Strix FY 19 trading update: ahead of FY 19 results due on 18th March, Strix has issued a very reassuring year-end update. ‘Strix has delivered a solid performance during 2019 despite continuing global volatility driven by Brexit and USA China trade tensions…and expect to report profit after tax in line with market expectations.’
Accordingly, we leave our FY 19/20 P&L forecasts unchanged. Encouragingly, Strix also reconfirms at this stage its intention to pay total dividends of 7.7p per share for FY 19, +10% YoY. This should underline the income attractions of this stock to investors.
Strix is the leading player in the global kettle controls market. This is a market that grew at c. 4% in 2019 in spite of well-flagged macro headwinds. The company highlights stable market share in 2019 across territories, with some market share gain in China. Elsewhere, Strix expects to report 2019 growth of 6% y-o-y for its Water category of products, now inclusive of HaloSource. It also confirms plans for a launch programme of twelve new products across the appliance/water categories in 2020.
Net debt is expected to be £26.3m, which is lower than current expectations and benefits from strong cash generation, together with some phasing around capex associated with Strix’s factory relocation in China. Strix confirms that the new, enlarged manufacturing facility is well on track, where completion is expected in Q1 2021.
An attractive investment case. The share price has rallied by c 15% in recent months. However, in our view, this is still an attractively rated entry point to the shares. Valuation multiples are undemanding at 13x PER, 9.7x EV/EBITDA. The dividend yield at the current price is a compelling 4%. We estimate that fair value for the shares lies in the 220p-240p share price range.
Strix is a unique strategic asset on the UK market, with industry leading margins and many growth initiatives underway. It screens well for investors with a ‘sustainability’ mandate, given its alignment to health products and improved filtration.