Strix Group (KETL) released preliminary results for the 12 months ended 31 December 2022 (FY22), reporting revenues of £106.9m, down 10.5% from FY21, driven predominantly by a reduction in kettle controls sales. As a result, adjusted EBITDA was down 20.7% year-on-year and adjusted PAT was down 28.6%, in line with guidance given in November 2022.
Net debt was up to £87.4m, representing a a net debt/adjusted EBITDA ratio of 2.2x. Adjusted basic earnings per share and adjusted diluted earnings per share were 10.9p and 10.8p respectively, from 15.2p and 14.9p in FY21. Strix proposed a final dividend of 3.25p/share, down from 5.6p in FY21, as management is prioritising debt reduction.
The company acquired tap systems company Billi during the period and reported successful integration of its business, resulting in new sales channels and trading performance in line with budget.
Strix said it retained global kettle control market share by value at c. 56%. Manufacturing in China was fully operational again after Covid disruption, with efficiency improved by 6.1% in FY22 year-on-year.
Strix announced new product launches for 2023, including an integrated tap in Billi, the Ontario desktop appliance, and Aurora coffee appliance.
Mark Bartlett, CEO, commented: "Following a period of uncertainty across a number of Strix's key export markets in Q4, recent sales data in 2023 indicates some green shoots are appearing and the path to a return of growth is opening across all segments. The successful integration of Billi will propel Strix into a new growth phase, further diversifying away from the core Kettle Controls business with strong potential for greater top line growth and improved margins going forward."
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After a diffiult year which has seen its shares come under heavy selling pressure, this was an encouraging update from Strix. While revenue was down in FY22, the company's bullish outlook, success in M&A/integration of Billi, growth in non-kettle control business, and positive outlook for global demand in FY23 and beyond, suggests continued growth. Markets therefore reacted positively, pushing Strix shares up 7.14% early on Wednesday.
The main reason for the dilution of revenues and margin in Strix's FY22 balance sheet was lower kettle controls sales in regulated markets that command higher margins, as well as the cost of living crisis in Europe, Covid shutdowns in China, and the Ukraine/Russia crisis impacting less regulated markets. As a result, Strix's Kettle Control category recorded a revenue decrease of 19.9%.
However, the Water and Appliances categories showed margin improvements, helped by the acquisition of Billi in November 2022 at a reported multiple of 3.8x EBITDA on transaction date. The Appliance and Water categories now account for 50% of Strix's pro forma group revenue.
Overall, the Appliance category reported revenue growth of 12.8% to £14.5m in FY22. Strix's Aqua Optima brand recorded 87% growth in appliances, driven through geographical expansion, successful Aqua Optima expansion across Europe and North America, Strix/LAICA cross selling, and new product launches.
The Water category similarly reported revenue growth of 12.8% to £24.1m in FY22.
The successful integration of Billi should help Strix transition into a new growth phase, further diversifying away from the its core kettle controls business. Through Billi, Strix gains a range of new sales channels to professional customers, including restaurants, hotels, and commercial premises.
Strix said there would be no further M&A activity or investment into new factory builds, which should result in significantly reduced capex and working capital over the medium term.
Strix's new strategy prioritises debt reduction and free cash flow generation, with a clear plan to get net debt/EBITDA to below 2.0x in FY23, and to below 1.5x in FY24. In addition, Strix is prioritising geographic diversity, reducing reliance on any one territory. Regarding sales in China, the outlook is positive for FY23, given the change in Covid policy.
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