REG - Strix Group PLC - Interim Results
21/09/2023 07:00
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RNS Number : 1382N Strix Group PLC 21 September 2023
21 September 2023
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of MAR
Strix Group Plc
("Strix", the "Group" or the "Company")
Interim results for the six months ended 30 June 2023
Financial Summary(1)
H1 2023 H1 2022 Change (23 - 22)
£m £m %(4)
Revenue 65.2 50.7 +28.6%
Gross profit 23.9 19.5 +22.6%
EBITDA(2) 15.6 15.9 -1.9%
Operating profit 11.8 12.9 -8.5%
Profit before tax 6.8 11.6 -41.4%
Profit after tax 5.7 11.6 -50.9%
Net debt(3) 93.1 61.3 +51.9%
Net cash generated from operating activities 13.1 9.9 +32.3%
Basic earnings per share (pence) 2.6 5.6 -53.6%
Diluted earnings per share (pence) 2.6 5.5 -52.7%
Interim dividend per share (pence) 0.9 2.75 -67.3%
1. Adjusted results exclude adjusting items, which include
share-based payment transactions, COVID-19 related costs, and 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 and providing post-combination
services.
4. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
Financial Highlights
• The Group reported revenue of £65.2m, an increase of 28.6% versus the same
period in prior year mainly as a result of the first time inclusion of Billi
revenues of £21.5m which helped to fully offset a reduction in organic sales,
particularly in kettle controls.
Adjusted EBITDA was £15.6m, a decrease of 1.9% versus the same period in
• prior year.
• Adjusted PAT was £5.7m, a decrease of 50.9% versus the same period in prior
year (£11.9m) mainly attributable to interest and finance fee costs due to an
increase in the net debt to fund the Billi acquisition and a higher interest
rates environment.
• Net debt increased to £93.1m (FY 2022: £87.4m) due to the strategic
acquisition of Billi. This represents a net debt/adjusted EBITDA ratio
(calculated on a trailing twelve-month basis) of 2.66x.
• Basic earnings per share and adjusted diluted earnings per share were 2.6p
(2022: 5.6p) and 2.6p (2021: 5.5p) respectively.
Given the increase in net debt due to the strategic acquisition of Billi, and
• with the high interest rates environment, the Board continues to take
precautions to balance the capital allocation priorities and as a result the
Board is declaring an interim dividend of 0.9p per share (HY 2022: 2.75p).
Strategic Highlights
• Transformational acquisition of Billi which has a successful history of
growth, with double digit revenue CAGR over the past five years and is highly
cash generative, delivering historic cash conversion of c.88%.
Group Strategic Business Objectives ("SBO's") to be delivered by the end of FY
2026.
•
New divisional reporting structure to better position the Group in delivering
on its New SBO's:
· Group revenue from £107m to £206m and Group gross profit from £42m
to £80m by end of 2026.
· Kettle controls - profitably grow Control revenue from £68m to £88m
by 2026, delivering a gross profit in excess of 40% through the introduction
of innovative new products focused on sustainability, safety and convenience.
· Billi - leverage the new product development and expand the
geographical distribution in both residential and commercial markets to
deliver £58m of revenue with a gross profit in excess of 45% by 2026.
· Consumer Goods - Grow consumer goods business beyond market growth
through innovation, world class sourcing and commercial excellence, delivering
revenue of £60m and gross profit in excess of 30%.
Operational Highlights
• Acquisition of Billi continues to be successfully integrated in line with plan
to achieve the identified operational benefits, as the business opens up new
sales channels for Strix.
• Direct labour efficiency improved by 3.5% in H1 2023 against H1 2022 and
indirect labour efficiency improved by 11% via various lean approaches.
Quality performance of customer returns improved by 19% and product built on
• the automation lines remained at zero return.
Surveillance audits to ISO 9001:2015, ISO 14001:2015, & ISO 45001:2018
have been passed with outstanding rating for all the areas.
•
Added a new line in the Vicenza, Italy facility to deliver an anti-bacterial
filter, replacing a third party sourced product and completing 100%
in-sourcing of all water filter products in the range.
•
Pipeline of new product launches through 2023 including an integrated tap in
Billi, the digital water filter kettle and Aurora coffee appliance.
Perfect Pour jug has been awarded the Highly Commended accolade in the
Sustainability category by Housewares Magazine.
•
•
Mark Bartlett, Chief Executive Officer of Strix Group plc, said:
"The continued macro headwinds have resulted in a reduction in demand in
kettle controls in the key export regulated markets of UK and Germany during
H1 and a slower than anticipated recovery. Whilst recent order rates are
tracking in a positive direction, we now anticipate the path to a return of
normalised growth to take longer and for there to be a decrease in the short
term revenues within this category. The Group's second half of the year is
always stronger than the first and weighted to Q4 driven by the replenishment
of stock and normal seasonal uplift, the performance required in Q4 to achieve
the full year outcome is lower than in 2022 and 2021.
"Given the increase in net debt due to the strategic acquisition of Billi, and
with the high interest rates environment, the Board continues to take
precautions to balance the capital allocation priorities. To be prudent, the
Board has decided to prioritise the reduction of debt with a clear plan to net
debt / EBITDA to below 1.5x over the medium term.
"Despite the short term headwinds, Strix is also announcing Strategic Business
Objectives which will deliver group revenue of £206m and gross profit of
£80m by the end of FY 2026 reflecting the attractiveness of the underlying
markets that it operates within."
CEO's report:
Financial performance
The Group reported revenue of £65.2m, an increase of 28.6% versus the same
period in prior year mainly as a result of the first time inclusion of Billi
revenues which helped to fully offset a reduction in organic sales,
particularly with the kettle controls category.
Adjusted gross profit increased by 22.6% to £23.9m (H1 2022: £19.5m), in
line with increased revenues as described above. This increase is mainly
attributable to the Billi inclusion of £10.0m, and also slightly from the
water category, however partially offset by a decrease in adjusted gross
profits for kettle controls of £4.3m (28.6% decrease) and marginally by
appliances category.
Adjusted gross profit margin in H1 2023 was 36.7% (H1 2022: 38.4%), showing a
margin dilution of 1.7% compared to same period last year. This dilution is
mainly due to the under-absorption of fixed manufacturing overhead costs as
production volume has reduced to align to the softening of sales volume.
Costs optimisation evaluation and measures are in place to ensure skilled
labour is maintained for medium term recovery, while streamlining non-critical
spending to adopt a balanced approach to manage this softening in the H1
period. This decline was partially offset by the addition of Billi which made
a positive contribution to margins, decreases in commodity prices, and a
positive impact from the LAICA sub-group consumer goods.
Adjusted profit before tax was £6.8m (H1 2022: £11.6m), a decrease of £4.8m
(41.4% decrease) compared to the same period last year. This is attributable
mainly to interest and finance fee costs which had an adverse variance in the
current H1 period of £3.7m compared to the same period last year due to an
increase in the net debt to fund the Billi acquisition and a higher interest
rates environment.
Adjusted profit after tax was £5.7m (H1 2022: £11.6m), a £5.9m adverse
variance compared to the same period last year. Tax expense for the current
period was £1.1m, primarily relating to the tax liability from Billi of
£0.8m recognised in the Group being the first year of acquisition. The
balance of £0.3m relates to tax expense in the organic business.
As anticipated, the Group's net debt increased to £93.1m (FY 2022: £87.4m).
This represents a net debt/adjusted EBITDA ratio (calculated on a trailing
twelve-month basis) of 2.66x which complies with the Company's debt covenant
threshold of 2.75 times.
Given the increase in net debt due to the strategic acquisition of Billi, and
with the high interest rates environment, the Board continues to take
precautions to balance the capital allocation priorities. To be prudent, the
Board has decided to prioritise the reduction of debt for the rest of the
current year with a clear plan to reduce net debt / EBITDA to below 1.5x over
the medium term. The Board is therefore declaring an interim dividend in FY
2023 of 0.9p per share (HY 2022: 2.75p).
New divisional reporting structure
To better position the Group in delivering on its new Strategic Business
Objectives, Strix has established a new divisional reporting structure to
capitalise on attractive growth opportunities in its end markets during this
next phase of growth.
Three divisions have been identified from a product perspective, namely:
kettle controls, premium filtration systems (primarily Billi products), and
consumer goods (made up of water products and appliances).
Kettle control category
The kettle controls revenue decreased by 17.2% to £28.9m (H1 2022: £34.8m).
In line with international government sanctions, Strix's key global brands
remain exited from Russia (a significant market) and Strix also stopped
trading directly with Russian brands. It is worth noting that excluding the
affected regions, Strix's market share in Kettle Controls remained at c. 56%.
The kettle market has experienced continued macro headwinds which have
resulted in a reduction in demand in the key export regulated markets of UK
and Germany during H1 and a slower than anticipated recovery.
Whilst recent order rates are tracking in a positive direction, evident from
an increase in sales in Q2, this remains in smaller quantities than expected
as customers continue to manage their cash balances prudently in key regulated
export markets. Strix now anticipates the path to a return of normalised
growth to take longer and for there to be a decrease in the short term
revenues within this category.
Strix has also continued to focus product development on opportunities and
design improvements in a sustainable way to reduce the overall manufactured
product footprint that will further strengthen Strix's position and support
its market share aspirations.
Overview of strategic rationale of the acquisition of Billi
Billi has a successful history of growth, with double digit revenue CAGR over
the past five years and is highly cash generative, delivering cash conversion
of c.88%.
The acquisition materially changes the earnings profile of the Group. It adds
well developed and premium products in the high growth and strategically
important hot tap market and increases Strix's position and portfolio of water
dispenser systems. The Board expects Strix's existing technology, resource and
expertise can be used to further enhance Billi's new product development
roadmap.
Efficiencies were identified across Billi's product lifecycle and will be
enhanced utilising Strix's Chinese operation to improve procurement,
insourcing of certain key parts, and consolidation of the marketing group.
There are also opportunities for further organic growth. These include
residential sales, new product development particularly in sparkling,
internationalising Billi's revenue stream through Strix's global footprint,
cross selling Strix products into commercial applications and growing
aftermarket sales.
Progress since completion of Billi
The acquisition of Billi continues to be successfully integrated in line with
plan to achieve the identified operational benefits, as the business opened up
new sales channels for Strix.
New flagship OmniOne product (offering boiling, chilled and sparkling water
for commercial and residential applications) was successfully launched in Q2.
This will be a major opportunity for all markets and an order has already been
secured and fulfilled from one of Australia's largest listed companies.
Strong progress has been made at Billi UK to exit the Transitional Services
Agreement ("TSA") on time on 31 August 2023. Australian TSA with Culligan
exited on time and without incident on 31 May 2023. Good progress has also
been made with new sites identified as Strix procures smaller storage
locations in New South Wales, Western Australia and South Australia and
the New Showroom in London (Farringdon) has been opened. The head office in
Wolverhampton has already been established and Strix continues to integrate
Strix and Billi employees during Q4.
Distributors in Singapore, Hong Kong and China have been re-signed and new
distributors in the UAE and Qatar have been secured.
Consumer goods division
Overall, the consumer goods division reported a decline in revenue of 6.3% to
£14.9m in H1 2023 (H1 2022: £15.9m), driven primarily by softening of the
appliances category market, however partially offset by improved water
category revenues.
Despite a decline in appliance sales, Strix's Aqua Optima brand showed
resilience as the Group continues to explore opportunities through
geographical expansion, with continued expansion across Europe and North
America, Strix/LAICA cross selling, and new innovative product launches.
Other notable achievements included:-
· Aqua Optima Aurora Hot and Cold Water Dispenser has been granted the
Highly Commended award in the Best Smart Innovation - Small Domestic
Appliances category at the prestigious Innovative Electrical Retailing (IER)
Awards.
· Perfect Pour jug has been awarded the Highly Commended accolade in
the Sustainability category by Housewares Magazine. This prestigious
recognition is a testament to our dedication to promoting sustainable living
and reducing single-use plastic waste.
· Successful launch of Strix innovations under the LAICA brand with the
launch of the Dual Flo range. This newly launched product utilises superior,
energy efficient technology and is believed to be the only combined kettle and
one cup hot water dispenser.
· On boarded three new online market place launches as the Group
continues to expand its online presence which has seen the number of
marketplace shipments across the Group double in H1 2023.
· LAICA Water Filter Variable Temperature Kettle and Ultrasonic
Humidifier all successfully launched.
Overall, the water category reported a growth in revenue of 2.3% to £10.5m in
H1 2023 (H1 2022: £10.3m).
Both Aqua Optima & LAICA water brands have seen growth year on year due to
initial geographical expansion via Amazon sales outperforming the private
label business.
Strix now manufactures the majority of its filters in house in two locations
freeing the Group from 3(rd) party risk, whilst allowing a new level of
flexibility to offer our customers.
Key growth initiatives for the category will be geographic expansion (cross
selling existing LAICA & Aqua Optima products into new territories),
coffee filtration expertise and using private label water supply as a way to
open doors into large retailers for other categories.
Strategic Business Objectives (SBOs)
Alongside the interim results, Strix is announcing Strategic Business
Objectives ("SBO's") to be delivered by the end of FY 2026.
In summary:-
· Group revenue from £107m to £206m and Group gross profit from £42m
to £80m by end of FY 2026.
· Kettle controls - profitably grow Control revenue from £68m to £88m
by 2026, delivering a gross profit in excess of 40% through the introduction
of innovative new products focused on sustainability, safety and convenience.
· Billi - leverage the new product development and expand the
geographical distribution in both residential and commercial markets to
deliver £58m of revenue with a gross profit in excess of 45% by 2026.
· Consumer Goods - grow consumer goods business beyond market growth
through innovation, world class sourcing and commercial excellence, delivering
revenue of £60m and gross profit in excess of 30%.
· Geographical Expansion - Become a true global presence with a market
leading position in our chosen fields of SDA, Water Filtration and
multi-functional hot tap solutions - EMEA, APAC, NAM & LATAM.
· Talent and Skills - Right People, Right place, Right Skills,
motivated and engaged to deliver strategic objectives.
· Technology - Develop the leading, innovative technology in the fields
of water heating, safety control systems and water treatment of drinking water
to support the business growth.
The Strix management will host a capital markets day after the interim results
analyst presentation to provide more context.
Barriers to entry and defence of intellectual property
Strix constantly assesses the risks posed by competitive threats which drives
its determination to constantly evolve its innovative technologies in a
sustainable way by investing in its portfolio of intellectual property to
protect its new products.
The Group actively monitors the markets in which it operates for violation of
its intellectual property rights. Strix has unique relationships with its
brands, OEMs and retailers and provides its support across the value chain and
throughout the product lifecycle, including product design and advice on
specification and manufacturing solutions. These value-added services and
existing strong relationships ensure brands, OEMs and retailers continue to
rely on Strix's components and support.
Strix remains committed to consumer safety and continues to prompt regulatory
enforcement authorities to remove unsafe and poor quality products from its
major markets. Nine such actions were undertaken in 2021 resulting in product
recalls and withdrawal of kettles from Bulgaria. Defence of intellectual
property and regulatory enforcement remain core activities of its business and
there have now been 66 in total since 2017 until the end of 2021, with 4
further regulatory and 3 intellectual property actions conducted in 2022.
Sustainability
Strix core products are associated with the consumption of critical resources,
primarily electricity and water, hence Strix's drive for continual improvement
has aligned it with a sustainability led agenda. Recent years have seen an
increase in the emphasis and broadening of the scope of its sustainability
agenda. This was highlighted by the adoption of a wide range of KPIs and
associated targets in 2021.
One of the most challenging and differentiating goals was to achieve Scope
1&2 net zero by 2023. Key elements have been put in place with long term
renewable power contracts for all key facilities and head office along with
investment in solar capacity. Indeed, Strix now expects its own renewable
sources to generate around 10% of the Group's total energy requirements. As a
consequence, the Group started 2023 in-line with its net zero agenda. This is
increasingly important as its customers look to assess their own emissions
footprint, of which Strix forms part of their Scope 3 inventory. Strix's
position as a leader in low emissions therefore offers a potential commercial
advantage over its competition. Efforts are being expanded into analysing its
own Scope 3 inventory in 2023 to fully embrace its extended emissions chain.
This leads to additional constructive conversation with suppliers and
customers including re-assessment of operational and supply chain practices.
The Group's sustainability agenda is sympathetic to changing consumer trends
and hence is key for driving the roadmap and pace of new product development.
The Group's sustainability strategy and adopted KPIs are generating greater
emphasis and efforts on a broad range of aspects. Employee training has been a
focus with significant increase in training hours assisted by adoption of a
more structured approach, including Kallidus e-learning system and a new
training management structure in China. Health & Safety continues to be a
top priority with the three year average trend continuing in a positive
direction. The Company values its employees and their contribution and looks
to develop their wellbeing reflected in improved facilities offered by the new
Chinese facility, whilst the West has seen changes in the working week, which
has also increased holiday entitlement, and the introduction of two charity
days a year.
Strix's sustainability agenda for 2023 remains high on the agenda as it
delivers on its Scope 1&2 targets, analyses its Scope 3 emissions and
continues to focus on its other KPIs. The pace and delivery of these goals
reflects the strong employee ethos and commitment to the agenda.
Dividend policy
Given the increase in net debt due to the strategic acquisition of Billi, and
with the high interest rates environment, the Board continues to take
precautions to balance the capital allocation priorities. To be prudent, the
Board has decided to prioritise the reduction of debt for the rest of the
current year.
Therefore, the Board is declaring an interim dividend in FY 2023 of 0.9p per
share (HY 2022: 2.75p).
The interim dividend will be paid on 29 December 2023 to shareholders on the
register on 17 November 2023 and the shares will trade ex-dividend from 16
November 2023.
Going forward the Group will implement a payout ratio of 30% of
adjusted profit after tax which will enable sustainable returns to be
delivered to our shareholders. Over the medium term, Strix has a clear plan to
reduce net debt / EBITDA to below 1.5x and will then have the ability to
return excess capital to shareholders subject to their future requirements and
the prevailing macro environment.
Financial Position
Strix is focused on its highly cash generative operating model and the
management team will prioritise integration and unlocking anticipated revenue
and cost synergies following the acquisition of Billi.
Over the past few years, Strix has made significant investments in
acquisitions, a new factory and working capital. A primary driver of the
increased adjusting items (formerly exceptional items) is due to the number of
acquisitions and one-off costs relating to capital expenditures.
There will be no further M&A activity or investment into new factory
builds, with significantly reduced capex and working capital over the medium
term. Capital allocation decisions will prioritise debt reduction and free
cash flow generation with a clear plan to net debt / EBITDA to below 1.5x over
the medium term.
Outlook
In light of the continued macro headwinds which have resulted in a reduction
in demand in kettle controls in the key export regulated markets of UK and
Germany during H1 and a slower than anticipated recovery, the Group now
anticipates Q3 adjusted profit after tax of £6.5m and for the full year to be
in excess of £21m.
Whilst recent order rates are tracking in a positive direction, evident from
an increase in sales in Q2 this remains in smaller quantities than expected as
customers continue to manage their cash balances prudently in key regulated
export markets. Strix now anticipates the path to a return of normalised
growth to take longer and for there to be a decrease in the short term
revenues within this category.
The Group's second half of the year is always stronger than the first and
weighted to Q4 driven by the replenishment of stock and normal seasonal
uplift, the performance required in Q4 to achieve the full year outcome is
lower than in 2022 and 2021.
Despite the short term headwinds, Strix is also announcing Strategic Business
Objectives which in summary will deliver group revenue of £206m and gross
profit of £80m by the end of FY 2026 reflecting the attractiveness of the
underlying markets that it operates within.
Alongside this, Strix continues to implement a range of strategic initiatives
to minimise the impact of the headwinds it is facing, which includes an
internal streamlining programme and a focus on the reduction of inventory in
order to maximise cash generation for the Group.
Also, the successful integration of Billi will propel Strix into a new growth
phase, further diversifying into these new areas whilst continuing to focus on
the core Kettle Controls business with strong potential for greater top line
growth and improved margins going forward.
Chief Financial Officer's Review
Adjusted results(1) Reported results
H1 2023 H1 2022 Change H1 2023 H1 2022 Change
(23 - 22)
(23 - 22)
£m £m %(4) £m £m %(4)
Revenue 65.2 50.7 +28.6% 65.2 50.7 +28.6%
Gross profit 23.9 19.5 +22.6% 23.9 19.0 +25.8%
EBITDA(2) 15.6 15.9 -1.9% 13.7 12.2 +12.3%
Operating profit 11.8 12.9 -8.5% 9.9 9.1 +8.8%
Profit before tax 6.8 11.6 -41.4% 4.9 7.9 -38.0%
Profit after tax 5.7 11.6 -50.9% 3.8 7.8 -51.3%
Net debt(3) 93.1 61.3 +51.9% 93.1 61.3 +51.9%
Net cash generated from operating activities 13.1 9.9 +32.3% 13.1 9.9 +32.3%
Basic earnings per share (pence) 2.6 5.6 -53.6% 1.8 3.8 -52.6%
Diluted earnings per share (pence) 2.6 5.5 -52.7% 1.7 3.7 -54.1%
Interim dividend per share (pence) 0.9 2.75 -67.3% 0.9 2.75 -67.3%
1. Adjusted results exclude adjusted items, which include share-based
payment transactions, COVID-19 related costs, and 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 and providing post-combination services.
4. Figures are calculated from the full numbers as presented in the
consolidated financial statements.
Financial performance
Revenues in the first half increased by 28.6% to £65.2m (H1 2022: £50.7m),
mainly as a result of the first time inclusion of Billi revenues of £21.5m,
which helped to fully offset a reduction in organic sales, particularly of
kettle controls.
The kettle controls revenue decreased by 17.2% to £28.9m (H1 2022: £34.8m),
with the cost of living crisis and the Russia/Ukraine conflict being the key
negative drivers in regulated markets. In line with international government
sanctions, our key global brands remain exited from Russia (a significant
market) and Strix also stopped trading directly with Russian brands. Despite
the decrease in revenues however, recent incoming order rates are tracking in
a positive direction, evident from a surge in sales in Q2.
The Group's consumer goods division continues to show resilience particularly
in the water category with noticeable growth in European and North American
territories as a result of continued online market place launches.
Adjusted gross profit increased by 22.6% to £23.9m (H1 2022: £19.5m), mainly
attributable to the Billi inclusion of £10.0m, but was partially offset by a
decrease in adjusted gross profits for kettle controls of £4.3m (28.6%
decrease) and slightly by appliances category. Reported gross profits
increased by 25.8% to £23.9m (H1 2022: £19.0m).
Adjusted gross profit margin in H1 2023 was 36.7% (H1 2022: 38.4%), showing a
margin dilution of 1.7% compared to same period last year. This dilution is
mainly due to under absorption of fixed manufacturing costs on a per unit of
volume basis, as a result of a lower kettle controls production volume.
Costs optimisation evaluation and measures are in place to ensure skilled
labour are maintained for medium term recovery, while streamlining
non-critical spending to adopt a balanced approach to manage this softened in
the current H1 period. This decline was partially offset by addition of Billi
group which made a positive contribution to margins, decreases in commodity
prices, and a positive impact from the LAICA sub-group consumer goods.
Adjusted EBITDA is defined as profit before depreciation, amortisation,
finance costs, finance income, taxation, and adjusting items including share
based payments. Adjusted EBITDA was £15.6m (H1 2022: £15.9m), showing a
small decrease of 1.9% compared to the same period last year. The Billi
acquisition provides significant income growth in H1 2023 (£21.5m net sales,
£5.2m adjusted EBITDA), however the underlying Strix organic business shows
significant decrease to H1 2023 (£6.9m net sales decrease, £5.5m adjusted
EBITDA decrease), with kettle controls revenues being the main driver, showing
a £6.0m decrease vs H1 2022.
Adjusted EBITDA margin in H1 2023 was 23.9% (H1 2022: 31.4%), representing a
margin dilution of 7.4%, which is largely due to lower kettle controls volume.
Billi had a positive impact of £5.2m adjusted EBITDA with a strong margin of
24.0% which is in line with IM targets. Distribution and administration
costs in the organic business decreased marginally by £0.1m (circa 2.0%).
These overheads are discussed in detail in the Costs section below.
Adjusted operating profits decreased by 8.5% to £11.8m (H1 2022: £12.9m), a
decrease of £1.1m. Depreciation and amortisation costs are deducted from
adjusted EBITDA to arrive at the adjusted operating profits. These have
remained relatively constant for the organic business compared the same period
last year. The decrease in adjusted operating profits was mainly due to Billi
contributing £0.5m of depreciation and amortisation costs in the current
period. The remainder of the decrease in adjusted EBITDA is mainly due to
lower sales volumes in the organic business and reduction in adjusted gross
profits as explained above.
Adjusted profit before tax was £6.8m (H1 2022: £11.6m), a decrease of £4.8m
(41.4% decrease) compared to the same period last year. This is attributable
mainly to interest and finance fee costs which had an adverse variance in the
current H1 period of £3.7m compared to the same period last year due to an
increase in the net debt to fund the Billi acquisition and a higher interest
rates environment.
Adjusted profit after tax was £5.7m (H1 2022: £11.6m), a £5.9m adverse
variance compared to the same period last year. Tax expense for the current
period was £1.1m, primarily relating to the tax liability from Billi of
£0.8m recognised in the Group being first year of acquisition. The balance
£0.3m relates to tax expense in the organic business.
Costs
Costs in H1 2023 increased across the board compared to the prior year, mainly
due to the inclusion of Billi in the current year, however decreased
marginally in the organic business.
Cost of sales (excluding adjusting items) increased by 32.4% to £41.3m (H1
2022: £31.2m), with Billi contributing £11.5m of cost of sales. Excluding
Billi's impact the total cost of sales for the Group stands at £29.8m in H1
2023 vs £31.2m in H1 2022, falling by £1.4m (4.5% decline).
This fall on total cost of sales in the organic business was primarily driven
by total material cost of sales going down from £20.2m in H1 2022 to £17.7m
in H1 2023, down by 12.4%, largely in line with lower sales vs a comparative
H1 2022 period in the organic business. The Group continues to take measures
to reduce costs, increase efficiencies, while balancing the cost impact due to
the short term decline in sales volume to ensure our operation capabilities is
well prepared for a rebound.
Sales and Distributions costs increased by 11.3% to £5.0m (H1 2022: £4.5m)
mainly due to the inclusion of Billi costs in the current year of £0.6m.
The Group's organic (excluding Billi) outward carriage and freight outward
costs were lower by 9% or £0.1m (£1.1m in H1 2023 vs £1.2m H1 2022) in line
with decrease in sales. This decrease in carriage and freight outward costs
was offset by an increase in advertising and promotion costs of 9.1% or £0.1m
(£1.2m in H1 2023 vs £1.1m in H1 2022). Advertising and promotion costs are
spent mainly on consumer goods products, comprising of water and appliances
products. Increase in advertising and promotion can be attributable to an
increase in water product sales.
Administration costs (excluding adjusting items) increased by £4.6m or 173.7%
to £7.3m (H1 2022: £2.7m), predominantly due to the inclusion of Billi's
admin costs of £4.5m. Excluding the impact of Billi, administration costs
fell by 1.0% as part of the Group's restructuring programme.
Adjusted items included Exceptional costs and Acquisitions purchase price
allocation amortization costs from LAICA and Billi (both are non-cash and are
pure accounting valuations). This will allow like-to-like comparisons of the
Group's normalised results. Exceptional costs incurred in H1 has reduced by
50% to £1.9m (H1 2022: £3.8m). They were largely due to post Billi
acquisition costs relating to legal and tax due diligence, with a small
portion was due to restructuring.
Cash flow
Cash flows from operating activities showed a modest improvement of £3.2m
(32.3% improvement) from the same period last year. This is mainly due to the
improvement in the changes of net working capital (£4.3m improvement),
however partially offset by increase in tax-related cash outflows.
Movements in net working capital showed a significant decrease in cash
outflows compared to the prior year. Net working capital cash flows in the
current period resulted in cash inflow of £0.1m (H1 2022: £4.2m cash
outflow). Excluding the impact of Billi, net working capital cash inflows in
the organic business significantly improved to £1.8m cash inflows compared to
£4.2m cash outflows in the same period last year. Billi's net working capital
cash outflows of £1.7m in the current period hence offset the cash inflows
from the organic business, as the Group invested more in its newest subsidiary
to meet forecasted customer demand in H2.
Net working capital movements are broken down as follows:
Inventory: Overall cash flows relating to inventory significantly improved to
£0.1m cash outflows vs £4.2m cash outflows in the same period last year. The
organic business recognised no material change in cash flows as the Group
optimised inventory levels to align to H2 sales forecasts, with Billi
contributing a cash outflow of £0.2m as the Group slightly increased Billi's
stock levels at period-end to match our sales planning and forecasting in H2.
Debtors: The Group recognised cash outflows in current period from debtors of
£0.8m (H1 2022: £2.7m cash outflows), with the organic business contributing
£1.6m cash inflows compared to £2.7m outflows in the same period last year.
Billi's recognised £2.4m cash outflows as the Group invests further in
expanding Billi's customer base in its first year of operations
post-acquisition.
Creditors: Cash flows improved significantly from creditors to £1.0m cash
inflows in the currently period vs £2.7m cash outflows in the same period
last year, with Billi contributing £0.9m cash inflows as their creditor books
were aligned to the Group working capital improvement plans as mentioned
above. The organic business's creditor cash inflows of £0.2m in the current
period compared well to £2.7m cash outflows from the same period last year,
again in line with the Group's working capital management reduction plans.
Tax-related cash outflows were at £1.3m mainly due to Billi tax payments made
in Australia and New Zealand.
Cash outflows for investing activities increased in the current period (H1
2023: £12.9m) compared to the same period last year (H1 2022: £6.4m) mainly
due to LAICA-related earn-out costs which were settled at the beginning of the
current year, and an increase in capital expenditures due to the further
investments in capitalised development costs. This was partially offset by
cash inflows received from the vendor shareholders of Billi as consideration
refunded as a result of net debt and working capital adjustments on opening
balances at acquisition.
Cash outflows for financing activities increased by £3.4m compared to the
same period prior year. It is largely due to finance costs paid
significantly increased due to an increase in the net debt to fund the Billi
acquisition in a higher interest rate environment.
Balance Sheet
Property, plant and equipment decreased to £46.3m (FY 2022: £47.4m), mainly
due to depreciation charges of £2.6m (H1 2022: £2.0m). This was partially
offset by net additions of £1.5m towards plant and machinery and production
tooling for continued improvement of automation and production efficiencies,
and an increase of fixtures, fittings, equipment (including computer hardware)
to support Billi operations.
Intangible assets slightly increased to £74.0m (FY 2022: £73.4m) reflecting
a net increase of £0.6m. Notable net additions to intangible assets were
relating to capitalised development costs from new product development
projects of circa £2.4m, and computer software and other intangible asset
additions of circa £0.5m. The total amortisation charges were £1.2m (H1
2022: £1.1m), and foreign currency movements of £1.0m were recognised on
translation of intangible assets denominated in foreign currencies.
Net working capital, which includes inventories, trade and other receivables,
and trade and other payables (including tax liabilities, but excluding
short-term portions of long-term liabilities), increased to £28.5m (FY 2022:
£27.6m), an increase on £0.9m. This was mainly due to Billi's net working
capital increase of £1.6m as the Group invests further in expanding Billi's
working capital in its first year of operations post-acquisition. Excluding
Billi, net working capital decreased by £0.7m as the Group continues to
prudently manage working capital demands as discussed in the cash flow section
above.
Non-current liabilities (including short-term portions) decreased to £130.6m
(FY 2022: £141.6m), a decrease of £11.3m, which is mainly driven by
reductions of LAICA-related earn-outs paid at the beginning of the current
year, and repayments made in the current year towards the term loan of the
Billi-acquisition-related revolving credit facility.
Net debt
The Group's net debt position as at 30 June 2023 increased to £93.1m (FY
2022: £87.4m).
Total committed debt facilities at 30 June 2023 amounted to £115.5m
(excluding loan arrangement fees which are included in borrowings), giving a
liquidity pool of £21.4m. Net debt equated to 2.66 times trailing twelve
months' EBITDA as at 30 June 2023, which complies with our debt covenant
threshold of 2.75 times.
Dividend
Given the increase in net debt due to the strategic acquisition of Billi, and
with the high interest rates environment, the Board continues to take
precautions to balance the capital allocation priorities. To be prudent, the
Board has decided to prioritise the reduction of debt for the rest of the
current year.
Therefore, the Board is declaring an interim dividend in FY 2023 of 0.9p per
share (HY 2022: 2.75p).
Condensed INTERIM consolidated statement of comprehensive income
for the period ended 30 June 2023 (unaudited)
(unaudited) (unaudited)
Period ended
Period ended
30 June 2023
30 June 2022
Note £000s £000s
Revenue 7 65,218 50,694
Cost of sales - before adjusting items (41,280) (31,207)
Cost of sales - adjusting items 6 (66) (468)
Cost of sales (41,346) (31,675)
Gross profit 23,872 19,019
Distribution costs (5,017) (4,508)
Administrative expenses - before adjusting items (7,307) (2,668)
Administrative expenses - adjusting items 6 (1,829) (3,288)
Administrative expenses (9,136) (5,956)
Share of (losses) from joint ventures (25) (10)
Other operating income 207 587
Operating profit 9,901 9,132
Analysed as:
Adjusted EBITDA(1) 15,632 15,941
Amortisation 8 (1,231) (1,062)
Depreciation (excluding Right-of-use asset depreciation) 9 (1,998) (1,512)
Right-of-use asset depreciation 9 (607) (479)
Adjusting items 6 (1,895) (3,756)
Operating profit 9,901 9,132
Finance costs 5 (5,032) (1,262)
Finance income 67 5
Profit before taxation 4,936 7,875
Income tax expense (1,109) (43)
Profit after taxation 3,827 7,832
Other comprehensive income:
Exchange differences on translation of foreign operations (971) 678
Total comprehensive income 2,856 8,510
Profit for the period attributable to:
Equity holders of the Company 3,856 7,770
Non-controlling interests (29) 62
3,827 7,832
Total comprehensive income for the period attributable to:
Equity holders of the Company 2,900 8,424
Non-controlling interests (44) 86
2,856 8,510
Earnings per share (pence)
Basic 6 1.8 3.8
Diluted 6 1.7 3.7
1. Adjusted EBITDA, which is defined as profit before finance costs,
tax, royalty charges, depreciation, amortisation and adjusting items, is a
non-GAAP metric used by management and is not an IFRS disclosure.
Condensed INTERIM consolidated balance sheet
as at 30 June 2023 (unaudited)
Note (unaudited) (audited)
As at
As at
30 June 2023 31 December 2022
ASSETS £000s £000s
Non-current assets
Intangible assets 8 74,010 73,374
Property, plant and equipment 9 46,295 47,364
Investments in joint ventures (12) 19
Net investments in finance leases 11 16
Total non-current assets 120,304 120,773
Current assets
Inventories 10 28,534 27,702
Trade and other receivables 12 27,322 29,791
Current income tax receivable 443 497
Cash and cash equivalents 21,431 30,443
Total current assets 77,730 88,433
Total assets 198,034 209,206
EQUITY AND LIABILITIES
Equity
Share capital and share premium 23,642 23,861
Share based payment reserve 272 202
Retained earnings 15,325 12,479
Non-controlling interests 663 707
Total equity 39,902 37,249
Current liabilities
Trade and other payables 13 27,333 29,963
Borrowings 14 14,638 14,734
Future lease liabilities 17 911 1,069
Contingent consideration - 7,532
Current income tax liabilities 13 509 444
Total current liabilities 43,391 53,742
Non-current liabilities
Future lease liabilities 17 2,814 2,819
Deferred tax liability 11,206 11,387
Borrowings 14 99,877 103,092
Post-employment benefits 844 917
Total non-current liabilities 114,741 118,215
Total liabilities 158,132 171,957
Total equity and liabilities 198,034 209,206
Condensed INTERIM consolidated statement of changes in equity
as at 30 June 2023 (unaudited)
Share capital and share premium Share-based payment reserve Retained earnings Total equity attributable to owners Non-controlling interests Total equity
(unaudited) £000s £000s £000s £000s £000s £000s
Balance at 1 January 2022 13,139 2,039 10,146 25,324 681 26,005
Profit for the period - - 7,770 7,770 62 7,832
Other comprehensive income - - 654 654 24 678
Total comprehensive income for the period - - 8,424 8,424 86 8,510
Dividends paid (note 16) - - (11,601) (11,601) - (11,601)
Transfers between reserves 7 (1,210) 1,203 - - -
Share-based payment transactions - 572 - 572 - 572
Total transactions with owners recognised directly in equity 7 (638) (10,398) (11,029) - (11,029)
Other transactions recognised directly in equity (note 11) - (52) 59 7 - 7
Balance at 30 June 2022 13,146 1,349 8,231 22,726 767 23,493
(unaudited)
Balance at 1 January 2023 23,861 202 12,479 36,542 707 37,249
Profit for the period - - 3,856 3,856 (29) 3,827
Other comprehensive income - - (956) (956) (15) (971)
Total comprehensive income for the period - - 2,900 2,900 (44) 2,856
Dividends paid (note 16) - - - - - -
Transfers between reserves - (47) 10 (37) - (37)
Transaction costs (219) - - (219) - (219)
Share-based payment transactions - 86 - 86 - 86
Total transactions with owners recognised directly in equity (219) 39 10 (170) - (170)
Other transactions recognised directly in equity (note 11) - 31 (64) (33) - (33)
Balance at 30 June 2023 23,642 272 15,325 39,239 663 39,902
Condensed INTERIM consolidated cash flow statement
for the PERIOD ended 30 June 2023 (unaudited)
(unaudited) (unaudited)
Period ended Period ended
30 June 2023 30 June 2022
Note £000s £000s
Cash flows from operating activities
Cash generated from operations 18(a) 14,443 9,759
Tax received / (paid) (1,327) 96
Net cash generated from operating activities 13,116 9,855
Cash flows from investing activities
Purchase of property, plant and equipment 9 (1,982) (2,954)
Capitalised development costs 8 (4,103) (1,643)
Earnout payments regarding the acquisition of LAICA (7,499) (1,671)
Consideration refunded regarding the acquisition of Billi 1,046 -
Purchase of other intangibles 8 (463) (175)
Finance income 65 5
Net cash used in investing activities (12,936) (6,438)
Cash flows from financing activities
(Repayments) / Drawdowns of non-current borrowings 18(b) (3,661) 8,543
Finance costs paid (4,358) (1,638)
Principal elements of lease payments (489) (401)
Dividends paid 16 - (11,601)
Net cash used in financing activities (8,508) (5,097)
Net decrease in cash and cash equivalents (8,328) (1,680)
Cash and cash equivalents at the beginning of the period 30,443 19,670
Effects of foreign exchange on cash and cash equivalents (684) 147
Cash and cash equivalents at the end of the period 21,431 18,137
Notes to the condensed INTERIM cONSOLIDATED financial statements
for the PERIOD ended 30 June 2023 (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 registered number 014963V. 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,
water filtration and small household appliances for personal health and
wellness.
These condensed interim consolidated financial statements ('interim financial
statements') were approved for issue on 20 September 2023. The interim report
will be available 21 September 2023 on the Group's website www.strixplc.com
(http://www.strixplc.com) and from the registered office. These interim
financial statements are unaudited.
2. Principle accounting policies
The Group's principle accounting policies, all of which have been applied
consistently to all of the periods presented, are set out below.
Basis of preparation
The Group's annual financial statements are prepared in accordance with
International Financial Reporting Standards ('IFRS') and International
Financial Reporting Standards Interpretation Committee ('IFRS IC') as adopted
by the European Union.
These interim financial statements have been prepared in accordance with IAS
34 "Interim Financial Reporting". They do not include all the information
required for a complete set of financial statements prepared in accordance
with International Financial Reporting Standards as adopted by the European
Union. However, explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and its financial performance compared with the
comparative periods ended 31 December 2022 and 30 June 2022 respectively.
These interim financial statements should be read in conjunction with the last
annual consolidated financial statements as at 31 December 2022 and the
comparative interim results for the period ended 30 June 2022.
The preparation of Group financial statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the interim financial
statements, are disclosed in note 3.
Accounting policies
The interim financial statements have been prepared in accordance with the
accounting policies set out in the Group's Annual Report and Accounts for the
year ended 31 December 2022, which is available at www.strixplc.com
(http://www.strixplc.com) .
Basis of consolidation
The interim financial statements comprise the financial statements of the
Company and all of its subsidiary undertakings. Subsidiaries are fully
consolidated from the date on which control commences and are deconsolidated
from the date that control ceases. The financial statements of all Group
companies are adjusted, where necessary, to ensure the use of consistent
accounting policies.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the
Group is exposed to or has the rights to variable returns from its involvement
with the entity and has the ability to affect those returns through its power
over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. Consolidation of subsidiaries ceases from the date
that control also ceases.
Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated statement of comprehensive income, consolidated
statement of changes in equity and the consolidated statement of financial
position, respectively.
Joint ventures
Joint ventures are joint arrangements of which the Group has joint control,
with rights to the net assets of those arrangements. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of
the parties sharing control. Interests in joint ventures are accounted for
using the equity method of accounting (detailed below) after being recognised
at cost in the consolidated statement of financial position.
Equity method of accounting
Under the equity method of accounting, investments in joint ventures are
initially recognised at cost and adjusted thereafter to recognise the Group's
share of the post-acquisition profits or losses from the joint arrangement in
profit or loss, and the Group's share of movements in other comprehensive
income of the joint arrangement in other comprehensive income. Dividends
received from joint ventures are recognised as a reduction in the carrying
amount of the investment.
Unrealised gains on transactions between the Group and its joint ventures are
eliminated to the extent of the Group's interest in these entities.
The carrying amount of equity-accounted investments is tested for impairment
in accordance with the impairment of assets policy as described below in this
note.
Transactions eliminated on consolidation
Intra-group balances and any gains and losses or income and expenses arising
from intra-group transactions, are eliminated in preparing the interim
financial statements.
Business combinations
Business combinations are accounted for using the acquisition method as at the
acquisition date with the assets and liabilities of a subsidiary being
measured at their fair values. Any excess of the cost of acquisition over the
fair values of the identifiable net assets acquired is recognized as goodwill.
The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognized 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.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis at the non-controlling interest's
proportionate share of the fair value of the acquired entity's net
identifiable assets. Transaction costs that the Group incurs in connection
with a business combination are expensed as incurred.
If the initial accounting for a business combination is preliminary by the end
of the reporting period in which the business combination occurs, provisional
amounts are reported. Those provisional amounts are adjusted during the
measurement period, or additional assets or liabilities recognised
retrospectively to reflect the new information obtained about facts and
circumstances that existed as at the acquisition date, and if known, would
have affected the measurement of assets and liabilities recognised at that
date. Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value, with changes in fair value recognised in profit or
loss
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 £21.4m (YE 2022: £30.4m);
· the availability of further funding should this be required (with a liquidity
pool of £22.4m (YE 2022: £31.6m) on the revolving credit facility and the
access to the AIM market afforded by the Company's admission to AIM);
· the current and past ability of the Group to meet its debt covenants;
· the low liquidity risk the Group is exposed to; and
· the Group operates within a sector that is experiencing relatively stable
demand for its products.
Based on these considerations, the Directors have concluded that there is a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. The key
entities in the Group have traded profitably for a long period of time. As a
result, the Directors continue to adopt the going concern basis of accounting
in preparing the interim financial statements and there are no material
uncertainties about the Group's ability to continue as a going concern.
EBITDA and adjusted EBITDA - non-GAAP performance measures
Earnings before interest, taxation, depreciation and amortization ('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 amortization. Adjusting
items are excluded from EBITDA to calculate adjusted EBITDA.
The Directors primarily use the adjusted EBITDA measure when making decisions
about the Group's activities. As these are non-GAAP measures, EBITDA and
adjusted EBITDA measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
Seasonality of operations
The Group's revenue and profit after tax is subject to a degree of seasonality
due primarily to the occurrence of the Chinese New Year public holiday during
the first half of the year ('H1'), when the Group's major customers and
suppliers based in China cease operations for a period. In the financial year
ended 31 December 2022, 42% (FY 2021: 46%) of the Group's revenue and 37% (FY
2021: 37%) of the Group's profit after tax accumulated in H1.
Foreign currency translation
Functional and presentational currency
Items included in the financial information of each of the Group's entities
are measured using the currency of the primary economic environment in which
the entity operates ('the functional currency'). The interim financial
statements are presented in Sterling, which is Strix Group Plc's functional
and presentation currency.
Transactions and balances
Foreign currency balances are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognized in the condensed
interim consolidated statement of comprehensive income within cost of sales.
Group companies
The results and financial position of foreign operations that have a
functional currency different from the presentation currency are translated
into the presentation currency as follows:
· assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet, or historic rates for certain
line items;
· income and expenses for each condensed interim consolidated statement of
comprehensive income are translated at average exchange rates (unless this is
not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions), and
· all resulting exchange differences are recognised in the condensed interim
consolidated statement of comprehensive income.
Leases
Leases in which a significant portion of the risks and rewards of ownership
are not transferred to the Group as lessee are classified as operating leases.
Payments made under operating leases (net of any incentives received from the
lessor) are charged to the statement of comprehensive income on a
straight-line basis over the period of the lease.
The leasing activities of the Group and how these are accounted for
The Group leases office space, workshops, warehouses and factory space. Rental
contracts are typically made for periods of 3 - 10 years, but may have
extension options. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease agreements
do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Leases are recognized 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 readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to the consolidated statement of comprehensive income over the
lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
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
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis
Payments associated with short-term leases and leases of low-value assets are
recognized 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 maximize operational flexibility in
terms of managing contracts.
Lease income
Lease income from operating leases where the Group is a lessor, and where
substantially all the risks and rewards associated with the leased asset
remain with the Group, is recognised in other income on a straight-line basis
over the lease term.
Property, plant and equipment
Initial recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes the original purchase price
of the asset and the costs attributable to bringing the asset to its working
condition for its intended use. When parts of an item of property, plant and
equipment have different useful lives, the components are accounted for as
separate items.
Subsequent costs are included in the asset's carrying amount or recognized as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying value of the replaced part
is derecognised. All other repairs and maintenance are charged to profit or
loss during the reporting period in which they are incurred.
Subsequent measurement
Depreciation is calculated using the straight-line method to allocate the cost
of the assets, net of any residual values, over their estimated useful lives.
The useful lives are shown below:
Asset class Estimate
· Plant and machinery 3-25 years
· Point of use dispensers 4-10 years
· Fixtures, fittings and equipment 2-10 years
· Motor vehicles unchanged
· Production tools 1-10 years
· Right-of-use assets unchanged
· Land and buildings unchanged
The Group manufactures some of its production tools and equipment. The costs
of construction are included within a separate category within property, plant
and equipment ("assets under construction") until the tools and equipment are
ready for use at which point the costs are transferred to the relevant asset
category and depreciated. Any items that are scrapped are written off to the
consolidated statement of comprehensive income.
The assets' residual values and useful lives are reviewed at the end of each
reporting period.
Fixtures, fittings and other equipment includes computer hardware.
Derecognition
Property, plant and equipment assets are derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains or losses
arising from derecognition of property, plant and equipment, measured as the
difference between net disposal proceeds and the carrying amount of the asset,
are recognised in the consolidated statement of comprehensive income on
derecognition.
Impairment
Tangible assets that are subject to depreciation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell
and value in use.
Intangible assets
Initial recognition and measurement
The Group's intangible assets relate to goodwill, capitalised development
costs, intellectual property, customer relationships, brands and computer
software. Goodwill is the excess of the consideration paid over the fair value
of the identifiable assets, liabilities and contingent liabilities in a
business combination and relates to assets which are not capable of being
individually identified and separately recognised. Goodwill acquired is
allocated to those cash-generating units ("CGUs") expected to benefit from the
business combination in which the goodwill arose. Goodwill is measured at cost
less any accumulated impairment losses and is held in the functional currency
of the acquired entity to which it relates and remeasured at the closing
exchange rate at the end of each reporting period, with the movement taken
through other comprehensive income. The CGUs represent the lowest level within
the Group at which goodwill is monitored for internal management purposes.
Capitalised development costs are recorded as intangible assets and amortised
from the point at which the asset is ready for use. Internal costs that are
incurred during the development of significant and separately identifiable new
products and manufacturing techniques for use in the business are capitalised
when the following criteria are met:
• it is technically feasible to complete the project so that it will
be available for use;
• management intends to complete the project and use or sell it;
• it can be demonstrated how the project will develop probable
future economic benefits;
• adequate technical, financial, and other resources to complete the
project and to use or sell the project output are available; and
• expenditure attributable to the project during its development can
be reliably measured.
Capitalised development costs include employee, travel and other directly
attributable costs necessary to create, produce and prepare the asset to be
capable of operating in the manner intended by management. Refer to note 6(a)
for details.
Intellectual property is capitalised where it is probable that future economic
benefits associated with the patent will flow to the Group, and the cost can
be measured reliably. The costs of renewing and maintaining patents are
expensed in the consolidated statement of comprehensive income as they are
incurred.
Customer relationships, intellectual property and brands are recognised on
acquisitions where it is probable that future economic benefits will flow to
the Group.
Computer software is only capitalised when it is probable that future economic
benefits associated with the software will flow to the Group, and the cost of
the software can be measured reliably. Computer software that is integral to
an item of property, plant and equipment is included as part of the cost of
the asset recognised in property, plant and equipment.
Other development expenditures that do not meet these criteria are recognised
as an expense as incurred.
Subsequent measurement
The Group amortises intangible assets with a limited useful life using the
straight-line method.
Asset class Estimate
· Capitalised development costs 2-10 years
· Intellectual property unchanged
· Technology and software unchanged
· Customer relationships unchanged
· Brands unchanged
· Goodwill unchanged
Brands have an indefinite useful life because there is no foreseeable limit on
the period during which the Group expects to consume the future economic
benefits embodied in the asset.
The LAICA brand has been trading since inception and has been a well
recognisable brand amongst the Group's trading partners, and the Group does
not foresee a time limit by when these partnerships will cease.
The Billi brand is a well-established and competitive brand, being one of the
top 2 brands in the Australian and New Zealand industries, and well recognised
in the United Kingdom among residential and commercial clientele. The Group
does not foresee a time limit by when this market presence will cease.
Amortisation is charged to the consolidated statement of comprehensive income
on a straight-line basis over the estimated useful lives above.
Derecognition
Intangible assets are derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains or losses arising from
derecognition of intangible assets, measured as the difference between the net
disposal proceeds and the carrying amount of the asset, and are recognised in
the consolidated statement of comprehensive income when the asset is
derecognised. Where a subsidiary is sold, any goodwill arising on acquisition,
net of any impairment, is included in determining the profit or loss arising
on disposal.
Impairment
Intangible assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell
and value in use.
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
Intangible assets with indefinite useful lives impairment assessments
Intangible assets with indefinite useful lives arising on business
combinations are allocated to the relevant CGU and are treated as the foreign
operation's assets.
Impairment reviews are performed at least annually, or more frequently if
there are indicators that goodwill might be impaired. The Group has assessed
the carrying values of goodwill and brands to determine whether any amounts
have been impaired. The recoverable amount of the underlying CGU was based on
a value in use model where future cashflows were discounted using a weighted
average cost of capital as the discount rate with terminal values calculated
applying a long-term growth rate. In determining the recoverable amount, the
Group considered several sources of estimation uncertainty and made certain
assumptions or judgements about the future. Future events could cause the
assumptions used in the impairment review to change with an impact on the
results and net position of the group.
3. Critical accounting judgements and estimates
In the application of the Group's accounting policies, which are described in
Note 2, the directors are required to make judgements (other than those
involving estimations) that have a significant impact on the amounts
recognised and to make estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates. There is no change in applying accounting policies for
critical accounting estimates and judgements from the prior year.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
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 2022.
Alternative performance measures (APMs) - Adjusting items
Management and the Board consider the quantitative and qualitative factors in
classifying items as adjusting items and exercise judgement in determining the
adjustments to apply to IFRS measures. This assessment covers the nature of
the item, cause of occurrence, frequency, predictability of occurrence of the
item or related event, and the scale of the impact of that item on reported
performance.
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,
dispensers, jugs and filters, primarily to Original Equipment Manufacturers
("OEMs"), commercial and residential customers based in China, Italy,
Australia, New Zealand and the United Kingdom.
The Board of Directors has identified 3 reportable segments from a product
perspective, namely: kettle controls, premium filtration systems (primarily
Billi products), and consumer goods (made up of water products 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 2023
(£000s)
Kettle controls Premium filtration systems Consumer goods Total
Revenue 28,819 21,468 14,931 65,218
Cost of sales (18,127) (11,515) (11,704) (41,346)
Gross profit 10,692 9,953 3,227 23,872
Period ended 30 June 2022
(£000s)
Kettle controls Premium filtration systems Consumer goods Total
Revenue 34,802 - 15,892 50,694
Cost of sales (20,218) - (11,457) (31,675)
Gross profit 14,584 - 4,435 19,019
Adjusted Results
Period ended 30 June 2023
(£000s)
Kettle controls Premium filtration systems Consumer goods Total
Revenue 28,819 21,468 14,931 65,218
Cost of sales (18,099) (11,518) (11,678) (41,295)
Gross profit 10,720 9,950 3,253 23,923
Period ended 30 June 2022
(£000s)
Kettle controls Premium filtration systems Consumer goods Total
Revenue 34,802 - 15,892 50,694
Cost of sales (19,797) - (11,410) (31,207)
Gross profit 15,005 - 4,482 19,487
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 and major customers to whom the majority of sales are
made are primarily based in China, Italy, Australia and the United Kingdom.
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, Italy Australia, New Zealand, and the
United Kingdom where Group's main principle operating subsidiaries are
domiciled.
30 June 31 December 2022
2023
£000s £000s
Country of domicile
Intangible assets 12,804 11,354
Property, plant and equipment 2,815 3,151
Total country of domicile non-current assets 15,619 14,505
Foreign countries
Intangible assets 61,205 62,020
Property, plant and equipment 43,480 44,213
Total foreign non-current assets 104,685 106,233
Total non-current assets 120,304 120,738
Major customers
In the first half of 2023, there was one major customer which individually
accounted for at least 10% of total revenues (H1 2022: one customer). The
revenues relating to this customer in 6 months ended 30 June 2023 was
£6,937,000 (H1 2022: £7,204,000).
5. finance costs
Period ended Period ended
30 June 2023
30 June 2022
£000s £000s
Letter of credit charges 92 36
Lease liability interest 75 42
Borrowing costs 4,865 1,184
Total finance costs 5,032 1,262
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 Period ended
30 June 2023
30 June 2022
Earnings (£000s)
Earnings for the purpose of basic and diluted earnings per share 3,856 7,770
Number of shares (000s)
Weighted average number of shares for the purposes of basic earnings per share 218,712 206,960
Weighted average dilutive effect of conditional share awards 2,578 2,796
Weighted average number of shares for the purposes of diluted earnings per 221,290 209,756
share (000s)
Earnings per ordinary share (pence)
Basic earnings per ordinary share 1.8 3.8
Diluted earnings per ordinary share 1.7 3.7
Adjusted earnings per ordinary share (pence) (1)
Basic adjusted earnings per ordinary share 2.6 5.6
Diluted adjusted earnings per ordinary share 2.6 5.5
The calculation of basic and diluted adjusted earnings per share is based
on the following data:
Period ended Period ended
30 June 2023
30 June 2022
£000s £000s
Profit for the period 3,856 7,770
Add back adjusting items in cost of sales:
COVID-19 net adjusting items² - 172
Land and factory - 30
Restructuring 66 266
66 468
Add back adjusting items in administrative expenses:
COVID-19 net adjusting items² - 356
Restructuring 39 260
Mergers and acquisitions 1,704 1,937
Disaster recovery - 163
Share based payments 86 572
1,829 3,288
Total adjusting items 1,895 3,756
Adjusted earnings (1) 5,751 11,526
( )
(1. Adjusted results exclude adjusting items, including share-based payments.
Adjusted results are non-GAAP metrics used by management and are not an IFRS
disclosure.)
(2. COVID-19 net adjusting items included consumables, certain employment
costs and Government support grants in the comparative period.)
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
division:
Period ended Period ended
30 June 2023
30 June 2022
£000s £000s
Kettle controls 28,819 34,802
Premium filtration systems 21,468 -
Consumer goods 14,931 15,892
Total revenue 65,218 50,694
8. Intangible assetS
For the period ended 30 June 2023
Development Costs Software Intellectual Property Customer relationships Brands Goodwill Intangible assets under construction Total
£000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 19,428 4,452 1,482 18,549 19,785 20,067 103 83,866
Accumulated amortization/impairment (7,716) (1,817) (256) (703) - - - (10,492)
Net book value 11,712 2,635 1,226 17,846 19,785 20,067 103 73,374
Period ended 30 June
Additions 4,103 114 207 - - - 142 4,566
Transfers (1,356) 5 37 70 - - (26) (1,269)
Disposals (314) (4) - - - - - (318)
Amortisation charges (748) (318) (60) (104) - - - (1,231)
Exchange differences (208) 84 (8) 72 (556) (488) (9) (1,112)
Closing net book value 13,189 2,516 1,403 17,884 19,229 19,579 210 74,010
At 30 June
Cost 21,713 4,574 4,930 18,399 19,229 20,011 210 89,065
Accumulated amortisation/impairment (8,523) (2,059) (3,527) (515) - (431) - (15,055)
Net book value 13,189 2,516 1,403 17,884 19,229 19,579 210 74,010
All amortisation charges have been treated as an expense, and allocated to
cost of sales £1,036,000 (H1 2022: £884,000) and administrative expenses
£194,000 (H1 2022: £178,000) in the condensed interim consolidated statement
of comprehensive income. There were no reversals of prior year impairments
during the period (H1 2022: none).
For the period ended 30 June 2022
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 15,971 4,186 1,128 66 2,232 6,174 8,736 38,493
Accumulated amortization/impairment (6,565) (1,153) (111) - (196) - - (8,025)
Net book value 9,406 3,033 1,017 66 2,036 6,174 8,736 30,468
Period ended 30 June
Additions 1,645 - 187 4 - - - 1,836
Transfers - 73 (17) (70) - - - (14)
Amortisation charges (600) (305) (56) - (101) - - (1,062)
Exchange differences 136 3 41 - 49 154 208 591
Closing net book value 10,587 2,804 1,172 - 1,984 6,328 8,944 31,819
At 30 June
Cost 17,769 4,263 1,623 - 2,292 6,328 8,944 41,219
Accumulated amortisation/impairment (7,182) (1,459) (451) - (308) - - (9,400)
Net book value 10,587 2,804 1,172 - 1,984 6,328 8,944 31,819
All amortisation charges have been treated as an expense, and allocated to
cost of sales £884,000 (H1 2021: £826,000) and administrative expenses
£178,000 (H1 2021: £126,000) in the condensed interim consolidated statement
of comprehensive income. There were no reversals of prior year impairments
during the period (H1 2021: none).
9. Property, plant and equipment
For the period ended 30 June 2023
Plant & machinery Fixtures, fittings & equipment Motor vehicles Production tools Land & Buildings Right-of-use assets *Point of use dispensers Assets under construction Total
£000s £000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 29,988 8,124 375 13,693 20,690 8,678 1,430 2,247 85,225
Accumulated depreciation (15,775) (4,604) (331) (11,049) (978) (5,053) (71) - (37,861)
Net book value 14,213 3,520 44 2,644 19,712 3,625 1,359 2247 47,364
Period ended 30 June
Additions 485 366 6 509 81 611 66 1,036 3,160
Transfers 108 47 10 - 39 - - (1,549) (1,345)
Disposals (26) (139) (17) (7) - (19) - (12) (220)
Depreciation charge for the period (820) (483) 4 (312) (225) (607) (162) - (2,605)
Exchange differences 39 66 1 16 (5) (169) 125 (132) (59)
Closing net book value 13,999 3,377 48 2,850 19,602 3,441 1,388 1,590 46,295
At 30 June
Cost 30,274 8,035 320 14,308 20,360 8,934 1,617 1,647 85,495
Accumulated depreciation (16,275) (4,658) (271) (11,458) (758) (5,493) (229) (57) (39,200)
Net book value 13,999 3,377 48 2,850 19,602 3,441 1,388 1,590 46,295
Depreciation charges are allocated to cost of sales £1,973,000 (H1 2022:
£1,575,000), distribution costs £95,000 (H1 2022: £44,000), and
administrative expenses £538,000 (H1 2022: £373,000) in the condensed
interim consolidated statement of comprehensive income.
For the period ended 30 June 2022
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 (1,331) (110) (1) (68) (1,882) (319) (39) (3,750)
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 £1,575,000 (H1 2021:
(£2,196,000)), distribution costs £44,000 (H1 2021: (£46,000)), and
administrative expenses £373,000 (H1 2021: (£338,000)) in the condensed
interim consolidated statement of comprehensive income.
10. Inventories
30 June 31 December 2022
2023
£000s £000s
Raw materials and consumables 13,214 11,242
Finished goods and goods in transit 15,320 16,460
28,534 27,702
The cost of inventories recognised as an expense and included in cost of sales
amounted to £24,639,000 (H1 2022: £22,446,000). The charge for impaired
inventories was £NIL (H1 2022: £NIL). 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, and existing
joint arrangements the Group is currently part of, which are all included in
the consolidated financial statements, is set out below
Name of entity Nature of business Country of incorporation % of ordinary shares held by the Group Nature of shareholding
Sula Limited Holding company IOM 100 Subsidiary
Strix Limited Manufacture and sale of products IOM 100 Subsidiary
Strix Guangzhou Limited Dormant company China 100 Subsidiary
Strix (U.K.) Limited Holding company and group's sale and distribution center United Kingdom 100 Subsidiary
Strix Hong Kong Limited Sale and distribution of products Hong Kong 100 Subsidiary
Strix (China) Limited Manufacture and sale of products China 100 Subsidiary
HaloSource Water Purification Technology (Shanghai) Co. Limited Manufacture and sales of products China 100 Subsidiary
Strix (USA), Inc. Research and development, sales, and distribution of products USA 100 Subsidiary
LAICA S.p.A. Manufacture and sales of products Italy 100 Subsidiary
LAICA Iberia Distribution S.L. Sale and distribution of products Spain 100 Subsidiary
LAICA International Corp. Sale and distribution of products Taiwan 67 Subsidiary
Taiwan LAICA Corp. Sale and distribution of products Taiwan 67 Subsidiary
Foshan Yilai Life Electric Appliances Co. Limited. Sale and distribution of products China 45 Joint venture
LAICA Brand House Limited Holding and licensing of trademarks Hong Kong 45 Joint venture
Strix Australia Pty Limited Holding company Australia 100 Subsidiary
Billi UK Limited Manufacture and sale of products United Kingdom 100 Subsidiary
Billi Australia Pty Limited Manufacture and sale of products Australia 100 Subsidiary
Billi New Zealand Limited Manufacture and sale of products New Zealand 100 Subsidiary
Billi R&D Limited Research and development Australia 100 Subsidiary
Billi Financial Services Limited Financial Services Australia 100 Subsidiary
Group restrictions
Cash and cash equivalents held in China are subject to local exchange control
regulations. These regulations provide for restrictions on exporting capital
from those countries, other than through normal dividends. The carrying amount
of the cash and cash equivalents included within the interim financial
statements to which these restrictions apply is £1,430,000 (FY 2022:
£3,568,000). There are no other restrictions on the Group's ability to access
or use the assets and settle the liabilities of the Group's subsidiaries.
12. Trade and other receivables
30 June 31 December 2022
2023
£000s £000s
Amounts falling due within one year:
Trade receivables 18,960 19,547
Loss allowance (198) (158)
Trade receivables - net 18,762 19,389
Prepayments 1,654 2,335
Advance purchases of commodities 2,629 2,344
VAT receivables 2,222 1,279
Tax receivables 443 497
Other receivables 2,055 4,444
27,765 30,288
Trade and other receivables carrying values are considered to be equivalent to
their fair values.
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.
13. Trade and other payables
30 June 2023 31 December 2022
£000s £000s
Trade payables 12,541 10,010
Current income tax liabilities 509 444
Social security and other taxes 290 368
Other liabilities 7,979 11,447
Payments in advance from customers 2,448 2,270
Accrued expenses 4,075 5,868
27,842 30,407
The fair value of financial liabilities approximates their carrying value due
to short maturities.
14. Borrowings
30 June 31 December 2022
2023
£000s £000s
Current bank loans 14,638 14,734
Non-current bank loans 99,877 103,092
The current bank loans comprise of current portion of term loan explained in
detail below and small individual short-term arrangements for financing
purchases and optimizing 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
£1,023,000 (2022: £956,000) and £1,399,000 (2022: £422,000) respectively.
Term and debt repayment schedule for long-term borrowings
Currency Interest rate Maturity Date 30 June 2023 carrying value (£000s) 31 December 2022
carrying value (£000s)
Revolving Credit Facility GBP SONIA + 2.15% to 4% 25-Oct-25 77,578 80,000
Term loan GBP SONIA + 2.15% to 4% 30-Nov-25 35,455 39,000
Unicredit facility EUR EURIBOR 6M + 1,2% 28-Jun-24 86 133
Banco BPM EUR 1.45% 30-Nov-23 75 167
Banca Monte dei Paschi di Siena EUR 2.95% 30-Jul-23 414 -
Intesa San Paolo EUR 3.73% 30-Jul-23 120 -
Intesa San Paolo EUR 4.22% 31-Aug-23 297 -
Banco BPM EUR 3.83% 31-Oct-23 488 -
IRS on bank loans EUR 3 (4)
Credito Emiliano EUR 1.10% 04-Jan-23 - 221
Banco BPM EUR 1.69% 03-Jan-23 - 112
Banco BPM EUR 1.69% 03-Jan-23 - 54
Banco BPM EUR 1.00% 28-Feb-23 - 432
BNP Paribas EUR 0.79% 03-Feb-23 - 436
114,516 120,552
Towards the end of the prior year, the existing revolving credit facility
('RCF') agreement was further refinanced and amended on 25 October 2022 as
follows:
New lenders - Barclays Bank Plc and HSBC Bank Plc came on board as new lenders
under the restated agreement.
Revolving credit facility (Facility B) - This relates to the RCF of
£80,000,000. The termination date has been revised to three years after the
fourth restatement date, 25 October 2025, with an option to extend the term
initially by twelve months and a further twelve months thereafter. The purpose
of the extended facility was to finance the acquisition of LAICA as well as
other significant capital projects including the new factory in China and
ongoing working capital needs of the Group. Under the amended agreement, the
purpose of the RCF remains the same. As at 30 June 2023, the total facility
available is £80,000,000 (31 December 2022: £80,000,000).
Term loan (Facility A) - The Company obtained further funding on 30 November
2022 in the form of a three-year term loan of £49,000,000 payable initially
by a lump sum of £10,000,000 followed by eleven fixed repayments thereafter
with the first quarterly repayment of £3,545,000 which was paid on 31 March
2023. The purpose of the term loan was to finance the acquisition of Billi.
The £10m repayment was made towards the term loan on 30 November 2022. As at
30 June 2023, the outstanding balance on the term loan is £35,454,000 (31
December 2022: £39,000,000).
Interest applied to the revolving credit facility and term loan is calculated
as the sum of the margin and SONIA. The margin under the amended agreement was
3.5% until 31 March 2023, and then 2.85% from 1 April 2023 to 30 June 2023,
and thereafter margin will be dependent on the net leverage of the Group based
on the following table:
Leverage Facility A Margin Facility B Margin
% p.a. % p.a.
Greater than or equal to 3.0:1 4.00 4.00
Less than 3.0:1 but greater than or equal to 2.5:1 3.50 3.50
Less than 2.5:1 but greater than or equal to 2.0:1 2.85 2.85
Less than 2.0:1 but greater than or equal to 1.5:1 2.35 2.35
Less than 1.5:1 but greater than or equal to 1.0:1 2.15 2.15
Less than 1.0:1 2.00 2.00
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 (2022: same).
Transactions costs amounting to £135,000 in H1 2023 (FY 2022: £2,324,000)
were incurred as part of refinancing and amending the RCF agreement, and were
capitalised and are being amortised over the period of three years.
The various agreements contain representations and warranties which are usual
for an agreement of this nature. The agreement also provided 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 2023, the Group has not
breached any of the financial covenants contained within the agreements (2022:
same)
The fair values of the borrowings are not materially different from their
carrying amounts, since the interest payable on those borrowings is either
close to current market rates or the borrowings are of a short-term nature.
15. CAPITAL Commitments
30 June 31 December 2022
2023
£000s £000s
Contracted for but not provided in the interim financial statements: Property, 677 695
plant and equipment
The above commitments include capital expenditure of £527,000 (2022:
£256,000) relating to plant and machinery and production equipment for the
factory in China.
16. Dividends
The following amounts were recognized as distributions in the period:
Period ended Period ended
30 June 2023
30 June 2022
£000s £000s
Final 2022 dividend of 3.25p per share (H1 2022: 5.60p) - 11,601
Total dividends recognized in the period - 11,601
The aggregate amount of £7.1m for the proposed final dividend for year ended
31 December 2022 was paid on 11 August 2023 out of retained earnings at 31
December 2022. The payment of this dividend had no tax consequences for the
Group.
In addition to the above dividend, since the end of the period the Directors
have approved the payment of an interim dividend of 0.9p per share. The
aggregate amount of the interim dividend expected to be paid on 29th December
2023 out of retained earnings at 30 June 2023, but not recognised as a
liability at the period end, is £1,968,398.10. The payment of this dividend
will not have any tax consequences for the Group.
17. FUTURE LEASE LIABILITIES
The table below shows the split of future leases payable between current and
non-current in the condensed interim consolidated balance sheet:
30 June 31 December 2021
2023
£000s £000s
Current future lease liabilities (due within 12 months) 911 1,069
Non-current future lease liabilities (due in more than 12 months) 2,814 2,819
Total future lease liabilities payable 3,725 3,888
18. Cash flow statement notes
a) Cash generated from operations
Period ended Period ended
30 June 2023
30 June 2022
£000s £000s
Cash flows from operating activities
Operating profit 9,900 9,132
Adjustments for:
Depreciation of property, plant and equipment (note 9) 1,998 1,512
Depreciation of right-of-use assets (note 9) 607 479
Amortisation of intangible assets (note 8) 1,231 1,062
Share of losses from joint ventures 25 10
(Profit)/loss on disposal of property, plant and equipment (6) 40
Other non-cash flow items (14) 1,243
Share based payment transactions 86 572
Net exchange differences 488 (128)
14,315 13,922
Changes in working capital:
Increase in inventories (147) (4,223)
(Increase) / Decrease in trade and other receivables (769) 2,722
Decrease / (Increase) in trade and other payables 1,044 (2,662)
Cash generated from operations 14,443 9,759
b) Movement in net debt
Non-cash movements
At 1 January 2023 Cash flows Currency movements Other movements At 30 June 2023
£000s £000s £000s £000s £000s
Borrowings, net of loan arrangement fees (117,826) 3,661 - (350) (114,515)
Lease liabilities (3,888) 489 - (326) (3,725)
Total liabilities from financing activities (121,714) 4,150 - (676) (118,240)
Cash and cash equivalents 30,443 (8,327) (684) - 21,432
Net debt (91,271) (4,177) (684) (676) (96,808)
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 Operational
Board, representing members of the senior management team from all key
departments of the Group.
Period ended Period ended
30 June 2023
30 June 2022
£000s £000s
Salaries and other short-term employment benefits 1,045 1,003
Post-employment benefits 88 93
Termination - 74
Share-based payment transactions - 450
1,133 1,620
There are no defined benefit schemes for key management.
20. Post balance sheet events
The Group does not have any material events after the reporting period to
disclose.
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