Strix Group Q&A: Strong platform of new products to drive growth (LON:KETL)

Strix Group plc (LON:KETL) Chief Executive Officer Mark Bartlett caught up with DirectorsTalk for an exclusive interview to discuss full year results, strategic achievements, doubling revenues in five years, sustainability strategy and what we can expect from the company over the coming year.

Q1: You’ve released your full year results earlier, could you just talk us through the main 2020 financial highlights?

A1: Strix Group has a very robust and resilient business model and to be fair, we performed very well in 2020, despite the various disruptions and challenges that were around during the year.

Through very careful management of our balance sheet, we were able to report a 3% growth in our adjusted EBITDA year over year, despite a slight shortfall in revenue of around 1.6%, which is well ahead of our scenario for the pandemic. Net debt increased to £37.2 million, and we really were funding some strategic initiatives, for instance, the acquisition of LAICA and continued investment in some compelling growth initiatives, as well as the continued development of our new factory in China. This represents a net debt EV/EBITDA ratio of around 1 times and the group itself has significant liquidity which has provided financial flexibility.

Given the performance we’ve had in 2020 and the confidence we have on our outlook, we have been very pleased to confirm our intention to increase the total dividend to 7.85p which is in line with that progressive dividend policy.

So overall, a very positive, given the backdrop.

Q2: You’ve made a number of strategic achievements throughout the year, could you just talk us through those?

A2: We have been extremely busy this year and have invested to really try and position our company to deliver on our growth objectives. We’ve continued to build our new factory in China, which will double our capacity, this remains on target to be fully operational in August this year and remains on budget, which is a great achievement in the environment.

We made the acquisition of LAICA which a really excellent Italian-based company that fits perfectly with our growth ambitions, both in the water filtration but also in the small domestic appliance area. It really does provide us with a very strong footprint in Europe, which is particularly interesting at this time.

We implemented a new business system, SAP, it will significantly improve our real-time data and also helps to streamline our business processes.

We also delivered on our commitment in MPD to complete 14 new products which was a record for the company last year and we certainly intend to continue that level of new product development going forward.

Finally, we updated our medium-term targets to double our revenues within five years based on the confidence of our business model.

Q3: I was just going to ask that, you wanted to double in the next five years, how will you achieve that?

A3: The growth is predominantly organic growth, split within our three categories.

So, first of all, in the kettle, we will show modest growth in share as we continue to expand our addressable market. It furthers evolving our control range as well as introducing some quite interesting, disruptive new technology.

In the water category, with the addition of the recent acquisitions, we now have a really strong portfolio of products and we have sales channels in the USA, UK, Italy, and China so we are very, very well placed to expand that business as well as an exciting roadmap of new product.

Finally, in the appliance category, we will continue to launch new innovative products, both with our own brands and also with our strategic partners providing a range of products that will offer increased functionality, linked to our sustainability strategy, to reduce energy and provide a wide range of consumer benefits.

So, I think we have a really strong platform of new products to drive that growth.

Q4: Now, as you say, the company has a clear sustainability strategy, can you just comment further on that for us?

A4: We have a very attractive ESG proposition and we’re working really hard to bring that to life and increase the awareness and communications to the wider market.

The environmental element has had quite a lot of press over the last 12 months and our products really do provide significant benefits by reducing energy use, reducing the use of single use plastics, providing clean water, and really making products safer with a longer lifespan so ticks many of the boxes.

In addition to our products, we also have a very strong position within our operations and are really working to implement renewable energy in all of our assembly lines. We’re looking to reuse wastewater use during the testing of our products, as well as a number of programs to reduce our overall carbon footprint. Later this year, following the opening of the new factory, we will set out very clear benchmarks so we can monitor and communicate that performance to the wider market on a regular basis.

Obviously, it’s social and governance aspects are equally important, here we are also very well positioned with our strategy and our core business activities being clearly aligned to the relevant UN sustainable development goals.

From a government’s perspective, we are very well positioned, working to a numerous number of the ISO standards across our business and our approach to sustainability comes right from the top with myself as CEO, driving those initiatives, supported by a dedicated committee, which is set up by Richard Sells, our NED, from a Board perspective.

Q5: Just looking forward, what can we expect to see from Strix Group in the next year?

A5: Last year, we were really building the foundations to ensure that we could emerge from the pandemic even stronger and to be honest, we’re really just getting started.

This year, you’re going to see more new products, including some quite interesting disruptive technologies I feel, and you’ll see the factory fully up and running, providing further efficiencies, and allowing us to reach our expansion goals. You’ll see the full integration of LAICA which will increase our addressable market with a full portfolio of products and an exciting roadmap of new products.

We will certainly bring our ESG commitments to life, benchmarking our key priorities so we can monitor the progress and we, as a management team, are very confident of both our 2021 commitments and executing on the medium-term five-year target.

So, you will for sure see us deliver on those commitments.

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