REG - Strix Group PLC - Results for the year ended 31 December 2023
27/03/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240327:nRSa4172Ia&default-theme=true
RNS Number : 4172I Strix Group PLC 27 March 2024
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of MAR
Strix Group Plc
("Strix", the "Group" or the "Company")
Preliminary results for the twelve months ended 31 December 2023
Financial Summary
( )
Adjusted results(1) Reported results
FY 2023 FY 2022 Change FY 2023 FY 2022 Change
(23 - 22)
(23 - 22)
£m £m £m £m
Revenue 144.6 106.9 +35.2% 144.6 106.9 +35.2%
Gross profit 57.2 41.5 +37.7% 57.1 40.7 +40.4%
Gross margin 39.6% 38.8% +80 bps 39.5% 38.0% +150 bps
EBITDA margin 27.3% 30% -270bps 25.3% 24.5% +80bps
Operating profit 32.1 25.9 +24.3% 27.9 19.9 +40.2%
Operating margin 22.2% 24.2% -200bps 19.3% 18.6% +70bps
Profit before tax 21.9 22.2 -1.1% 17.7 16.1 +10.3%
Profit after tax 20.1 23.0 -12.7% 16.2 16.9 -4.1%
Net debt(2) 83.7 87.4 -4.3% 83.7 87.4 -4.3%
Operating cash conversion(3) - - - 106% 94% +1,200 bps
Basic earnings per share (pence) 9.2 10.9 -15.7% 7.4 8.0 -7.4%
Diluted earnings per share (pence) 9.1 10.8 -16.2% 7.3 7.9 -7.7%
Total dividend per share (pence) - - - 0.9 6.0 -85.0%
1. Adjusted results exclude adjusting items (see note 6 of the
financial statements)
2. Net debt excludes accrued interest, ROU lease liabilities and is
net of loan arrangement fees, as defined in our banking facility agreement
3. Cash generated from operations as a percentage of EBITDA
Highlights
§ A rebasing of the core business is being undertaken in 2024 to build strong
foundations for medium-term growth opportunities as the market continues to
recover.
§ Despite the macro challenges, the fundamentals of the Group that were seen so
positively by the capital markets post listing remain unchanged. Its core
business is a resilient one and maintains its dominant market position, with
stable market share by value.
§ Strix has demonstrated good revenue growth, largely driven by Billi, continues
to be highly profitable and is strongly cash generative.
§ The Board remains focused on maximising cash generation to support debt
reduction which will result in a temporary pause in the final and interim
dividend payments in calendar year 2024, with a planned return to a
sustainable dividend pay-out ratio of 30% of adjusted PAT in 2025.
§ This pause will enable the Company to accelerate its deleveraging profile to
ensure that it will be in a stronger financial position. It will also provide
the flexibility to enable the business to selectively invest in new
technologies to support longer term growth initiatives.
§ Strix has been proactively working with its banking syndicate who have
provided a normalisation of the net debt leverage covenant to 2.75x for the
duration of the facility.
§ Senior management changes. The recent recruitment of Clare Foster (CFO) and
Rachel Pallett (CCO of Kettle Controls & PFS (Billi)) who both bring
extensive skills and experience to the Group.
Mark Bartlett, Chief Executive Officer of Strix Group plc, said:
"Strix is a resilient and highly cash generative business with the opportunity
to expand its addressable market across all divisions.
The recent strategic acquisition of Billi has delivered double-digit revenue
and profit growth on a constant currency basis over the period which is
anticipated to continue, helped by a staged expansion into key European
markets.
The Group plans to return to its sustainable dividend pay-out ratio policy in
2025 reflecting the Board's confidence in the medium-term prospects."
For further enquiries, please contact:
Strix Group Plc +44 (0) 1624 829829
Mark Bartlett, CEO
Mark Kirkland, Interim CFO
Zeus (Nominated Advisor and Joint Broker) +44 (0) 20 3829 5000
Nick Cowles / Jordan Warburton (Investment Banking)
Stifel Nicolaus Europe Limited (Joint Broker) +44 (0) 20 7710 7600
Matthew Blawat / Francis North
IFC Advisory Limited (Financial PR and IR) +44 (0) 20 3934 6630
Graham Herring / Tim Metcalfe / Florence Chandler
CEO's report:
Executive summary
Strix's investment proposition which was seen so positively by the equity
capital markets since its IPO remains fundamentally unchanged. Its core
business is a resilient one and maintains its dominant market position, with
stable market share by value.
During 2024, a rebasing of the core business is being undertaken to provide a
strong platform for medium-term growth opportunities as the market continues
to recover.
The Board remains focused on maximising cash generation to support debt
reduction which will result in a temporary pause in dividend payments in
calendar year 2024. A planned return to a sustainable dividend pay-out ratio
of 30% of adjusted PAT will take place in 2025.
This pause will enable the Company to accelerate its deleveraging profile and
provide the financial flexibility to enable the business to make measured
strategic investments into new products, technologies and manufacturing
capabilities to support an accelerated growth profile in the medium-term.
Financial performance
The Group has seen strong growth with revenues increasing by 35.2% year on
year to £144.6m (FY 2022 £106.9m), mainly as a result of the full year
inclusion of Billi revenues of £41.3m (FY 2022, 1 month revenue of £2.7m).
The Group's adjusted EBITDA margin remains strong at 27.3% (2022: 30.0%)
reflecting the robust underlying profitability of the Group despite the macro
challenges.
Despite the significant increase in net finance costs, the Group's adjusted
profit before tax shows only a slight year on year decrease of £0.3m to
£21.9m (2022: £22.2m).
Adjusted profit after tax for the full year was £20.6m on a constant currency
basis and £20.1m on a reported basis.
Cash generation was strong (operating cash conversion was 106%) and year-end
net debt was reduced by £3.7m to £83.7m.
Kettle Controls division
Kettle Controls revenue increased to £70.1m (2022: £68.2m).
Whilst the macroeconomic and geopolitical environment that Strix and its peers
operate in remains challenging, revenue growth in Kettle Controls outpaced the
market, growing at 2.7% by value. The recovery in regulated markets started in
H2 of 2023 (albeit slower than originally anticipated) recording quarter on
quarter growth against the prior year.
Key initiatives going forward include:-
§ New patent protected Series Z controls range undergoing customer testing,
preparations for volume manufacture underway;
§ 'Technology Showcase' to demonstrate how Series Z controls enable new
applications and growth opportunities beyond traditional kettles; and
§ A new range of low-cost controls tailored to the domestic China and less
regulated market requirements which increases the target addressable market.
Premium Filtration Systems division ("PFS") (Billi)
The recent strategic acquisition of Billi delivered double-digit revenue and
profit growth on a constant currency basis over the period. Strix anticipates
that this trajectory will continue given the expanded target addressable
market that Billi provides.
The new Billi UK head office in Wolverhampton, a new UK warehousing,
distribution and refurbishment facility in Thurrock and the flagship Billi
showroom and event space in London are now open. The right-sizing of
Australian storage and distribution facilities in New South Wales, Western
Australia and South Australia is now complete. First installations of the new
OmniOne unit, offering boiling, chilled and sparkling water for commercial and
residential applications, and introduction of the new Luxgarde UVC
purification system for defense against waterborne bacteria and pathogens, are
underway.
Key initiatives going forward include:-
§ Global launch of new Multi-Function Tap, compatible with the full range of
Billi under-counter modules;
§ Introduction of the new Omni-One under-counter unit to export markets
(commercial and residential applications);
§ New product development programme targeting the residential market via
selected channel partners;
§ European expansion via strategic sales and service partners, with technical
and commercial support from Billi UK; and
§ Business development in South-East Asia and the Middle East through
established distribution channels.
Consumer Goods division
Overall, the Consumer Goods division reported an 8.7% decrease in revenue
to £32.3m in 2023 (2022: £35.4m), driven primarily by a softening of the
appliances category market, however this was partially offset by improved
water category revenues.
In 2023, Aqua Optima secured a distribution agreement with a leading UK retail
outlet. It was also agreed they would be a strategic brand partner for a
European private label deal within the water category for distribution into
France and expansion into Turkey. Aurora coffee also launched in North
America.
Key initiatives going forward include:-
§ Drive OEM business; two major contracts secured which will deliver c. 40% of
2024 growth; and
§ New product development focus on bolstering core profitable categories,
including launches across filtration & vacuum sealer categories.
A divisional restructuring at the start of 2024 has streamlined and re-focused
the Consumer Goods division to drive ongoing profitable growth.
Senior management changes
Further to the prior announcement, Strix is also pleased to welcome the
appointment of Clare Foster as Chief Financial Officer. Clare has over 25
years of experience working in international businesses and was most recently
the Group Chief Financial Officer at Trifast plc making her a valuable
addition to Strix's leadership team. She joined Strix on 1 February 2024 and
following a handover period, will formally take office and join the Board on 2
April 2024 at which point Mark Kirkland will step down as Interim Chief
Financial Officer. He will continue as a Non-Executive Director on the Strix
Board.
In addition, Rachel Pallett has been appointed as CCO of Kettle Controls
& PFS (Billi). Rachel has 30 years of international experience in the
business of engineering. She has held senior executive positions at Spirax
Sarco Engineering plc, where she was Director of Business Development for
Steam Specialties - responsible for the design, development and
commercialisation of steam systems, controls and thermal energy management
solutions. Prior to Spirax, she held several leadership and technical
positions at Renishaw plc, the precision metrology and healthcare technology
group.
Barriers to entry and defence of intellectual property
Strix constantly assesses the risks posed by competitive threats which drives
its determination to constantly evolve its innovative technologies in a
sustainable way by investing in its portfolio of intellectual property to
protect its new products.
The Group actively monitors the markets in which it operates for violation of
its intellectual property rights. Strix has unique relationships with its
brands, OEMs and retailers and provides its support across the value chain and
throughout the product lifecycle, including product design and advice on
specification and manufacturing solutions. These value-added services and
existing strong relationships ensure brands, OEMs and retailers continue to
rely on Strix's components and support.
Sustainability
Strix core products are associated with the consumption of critical resources,
primarily electricity and water, hence Strix's drive for continual improvement
has aligned it with a sustainability led agenda. Recent years have seen an
increase in the emphasis and broadening of the scope of its sustainability
agenda. This was highlighted by the adoption of a wide range of KPIs and
associated targets in 2021.
The Group's sustainability strategy and adopted KPIs are generating greater
emphasis and efforts on a broad range of aspects. Employee training has been a
focus with a significant increase in training hours assisted by adoption of a
more structured approach, including Kallidus e-learning system and a new
training management structure in China. Health and safety continues to be a
top priority with the three-year average trend continuing in a positive
direction. The Company values its employees and their contribution and looks
to develop their wellbeing. This is reflected in improved facilities offered
by the new Chinese facility, whilst the West has seen changes in the working
week, increased holiday entitlement, and the introduction of two charity days
a year.
Strix's sustainability agenda for 2024 remains high on the agenda as it
delivers on its Scope 1&2 targets, analyses its Scope 3 emissions and
continues to focus on its other KPIs. The pace and delivery of these goals
reflects the strong employee ethos and commitment to the agenda. An updated
ESG report is published today and will be available on the Strix website.
Key strategic business objectives
Strix reconfirms its commitment to the Key strategic business objectives
outlined below:-
"Developing leading, innovative technology in the fields of water heating,
safety control systems and drinking water treatment."
§ Kettle Controls:
§ Profitably grow revenue through the introduction of innovative new products
focused on sustainability, safety and convenience - including a new range of
controls to increase the addressable markets within the unregulated and the
China domestic markets.
§ Leveraging the Group's global manufacturing footprint to drive cost efficiency
and improve sustainability.
§ PFS (Billi):
§ Leverage new product development and expand the geographical distribution in
both residential and commercial markets.
§ Priority will be placed on expansion into Europe and further product
development to support the residential market opportunities.
§ Consumer Goods:
§ Following a divisional restructure, a refreshed and robust strategy will see
LAICA in Italy becoming a highly profitable centre of excellence for the
Group.
§ Grow market share through innovation, world class sourcing and commercial
excellence.
§ Focus will be on geographical expansion and rationalisation of products to
maximise profitability.
"Right People, Right Place, Right Skills, motivated and engaged to deliver
our strategic objectives."
Outlook
A rebasing of the core business is being undertaken in 2024 to build strong
foundations for medium-term growth opportunities as the market continues to
recover.
Despite the macro challenges, the fundamentals of the Group that were seen so
positively by the capital markets post listing remain unchanged. The core
business is a resilient one and maintains its dominant market position, with a
stable kettle controls' market share by value.
The recovery in the Kettle Controls regulated markets started in H2 of 2023
(albeit slower than originally anticipated) recording quarter on quarter
growth against the prior year that has continued into Q1 of 2024.
Billi's double-digit revenue and profit growth is expected to continue, helped
by a staged expansion into key European markets.
Divisional restructuring at the start of 2024 has streamlined and re-focused
the Consumer Goods division to drive ongoing profitable growth.
Whilst the Board remains focused on deleveraging, prudent strategic investment
continues into new products, technologies and manufacturing capabilities to
support an accelerated growth profile in the medium-term.
CFO's report:
Financial performance
Revenue
The Group has seen strong growth with revenues increasing by 35.2% year on
year to £144.6m (FY 2022 £106.9m), mainly as a result of the full year
inclusion of Billi revenues of £41.3m (FY 2022, 1 month revenue of £2.7m).
In our organic business, we have seen a small net reduction in sales driven by
decreases in the Consumer Goods division.
Billi (which forms the major part of our Premium Filtration Systems (PFS)
division) has performed ahead of expectations, securing over 10% growth
against pre-acquisition trading levels at constant currency as the business
continues to expand. In the UK market, sales have grown by c.13% year on year,
reflecting a key part of our post-acquisition growth strategy for the
business.
Following on from an extremely challenging 2022, we are pleased to report that
revenues in our Kettle Controls division have increased by 2.7% to £70.1m (FY
2022: £68.2m) driven mainly by an 18% growth in the less regulated kettle
market. The pace of recovery in the larger regulated kettle market continues
to be slower than originally anticipated due to the ongoing effects of the
cost of living crisis and the Russia/Ukraine conflict. Recent incoming order
rates are now tracking in a positive direction, evident from higher sales in
the last quarter of 2023 and a continued slow recovery into Q1 of 2024.
Consumer Goods revenue decreased by 8.7% to £32.3m (FY 2022: £35.4m) with
challenging market conditions in the APAC region being the key driver for this
decline. Despite this, we have continued to successfully expand our online
presence with Amazon and have secured a number of new private label customers
over the course of year, that are set to drive growth into 2024. Aqua Optima,
our lower price point water filtration brand, has also seen strong growth in
the year, providing the Group with an alternative access route into this key
market.
Trading profit
Adjusted gross margin in FY 2023 was 80bps higher at 39.6% (FY 2022: 38.8%).
The main driver of this is from our PFS division where gross margins have
increased strongly to 45.8% (2022: 35.4%) as a result of the full year
inclusion of Billi. With the addition of Billi, PFS now represents the highest
gross margin division in the Group.
Partly offsetting this, product mix changes in Kettle Controls have led to a
divisional gross margin reduction of 190bps to 39.0% (2022: 40.9%) due to
faster recovery during 2023 in the lower margin less regulated and China
domestic markets. Consumer Goods margin dilution of 250bps to 32.6% (2022:
35.1%) is largely down to reduced manufacturing volumes in 2023 impacting
overhead recovery and the relative increase in lower margin online and Aqua
Optima trading levels.
The Group's adjusted EBITDA margin remains strong at 27.3% (2022: 30%)
reflecting the robust underlying profitability of the Group despite the macro
challenges.
Adjusted operating profit margins have reduced by 200bps to 22.2% (FY 2024:
24.2%) as higher overhead costs offset the gross margin uplift noted above.
This increase is predominantly due to the full year inclusion of Billi. As a
business, Billi carries a higher overhead base than the rest of the Group at
c. 25% of revenue (Group: c. 15%). At an operating profit level and slightly
ahead of our pre-acquisition expectations, Billi generated £9.0m adjusted
operating profit for the Group at an adjusted operating margin of 21.8%
(Group: 22.2%).
Excluding the impact of Billi, distribution costs in the organic business
decreased by £1.0m largely due to a reduction in carriage costs associated
with the decrease in sales in Consumer Goods. Whilst organic administration
costs increased by c. 8.0% mainly due to higher staff costs reflecting salary
increases and some limited headcount investment seen across the Group to
support future growth.
Net finance costs
Net finance costs have increased significantly year on year to £10.2m (2022:
£3.9m), due to an increase in the average gross debt to fund the Billi
acquisition and a higher interest rate environment.
Profit before and after tax
Despite the significant increase in net finance costs, the Group's adjusted
profit before tax shows only a slight year on year decrease of £0.3m to
£21.9m (2022: £22.2m). As the contribution to adjusted operating profit
before tax from Billi has offset both finance cost increases and the small
decrease in organic trading. Reported profit before tax was £17.7m (FY 2022:
£16.1m).
Adjusted profit after tax was £20.1m (FY 2022: £23.0m), a decrease of £2.9m
(12.7% decrease). The tax expense significantly increased in the current year
mainly due to tax expense from Billi of £1.3m and Italy of £0.6m, as opposed
to tax incentive credits granted in Italy and the release of tax provisions in
2022 totaling (£0.8m). Reported profit after tax was £16.2m (FY 2022:
£16.9m).
Adjusting items
Adjusting items decreased by 36.4% to £3.9m (2022: £6.1m) due to no COVID-19
related costs and a reduction in restructuring and acquisition expenses (see
note 6 in the financial statements for full details). Share based payments
continue to be treated as an adjusting item and from 2023 we have also
included amortisation charges (£1.3m) on intangible assets recognised on
acquisition.
Cash flow
In line with previous years, the Group has maintained consistently high
operating cash generation, with an operating cash conversion ratio of 106% in
the year (2022: 94%).
This has been helped by strong working capital management, leading to further
decreases in net working capital of £2.3m compared to cash outflows of £2.6m
in the prior year. Reflecting our success in this area, working capital as a %
of sales has reduced significantly to 16.7% (2022: 25.3%).
Cash outflows from investing activities significantly decreased in the current
year to £14.3m (2022: £47.8m) and include the final earn-out payments in
relation to the LAICA acquisition of £7.5m and a lower broadly maintenance
level of capital expenditure (including product led capital development) of
£8.0m. In 2022, cash outflows were higher as a result of the acquisition of
Billi.
Excluding dividends, cash outflows from financing activities significantly
increased in the year to £24.4m, largely reflecting higher interest costs and
substantial repayments in line with the acquisition term loan of £3.5m per
quarter. Quarterly payments of this loan will continue until the facility ends
in October 2025.
Net debt and capital allocation
The Group's net debt position (excluding accrued interest, ROU lease
liabilities and net of loan arrangement fees, as defined in our banking
facility agreement), decreased to £83.7m (FY 2022: £87.4m). As discussed
above, this decrease is mainly attributable to strong operating cash
generation and working capital management delivering cash inflows of £38.9m.
Partially offset by maintenance level capital investments, the final earn-out
payment in relation to LAICA and higher finance costs.
Total committed debt facilities at 31 December 2023 amounted to £103.7m
(2022: £117.8m) and the Group held £20.1m in cash, providing accessible
liquidity. Net debt equated to 2.19 times trailing twelve months' adjusted
EBITDA, in compliance with our debt covenant threshold of 2.25 times.
The Group have been proactively working with banking syndicate to enhance
flexibility and security of funds within the existing agreement. As a result
of that process and illustrating their ongoing confidence and support, a
normalisation of the net debt leverage covenant to 2.75x for the duration of
the remaining facility was agreed on 22 March 2024.
Given the increase in net debt due to the strategic acquisition of Billi, and
with the high interest rates environment, the Group has reviewed its capital
allocation framework to prioritise cash retention and net debt leverage
reduction in the short term.
As a result of this process, a target of initially reducing net debt leverage
to 1.5x has been put in place. After which, leverage appetite will remain at
between 1.0x to 2.0x for the medium term.
Dividend
The Board remains focused on maximising cash generation to support debt
reduction which will result in a temporary pause in the final and interim
dividend payments in calendar year 2024, with a planned return to a
sustainable dividend pay-out ratio of 30% of adjusted PAT in 2025.
The total dividend declared for 2023 is therefore 0.9p per share (2022: 6.00p
per share), representing the interim dividend paid to shareholders in December
2023.
( )
( )
( )
Consolidated statement of comprehensive income
for the year ended 31 December 2023
26 March 2024
Revenue 7 144,586 106,920
Cost of sales - before adjusting items (87,398) (65,395)
Cost of sales - adjusting items 6 (99) (847)
Cost of sales (87,497) (66,242)
Gross profit 57,089 40,678
Distribution costs (10,896) (10,824)
Administrative expenses - before adjusting items (14,679) (5,570)
Administrative expenses - adjusting items 6 (4,127) (5,101)
Administrative expenses (18,806) (10,671)
Share of profits/(losses) from joint ventures 85 (18)
Other operating income 442 751
Operating profit 27,914 19,916
Analysed as:
Adjusted EBITDA(1) 39,585 32,128
Amortisation 11 (3,365) (2,063)
Depreciation 12 (5,341) (4,201)
Adjusting items 6 (2,965) (5,948)
Operating profit 27,914 19,916
Finance costs 8 (10,386) (3,925)
Finance income 175 59
Profit before taxation 17,703 16,050
Income tax (expense)/credit 9 (1,543) 805
16,855
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations (1,612) 1,495
18,350
Profit for the year attributable to:
Equity holders of the Company 16,203 16,790
Non-controlling interests (43) 65
16,160 16,855
Total comprehensive income for the year attributable to:
Equity holders of the Company 14,602 18,324
Non-controlling interests (54) 26
14,548 18,350
Earnings per share (pence)
Basic 10 7.4 8.0
Diluted 10 7.3 7.9
( )
(1) Adjusted EBITDA, which is defined as earnings before finance costs, tax,
depreciation, amortisation, and adjusting items, is a non-GAAP metric used by
management and is not an IFRS disclosure
( )
Consolidated statement of financial position
as at 31 December 2023
Non-current assets
Intangible assets 11 73,409 73,374
Property, plant and equipment 12 46,215 47,364
Deferred tax asset 9 957 -
Investments in joint ventures 1 19
Net investments in finance leases 11 16
Total non-current assets 120,593 120,773
Current assets
Inventories 15 25,440 27,702
Trade and other receivables 16 27,713 29,791
Current income tax receivable 16 220 497
Cash and cash equivalents 17 20,114 30,443
Total current assets 73,487 88,433
209,206
EQUITY AND LIABILITIES
Equity
Share capital and share premium 24 23,642 23,861
Share based payment reserve 23 572 202
Retained earnings 18,167 12,479
Non-controlling interests 653 707
Total equity 43,034 37,249
Current liabilities
Trade and other payables 18 27,165 29,963
Borrowings 19 16,062 14,734
Lease liabilities 26 1,218 1,069
Contingent consideration 14 - 7,532
Current income tax liabilities 18 2,074 444
Total current liabilities 46,519 53,742
Non-current liabilities
Lease liabilities 26 3,592 2,819
Deferred tax liability 9 10,304 11,387
Borrowings 19 89,743 103,092
Post-employment benefits 5(c) 888 917
Total non-current liabilities 104,527 118,215
Total liabilities 151,046 171,957
209,206
Consolidated statement of changes in equity
for the year ended 31 December 2023
Balance at 1 January 2022 13,139 2,039 10,146 25,324 681 26,005
Profit for the year - - 16,790 16,790 65 16,855
Other comprehensive income / (expenses) - - 1,534 1,534 (39) 1,495
Total comprehensive income for the year - - 18,324 18,324 26 18,350
Dividends paid (note 25) - - (17,300) (17,300) - (17,300)
Share-based payment transactions (note 23) - (491) - (491) - (491)
Transfers between reserves (note 23) 7 (1,210) 1,203 - - -
Issue of shares (note 24) 13,000 - - 13,000 - 13,000
Transaction costs (note 24) (2,285) - - (2,285) - (2,285)
Total transactions with equity holders recognised directly in equity 10,722 (1,701) (16,097) (7,076) - (7,076)
Other transactions recognised directly in equity (note 23) - (136) 106 (30) - (30)
Balance at 1 January 2023 23,861 202 12,479 36,542 707 37,249
Profit for the year - - 16,203 16,203 (43) 16,160
Other comprehensive income / (expenses) - - (1,601) (1,601) (11) (1,612)
Total comprehensive income for the year - - 14,602 14,602 (54) 14,548
Dividends paid (note 25) - - (9,070) (9,070) - (9,070)
Share-based payment transactions (note 23) - 380 - 380 - 380
Transfers between reserves (note 23) - (10) 10 - - -
Transaction costs (note 24) (219) - - (219) - (219)
Total transactions with equity holders recognised directly in equity (219) 370 (9,060) (8,909) - (8,909)
Other transactions recognised directly in equity - - 146 146 - 146
Balance at 31 December 2023 23,642 572 18,167 42,381 653 43,034
Consolidated statement of cash flows
for the year ended 31 December 2023
Cash flows from operating activities
Cash generated from operations 27 38,902 24,567
Tax paid (1,297) (1,204)
Net cash generated from operating activities 37,605 23,363
Cash flows from investing activities
Purchase of property, plant and equipment (3,296) (4,749)
Cash outflows from capitalised development costs 11 (3,560) (3,326)
Purchase of LAICA S.p.A (deferred consideration) (7,502) (1,671)
Consideration refund/(purchase of Billi, net of cash acquired) 14 1,046 (37,658)
Purchase of other intangibles 11 (1,169) (484)
Finance income 180 59
Net cash used in investing activities (14,301) (47,829)
Cash flows from financing activities
Drawdowns under credit facility 19 - 46,487
Repayment of borrowings 19 (15,114) -
Finance costs paid 19 (7,611) (3,263)
Principal elements of lease payments 26 (1,426) (833)
(Transaction costs)/net proceeds from issue of new shares 24 (219) 10,715
Dividends paid 25 (9,070) (17,300)
Net cash (used in)/generated from financing activities (33,440) 35,806
Net (decrease)/increase in cash and cash equivalents (10,136) 11,340
Cash and cash equivalents at the beginning of the year 30,443 19,670
Effects of foreign exchange on cash and cash equivalents (193) (567)
Notes to the consolidated financial statements
for the year ended 31 December 2023
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. MATERIAL ACCOUNTING POLICIES
The Group's material 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
IFRS Accounting Standards ("IFRS") and International Financial Reporting
Standards Interpretation Committee ("IFRS IC") interpretations as adopted by
the European Union. 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
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. In making this assessment the Directors have
considered the following:
· the resilient historic trading performance of the Group;
· budgets and cash flow forecasts for the period to December 2025;
· the current financial position of the Group, including its cash and cash
equivalents balances of £20.1m;
· the availability of further funding by way of 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 diverse sectors that are experiencing
gradually increasing demand for its products as the world returns back to a
"new normal" in the aftermath of the COVID-19 pandemic, despite some
offsetting impacts of the conflicts in Ukraine and the Middle East; and
· that there has been minimal 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.
Standards, amendments and interpretations adopted
The group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2023:
• IFRS 17 Insurance Contracts
This standard replaces IFRS 4, which currently permits a wide variety of
practices in accounting for insurance contracts. IFRS 17 will fundamentally
change the accounting by all entities that issue insurance contracts with
discretionary participation features.
This standard does not have an impact on the Group as the Group has no
contracts in scope for this standard. The group has warranties provisions in
relation to inventory, however, the warranties relating to manufacturing
entities are excluded from the scope of IFRS 17 as they are covered by IFRS
15.
• Definition of Accounting Estimates - amendments to IAS 8
The amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors clarifies how companies should distinguish changes in accounting
policies from changes in accounting estimates. The distinction is important,
because changes in accounting estimates are applied prospectively to future
transactions and other future events, whereas changes in accounting policies
are generally applied retrospectively to past transactions and other past
events as well as the current period.
• Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - amendments to IAS 12
The amendments to IAS 12 Income Taxes require companies to recognise deferred
tax on transactions that, on initial recognition, give rise to equal amounts
of taxable and deductible temporary differences, and will require the
recognition of additional deferred tax assets and liabilities.
The amendment should be applied to transactions that occur on or after the
beginning of the earliest comparative period presented. In addition, entities
should recognise deferred tax assets (to the extent that it is probable that
they can be utilised) and deferred tax liabilities at the beginning of the
earliest comparative period for all deductible and taxable temporary
differences associated with:
- right-of-use assets and lease liabilities, and
- decommissioning, restoration and similar liabilities, and the corresponding
amounts recognised as part of the cost of the related assets.
The cumulative effect of recognising these adjustments is recognised in the
opening balance of retained earnings, or another component of equity, as
appropriate.
• Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
The IASB amended IAS 1 Presentation of Financial Statements to require
entities to disclose their material rather than their significant accounting
policies.
The amendments define what is 'material accounting policy information' (being
information that, when considered together with other information included in
an entity's financial statements, can reasonably be expected to influence
decisions that the primary users of general-purpose financial statements make
on the basis of those financial statements) and explain how to identify when
accounting policy information is material.
They further clarify that immaterial accounting policy information does not
need to be disclosed. If it is disclosed, it should not obscure material
accounting information.
To support this amendment, the IASB also amended IFRS Practice Statement 2
Making Materiality Judgements to provide guidance on how to apply the concept
of materiality to accounting policy disclosures.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
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 2023 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.
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
to direct the activities of 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.
If those amounts are less than the fair value of the net identifiable assets
of the business acquired, the difference is recognised directly in profit or
loss as a bargain purchase. 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
retrospectively where material to reflect the new information obtained about
facts and circumstances that existed as at the acquisition date, and if known,
would have affected the measurement of assets and liabilities recognised at
that date. Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value, with changes in fair value recognised
in profit or loss.
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.
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. 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.
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 3-25 years
· Fixtures, fittings and equipment 2-10 years
· Motor vehicles 3-5 years
· Production tools 1-10 years
· Right-of-use assets 2-8 years
· Land and buildings 50 years
· Point-of-use dispensers 4-10 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 2-10 years
· Intellectual property Lower of useful or legal life
· Technology and software 2-10 years
· Customer relationships 10-15 years
· Brands Indefinite useful life
· Goodwill Indefinite useful life
The useful lives for customer relationships have been updated to include those
relating to Billi post finalization of the fair values on acquisition.
Customer relationships in the prior year were amortised over 10-13 years.
Brands have an indefinite useful life because there is no foreseeable limit on
the period during which the Group expects to consume the future economic
benefits embodied in the asset.
The LAICA brand has been trading since inception and has been a well
recognisable brand amongst the Group's trading partners, and the Group does
not foresee a time limit by when these partnerships will cease.
The Billi brand is a well-established and competitive brand, being one of the
top 2 brands in the Australian and New Zealand markets, and well recognised in
the United Kingdom among residential and commercial clientele. The Group does
not foresee a time limit by when this market presence will cease.
Amortisation is charged to the consolidated statement of comprehensive income
on a straight-line basis over the estimated useful lives above.
Derecognition
Intangible assets are derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains or losses arising from
derecognition of intangible assets, measured as the difference between the net
disposal proceeds and the carrying amount of the asset, 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 the assets or 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, motor vehicles 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
Borrowing costs or arrangement fees, including option-type arrangements, are
recognised initially at fair value. Borrowing costs including option-type
borrowing arrangements are subsequently measured at amortised cost. The
establishment of such option-type arrangements are recognised as a 'right to
borrow' asset, and together with other borrowing costs or arrangement fees are
amortised over the period of the facilities to which the fees relate, and are
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 including applicable supplier rebates, 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.
Supplier rebates
The Group enters into agreements with suppliers whereby volume-related
allowances and various other fees and discounts are received in connection
with the purchase of goods from those suppliers. Most of the income received
from suppliers relates to commercially agreed rebates based on historic sales
volumes.
Rebates are recognised when earned by the Group, which occurs when all
obligations conditional for earning income have been discharged, and the
income can be measured reliably based on the terms of the contract. The income
is recognised as a credit within cost of sales.
Where the income earned relates to inventories which are held by the Group at
the year end, the income is included within the cost of those inventories, and
recognised in cost of sales upon sale of those inventories. Amounts due
relating to supplier rebates are recognised within trade and other
receivables.
Revenue
The Group primarily recognises revenue from the sale of goods and services to
its customers as well as from licensing arrangements. The transaction price is
based on the sales agreement with the customer. Revenue is reported net of
sales taxes, discounts, rebates and after eliminating intra-group sales.
Rebates are based on a certain volume of purchases by a customer within a
given period and are recognised on an expected value approach.
Revenue is measured based on the consideration to which the Group expects to
be entitled in a contract with a customer and is recognised when the
performance obligations have been fulfilled. The Group recognises revenue from
the sale of goods and services either at a point in time or over time, based
on the nature of the contract terms. The Group recognises revenue from three
main categories namely kettle controls, premium filtration systems and
consumer goods.
Kettle controls
The performance obligation is the delivery of the goods to customers, and
revenue is recognised on dispatch, otherwise it 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 Original Equipment
Manufacturer ('OEM') or wholesaler. All of the amounts recognised as revenue
are based on contracts with customers. No element of financing is deemed
present because the sales are made under normal credit terms, which is
consistent with market price.
Payment terms for the majority of customers in this category are to pay cash
in advance of the goods being delivered. The Group recognises the advance
payments 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.
Premium Filtration Systems
The Group recognises revenue from the following major sources under premium
water filtration system categories:
· Sale of Point-of-use (POU) water and coffee machines
Revenue from the sale of point-of-use water and coffee machines is recognised
once control of the goods has been transferred to the customer.
· Rental of Point-of-use (POU) dispensers and coffee machines
Rental income is made up of revenue from the supply of goods where the Group
is lessor in an operating lease and is recognised over time, with the
transaction price allocated to this service released on a straight-line basis
over the period of the lease. Included in the transaction price for the rental
of dispensers, in some contracts, is the installation of those dispensers. The
rental and installation elements of the contract are considered to be one
deliverable, as they are highly interrelated, and therefore there is no
allocation of a portion of the transaction price to the installation.
Rental income from operating leases is recognised on a straight-line basis
over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease (except where immaterial) are
added to the carrying amount of the leased asset and recognised on a
straight-line basis over the lease term. Commissions on new contracts are
capitalised and depreciated over one and a half times the initial lease
term.
Rental agreements run for a minimum period of twelve months and typically for
three to five years. Some rental agreements have no fixed end date and may be
cancelled by either party subject to a minimum notice period or early
termination penalty. The average useful economic life for a POU water device
is approximately four to ten years whilst refurbishment can extend the life of
some devices to eleven years or more. For this reason, existing rental
agreements are not judged to transfer substantially all of the risks and
rewards of ownership to the lessee.
· Servicing of Point-of-use (POU) units
Sale of services are recognised proportionally over the duration of the
service period, provided a right to consideration has been established.
· Sale of consumables
Revenue from the sale of consumables is recognised once control of the goods
has been transferred to the customer.
Combined rental and service contracts
The Group has in place some contracts that cover both the rental and servicing
and maintenance of dispensers. The transaction price is allocated to each
performance obligation to reflect the amount of consideration to which the
Group is entitled to, in exchange for transferring the promised goods or
services to the customer. The Group allocates combined rental and service
income to the separate rental and service categories based on a percentage
allocation method, which is calculated for each business unit. The percentage
allocation, which is recalculated periodically, is based on the transaction
price being allocated to each performance obligation in proportion to its
stand-alone selling price.
Consumer Goods
Sales are either 'direct' to the end user customers or 'indirect' to wholesale
and retail distributors. Revenue from the supply of goods is recognised once
control of the goods has been transferred to the customer, being when goods
have been delivered to a customer site or in the case of indirect sales, when
the goods have been delivered to the wholesale distributor.
Deferred revenue
Revenue recognised in the consolidated statement of comprehensive income but
not yet invoiced is held in the statement of financial position within 'Trade
receivables'. Revenue invoiced but not yet recognised in the consolidated
statement of comprehensive income is held on the consolidated statement of
financial position within 'Payments in advance from customers'.
Licensing income
The Group holds a substantial portfolio of issued and registered intellectual
property rights relating to certain aspects of its hardware devices,
accessories, goods, software and services. This includes patents, designs,
copyrights, trademarks and other forms of intellectual property rights
registered in the U.K. and various foreign countries.
From time to time, the Group enters into term-based and exclusive licensing
arrangements with some of its customers in respect of its intellectual
property.
The licensing income is recognised at a point in time or over time based on
the following assessment. Where the licensing arrangement is a distinct
performance obligation, Management assess whether the licensing contract gives
the customer either:
· the right to access the Group's intellectual property as it exists throughout
the licence period; or
· right to use the Group's intellectual property as it exists at the point in
time at which the licence is granted.
Revenue from a licencing contract which is considered to provide a right to
the customer to access the Group's intellectual property as it exists
throughout the licence period is recognised over time, as and when the related
performance obligation is satisfied.
A licensing contract gives the customer the right to access the Group's
intellectual property as it exists throughout the license period when all the
following are met:
· the contract requires, or the customer reasonably expects, that we will
undertake activities that significantly affect the intellectual property to
which the customer has rights; and
· the rights granted by the licence directly expose the customer to any positive
or negative effects of the entity's activities identified above; and
· those activities do not result in the transfer of a good or a service to the
customer as those activities occur.
Revenue relating to a licensing contract which does not meet the above
criteria is recognised at a point in time, which is usually the point at which
the licence is granted to the customer but not before the beginning of the
period during which the customer is able to use and benefit from the licence.
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
dispensers, taps, 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.
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 income
Finance income comprises bank interest receivable on funds invested. Finance
income is recognised using the effective interest rate method.
Finance costs
Finance costs directly attributable to the acquisition or construction of a
qualifying asset are capitalised. Qualifying assets are those that necessarily
take a substantial period of time to prepare for their intended use. All
other borrowing cost are recognised in the consolidated statement of income in
finance costs. Finance costs comprise interest charges on lease liabilities,
interest on borrowings, the unwind of discounts on the present value of
liabilities, and finance charges relating to letters of credit. Finance costs
are determined using the effective interest rate method.
Income tax
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.
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.
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.
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.
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.
Provisions
General
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. When the Group expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the reimbursement is
recognised as a separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in the statement of
profit or loss net of any reimbursement. If the effect of the time value of
money is material, provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability. When
discounting is used, the increase in the provision due to the passage of time
is recognised as a finance cost.
Warranty provisions
The Group provides warranties for general repairs of defects that existed at
the time of sale, as required by law. Provisions related to these warranties
are recognised when the product is sold, or the service is provided to the
customer. Initial recognition is based on historical experience which may vary
due to the use of new materials, changes in manufacturing processes or other
developments that affect product quality. The estimate of warranty-related
costs is revised annually.
EBITDA and adjusted EBITDA - non-GAAP alternative performance measures
In the reporting of financial information, the Directors have adopted Earnings
before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and
adjusted EBITDA when assessing the operating performance of the Group.
Adjusting items are excluded from EBITDA to calculate adjusted EBITDA. The
Directors primarily use the adjusted EBITDA measure when making decisions
about the Group's activities.
EBITDA and adjusted EBITDA are non-GAAP measures and may not be calculated in
the same way and hence may not be directly comparable to those reported by
other entities. In determining the adjusting items, the following criteria are
considered:
· if a certain event (defined as adjusting) 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 or diverted 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.
An item is treated as adjusting if it relates to certain costs or income that
derive from events or transactions that fall within the normal activities of
the Group but which, individually or, if of a similar type, in aggregate, are
excluded from the Group's Alternative Performance Measures (APMs) by virtue of
their nature or size, in order to better reflect management's view of the
underlying trends and operating performance of the Group that is more
comparable over time.
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 has 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.; Taiwan LAICA Corp. which both have a Taiwan Dollar functional currency,
Billi Australia (Pty) Ltd which has an Australian Dollar functional currency
and Billi New Zealand Ltd which has a New Zealand 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.
Alternative performance measures (APMs) - Adjusting items
Management and the Board consider the quantitative and qualitative factors in
classifying items as adjusting and exercise judgement in determining the
adjustments to apply to IFRS measures. This assessment covers the nature of
the item, cause of occurrence, frequency, predictability of occurrence of the
item or related event, and the scale of the impact of that item on reported
performance. Reversals of previous adjusting items are assessed based on the
same criteria.
An analysis of the adjusting items included in the consolidated statement of
comprehensive income is disclosed in note 6(b).
Critical estimates in applying the entity's accounting policies
There are no estimates in the financial statements where a reasonably possible
change in the next year could be expected to result in a material change to
amounts recognised. However, an area of estimation performed by management in
the year which is relevant to the financial statements is disclosed below.
Impairment of indefinite lived intangible assets and goodwill
Determining whether goodwill and intangible assets with indefinite lives are
impaired requires an estimation of the value in use or the fair value less
costs to sell of the cash generating unit (CGU) to which the goodwill or
intangible asset has been allocated. The value in use calculation requires
management's estimation of the future cash flows expected to arise from the
CGU. Refer to Note 11 for the sensitivity analysis of the assumptions used in
the impairment analysis of goodwill and intangible assets with indefinite
lives.
4. SEGMENTAL REPORTING
Management has determined the operating segments based on the operating
reports reviewed by the Board of Directors that are used to assess both
performance and strategic decisions. Management has identified that the Board
of Directors is the chief operating decision maker in accordance with the
requirements of IFRS 8 'Operating Segments'.
The Group's activities consist of the design, manufacture and sale of
thermostatic controls, cordless interfaces, and other products such as water
dispensers, jugs, filters, water heating and temperature control, steam
management, water filtration and small household appliances for personal
health and wellness, primarily to Original Equipment Manufacturers ("OEMs"),
commercial and residential customers based in China, Italy, Australia, New
Zealand and the United Kingdom.
During the current year, the Board of Directors established a new divisional
reporting structure to capitalise on attractive growth opportunities in its
end markets. The Board of Directors has identified 3 reportable segments from
a product perspective, namely: kettle controls, premium filtration systems
(primarily Billi products), and consumer goods (made up of water products and
appliances). The Board of Directors primarily uses a measure of gross profit
to assess the performance of the operating segments, broken down into revenue
and cost of sales for each respective segment which is reported to them on a
monthly basis. Information about segment revenue is disclosed below, as well
as in note 7.
Revenue 70,102 42,106 32,378 144,586
Cost of sales (42,787) (22,859) (21,851) (87,497)
Gross profit 27,315 19,247 10,527 57,089
Revenue 68,243 3,224 35,453 106,920
Cost of sales (41,108) (2,263) (22,871) (66,242)
Gross profit 27,135 961 12,582 40,678
Revenue 70,102 42,106 32,378 144,586
Cost of sales (42,746) (22,825) (21,827) (87,398)
Gross profit 27,356 19,281 10,551 57,188
Revenue 68,243 3,224 35,453 106,920
Cost of sales (40,306) (2,083) (23,006) (65,395)
Gross profit 27,937 1,141 12,447 41,525
*Adjusted gross profit excludes adjusting items as detailed in note 6(b).
Adjusted results are non-GAAP metrics used by management and are not an IFRS
disclosure.
Below is the geographical analysis of revenue from external customers.
Australia 26,985 1,814
China 67,989 70,142
Italy 14,478 14,749
UK 16,376 6,173
Others 18,758 14,042
Total 144,586 106,920
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
In accordance with IFRS 8, the following table discloses the non-current
assets located in both the Company's country of domicile (the Isle of Man) and
foreign countries, primarily China, Italy, Australia, New Zealand and the
United Kingdom where the Group's principle subsidiaries are domiciled.
Country of domicile
Intangible assets 13,084 11,354
Property, plant and equipment 2,599 3,151
Total country of domicile non-current assets 15,683 14,505
Non-current assets (i) attributed to country of domicile and (ii) attributable
to all other foreign countries (continued)
Foreign countries
Intangible assets 60,325 62,020
Property, plant and equipment 43,616 44,213
Total foreign non-current assets 103,941 106,233
Total non-current assets 119,624 120,738
Major customers
In 2023, there was one major customer that accounted for at least 10% of total
revenues (2022: one customer). The revenue relating to this customer in 2023
was £16,938,000 (2022: £13,587,000).
5. EMPLOYEES AND DIRECTORS
(a) Employee benefit expenses
Wages and salaries 36,976 27,500
Defined contribution pension cost (note 5(c)(i)) 1,352 782
Employee benefit expenses 38,328 28,282
Share based payment transactions (note 23) 380 (491)
Total employee benefit expenses 38,708 27,791
(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
Operational Board, representing members of the senior management team from all
key departments of the Group.
Salaries and other short-term employee benefits 2,179 2,069
Post-employment benefits 175 181
Termination benefits 146 74
Share based payment transactions 57 (348)
2,557 1,976
-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 £1,352,000 (2022:
£782,000).
(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 13.05. Although the benefit is paid in full by the employer, part (0.5% of
pay) of the annual accrual is paid to INPS by the employer, and is subtracted
from the severance pay accruals for the contribution reference period. As of
31st December of every year, the severance pay accrued as of 31st 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 31 December 2023:
Liability as at 1 January 832 897
Current service cost for the period (16) (113)
Exchange differences on translation of foreign operations (14) 48
Liability as at 31 December 802 832
The key actuarial assumptions used in arriving at these figures include:
• annual discount rate of 3.17% (2022: 3.77%)
• annual price inflation of 2.0% (2022: 2.3%)
• annual TFR increase of 3.0% (2022: 3.2%)
• demographic assumptions based on INPS published data
The remainder of the post-employment benefit liability of £86,000 (2022:
£85,000) as at 31 December 2023 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
Employee benefit expense (note 5(a)) 38,328 28,282
Depreciation charges 5,341 4,201
Amortisation and impairment charges 2,104 2,063
Adjusting items (see below) 4,226 5,948
Foreign exchange losses 530 188
Research and development expenditure totalled £4,485,000 (2022: £4,888,000),
and £3,870,000 (2022: £3,326,000) of development costs have been capitalised
during the year.
(b) Adjusting items
Adjusting items are excluded from our adjusted results by virtue of their
nature, cause and predictability of occurrence, frequency, and scale of impact
on underlying performance in order to better reflect management's view of the
underlying trends and operating performance of the Group that is more
comparable over time. Total adjusting items charged against reported profit
after tax in the current year are £3,897,000 (2022: £6,128,000).
The main categories of adjusting items in the current year relate to major
adjusting events or projects impacting the Group's underlying operations,
namely strategic projects relating to mergers and acquisitions with particular
reference to the acquisition of Billi in 2022 and its continued integration
into the Group in the current year. Other adjusting items relate to
reorganisation and restructuring projects, 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), amortisation
charges on intangibles assets recognised in accordance with IFRS 3: Business
Combinations on any acquisitions as defined therein, and the related deferred
tax implications on these aforementioned intangible assets which were charged
or recognised in reported profit after tax.
(b) Adjusting items (continued)
Adjusting items have been broken down as follows:
Adjusting items in cost of sales:
COVID-19 related costs - 485
Reorganisation and restructuring costs 99 362
99 847
Adjusting items in administrative expenses:
Share-based payments 380 (491)
Mergers and acquisitions related costs 2,073 3,992
COVID-19 related costs 14 673
Disaster recovery - 377
Reorganisation and restructuring costs 399 550
Amortisation charges on acquired intangible assets 1,261 -
4,127 5,101
Total adjusting items before depreciation, finance cost and taxes 2,965 5,948
Amortisation charges on acquired intangible assets 1,261 -
Total adjusting items (before finance costs and taxation charges/(credits)) 4,226 5,948
Adjusting items in finance costs:
Unwinding discount on Laica contingent consideration (performance earn-out) - 180
- 180
Adjusting items in taxation charges/(credits) :
Deferred taxation credits relating to acquired intangible assets (329) -
(329) -
Total adjusting items 3,897 6,128
Included within adjusting items in administrative expenses are amortisation
charges on intangible assets recognised on acquisitions as defined in IFRS 3:
Business Combinations. These amount to £1,261,000 in the current year (2022:
£nil). These amortisation charges have been included in note 11 relating to
Intangibles Assets. In the current year, management reassessed the impact of
amortisation charges on acquired intangible assets and concluded that these
relates to historical inorganic business combinations and do not reflect the
Group's ongoing underlying trading performance. Therefore, these will be
prospectively excluded when assessing the underlying performance of the Group,
and will be included as adjusting items. The 2022 amounts of £210,000 have
not been restated.
Also included within adjusting items in taxation charges/(credits) are
deferred tax movements on temporary differences relating to acquired
intangible assets as defined in IFRS 3: Business Combinations. These amount to
credits of £329,000 in the current year (2022: £nil). These deferred tax
credits have been included in note 9 relating to Taxation. In the current
year, management reassessed the impact of deferred tax credits on acquired
intangible assets and concluded that these relates to historical inorganic
business combinations and do not reflect the Group's ongoing underlying
trading performance. Therefore, these will be prospectively excluded when
assessing the underlying performance of the Group, and will be included as
adjusting items. 2022 amounts have not been restated.
Also included as an adjusting item are finance costs of £nil in the current
year (2022: £180,000). Costs incurred in the prior year related to the
discount unwinding of the present values of contingent liabilities recognised
on acquisition of Laica S.p.A in 2020. The contingent liabilities were fully
matured at the beginning of the current year and were paid in the first
quarter of 2023. No finance charges were incurred in the current year. These
costs have been included in the prior year within finance costs in note 8.
Mergers and acquisitions adjusting items relate mainly to legal and
consultancy fees, and other acquisition-related costs incurred on transition
from previous shareholders and integration of the Billi entities into the
Group.
COVID-19 related adjusting items 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 the consequent minor
preventative measures and projects after the effects have largely receded). In
the current year, these mainly consisted of immaterial consumables relating to
additional cleaning and sanitation costs incurred as part of infection control
or prevention.
Reorganisation and restructuring adjusting items in the current year mainly
related to the Group internal divisional restructuring programmes particularly
of our operating segments and divisions in order to re-align our business and
focus on our core competencies of technology, innovation, manufacturing
excellence, quality and safety, so as to steer our valuable resources more
towards profitable growth opportunities.
Disaster recovery costs related to staff and non-staff costs incurred in
response to a cyber incident which occurred in February 2022. The Group
engaged external specialists, took precautionary measures with its IT
infrastructure and implemented its business continuity plan. The systems were
successfully restored and are fully operational. The Group continues to
monitor its exposure.
(c) Auditor's remuneration
During the year the Group (including its subsidiaries) obtained the following
services from the Company's auditor, PricewaterhouseCoopers (PwC) LLC and
other firms in the PwC network, as detailed below:
Fees payable to Company's auditor and its associates for the audit of the 283 245
consolidated financial statements
Fees payable to Company's auditor and its associates for other services:
- the audit of Company's subsidiaries 13 8
- other assurance services 4 3
- tax compliance and other 191 5
491 261
Included within 'other' are fees of £184,000 paid to PricewaterhouseCoopers
LLP, UK in relation to integration costs of the Billi UK acquisition.
Audit fees of £70,000 (2022: £68,000) were paid to non-PwC firms in
connection with the audit of the Company's subsidiaries.
7. REVENUE
The following table shows a disaggregation of revenue into categories by
product line:
Kettle controls 70,102 68,243
Premium filtration systems 42,106 3,224
Consumer goods 32,378 35,453
Total revenue 144,586 106,920
Included within the revenue from the kettle controls is licensing fee income
relating to intellectual property amounting to £852,000 (2022: £nil).
Included within the revenue from the consumer goods is licensing fee income
relating to intellectual property amounting to £318,000 (2022: £1,442,000).
8. FINANCE COSTS
Letter of credit charges 176 94
Right-of-use lease interest 198 92
Discount unwinding of present value of contingent consideration - 180
Borrowing costs 10,012 3,559
Total finance costs 10,386 3,925
The discount unwinding of present value of contingent consideration in the
prior year related to the contingent consideration on a performance earn-out
recognised on acquisition of LAICA S.p.A. The amount has been included in
finance costs as an adjusting item (refer to note 6).
9. TAXATION
Current tax (overseas) and deferred tax
Current tax on overseas profits for the year 2,521 491
Adjustments to prior years' overseas tax provisions - (1,323)
Movement in deferred tax assets and liabilities (978) 27
Total tax charge/(credit) 1,543 (805)
Included in the movement of deferred tax liabilities are the deferred tax
impact of temporary differences relating to intangible assets recognised on
acquisitions as defined in IFRS 3: Business Combinations. These amount to
credits of £329,000 in the current year (2022: £nil). These deferred tax
credits have been included in note 6(b) relating to Adjusting Items.
Overseas tax relates primarily to tax payable by the Group's subsidiaries in
China, Australia, New Zealand, Italy and the UK.
In relation to the prior year's tax provision adjustments, these related to
tax provision releases in the Group's Chinese subsidiary based on independent
recommendations taken to convert from a contract processing model to an import
processing model in 2019, which is a more acceptable tax model by Chinese tax
authorities and largely in use by the majority of the OEMs in China. All
potential tax provisions that had been made from 2015 to 2019 were deemed
overly conservative, and were therefore released in the prior year as they
were no longer needed after a tax certificate from the in-charge tax bureau in
China was obtained which confirmed that all tax matters in the subsidiary had
been settled. In addition, tax provision releases were also made in the prior
year of withholdings taxes accrued for anticipated dividends payable by the
Chinese subsidiary to its immediate holding company in the Isle of Man, after
the Group's management decided in the prior year to invest more towards the
Chinese manufacturing facility in terms of capital expenditure, thereby
keeping profits within the Chinese subsidiaries.
There were no tax provision releases in the current year.
Movement in the deferred tax assets and liabilities mainly related to the
impact of taxable and deductible temporary differences with the Italian,
Australian and New Zealand subsidiaries.
Reconciliation of the movement in deferred tax liabilities and assets has been
presented below:
Deferred tax liabilities:
Deferred tax liability on 1 January 11,387 2,303
Deferred tax liabilities recognised on acquisition of Billi (note 14) - 9,011
Prior year adjustments (180) -
Reversal of deferred tax on utilisation of temporary differences (903) 73
Deferred tax liability as at 31 December 10,304 11,387
The balance comprises temporary differences attributable to intangible assets
recognised on acquisition of LAICA in 2020 and Billi in 2022.
Deferred tax assets:
Deferred tax assets on 1 January 313 258
Deferred tax assets recognised on acquisition of Billi - 8
Reclassifications 153 -
Prior year adjustments 416 -
Deferred tax asset on utilisation of deductible temporary differences 75 47
Deferred tax asset as at 31 December 957 313
The balance comprises temporary differences mainly attributable to provisions.
In the prior year, the deferred tax asset of £313,000 was included in trade
and other receivables.
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 different to the standard rate of income tax
in the Isle of Man of 0% (2022: 0%). The differences are explained below:
Profit on ordinary activities before tax 17,703 16,050
Profit on ordinary activities multiplied by the rate of income tax in the Isle - -
of Man of 0% (2022: 0%)
Impact of higher overseas tax rate 1,543 518
Adjustments in relation to prior years' overseas tax provisions - (1,323)
Total taxation (credit)/charge 1,543 (805)
The Group is subject to Isle of Man income tax on profits at the rate of 0%
(2022: 0%), UK corporation tax on profits at a rate of 25% (2022:19%), Chinese
corporate income tax on profits at the rate of 25% (2022: 25%), Italian
corporate income tax on profits at a rate of 27.9% (2022: 27.9%), Australian
income tax on profits at the rate of 30% (2022: 30%) and New Zealand corporate
income tax on profits at the rate of 28% (2022:28%).
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the
following data.
Earnings (£000s)
Earnings for the purposes of basic and diluted earnings per share 16,203 16,790
Number of shares (000s)
Weighted average number of shares for the purposes of basic earnings per share 218,713 209,911
Weighted average dilutive effect of share awards 3,422 2,585
Weighted average number of shares for the purposes of diluted earnings per 222,135 212,496
share
Earnings per ordinary share (pence)
Basic earnings per ordinary share 7.4 8.0
Diluted earnings per ordinary share 7.3 7.9
Adjusted earnings per ordinary share (pence) ((1))
Basic adjusted earnings per ordinary share ((1)) 9.2 10.9
Diluted adjusted earnings per ordinary share ((1)) 9.0 10.8
The calculation of basic and diluted adjusted earnings per share is based on
the following data:
Profit for the year 16,203 16,790
Add back adjusting items included in (note 6(b)):
Cost of sales 99 847
Administrative expenses 4,127 5,101
Finance costs - 180
Taxation credits (329) -
Adjusted earnings ((1)) 20,100 22,918
(1. Adjusted earnings and adjusted earnings per share exclude adjusting items
as explained in note 6. 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
Development costs Software Intellectual Property Customer relationships Brands Goodwill Intangible assets under construction Total
£000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 19,428 4,452 1,482 18,549 19,785 20,067 103 83,866
Accumulated amortisation and impairment (7,716) (1,817) (256) (703) - - - (10,492)
Net book value 11,712 2,635 1,226 17,846 19,785 20,067 103 73,374
Period ended 31 December
Additions 3,870 448 464 - - 242 5,024
Transfers - 9 42 (116) 28 69 (32) -
Purchase consideration refund - - - - - (1,046) - (1,046)
Fair value adjustments (note 14) - - - (84) - 654 - 570
Disposals (cost) (494) (50) - - - - - (544)
Disposals (accumulated amortisation) 184 46 - - - - - 230
Amortisation charge (1,304) (641) (159) (1,261) - - - (3,365)
Exchange differences (292) (5) (31) (9) (139) (374) 16 (834)
Closing net book value 13,676 2,442 1,542 16,376 19,674 19,370 329 73,409
At 31 December
Cost 22,742 4,848 1,950 18,222 19,674 19,370 329 87,135
Accumulated amortisation and impairment (9,066) (2,406) (408) (1,846) - - - (13,726)
Net book value 13,676 2,442 1,542 16,376 19,674 19,370 329 73,409
Amortisation charges have been treated as an expense, and are allocated to
cost of sales (£1,709,000), distribution costs (£nil) and administrative
expenses (£1,656,000) in the consolidated statement of comprehensive income.
The Group's goodwill, customer relationships and brands predominantly relate
to those arising on the acquisition of LAICA which was completed in 2020, and
also on the acquisition of the Billi entities, which were acquired in 2022
(note 14).
Laica S.p.A and subsidiaries intangible assets impairment review
The carrying values of goodwill and brands of £8.6m (2022: £8.8m) and £6.4m
(2022: £6.5m) respectively have been subject to an annual impairment test,
and the recoverable amounts assessed at each cash generating unit (CGU) level
determined on the basis of value-in-use calculations over a five-year forecast
period for goodwill and a twenty-year period for brands. The key assumptions
applied in the value-in-use calculations for LAICA are a discount rate of
11.8%, (2022: 12%) variable trading margins, variable revenue growth rates as
well as the terminal growth rate of 2% (2022: 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
(2022: 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
assumptions, being the discount and growth rates, was undertaken. An increase
of 1% in the discount rate or a decrease of 1% in the growth rate would
decrease the headroom of £20.2m by circa £2.4m for goodwill and would
extinguish the headroom of £0.4m for brands.
Billi entities intangible assets impairment review
For impairment testing, the goodwill and brands acquired in the acquisition of
Billi are allocated to three cash generating units (CGUs).
Carrying amount of goodwill and brands allocated to each of the CGUs:
Goodwill Brands Total
Billi Australia 7,944 8,241 9,555 9,555 17,499 17,796
Billi New Zealand 260 270 1,165 1,165 1,425 1,435
Billi UK 2,289 2,374 2,548 2,548 4,837 4,922
Total 10,493 10,885 13,268 13,268 23,761 24,153
Billi Australia CGU
The carrying values of existing goodwill and brands of £7.9m (2022: £8.2m)
and £9.5m (2022: £9.5m) for the Billi Australia CGU were subject to an
annual impairment test for the first time, and the recoverable amounts
determined on the basis of value-in-use calculations over a five-year and
ten-year forecast period respectively. The key assumptions applied in the
value-in-use calculations are a discount rate of 14.91%, variable trading
margins and variable revenue growth rates. 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.
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 of £46.6m by circa £1.8m for goodwill and would
decrease the headroom of £0.6m by circa £0.4m for brands.
Billi New Zealand CGU
The carrying values of existing goodwill and brands of £0.26m (2022: £0.27m)
and £1.1m (2022: £1.1m) for the Billi New Zealand CGU were subject to an
annual impairment test for the first time, and the recoverable amounts
determined on the basis of value-in-use calculations over a five-year and ten
year forecast period respectively. The key assumptions applied in the
value-in-use calculations are a discount rate of 16.24%, variable trading
margins and variable revenue growth rates. 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.
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 of £5.5m by circa £0.3m for goodwill and would
decrease the headroom of £0.07m by circa £0.05m for brands.
Billi UK CGU
The carrying values of existing goodwill and brands of £2.2m (2022: £2.3m)
and £2.5m (2022: £2.5m) for the Billi UK CGU were subject to an annual
impairment test for the first time, and the recoverable amounts determined on
the basis of value-in-use calculations over a five-year and ten-year forecast
period respectively. The key assumptions applied in the value-in-use
calculations are a discount rate of 15.36%, variable trading margins and
variable revenue growth rates. 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.
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 of £12.9m by circa £1.0m for goodwill and would
decrease the headroom of £0.15m by circa £0.11m for brands.
Development costs Software Intellectual Property Customer relationships Brands Goodwill Intangible assets under construction Total
£000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 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
Period ended 31 December
Additions 3,326 178 272 - - - 34 3,810
Acquisitions of subsidiaries (note 14) 3 4 - 15,912 13,283 10,885 - 40,087
Disposals (cost) (20) - - - - - - (20)
Disposals (accumulated amortisation) 1 - - - - - - 1
Amortisation charge (1,103) (605) (145) (210) - - - (2,063)
Exchange differences 99 25 82 108 328 446 3 1,091
Closing net book value 11,712 2,635 1,226 17,846 19,785 20,067 103 73,374
At 31 December
Cost 19,428 4,452 1,482 18,549 19,785 20,067 103 83,866
Accumulated amortisation and impairment (7,716) (1,817) (256) (703) - - - (10,492)
Net book value 11,712 2,635 1,226 17,846 19,785 20,067 103 73,374
Amortisation charges have been treated as an expense, and are allocated to
cost of sales (£1,707,000), distribution costs £nil and administrative
expenses (£356,000) in the consolidated statement of comprehensive income.
12. PROPERTY, PLANT AND EQUIPMENT
Plant & machinery Fixtures, fittings & equipment Motor vehicles Production tools Land & Buildings Right-of-use assets Point of use dispensers Assets under construction Total
(note 26)
£000s £000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
Cost 29,988 8,124 375 13,693 20,690 8,678 1,430 2,247 85,225
Accumulated depreciation (15,775) (4,604) (331) (11,049) (978) (5,053) (71) - (37,861)
Net book value 14,213 3,520 44 2,644 19,712 3,625 1,359 2,247 47,364
Period ended 31 December
Additions 79 705 67 101 332 2,321 297 807 4,709
Transfers 742 - - 492 - - - (1,234) -
Fair value adjustments (note 14) - - - - - - (136) - (136)
Disposals (cost) (183) (378) (67) (11) - (1,143) (36) (18) (1,836)
Disposals (accumulated depreciation) 164 240 65 6 - 1,127 30 - 1,632
Depreciation charge (1,553) (1,010) (24) (601) (452) (1,321) (380) - (5,341)
Exchange differences (38) (27) (1) 1 (2) (99) - (11) (177)
Closing net book value 13,424 3,050 84 2,632 19,590 4,510 1,134 1,791 46,215
At 31 December
Cost 30,530 8,315 289 14,272 21,012 9,573 1,553 1,791 87,335
Accumulated depreciation (17,106) (5,265) (205) (11,640) (1,422) (5,063) (419) - (41,120)
Net book value 13,424 3,050 84 2,632 19,590 4,510 1,134 1,791 46,215
Depreciation charges are allocated to cost of sales (£4,021,000),
distribution costs (£190,000) and administrative expenses (£1,130,000) in
the consolidated statement of comprehensive income.
Plant & machinery Fixtures, fittings & equipment Motor vehicles Production tools Land & Buildings Right-of-use assets Point of use dispensers Assets under construction Total
(note 26)
£000s £000s £000s £000s £000s £000s £000s £000s £000s
At 1 January
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
Period ended 31 December
Additions 2,904 1,503 23 864 125 505 - (78) 5,846
Acquisition of Billi (note 14) 419 211 17 - - 1,237 1,386 144 3,414
Disposals (cost) (90) (237) (1) - - (698) - - (1,026)
Disposals (accumulated depreciation) 53 157 1 - - 125 - - 336
Depreciation charge (1,402) (883) (23) (484) (426) (920) (63) - (4,201)
Exchange differences 48 20 (6) (1) 1 129 36 5 232
Closing net book value 14,213 3,520 44 2,644 19,712 3,625 1,359 2,247 47,364
At 31 December
Cost 29,988 8,124 375 13,693 20,690 8,678 1,430 2,247 85,225
Accumulated depreciation (15,775) (4,604) (331) (11,049) (978) (5,053) (71) - (37,861)
Net book value 14,213 3,520 44 2,644 19,712 3,625 1,359 2,247 47,364
Depreciation charges in the prior year were allocated to cost of sales
(£3,149,000), distribution costs (£184,000), and administrative expenses
(£868,000) in the consolidated statement of comprehensive income.
Point-of-use dispensers were acquired as part of the acquisition of Billi.
Refer to Note 14.
13. 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.
Sula Limited Holding company IOM 100 Subsidiary
Strix Limited Manufacture and sale of products IOM 100 Subsidiary
Strix Guangzhou Limited Dormant company China 100 Subsidiary
Strix (U.K.) Limited Holding company and group's sale and distribution centre United Kingdom 100 Subsidiary
Strix Hong Kong Limited Sale and distribution of products Hong Kong 100 Subsidiary
Strix (China) Limited Manufacture and sale of products China 100 Subsidiary
HaloSource Water Purification Technology (Shanghai) Co. Limited Manufacture and sales of products China 100 Subsidiary
Strix (USA), Inc. Research and development, sales, and distribution of products USA 100 Subsidiary
LAICA S.p.A. Manufacture and sales of products Italy 100 Subsidiary
LAICA Iberia Distribution S.L. Sale and distribution of products Spain 100 Subsidiary
LAICA International Corp. Sale and distribution of products Taiwan 67 Subsidiary
Taiwan LAICA Corp. Sale and distribution of products Taiwan 67 Subsidiary
LAICA Brand House Limited Holding and licensing of trademarks Hong Kong 45 Joint venture
Strix Australia Pty Limited Holding company Australia 100 Subsidiary
Billi UK Limited Manufacture and sale of products United Kingdom 100 Subsidiary
Billi Australia Pty Limited Manufacture and sale of products Australia 100 Subsidiary
Billi New Zealand Limited Manufacture and sale of products New Zealand 100 Subsidiary
Billi R&D Limited Research and development Australia 100 Subsidiary
Billi Financial Services Limited Financial Services Australia 100 Subsidiary
On 31 December 2023, LAICA S.pA. entered in a share transfer
agreement to sell the shares of Foshan Yilai Life Electric Co.Ltd, a Chinese
joint venture of which LAICA S.pA. held 45% of the shares. The agreement
provides LAICA S.pA. to sell its shares for a total price of 900.000 Yuan to
the company Guangdong Xinbao Electric Co., LTD. (transferee). This transaction
was in the interest of LAICA S.pA. as the company Foshan Yilai Life Electric
Co., Ltd was loss-making. The Group recognised a gain of £85,000 in its
consolidated statement of comprehensive income with respect to this disposal.
Group restrictions
Cash and cash equivalents held in China are subject to local exchange control
regulations. These regulations provide for restrictions on exporting capital
from those countries, other than through normal dividends. The carrying amount
of the cash and cash equivalents included within the consolidated financial
statements to which these restrictions apply is £2,673,000 (2022:
£3,568,000). There are no other restrictions on the Group's ability to access
or use the assets and settle the liabilities of the Group's subsidiaries.
14. ACQUISITIONS
Acquisitions made in the year ended 31 December 2023:
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 2022:
On 30 November 2022 (in the prior year), the Group, through its subsidiaries,
Strix (U.K.) Limited and newly incorporated Strix Australia Pty Limited,
acquired 100% of the share capital of Billi Australia Pty Ltd, Billi New
Zealand Ltd, and certain assets and liabilities through a newly acquired
company, Billi UK Ltd, (all together referred to as "Billi"). The initial
consideration for the acquisition was £38,912,000 paid in cash. Following
finalisation of the completion accounts for the Billi acquisition, an amount
of £1,046,000 of the consideration was adjusted and repaid in the current
year bringing the final consideration paid to £37,866,000.
In the prior year financial statements, the accounting for the acquisition of
Billi 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 2023, one year has 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 intangible assets, property, plant and
equipment, inventories, trade and other receivables, trade and other payables
and deferred tax liability at acquisition date. Consequently, the amounts
recognised at acquisition date have been updated to reflect the increase in
the fair value of trade and other payables in the amount of £291,000 and the
decrease in the fair values of intangible assets of £84,000, property, plant
and equipment of £136,000, inventories of £140,000, trade and other
receivables of £32,000 and deferred tax liability of £29,000.
The consideration refund and the adjustments in fair values resulted in a
decrease in the amount of goodwill recognised of £392,000. The final fair
values at acquisition date of the assets and liabilities acquired were as
follows:
Non-current assets
Intangible assets 5,993 23,209 29,202 (84) 29,118
Property, plant and equipment 3,609 (195) 3,414 (136) 3,278
Other non-current assets 130 - 130 - 130
Total non-current assets 9,732 23,014 32,746 (220) 32,526
Current assets
Inventories 6,461 (376) 6,085 (140) 5,945
Trade and other receivables 9,152 - 9,152 (32) 9,120
Cash and cash equivalents 1,254 - 1,254 - 1,254
Total current assets 16,867 (376) 16,491 (172) 16,319
Total assets 26,599 22,638 49,237 (392) 48,845
Non-current liabilities
Lease liabilities more than 1 year 900 - 900 - 900
Deferred tax liability 654 8,357 9,011 (29) 8,982
Total non-current liabilities 1,554 8,357 9,911 (29) 9,882
Current liabilities
Trade and other payables 10,919 - 10,919 291 11,210
Lease liabilities more than 1 year 380 - 380 - 380
Total current liabilities 11,299 - 11,299 291 11,590
Total liabilities 12,853 8,357 21,210 262 21,472
Net assets acquired 13,746 14,281 28,027 (654) 27,373
Values have been translated at the closing exchange rates as at the
acquisition date.
The fair values of the intangible assets were calculated using an income
approach (multi-period excess earnings method for customer related assets and
the royalty relief method for brands) based on a discounted cash flow model
that reflects the expected future income they will generate. The discount
rates applied to customer related assets were based on the assessed Weighted
Average Cost of Capital for each territory of operations ranging from 14.9% to
16.2%, with a 1% premium applied to brands, and a growth rate based on
forecasted revenues. The economic life of brands and customer relationships
applied within the model range from 11 years to 15 years. A deferred tax
liability of £8,328,000 has been recognised on the fair value adjustments to
intangible assets at the applicable corporate tax rates.
The fair value of acquired receivables shown in the table above and gross
contractual amounts differed by a loss allowance of £178,000.
Acquisition costs included within 'Administration expenses - adjusting items'
in the consolidated statement of comprehensive income amounted to £2.6m.
These were designated as a 'separate transaction' per IFRS 3 and therefore not
included as part of the purchase consideration.
Net cash flow on acquisition of the business was £37,658,000 made up of
purchase consideration of £38,912000 less net cash acquired with the business
of £1,254,000.
Billi contributed revenues of £41,300,000 (2022: £2,700,000) and an adjusted
profit after tax of £5,600,000 (2022: £600,000) to the Group. If Billi had
been acquired at the beginning of 2022, its contribution to revenues and
adjusted profits after tax for that year would have been £38,800,000 and
£5,600,000 respectively.
The revised goodwill at acquisition of £10,493,000 was calculated as the
revised purchase consideration of £37,866,000, less the fair value of the net
assets acquired of £27,373,000. The goodwill was attributable to new growth
opportunities, workforce and synergies of the combined business operations and
it is not expected to be deductible for tax purposes.
Acquisition of LAICA
The Group acquired 100% of the issued share capital of LAICA S.p.A. in October
2020. The total consideration transferred for the acquisition was £24.4m
(€26.9m), made up of £11.7m (€13.0m) paid in cash, the issue of 3,192,236
Strix Group plc ordinary shares of £0.01 each with a total fair value of
£7.3m (€8.0m), and a further contingent consideration with a fair value of
£5.4m (€5.9m) 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. Based on an arbitration process which
was finalised in February 2023 and the financial results of LAICA S.p.A. for
the year ended 31 December 2022, the actual fair value of the estimated
contingent consideration payable to the vendor shareholders was recorded at
£4.9m (€5.6m) in 2022.
In addition, a supplemental consulting arrangement was entered into with the
vendor shareholders of LAICA under which total costs amounting to £4.4m
(€4.9m) were payable in the financial years ending 31 December 2021 and
2022, relating to compensation for post-combination services contingent on the
vendors remaining in service. These costs were accrued as the services are
rendered to LAICA. As at 31 December 2022, £2.6m (€2.9m) was accrued for
services rendered to date.
The accruals relating to both the contingent consideration and the
compensation for the supplemental consulting agreement were reflected as
current liabilities as at 31 December 2022. These amounts totalling £7.5m
were paid in the current year.
15. INVENTORIES
2023 2022
£000s £000s
Raw materials and consumables 9,444 11,242
Finished goods and goods in transit 15,996 16,460
25,440 27,702
The cost of inventories recognised as an expense and included in cost of sales
amounted to £59,181,000 (2022: £44,241,000). There were no inventory
write-downs in 2023 (2022: £nil).
16. TRADE AND OTHER RECEIVABLES AND CURRENT INCOME TAX RECEIVABLES
2023 2022
£000s £000s
Amounts falling due within one year:
Trade receivables - current 11,495 15,967
Trade receivables - past due 8,419 3,580
Trade receivables - gross 19,914 19,547
Loss allowance (222) (158)
Trade receivables - net 19,692 19,389
Prepayments 1,448 2,335
Advance purchase of commodities 1,477 2,344
VAT receivable 1,399 1,279
Tax receivable 220 497
Other receivables 3,697 4,444
27,933 30,288
Trade and other receivables carrying values are considered to be equivalent to
their fair values. The amount of trade receivables impaired at 31 December
2023 is equal to the loss allowance provision (2022: same).
The advance purchase of commodities relates to a payment or payments in
advance to secure the purchase of key commodities at an agreed price to
mitigate the commodity price risk.
Other receivables include receivables from licencing income of £992,000
(2022: £1,191,000) and £1,966,000 (2022: £2,184,000) rebates receivable
from suppliers from procurements made in prior years. Settlement of the
rebates receivable from suppliers will be via net cash settlement of future
purchases.
Government grants due amounted to £73,000 (2022: £nil). 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 prior year other receivables include deferred tax assets of £313,000. In
the current year, deferred tax assets have been presented separately under
non-current assets. Refer to note 9.
The Group's trade and other receivables are denominated in the following
currencies:
2023 2022
£000s £000s
Pound Sterling 8,176 7,773
Chinese Yuan 3,068 2,520
US Dollar 5,740 3,993
Euro 6,788 8,401
Hong Kong Dollar 84 120
Australian Dollar 3,539 6,839
New Zealand Dollar 469 512
Taiwan Dollar 69 130
27,933 30,288
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 2023 was £222,000 (2022: £158,000).
17. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are denominated in the following currencies:
Pound Sterling 3,402 15,155
Chinese Yuan 2,654 2,506
US Dollar 2,869 6,959
Euro 7,132 4,471
Hong Kong Dollar 78 211
Australian Dollar 3,028 616
New Zealand Dollar 352 159
Taiwan Dollar 599 366
20,114 30,443
18. TRADE AND OTHER PAYABLES AND CURRENT INCOME TAX LIABILITIES
Trade payables 13,847 10,010
Current income tax liabilities 2,074 444
Social security and other taxes 410 368
Customer rebates provisions 179 745
Capital creditors 756 2,848
VAT liabilities 721 546
Other liabilities 3,618 7,308
Payments in advance from customers 2,483 2,270
Accrued expenses 5,151 5,868
29,239 30,407
The fair value of financial liabilities approximates their carrying value due
to short maturities. Other liabilities include goods received not invoiced
amounts of £1,436,000 (2022: £1,189,000) and an accrual of costs incurred as
part of the Billi acquisition of £nil (2022: £3,356,000).
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.
Trade and other payables and current income tax liabilities are denominated in
the following currencies:
Pound Sterling 6,582 10,069
Chinese Yuan 11,353 7,228
US Dollar 2,412 1,051
Euro 3,342 4,461
Hong Kong Dollar 135 198
Australian Dollar 5,116 6,408
New Zealand Dollar 191 881
Taiwan Dollar 108 111
29,239 30,407
19. BORROWINGS
Total current borrowings ((1)) 16,062 14,734
Total non-current borrowings 89,743 103,092
105,805 117,826
((1) The current year borrowings include the interest accrued portion of
£2,031,000 in contrast to prior year where interest accrued of £555,000 was
included in accrued expenses within Trade and other payables).
Current bank borrowings include 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 its acquisition by the Group in
2020.
Current and non-current borrowings are shown net of loan arrangement fees of
£1,023,000 (2022: £956,000) and £888,000 (2022: £1,770,000), respectively.
Total cash outflows relating to loan repayments and interest payments were
£15,114,000 (2022: net drawdown of £46,487,000) and £7,611,000 (2022:
£3,263,000) respectively.
Term and debt repayment schedule for long term borrowings
Revolving credit facility B GBP SONIA + 2.15% to 4% 25-Oct-25 80,120 77,274
Term loan (facility A) GBP SONIA + 2.15% to 4% 30-Nov-25 24,818 39,000
Unicredit facility EUR EURIBOR 6M + 1,2% 28-Jun-24 43 133
Banco BPM EUR 1.45% 30-Nov-23 - 167
BNP Paribas EUR 4.07% 31-Jan-24 379 436
Credito Emiliano EUR 4.75% 05-Jan-24 433 221
Banco BPM EUR 1.69% 03-Jan-23 - 112
Banco BPM EUR 0.01692 03-Jan-23 - 54
Banco BPM EUR 1.00% 28-Feb-23 - 432
Other EUR 12 (3)
105,805
117,826
The existing revolving credit facility ('RCF') agreement was refinanced and
amended on 25 October 2022 as follows:
New lenders - Barclays Bank Plc and HSBC Bank Plc came on board as new lenders
under the restated agreement.
Term loan (facility A) - The Company has a three-year term loan of
£39,000,000 payable by eleven fixed repayments with the first quarterly
repayment of £3,545,000 on 31 March 2023. The purpose of the term loan was to
part finance the acquisition of Billi. As at 31 December 2023, the outstanding
balance on the term loan is £24,818,000 (2022: £39,000,000).
Revolving credit facility (RCF) - The Group has a RCF of £80,000,000. In
2022, the termination date was amended to four years being 25 October 2025,
with an option to extend the term for a further twelve months thereafter. The
RCF was utilised to finance the acquisition of LAICA as well as other
significant capital projects including the new factory in China and the
ongoing working capital needs of the Group.
Under the amended agreement, the purpose of the RCF remains the same. As at 31
December 2023, the total facility available is £80,000,000 (2022:
£80,000,000).
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 borrower under
the agreement.
Transactions costs amounting to £200,000 (2022: £2,324,000) incurred as part
of refinancing and amending the RCF agreement were capitalised and are being
amortised over the period of three years.
The various agreements contain representations and warranties which are usual
for an agreement of this nature. The agreements also provide for the payment
of commitment fees, agency fees and arrangement fees, contain certain
undertakings, guarantees and covenants (including financial covenants) and
provide for certain events of default. During 2023, the Group has not breached
any of the financial covenants contained within the agreements - see note
22(d) for further details (2022: same).
The fair values of the Group's borrowings are not materially different from
their carrying amounts, since the interest payable on those borrowings is
close to current market rates and the borrowings are of a short-term nature.
Interest applied to the revolving credit facility is calculated as the sum of
the margin and SONIA. The margin under the amended agreement was 3.5% until 31
March 2023, and then 2.85% from 1 April 2023 to 30 June 2023, and thereafter
the margin is dependent on the net leverage of the Group based on the
following table:
Greater than or equal to 3.0:1 4.00 4.00
Less than 3.0:1 but greater than or equal to 2.5:1 3.50 3.50
Less than 2.5:1 but greater than or equal to 2.0:1 2.85 2.85
Less than 2.0:1 but greater than or equal to 1.5:1 2.35 2.35
Less than 1.5:1 but greater than or equal to 1.0:1 2.15 2.15
Less than 1.0:1 2.00 2.00
At 31 December 2023, the margin applied was 2.85% (2022: 3.5%). The fair
values of the borrowings are not materially different from their carrying
amounts, since the interest payable on those borrowings is either close to
current market rates or the borrowings are of a short-term nature.
20. CAPITAL COMMITMENTS
Contracted for but not provided in the consolidated financial statements - 245 695
Property, plant and equipment
The above commitments include capital expenditure of £148,000 (2022:
£547,000) relating to plant and machinery and production equipment for the
factory in 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 at 31 December 2023 (2022: same), as any receipts
are dependent on the final outcome of each case. There are also no
corresponding contingent liabilities at 31 December 2023 (2022: 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 in the IOM, UK, EU, US, Australia, New Zealand 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)
· Chinese Yuan (CNY)
· United States Dollar (USD)
· Euro (EUR)
· Hong Kong Dollar (HKD)
· Australian Dollar (AUD)
· New Zealand Dollar (NZD)
· Taiwan Dollar (TWD)
In December 2022, the Group entered into USD/GBP and USD/EUR forward exchange
rate contracts to sell the notional amount of US$8,500,000 and hence mitigate
the risk and impact of volatile exchange rate movements seen during the year
on group profits. The fair value of these contracts at the prior year-end was
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, term loan 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.
(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 2023 or 2022 as they relate to physical
commodities being purchased for the Group's own use. At 31 December 2023 and
2022, 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, TWD, AUD and NZD. Assuming a
reasonably possible change in FX rates of +10% (2022: +10%), the impact on
profit would be a decrease of £2,460,000 (2022: a decrease of £319,000), and
the impact on equity would be a decrease of £1,487,000 (2022: decrease of
£738,000). A -10% change (2022: -10%) in FX rates would cause an increase in
profit of £3,010,000 (2022: an increase in profit of £390,000) and a
£1,822,000 increase in equity (2022: £902,000 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 balance sheet 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% (2022: ±0.5%), the impact
on profit would be an increase/decrease of £560,000 (2022: £476,000), and
the impact on equity would be an increase/decrease of £560,000 (2022:
£72,000). 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 ±13% for silver (2022: ±13%) and ±15% for
copper (2022: ±15%) based on volatility analysis for the past year, the
impact on profit would be an increase/decrease of £1,835,704 (2022:
£1,346,000). 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 (2022: 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 the normal provision for
doubtful receivables, as disclosed in note 16. The amount of trade and other
receivables written off during the year amounted to 0% of revenue (2022: less
than 0.07% 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. At
year-end, £4,732,000 (2022: £19,456,000) was held with one financial
institution with a credit rating of BBB and £4,462,000 (2022: £Nil) was held
with one financial institution with a credit rating of BBB+.
The following table shows the external credit ratings of the institutions with
whom the Group has cash deposits:
Credit risk
AA 2,635 797
A+ 1,037 -
A 3,280 4132
BBB+ 4,462 -
BBB 8,213 25,450
B 32 27
n/a 455 37
20,114 30,443
(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 revolving
credit facilities to provide access to cash for various purposes. The
facilities were fully utilised as at 31 December 2023 (2022: fully utilized).
The table below analyses the group's financial liabilities as at 31 December
2023 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.
Trade and other payables 26,034 - - - - 26,034 26,034
Borrowings 12,007 10,530 95,700 - - 118,237 105,805
Lease liabilities 852 852 1,406 1,694 746 5,550 4,810
Total financial liabilities 38,893 11,382 97,106 1,694 746 149,821 136,649
The table below analyses the respective financial liabilities as at 31
December 2022 (the prior year):
Trade and other payables 30,407 - - - - 30,407 30,407
Borrowings 8,478 7,212 14,226 90,636 - 120,552 117,826
Lease liabilities 535 534 1,247 1,645 - 3,961 3,888
Contingent consideration payable 7,532 - - - - 7,532 7,532
Total financial liabilities 46,952 7,746 15,473 92,281 - 162,452 159,653
(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 2023 these ratios were as follows:
Debt Service Cover ratio (DSCR): c1.18x (2022: c.7.00x) - minimum per facility
terms is 1.10x; and
Leverage ratio: 2.19x (2022: 2.24x) - maximum per facility terms is 2.25x.
As of the 22 March 2024, the net debt leverage ratio maximum was reset to
2.75x (from 2.25x) for the remainder of the facility term
(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.
There have been no movements into or out of any levels during the year. There
were no financial instruments held at fair value at the end of the current
year (2022: same).
The carrying amounts reflected in these financial statements for cash and cash
equivalents, current trade and other receivables/payables and the fixed and
floating rate bank borrowings approximate their fair values.
23. SHARE BASED PAYMENTS
Long term incentive plan terms
As part of the admission to trading on AIM in August 2017, the Group granted a
number of share options to employees of the Group. All of the shares granted
were 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 included certain performance conditions which
must be met, based on predetermined earnings per share, dividend pay-out, or
share price targets for the three financial years from grant date. Further
awards have been made since August 2017 under the same scheme on similar
terms, with additional ESG-related performance conditions added on for certain
senior members of management.
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:
At 1 January 1,654,667 3,054,161
Granted during the year 2,821,338 600,131
Exercised during the year (3,448) (734,608)
Forfeited during the year (251,037) (1,265,017)
As at 31 December 4,221,520 1,654,667
The Group has recognised a total expense of £380,000 (2022: gain of
£491,000) in respect of equity-settled share-based payment transactions in
the year ended 31 December 2023.
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 2023 was
8.8 years (2022: 8.7 years).
Valuation model inputs
The key inputs to the Black-Scholes-Merton model for the purposes of
estimating the fair values of the share options outstanding at the end of the
year are as follows:
21 April 2021 290.00 21 April 2031 26.3% 747,493 803,919
01 January 2022 303.50 01 January 2032 0.0% 9,164 9,164
21 April 2022 208.50 21 April 2031 6.8% 382,359 382,359
20 April 2023 96.90 20 April 2033 9.3% 1,340,208 -
01 November 2023 59.60 01 November 2033 0.0% 229,216 -
Total Share Options 2,708,440 1,195,442
The key inputs to the Black-Scholes-Merton model for the purposes of
estimating the fair values of the conditional share awards outstanding at the
end of the year are as follows:
21 April 2021 290.00 31 December 2023 0.0% 210,253 225,204
06 December 2021 296.50 31 December 2023 0.0% - 16,090
06 December 2021 296.50 31 December 2024 0.0% 6,364 9,323
21 April 2022 208.50 31 December 2024 0.0% 160,571 208,608
20 April 2023 96.90 31 December 2025 0.0% 1,135,892 -
Total conditional share awards 1,513,080 459,225
Total share options and conditional share awards 4,221,520 1,654,667
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 £20,000 (2022: £nil) and the expected charge over the life of the
options by a total of £20,000 (2022: £nil).
The other factors in the Black-Scholes-Merton model 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 £1.5147 (2022:
£2.5719).
The movement within the share-based payments reserve during the period is as
follows:
Shared based payments reserves as at 1 January 202 2,039
Share based payments transactions (note 5(a)) 380 (491)
Other share based payments - (136)
Share based payments transferred to other reserves upon exercise/vesting (10) (1,210)
Shared based payments reserve as at 31 December 572 202
Other movements
Other transactions recognised directly in equity in 2022 include the
settlement of dividend entitlements previously accrued as part of the LTIP
programme and employer contributions to national insurance for vested LTIPs.
24. SHARE CAPITAL AND SHARE PREMIUM
Allotted and fully paid: ordinary shares of 1p each
Balance at 1 January 2023 218,711 2,186 21,675 23,861
Transaction costs - - (219) (219)
Share options exercised during the year (note 23) 3 - - -
Balance at 31 December 2023 218,714 2,186 21,456 23,642
Under the Isle of Man Companies Act 2006, the Company is not required to have
an authorised share capital.
Transaction costs of £219,000 recognised directly in share premium relate to
costs associated with the raise of equity for the acquisition of Billi.
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:
Interim 2023 dividend of 0.9p per share (2022: 2.75p) 1,967 5,699
Final 2022 dividend of 3.25p per share (2021: 5.6p) 7,103 11,601
Total dividends recognised in the year 9,070 17,300
No final dividend is proposed for financial year 2023 (2022: 3.25p).
No final dividend proposed for FY23 (2022: 3.25p) - 7,108
Total dividends proposed but not recognised in the year, and estimated to be - 7,108
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:
Right-of-use assets
Land and buildings 4,511 3,625
Total right-of-use assets 4,511 3,625
Current future lease liabilities (due within 12 months) 1,218 1,069
Non-current future lease liabilities (due in more than 12 months) 3,592 2,819
Total future lease liabilities 4,810 3,888
Additions to the right-of-use liabilities during the 2023 financial year were
£2,321,000 (2022: £505,000). Disposals of right-of-use liabilities during
the current year were £16,000 (2022: £586,000)
Short-term leases and leases of low values were recognised directly in the
consolidated statement of comprehensive income, amounting to £317,000 (2022:
£106,000). Total cash outflows relating to all lease payments, including
short-term leases and leases of low values were £1,743,000 (2022: £939,000).
The movement in lease liabilities is as follows:
Balance as at 1 January 3,888 3,371
Additions 2,321 505
Disposals (16) (586)
Adjustments to leases (49) -
Acquisition of Billi entities (note 14) - 1,284
Repayments (1,426) (833)
Interest expense (included in finance cost) 198 92
Foreign exchange differences (106) 55
Balance as at 31 December 4,810 3,888
b) Amounts recognised in the consolidated statement of comprehensive income
The statement of consolidated comprehensive income shows the following amounts
relating to leases:
Depreciation of right-of-use assets (1,321) (920)
Short-term and low value leases (317) (106)
Interest expense (included in finance cost) (198) (92)
Total cost relating to leases (1,836) (1,118)
c) Group as a lessor
Rental income recognised by the Group during the year is £4,750,000 (2022:
£383,000) which is included in the Premium Filtration Systems segment (see
note 7). Future minimum rentals receivable under non-cancellable operating
leases are £2,209,000 (2022: £1,348,000). These amounts are expected to be
received within a year.
27. STATEMENT OF CASH FLOWS NOTES
a) Cash generated from operations
Cash flows from operating activities
Operating profit 27,914 19,916
Adjustments for:
Depreciation of property, plant and equipment 12 4,020 3,281
Depreciation of right-of-use assets 12 1,321 920
Amortisation of intangible assets 11 3,365 2,063
Share of (profits)/losses from joint ventures (85) 18
Other non-cash flow items 73 1,275
Share based payment transactions 23 380 (491)
Net exchange differences (435) 188
36,553 27,170
Changes in working capital:
Decrease/(increase) in inventories 1,639 (1,213)
(Increase)/decrease in trade and other receivables (2,422) 3,159
Increase/(decrease) in trade and other payables 3,132 (4,549)
Cash generated from operations 38,902 24,567
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
Borrowings, net of loan arrangement fees (117,826) 15,114 39 (3,132) (105,805)
Lease liabilities (3,888) 1,426 106 (2,454) (4,810)
Total liabilities from financing activities (121,714) 16,540 145 (5,586) (110,615)
Cash and cash equivalents 30,443 (10,136) (193) - 20,114
Net debt (91,271) 6,404 (48) (5,586) (90,501)
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
2023 2022 2023 2022
£000s £000s £000s £000s
Related party
LAICA Brand House Limited 26 26 - -
(c) Related party transactions
The following transactions with related parties occurred during the year:
Transactions with related parties
Revenue earned from LAICA Brand House Limited 3 3
Contributions paid to The Strix Limited Retirement Fund (note 5(c)(i)) (1,352) (782)
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
As discussed in note 22(d), the net debt leverage ratio maximum was reset to
2.75x (from 2.25x) for the remainder of the facility term as of the 22 March
2024.
The Group does not have any material events after the reporting period to
disclose.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR PPUGGWUPCPUQRecent news on Strix
See all newsREG - AIM - AIM Notice - 26/04/2024
AnnouncementREG - Strix Group PLC - Exercise and Grant of Options and Issue of Equity
AnnouncementREG - Strix Group PLC - Director Dealings
AnnouncementREG - Strix Group PLC - Confirmation of CFO start date
AnnouncementREG - Strix Group PLC - Results for the year ended 31 December 2023
Announcement