Strix Group PLC

www.strixplc.com
Ticker: KETL Exchange: AIM

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.

Latest Reports

Signs of recovery now apparent

Published: 23rd July 2020

Today, Strix has published its H1 20 pre-close update (interims due in Sept). Against a backdrop of global disruption caused by COVID-19, Strix’s H1 performance is said to be in line with expectations. Net sales down 21% YoY, with a much smaller impact on net profits on the back of strong cost management. Encouragingly, there are now signs of a bounce-back in H2 with a solid performance for June and a strong order book for July and August. FY profit expectations are largely intact, which the market should respond well to.

Current share levels provide an attractively rated entry point. Valuation multiples are 12.9x PER 19, and 13.3x PER20. Strix has shown commitment to its dividend, and the yield at the current price is an attractive 4%. We estimate that fair value for the shares lies in the 220p-240p share price range.

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CEO Interview - Signs of recovery now apparent

Published: 23rd July 2020

Mark Bartlett, CEO of Strix plc, discussess the company's trading update after a tough four months due to the COVID-19 pandemic.  Despite these headwinds, this experienced management team have minimised the hit to the bottom line, and are now seeing strong orders coming through, giving confidence to a recovery in the second half.

 

Reassuring AGM update, still attractively valued

Published: 1st June 2020

Strix 2020 AGM trading update: Strix last week issued a reassuring statement. ‘Strix has continued to make a solid start to 2020, given the global macroeconomic disruption caused by COVID-19…We have successfully implemented a range of efficiency measures and strategic initiatives to limit the impact on the FY forecast and continue to monitor consumer demand carefully as lockdown restrictions are eased’ CEO, Mark Bartlett.

Accordingly, we leave our FY 20/21 P&L forecasts unchanged. As a reminder, Strix’s final dividend will be paid shortly (3 June 2020). The Company’s dividend intention is to increase the dividend in line with future underlying earnings, from a 2019 base of 7.7p. This underlines the income attractions of this stock to investors, at a time when UK plc has been widely cutting dividend in response to COVID19 pressures.

Other important news: The new factory is on budget and set to be fully operational by Aug 2021 as planned. Strix has also announced a refinancing of Group debt facilities with RBS and Bank of China, for the first time, providing a £60m RCF with improved financial flexibility. Elsewhere, Strix remains on target to release 14 new products this year, mainly in H2, across their appliance and water categories, as well as the core kettle controls business.

The Strix share price has now rallied 60% from its March lows (a time of widespread market anxiety regarding the emerging pandemic). Strix has clearly reassured investors of its defensive qualities and remains a unique strategic asset on AIM, with industry leading margins and many organic growth initiatives underway.

Current levels provide an attractively rated entry point. Valuation multiples are 13.1x PER, 10.7x EV/EBITDA. The dividend yield at the current price is a compelling 4%. We estimate that fair value for the shares lies in the 220p-240p price range.

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Solid FY19 results ahead of expectations & COVID 19 resilience

Published: 19th March 2020
Yesterday Strix announced strong results for FY19, while also demonstrating resilience and managing the impact on its business from COVID19. Strix has delivered £36.9m EBITDA, slightly ahead of our expectations. Total dividends of 7.7p have been announced, which is 10% growth year-on-year (yoy), offering a 6% yield, nearly 2x covered.   
Net debt of £26.3m is at multi-year lows, with continued strong cash generation funding both growth capex and new product development. Debt now sits at a modest 0.7x ND/EBITDA ratio. 
Regarding COVID19, "The impact on Strix has thus far been limited … Strix’s products have historically had limited correlation with short term consumer confidence … our profitability model strategically targets the second half of 2020’. Manufacturing in China is again at 88% capacity and all of the top 20 OEM customers are back in production.  
Strix is the leading player in the global kettle controls market. This is a resilient market, which grew at c. 3% in 2019. The company today highlights stable market share in 2019 across territories, with some market share gain in China. 
In addition, Strix is seeing healthy growth in Water/Appliances, with plans for a launch programme of over a dozen new products across all categories in 2020. Strix confirms that the new, enlarged manufacturing facility is well on track, and where completion is expected in August 2021.
The Strix share price has fallen by more than a third in 2020. Yet, for those investors with the patience to ride out current macro headwinds, Strix is a unique strategic asset listed on the UK market, with industry leading margins and many growth initiatives underway.
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Robust FY19 update, still attractively valued

Published: 23rd January 2020

Strix is a unique strategic asset on the UK market, with industry leading margins and many growth initiatives underway.  It screens well for investors with a ‘sustainability’ mandate, given its alignment to health products and improved filtration.

An attractive investment case. The share price has rallied by c 15% in recent months. However, in our view, this is still an attractively rated entry point to the shares. Valuation multiples are undemanding at 13x PER, 9.7x EV/EBITDA. The dividend yield at the current price is a compelling 4%. We estimate that fair value for the shares lies in the 220p-240p share price range.

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Interim results discussion September 2019

Published: 18th September 2019
Mark Bartlett, CEO, and Raudres Wong, CFO, discuss the ongoing opportunities in the Water Category and New Product Development, while reflecting on the continued successes in kettle controls.

Solid H1 results, promising outlook

Published: 18th September 2019
Strix H1 19 results published today: ‘The Group has delivered a solid H1 performance and is trading in line with full year market expectations’. Accordingly, we leave our FY 19/20 forecasts unchanged. Reassuringly, Strix reconfirms at this stage its intention to pay total dividends of 7.7p per share for FY 19, +10% YoY. This should underline the income attractions of this stock to investors. 

CEO Mark Bartlett highlights in his update the operating progress achieved by the Group in H1 together with comments on stable market share as the leading player in the global kettle controls market. This is a market still growing at c. 2% pa, in spite of well-flagged macro headwinds. 

Re operating momentum in 2019, we signal the appointment of a CCO (Chief Commercial Officer) to increase focus on new product innovation plus the new, enlarged manufacturing facility in China, where construction is due to start imminently, with expected completion in Q1 2021. Agreement has also been reached for the recently acquired Astrea product to be launched globally under the Philips brand. Taken together, these initiatives highlight the scope for future value creation at Strix and the forward planning of management.  

Time to revisit the Strix investment case. The shares have been treading water in recent months, in part reflecting the sell-down of a major institutional shareholding. In our view, this appears an attractive entry point to the shares. Valuation multiples are undemanding at 11x PER, 9.6x EV/EBITDA. The dividend yield at the current price is a compelling 4.7%. We estimate fair value for the shares in the 220p-240p range. 

Strix is a unique strategic asset on the UK stockmarket, with industry leading margins and a number of growth initiatives.  It also screens well for investors with a ‘sustainability’ mandate, with a focus on health products and improved filtration. 

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Full year results interview March 2019

Published: 25th March 2019
The management of Strix Group plc review their full year results: Mark Bartlett, CEO, comments on their continued growth in both kettle controls and Aqua Optima, whilst Raudres Wong, CFO, discusses the Group's excellent cash generation and investment in their new factory facility in Chna. 
 

Securing Future Expansion

Published: 21st March 2019
Strix – the world’s largest kettle safety controls supplier – released preliminary FY2018 results in line with our own, and market, expectations.  Expansion plans, including the new Chinese factory and growth outside kettle controls, notably Aqua Optima, appear on track.  In 2019, dividends are still planned to increase by 10.0% to 7.7p per share, which reflects management confidence.

Strix’s 2018 results reported a 2.7% sales increase (+4.5% constant currency), a 3.5% gain in adjusted EBITDA, 3.2% higher pre-tax profit and a full year 7.0p per share dividend.  Going forward, dividends are planned to rise in line with underlying earnings growth with a useful 10.0% increase to 7.7p committed to for 2019.  Net debt fell by £18m and closed the year at £27.5m, consistent with the company’s 22nd January 2019 trading update, and was relatively modest at only around 0.8x last year’s EBITDA.

The 2018 results augur well for 2019 about which the company already expressed confidence.  Importantly, volumes remain strong having increased by 7.9% last year and, on a constant currency basis, sales growth was faster than headline at 4.5%.  Strix maintained 38% share of the global kettle controls market while making some important gains in both the regulated (notably North America) and less regulated markets (where Africa and South East Asia performed well). China should return to growth this year.

Strix completed its £1m acquisition of certain HaloSource assets on 7th March 2019.  These included the HaloPure division and the Astrea product.  The company reiterates the benefits of some key technologies and research & development skills in the water filtration market. The HaloSource assets are expected to support Aqua Optima’s overall growth as well as entrenching the group’s important USA foothold.

In our view, the investment case for Strix remains positive.  The company aligns itself to increased demand for healthy products through the association of kettles with tea and pure water with hydration.  Furthermore, the benefits of strong finances tend to be confirmed by its ability to acquire well strategically – as in the case of HaloSource – while its core business benefits from a rigorous approach to IP protection.

Strix’s key financials are summarised in the table below.  Based on yesterday’s close the shares continue to trade on a single digit EV/EBITDA multiple while boasting an undemanding 11.6x P/E ratio and a very generous 4.6% prospective dividend yield. 

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Well positioned for further growth in 2019

Published: 23rd January 2019
Strix’s pre-close trading update, which confirmed market expectations for its 2018 earnings, included a number of other positives: robust free cash flow, sustained market leadership, brisk 7% core kettle safety category growth, an on track planned factory relocation and reconfirmation of ongoing vigorous IP protection.  

In our view, Strix remains well placed for further progress in 2019 whilst valuation remains relatively undemanding. We regard Strix shares as attractively priced, trading at single digit prospective EV/EBITDA (pre any IFRS16 impact) and P/E ratios, both of which seem too low.  A 7.0p 2018 intended dividend implies an attractive 4.9% trailing yield.  
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Protecting shareholder value

Published: 13th December 2018
Strix announced three important updates in relation to its IP and patent protection in an RNS yesterday.  This announcement is important both for the quality of the company’s growth and for the valuation placed on the company’s shares.  As a result, we view it positively.

Strix’s ability to deliver organic sales volume growth from its core kettle safety devices business and closely related extensions into new products, remain central to the company’s investment case.  However, the quality of that growth and its implications for valuation require vigorous IP and patent protection.

Strix announced in a 12th December 2018 RNS that it has again successfully defended key patents in China.  These announcements covered three actions. Our overall view is that the Strix’s organic growth outlook remains positive. There is clear demand for its high specification products and substantial headroom for growth.  A vigorous approach to IP and patent protection should help sustain its leading 38% market share in kettle safety devices. For valuation, these kinds of announcements are important. After the recent global stock market weakness, Strix currently trades on a 9.6x 2018 P/E (based on our forecasts) and yields 5.2%, both of which look attractive.

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Strix at the Equity Development investor forum September 2018

Published: 3rd October 2018
CEO of Strix Group, Mark Bartlett discusses the businesses progress one year into its listing and how its global domination of the kettle safety control market, coupled with the growth opportunities in Hot Water on Demand, and Aqua Optima, are driving the business forward.

Strix plc September 2018 interim results interview

Published: 19th September 2018
Mark Barlett, CEO and Raudres Wong, CFO, discuss how the business has successfully maintained its global market share in kettle safety controls, while funding growth and new opportunities in Aqua Optima and Hot Water on Demand segments. 

 

Interims Confirm Growth Optimism

Published: 18th September 2018
Strix announced interim results this morning.  Net revenue advanced by 1.5% to £42.9m and adjusted EBITDA by a faster 4.3% as gross and EBITDA margins both expanded: to 37.9% (37.2%) and 34.5% (33.6%) respectively.  Pre-tax profit to fall by 1.9% to £11.0m but the cash position remains strong.  Net debt fell by £8.0m to £37.9m as net cash from operations was positive by £15.2m: a 97% conversion rate.

Kettle controls revenue was slightly lower in the half year at 1.9%. Global category volume was strong at 6% with China returning to growth and recovering by a similar amount.  Despite global category growth, Strix maintained a 38% world market share in kettle safety controls. Volumes advanced by 7.6% to 36.8m units in the period. In the USA, growth was pleasingly strong at 20%. The new U9 series of controls continued to win new business.  It also drove growth in the less regulated and China market segments.

Aqua Optima nearly doubled in size in the first half (+88%) and was close to 9% of group revenue.  Its reach into an additional 2,500 outlets augurs well for future growth and we look forward to seeing the impact of its launch in China in the next six months.

We continue to regard the US as an important growth story across both kettle controls and the hot water on demand category. Not only is there substantial per capita volume increase in consumption in tea, but there is also a significant opportunity for meaningful growth in single-serve coffee, illustrated on 30th August when Strix announced a coffee collaboration with a leading US consumer products company.

Strix remains well placed to match market expectations for the full year and should enjoy sustained organic sales growth in our view thereafter.  Moreover, its FY2018 12.0x P/E ratio and 4.2% dividend yields appear undemanding.  In our view a 200p fair value – which would imply a 14.3x P/E and a 3.5% - seems realistic as further growth opportunities continue to reveal themselves, as well as offering more than 20% upside.  

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An Introduction to Strix Plc, analyst Chris Wickham

Published: 31st July 2018
Following their IPO twelve months ago Chris Wickham discusses the themes he explores in his initiation note. These include opportunities for growth in the US as well as new product development initiatives. 

Steaming ahead

Published: 17th July 2018
A combination of steady top line expansion, operating margins fully supported by technological excellence and unique product experience, all support the case for Strix – the world’s largest supplier of kettle controls – consistently to deliver profit growth to shareholders.  Despite strong cash conversion, a circa 38% global market share and high growth visibility, the valuation looks undemanding.

Strix kettle safety controls should deliver steady sales growth for some time in our view.  With a clearly articulated market structure, broken down into Regulated, Less Regulated and China, the company demonstrates an ability to perform well at the premium, arguably most demanding, end of the spectrum. Its market share in Regulated markets is an impressive 61%, bolstered by a commitment to technological excellence.  Kettle safety controls represent around 90% of Strix’s sales revenue.

Strix's latest trading update, which refers to the first half of 2018, was released today.  The company confirms that it is on-track to meet current market expectations with very strong cash conversion likely to be achieved.  Key revenue growth highlights included North America and the success of the company's U9 series of controls.  Among new products Aqua Otima performed well and achieved c.20% market share.  The company continues to protect its IP rigorously.  Strix cited a successful infringement claim in China and that it effected the removal of a number of webpages from Amazon's European platform.  

Based on our forecasts the 2019 P/E ratio is just 11x. As investors become more aware of the group’s strengths and growth, it would be logical for that rating to increase accordingly.  

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Encouraging H1 19 update and FY on track

Published: 17th July 2019
Strix H1 trading update just published remains inline with market expectations. Accordingly, we leave our FY 19/20 forecasts unchanged. Reassuringly, Strix reconfirms at this stage its intention to pay total dividends of 7.7p per share for FY 19, +10% YoY. This should underline the income attractions of this stock to investors. 

We think it is time to revisit the Strix investment case. The shares have been treading water through Q2 ‘19, in part reflecting the sell-down of a major institutional shareholding. In our view, this appears a strong and attractive entry point to the shares, with additional confidence on the back of the trading update. Valuation multiples are undemanding at 11x PER, 9.8x EV/EBITDA. The dividend yield at the current price is a compelling 5%. We estimate fair value for the shares in the 220p-240p share price range. 

Strix is a unique strategic asset on the UK stockmarket, with industry leading margins and a number of interesting growth initiatives underway.  It also screens well for investors with a ‘sustainability’ mandate, given its alignment to health products and improved filtration. 
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