leading global brand and will be in UK, Europe and North America over the coming months.

 

Throughout 2021 so far, in line with our medium-term growth ambitions, we have multiple new product launches.  The Group will continue to focus its highly skilled engineering resource towards enhancing our core technologies and innovating into new commercial markets in a sustainable manner.

 

The arrival of a new Chief Technology Officer, Ceyda Gibson, brings significant expertise in project planning and the successful implementation of commercialisation strategies in delivering high quality and innovative new products to market in a timely and cost effective manner. This appointment will be an invaluable addition to support Strix's new product development initiatives which is an important part of the Group's medium-term growth ambition. Previously, Ceyda Gibson served a variety of leadership roles including Global R&D Business Director at Avery Dennison in the Netherlands and Quality, Operational Excellence & Regulatory Compliance Director at Philips Consumer Lifestyle. She will join the Group in November 2021.

 

Kettle control category

 

The market has continued to experience strong demand in H1. Throughout this period, Strix has managed to grow its market leading position by a further 1% to circa 56% of the global kettle controls market by value, continuing to grow the number of specifications using its latest platform ranges and regions.

 

Regulated segments grew with a strong contribution from the UK, Mainland Europe and North America. Less regulated segments also grew with strong growth in Russia offsetting declines in South Africa.  Despite some weakness within the Chinese market last year, this began to show a marked recovery in 2021 and Strix remains the leading supplier of controls in that market .

 

We have also continued to focus product development on opportunities and design improvements in a sustainable way to reduce the overall manufactured product footprint within the Regulated, Less Regulated and China markets that will further strengthen Strix's position and support our market share aspirations.

 

Following the successful launch of the U9 Series during 2017, the Group has successfully produced over 55 million controls to date. The Group continues to innovatively develop this series with new variants launched to target the smaller size and split switch kettle appliances to further enhance the portfolio of best in class controls.

 

Continuous improvement initiatives in our manufacturing, measurement and testing processes are a key focus to improve stability of the manufacturing process, enhancing product performance to help our customers improve their sustainability ambitions, product quality and reduce costs. Production efficiency of core kettle products improved with 73% of all assembly lines now fully automated.

 

Lifetime energy footprint studies of kettles show that the energy consumed in "use" is estimated at 95% of the total product lifecycle energy requirements. Strix's goal is to reduce wastage in this phase for existing products and to design new, innovative products which reduce environmental wastage compared to the incumbent technology or products. As a result, Strix has successfully developed products and designs to reduce the level of overfill in traditional kettles as well as new 'over-fill proof' water heating products.

 

Water category

 

2020 was a transformational year for Strix's water filtration category with the acquisition of LAICA and the Aqua Optima brand delivering record sales which consolidates the brand's position as the clear number 2 in the UK market. Overall, the water category reported a significant growth in revenue in H1 2021 with the combined contribution of LAICA and HaloPure technology and has continued to develop its product base and progressed towards our category growth aspirations.

 

LAICA has a considerable global presence, an established product range and an advanced new product roadmap. The acquisition continues to be successfully integrated in line with plan to achieve the identified benefits and the trading performance has been strong over the period delivering greater than 20% revenue growth. It is already providing some strategic consolidation opportunities in the water treatment range, driving efficiencies and a comprehensive portfolio of products for the Group globally.

 

The new, expanded, brand portfolio will be used for the planned geographical expansion in the second half of 2021 for consumer water. The Group expects many of the new product launches, including those from LAICA to accelerate this year as the retailers introduce them to both their in-store and online portfolios.

 

For professional water, Strix launched the HaloPure technology and recently announced the HaloPure technology is gaining wider recognition by the market and, in addition to securing two further contracts at a regional government owned livestock company in China, the Group has reached an agreement with a leading global company of poultry feeding systems to mutually promote the HaloPure product and any relevant technical support in the Chinese market. This provides further confidence that the Group will secure 10 systems by then end of this financial year, which demonstrates the continued focus on commercialising this important product.

   

Water remains a limited natural resource experiencing ever greater demand, expected to increase by 40% by 2030. Strix is focused on enhancing the quality of water and providing sustainable delivery mechanisms to replace the 7.7 billion plastic water bottles used every year in the UK alone.  LAICA and astrea reusable filtered water bottles offer significant benefits from purchased bottled water in terms of re-usability of the container whilst also significantly reducing transportation costs. To complete the full product life cycle Aqua Optima has put a recycling agreement in place in the UK with specialist TerraCycle. The acquisition of HaloSource has brought new technology, including lead reduction and patented bromine technology, that kills bacteria and viruses. These technologies, coupled with the enhanced new product roadmap from LAICA enable Strix to offer improved quality drinking water to both the consumer and agriculture markets.

 

Appliance category

 

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.

 

2021 has seen and will continue to see many of the appliances created in 2020 penetrate consumer markets across the world with the most notable being the Aurora (Instant Flow Heater/Chiller) in the first half, and Dual Flo and the expansion of the Baby Care technology range in the second half.

 

There are now multiple agreements in place within the appliances and baby care categories for exciting new launches across all regions. Strix will continue to work closely with its key partners and own brands to bring technological innovation to the markets delivering core benefits in usability and sustainability to the consumer.

 

Operations review

 

The new manufacturing operations within Zengcheng district in Guangzhou, China are now fully operational and were delivered on time and to budget and all was executed during a global pandemic. The new factory will double the Group's current manufacturing capacity enabling it to grow the business and deliver its stated strategy of doubling revenues over a five year period. Efficiencies and further in-sourcing arising from the new manufacturing facility are expected to have a positive effect on margins.  

 

A corporate video giving an updated overview of the new factory is now available via this link:  https://player.vimeo.com/video/605235693 . The decision to invest in the construction of a new factory was taken by the Board in 2018. The land was successfully purchased in the summer of 2019 and external construction work began in late 2019 completing in December 2020. Production and assembly lines were then installed facilitating the commencement of operations.

 

Barriers to entry and defence of intellectual property

 

Strix constantly assesses the risks posed by completive 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.

 

We actively monitor the markets in which we operate for violation of our 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.

 

We remain committed to consumer safety and continue to prompt regulatory enforcement authorities to remove unsafe and poor quality products from our major markets. Nine such actions have again been undertaken so far in 2021 resulting in product recalls and withdrawal of kettles from Bulgaria. Defence of intellectual property and regulatory enforcement remain core activities of our business and there have now been 66 in total since 2017.

 

Sustainability

 

In 2020, the Group reassessed its approach to sustainability with a view of integrating a sustainability strategy within core business activities aligning ourselves with the UN's Sustainable Development Goals (SDGs). Today, Strix is launching its sustainability report and its "Sustainable. Innovative. Dependable." strategy.

 

An internal management and reporting structure has been put in place to ensure inclusion, responsibility and accountability from the shop floor to the boardroom. We have developed metrics of sustainability measures which have been standardised and are being rolled out across the organisation.  Our latest and highly ambitious step sees the externalisation of our sustainability KPIs as set out in the sustainability report available via this link: https://www.strixplc.com/sustainability . Measuring, committing and reporting on progress will ensure that these factors will be a key driving force in the direction of the business. 

 

We have focused on climate change and our carbon emissions as a key KPI for 2021/22. This is despite the complexities that the new Chinese factory, which will be the biggest energy consumer in the Group, and assimilating LAICA bring. Our Scope 1&2 emissions emanate primarily from our manufacturing plants, especially the new facility in China which is being commissioned in 2021. We have been developing our pathway to net zero. As a consequence of which we have set an ambitious target for net zero Scope 1&2 emissions by the end of 2023. We believe this to be 'best-in-class' and far in excess of the Paris 1.5°C scenario requirements.

 

In addition, our goal is to achieve over 95% of this through reduction of our own emissions with less than 5% from carbon offsets. To achieve this ambitious target, we are in the process of investing over £0.6m into a solar array at our new Chinese manufacturing site which will provide over 10% of the required electricity with the remainder due to be switched to renewable electricity in 2022.

 

The Isle of Man has signed an agreement for green power starting in Q4 2021. LAICA is also targeting a combination of solar and renewable electricity although with the integration currently at the fore this is expected to be implemented through 2022. We are also developing a range of programmes to reduce our Scope 1 emissions, for instance China and now the Isle of Man has started to move to electric cars. The Isle of Man will take the lead on alternative offsetting of our 'hard to remove' emissions using the SBTi mitigation hierarchy.

 

Our other sustainability KPIs are taken from key operating practices already embedded into our culture. Promotion of the sustainability agenda and KPIs is generating renewed emphasis on these activities. This has included additional planning and pathways to improvement and, where applicable, setting of ambitious future targets. We expect to enunciate further on these plans in the coming year. These KPIs are important but we also remain committed to other areas of our sustainability agenda. This is highlighted in our community engagement where we have an aspiration to increase volunteer hours by 10% a year.

 

The next few years will see significant planning and project execution as we look to advance our KPIs and set ever ambitious goals but this is a critical aspect of Strix's vision to e stablishing a world leading innovative and sustainable technology business .

 

Accreditations

 

Strix has a strong record for accreditations to ensure that best practices are adhered to across the Group. Key quality management, environmental and health & safety are in-place in our key sites. In addition, other specific accreditations are sought where necessary, for instance, Ronaldsway ISO17025 accreditation for test and certification and LAICA ISO13485 accreditation required for medical instrumentation.

 

2021 has seen a step change in activity with the new Chinese factory achieving ISO9001, ISO14001 and ISO45001 with no non-conformities, a significant achievement in such a short timescale with the official opening only in August. LAICA is looking towards ISO14001 and ISO45001 compliance in 2022.

 

As part of the drive towards improving the Group's environmental footprint and its aim to reduce energy consumption alongside decarbonisation the new Chinese facility is expected to achieve ISO50001, energy management, in 2021 with plans to roll-out this standard across other key manufacturing sites in 2022/3.

 

In addition, we place significant importance on our annual OEM customer survey which helps to define what we can do better. In 2020, despite COVID, our survey witnessed a 21% reduction in concerns from 2019 (31% from 2018) including quality improving circa 40% in China and circa 35% in the Isle of Man. Particularly pleasing was that the quality of Strix people achieving the highest rating within the survey.

 

Strix also continues to ensure compliance with a range of international standards, solidifying the quality and safety of our products and internal processes including (ISO9001, ISO14001, ISO45001, ISO50001, ISO17025, ISO13485).

 

Dividend policy

 

Given the Group's performance in H1 2021 and confidence in the continued strength of its cash generation the Board reiterates its intention to implement a progressive dividend policy that is linked to underlying earnings at the full year.

 

Therefore, the Board declares an increase in the interim dividend to 2.75p per share (H1 2020: 2.6p).

 

The interim dividend will be paid on 7 October 2021 to shareholders on the register at 1 October 2021 and the shares will trade ex-dividend from 30 September 2021. 

 

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 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 niche technologies that will add further value across the Group and has a pipeline of opportunities that it is tracking closely.

 

Outlook

 

The Group has experienced positive trends and momentum in H1 2021 and achieved revenue growth of 57.6%, including the impact of LAICA, compared to the COVID-affected prior year and remains confident that it will deliver revenue growth of circa 30% for the Group in 2021.

 

Strix has also successfully implemented price increases on some of its legacy products in both kettle controls and water categories, alongside a range of other efficiency measures which will help to minimise the impact of any cost inflation. Gross profit margin for the 2021 full year remain in line with management's expectations.

 

Given the Group's performance in H1 2021 and confidence in the continued strength of its cash generation the Board reiterates its intention to implement a progressive dividend policy that is linked to underlying earnings at the full year. Therefore, the Board declares an increase in the interim dividend to 2.75p per share (H1 2020: 2.6p).

 

Notwithstanding the positive demand backdrop, there are still a number of headwinds including supply chain disruption, foreign exchange rates and raw material prices which have increased significantly through the first half of the financial year and implying the Group will continue to face a challenging operating environment.

 

Strix remains confident of delivering 2021 full year results in line with management's expectations and executing on the medium-term strategy to deliver against its five year targets.

 

 

 

Chief financial officer's review

 

 

Adjusted results 1

Reported results

 

H1 2021

H1 2020

H1 2019

Change (21 - 20)

Change (21 - 19)

H1 2021

H1 2020

H1 2019

Change (21 - 20)

Change (21 - 19)

 

£m

£m

£m

%4

%4

£m

£m

£m

%4

%4

Revenue

54.7

34.7

43.9

57.6%

24.6%

54.7

34.7

43.9

57.6%

24.6%

Gross profit

20.5

13.8

16.7

48.6%

22.8%

18.2

13.8

16.7

31.9%

9.0%

EBITDA 2

17.4

13.6

14.9

27.9%

16.8%

12.7

11.1

10.9

14.4%

16.5%

Operating profit

13.9

10.6

12.2

31.1%

13.9%

9.1

8.1

8.1

12.3%

12.3%

Profit before tax

13.2

10.1

11.5

30.7%

14.8%

8.5

7.5

7.5

13.3%

13.3%

Profit after tax

12.3

9.8

10.9

25.5%

12.8%

7.6

7.3

6.9

4.1%

10.1%

Net debt 3

46.0

36.9

33.4

24.7%

37.7%

46.0

36.9

33.4

24.7%

37.7%

Net cash generated from operating activities

13.5

8.3

10.9

62.7%

23.9%

13.5

8.3

10.9

62.7%

23.9%

Basic earnings per share (pence)

6.0

4.9

5.7

22.4%

5.3%

3.7

3.7

3.6

0.0%

2.8%

Diluted earnings per share (pence)

5.9

4.9

5.4

2.0%

-7.4%

3.6

3.6

3.4

0.0%

5.9%

Total dividend per share (pence)

2.75

2.6

2.6

5.8%

5.8%

2.75

2.6

2.6

5.8%

7.7%

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.  Net debt excludes the impact of IFRS 16 lease liabilities, pension liabilities, deferred tax liabilities and earn-out provisions on satisfaction of performance conditions. Net debt including earn-out provisions was £51.6m.

4.  Figures are calculated from the full numbers as presented in the consolidated financial statements.

 

 

 

 

 

 

 

 

Financial performance

 

Revenue increased significantly by 57.6% to £54.7m (H1 2020 £34.7m). This was partly due to the inclusion of LAICA revenues of £10.1m in H1, with the remaining increase of £9.9m (representing a 28.5% increase from comparative prior period) realised from organic growth as the Group bounced back to higher than pre-pandemic levels. Revenue increased by 24.6% in comparison to H1 2019 period.

 

Revenue on a constant currency basis and organic basis showed an increase of 34.6%. This is influenced by weaker foreign currencies against Pound Sterling in H1 compared to prior comparative period, which effectively increases the Pound Sterling value of revenues for products that are priced in foreign currency.

 

Adjusted gross profit increased by 48.6% to £20.5m (H1 2020: £13.8m), partly due to LAICA's inclusion of £3.0m, and also driven mainly by kettle controls sales volumes which were 36% higher up on the prior comparative period due to increased customer demand linked to the market recovery from 2020. Reported gross profits increased by 31.9% to £18.2m (H1 2020: £13.8m).

 

Adjusted gross profit margin in H1 was 37.5% (H1 2020: 39.8%), showing a margin dilution of 2.3% attributable mainly to the inclusion of LAICA product ranges which have lower gross profit margins.

 

Adjusted EBITDA was £17.4m, an increase of 27.9% (H1 2020: £13.6m), partly due to LAICA which brought in £1.7m, with the remainder of the increase of £2.1m resulting from organic growth of 15%.  Adjusted EBITDA is defined as profit before depreciation, amortisation, finance costs, finance income, taxation, and exceptional items including share based payments. Reported EBITDA increased 14.4% to £12.7m (H1 2020: £11.1m).

 

Adjusted EBITDA margin in H1 was diluted to 31.8% (H1 2020: 39.2%), representing a dilution of 7.4%. Part of the dilution is as a result of LAICA's inclusion which had a 3.4% dilutive impact, leaving an organic dilution of 4.0%. The following factors played a role in organic dilution: (1) higher outward carriage and freight costs experienced globally with the recovery from the pandemic, (2) higher payroll costs as the Group increased its headcount in line with management expectations and medium-term targets, and (3) higher advertising and promotional costs as the Group diversifies its product range with growth in its water and appliances categories. These cost implications have a similar effect on dilution of the other adjusted KPI margins of operating profit, profit before tax and profit after tax.

 

Adjusted operating profits increased by 31.1% to £13.9m (H1 2020: £10.6m), an increase of £3.3m. LAICA contributed £1.4m to the increase, giving organic growth of £1.9m (17.9%). Reported operating profits were higher by 12.3% to £9.1m (H1 2020: £8.1m) after deducting exceptional costs of £4.8m (H1 2020: £2.5m) which increased mainly due to the removal and write-off of assets, and land and factory relocation costs associated with the move from the old factory to the new manufacturing plant, and LAICA acquisition-related strategic project costs (see note 6 of the financial statements).

 

Adjusted profit before tax was £13.2m, an increase of £3.1m (30.7%) from prior comparative period (H1 2020: £10.1m), of which LAICA contributed £1.1m. Interest charges were fairly constant, with a minor increase to reflect the increase in the Net Debt. Reported profit before tax was £8.5m (H1 2020: £7.5m).

 

Adjusted profit after tax was £12.3m (H1 2020: £9.8m), an increase of £2.5m (25.5%) and this represents an impressive 12.8% growth to the pre-pandemic performance in 2019 . LAICA adjusted profit after tax of £0.9m contributed to this increase. There was an increase in the tax expense, partly due to the inclusion of LAICA. The effective tax rate on adjusted profit before tax in H1 was 6.8%. Excluding the impact of LAICA, the effective tax rate drops down to 5.9%.

 

Costs

 

Costs in the current period increased compared to the prior period all in support of the increase in the top line as the Group recovered from impacts of the COVID pandemic.

 

Cost of sales (excluding exceptional costs) increased to £34.2m (H1 2020: £20.9m), driven by the increase in revenues, however with a dilutive effect on gross margin percentages mainly due to impact on pricing of adverse foreign exchange movements, higher commodity prices, and adverse sales mixes particularly linked to margin dilutions from LAICA's product ranges as the Group expands its water and appliances categories.

 

Distributions costs increased to £3.9m (H1 2020: £2.1m) mainly due to higher outward carriage and freight costs, higher payroll costs, and increased advertising and promotional costs, also taking into consideration the inclusion of LAICA in the Group.

 

Administration costs (excluding exceptional costs) were £3.0m (H1 2020: £1.4m), increasing mainly due to the inclusion of LAICA, and also as a result of higher payroll costs as the Group increased its headcount in line with management expectations and medium-term targets.

 

Exceptional costs increased mainly due to LAICA acquisition-related strategic project costs, the removal and write-off of assets, and land and factory relocation costs associated with the move from the old factory to the new Chinese manufacturing plant as of 27 August 2021, which was completed within the budget of circa £20m.

 

Cash flow

 

Net cash generated from operating activities rose to £13.5m (H1 2020: £8.3m) mainly due to an increase in operating profits driven by increases in sales. Net working capital movements in H1 2021 improved, showing an outflow of just £0.4m compared the prior comparative period (H1 2020: £2.8m outflow), demonstrating a continued trend of the Group's continued policy on maximizing its operating cash resources. Net working capital cash outflows decreased in H1 2021 mainly due to an increase in stocks held at period-end to fund the anticipated increase in demand in H2, which had the consequential effect of increased trade and other payables due to negotiated payment terms with suppliers to allow leeway for the Group to realise cash inflows from the anticipated increased demand in H2. 

 

Cash outflows for investing activities have increased by £3.2m from the prior comparative period mainly due to the capital costs associated with completion of the new factory, and further investment in LAICA. The new manufacturing plant in China is now fully operational as of the 27th August 2021, with production and assembly lines installed, and having been completed on budget and on time. Total factory construction costs were in line with budget of circa £20m.

 

Cash flows for financing activities remained fairly constant compared to the prior comparative period, driven in both periods by mainly drawdowns from the revolving credit facility and payment of final prior year dividends.

 

Balance Sheet

 

Property, plant and equipment increased to £40.4m (FY 2020: £37.2m), a net increase of £3.2m. This net increase was due to: (1) £9.7m (H1 2020: £5.6m) of additions attributable mainly to net capital expenditure of £5.1m on the completion new factory in China,  new ROU asset additions worth £1.4m, and new plant and machinery additions of £2.5m, (2) partially offset by the write-off of old assets from the old factory with a net book value of circa £1.6m, the sale of LAICA building with a net book value of circa £1.7m in a leaseback arrangement, and depreciation charges of £2.6m (H1 2020: £2.2m).

 

Intangible assets increased to £31.6m (FY 2020: £29.7m) reflecting a net increase of £1.9m. The net increase is due to additions of circa £3.2m, the majority of which are capitalised development costs from the new product development projects of circa £1.6m. The total amortisation charge was £1.0m (H1 2020: £0.7m).

 

Current assets increased to £40.8m (FY 2020: £35.9m), an increase of £4.9m. Broken down, inventories increased by £4.2m due to higher stock held at period-end to meet demand in H2 and also due to disruptions in supply chains as the global economy recovers from the pandemic. LAICA also purchases stocks in bulk to maximize economies of scale, and holds these in preparation for anticipated increases in demand of their products in the second half of the year. Trade debtor and prepayments remained fairly constant, with a slight increase of £0.7m.

 

Current liabilities (including tax liabilities, but excluding short-term portions of long-term liabilities) increased to £33.7m (FY 2020: £30.2m), and increase of £3.5m. Part of the increase is from LAICA trade creditors, which increased by £0.5m evident from the higher stock purchases and stock levels held at period-end. Trade and other creditors, and accruals increased mainly due to increases in purchases and various operational expenditures keeping in pace with recovery from the pandemic.

 

Non-current liabilities (including short-term portions) increased to £74.7m (FY 2020: £66.0m), an increase of £8.7m, which is mainly driven by the further drawdowns in the period from the revolving credit facility to fund the completion of the new manufacturing plant in China.

 

Net debt

 

The Group's net debt position, excluding earn-out provisions, as at 30 June 2021 increased to £46.0m (FY 2020: £37.2m). 

Total committed debt facilities at 30th June 2021 amounted to £61.0m, giving a liquidity pool of £34.0m. Net debt equated to 1.1 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 increase in the interim dividend to 2.75p per share (H1 2020: 2.6p) and given the Group's performance in H1 2021, confidence in the continued strength of its cash generation it reiterates its intention to implement a progressive dividend policy that is linked to underlying earnings at the full year.

 

The interim dividend will be paid on 7 October 2021 to shareholders on the register at 1 October 2021 and the shares will trade ex-dividend from 30 September 2021. 

 

 

 

 

 

 

 

 

Condensed INTERIM consolidated statement of comprehensive income

for the period ended 30 June 2021 (unaudited)

 

 

 

 

 

(unaudited)
Period ended
30 June 2021

 

(unaudited)
Period ended
30 June 2020

 

 

Note

 

£000s

 

£000s

Revenue

 

7

 

54,666

 

34,712

Cost of sales - before exceptional items

 

 

 

(34,206)

 

(20,948)

Cost of sales - exceptional items

 

6

 

(2,280)

 

-

Cost of sales

 

 

 

(36,486)

 

(20,948)

Gross profit

 

 

 

18,180

 

13,764

Distribution costs

 

 

 

(3,949)

 

(2,121)

Administrative expenses - before exceptional items

 

 

 

(2,950)

 

(1,416)

Administrative expenses - exceptional items

 

6

 

(2,476)

 

(2,517)

Administrative expenses

 

 

 

(5,426)

 

(3,933)

Share of (losses) / profits from joint ventures

 

 

 

(10)

 

-

Other operating income

 

 

 

355

 

402

Operating profit

 

 

 

9,150

 

8,112

Analysed as:

 

 

 

 

 

 

Adjusted EBITDA1

 

 

 

17,438

 

13,589

Amortisation

 

8

 

(952)

 

(748)

Depreciation (excluding Right-of-use asset depreciation)

 

9

 

(1,772)

 

(1,491)

Right-of-use asset depreciation

 

9

 

(808)

 

(721)

Exceptional items

 

6

 

(4,756)

 

(2,517)

Operating profit

 

 

 

9,150

 

8,112

Finance costs

 

5

 

(686)

 

(585)

Finance income

 

 

 

6

 

8

Profit before taxation

 

 

 

8,470

 

7,535

Income tax expense

 

 

 

(893)

 

(217)

Profit after taxation

 

 

 

7,577

 

7,318

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

 

(388)

 

134

Total comprehensive income

 

 

 

 7,189

 

7,452

 

 

 

 

 

 

 

Profit for the period attributable to:

 

 

 

 

 

 

Equity holders of the Company

 

 

 

7,526

 

7,318

Non-controlling interests

 

 

 

51

 

-

 

 

 

 

7,577

 

7,318

Total comprehensive income for the period attributable to:

 

 

 

 

 

 

Equity holders of the Company

 

 

 

6,993

 

7,452

Non-controlling interests

 

 

 

196

 

-

 

 

 

 

7,189

 

7,452

Earnings per share (pence)

 

 

 

 

 

 

Basic

 

6

 

3.7

 

3.7

Diluted

 

6

 

3.6

 

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 2021 (unaudited)

 

 

Note

(unaudited)
As at

30 June 2021

(unaudited)
As at

31 December 2020

ASSETS

 

£000s

£000s

Non-current assets

 

 

 

Intangible assets

8

31,541

29,648

Property, plant and equipment

9

40,447

37,205

Investments in joint ventures

 

73

92

Total non-current assets

 

72,061

66,945

Current assets

 

 

 

Inventories

10

19,446

15,224

Trade and other receivables

12

21,391

20,672

Cash and cash equivalents

 

15,409

15,446

Total current assets

 

56,246

51,342

 

 

 

 

Total assets

 

128,307

118,287

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

Equity

 

 

 

Share capital and share premium

 

13,138

13,130

Share based payment reserve

 

1,425

1,913

Retained earnings

 

4,435

6,290

Non-controlling interests

 

912

716

Total equity

 

19,910

22,049

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

13

30,820

27,151

Borrowings

14

626

2,220

Future lease liabilities

17

1,241

1,254

Contingent consideration

 

3,880

-

Current income tax liabilities

13

2,863

3,048

Total current liabilities

 

39,430

33,673

Non-current liabilities

 

 

 

Future lease liabilities

17

3,079

2,846

Deferred tax liability

 

2,458

2,558

Borrowings

14

60,823

50,426

Contingent consideration

 

1,671

5,380

Post-employment benefits

 

936

1,355

Total non-current liabilities

 

68,967

62,565

Total liabilities

 

108,397

96,238

 

 

 

 

Total equity and liabilities

 

128,307

118,287

 

 

 

Condensed INTERIM consolidated statement of changes in equity

as at 30 June 2021 (unaudited)

 

Share capital and share premium

Share-based payment reserve

Retained (deficit)/ earnings

Total equity attributable to owners

Non-controlling interests

Total equity

(unaudited)

£000s

£000s

£000s

£000s

£000s

£000s

Balance at 1 January 2020

1,900

13,063

(14,052)

911

-

911

Profit for the period

-

-

7,318

7,318

-

7,318

Other comprehensive income

-

-

134

134

-

134

Total comprehensive income for the period

-

-

7,452

7,452

-

7,452

Dividends paid (note 16)

-

-

(10,126)

(10,126)

-

(10,126)

Share-based payment transactions

89

480

-

569

-

569

Total transactions with owners recognised directly in equity

89

480

(10,126)

(9,557)

-

(9,557)

Other transactions recognised directly in equity

-

-

-

-

-

-

Balance at 30 June 2020

1,989

13,543

(16,726)

(1,194)

-

(1,194)

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

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 income

-

-

(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 (note 11)

-

-

1,016

1,016

-

1,016

Balance at 30 June 2021

13,138

1,425

4,435

18,998

912

19,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed INTERIM consolidated cash flow statement

for the PERIOD ended 30 June 2021 (unaudited)

 

 

 

(unaudited)
Period ended
30 June 2021

(unaudited)
Period ended
30 June 2020

 

Note

£000s

£000s

Cash flows from operating activities

 

 

 

Cash generated from operations

18(a)

14,620

8,988

Tax paid

 

(1,109)

(676)

Net cash generated from operating activities

 

13,511

8,312

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(8,137)

(4,294)

Capitalised development costs

8

(1,529)

(1,231)

Consideration paid in relation to the purchase of LAICA S.p.A

 

(1,605)

-

Purchase of intangibles

8

(627)

(1,458)

Proceeds on sale of property, plant and equipment

9

1,750

-

Finance income

 

6

7

Net cash used in investing activities

 

(10,142)

(6,976)

 

 

 

 

Cash flows from financing activities

 

 

 

Drawdowns and new loans / (repayments) of non-current borrowings

18(b)

8,697

9,000

Finance costs paid

 

(271)

(691)

Principal elements of lease payments

 

(855)

(800)

Transaction costs related to borrowings

 

-

(480)

Dividends paid

16

(10,831)

(10,126)

Net cash used in financing activities

 

(3,260)

(3,097)

 

 

 

 

Net decrease in cash and cash equivalents

 

109

(1,761)

Cash and cash equivalents at the beginning of the period

 

15,446

13,658

Effects of foreign exchange on cash and cash equivalents

 

(146)

206

Cash and cash equivalents at the end of the period

 

15,409

12,103

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed INTERIM cONSOLIDATED financial statements

for the PERIOD ended 30 June 2021 (unaudited)

 

1. General information

Strix Group Plc ('the Company') was incorporated and registered in the Isle of Man on 12 July 2017 as a company limited by shares under the Isle of Man Companies Act 2006 with the name Steam Plc and with the registered number 014963V. The Company changed its name to Strix Group Plc on 24 July 2017. The address of its registered office is Forrest House, Ronaldsway, Isle of Man, IM9 2RG.

The Company's shares were admitted to trading on AIM, a market operated by the London Stock Exchange on 8 August 2017.

The principal activities of Strix Group Plc and its subsidiaries (together 'the Group') are the design, manufacture and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration.

These condensed interim consolidated financial statements ('interim financial statements') were approved for issue on 22 September 2021. The interim report will be available 22 September 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 period ended 31 December 2020 and 30 June 2020 respectively. These interim financial statements should be read in conjunction with the last annual consolidated financial statements as at 31 December 2020 and the comparative interim results for the period ended 30 June 2020.

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 consolidated 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 2020, which is available at www.strixplc.com.

Basis of consolidation

The consolidated 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 consolidated 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 £15.4m (YE 2020: £15.4m);

·

the availability of further funding should this be required (including the headroom of £19.0m (YE 2020: £30.0m) on the revolving credit facility and the access to the AIM market afforded by the 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, although the retained reserves of the Group show a deficit.

 

 

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, as well as the impact of the COVID pandemic in the first half of 2020. In the financial year ended 31 December 2020, 36% (2019: 45%) of the Group's revenue and 30% (2019: 32%) 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 consolidated 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 were not transferred to the Group as lessee were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were 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.

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 2020.

 

 

 

 

 

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 2021

 

(£000s)

 

Kettle controls

Water 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

 

Period ended 30 June 2020

 

(£000s)

 

Kettle controls

Water Category

Appliances

Total

Revenue

29,132

5,039

541

34,712

Cost of sales

(16,507)

(4,051)

(390)

(20,948)

Gross profit

12,625

988

151

13,764

 

 

Adjusted Results

 

Period ended 30 June 2021

 

(£000s)

 

Kettle controls

Water 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

2,423

1,258

20,460

 

Period ended 30 June 2020

 

(£000s)

 

Kettle controls

Water Category

Appliances

Total

Revenue

29,132

5,039

541

34,712

Cost of sales

(16,507)

(4,051)

(390)

(20,948)

Adjusted gross profit

12,625

988

151

13,764

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, where one of the Group's principle subsidiaries is domiciled.

 

30 June

2021

31 December 2020

 

£000s

£000s

 

 

 

Country of domicile

 

 

Intangible assets

9,309

8,888

Property, plant and equipment

2,938

2,958

Total country of domicile non-current assets

12,247

11,846

 

 

 

Foreign countries

 

 

Intangible assets

22,232

20,760

Property, plant and equipment

37,509

34,247

Total foreign non-current assets

59,741

55,007

 

 

 

Total non-current assets

71,988

66,853

 

Major customers

In the first half of 2021, there were two major customers that individually accounted for at least 10% of total revenues (2020: two customers). The revenues relating to these customers in 6 months ended 30 June 2021 were £6,624,000 and £4,598,000 (2020: £13,683,000 and £11,618,000).

Geographical

A geographical analysis of revenue from external customers has not been presented, as the OEMs to whom sales are made are primarily based in China.

5. finance costs

 

Period ended
30 June 2021

Period ended
30 June 2020

 

£000s

£000s

Letter of credit charges

43

51

Lease liability interest

51

53

Borrowing costs

592

481

Total finance costs

686

585

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 ended
30 June 2021

Period ended
30 June 2020

Earnings (£000s)

 

 

Earnings for the purpose of basic and diluted earnings per share

7,526

7,318

Number of shares (000s)

 

 

Weighted average number of shares for the purposes of basic earnings per share

206,041

198,878

Weighted average dilutive effect of conditional share awards

3,487

2,872

Weighted average number of shares for the purposes of diluted earnings per share (000s)

209,528

201,750

Earnings per ordinary share (pence)

 

 

Basic earnings per ordinary share

3.7

3.7

Diluted earnings per ordinary share

3.6

3.6

Adjusted earnings per ordinary share (pence) 1

 

 

Basic adjusted earnings per ordinary share

6.0

4.9

Diluted adjusted earnings per ordinary share

5.9

4.9

 

 The calculation of basic and diluted adjusted earnings per share is based on the following data:

 

 

Period ended
30 June 2021

Period ended
30 June 2020

 

£000s

£000s

Profit for the period

7,526

7,318

Add back:

 

 

Share-based payments

649

1,030

COVID-19 net exceptional costs²

332

456

Strategic projects

1,295

673

Reorganisation costs

2,480

358

Adjusted earnings 1

12,282

9,835

 

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 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 ended
30 June 2021

Period ended
30 June 2020

 

£000s

£000s

Kettle controls

39,407

29,132

Water Category

9,978

5,039

Appliances

5,281

541

Total revenue

54,666

34,712

 

 

 

 

For the period ended 30 June 2021

 

Development costs

Software

Intellectual Property

Intangible assets under construction

Customer relationships

Brand name

Goodwill

Total

 

£000s

£000s

£000s

£000s

£000s

£000s

£000s

£000s

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 £826,000 (H1 2020: £696,000) and administrative expenses £126,000 (H1 2020: £52,000) 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 £997,000 reclassified from pre-merger retained profits impacted by foreign exchange differences from the depreciation of the EUR currency.

 

 

 

For the period ended 30 June 2020

 

Development costs

Software

Intellectual Property

Intangible Assets under Construction

Goodwill

Total

 

£000s

£000s

£000s

£000s

£000s

£000s

At 1 January

 

 

 

 

 

 

Cost

9,837

922

488

-

384

11,631

Accumulated amortisation and impairment

(4,006)

(540)

(17)

-

-

(4,563)

Net book value

5,831

382

471

-

384

7,068

 

 

 

 

 

 

 

Period ended 30 June

 

 

 

 

 

 

Additions

1,418

27

70

564

-

2,079

Transfers in/(out)

-

23

-

1,131

-

1,154

Amortisation charges

(626)

(113)

(9)

-

-

(748)

Exchange differences

(170)

(5)

(22)

9

-

(188)

Closing net book value

6,453

314

510

1,704

384

9,365

At 30 June

 

 

 

 

 

 

Cost

11,085

967

536

1,704

384

14,676

Accumulated amortisation and impairment

(4,632)

(653)

(26)

-

-

(5,311)

Net book value

6,453

314

510

1,704

384

9,365

 

 

All amortisation charges have been treated as an expense, and allocated to cost of sales 696,000 (H1 2019: £633,000) and administrative expenses £52,000 (H1 2019: £55,000) in the condensed interim consolidated statement of comprehensive income.

There were no reversals of prior year impairments during the year. During the period, £1,131,000 of assets under construction were transferred in. 

 

 

 

 

 

 

For the period ended 30 June 2021

 

Plant & machinery

Fixtures, fittings & equipment

Motor vehicles

Production tools

Land & Buildings

Right-of-use assets

Assets under construction

Total

 

£000s

£000s

£000s

£000s

£000s

£000s

£000s

£000s

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 £2,196,000 (H1 2020: (£1,757,000)), distribution costs £46,000 (H1 2020: (£61,000)), and administrative expenses £338,000 (H1 2020: (£394,000)) in the condensed interim consolidated statement of comprehensive income.

Included in disposals during the period were assets with a net book value of £1,678,000 that were scrapped for £NIL due to the move from the old to the new manufacturing plant in China, and land and buildings with a net book value of £1,882,000 in the Group's subsidiary LAICA International Corp. disposed of in a sale and leaseback arrangement in line with the acquisition agreement for £1,750,000.

 

 

 

 

For the period ended 30 June 2020

 

Plant & machinery

Fixtures, fittings & equipment

Motor vehicles

Production tools

Land & Buildings

Right-of-use assets

Assets under construction

Total

 

£000s

£000s

£000s

£000s

£000s

£000s

£000s

£000s

At 1 January

 

 

 

 

 

 

 

 

Cost

21,924

4,126

130

13,298

1,996

5,386

8,569

55,429

Accumulated depreciation

(14,444)

(2,935)

(67)

(11,291)

(33)

(1,135)

-

(29,904)

Net book value

7,480

1,191

64

2,007

1,963

4,251

8,569

25,525

 

 

 

 

 

 

 

 

 

Period ended 30 June

 

 

 

 

 

 

 

 

Additions

1,935

111

-

571

7

203

2,787

5,614

Transfers

(36)

(43)

-

56

-

-

(1,131)

(1,154)

Disposals

-

-

-

-

-

-

-

-

Depreciation charge

(612)

(387)

(16)

(426)

(50)

(721)

-

(2,212)

Exchange differences

11

(21)

-

(7)

-

(79)

(41)

(137)

Closing net book value

8,778

851

48

2,201

1,920

3,654

10,184

27,636

 

 

 

 

 

 

 

 

 

At 30 June

 

 

 

 

 

 

 

 

Cost

23,834

4,173

130

13,918

2,003

5,509

10,184

59,751

Accumulated depreciation

(15,056)

(3,322)

(83)

(11,717)

(83)

(1,856)

-

(32,117)

Net book value

8,778

851

48

2,201

1,920

3,654

10,184

27,636

Depreciation charges are allocated to cost of sales £1,757,000, distribution costs £61,000, and administrative expenses £394,000 in the condensed interim consolidated statement of comprehensive income.

 

 

 

10. Inventories

 

30 June

2021

31 December 2020

 

£000s

£000s

Raw materials and consumables

11,397

9,154

Finished goods and goods in transit

8,049

6,070

 

19,446

15,224

The cost of inventories recognised as an expense and included in cost of sales amounted to £23,816,000 (H1 2020: £ 12,189,000 ). The charge for impaired inventories was £157,000 (H1 2020: £129,000). 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.

Subsidiary

Nature of business

Country of incorporation

% of ordinary shares held by the Company

% of ordinary shares held by the Group

 

 

 

%

%

Sula Ltd

Holding company

IOM

100

100

Strix Ltd

Manufacture and sale of products

IOM

 -

  100

Strix Guangzhou Ltd

Manufacture and sale of products

China

 -

  100

Strix (U.K.) Ltd

Group's sale and distribution centre

UK

 -

  100

Strix Hong Kong Ltd

Sale and distribution of products

Hong Kong

 -

  100

Strix (China) Ltd

Construction of manufacturing facility 

China

 -

100

HaloSource Water Purification Technology (Shanghai) Co. Ltd

Manufacturing and sales of products

China

 -

100

Strix (USA), Inc.

Research and development, sales, and distribution of products

USA

 -

100

LAICA S.p.A.

Manufacture and sales of products

Italy

 -

100

LAICA Iberia Distribution S.L.

Sale and distribution of products

Spain

 -

100

LAICA International Corp.

Sale and distribution of products

Taiwan

 -

67

Taiwan LAICA Corp.

Sale and distribution of products

Taiwan

 -

67

Foshan Yilai Life Electric Appliances Co. Limited.

Sale and distribution of products

China

 -

45

LAICA Brand House Limited

Holding and licensing of trademarks

Hong Kong

 -

45

Strix Italy S.R.L. (see below)

Merged entity

Italy

 -

-

As part of a Group restructuring that occurred during April 2021, Strix Italy S.R.L was merged into LAICA S.p.A. in a downstream merger transaction, resulting in Strix (U.K.) Limited owning 100% of the merged entity's share capital. As a result of the group restructure, all assets and liabilities of the merged entity were recognised at net book value amounts at date of the downstream merger, with goodwill recognised on acquisition of LAICA S.p.A. in October 2020 being revalued from reclassification of pre-merger profits impacted by foreign exchange differences from the depreciation of the EUR currency, in line with IFRS acquisition accounting allowable within the 12 month look-back period.

12. Trade and other receivables

 

30 June

2021

31 December 2020

 

£000s

£000s

Amounts falling due within one year:

 

 

Trade receivables

12,066

13,355

Loss allowance

(76)

(159)

Trade receivables - net

11,990

13,196

Prepayments

994

1,108

Advance purchases of commodities

2,684

2,024

Advance payments to capital expenditure suppliers

2,351

764

Other receivables

3,372

3,580

 

21,391

20,672

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

2021

31 December 2020

 

£000s

£000s

Trade payables

11,644

10,499

Current income tax liabilities

2,863

3,048

Social security and other taxes

269

316

Other liabilities

10,092

8,242

Payments in advance from customers

3,190

2,955

Accrued expenses

5,625

3,620

Consideration payable

-

1,519

 

33,683

30,199

 

The fair value of financial liabilities approximates their carrying value due to short maturities.

14. Borrowings

 

30 June

2021

31 December 2020

 

£000s

£000s

Current bank loans

626

2,220

Non-current bank loans

60,823

50,426

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 £181,000 (2020: £175,000) and £603,000 (2020: £700,000), respectively.

Term and debt repayment schedule for long-term borrowings

 

Currency

Interest rate

Maturity date

30 June 2021 carrying value (£000s)

31 December 2020 carrying value (£000s)

Revolving credit facility

GBP

LIBOR +1.50% to + 2.85%

27-May-25

61,000

50,000

Unicredit facility

EUR

EURIBOR +1.10% to + 3.60%

28-Jun-24

258

317

Banco BPM

EUR

EURIBOR +1.10% to + 3.60%

30-Nov-23

423

536

BNP Paribas

EUR

0.3115%

30-Sep-21

168

632

Banca Intesa Sanpaolo

EUR

0.2%

29-Oct-21

312

170

Banca Intesa Sanpaolo

EUR

EURIBOR 3M + 1,10%

27-Oct-21

68

142

Banca Monte dei Paschi di Siena

EUR

0.9%

1-Feb-21

-

659

BANK SINOPAC CO.LTD.

TWD

LIBOR 1Y + Spread 0,755%

29-May-27

-

275

BANK SINOPAC CO.LTD.

TWD

LIBOR 3M + Spread 0.750%

23-Jun-21

-

789

 

 

 

 

 

 

 

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 £70,000,000, of which £40,000,000 was drawn down as at 31 December 2019. 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 £80,000,000, with materially the same terms and covenants as the existing facility.

On 27 May 2020, the first facility available with Royal Bank of Scotland Plc through the addition of the Bank of China (UK) Limited increased to £60,000,000, and has continued to increase by a further £20,000,000 on 1 October 2020 by applying for a further facility with Bank of Ireland through the same. As at 30 June 2021, the total facilities available are £80,000,000 (YE 2020: £80,000,000).

The initial drawdown of £50,000,000 allowed for the refinancing of the existing revolving credit facility as well as being used to fund the acquisition of LAICA S.p.A.. Additional amounts may be drawn under the agreement for financing working capital and for general corporate purposes of the Group.

All amounts become immediately repayable and undrawn amounts cease to be available for drawdown in the event of a third party gaining control of the Company. The Company and its material subsidiaries have entered into the agreement as guarantors, guaranteeing the obligations of the borrowers under the agreement (2020: same).

Transactions costs amounting to £875,000 incurred as part of the debt financing with the new facility entered were capitalised in the prior year 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 2021, the Group has not breached any of the financial covenants contained within the agreements (2020: same)

Interest applied to the revolving credit facility is calculated as the sum of the margin and LIBOR. The margin is 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 2021, the margin applied was 2.00% (31 Dec 2020: 2.00%).

 

15. CAPITAL Commitments

 

30 June

2021

31 December 2020

 

£000s

£000s

Contracted for but not provided in the interim financial statements: Property, plant and equipment

3,222

4,307

 

Construction of new factory

The above commitments include capital expenditure of £1,702,579 (2020: £2,810,000) relating to the construction of a new factory in Zengcheng district, China.

16. Dividends

The following amounts were recognised as distributions in the period:

 

Period ended
30 June 2021

Period ended
30 June 2020

 

£000s

£000s

Final 2020 dividend of 5.25p per share (H1 2020: 5.1p)

10,831

10,126

Total dividends recognised in the period

10,831

10,126

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 7th  October 2021 out of retained earnings at 30 June 2021, but not recognised as a liability at the period end, is £5,679,000. 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

2021

31 December 2020

 

 000s

 000s

Current future lease liabilities (due within 12 months)

1,241

1,254

Non-current future lease liabilities (due in more than 12 months)

3,079

2,846

Total Future Lease Liabilities payable

4,320

4,100

 

18. Cash flow statement notes

a) Cash generated from operations

 

 

Period ended
30 June 2021

Period ended
30 June 2020

 

 

£000s

£000s

Cash flows from operating activities

 

 

 

Operating profit

 

9,150

8,112

Adjustments for:

 

 

 

Depreciation of property, plant and equipment  (note 9)

 

1,772

1,491

Depreciation of right-of-use assets  (note 9)

 

808

721

Amortisation of intangible assets (note 8)

 

952

748

Share of losses from joint ventures

 

10

-

Loss/(profit) on disposal of property, plant and equipment (note 9)

 

1,678

-

Other non-cash flow items

 

420

-

Pension contributions made

 

-

59

Share based payment transactions

 

649

678

Net exchange differences

 

(411)

(61)

 

 

15,028

11,748

Changes in working capital:

 

 

 

(Increase)/ decrease in inventories

 

(4,222)

(1,674)

(Increase)/ decrease in trade and other receivables

 

(718)

1,235

Increase / (decrease)  in trade and other payables

 

4,532

(2,321)

Cash generated from operations

 

14,620

8,988

 

b) Movement in net debt

 

 

 

Non-cash movements

 

 

At 1 January 2021

Cash flows

Currency movements

Other movements

At 30 June 2021

 

£000s

£000s

£000s

£000s

£000s

Borrowings, net of loan arrangement fees

(52,646)

(8,697)

-

(105)

(61,448)

Contingent consideration (earn-out provisions)

-

-

-

(5,551)

(5,551)

Lease Liabilities

(4,100)

855

-

(1,074)

(4,319)

Total liabilities from financing activities

(56,746)

(7,842)

-

(6,730)

(71,318)

Cash and cash equivalents

15,446

109

(146)

-

15,409

Net debt

(41,300)

(7,733)

(146)

(6,730)

(55,909)

 

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 ended
30 June 2021

Period ended
30 June 2020

 

£000s

£000s

Salaries and other short-term employment benefits

1,208

806

Post-employment benefits

84

81

Termination

-

48

Share-based payment transactions

440

820

 

1,732

1,755

There are no defined benefit schemes for key management.

20. Post balance sheet events

The Group has no post balance sheet events to disclose.

 

 

 

 

 

 

 

 

 

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