One year on from the first UK lockdown, Strix has proven the flexibility and resilience of its business, significantly outperforming management’s base case at the time.
For the 12 months to 31 December 2020 pre-tax profit was up 2.4% to £30.9 million despite a 1.9% drop in revenues to £95.3 million, reflecting a ‘marked’ second half recovery and a flexible variable cost base.
FIVE YEAR ROAD MAP
The company reiterated its confidence in executing on its medium-term strategy to double revenue primarily through organic growth supplemented by niche acquisitions.
The core Kettle controls business, representing 86% of revenue is expected to grow around 3% a year, increasing the firm’s total market share by 1% to 55%.
The bulk of growth, around £50 million of incremental sales is expected to come from the Water segment which comprise the Aqua Optima and recently acquired LAICA brands which hold 21.1% and 26.4% market share in the UK and Italy respectively.
The segment also includes the HaloPure water filtration technology which is targeting the farming and healthcare markets in China.
Shore Capital's Tom Fraine acknowledged that the Water category is expected to grow strongly representing around 36% of group revenues by 2025.
But Fraine has concerns that the growth will dilute overall profitability, saying, ‘we would expect the water category to generate a significantly lower percentage of gross and operating profit, in the absence of any acquisitions, given its lower margins versus kettle controls’.
‘Although we view Strix as a well-managed, innovative company that is operationally excellent, we expect EPS growth to continue to be limited to low single digits in the medium term' Fraine added.