A success story
Strix is focused on its highly cash generative operating model and management will prioritise integration and unlocking anticipated revenue and cost synergies.
Maintained dominant market position in global kettle controls with high barriers to entry
• Global market value share of the kettle controls remained stable as the Group retained dominance in the market.
• Whilst the macroeconomic and geopolitical environment that Strix and its peers operate in remains challenging, revenue growth in Strix 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:
o New patent protected Series Z controls range undergoing customer testing, with preparations for volume manufacture underway;
o ‘Technology Showcase’ to demonstrate how Series Z controls enable new applications and growth opportunities beyond traditional kettles; and
o A new range of low-cost controls tailored to the domestic China and less regulated markets requirements which increases the target addressable market.
Significant growth opportunities in the Premium Filtration Systems (PFS) (Billi) and Consumer Goods segments
• The 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.
• Key initiatives going forward include:
o Global launch of new Multi-Function Tap, compatible with the full range of Billi under-counter modules;
o Introduction of the new OmniOne under-counter unit to export markets (commercial and residential applications);
o New product development programme targeting the residential market via selected channel partners;
o European expansion via strategic sales and service partners, with technical and commercial support from Billi UK; and
o Business development in South-East Asia and the Middle East through established distribution channels.
• 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:
o Drive OEM business; two major contracts secured which will deliver c.40% of 2024 growth;
o New product development focus on bolstering core profitable categories, including launches across filtration and vacuum sealer categories; and
o A divisional restructuring at the start of 2024 has streamlined and refocused the Strix Consumer Goods division to drive ongoing profitable growth.
Strong ESG credentials with structural growth tailwinds
S• Comprehensive Board-led sustainability strategy embedded within core business activities and aligned with key and relevant UN Sustainable Development Goals.
• Range of initiatives that focus on the full spectrum of Environmental, Social and Governance with baselines established to track improvements and to clearly monitor progress year-on-year.
• Achieved ambitious net zero Scope 1 & 2 target in 2023 with a reduction in emissions of 95% over two years and investment to supply 10% of our requirements from our own solar infrastructure.
• Focus turning to reducing Scope 3 emissions.
• An updated ESG report is available on the Strix website.
Strong free cash flow generation with unique working capital cycle
Customers typically pay in advance, reducing nonpayment risk and increasing cash conversion cycle.
Low requirement for maintenance capex (excluding investment in new factory that remains on schedule to complete in August 2021).
Operating free cash flow (before financing and tax and exceptional factory capex) to EBITDA conversion of 70%.
Market-leading adjusted EBITDA margin
M• Significant investment in automation, as well as ongoing focus on other efficiency measures, strategic initiatives and acquisition synergies underpinning EBITDA margin uplift.
• Increasing the appliances product mix further, to focus on differentiated products, boosts margins as these are typically more complex technologies that can command a higher price point.
• Increased capacity at the new factory allows for insourcing of additional products and components with margin benefit.
• Extensive patent portfolio and safety actions underpin margins, with campaigns to report infringements and remove copyist products from the market.
Disciplined Capital Allocation Framework
D• 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.
• The Board remains focused on maximising cash generation to support debt reduction which will result in a temporary pause in dividend payments during the 2024 calendar year.
• A planned return to a sustainable dividend pay-out ratio of 30% of adjusted profit after tax 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.
• A target of initially reducing net debt leverage to 1.5x EBITDA has been put in place. After this period, leverage appetite for the Group will remain at between 1.0x to 2.0x for the medium term.