REG - Strix Group PLC - Results for the year ended 31 December 2021
30/03/2022 07:00
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RNS Number : 4742G Strix Group PLC 30 March 2022
Strix Group Plc
("Strix", the "Group" or the "Company")
Preliminary results for the twelve months ended 31 December 2021
Financial Summary
Adjusted results(1)
FY 2021 FY 2020 FY 2019 Change (21 - 20) Change (21 - 19)
£m £m £m %(5) %(5)
Revenue 119.4 95.3 96.9 +25.3% +23.2%
Revenue - constant currency basis(2) 122.7 95.3 96.9 +28.8% +26.6%
Gross profit 47.4 39.4 39.6 +20.3% +19.7%
EBITDA(3) 40.5 38.1 36.9 +6.3% +9.8%
Operating profit 33.7 32.1 31.5 +5.0% +7.0%
Profit before tax 32.2 30.9 30.2 +4.2% +6.6%
Profit after tax 31.4 29.5 28.9 +6.4% +8.7%
Net debt(4) 51.2 37.2 26.3 +37.6% +94.7%
Net cash generated from operating activities 22.3 31.2 34.4 -28.5% -35.2%
Basic earnings per share (pence) 15.2 14.9 15.2 +2.0% +0.0%
Diluted earnings per share (pence) 14.9 14.3 14.1 +4.2% +5.7%
Total dividend per share (pence) 8.35 7.85 7.70 +6.4% +8.4%
1. Adjusted results exclude exceptional 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. Revenue - constant currency basis, which is defined as 2021
revenue restated at the exchange rates prevailing in 2020, is a non-GAAP
metric used by management and is not an IFRS disclosure.
3. 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.
4. Net debt excludes the impact of IFRS 16 lease liabilities,
pension liabilities, deferred tax liabilities and earn-out provisions on
satisfaction of performance conditions and providing post-combination
services. Net debt including earn-out provisions was £58.6m.
5. Figures are calculated from the full numbers as presented in
the consolidated financial statements.
Financial Highlights
• The Group reported revenue of £119.4m, an increase of 28.8% on a constant
currency basis versus the same period in prior year and an increase of 26.6%
on a constant currency basis versus the same period in 2019. This was driven
by both organic growth and the acquisition of LAICA which has delivered strong
revenue growth over the period.
• Adjusted EBITDA increased to £40.5m (2020: £38.1m), representing a 6.3%
increase compared to the same period last year and an increase of 9.8% versus
the comparable period in 2019. Adjusted EBITDA margin was 33.9% (2020: 40.0%)
and adjusted gross profit margin was 39.7% (2020: 41.4%), as a result of of
factors including the impact of a number of headwinds which continue to
persist including increases in commodity prices, freight cost inflation,
supply chain and adverse foreign exchange rates.
• Net debt (excluding the impact of IFRS 16 lease liabilities) increased to
£51.2m (2020: £37.2m) to fund the LAICA acquisition, continued investment
in compelling growth opportunities as well as new manufacturing operations
in China. This represents a net debt/adjusted EBITDA ratio (calculated on a
trailing twelve month basis) of 1.3x.
• Strong free cash flow generation with unique working capital cycle. Operating
free cash flow (before financing and tax and exceptional factory capex) to
EBITDA conversion of 70%.
• The Group has significant liquidity providing financial flexibility to
continue to deploy capital consistent with its allocation of capital
priorities and is focused on investing in compelling growth opportunities.
• Adjusted basic earnings per share and adjusted diluted earnings per share were
15.2p (2020: 14.9p) and 14.9p (2020: 14.3p) respectively.
• The Board is proposing an increased final dividend of 5.60p per share (2020:
5.25p) which would represent a total dividend of 8.35p per share (2020:
7.85p).
Strategic Highlights
• Remain on track to deliver medium-term targets to double the Group's revenues
primarily through growth in its water and appliances categories.
Expanded share of the global kettle controls market further 1% to 56% by
• value.
• Acquisiton of LAICA continues to be successfully integrated in line with plan
to achieve the identified benefits and the trading performance has been strong
over the period.
• New manufacturing operations within Zengcheng district in Guangzhou, China are
now fully operatonal and were delivered on time, to budget and executed during
a global pandemic.
Launches of Aurora and Dual Flo as key extensions of Strix domestic appliance
category, both with strong energy saving and sustainability benefits.
•
Excellent recent progress made in Strix's water category in Asia-Pacific,
Europe and North America through new distribution and private label contracts
with reputable distributors, retailers and brands in those regions.
•
Operational Highlights
• Production efficiency of core kettle products improved with 73% of all
assembly lines now fully automated.
• Launching of sustainability report and "Sustainable. Innovative. Dependable."
strategy.
• Industry leading and ambitious decarbonisation target - scope 1 & 2 net
zero by 2023 demonstrates commitment to sustainability agenda.
• New Strix.com website launched demonstrating the Company's vision of the
future.
• Successfully upgraded to SAP to improve real time data and streamline internal
processes.
Mark Bartlett, Chief Executive Officer of Strix Group plc, said:
"Strix has a robust business model and disciplined execution of our strategies
have underpinned the resilience of our performance throughout economic cycles,
so we remain confident in our ability to navigate the growing uncertainties
ahead and delivering on the medium-term strategic plan and delivering against
its targets."
CEO's report:
Introduction
In 2021 we have delivered a solid trading performance which has strengthened
the Group's position across its three product categories; kettle controls,
water, and appliances.
This performance demonstrates the resilience of Strix's business model, which
benefits from geographical and product diversification, and is strengthened
further by the Group's high cash generation and prudent control of its balance
sheet.
The Group has expanded its market leading value share of the global kettle
controls market whilst significantly expanding the size of its water category
through both organic growth and the strategically compelling acquisition of
LAICA which has delivered strong revenue growth over the period.
In addition, the Group has made solid progress against its medium-term target
to double Group revenues primarily through organic growth in its water and
appliances categories.
Financial performance
The Group reported revenue of £119.4m, an increase of 28.8% on a constant
currency basis, versus the same period in prior year and an increase of 26.6%
on a constant currency basis, versus the same period in 2019. This was driven
by both organic growth and the acquisition of LAICA which has delivered strong
revenue growth over the period.
Adjusted EBITDA increased to £40.5m (2020: £38.1m), representing a 6.3%
increase compared to the same period in prior year and an increase of 9.8%
versus the same period in 2019. Adjusted EBITDA margin was 33.9% (2020:
40.0%) and adjusted gross profit margin was 39.7% (2020: 41.4%), as a result
of LAICA's inclusion alongside a number of factors including the impact of a
number of headwinds which continue to persist including increases in commodity
prices, freight cost inflation, supply chain and adverse foreign exchange
rates.
Strix has a highly cash generative model which incorporates a high ROCE and a
high proportion of cash in advance payment terms limits risk of non-payment
and working capital fluctuations.
Net debt (excluding the impact of IFRS 16 lease liabilities) increased to
£51.2m (2020: £37.2m) to fund the LAICA acquisition, continued investment
in compelling growth opportunities as well as the new manufacturing operations
in China. This represents a net debt/adjusted EBITDA ratio (calculated on a
trailing twelve month basis) of 1.3x compared to 1.1x at the interim stage.
Strix is in a strong financial position with significant liquidity providing
flexibility to continue to deploy capital consistent with its allocation of
capital priorities and is focused on investing in compelling growth
opportunities, in particular on new product development and compelling
acquisition opportunities that supports the medium-term growth ambition of the
Group.
Given the Group's performance and confidence in the continued strength of its
cash generation, the Board is pleased to propose an increased final
dividend of 5.60p per share (2020: 5.25p) which would represent a total
dividend of 8.35p per share (2020: 7.85p).
Kettle control category
Overall, the kettle control category reported significant growth in revenue of
6.6% to £85.1m in 2021.
The market has continued to experience strong demand in 2021. Throughout this
period, Strix has grown its market leading position further to 56% of the
global kettle controls market by value and is continuing to expand both
geographically and in the number of specifications using its latest platform
ranges.
The first half of 2021 saw the Regulated segment grow with a strong
contribution from the UK, Mainland Europe and North America. Less regulated
segments also grew in a strong first half. The Chinese market experienced
some weakness during 2020, but this began to show a marked recovery in 2021
and Strix remains the leading supplier of controls in that market. However,
the second half of 2021 had significant headwinds impacting demand for the
full year with the total market showing a decline in value but still good
growth in volume in line with the market forecast of 3%.
Strix has also continued to focus product development on opportunities and
design improvements in a sustainable way to reduce the overall manufactured
product footprint within the Regulated, Less Regulated and China markets that
will further strengthen Strix's position and support our market share
aspirations.
Following the successful launch of the U9 Series during 2017, the Group has
successfully produced over 70 million controls to date. The Group continues to
develop this series with new variants launched to target the smaller size and
split switch kettle appliances to further enhance the portfolio of
best-in-class controls.
Continuous improvement initiatives in our manufacturing, measurement and
testing processes are a key focus to enhance product performance to help our
customers improve their sustainability ambitions, product quality and reduce
costs. Production efficiency of core kettle products improved with 73% of all
assembly lines now fully automated.
New product development
New product development remains a fundamental driver in the Group's core
business strategy, with specific focus on the identification of cross category
opportunities. The Group has made significant headway having delivered on the
targets outlined in the product development roadmap with the launch of
multiple new products. The Group has also re-focused its commercialisation
strategy, optimising cross category synergies within both our higher value
appliance and water categories.
Throughout 2021, in line with its medium-term growth ambitions, Strix has
multiple new product launches. The Group will continue to focus its highly
skilled engineering resource towards enhancing our core technologies and
innovating into new commercial markets in a sustainable manner.
Appliance category
Overall, the appliance category reported a significant growth in revenue of
244.2% to £12.9m in 2021.
Strix seeks to use its technology and innovation expertise to develop adjacent
products to solve problems in tangential markets in a sustainable way. The
Group looks to develop products offering meaningful benefits to customers
which can then be commercialised through existing relationships with
experienced and trusted OEM's and consumer appliance specialists.
In October 2021 the Company announced the launches of Aurora and Dual Flo as
key extensions of Strix domestic appliance category, both with strong energy
saving and sustainability benefits. Strix's mission within the Appliance
category is to develop products that allow consumers to live a safer, more
convenient, and sustainable life at home.
Aurora is powered by Strix's Instant Flow Heater technology, delivering
auto-dispensed hot, boiled, and chilled filtered water at the touch of a
button. The Aurora Hot was launched in Q4 2021 and is now listed and selling
well on Amazon, while the Aurora Chilled is on track to be in the market in
the second quarter of 2022. Aurora products have numerous environmental and
energy saving advantages. The Aurora has recently been awarded the Quiet Mark
award which is an industry accreditation aimed at encouraging companies
worldwide to prioritise noise reduction within product design. Strix recently
organised a virtual press event for the Aurora product to demonstrate the
product and the consumer insights behind it and raise retail awareness of
Strix's recent new product development activity.
The Visione induction kettle launched in December with a focussed marketing
campaign planned to increase awareness and sales this year. It has also
recently been awarded both the German Design Award 2022 and the reddot design
award, two prestigious awards in the industry.
Water category
Overall, the water category reported a significant growth in revenue of 82.3%
to £21.4m in 2021 with the combined contribution of LAICA and HaloPure
technology and has continued to develop its product base and progressed
towards our category growth aspirations.
LAICA has a considerable global presence, an established product range and an
advanced new product roadmap. The acquisition continues to be successfully
integrated in line with plan to achieve the identified benefits and the
trading performance has been strong over the period. It is already providing
some strategic consolidation opportunities in the water treatment range,
driving efficiencies and a comprehensive portfolio of products for the Group
globally.
The HaloPure technology also continues to gain wider recognition by the
market and has now secured 14 contracts, which demonstrates the continued
focus on commercialising this important product.
Strix previously highlighted that it had secured contracts at a regional
government owned livestock company in China and more recently the preliminary
result from new product development shows a significant breakthrough to apply
the HaloPure technology onto smaller size of livestock farms which will
enlarge the target addressable market. The prototype is currently undergoing
the field testing phase.
Excellent recent progress has been made in Strix's water category in
the Asia-Pacific ("APAC"), Europe and the North America through new
distribution and private label contracts with reputable distributors,
retailers and brands in those regions.
In South-East Asia, Strix recently entered into a significant distribution
agreement with a global consumer electronics manufacturer, under which its
water filtration technology and products will be introduced to local Asian
markets in Q2 2022.
In Europe, Strix has secured the supply of its water filtration technology and
products to one of Europe's largest consumer electronics retailers. Strix has
also appointed a new distributor for Denmark who will take a range of Aqua
Optima jugs and filters.
Additionally, new retail listings for the Aqua Optima range have also been won
across the UK and Ireland growing the brand's presence across the region with
more than 200 additional store listings across well-known high street and
independent retailers. Strix now also has a presence in the hardware
and garden centre market in the UK with listings of its Aqua Optima jugs
and filters.
In the US, the Company has recently appointed an additional distributor for
the North American region. The distributor has an excellent track record in
supplying major consumer electronics brands.
Operations review
The new manufacturing operations within Zengcheng district in Guangzhou,
China are now fully operational and were delivered on time and to budget
during a global pandemic. The new factory will double the Group's current
manufacturing capacity enabling it to grow the business and deliver its stated
medium term strategy of doubling revenues. Efficiencies and further
in-sourcing arising from the new manufacturing facility are expected to have a
positive effect on margins.
Additionally, in light of the recent lockdowns in China, Strix is holding
finished stock in different districts in order to minimise any disruption and
continues to take proactive measures above the governmental regulations being
implemented globally.
Barriers to entry and defence of intellectual property
Strix constantly assesses the risks posed by competitive threats and sees the
real benefits of market disruption which drives its determination to
constantly evolve its innovative technologies in a sustainable way by
investing in its portfolio of intellectual property to protect its new
products.
The Group actively monitors the markets in which its operates for violation of
our intellectual property rights. Strix has unique relationships with its
brands, OEMs and retailers and provides its support across the value chain and
throughout the product lifecycle, including product design and advice on
specification and manufacturing solutions. These value-added services and
existing strong relationships ensure brands, OEMs and retailers continue to
rely on Strix's components and support.
Strix remains committed to consumer safety and continue to prompt regulatory
enforcement authorities to remove unsafe and poor quality products from our
major markets. Nine such actions 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 our
business and there have now been 66 in total since 2017.
Sustainability
In 2020, the Group reassessed its approach to sustainability with a view of
integrating a sustainability strategy within core business activities aligning
ourselves with the UN's Sustainable Development Goals (SDGs). Today, Strix is
launching its sustainability report and its "Sustainable. Innovative.
Dependable." strategy.
An internal management and reporting structure has been put in place to ensure
inclusion, responsibility and accountability from the shop floor to the
boardroom. Strix has developed metrics of sustainability measures which have
been standardised and are being rolled out across the organisation. The
Group's latest and highly ambitious step sees the externalisation of our
sustainability KPIs as set out in the sustainability report available via this
link: https://www.strixplc.com/sustainability.html. Measuring, committing and
reporting on progress will ensure that these factors will be a key driving
force in the direction of the business.
Strix has focused on climate change and carbon emissions as a key KPI for
2022. Our Scope 1&2 emissions emanate primarily from our manufacturing
plants, especially the new facility in China which has been commissioned.
Strix has set an ambitious target for net zero Scope 1&2 emissions by
2023. The Group believes this to be 'best-in-class' and far in excess of the
Paris 1.5°C scenario requirements.
In addition, our goal is to achieve over 95% of this through reduction of our
own emissions with less than 5% from carbon offsets. To achieve this ambitious
target, the Group has invested over £0.6m into a solar array at our new
Chinese manufacturing site which will provide over 10% of the required
electricity with the remainder due to be switched to renewable electricity in
2022.
Diversity is important to Strix as a business and 60% of the work force is
female, 40% at the C-suite level and 27% at the senior management level. The
target is to further embed diversity thinking throughout the organisation and
work to promote gender diversity of the Group's senior management.
LAICA is also targeting a combination of solar and renewable electricity
although with the integration currently at the fore this is expected to be
implemented through 2022. Strix are also developing a range of programmes to
reduce our emissions, for instance China and now the Isle of Man has started
to move to electric cars. The Isle of Man will take the lead on alternative
offsetting of our 'hard to remove' emissions using the SBTi mitigation
hierarchy.
Our other sustainability KPIs are taken from key operating practices already
embedded into our culture. Promotion of the sustainability agenda and KPIs is
generating renewed emphasis on these activities. This has included additional
planning and pathways to improvement and, where applicable, setting of
ambitious future targets. Strix expects to enunciate further on these plans in
the coming year. These KPIs are important but the Group also remains committed
to other areas of our sustainability agenda. This is highlighted in our
community engagement where we have an aspiration to increase volunteer hours
by 10% a year.
The next few years will see significant planning and project execution as
Strix looks to advance the KPIs and set ever ambitious goals but this is a
critical aspect of Strix's vision to establishing a world leading innovative
and sustainable technology business.
Dividend policy
Given the Group's performance and confidence in the continued strength of its
cash generation the Board proposes an increase in the final dividend to 5.60p
per share (2020: 5.25p) which would represent a total dividend of 8.35p per
share (2020: 7.85p). The Board reiterates its intention to implement a
progressive dividend policy that is linked to underlying earnings.
The final dividend will be paid on 10 June 2022 to shareholders on the
register at 13 May 2022 and the shares will trade ex-dividend from 12 May
2022.
Financial Position
Strix is in a strong financial position with significant liquidity providing
flexibility to continue to deploy capital consistent with its allocation of
capital priorities and is focused on investing in compelling growth
opportunities, in particular on new product development and commercialisation
strategy that supports the medium-term growth ambition of the Group.
The Company also continues to seek the acquisition of technologies that will
add further strategic value across the Group and has a buoyant pipeline of
opportunities it is tracking closely. Following the successful integration of
LAICA, the Group is now actively considering a number of potential acquisition
targets.
Outlook
The Group reported revenue increase of 28.8% on a constant currency
basis, versus the same period in prior year and an increase of 26.6% on a
constant currency basis, versus the same period in 2019. This was driven by
both organic growth and the acquisition of LAICA which has delivered strong
revenue growth over the period.
Strix has successfully implemented price increases on some of its legacy
products in both kettle controls and water categories and will also be
implementing further increases across the wider range with effect from 1 May
2022, which alongside a range of other efficiency measures and foreign
exchange rate and commodity hedging arrangements will help to minimise the
impact of any cost inflation.
Notwithstanding the positive demand backdrop, there are a number of headwinds
which continue to persist including increases in commodity prices, freight
cost inflation, supply chain and adverse foreign exchange rates which
implies the Group will continue to face a challenging operating environment.
The Group also has no direct sales into Russia and any products sold into that
region are typically from a Chinese based OEM which equated to total revenues
of circa £3m in 2021.
Strix has a robust business model and disciplined execution of our strategies
have underpinned the resilience of performance throughout economic cycles, so
remains confident in its ability to navigate the growing uncertainties ahead
and remain confident of delivering on the medium-term strategic plan and
delivering against its targets.
CFO's report:
Adjusted results(1) Reported results
FY 2021 FY 2020 FY 2019 Change (21 - 20) Change (21 - 19) FY 2021 FY 2020 FY 2019 Change Change
(21 - 20) (21 - 19)
£m £m £m %(5) %(5) £m £m £m %(5) %(5)
Revenue 119.4 95.3 96.9 +25.3% +23.2% 119.4 95.3 96.9 +25.3% +23.2%
Revenue - constant currency basis(2) 122.7 95.3 96.9 +28.8% +26.6% 122.7 95.3 96.9 +28.8% +26.6%
Gross profit 47.4 39.4 39.6 +20.3% +19.7% 43.8 38.9 39.4 +12.6% +11.2%
EBITDA(3) 40.5 38.1 36.9 +6.3% +9.8% 30.6 32.6 29.6 -6.1% +3.4%
Operating profit 33.7 32.1 31.5 +5.0% +7.0% 23.7 26.6 24.2 -10.9% -2.1%
Profit before tax 32.2 30.9 30.2 +4.2% +6.6% 21.5 25.5 22.9 -15.7% -6.1%
Profit after tax 31.4 29.5 28.9 +6.4% +8.7% 20.6 24.1 21.5 -14.5% -4.2%
Net debt(4) 51.2 37.2 26.3 +37.6% +94.7% 51.2 37.2 26.3 +37.6% +94.7%
Net cash generated from operating activities 22.3 31.2 34.4 -28.5% -35.2% 22.3 31.2 34.4 -28.5% -35.2%
Basic earnings per share (pence) 15.2 14.9 15.2 +2.0% +0.0% 10.0 12.2 11.3 -18.0% -11.5%
Diluted earnings per share (pence) 14.9 14.3 14.1 +4.2% +5.7% 9.8 11.7 10.5 -16.2% -6.7%
Total dividend per share (pence) 8.35 7.85 7.70 +6.4% +8.4% 8.35 7.85 7.70 +6.4% +8.4%
6. Adjusted results exclude exceptional 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.
7. Revenue - constant currency basis, which is defined as 2021
revenue restated at the exchange rates prevailing in 2020, is a non-GAAP
metric used by management and is not an IFRS disclosure.
8. 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.
9. 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. Net debt including earn-out provisions was £58.6m.
10. Figures are calculated from the full numbers as presented in the
consolidated financial statements.
Financial performance
Revenue increased by 25.3% to £119.4m (FY 2020 £95.3m). This was partly due
to the inclusion of LAICA S.p.A ("LAICA") revenues of £22.7m in FY 2021 (FY
2020: £4.1m), with the remaining increase of £5.5m (representing a 6.0%
increase from comparative prior year) realised from organic growth. Revenue
increased by 23.2% above FY 2019 levels.
Revenue on a constant currency basis showed an increase of 28.8% from FY 2020.
This was impacted by the weakening of foreign currencies against Pound
Sterling during the current year compared to FY 2020, which would have
effectively increased the Pound Sterling value of revenues for products that
are priced in foreign currency, had the foreign currency exchange rates
remained constant.
Adjusted gross profit increased by 20.3% to £47.4m (FY 2020: £39.4m), which
included the full year effect of LAICA's contribution compared to only 2
months' in the prior year. Increase in gross profits was driven by growth in
the sale of appliances, which were 59.9% higher compared to the same period in
the prior year, realised from new products launched in this category and
selling well on Amazon, with more sales expected in FY 2022 in anticipation of
increased demand and further planned new product listings. Reported gross
profits increased by 12.6% to £43.8m (FY 2020: £38.9m).
Adjusted gross profit margin in FY 2021 was 39.7% (FY 2020: 41.4%), showing a
margin dilution of 1.6% attributable mainly to increases in commodity prices
and inward freight costs experienced in global supply chains in the wake of
the pandemic recovery, adverse foreign currency exchange rate movements due to
the weakening of foreign currencies against the Pound Sterling, and direct
labour wage increases as the Group expanded its labour force in line with
meeting its medium-term targets. These adverse factors were partially offset
by product price increases in the current year, adoption of lean and automated
manufacturing processes with in-sourcing of commodities from increased
production capacity at the new manufacturing plant, inclusion of sales from
LAICA for the full year with its higher margins products, and market growth in
the Group's kettle controls and appliances categories.
Adjusted EBITDA stood at £40.5m (FY 2020: £38.1m), increasing by 6.3%, with
the full year effect of LAICA's contribution compared to only 2 months' in the
prior year. Adjusted EBITDA is defined as profit before depreciation,
amortisation, finance costs, finance income, taxation, and exceptional items
including share based payments. Reported EBITDA decreased 6.1% to £30.6m (FY
2020: £32.6m).
Adjusted EBITDA margin in FY 2021 was 33.9% (FY 2020: 40.0%), representing a
dilution of 6.1%. In addition to the factors mentioned above which contributed
to a 1.6% dilution in the adjusted gross profit margin, other factors which
played a role in the dilution of adjusted EBITDA during H1 2021 continued into
the second half of the year, which were higher outward carriage and freight
costs experienced globally throughout the entire year as the supply chains
felt the impacts of recovery from the pandemic, higher payroll costs as the
Group continued to increase its headcount in line with management expectations
and medium-term targets, and higher advertising and promotional costs as the
Group continued to widen its product reach in its water and appliances
categories. These cost implications have a similar effect on dilution of the
other adjusted KPI margins of operating profit, profit before tax and profit
after tax throughout the year.
Adjusted operating profits increased by 5.0% to £33.7m (FY 2020: £32.1m),
showing an increase of £1.6m, mainly attributable to LAICA. Reported
operating profits were lower by 10.9% to £23.7m (FY 2020: £26.6m) after
deducting exceptional costs of £10.0m (FY 2020: £5.5m) which increased
mainly due to reason described in the "Costs" section further below.
Adjusted profit before tax was £32.2m (FY 2020: £30.9m), an increase of
£1.3m (4.2%) from prior year which included the full year effect of LAICA's
contribution. Reported profit before tax was £21.5m (FY 2020: £25.5m).
Interest charges recognised were higher than those in the prior year, in line
with an increase in the Net Debt, and also due to exceptional finance costs of
£0.8m relating to the discounted unwinding of present values of contingent
liabilities recognised on acquisition of LAICA in 2020.
Adjusted profit after tax was £31.4m (FY 2020: £29.5m), an increase of
£1.9m (6.4% increase). The tax expense decreased in the current year mainly
due to certain tax measures adopted with the move of operations to the new
factory. Reported profit after tax was £20.6m (FY 2020: £24.1m). The
effective tax rate on adjusted profit before tax in FY 2021 was 2.7% (FY 2020:
4.5%).
Costs
Costs in FY 2021 increased across the board compared to the prior year, partly
in support of the increase in sales and the inclusion of LAICA's full year
results, but also caused by global inflationary prices increases seen in major
supply chain channels in all industries due to remnant impacts of recovery
from the COVID-19 pandemic.
Cost of sales (excluding exceptional costs) increased to £72.0m (FY 2020:
£55.9m). In addition to increases in line with sales, the main drivers of
increase in costs were higher commodity and labour costs, increased inward
carriage and freight costs, and higher energy costs, all following general
global inflationary trends as the world recovered from the pandemic. Higher
costs were also seen for product approvals in line with a number of new
product launches within the Group's appliances category which prompted new
patent and trademark applications to be filed in line with the Group's vision
and mission of offering safer and sustainable products.
Distribution costs increased to £9.2m (FY 2020: £5.0m), continuing on from
the upward trends seen in the first half of the year, with main drivers being
higher outward carriage and freight costs, higher payroll costs, and increased
advertising and promotional costs as the Group widened its reach to the
markets with new product listings.
Administration costs (excluding exceptional costs) increased to £5.1m (FY
2020: £3.5m), increasing mainly due to the inclusion of LAICA, and also as a
result of higher payroll costs seen across all departments as the Group
increased its headcount in line with management expectations and medium-term
targets, and increased ERP costs as the Group continues to improve on its
newly implemented ERP system in the prior year in order to increase
operational efficiencies.
Exceptional costs increased mainly due to LAICA acquisition-related strategic
costs, the removal and write-off of assets and land and factory relocation
costs associated with the move from the old factory to the new Chinese
manufacturing plant as of 27 August 2021, which was completed within the
budget of circa £20m. Refer to note 6 of the Group's financial statements for
details on exceptional items.
Cash flow
Net cash generated from operating activities decreased to £22.3m (FY 2020:
£31.2m) mainly due to the Group's investment in net working capital in the
current year. Net working capital movements in FY 2021 increased, reflecting a
cash outflow of £11.4m compared to prior year (FY 2020: £1.7m outflow). The
increase is shown mainly in increased stock holdings at year-end due to
forward procurement of commodities to secure future profits, and increased
debtors in line with an increase in sales, and also due to Chinese VAT of
£4.2m receivable from completion of the new factory, which will be reclaimed
in FY 2022/23. Change in creditors remained relatively flat during the
year.
Cash outflows for investing activities decreased by £7.2m from the prior year
mainly due to cash outflows in the prior year to fund the acquisition of
LAICA, which were much lower in the current year. The new manufacturing plant
in China was fully operational as of the 27 August 2021, with production and
assembly lines installed, and having been completed on budget and on time.
Total factory construction costs were in line with budget of circa £20m.
Cash outflows for financing activities decreased by £3.8m from prior year,
driven by the offsetting impact of increased drawdowns from the revolving
credit facility to fund investment in anticipated future commodity price
inflation.
Balance Sheet
Property, plant and equipment increased to £42.8m (FY 2020: £37.2m), a net
increase of £5.6m. The majority of the increase, amounting to £4.7m (FY
2020: £9.1m) is attributable to capital expenditure in the current year to
complete the construction of new factory in China, which became fully
operational on 27 August 2021 and was completed on time and within budget of
£20m. The remainder of the increase in property, plant and equipment is
attributable to the increase in plant and machinery and production tools of
£6.3m for the new factory, and the increase of equipment and other assets of
£2.5m, partly in the form of computer equipment in support of the new ERP
system that was implemented in the prior year, partially offset by the
write-off of old assets from the old factory with a net book value of circa
£1.6m, the sale of LAICA buildings with a net book value of circa £1.7m in a
sale and leaseback arrangement, and depreciation charges of £4.6m (FY 2020:
£4.5m).
Intangible assets increased to £30.5m (FY 2020: £29.7m) reflecting a net
increase of £0.8m. The net increase is due to additions of circa £5.1m, the
majority of which are capitalised development costs from the new product
development projects of circa £3.6m, and computer software and intellectual
property totalling £1.5m. These additions were offset by amounts totalling
circa £2.0m relating to foreign exchange losses from translation of
intangible assets recognised at acquisition date that are held by LAICA as a
foreign operation, reassessment (during the measurement period) of the fair
values of LAICA net assets acquired and recognised in the prior year, and
transfers of intangible assets under construction to property, plant and
equipment. The total amortisation charge was £2.3m (FY 2020: £1.5m).
Current assets increased to £45.5m (FY 2020: £35.9m), an increase of £9.6m.
This is attributable mainly to increases in inventories by £4.8m due to
higher stocks held at year-end to protect against increases in commodity
prices, and increases in trade debtors and prepayments by £4.8m in line with
an increase in sales.
Current liabilities (including tax liabilities, but excluding short-term
portions of long-term liabilities) decreased to £27.5m (FY 2020: £30.2m), a
decrease of £2.7m. The majority of the decrease is driven by payments in
the current year of additional earn-out entitlements that had been accrued as
payable in the prior year for the acquisition of LAICA, as well as a decrease
in the tax liabilities due to payments made in the current year.
Non-current liabilities (including short-term portions) increased to £85.0m
(FY 2020: £66.0m), an increase of £18.9m, mainly driven by further
drawdowns in the year from the revolving credit facility as aforementioned,
and outstanding amounts accrued as contingent liabilities (earn-out
provisions) payable in FY 2022 and FY 2023 to the previous owners of LAICA
upon meeting certain performance conditions and providing post-combination
services as part of the acquisition of the subsidiary in the prior year.
Net debt
The Group's net debt position, excluding IFRS 16 lease liabilities, pension
liabilities, deferred tax liabilities and earn-out provisions, as at 31
December 2021 increased to £51.2m (FY 2020: £37.2m).
Total committed debt facilities at 31 December 2021 amounted to £70.0m,
giving available liquidity of £28.8m. Net debt equated to 1.31 times trailing
twelve months' EBITDA, which compares favourably to our debt covenant of 2.50
times. This continues to underpin the Group's strong cash generation
ability.
Dividend
The Board proposes an increased final dividend of 5.60p per share (FY 2020:
5.25p) which would represent a total dividend of 8.35p per share (2020:
7.85p) and given the Group's performance in FY 2021 and confidence in the
continued strength of its cash generation, reiterates our intention to
implement a progressive dividend policy linked to underlying earnings for the
full year.
The final dividend will be paid on 10 June 2022 to shareholders on the
register at 13 May 2022 and the shares will trade ex-dividend from 12 May
2022.
Directors' report
for the year ended 31 December 2021
The Directors present their report together with the audited consolidated
financial statements of Strix Group Plc ("the Company") for the year ended 31
December 2021.
Principal activities of the Group
The principal activities of Strix Group Plc and its subsidiaries (together
"the Group") are the design, manufacture and supply of kettle safety controls
and other components and devices involving water heating and temperature
control, steam management and water filtration.
Business review and future developments
The Group has remained resilient during 2021 as the world recovers from the
global impact of the COVID-19 pandemic in the wake of a "new normal". As a
result of further funding for the completion of the new factory and adverse
effects of net working capital movements to fund ongoing operations, the
Group's net debt position increased to £51.2m (2020: £37.2m), excluding the
impact of IFRS 16 lease liabilities.
The new manufacturing operations within Zengcheng district in Guangzhou, China
are now fully operational and were delivered on time and to budget, and all
was executed during a global pandemic.
Results and dividends
The Group recorded revenue in the year of £119.4m (2020: £95.3m) and a
profit after tax of £20.6m (2020: £24.1m).
The Directors recommend a final dividend for the year of 5.6p per share which,
if approved at the Annual General Meeting ('AGM') on 26 May 2022, will be
payable on 10 June 2022 to shareholders who are on the register at 13 May 2022
and the shares will trade ex-dividend from 12 May 2022. Together with the
interim dividend paid during the year of 2.75p per share, this will result in
a total dividend of 8.35p per share.
Financial risk management
Information relating to the financial risks of the Group have been included
within note 22, "Financial risk management".
Directors and their interests
The Directors of the Company who were in office during the year and up to the
date of signing the consolidated financial statements were:
· Mark Bartlett
· Mark Kirkland
· Gary Lamb
· Raudres Wong
· Richard Sells
Mark Kirkland will retire by rotation in accordance with the Company's
Memorandum and Articles of Association and will be proposed for re-election at
the AGM on 26 May 2022. The Directors who held office during the year and as
at 31 December 2021 had the following interests in the number of ordinary
shares of the Company:
Name of Director 2021 2020
Mark Bartlett 2,410,878 3,400,000
Mark Kirkland 8,710 -
Gary Lamb 250,000 500,000
Raudres Wong 1,802,075 2,200,000
Richard Sells - -
In addition to the interests in ordinary shares shown above, the Group
operates a performance share plan ("the LTIP") for senior executives, under
which certain Directors have been granted conditional share awards. Subject to
achieving performance targets, the maximum number of ordinary shares which
could be issued to Directors in the future under such awards at 31 December
2021 is shown below:
2021 2020
Mark Bartlett 519,531 603,953
Raudres Wong 499,920 584,197
The market price of the Company's shares at the end of the financial year was
303.5p (2020: 220.0p) and the range of market prices in the year was between
220.0p and 385.0p (2020: between 134.8p and 245.5p).
No changes took place in the interests of Directors between 31 December 2021
and the date of signing the consolidated financial statements.
Directors' indemnities and insurance
The Articles permit the Board to grant the Directors indemnities in relation
to their duties as Directors, including third party indemnity provisions
(within the meaning of the Isle of Man Companies Act 2006) in respect of any
liabilities incurred by them in connection with any negligence, default,
breach of duty or breach of trust in relation to the Company. Deeds of
indemnity have been granted to each Director, but do not cover criminal acts.
Directors' and Officers' liability insurance cover is in place at the date of
this report. The Board remains satisfied that an appropriate level of cover is
in place and a review of the levels of cover takes place on an annual basis.
Going concern
After making appropriate enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future and for at least one year
from the date of issue of these consolidated financial statements. As a
result, the Directors continue to adopt the going concern basis in preparing
the consolidated financial statements.
Further details are provided in note 2 of the financial statements.
Independent auditor
The auditor, PricewaterhouseCoopers LLC, has indicated its willingness to
continue in office and a resolution concerning reappointment will be proposed
at the AGM.
On behalf of the Board
Raudres Wong
Director
29 March 2022
Statement of Directors' responsibilities in respect of the financial
statements
for the year ended 31 December 2021
The Directors are responsible for preparing the consolidated financial
statements in accordance with applicable laws and regulations. The Directors
have elected to prepare the consolidated financial statements in accordance
with International Financial Reporting Standards ("IFRSs") as adopted by the
European Union.
In preparing the consolidated financial statements, the Directors are
responsible for:
· selecting suitable accounting policies and applying them consistently;
· stating whether IFRSs as adopted by the European Union, have been followed
subject to any material departures disclosed and explained in the financial
statements;
· making judgements and accounting estimates that are reasonable and prudent;
· preparing the consolidated financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue in
business; and
· preparing consolidated financial statements which give a true and fair view of
the state of affairs of the Group and of the profit or loss of the Group for
that period.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group. They are
also responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
Raudres Wong
Director
29 March 2022
Independent auditor's report
Our opinion
In our opinion the consolidated financial statements give a true and fair view
of the consolidated financial position of Strix Group Plc (the "Company") and
its subsidiaries (together the "Group") as at 31 December 2021 and of its
consolidated financial performance and its consolidated cash flows for the
year then ended in accordance with International Financial Reporting Standards
as adopted by the European Union.
What we have audited
Strix Group Plc's consolidated financial statements (the "financial
statements") comprise:
· the consolidated statement of financial position as at 31 December 2021;
· the consolidated statement of comprehensive income for the year then ended;
· the consolidated statement of changes in equity for the year then ended;
· the consolidated statement of cash flows for the year then ended; and
· the notes to the financial statements, which include significant accounting
policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
("ISAs"). Our responsibilities under those standards are further described in
the "Auditor's responsibilities for the audit of the financial statements"
section of our report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the International Code of
Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants
("IESBA Code"). We have fulfilled our other ethical responsibilities in
accordance with the IESBA Code.
Our audit approach
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
considered where the Directors made subjective judgements; for example, in
respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our
audits, we also addressed the risk of management override of internal
controls, including among other matters, consideration of whether there was
evidence of bias that represented a risk of material misstatement due to
fraud.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key audit How our audit addressed the key audit matters
matters
Revenue Recognition Our audit work included, but was not restricted to:
Refer to notes 2 and 7 to the financial statements. · Obtaining a detailed understanding of the standard flows of
transactions for each material revenue stream;
Fraud Risk - Revenue recognition through inappropriate manual journal entries.
· Employing data analytics tools to trace revenue transactions to cash
The Directors and management participate in reward and incentive schemes, receipts; and to identify transactions which did not follow the standard
including share-based payment programs that may incentivise or place pressure flows, which were verified to originating documentation to confirm that the
on the Directors and management to manipulate revenue recognition. entries were valid;
There is a risk that management may override controls to intentionally
misstate revenue transactions by recording fictitious revenue transactions
through inappropriate manual journal entries.
· Considering the stated accounting policy in respect of revenue
recognition and whether it is compliant with International Financial Reporting
Standard (IFRS) 15 "Revenue from contracts with customers";
· Testing significant controls in relation to the sales process,
including the automated generation of invoices and packing lists, and approval
of changes to standing data;
· Testing revenue cut-off around the year-end by selecting a sample of
transactions from either side of the year-end to supporting documentation, as
well as reviewing post year-end credit notes issued for indications of revenue
manipulation; and
· Testing a sample of revenue transactions back to the purchase order,
the invoice and proof of receipt from the client to confirm occurrence and
accuracy of the transaction.
Based on our work we did not identify any evidence of inappropriate management
override in respect of the amount of revenue recorded through inappropriate
journal entries.
Other information
The other information comprises the Directors' Report and the Statement of
Directors' Responsibilities (but does not include the financial statements and
our auditor's report thereon), which we obtained prior to the date of the
auditor's report, and the other information to be included in the annual
report and accounts, which is expected to be made available to us after that
date. The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When
we read the other information to be included in the annual report and
accounts, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the Directors.
Responsibilities of the Directors for the financial statements
The Directors are responsible for the preparation of the financial statements
that give a true and fair view in accordance with International Financial
Reporting Standards as adopted by the European Union and Isle of Man law, and
for such internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
· Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Group's
internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Directors.
· Conclude on the appropriateness of the Directors' use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
· Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves
fair presentation.
· Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our
audit.
We also provide the Directors with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters
that were of most significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe these
matters in our auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
This report, including the opinion, has been prepared for and only for the
Company's members as a body in accordance with our engagement letter dated 27
January 2022 and for no other purpose. We do not, in giving this opinion,
accept or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Nicholas Halsall
for and on behalf of PricewaterhouseCoopers LLC
Chartered Accountants
Douglas, Isle of Man
29 March 2022
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Note 2021 2020
£000s £000s
Revenue 7 119,410 95,305
Cost of sales - before exceptional items (71,986) (55,896)
Cost of sales - exceptional items 6 (3,578) (504)
Cost of sales (75,564) (56,400)
Gross profit 43,846 38,905
Distribution costs (9,168) (5,001)
Administrative expenses - before exceptional items (5,107) (3,479)
Administrative expenses - exceptional items 6 (6,363) (4,952)
Administrative expenses (11,470) (8,431)
Share of (losses)/profits from joint ventures (50) 61
Other operating income 562 1,101
Operating profit 23,720 26,635
Analysed as:
Adjusted EBITDA((1)) 40,540 38,080
Amortisation 11 (2,310) (1,477)
Depreciation 12 (3,173) (3,042)
Right of use depreciation 12 (1,396) (1,470)
Exceptional items 6 (9,941) (5,456)
Operating profit 23,720 26,635
Finance costs 8 (2,226) (1,194)
Finance income 13 13
Profit before taxation 21,507 25,454
Income tax expense 9 (860) (1,384)
Profit for the year 20,647 24,070
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations (1,693) 31
Total comprehensive income for the year 18,954 24,101
Profit for the year attributable to:
Equity holders of the Company 20,599 24,049
Non-controlling interests 48 21
20,647 24,070
Total comprehensive income for the year attributable to:
Equity holders of the Company 18,736 24,120
Non-controlling interests 218 (19)
18,954 24,101
Earnings per share (pence)
Basic 10 10.0 12.2
Diluted 10 9.8 11.7
1. (Adjusted EBITDA, which is defined as earnings before finance costs,
tax, depreciation, amortisation, and exceptional items, is a non-GAAP metric
used by management and is not an IFRS disclosure)
The notes form part of these consolidated financial statements.
Consolidated statement of financial position
as at 31 December 2021
Note 2021 2020
ASSETS £000s £000s
Non-current assets
Intangible assets 11 30,468 29,648
Property, plant and equipment 12 42,763 37,205
Investments in joint ventures 28 92
Net investments in finance leases 15 -
Total non-current assets 73,274 66,945
Current assets
Inventories 15 20,022 15,224
Trade and other receivables 16 25,511 20,672
Cash and cash equivalents 17 19,670 15,446
Total current assets 65,203 51,342
Total assets 138,477 118,287
EQUITY AND LIABILITIES
Equity
Share capital and share premium 24 13,139 13,130
Share based payment reserve 23 2,039 1,913
Retained earnings 10,146 6,290
Non-controlling interests 681 716
Total equity 26,005 22,049
Current liabilities
Trade and other payables 18 25,886 27,151
Borrowings 19 1,064 2,220
Future lease liabilities 26 773 1,254
Contingent consideration 14 6,082 -
Current income tax liabilities 18 1,631 3,048
Total current liabilities 35,436 33,673
Non-current liabilities
Future lease liabilities 26 2,598 2,846
Deferred tax liability 14 2,303 2,558
Borrowings 19 69,782 50,426
Contingent consideration 14 1,382 5,380
Post-employment benefits 5(c) 971 1,355
Total non-current liabilities 77,036 62,565
Total liabilities 112,472 96,238
Total equity and liabilities 138,477 118,287
The consolidated financial statements were approved and authorised for issue
by the Board of Directors on 29 March 2022 and were signed on its behalf by:
Mark
Bartlett
Raudres Wong
Director
Director
Consolidated statement of changes in equity
for the year ended 31 December 2021
Share capital and share premium Share based payment reserve Retained (deficit) / earnings Total Equity attributable to owners Non-controlling interests Total Equity
£000s £000s £000s £000s £000s £000s
Balance at 1 January 2020 1,900 13,063 (14,052) 911 - 911
Profit for the year - - 24,049 24,049 21 24,070
Other comprehensive income / (expenses) - - 71 71 (40) 31
Total comprehensive income for the year - - 24,120 24,120 (19) 24,101
Dividends paid (note 25) - - (15,310) (15,310) - (15,310)
Dividends paid to non-controlling interests - - 108 108 (108) -
Acquisition of LAICA S.p.A. (note 14) - - - - 843 843
Transfers between reserves (note 23) - (13,019) 13,019 - - -
Issue of shares (note 24) 11,230 - - 11,230 - 11,230
Share based payment transactions (note 23) - 1,869 - 1,869 - 1,869
Total transactions with owners recognised directly in equity 11,230 (11,150) (2,183) (2,103) 735 (1,368)
Other transactions recognised directly in equity (note 23) - - (1,595) (1,595) - (1,595)
Balance at 1 January 2021 13,130 1,913 6,290 21,333 716 22,049
Profit for the year - - 20,599 20,599 48 20,647
Other comprehensive income / (expenses) - - (1,863) (1,863) 170 (1,693)
Total comprehensive income for the year - - 18,736 18,736 218 18,954
Dividends paid (note 25) - - (16,510) (16,510) - (16,510)
Dividends paid to non-controlling interests - - 253 253 (253) -
Transfers between reserves (note 23) 9 (1,249) 1,240 - - -
Share based payment transactions (note 23) - 1,549 - 1,549 - 1,549
Total transactions with equity holders recognised directly in equity 9 300 (15,017) (14,708) (253) (14,961)
Other transactions recognised directly in equity - (174) 137 (37) - (37)
Balance at 31 December 2021 13,139 2,039 10,146 25,324 681 26,005
The notes form part of these consolidated financial statements.
Consolidated statement of cash flows
for the year ended 31 December 2021
2021 2020
Note £000s £000s
Cash flows from operating activities
Cash generated from operations 27 24,206 32,120
Tax paid (1,916) (908)
Net cash generated from operating activities 22,290 31,212
Cash flows from investing activities
Purchase of property, plant and equipment (12,049) (12,999)
Capitalised development costs 11 (3,609) (2,808)
Purchase of LAICA S.p.A. net of cash acquired 14 (1,605) (6,735)
Purchase of other intangibles 11 (1,487) (1,642)
Proceeds on sale of property, plant and equipment 1,750 -
Finance income 13 13
Net cash used in investing activities (16,987) (24,171)
Cash flows from financing activities
Drawdowns under credit facility 19 24,000 22,193
Repayment of borrowings 19 (5,820) (12,339)
Finance costs paid 19 (1,170) (1,951)
Principal elements of lease payments 26 (1,562) (1,455)
Proceeds from issue of new shares 23 - 3,800
Dividends paid 25 (16,510) (15,310)
Dividends paid to non-controlling interests (254) (63)
Net cash used in financing activities (1,316) (5,125)
Net increase in cash and cash equivalents 3,987 1,916
Cash and cash equivalents at the beginning of the year 15,446 13,658
Effects of foreign exchange on cash and cash equivalents 237 (128)
Cash and cash equivalents at the end of the year 19,670 15,446
The notes part of these consolidated financial statements.
Notes to the consolidated financial statements
for the year ended 31 December 2021
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.
2. PRINCIPAL ACCOUNTING POLICIES
The Group's principal accounting policies, all of which have been applied
consistently to all of the years presented, are set out below.
Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and International
Financial Reporting Standards Interpretation Committee ("IFRS IC")
interpretations as adopted by the European Union. The financial statements
comply with IFRS as issued by the International Accounting Standards Board
(IASB). The financial statements have been prepared on the going concern
basis.
The preparation of consolidated financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's
accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in note 3.
Historical cost convention
The financial statements have been prepared on a historical cost basis, except
for the following:
· contingent consideration - measured at fair value
Basis of consolidation
The consolidated 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 consolidated
financial statements.
Business combinations
Business combinations are accounted for using the acquisition method as at the
acquisition date with the assets and liabilities of subsidiaries being
measured at their fair values. Any excess of the cost of acquisition over the
fair values of the identifiable net assets acquired is recognised as goodwill.
The Group measures goodwill at the acquisition date as:
· the fair value of the consideration transferred; plus
· the recognised amount of any non-controlling interests in the acquiree; plus
· if the business combination is achieved in stages, the fair value of the
pre-existing interest in the acquiree; less
· the fair value of the identifiable assets acquired and liabilities assumed.
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 to reflect
the facts and circumstances that existed as at the acquisition 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.
Going concern
These consolidated 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. The Directors no longer consider going
concern to be a critical accounting judgement as was previously disclosed in
the prior year financial statements. In determining that going concern is no
longer a critical accounting judgement they have taken into account the
following:
· the strong historic trading performance 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 £19.7m;
· the availability of further funding should this be required (including the
headroom of £10m on the revolving credit facility and the access to the AIM
market afforded by the Company's admission to AIM);
· the low liquidity risk the Group is exposed to;
· the fact that the Group operates within a sector that is experiencing
relatively stable demand for its products, amidst the global COVID-19
pandemic; and
· that there has been no disruption to the Group's manufacturing or supply
chain.
Based on these considerations, the Directors have concluded that there are no
material uncertainties that may cast significant doubt on its ability to
continue as a going concern and the Group has adequate resources to continue
in operational existence for the foreseeable future. As a result, the
Directors continue to adopt the going concern basis of accounting in preparing
the consolidated financial statements.
Foreign currency translation
Functional and presentational currency
Items included in the financial information of each of the Group's entities
are measured using the currency of the primary economic environment in which
the entity operates ("the functional currency"). The consolidated financial
statements are presented in Pound Sterling, which is Strix Group Plc's
functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates, are recognised in the 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, including intangible assets and goodwill arising on acquisition of
those foreign operations, and liabilities for each statement of financial
position presented are translated at the closing rate at the date of that
statement of financial position, or at historic rates for certain line items;
· income and expenses for each statement of comprehensive income presented 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 other comprehensive
income. Such translation differences are reclassified to profit or loss only
on disposal or partial disposal of the foreign operation.
Standards, amendments and interpretations adopted
The Group has applied the amendments to IFRS 9 in relation to Interest Rate
Benchmark Reform in the year. For the borrowings measured using amortised cost
measurement where interest rates have been modified to be linked to SONIA
rather than LIBOR, this change has been reflected by adjusting the effective
interest rate. No immediate gain or loss has been recognised. Other than the
above, there are no other standards, amendments to standards or
interpretations that the Group has applied for the first time in the reporting
period commencing 1 January 2021 that have had a material impact on the
financial statements.
Standards, amendments and interpretations which are not effective or early
adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2021 reporting periods and have not been
early adopted by the Group. These standards are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
Property, plant and equipment
Initial recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes the original purchase price
of the asset and the costs attributable to bringing the
asset to its working condition for its intended use. When parts of an item of
property, plant and equipment have different useful lives, the components are
accounted for as separate items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying value of the replaced part
is derecognised. All other repairs and maintenance are charged to profit or
loss during the reporting period in which they are incurred.
Subsequent measurement
Depreciation is calculated using the straight-line method to allocate the cost
of the assets, net of any residual values, over their estimated useful lives
as follows:
· Plant and machinery 3 - 10 years
· Fixtures, fittings and equipment 2 - 5 years
· Motor vehicles 3 - 5 years
· Production tools 1 - 5 years
· Right of use assets 2 - 8 years, based on the lease terms
· Land and buildings 50 years
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 over the following periods:
· Capitalised development costs 2 - 5 years
· Intellectual property Lower of useful or legal life
· Technology and software 2 - 10 years
· Customer relationships 10 - 13 years
· Brands Indefinite useful life
Brands have an indefinite useful life because there is no foreseeable limit on
the period during which the Group expects to consume the future economic
benefits embodied in the asset. The LAICA brand has been trading since
inception and has been a well recognisable brand amongst the Group's trading
partners, and the Group does not foresee a time limit by when these
partnerships will cease.
Amortisation is charged to the consolidated statement of comprehensive income
on a straight-line basis over the estimated useful lives above.
Derecognition
Intangible assets are derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains or losses arising from
derecognition of intangible assets, measured as the difference between the net
disposal proceeds and the carrying amount of the asset, and are recognised in
the consolidated statement of comprehensive income when the asset is
derecognised. Where a subsidiary is sold, any goodwill arising on acquisition,
net of any impairment, is included in determining the profit or loss arising
on disposal.
Impairment
Intangible assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell
and value in use.
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
Intangible assets with indefinite useful lives impairment assessments
Intangible assets with indefinite useful lives arising on business
combinations are allocated to the relevant CGU and are treated as the foreign
operation's assets.
Impairment reviews are performed at least annually, or more frequently if
there are indicators that goodwill might be impaired. The Group has assessed
the carrying values of goodwill and brands to determine whether any amounts
have been impaired. The recoverable amount of the underlying CGU was based on
a value in use model where future cashflows were discounted using a weighted
average cost of capital as the discount rate with terminal values calculated
applying a long-term growth rate. In determining the recoverable amount, the
Group considered several sources of estimation uncertainty and made certain
assumptions or judgements about the future. Future events could cause the
assumptions used in the impairment review to change with an impact on the
results and net position of the group.
Leases
The leasing activities of the Group and how these are accounted for
The Group leases office space, workshops, warehouses and factory space. Rental
contracts are typically made for periods of 3 - 10 years, but may have
extension options. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease agreements
do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Leases are recognised as a right-of-use ("ROU") 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
recognised on a straight-line basis as an expense in the consolidated
statement of comprehensive income. Short-term leases are leases with a lease
term of 12 months or less. Low-value assets comprise primarily IT equipment.
Extension and termination options
Extension and termination options are included in a number of property leases
across the Group. These terms are used to maximise operational flexibility in
terms of managing contracts.
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.
Financial assets
Classification
The Group classifies its financial assets as financial assets held at
amortised cost. Management determines the classification of its financial
assets at initial recognition.
The Group classifies its financial assets as at amortised cost only if both of
the following criteria are met:
· the asset is held within a business model whose objective is to collect the
contractual cash flows; and
· the contractual terms give rise to cash flows that are solely payments of
principal and interest.
Financial assets held at amortised cost are initially recognised at fair
value, and are subsequently stated at amortised cost using the effective
interest method. Financial assets at amortised cost comprise cash and cash
equivalents and trade and other receivables (excluding prepayments and the
advance purchase of commodities). Trade receivables are amounts due from
customers for products sold performed in the ordinary course of business. They
are due for settlement either on a cash in advance basis, or generally within
45 days, and are therefore all classified as current. Other receivables
generally arise from transactions outside the usual operating activities of
the Group.
Impairment of financial assets
The Group assesses, on a forward-looking basis, the expected credit losses
associated with its debt instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk.
The Group applies the expected credit loss model to financial assets at
amortised cost. For trade receivables, the Group applies the simplified
approach permitted by IFRS 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables. Given the nature of
the Group's receivables, expected lifetime losses are not material.
Financial liabilities
With the exception of contingent consideration, the Group initially recognises
its financial liabilities at fair value net of transaction costs where
applicable and subsequently they are measured at amortised cost using the
effective interest method. Financial liabilities comprise trade payables,
payments in advance from customers and other liabilities. They are initially
recognised at transaction price, unless the arrangement constitutes a
financing transaction, where the debt instrument is measured at the present
value of the future payments discounted at a market rate of interest.
Contingent consideration is measured at fair value with changes in fair value
recognised in profit or loss.
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Trade payables are
classified as current liabilities if payment is due within one year or less.
If not, they are presented as non-current liabilities. Other liabilities
include rebates.
Borrowing costs
Borrowings, including option-type arrangements, are recognised initially at
fair value. Option-type borrowing arrangements are subsequently measured at
amortised cost. Fees paid on the establishment of such option-type
arrangements are recognised as a 'right to borrow' asset, and are capitalised
as a pre-payment for liquidity services and amortised over the period of the
facility to which the fees relate. This prepayment has been deducted from the
carrying value of the financial liability.
General and specific borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset
for its intended use or sale. Qualifying assets are assets that necessarily
take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings,
pending their expenditure on qualifying assets, is deducted from the borrowing
costs eligible for capitalisation. Other borrowing costs are expensed in the
period in which they are incurred.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with a
maturity of three months or less. While cash and cash equivalents are also
subject to the impairment requirements of IFRS 9, impairment losses are not
material.
Employee benefits
The Group provides a range of benefits to employees, including annual bonus
arrangements, paid holiday entitlements and defined benefit and contribution
pension plans.
Short-term benefits
Short-term benefits, including holiday pay and similar non-monetary benefits,
are recognised as an expense in the period in which the service is rendered.
The Group recognises a liability and an expense for bonuses where
contractually obliged or where there is a past practice that has created a
constructive obligation.
Pensions
Subsidiary companies operate both defined contribution and defined benefit
plans for the benefit of their employees.
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior periods. The Group has no further payment obligations once
the contributions have been paid. The contributions are recognised as employee
benefit expense when they are due. A defined benefit plan is a pension plan
that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an
employee will receive on retirement, usually dependent on one or more factors,
such as age, years of service or compensation.
The liability recognised in the consolidated statement of financial position
in respect of the defined benefit scheme is the present value of the defined
benefit obligation at the statement of financial position date less the fair
value of the scheme assets, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit
obligation is calculated by qualified independent actuaries using the
projected unit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using interest
rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating
to the terms of the related pension liability.
The net pension finance cost is determined by applying the discount rate, used
to measure the defined benefit pension obligation at the beginning of the
accounting period, to the net pension obligation at the beginning of the
accounting period taking into account any changes in the net pension
obligation during the period as a result of cash contributions and benefit
payments.
Pension scheme expenses are charged to the consolidated statement of
comprehensive income within administrative expenses. Actuarial gains and
losses are recognised immediately in the consolidated statement of
comprehensive income. Net defined benefit pension scheme deficits before tax
relief are presented separately in the consolidated statement of financial
position within non-current liabilities.
Share-based payments
The Group has issued conditional equity settled share-based options and
conditional share awards under a Long-Term Incentive Plan ("LTIP") in the
parent company to certain employees. Under the LTIP, the Group receives
services from employees as consideration for equity instruments of the Group.
The fair value of the employee services received in exchange for the grant of
the options is recognised as an expense.
The total amount to be expensed is determined by reference to the fair value
of the options granted:
· including any market performance conditions such as the requirement for the
Group's shares to be above a certain price for a pre-determined period;
· excluding the impact of any service and non-market performance vesting
conditions, including earnings per share targets, dividend targets, and
remaining an employee of the Group over a specified period of time; and
· including the impact of any non-vesting conditions, where relevant.
These awards are measured at fair value on the date of the grant using an
option pricing model and expensed in the consolidated statement of
comprehensive income on a straight-line basis over the vesting period, after
making an allowance for the estimated number of shares that will not vest. The
level of vesting is reviewed and adjusted bi-annually in the consolidated
statement of comprehensive income, with a corresponding adjustment to equity.
If the terms of an equity settled award are modified, at a minimum, an expense
is recognised as if the terms had not been modified. An additional expense is
recognised for any modification that increases the total fair value of the
share-based payment, or is otherwise beneficial to the employee, as measured
at the date of modification.
If an equity award is cancelled by forfeiture, where the vesting conditions
(other than market conditions) have not been met, any expense not yet
recognised for that award as at the date of forfeiture is treated as if it had
never been recognised. At the same time, any expense previously recognised on
such cancelled equity awards is reversed, effective as at the date of
forfeiture.
The dilutive effect, if any, of outstanding options is included in the
calculation of diluted earnings per share.
Further details on the awards is included in note 23.
Inventories
Inventories consist of raw materials and finished goods which are valued at
the lower of cost and net realisable value. Cost is determined using the
weighted average cost formula. Cost comprises expenditure which has been
incurred in the normal course of business in bringing the products to their
present location and condition, and include all related production and
engineering overheads at cost. Net realisable value is the estimated selling
price in the ordinary course of business, less applicable selling expenses. At
the end of each reporting period, inventories are assessed for impairment. If
inventory is impaired, the identified inventory is reduced to its selling
price less costs to complete and an impairment charge is recognised in the
consolidated statement of comprehensive income.
Revenue
The Group primarily recognises revenue from the sales of goods to its
customers. The amount of revenue relating to the provision of services is
minimal and the Group does not undertake any significant long-term contracts
with its customers where revenue is recognised over time.
The transaction price is based on the sales agreement with the customer.
Revenue is reported net of sales rebates, which are based on a certain volume
of purchases by a customer within a given period. Other than sales rebates,
there is no variable consideration. Rebates are contractually agreed taking
into consideration the type of customer, the type of transaction and the
specifics of each arrangement. No element of financing is deemed present
because the sales are made under normal credit terms, which is consistent with
market practice. Revenues associated with sales rebates are recognised on an
expected value approach.
The performance obligation is the delivery of goods to customers, and revenue
is recognised on dispatch for most revenue transactions. Otherwise, revenue is
recognised when the products have been shipped to a specific location, or when
the risks of obsolescence and loss have been transferred to the OEM or
wholesaler. There are a very small number of revenue transactions where
different performance obligations and/or recognition patterns occur. All of
the amounts recognised as revenue are based on contracts with customers.
The Group does not create any contract assets and all amounts are recognised
as trade receivables as there are no performance conditions other than the
passage of time. Payment terms for the majority of customers are to pay cash
in advance of the goods being delivered. The Group recognises these balances
within trade and other payables on the consolidated statement of financial
position as "Payments in advance from customers". At the point the revenue is
recognised, these balances are transferred from "Payments in advance from
customers" to revenue. For the majority of other customers payment is normally
due within 30 to 45 days from the date of sale.
Due to the simple nature of the Group's revenue no significant judgments have
been made in the application of IFRS 15.
All revenue is derived from the principal activities of the Group.
Cost of sales
Cost of sales comprise costs arising in connection with the manufacture of
thermostatic controls, cordless interfaces, and other products such as water
jugs and filters. Cost is based on the cost of purchases on a first in, first
out basis and includes all direct costs and an appropriate portion of fixed
and variable overheads where they are directly attributable to bringing the
inventories into their present location and condition. This also includes an
allocation of non-production overheads, costs of designing products for
specific customers and amortisation of capitalised development costs.
Exceptional items
An item is treated as exceptional if it is considered unusual by its nature or
size, and is of such significance that separate disclosure is required in
order to assess the underlying operating performance of the Group. These items
are unusual or infrequent in nature, and also meet the following criteria of
classification:
· if a certain event (defined as exceptional) had not occurred, the costs would
not have been incurred or the income would not have been earned; or the costs
attributable to the event have been identified using a reliable methodology of
splitting amounts on an ongoing basis; and
· economic resources have been expended in order to directly contribute towards
the related activities; and
· costs have been incurred that cannot be recovered due to the event and the
related activities.
The Board considers the quantitative and qualitative factors in classifying
items as exceptional in nature, including frequency and predictability of
occurrence of the related event, as well as the nature and size of the items,
looked at individually and in aggregate with other items of a similar nature.
Exceptional items charges are excluded from EBITDA to calculate adjusted
EBITDA. Refer to note 6(b) for further details.
Research and development
Research expenditure is written off to the consolidated statement of
comprehensive income within cost of sales in the year in which it is incurred.
Development expenditure is written off in the same way unless the Directors
are satisfied as to the technical, commercial and financial viability of the
individual projects. In this situation, the expenditure is classified on the
consolidated statement of financial position as a capitalised development
cost.
Finance costs
Finance costs comprise interest charges on lease liabilities, pension
liabilities, interest on non-current borrowings, and finance charges relating
to letters of credit. Finance costs are recognised when the right to make a
payment is established.
Finance income
Finance income comprises bank interest receivable on funds invested. Finance
income is recognised when the right to receive a payment is established.
Income tax
Income tax for the years presented comprises current tax. Income tax is
recognised in profit or loss except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the statement of financial
position date in the countries where the Company and its subsidiaries operate
and generate taxable income, and any adjustment to tax payable in respect of
previous years.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantively
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Income tax (continued)
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of investments in
foreign operations where the company is able to control the timing of the
reversal of the temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets and liabilities and where the
deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new ordinary shares are shown in equity as a
deduction from the proceeds. Share premium arising on the issue of shares is
distributable. Share capital and share premium have been grouped for the
purposes of financial statement presentation.
Dividends
Dividends are recognised when they become legally payable. In the case of
interim dividends to equity shareholders, this is when declared by the
Directors. In the case of final dividends, this is when approved by the
shareholders at the AGM.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing the
performance of the operating segments, has been identified as the Board of
Directors. The Board of Directors consists of the Executive Directors and the
Non-Executive Directors.
Government grants
Subsidiary companies receive grants from the Isle of Man and Chinese
governments towards revenue and capital expenditure. Government grants are
recognised at their fair value where there is a reasonable assurance that the
grant will be received and all attached conditions complied with.
Revenue grants are recognised as income over the period necessary to match the
grant on a systematic basis to the costs that it is intended to compensate.
The grant income is presented within other operating income in the
consolidated statement of comprehensive income.
Capital grants are initially recognised as deferred income liabilities when
received, and subsequently recognised as other income in profit or loss on a
straight-line basis over the useful life of the related asset. The grants are
dependent on the subsidiary company having fulfilled certain operating,
investment and profitability criteria in the financial year, primarily
relating to employment.
EBITDA and adjusted EBITDA - non-GAAP performance measures
Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA")
and adjusted EBITDA are non-GAAP measures used by management to assess the
operating performance of the Group. Exceptional items charges 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.
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.
Critical judgements in applying the entity's accounting policies
Functional currency
The Directors consider the factors set out in paragraphs 9, 10 and 11 of IAS
21, "The effects of changes in foreign currency" to determine the appropriate
functional currency of its overseas operations. These factors include the
currency that mainly influences sales prices, labour, material and other
costs, the competitive market serviced, financing cash flows and the degree of
autonomy granted to the subsidiaries.
The Directors have applied judgement in determining the most appropriate
functional currency for all entities to be Pound Sterling, with the exception
of Strix (Hong Kong) Ltd which has a Hong Kong Dollar functional currency,
Strix (USA), Inc. which has a United States Dollar functional currency,
HaloSource Water Purification Technology (Shanghai) Co. Ltd which have a
Chinese Yuan functional currency, LAICA S.p.A and LAICA Iberia Distribution
S.L. which both have a Euro functional currency, and LAICA International Corp.
and Taiwan LAICA Corp. which both have a Taiwan Dollar functional currency.
This may change as the Group's operations and markets change in the future.
Capitalisation of development costs
The Directors consider the factors set out in the paragraphs entitled
'Intangible assets - initial recognition and measurement' in note 2 with
regard to the timing of the capitalisation of the development costs incurred.
This requires judgement in determining when the different stages of
development have been met.
4. SEGMENTAL REPORTING
Management has determined the operating segments based on the operating
reports reviewed by the Board of Directors that are used to assess both
performance and strategic decisions. Management has identified that the Board
of Directors is the chief operating decision maker in accordance with the
requirements of IFRS 8 'Operating Segments'.
The Group's activities consist of the design, manufacture and sale of
thermostatic controls, cordless interfaces, and other products such as water
jugs and filters, primarily to Original Equipment Manufacturers ("OEMs") based
in China and Italy.
The Board of Directors has identified 3 reportable segments from a product
perspective, namely: kettle controls, water category and appliances.
The Board of Directors primarily uses a measure of gross profit to assess the
performance of the operating segments, broken down into revenue and cost of
sales for each respective segment which is reported to them on a monthly
basis. Information about segment revenue is disclosed below, as well as in
note 7.
Reported gross profit
2021
(£000s)
Kettle controls Water categories Appliances Total
Revenue 85,117 21,404 12,889 119,410
Cost of sales (52,880) (14,617) (8,067) (75,564)
Gross profit 32,237 6,787 4,822 43,846
Reported gross profit
2020
(£000s)
Kettle controls Water categories Appliances Total
Revenue 79,816 11,744 3,745 95,305
Cost of sales (44,022) (9,387) (2,991) (56,400)
Gross profit 35,794 2,357 754 38,905
Included in cost of sales are amounts of depreciation and amortisation
totalling £4,072,000 for kettle controls, £1,168,000 for water category, and
£609,000 for appliances (2020: £3,910,000 for kettle controls, £834,000 for
water category, and £266,000 for appliances).
Adjusted gross profit (1)
2021
(£000s)
Kettle controls Water categories Appliances Total
Revenue 85,117 21,404 12,889 119,410
Cost of sales (49,455) (14,500) (8,031) (71,986)
Gross profit 35,662 6,904 4,858 47,424
Adjusted gross profit(1)
2020
(£000s)
Kettle controls Water categories Appliances Total
Revenue 79,816 11,744 3,745 95,305
Cost of sales (43,582) (9,334) (2,980) (55,896)
Gross profit 36,234 2,410 765 39,409
(1. Adjusted gross profit excludes exceptional items, which include
strategic project costs as detailed in note 6(b). Adjusted results are
non-GAAP metrics used by management and are not an IFRS disclosure)
Assets and liabilities
No analysis of the assets and liabilities of each operating segment is
provided to the Board of Directors as part of monthly management reporting.
Therefore, no analysis of segmented assets or liabilities is disclosed in this
note.
Non-current assets (i) attributed to country of domicile and (ii) attributable
to all other foreign countries
A geographical analysis of revenue from external customers has not been
presented, as the OEMs to whom the majority of sales are made are primarily
based in China and Italy.
In accordance with IFRS 8, the following table discloses the non-current
assets located in both the Company's country of domicile (the Isle of Man) and
foreign countries, primarily China, where one of the Group's principle
subsidiaries is domiciled.
2021 2020
£000s £000s
Country of domicile
Intangible assets 9,756 8,888
Property, plant and equipment 2,742 2,958
Total country of domicile non-current assets 12,498 11,846
Foreign countries
Intangible assets 20,712 20,760
Property, plant and equipment 40,021 34,247
Total foreign non-current assets 60,733 55,007
Total non-current assets 73,231 66,853
Major customers
In 2021, there were two major customers that individually accounted for at
least 10% of total revenues (2020: two customers). The revenues relating to
these customers in 2021 were £15,390,000 and £12,133,000 (2020: £13,683,000
and £11,618,000).
5. EMPLOYEES AND DIRECTORS
(a) Employee benefit expenses
2021 2020
£000s £000s
Wages and salaries 28,167 18,347
Defined contribution pension cost (note 5(c)(i) and 5(c)(ii)) 684 631
Employee benefit expenses 28,851 18,978
Share based payment transactions (note 23) 1,549 1,869
Total employee benefit expenses 30,400 20,847
(b) Key management compensation
The following table details the aggregate compensation paid in respect of the
key management, which includes the Directors and the members of the Trading
Board, representing members of the senior management team from all key
departments of the Group.
2021 2020
£000s £000s
Salaries and other short-term employee benefits 2,025 1,673
Post-employment benefits 149 160
Termination benefits - 99
Share based payment transactions 311 404
2,485 2,336
-There are no defined benefit schemes for key management. Pension costs under
defined contribution schemes are included in the post-employment benefits
disclosed above.
(c) Retirement benefits
(i) The Strix Limited Retirement Fund
The Strix Limited Retirement Fund is a defined contribution scheme under which
the assets of the scheme are held separately from those of the Group in an
independently administered fund. The pension cost charge represents costs
payable by the Group to the fund and amounted to £684,000 (2020: £611,000).
(ii) LAICA S.p.A. Termination Indemnity
LAICA S.p.A. operates a defined benefit plan for its employees in accordance
with the Italian Termination Indemnity (named "Trattamento di Fine Rapporto"
or "TFR") provisions defined by the National Civil Code (Article 2120). In
accordance with IAS 19, the TFR provision is a defined benefit plan, which is
based on the principle to allocate the final cost of benefits over the periods
of service which give rise to an accrual of deferred rights under each
particular benefit plan.
The calculation of the liability is based on both the length of service and on
the remuneration received by the employee during that period of service.
Article 2120 states that severance pay is due to the employee by the companies
in any case of termination of the employment contract. For each year of
service, severance pay accruals are based on total annual compensation divided
by 13.50. Although the benefit is paid in full by the employer, part (0.5% of
pay) of the annual accrual is paid to Istituto Nazionale della Previdenza
Sociale (INPS) by the employer, and is subtracted from the severance pay
accruals for the contribution reference period. As of 31 December of every
year, the severance pay accrued as of 31 December of the preceding year is
revalued by an index stipulated by law as follows: 1.5% plus 75% of the
increase over the last 12 months in the consumer price index, as determined by
the Italian Statistical Institute.
In accordance with IAS 19, the determination of the present value of the
liability is carried out by an independent actuary under the projected unit
method. This method considers each period of service provided by workers at
the company as a unit of additional right. The actuarial liability must
therefore be quantified based on seniority reached at the valuation date and
re-proportioned based on the ratio between the years of service accrued at the
reference date of the assessment and the overall seniority reached at the time
scheduled for the payment of the benefit. Furthermore, this method provides to
consider future salary increases, due to any cause (inflation, career,
contract renewals, etc.), up to the time of termination of the employment
relationship.
The below chart summarises the defined benefit pension liability of LAICA
S.p.A. at 31st December 2021:
2021 2020
£000s £000s
Liability as at 1 January 898 878
Current service cost for the period 58 20
Exchange differences on translation of foreign operations (59) -
Liability as at 31 December 897 898
The key actuarial assumptions used in arriving at these figures include:
· annual discount rate of 0.87% (2020: 2.5%)
· annual price inflation of 1.6% (2020: 6.0%)
· annual TFR increase of 2.7% (2020: 2.1%)
· demographic assumptions based on INPS published data
The remainder of the post-employment benefit liability of £74,000 (2020:
£457,000) as at 31 December 2021 is made up of contractual post-employment
liabilities within LAICA S.p.A. that do not meet the definition of a defined
benefit plan in accordance with IAS 19.
6. EXPENSES
(a) Expenses by nature
2021 2020
£000s £000s
Employee benefit expense 28,851 18,978
Depreciation charges 3,173 3,042
ROU depreciation charges 1,396 1,470
Amortisation and impairment charges 2,310 1,477
Exceptional items (see below) 9,941 5,456
Foreign exchange losses 186 505
Research and development expenditure totalled £5,324,000 (2020: £4,117,000),
and £3,609,000 (2020: £2,808,000) of development costs have been capitalised
during the year.
(b) Exceptional items
The main categories of exceptional items relate to major exceptional events or
projects impacting the Group's underlying operations, namely strategic
projects undertaken relating to the construction of, and relocation to, the
new Chinese factory for costs which were not eligible for capitalisation,
strategic projects relating to mergers and acquisitions with particular
reference to the acquisition of LAICA in the prior year and its continued
integration into the Group in the current year, COVID-19 related costs and
related impacts on Group operations, reorganisation and restructuring
projects, and the Group's share incentive initiatives for conditional share
options and awards issued to certain employees of the Group (refer to note 23
for further details).
Exceptional items have been broken down as follows:
2021 2020
£000s £000s
Exceptional items in cost of sales:
Assets written off due to relocation to new factory 1,679 -
Other costs relating to relocation to new factory 1,596 -
COVID-19 related costs 226 439
Reorganisation costs 77 65
3,578 504
Exceptional items in administrative expenses:
Share-based payments 1,549 1,869
Other costs relating to relocation to new factory 1,140 -
Mergers and acquisitions related costs 2,749 2,623
COVID-19 related costs 819 191
Reorganisation costs 106 269
6,363 4,952
Total exceptional items 9,941 5,456
Also included as an exceptional item are finance costs of £780,000 (2020:
£NIL) relating to the discount unwinding of the present values of contingent
liabilities recognised per note 14. These costs have been included within
finance costs in note 8.
Costs relating to the new Chinese factory project were made up of assets
written off with a net book value of £1.7m which could not be relocated as
they would not be fit for the manufacturing operations at the new factory, and
other relocation costs totalling £2.7m relating to disassembly of machinery
at the old factory, moving costs, reassembly of machinery at the new factory,
labour costs incurred for the relocation, set-up and cleaning costs, logistics
services, approvals and inspections, consultancy and security services, and
other costs directly related to the relocation.
Mergers and acquisitions exceptional costs relate mainly to the accrual of
costs amounting to £1.7m for 2021 as part of a supplemental consulting
arrangement with the vendor shareholders of LAICA relating to compensation for
post-combination services as these services are rendered to LAICA in 2021 and
2022 (refer to note 14). Other mergers and acquisitions costs totalling £1.0m
relate to legal and consultancy fees incurred relating to the downstream
merger of Strix Italy S.R.L and LAICA in 2021, other legal and professional
costs relating to the LAICA acquisition, and labour costs incurred on
integration of LAICA into the Group.
COVID-19 related exceptional costs are those items that are incremental and
directly attributable to COVID-19. These are costs that would not have been
incurred if the COVID-19 pandemic had not occurred and are not expected to
recur once the effects have largely receded. In the current year, these mainly
consisted of incremental labour costs as a result of the pandemic. Other
COVID-19 exceptional costs included mothballing of certain activities as
resources were reorganised in response to the impact of COVID-19 on the
Group's operations, additional cleaning and sanitation costs incurred as part
of infection control or prevention, and exceptional freight and carriage costs
paid to fill shortages of supplies, materials and products directly caused by
impacts of COVID-19 on shipping and freight supply chains.
Reorganisation exceptional costs related to costs incurred to relocate to new
premises for the Group's US office.
(c) Auditor's remuneration
During the year the Group (including its subsidiaries) obtained the following
services from the Company's auditor as detailed below:
2021 2020
£000s £000s
Fees payable to Company's auditor and its associates for the audit of the 201 178
consolidated financial statements
Fees payable to Company's auditor and its associates for other services:
- the audit of Company's subsidiaries 8 24
- other assurance services 56 12
- tax compliance and other 4 7
269 221
7. REVENUE
The following table shows a disaggregation of revenue into categories by
product line:
2021 2020
£000s £000s
Kettle controls 85,117 79,816
Water category 21,404 11,744
Appliances 12,889 3,745
Total revenue 119,410 95,305
8. FINANCE COSTS
2021 2020
£000s £000s
Letter of credit charges 95 89
Right-of-use lease interest 105 103
Discount unwinding of present value of contingent liabilities 780 -
Borrowing costs 1,246 1,002
Total finance costs 2,226 1,194
The discount unwinding of present values relating to the contingent
liabilities recognised per note 14. The amount has been included in finance
costs as an exceptional item (refer to note 6).
9. TAXATION
2021 2020
Analysis of charge in year £000s £000s
Current tax (overseas) and deferred tax
Current tax on overseas profits for the year 1,115 1,384
Movement in deferred tax liabilities (255) -
Total tax charge 860 1,384
Overseas tax relates primarily to tax payable by the Group's subsidiaries in
China and Italy. During 2016, the Group's Chinese subsidiary paid additional
tax of £1.1m following a benchmarking assessment by the Chinese tax
authorities relating to contract processing businesses in the years 2009 to
2014. The potential additional liabilities for 2015 to 2018 of £0.9m (2020:
£0.9m), has been included within the current tax liability balance in the
consolidated statement of financial position as a result. The Chinese
subsidiary converted to an import processing model in 2019.
A deferred tax liability of £2,303,000 (2020: £2,558,000) relates to timing
differences arising on the recognition of intangible assets in LAICA S.p.A.
Reconciliation of the movement in deferred tax liabilities has been presented
below:
2021 2020
£000 £000
Deferred tax liability on 1 January 2,558 -
Deferred tax on recognition of intangible assets on acquisition of LAICA - 2,558
Reversal of deferred tax on utilisation of temporary differences (255) -
Deferred tax liability as at 31 December 2,303 2,558
As the most significant subsidiary in the Group is based on the Isle of Man,
this is considered to represent the most relevant standard rate for the Group.
The tax assessed for the year is higher than the standard rate of income tax
in the Isle of Man of 0% (2020: 0%). The differences are explained below:
2021 2020
£000s £000s
Profit on ordinary activities before tax 21,507 25,454
Profit on ordinary activities multiplied by the rate of income tax in the Isle - -
of Man of 0% (2020: 0%)
Impact of higher overseas tax rate 860 1,384
Total taxation charge 860 1,384
The Group is subject to Isle of Man income tax on profits at the rate of 0%
(2020: 0%), Chinese income tax on profits at the rate of 25% (2020: 25%) and
Italian income tax on profits at a rate of 27.9% (2020: 27.9%).
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the
following data.
2021 2020
Earnings (£000s)
Earnings for the purposes of basic and diluted earnings per share 20,599 24,049
Number of shares (000s)
Weighted average number of shares for the purposes of basic earnings per share 206,271 197,432
Weighted average dilutive effect of share awards 3,381 8,947
Weighted average number of shares for the purposes of diluted earnings per 209,652 206,379
share
Earnings per ordinary share (pence)
Basic earnings per ordinary share 10.0 12.2
Diluted earnings per ordinary share 9.8 11.7
Adjusted earnings per ordinary share (pence) ((1))
Basic adjusted earnings per ordinary share ((1)) 15.2 14.9
Diluted adjusted earnings per ordinary share ((1)) 14.9 14.3
The calculation of basic and diluted adjusted earnings per share is based on
the following data:
2021 2020
£000s £000s
Profit for the year 20,599 24,049
Add back:
Reorganisation costs/exit costs 183 334
Strategic project costs 8,988 3,253
Share based payment transactions 1,549 1,869
Adjusted earnings ((1)) 31,319 29,505
(1. Adjusted earnings and adjusted earnings per share exclude exceptional
items, which include share-based payment transactions, COVID-19-related costs
reorganisation costs and other strategic project costs. Adjusted results are
non-GAAP metrics used by management and are not an IFRS disclosure)
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.
11. INTANGIBLE ASSETS
2021
Development costs Software Intellectual Property Customer relationships Brand name Goodwill Intangible assets under construction Total
£000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 12,346 3,286 834 2,406 6,643 9,906 - 35,421
Accumulated amortisation and impairment (4,999) (710) (64) - - - - (5,773)
Net book value 7,347 2,576 770 2,406 6,643 9,906 - 29,648
Period ended 31 December
Additions 3,609 950 299 - - - 238 5,096
Acquisition of LAICA S.p.A. (note 14) - - - - - (487) - (487)
Transfers - - - - - - (172) (172)
Disposals (cost) (29) (8) (1) - - - - (38)
Disposals (accumulated amortisation) - 8 - - - - - 8
Amortisation charge (1,563) (495) (47) (205) - - - (2,310)
Exchange differences 42 2 (4) (165) (469) (683) - (1,277)
Closing net book value 9,406 3,033 1,017 2,036 6,174 8,736 66 30,468
At 31 December
Cost 15,971 4,186 1,128 2,232 6,174 8,736 66 38,493
Accumulated amortisation and impairment (6,565) (1,153) (111) (196) - - - (8,025)
Net book value 9,406 3,033 1,017 2,036 6,174 8,736 66 30,468
Amortisation charges have been treated as an expense, and are allocated to
cost of sales (£2,029,000), distribution costs £NIL and administrative
expenses (£281,000) in the consolidated statement of comprehensive income.
During the current year, £172,000 (2020: £NIL) of intangible assets under
construction have been reclassified to property plant and equipment, and £NIL
(2020: £861,000) of assets from property plant and equipment (note 12) have
been reclassified to intangible assets.
The Group's goodwill and brands predominantly relate to those arising on the
acquisition of LAICA S.p.A. which was completed in 2020 (note 14) which
represents a single cash generating unit (CGU). In the current year, the
carrying values of goodwill and brands have been subject to an annual
impairment test, and the recoverable amount of the CGU was determined on the
basis of value-in-use calculations over a five-year forecast period. The key
assumptions applied in the value-in-use calculations are a discount rate of
8.24%, variable trading margins, variable revenue growth rates as well as the
terminal growth rate of 2%. Based on these calculations, there is sufficient
headroom over the carrying values of goodwill and brands hence no impairment
has been recognised in the current year and there were no reversals of prior
year impairments during the year (2020: same).
The results of the Group impairment tests are dependent upon estimates and
judgements, particularly in relation to the key assumptions described above.
Sensitivity analysis to a reasonable and possible change in the most sensitive
assumption, being the discount rate, was undertaken. An increase of 1% would
decrease the headroom by £5.2m but still leave sufficient headroom over the
carrying values of the goodwill and brands.
2020
Development costs Software Intellectual Property Customer relationships Brand name Goodwill Total
£000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 9,837 922 488 - - 384 11,631
Accumulated amortisation and impairment (4,006) (540) (17) - - - (4,563)
Net book value 5,831 382 471 - - 384 7,068
Period ended 31 December
Additions 2,808 2,363 140 - - - 5,311
Acquisition of LAICA S.p.A. (note 14) - - 214 2,406 6,643 9,522 18,785
Disposals (cost) (300) - - - - - (300)
Disposals (accumulated depreciation) 267 - - - - - 267
Amortisation charge (1,260) (170) (47) - - - (1,477)
Exchange differences 1 1 (8) - - - (6)
Closing net book value 7,347 2,576 770 2,406 6,643 9,906 29,648
At 31 December
Cost 12,346 3,286 834 2,406 6,643 9,906 35,421
Accumulated amortisation and impairment (4,999) (710) (64) - - - (5,773)
Net book value 7,347 2,576 770 2,406 6,643 9,906 29,648
Amortisation charges in the prior year were treated as an expense, and were
allocated to cost of sales (£1,410,000), distribution costs £NIL, and
administrative expenses (£67,000) in the consolidated statement of
comprehensive income.
£861,000 of assets from property plant and equipment (note 12) have been
reclassified to intangible assets. These amounts are included within the
additions of software and intellectual property.
12. PROPERTY, PLANT AND EQUIPMENT
2021
Plant & machinery Fixtures, fittings & equipment Motor vehicles Production tools Land & Buildings Right-of-use assets Assets under construction Total
(note 26)
£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 31 December
Additions 86 2,474 20 1 - 1,474 10,086 14,141
Transfers 5,257 - - 1,183 18,386 - (24,654) 172
Disposals (cost) (7,021) (1,238) (5) (901) (2,297) (1,469) - (12,931)
Disposals (accumulated depreciation) 5,720 1,140 4 833 322 772 - 8,791
Depreciation charge (1,776) (568) (27) (724) (78) (1,396) - (4,569)
Exchange differences (49) 2 (1) - 71 (62) (7) (46)
Closing net book value 12,281 2,749 33 2,265 20,012 3,247 2,176 42,763
At 31 December
Cost 26,093 5,833 218 12,829 20,541 6,450 2,176 74,140
Accumulated depreciation (13,812) (3,084) (185) (10,564) (529) (3,203) - (31,377)
Net book value 12,281 2,749 33 2,265 20,012 3,247 2,176 42,763
Depreciation charges are allocated to cost of sales (£3,821,000),
distribution costs (£90,000) and administrative expenses (£658,000) in the
consolidated statement of comprehensive income. During the year £172,000
(2020: £NIL) of intangible assets under construction have been reclassified
to property, plant and equipment. These amounts are included within the
transfers in note 11. In addition, borrowing costs of £306,000 (2020:
£190,000), calculated at prevailing rates of the revolving credit facility
(note 19), have been capitalised to land and buildings in the year.
Included in disposals during the period were (i) assets with net book value of
£1,679,000 that were scrapped for £NIL due to the move from the old to the
new manufacturing plant in China, (ii) land and buildings with net book value
of £1,794,000 in the Group's subsidiary LAICA International Corp. disposed of
in a sale and leaseback arrangement in line with the acquisition agreement for
£1,750,000, and other assets with net book values of £668,000 that were
disposed of for £NIL in particular right of use assets that were terminated
before lease expiry dates due to relocations and early terminations.
2020
Plant & machinery Fixtures, fittings & equipment Motor vehicles Production tools Land & Buildings Right-of-use assets Assets under construction Total
(note 26)
£000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 21,924 4,126 130 13,298 1,996 5,386 8,569 55,429
Accumulated depreciation (14,444) (2,935) (66) (11,291) (33) (1,135) - (29,904)
Net book value 7,480 1,191 64 2,007 1,963 4,251 8,569 25,525
Period ended 31 December
Additions - 413 - - - - 13,094 13,507
Acquisition of LAICA S.p.A. 769 37 7 - 1,769 1,150 - 3,732
Transfers 3,239 - - 715 7 - (4,822) (861)
Disposals (cost) (3,136) (209) - - - - - (3,345)
Disposals (accumulated depreciation) 3,125 208 - - - - - 3,333
Depreciation charge (1,367) (701) (29) (849) (96) (1,470) - (4,512)
Exchange differences (46) - - - (35) (3) (90) (174)
Closing net book value 10,064 939 42 1,873 3,608 3,928 16,751 37,205
At 31 December
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
Depreciation charges in the prior year were allocated to cost of sales
(£3,601,000), distribution costs (£137,000), and administrative expenses
(£774,000) in the consolidated statement of comprehensive income.
During the prior year, £861,000 of assets under construction have been
reclassified to intangible assets. These amounts are included within the
additions in note 11. In addition, borrowing costs of £190,000 (2019:
£54,000) have been capitalised to land and buildings in the year.
13. PRINCIPAL SUBSIDIARY UNDERTAKINGS AND JOINT ARRANGEMENTS 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 Manufacture and sale of products China 100 Subsidiary
Strix (U.K.) Limited Group's sale and distribution centre UK 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
Strix Italy S.R.L. (merged with LAICA S.p.A) Holding company (merged with LAICA S.p.A) Italy 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
Downstream merger of Strix Italy S.R.L. and LAICA S.p.A.
As part of a Group restructuring that occurred during April 2021, Strix Italy
S.R.L was merged into LAICA S.p.A. in a downstream merger transaction
effective 1 January 2021, resulting in Strix (U.K.) Limited owning 100% of the
merged entity's share capital. All assets and liabilities of the merged entity
were recognised at net book values on the effective date of the downstream
merger, however there was no resulting impact on the fair values of the assets
and liabilities acquired as part of the acquisition of LAICA S.p.A, including
its subsidiaries and interests in joint ventures.
Group restrictions
Cash and cash equivalents held in China are subject to local exchange control
regulations. These regulations provide for restrictions on exporting capital
from those countries, other than through normal dividends. The carrying amount
of the assets included within the consolidated financial statements to which
these restrictions apply is £3,681,000 (2020: £4,618,000).
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.
14. ACQUISITIONS
Acquisitions made in the year ended 31 December 2021:
During the current year, there were no acquisitions of new subsidiaries or
interests in joint ventures or associates.
Acquisitions made in the year ended 31 December 2020:
Acquisition of LAICA S.p.A:
On 26 October 2020 (during the prior year), the Group completed the
acquisition of 100% of the issued share capital of LAICA S.p.A. ("LAICA")
through its newly incorporated subsidiary, Strix Italy S.R.L. ("Strix Italy"),
which has since been fully merged with LAICA S.p.A in a downstream merger in
the current year. LAICA is an Italian company focussed on water purification
and the sale of small household appliances for personal health and wellness.
The Group entered into a share purchase agreement with vendor shareholders of
LAICA, pursuant to which it acquired control of LAICA, including its
subsidiaries and interests in joint ventures. The total consideration
transferred for the acquisition was €26.9m (£24.4m), made up of €13.0m
(£11.7m) paid in cash, the issue of 3,192,236 Strix Group plc ordinary shares
of £0.01 each with a total fair value of €8.0m (£7.3m), and a further
contingent consideration with a fair value of €5.9m (£5.4m) representing an
amount payable in cash subject to certain conditions being met, including
threshold financial targets for the financial years ending 31 December 2021
and 2022. The present value of the contingent consideration as at 31 December
2021 was €6.9m (£5.8m).
In addition, a supplemental consulting arrangement was entered into with the
vendor shareholders of LAICA under which total costs amounting to €4.9m
(£4.4m) are payable in the financial years ending 31 December 2021 and 2022,
relating to compensation for post-combination services. These costs are being
accrued as the services are rendered to LAICA. As at 31 December 2021, €2.0m
(£1.7m) was accrued for services rendered to date.
In the prior year financial statements, the accounting for the acquisition of
LAICA included preliminary amounts of fair values of assets and liabilities
acquired. Initially, these were measured on a provisional basis to allow for
any potential adjustments resulting from any new information obtained within
one year of the date of acquisition about facts and circumstances that existed
at the date of acquisition. As at the end of the current financial year ended
31 December 2021, one year had passed after the acquisition, and it was
confirmed that new information came to light that prompted a revision to the
fair value amounts recognised for inventory at acquisition date. Consequently,
the amounts recognised at acquisition date have been updated to reflect the an
increase in the fair value of inventory in the amount of £487,000 which has
resulted in a decrease in the amount of goodwill recognised of £487,000.
The final fair values at acquisition date of the assets and liabilities
acquired were as follows:
Book values Fair value adjustments Fair values
£000s £000s £000s
Non-current assets
Intangible assets 437 8,826 9,263
Property, plant and equipment 3,732 - 3,732
Investment in joint ventures 20 - 20
Total non-current assets 4,189 8,826 13,015
Current assets
Inventories 5,543 487 6,030
Trade and other receivables 7,869 - 7,869
Cash and cash equivalents 3,371 - 3,371
Total current assets 16,783 487 17,270
Total assets 20,972 9,313 30,285
Non-current liabilities
Long-term borrowings 1,182 - 1,182
Post-employment benefits 1,322 - 1,322
Lease liabilities 895 - 895
Deferred tax liability - 2,558 2,558
Total non-current liabilities 3,399 2,558 5,957
Current liabilities
Current borrowings 2,513 - 2,513
Lease liabilities 255 - 255
Trade and other payables 5,403 - 5,403
Total current liabilities 8,171 - 8,171
Total liabilities 11,570 2,558 14,128
Net assets acquired 9,402 6,755 16,157
The fair value of the intangible assets was calculated based on a discounted
cash flow model, based on the expected future income they will generate. The
discount rate applied was the Group's Weighted Average Cost of Capital, and a
growth rate of 2% was assumed in perpetuity, based on the target inflation
rate of the European Central Bank. A deferred tax liability has arisen on the
fair value adjustments to intangible assets at the Italian corporate tax rate.
As at 31 December 2021, the deferred tax liability was €2.7m, being £2.3m
translated into Pound Sterling.
Inventory fair values were revised to reflect new information that arose from
commercial data obtained during the measurement period and updated inventory
provision policies aligned with the wider Group.
The fair value of acquired receivables shown in the table above and gross
contractual amounts differed by a loss allowance of €105,000 (£95,000).
Acquisition costs included within 'Administration expenses - exceptional
items' in the consolidated statement of comprehensive income for the year
ended 31 December 2020 amounted to £2.6m. These have been designated as a
'separate transaction' per IFRS 3 and therefore were not included as part of
the purchase consideration.
The revised goodwill at acquisition of €9.9m (£9.0m) was calculated as the
purchase consideration of €26.9m (£24.4m), less the fair value of the net
assets acquired of €17.9m (£16.2m) plus non-controlling interests of
€0.9m (£0.8m). Goodwill amount as at 31 December 2021 is £8.4m, which
decreased in Pound Sterling value due to exchange rate movements. Goodwill
arising on the acquisition of LAICA, its subsidiaries and interests in joint
ventures, is treated as LAICA's asset and is expressed in the Euro. For
purposes of initial recognition, it is calculated using the exchange rate on
the acquisition date. Subsequently, the goodwill is translated into the
Group's presentation currency, Pound Sterling, for consolidation purposes, at
the closing rate each period. The goodwill was attributable to intangible
assets that do not qualify for separate recognition, such as the cumulative
skills and knowledge of the members of staff who became employees of the Group
at the date of acquisition, together with the synergies expected to be
generated by the Group following the acquisition, particularly within the
Water and Small Appliances category. None of the goodwill is expected to be
deductible for tax purposes.
15. INVENTORIES
2021 2020
£000s £000s
Raw materials and consumables 12,139 9,154
Finished goods and goods in transit 7,883 6,070
20,022 15,224
The cost of inventories recognised as an expense and included in cost of sales
amounted to £52,396,000 (2020: £39,052,000). The provision for impaired
inventories is £2,063,000 (2020: £2,513,000).
16. TRADE AND OTHER RECEIVABLES
2021 2020
£000s £000s
Amounts falling due within one year:
Trade receivables - current 10,958 11,565
Trade receivables - past due 2,493 1,790
Trade receivables - gross 13,451 13,355
Loss allowance (104) (159)
Trade receivables - net 13,347 13,196
Prepayments 496 1,108
Advance purchase of commodities 5,389 2,788
VAT receivables 5,261 2,577
Other receivables 1,018 1,003
25,511 20,672
Trade and other receivables carrying values are considered to be equivalent to
their fair values.
The amount of trade receivables impaired at 31 December 2021 is equal to the
loss allowance provision (2020: same).
The advance purchase of commodities relates to a payment in advance to secure
the purchase of key commodities at an agreed price to mitigate the commodity
price risk.
Other receivables include government grants due of £300,000 (2020:
£433,000). There were no unfulfilled conditions in relation to these grants
at the year end, although if the Group ceases to operate or leaves the Isle of
Man within 10 years from the date of the last grant payment, funds may be
reclaimed.
The Group's trade and other receivables are denominated in the following
currencies:
2021 2020
£000s £000s
Pound Sterling 5,471 5,110
Chinese Yuan 9,465 4,356
US Dollar 1,478 1,863
Euro 8,668 8,210
Hong Kong Dollar 118 114
Taiwan Dollar - 1,019
Other 311 -
25,511 20,672
Movements on the Group's provision for impairment of trade receivables and the
inputs and estimation technique used to calculate expected credit losses have
not been disclosed on the basis the amounts are not material. The provision at
31 December 2021 was £104,000 (2020: £159,000).
17. CASH AND CASH EQUIVALENTS
The carrying amounts of the cash and cash equivalents are denominated in the
following currencies:
2021 2020
£000s £000s
Pound Sterling 4,424 4,594
Chinese Yuan 3,622 3,851
US Dollar 8,183 3,228
Euro 2,584 2,058
Hong Kong Dollar 207 108
Taiwan Dollar 650 1,607
19,670 15,446
Cash and cash equivalents include £NIL (2020: £401,000) of cash deposits
held as a guarantee to China SuiDong Customs office. Refer to note 13 for
details of cash and cash equivalents held in China are subject to local
exchange control regulations.
18. TRADE AND OTHER PAYABLES
2021 2020
£000s £000s
Trade payables 11,060 10,499
Current income tax liabilities 1,631 3,048
Social security and other taxes 352 316
Customer rebates provisions 2,152 3,187
Capital creditors 2,256 1,635
VAT liabilities 130 199
Other liabilities 3,204 3,221
Payments in advance from customers 1,936 2,955
Accrued expenses 4,796 3,620
Consideration payable (note 14) - 1,519
27,517 30,199
The fair value of financial liabilities approximates their carrying value due
to short maturities.
Other liabilities include deferred government grants of £583,000 (2020:
£709,000) There were no unfulfilled conditions in relation to these grants at
the year end.
Movement in payments in advance from customers were all driven by normal
trading, with the full amounts due at beginning of the year released to
revenues in the current year.
As at the end of the prior financial year ended 31 December 2020,
consideration payable was an amount due in relation to the acquisition of
LAICA S.p.A (note 14). This amount was settled on the 8 March 2021.
The carrying amounts of the Group's trade and other payables are denominated
in the following currencies:
2021 2020
£000s £000s
Pound Sterling 13,604 8,414
Chinese Yuan 7,249 12,493
US Dollar 1,951 1,800
Euro 4,030 383
Hong Kong Dollar 253 6,460
Taiwan Dollar 430 649
27,517 30,199
19. BORROWINGS
2021 2020
£000s £000s
Total current borrowings 1,064 2,220
Total non-current borrowings 69,782 50,426
All of the current bank loans comprise of small individual short-term
arrangements for financing purchases and optimising cash flows within the
Italian subsidiary and were entered into by LAICA S.p.A. prior to acquisition
by the Group.
Current and non-current borrowings are shown net of loan arrangement fees of
£181,000 (2020: £175,000) and £513,000 (2020: £700,000), respectively.
Term and debt repayment schedule for long term borrowings
Currency Interest rate Maturity date 31 December 2021 31 December 2020
Carrying value (£000s) Carrying value
(£000s)
Revolving credit facility, net of loan arrangement fees GBP LIBOR +1.50% to +2.85% 27-May-25 69,306 49,126
UniCredit facility EUR EURIBOR +1.10% to 28-Jun-24 210 317
+3.60%
Banco BPM EUR EURIBOR +1.10% to 30-Nov-23 329 536
+3.60%
BNP Paribas EUR 0.3115% 30-Sep-21 - 632
Banca Intesa Sanpaolo EUR 0.2% 29-Oct-21 - 170
Banca Intesa Sanpaolo EUR EURIBOR 3M 27-Oct-21 - 142
+1,10%
Banca Monte dei Paschi di Siena EUR 0.9% 01-Feb-21 - 659
BANK SINOPAC CO.LTD. TWD LIBOR 1Y + Spread 0,755% 29-May-27 - 275
BANK SINOPAC CO.LTD. TWD LIBOR 3M + Spread 0.750% 23-Jun-21 - 789
BNP Paribas EUR 0.18% 30-Apr-22 172 -
Banca Monte dei Paschi di Siena EUR 0.18% 31-Jan-22 425 -
Banco BPM EUR 0.18% 31-Mar-22 404 -
70,846 52,646
On 27 July 2017, the Company entered into an agreement with The Royal Bank of
Scotland Plc (as agent), and the Royal Bank of Scotland International Limited
and HSBC Bank Plc (as original lenders) in respect of a revolving credit
facility of £70,000,000. During 2020, the Company refinanced this by entering
into an agreement with The Royal Bank of Scotland Plc (as agent), along with
the Bank of China (UK) Limited and the Bank of Ireland in respect of a
revolving credit facility of £80,000,000, with materially the same terms and
covenants as the existing facility. As at 31 December 2021, the total
facilities available are £80,000,000 (2020: £80,000,000).
Under the amended agreement, the initial drawdowns of totalling £50,000,000
in the prior 2020 year allowed for the refinancing of the original revolving
credit facility as well as to fund the acquisition of LAICA (note 14). Further
drawdowns were made during the current 2021 year for financing working capital
and for construction of the new factory.
All amounts become immediately repayable and undrawn amounts cease to be
available for drawdown in the event of a third-party gaining control of the
Company. The Company and its material subsidiaries have entered into the
agreement as guarantors, guaranteeing the obligations of the borrowers under
the agreement (2020: same).
Transactions costs amounting to £875,000 incurred as part of the new debt
financing facility were capitalised in 2020 and are being amortised over the
period of the 5-year facility.
The various agreements contain representations and warranties which are usual
for an agreement of this nature. The agreement also provides for the payment
of a commitment fee, agency fee and arrangement fee, contains certain
undertakings, guarantees and covenants (including financial covenants) and
provides for certain events of default. During 2021, the Group has not
breached any of the financial covenants contained within the agreements - see
note 22(d) for further details. (2020: same)
Interest applied to the revolving credit facility is calculated as the sum of
the margin and LIBOR, and after 31 December 2021 LIBOR will be replaced by
SONIA. An amendment to the facility agreement was signed during the current
2021 year for the transition from LIBOR to SONIA. The margin is a calculated
based on the Group's leverage as follows:
Leverage Annualised margin
Greater than or equal to 2.5x 2.85%
Less than 2.5x but greater than or equal to 2.0x 2.50%
Less than 2.0x but greater than or equal to 1.5x 2.20%
Less than 1.5x but greater than or equal to 1.0x 2.00%
Less than 1.0x 1.50%
At 31 December 2021, the margin applied was 2.00% (2020: 2.00%).
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 and the borrowings are of a short-term nature.
20. CAPITAL COMMITMENTS
2021 2020
£000s £000s
Contracted for but not provided in the consolidated financial statements - 2,001 4,307
Property, plant and equipment
The above commitments include capital expenditure of £1,639,000 (2020:
£2,810,000) relating to the new factory in Zengcheng district, China.
21. CONTINGENT ASSETS AND CONTINGENT LIABILITIES
There continues a number of ongoing intellectual property infringement cases
initiated by the Group, as well as patent validation challenges brought by the
defendants. All of these cases are still subject to due legal process in the
countries in which the matters have been raised. As a result, no contingent
assets have been recognised as receivable at 31 December 2021 (2020: same), as
any receipts are dependent on the final outcome of each case. There are also
no corresponding contingent liabilities at 31 December 2021 (2020: same).
22. FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, interest rate risk and commodity price risk), credit
risk, liquidity risk and capital management risk.
Risk management is carried out by the Directors. The Group uses financial
instruments where required to provide flexibility regarding its working
capital requirements and to enable it to manage specific financial risks to
which it is exposed. Transactions are only undertaken if they relate to actual
underlying exposures and hence cannot be viewed as speculative.
(a) Market risk
(i) Foreign exchange risk
The Group operates predominantly in the IOM, UK, EU, US and China and is
therefore exposed to foreign exchange risk. Foreign exchange risk arises on
sales and purchases made in foreign currencies and on recognised assets and
liabilities and net investments in foreign operations.
The Group monitors its exposure to currency fluctuations on an ongoing basis.
The Group uses foreign currency bank accounts to reduce its exposure to
foreign currency translation risk, and the Group is naturally hedged against
foreign exchange risk as it both generates revenues and incurs costs in the
major currencies with which it deals. The major currencies the Group transacts
in are:
· British Pounds (GBP)
· United States Dollar (USD)
· Chinese Yuan (CNY)
· Euro (EUR)
· Hong Kong Dollar (HKD)
· Taiwan Dollar (TWD)
In December 2021, the Group entered into USD/GBP and USD/EUR forward exchange
rate contracts to sell the notional amount of US$12m and hence mitigate the
risk and impact of volatile exchange rate movements seen during the year on
group profits. The value of these contracts at year-end is considered not
material.
Exposure by currency is analysed in notes 16, 17 and 18.
(ii) Interest rate risk
The Group is exposed to interest rate risk on its long-term borrowings, being
the revolving credit facility and other borrowings disclosed in note 19. The
interest rates on the revolving credit facility are variable, based on SONIA
and certain other conditions dependent on the financial condition of the
Group, which exposes the Group to cash flow interest rate risk which is
partially offset by cash held at variable rates. Other borrowings are made up
of both fixed rate loans and variable loans based on EURIBOR. This exposure is
not considered by the Directors to be significant.
(iii) Price risk
The Group is exposed to price risk, principally in relation to commodity
prices of raw materials. The Group enters into forward commodity contracts or
makes payments in advance in order to mitigate the impact of price movements
on its gross margin. The Group has not designated any of these contracts as
hedging instruments in either 2021 or 2020 as they relate to physical
commodities being purchased for the Group own use. At 31 December 2021 and
2020, payments were made in advance to buy certain commodities at fixed
prices, as disclosed in note 16.
(iv) Sensitivity analysis
· Foreign exchange risk: The Group is primarily exposed to exchange rate
fluctuations between GBP and USD, CNY, HKD, EUR and TWD. Assuming a reasonably
possible change in FX rates of +10% (2020: +10%), the impact on profit would
be a decrease of £751,000 (2020: a decrease of £805,000), and the impact on
equity would be an increase of £1,877,000 (2020: an increase of £1,232,000).
A -10% change (2020: -10%) in FX rates would cause an increase in profit of
£918,000 (2020: an increase in profit of £1,832,000) and a £1,603,000
decrease in equity (2020: £1,505,000 decrease in equity). This has been
calculated by taking the profit generated by each currency and recalculating a
comparable figure on a constant currency basis, and by retranslating the
amounts in the consolidated statement of financial position to calculate the
effect on equity.
· Interest rate risk: The Group is exposed to interest rate fluctuations on its
non-current borrowings, as disclosed in note 19. Assuming a reasonably
possible change in the SONIA/EURIBOR rate of ±0.5% (2020: ±0.5%), the impact
on profit would be an increase/decrease of £313,000 (2020: £234,000), and
the impact on equity would be an increase/decrease of £138,000 (2020:
£37,000). This has been calculated by recalculating the loan interest using
the revised rate to calculate the impact on profit, and recalculating the year
end loan interest balance payable using the same rate.
· Commodity price risk: The Group is exposed to commodity price fluctuations,
primarily in relation to copper and silver. Assuming a reasonably possible
change in commodity prices of ±14% for silver (2020: ±39%) and ±14% for
copper (2020: ±23%) based on volatility analysis for the past year, the
impact on profit would be an increase/decrease of £3,766,000 (2020:
£3,353,000). The Group does not hold significant quantities of copper and
silver inventory, therefore the impact on equity would be the same as the
profit or loss impact disclosed (2020: same). This has been calculated by
taking the average purchase price of these commodities during the year in
purchase currency and recalculating the cost of the purchases with the price
sensitivity applied.
(b) Credit risk
The Group has policies in place to ensure that sales of goods are made to
clients with an appropriate credit history. The Group uses letters of credit
and advance payments to minimise credit risk. Management believe there is no
further credit risk provision required in excess of normal provision for
doubtful receivables, as disclosed in note 16. The amount of trade and other
receivables written off during the year amounted to less than 0.08% of revenue
(2020: less than 0.04% of revenue).
Cash and cash equivalents are held with reputable institutions. All material
cash amounts are deposited with financial institutions whose credit rating is
at least B based on credit ratings according to Standard & Poor's. The
following table shows the external credit ratings of the institutions with
whom the Group has cash deposits:
2021 2020
£000s £000s
A 3,989 5,497
BBB 15,633 9,909
B 11 14
n/a 37 26
19,670 15,446
As a result of the measures described above, the Group has no external
concentrations of credit risk.
(c) Liquidity risk
The Group maintained significant cash balances throughout the period and hence
suffers minimal liquidity risk. Cash flow forecasting is performed for the
Group by the finance function, which monitors rolling forecasts of the Group's
liquidity requirements to ensure it has sufficient cash to meet operational
needs and so that the Group minimises the risk of breaching borrowing limits
or covenants on any of its borrowing facilities. The Group has put into place
revolving credit facilities to provide access to cash for various purposes,
and headroom of £10,000,000 (2020: £30,000,000) remains available on this
facility at 31 December 2021.
The table below analyses the group's financial liabilities as at 31 December
2021 into relevant maturity groupings based on their contractual maturities
for all non-derivative financial liabilities. There are no derivative
financial liabilities. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying
balances as the impact of discounting is not significant.
Less than 6 - 12 Between Between Over Total Carrying
6 months
months
1 and 2
2 and 5
5 years
contractual
amount
years
years
cash flows
(assets) /
liabilities
£000s £000s £000s £000s £000s £000s £000s
Trade and other payables 27,517 - - - - 27,517 27,517
Borrowings 2,540 1,551 1,666 70,635 - 76,392 70,846
Lease liabilities 548 533 963 2,427 293 4,764 3,371
Contingent consideration payable 6,081 - 3,994 - - 10,075 7,464
Total financial liabilities 36,686 2,084 6,623 73,062 293 118,748 109,198
In the prior year, the Group's non-derivative financial liabilities included
trade and other payables (less payment received in advance); substantially all
had a contractual maturity date of less than three months. The Group's
borrowings were represented by several credit facilities detailed in note 19,
including current borrowings that were repaid in 2021 of £2,392,000, and the
remainder fell due between two and seven years. The contingent consideration
payable in relation to the acquisition of LAICA S.p.A. as disclosed in note
14, will only become payable in 2022 after 2021 performance criteria have been
assessed.
(d) Capital risk management
The Group manages its capital to ensure its ability to continue as a going
concern and to maintain an optimal capital structure to reduce the cost of
capital. The aim of the Group is to maintain sufficient funds to enable it to
make suitable capital investments whilst minimising recourse to bankers and/or
shareholders. In order to maintain or adjust capital, the Group may adjust the
amount of cash distributed to shareholders, return capital to shareholders,
issue new shares or raise debt through its access to the AIM market.
Capital is monitored by the Group on a monthly basis by the finance function.
This includes the monitoring of the Group's gearing ratios and monitoring the
terms of the financial covenants related to the revolving credit facilities as
disclosed in note 19. These ratios are formally reported on a quarterly basis.
The financial covenants were complied with throughout the period. At 31
December 2021 these ratios were as follows:
· Interest cover ratio: 27.3x (2020: 33.4x) - minimum per facility terms is
4.0x; and
· Leverage ratio: 1.31x (2020: 1.1x) - maximum per facility terms is 2.5x
(e) Fair value hierarchy
This section explains the judgements and estimates made in determining the
fair values of the financial instruments that are recognised and measured at
fair value in the financial statements. To provide an indication about the
reliability of the inputs used in determining fair value, the group has
classified its financial instruments into the three levels prescribed under
the accounting standards. An explanation of each level is as follows:
Level 1: The fair value of financial instruments traded in active markets (such as
publicly traded derivatives, and equity securities) is based on quoted market
prices at the end of the reporting period. The quoted market price used for
financial assets held by the group is the current bid price. These instruments
are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active
market (for example, over-the-counter derivatives) is determined using
valuation techniques which maximise the use of observable market data and rely
as little as possible on entity-specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is
included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market
data, the instrument is included in level 3. This is the case for unlisted
equity securities.
The resulting fair value estimate for contingent consideration payable in
relation to the acquisition of LAICA (note 14), where the fair values have
been determined based on probability estimates of meeting threshold financial
targets for the financial years ending 31 December 2021 and 2022 and
discounted using a rate of 12.7%, has been classified as a level 3. There have
been no other movements into or out of any levels during the year.
2021 2020 Unobservable inputs Probability weighted inputs Relationship of unobservable inputs to fair value
£000s £000s
Description 2021 2020
Contingent consideration (on performance conditions only) 5,785 5,380 Risk-adjusted discount rate 12.7% 12.7% A change in the discount rate by 100 bps would increase/decrease the FV by
£12,000
Probability weighted cash flows £5,961,000 Minimum £NIL If actual EBITDA increased to the highest probability level, fair value would
increase by £137,000. If actual EBITDA decreased to the lowest probability
- level, fair value would decrease by £151,000
Maximum £6,425,000
23. SHARE BASED PAYMENTS
Long term incentive plan terms
The Group granted a number of share options to employees of the Group. All of
the shares granted are subject to service conditions, being continued
employment with the Group until the end of the vesting period. The shares
granted to the executive Directors and senior staff also include certain
performance conditions which must be met, based on predetermined earnings per
share, dividend pay-out, and share price targets for the three financial years
from grant date.
During 2020, the Group amended the terms of the Isle of Man share options to
conditional share awards.
Participation in the plan is at the discretion of the Board and no individual
has a contractual right to participate in the plan or to receive any
guaranteed benefits. Where the employee is entitled to share options, these
remain exercisable until the ten-year anniversary of the award date. Where the
employee is entitled to conditional share awards, these are exercised on the
vesting date.
The dividends that would be paid on a share in the period between grant and
vesting reduce the fair value of the award if, in not owning the underlying
shares, a participant does not receive the dividend income on these shares
during the vesting period. All of the options and conditional share awards are
granted under the plan for NIL consideration and carry no voting rights. A
summary of the options and conditional share awards is shown in the table
below:
2021 2020
Number of Shares Number of Shares
At 1 January 3,590,383 11,173,522
Granted during the year 1,115,098 1,230,358
Exercised during the year (925,651) (8,754,059)
Forfeited during the year (725,669) (59,438)
As at 31 December 3,054,161 3,590,383
Vested and exercisable at 31 December - 124,793
The Group has recognised a total expense of £1,549,000 (2020: £1,869,000) in
respect of equity-settled share-based payment transactions in the year ended
31 December 2021.
For each of the tranches, the first day of the exercise period is the vesting
date and the last day of the exercise period is the expiry date, as listed in
the valuation model input table below. The weighted average contractual life
of options and conditional share awards outstanding at 31 December 2021 was
8.4 years (2020: 8.5 years).
Valuation model inputs
The key inputs to the model for the purposes of estimating the fair values of
the share options outstanding at the end of the year are as follows:
Grant date Share price on grant date Expiry date Weighted average probability of meeting performance criteria Share options outstanding at Share options outstanding at
(p)
31 December 2021
31 December 2020
15 August 2017 133.38 15 August 2027 100.00% - 124,793
12 February 2018 138.00 12 February 2028 100.00% - 19,500
01 November 2018 148.00 01 November 2028 51.16% - 748,853
26 November 2018 136.00 26 November 2028 100.00% - 10,760
04 March 2019 155.00 04 March 2029 100.00% - 200,215
20 May 2019 157.80 20 May 2029 41.0% 525,602 525,602
06 April 2020 170.00 06 April 2030 100.0% 310,867 7,288
01 May 2020 183.40 01 May 2030 34.0% 502,495 339,567
06 May 2020 181.00 06 May 2030 100.0% 36,364 502,495
21 April 2021 290.00 21 April 2031 66.0% 820,285 36,364
Total Share Options 2,195,613 2,515,437
The key inputs to the model for the purposes of estimating the fair values of
the conditional share awards outstanding at the end of the year are as
follows:
Grant date Share price on grant date Vesting date Weighted average probability of meeting performance criteria Conditional share awards outstanding at Conditional share awards outstanding at
31 December 2021
31 December 2020
(p)
12 February 2018 138.00 01 January 2021 100.0% - 14,000
12 February 2018 138.00 22 April 2021 100.0% - 60,500
01 November 2018 148.00 05 April 2021 100.0% - 348,233
20 May 2019 157.80 01 April 2022 41.0% 304,254 304,254
19 August 2019 158.00 01 April 2022 100.0% 4,250 4,250
24 February 2020 179.80 24 April 2022 100.0% 10,772 15,500
06 April 2020 170.00 06 April 2022 100.0% 90,104 101,381
01 May 2020 183.40 31 December 2022 34.0% 165,759 198,347
06 May 2020 181.00 31 December 2022 100.0% 28,481 28,481
21 April 2021 290.00 31 December 2023 60.4% 229,515 -
06 December 2021 296.50 31 December 2023 59.0% 16,090 -
06 December 2021 296.50 31 December 2024 59.0% 9,323 -
Total conditional share awards 858,548 1,074,946
Total share options and conditional share awards 3,054,161 3,590,383
The reduction in the fair value of the awards as a consequence of not being
entitled to dividends reduced the charge for the options granted during the
year by £NIL (2020: £47,000) and the expected charge over the life of the
options by a total of £NIL (2020: £420,000).
Other factors in determining the fair values of the share options and
conditional awards do not affect the calculation and have not been disclosed,
as the share options were issued for NIL consideration and do not have an
exercise price. The weighted average fair value of the options outstanding at
the period end was £2.1217 (2020: £1.4120).
The movement within the share-based payment reserve during the period is as
follows:
2021 2020
£000s £000s
Share-based payments reserve at beginning of the year 1,913 13,063
Share based payments transactions note 5(a) 1,549 1,869
Other share-based payments (174) -
Share based payments transferred to other reserves upon exercise/vesting (1,249) (13,019)
Share-based payments reserve at year-end 2,039 1,913
Share based payments transferred to other reserves upon exercise/vesting in
the prior year included the settlement of dividend entitlements previously
accrued as part of the LTIP programme, amounts released from forfeited LTIP
shares, and a warrant exercised on 27 November 2020 by Zeus Capital Limited
for 3,800,000 ordinary shares at an exercise price of £1.00.
24. SHARE CAPITAL AND SHARE PREMIUM
Number of shares Par value Total
(000s) £000s £000s
Allotted and fully paid: ordinary shares of 1p each
Balance at 1 January 2021 205,746 2,057 2,057
Shares issues during the year 926 9 9
Balance at 31 December 2021 206,672 2,066 2,066
Under the Isle of Man Companies Act 2006, the Company is not required to have
an authorised share capital.
In the current year, all share issues related to the exercise of vested share
options (refer to note 23).
In the prior year, the Company issued shares for a total value of £11,230,000
which included 3,192,236 shares at nominal value of £31,992 issued as part of
total consideration paid for the acquisition of LAICA S.p.A. on 27 October
2020, (note 14), 3,800,000 shares at a nominal value of £38,000 issued to
Zeus Capital Limited on exercising their warrant (note 23), and the remainder
relate to employee share-based payments (note 23). Accordingly, £11,073,000
was recognised as share premium.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company. All shares rank pari passu in all respects including voting rights
and dividend entitlement.
See note 23 for further information regarding share-based payments which may
impact the share capital in future periods.
25. DIVIDENDS
The following amounts were recognised as distributions in the year:
2021 2020
£000s £000s
Interim 2021 dividend of 2.75p per share (2020: 2.6p) 5,679 5,167
Final 2020 dividend of 5.25p per share (2019: 5.1p) 10,831 10,143
Total dividends recognised in the year 16,510 15,310
In addition to the above dividends, since year end the Directors have proposed
the payment of a final dividend of 5.6p per share (2020: 5.25p). The aggregate
amount of the proposed final dividend expected to be paid on 2 June 2022 out
of retained earnings at 31 December 2021, but not recognised as a liability at
year end, is shown in the table below. The payment of this dividend will not
have any tax consequences for the Group.
2021 2020
£000s £000s
Final 2021 dividend of 5.6p per share (2020: 5.25p) 11,574 10,802
Total dividends proposed but not recognised in the year, and estimated to be 11,574 10,802
recognised in the following year.
26. LEASES
a) Amounts recognised in the consolidated statement of financial position
The consolidated statement of financial position shows the following amounts
relating to leases:
2021 2020
£000s £000s
Right-of-use assets
Land and buildings 3,247 3,928
Total right-of-use assets 3,247 3,928
Current future lease liabilities (due within 12 months) 773 1,254
Non-current future lease liabilities (due in more than 12 months) 2,598 2,846
Total future lease liabilities 3,371 4,100
Additions to the right-of-use liabilities during the 2021 financial year were
£1,474,000 (2020: £1,150,000). Disposals of right-of-use liabilities during
the current year were £735,000 (2020: £NIL)
Short-term leases and leases of low values were recognised directly in the
statement of comprehensive income, amounting to £209,000 (2020: £280,000).
Total cash outflows relating to all lease payments, including short-term
leases and leases of low values were £1,771,000 (2020: £1,735,000).
b) Amounts recognised in the consolidated statement of comprehensive income
(continued)
The movement in lease liabilities is as follows:
2021 2020
£000s £000s
Balance as at 1 January 4,100 4,468
Additions 1,474 1,150
Disposals (735) -
Adjustments due to lease modifications 35 -
Repayments (1,562) (1,455)
Interest expense (included in finance cost) 105 103
Sub-lease income (40) (160)
Foreign exchange gains (6) (6)
Balance as at 31 December 3,371 4,100
b) Amounts recognised in the consolidated statement of comprehensive income
The statement of consolidated comprehensive income shows the following amounts
relating to leases:
2021 2020
£000s £000s
Depreciation of right-of-use assets (1,396) (1,470)
Interest expense (included in finance cost) (105) (103)
Foreign exchange gains 6 6
Total cost relating to leases (1,495) (1,567)
27. STATEMENT OF CASH FLOWS NOTES
a) Cash generated from operations
2021 2020
Note £000s £000s
Cash flows from operating activities
Operating profit 23,720 26,635
Adjustments for:
Depreciation of property, plant and equipment 12 3,173 3,042
Depreciation of right-of-use assets 12 1,396 1,470
Amortisation of intangible assets 11 2,310 1,477
Share of losses / (profits) from joint ventures 50 (61)
Loss on disposal of property, plant and equipment 12 1,679 12
Other non-cash flow items 1,703 -
Share based payment transactions 23 1,400 687
Net exchange differences 6(a) 186 505
35,617 33,767
Changes in working capital:
(Increase)/decrease in inventories (5,320) (138)
Increase in trade and other receivables (6,649) (4,294)
Increase in trade and other payables 558 2,785
Cash generated from operations 24,206 32,120
Other non-cash flow items include accrual of amounts relating to compensation
for post-combination services, which were accrued part of the acquisition of
LAICA as the services were rendered (see note 14).
Share-based payment transactions include other transactions recognised
directly in equity included in the statement of changes of equity.
b) Movement in net debt
Non-cash movements
At Cash flows Currency movements Other movements At
01 January 2021 31 December 2021
£000s £000s £000s £000s £000s
Borrowings, net of loan arrangement fees (52,646) (18,180) 206 (226) (70,846)
Lease liabilities (4,100) 1,562 6 (839) (3,371)
Total liabilities from financing activities (56,746) (16,618) 212 (1,065) (74,217)
Cash and cash equivalents 15,446 3,987 237 - 19,670
Net debt (41,300) (12,631) 449 (1,065) (54,547)
28. ULTIMATE BENEFICIAL OWNER
There is not considered to be any ultimate beneficial owner, as the Company is
listed on AIM. No single shareholder beneficially owns more than 25% of the
Company's share capital.
29. RELATED PARTY TRANSACTIONS
(a) Identity of related parties
Related parties include all of the companies within the Group, however, these
transactions and balances are eliminated on consolidation within the
consolidated financial statements and are not disclosed, except for related
party balances held with Joint Ventures which are not eliminated.
The Group also operates a defined contribution pension scheme which is
considered a related party.
(b) Related party balances
Trading balances
Balance due from Balance due to
2021 2020 2021 2020
£000s £000s £000s £000s
Related party
The Strix Limited Retirement Fund - - - -
Foshan Yilai Life Electric Appliances Co. Limited 165 94 -
LAICA Brand House Limited 25 - -
(c) Related party transactions
The following transactions with related parties occurred during the year:
2021 2020
Name of related party £000s £000s
Transactions with other related parties
Revenue earned from Foshan Yilai Life Electric Appliances Co. Limited 298 72
Revenue earned from LAICA Brand House Limited 3 -
Contributions paid to The Strix Limited Retirement Fund (note 5(c)(i)) (684) (611)
Further information is given on the related party balances and transactions
below:
· Key management compensation is disclosed in note 5(b).
· Information about the pension schemes operated by the Group is disclosed in
note 5(c), and transactions with the pension schemes operated by the Group
relate to contributions made to those schemes on behalf of Group employees.
· Information on dividends paid to shareholders is given in note 25.
30. POST BALANCE SHEET EVENTS
The Group does not have any material events after the reporting
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