Yesterday Strix announced strong results for FY19, while also demonstrating resilience and managing the impact on its business from COVID19. Strix has delivered £36.9m EBITDA, slightly ahead of our expectations. Total dividends of 7.7p have been announced, which is 10% growth year-on-year (yoy).
Net debt of £26.3m is at multi-year lows, with continued strong cash generation funding both growth capex and new product development. A year of progress. ‘During the year we have continued to execute on our organic and inorganic strategy for growth through the acquisition of HaloSource and the construction of a new factory in China.’ CEO Mark Bartlett
COVID19 update. ‘The impact on Strix has thus far been limited … Strix’s products have historically had limited correlation with short term consumer confidence … our profitability model strategically targets the second half of 2020’. Manufacturing in China is again at 88% capacity and all of the top 20 OEM customers are back in production. Strix is the leading player in the global kettle controls market. This is a resilient market, which grew at c. 3% in 2019. The company today highlights stable market share in 2019 across territories, with some market share gain in China.
Diversification and growth. Elsewhere, Strix is seeing healthy growth in Water/Appliances, with plans for a launch programme of over a dozen new products across all categories in 2020. Strix confirms that the new, enlarged manufacturing facility is well on track, and where completion is expected in August 2021.
At a time of major fear in stock-markets, we highlight Net Debt/EBITDA leverage at < 1x, which is a healthy position in current markets, particularly given Strix’s strongly cash generative nature and activities in a stable, resilient market.
Forecasts and yield. At this stage we have unsurprisingly tweaked down our FY20 P&L forecasts in the context of a weaker macro backdrop. However, we still forecast yoy dividend growth in 2020 (7.9p dividend, with cover of 1.8x). After the recent sell-off, shares in Strix Group now yield 5.9% which appears compelling. The Strix share price has fallen by more than a third in 2020. Yet, for those investors with the patience to ride out current macro headwinds, Strix is a unique strategic asset listed on the UK market, with industry leading margins and many growth initiatives underway.