(Alliance News) - Strix Group PLC shares plunged on Thursday as the firm announced a reduction to its half-year dividend and said demand has fallen in its key markets, but its CEO said recent months have seen "a gradual improvement."
The stock was down 38% to 56.85 pence in London on Thursday afternoon.
Strix, an Isle of Man-based provider of kettle safety controls, said its pretax profit for the first half of 2023 dropped 41% to GBP6.8 million from GBP11.6 million the year before. Revenue however increased 29% to GBP65.2 million from GBP50.7 million, and gross profit increased 23% to GBP23.9 million from GBP19.5 million.
In a call with Alliance News on Thursday afternoon, Chief Executive Officer Mark Bartlett said demand for kettle controls had decreased in the UK and Germany, Strix's key export regulated markets.
"Obviously, the current economic environment in the UK and Germany actually is quite weak because of the cost of living crisis," Bartlett explained. "Most of the regulated markets are probably running at about 80% of peak levels.
"Normally, when you get to those sorts of sort of financial depression...you will see a very sharp recovery come back at the end, [but] we have not seen that yet. We're seeing a very slow recovery rather than this sort of bull-whip effect, as we call it."
Strix noted its acquisition of Billi Australia Pty Ltd, Billi New Zealand Ltd and Billi UK Ltd in November last year as a key factor in its 2023 performance, adding GBP21.5 million to group revenue. However, it also caused net debt to increase to GBP93.1 million at June 30, up 52% from GBP6.1 million at the same time last year.
Consequently, Strix made the "prudent" decision to lower its interim dividend by 67% to 0.9p per share from 2.75p, changing its payout ratio to 30% of adjusted pretax profit.
"We tried to balance those capital allocation priorities in between paying sort of shareholders a dividend and delivering the business at a reasonable rate," Bartlett commented. "And the businesses - Billy in particular - are very cash generative, so we can deliver quite quickly."
Also on Thursday, Strix unveiled a set of new 'Strategic Business Objectives' to be delivered by the end of 2026. These include revenue between GBP107 million and GBP206 million, and gross profit of GBP42 million to GBP80 million, including revenue of GBP58 million with gross profit in excess of 45% from Billi.
"A lot of things have changed in the business," Bartlett told Alliance News. "And we felt, particularly with the acquisition of Billi, it was the right time to update our strategic objectives."
And while the market is recovering slowly, "what we've seen over the last three or two or three quarters is a gradual improvement. Q4 last year was the peak drop, and every quarter [since then] has been an improvement. There's nothing to indicate that would actually change in a negative direction."
In the nearer term, he added, "We're seeing good, positive growth in the consumer goods business, so we would expect that to pick up in the second half of the year."
Asked if he felt positive overall about the Billi acquisition, Bartlett said: "I think that would be a huge understatement - I'm extremely positive about the Billi acquisition. It's strategically very important for the business: it's got huge growth opportunities long term, it's a 46% margin, 80% cash to Ebitda business.
"And it's had double digit growth over the last five years, just in three territories in the world. So some significant growth opportunities, both in geography and in new product development."
By Emma Curzon, Alliance News reporter
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