Strix Group
Ticker: KETL Exchange: AIM

Strix is a global leader in the design, manufacture and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration.

Full steam ahead

Strix has published its prelims which are slightly ahead of market expectations despite a backdrop of global disruption caused by COVID 19. Net sales fell just 2% YoY, with no impact on net profits on the back of strong cost management. The progressive dividend policy has been maintained. Encouragingly, FY21 profit expectations are well underpinned from a diversified base and while the shares are already up materially YTD the Strix story remains compelling.

COVID resilience. Both the supply and demand side were affected in H1 20, with a significant decline in Q1 in China in particular, and export demand temporarily affected. However, manufacturing bounced back to full production in April ensuring good service to their defensive end markets which continue to perform well with good visibility into H1.

Strix position - the leading player in the global kettle controls market. This is a resilient market, which historically has grown in low single digits % p.a. Yet within this context, the company has been able to grow its global market value share highlighting its enduring competitive advantage. Regulated and less regulated more than offset a slight decline in China, which was largely due to limited access to physical stores where Strix’s product is more prevalent.

Diversification, growth in new markets and factory. Elsewhere, Strix is seeing healthy growth in Water/Appliances, with a launch programme of new products in 2021 in tandem with Global Brand partners, burnishing both their top line and their strong commitment to ESG principles. Strix also confirms that the new, enlarged group manufacturing facility is well on track, with full completion still expected in Aug 2021.

FY20 leverage, c 1x. This is lower than originally budgeted for, and in part reflects the range of efficiency measures undertaken YTD, along with some deferral of capex to FY21. Leverage ratios remain conservative and offers flexibility should further M&A opportunities present themselves.

Upgrade potential from LAICA acquisition. This €31.6m bolt on deal makes sense strategically and is already delivering. Synergy benefits could yet be material, with the cross-selling of Aqua Optima and LAICA’s established product range.

Investment case. The share price has rallied very strongly up from its March ‘20 lows (at the nadir of COVID market anxiety). Strix has reassured investors of both its defensive qualities, but also of its ability to deliver growth through both its water and appliances categories, as well as a strong commitment to ESG principles driving both product development and best practice. Strix remains a unique strategic asset on AIM, with industry leading margins.

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