Strix Group Plc (LON:KETL), the global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, has announced a pre-close trading update for the six month period ended 30 June 2022.
Strix confirms that despite the significant and well-publicised macro headwinds, current profit after tax consensus* for the full year remains broadly in line with expectations.
While the global outlook has weakened in recent months, this is based on the year-to-date performance, an anticipated improvement in trading conditions in the balance of the year, the second half of the year has proved seasonally stronger than the first and the resilience of historical H2 performance through prior macroeconomic cycles including during the COVID-19 pandemic.
Alongside this, Strix has successfully implemented further product price increases across the full kettle controls range and water categories (the most recent was with effect from 1 May 2022).
Strix has previously benefitted from its ability to adjust its highly variable cost base and it will be implementing a further range of efficiency measures and strategic initiatives to manage costs during this period in order to minimise the impact of the challenging operating environment and ongoing cost inflation.
Kettle Safety Controls, Water and Appliance Categories
Previously, the Group has indicated it had no direct sales into Russia and any products sold into that region are typically from a Chinese based OEM which equated to total revenues of circa £3m in 2021. However, certain peripheral geographies have been adversely impacted by the ongoing conflict in the Ukraine and it is estimated that this will now represent total revenues of circa £5m – £7m across the Group for 2022.
Despite some weakness in H1, particularly Q1, the Kettle Safety Controls category has continued to perform robustly and its market leading position of 56% of the global kettle controls market by value has been maintained.
Strix’s manufacturing operations within Zengcheng district in Guangzhou were not materially affected by the evolving COVID-19 situation in China. The proactive approach to minimise potential supply chain disruption by increasing levels of finished stock means that the Group is well positioned to benefit from any improvement in consumer demand in H2 which it is monitoring closely.
Within the Appliance category, Aurora (Strix’s Instant Flow Heater technology, delivering auto-dispensed hot, boiled, and chilled filtered water at the touch of a button) is now starting to show signs of penetrating consumer markets across the world. The Aurora Hot was launched in Q4 2021 and is selling well on Amazon, while the Aurora Chilled was launched in the Q2 2022. The Aurora has recently been awarded the Quiet Mark award, which is a prestigious industry accreditation aimed at encouraging companies worldwide to prioritise noise reduction within product design and it was also awarded the honour of Housewares’ Sustainable Product of the Year.
Dual Flo (which combines Strix’s technology with LAICA’s classic Italian design, is believed to be the UK’s only combined kettle and one cup hot water dispenser with an innovative, energy saving facility) was launched in April 2022 and is selling well on Amazon under the LAICA brand. The Visione induction kettle has recently been awarded both the German Design Award 2022 and the Red Dot design award, two prestigious awards in the industry.
The Water category has made progress in line with the Group’s international growth aspirations.
In addition to key range extensions within the UK and Europe, new contracts have been secured for key distributors across Europe, Canada, USA and China which will support the growth ambition during H2 2022. Issues experienced as a result of Brexit have also been successfully overcome by utilising LAICA as the European base as well as a resumption of sales through online channels such as Amazon EU.
In addition, online market place launches of the Aqua Optima and LAICA products have been secured on platforms such as eBay, OnBuy and B&Q as Strix continues to expand its online presence.
As previously announced at the year-end, a VAT receivable of circa £4m from the completion of the new Chinese manufacturing facility has now been successfully reclaimed in the period.
Strix Group has a robust business model and remains in a strong financial position to continue to deploy capital consistent with its capital allocation priorities and invest in a compelling growth strategy which includes actively seeking opportunities that will add value across the Group through niche acquisitions or technologies.
The Group will be announcing its interim results for the six months ended 30 June 2022 on 21 September 2022.
*Current profit after tax consensus for year ended 31 December 2022 is £32.2m according to FactSet.
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