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Strong & Steady Growth
Annual report and accounts 2020
Strix is a global leader in the design, manufacture and supply of kettle
safety controls and other components and devices involving water
heating and temperature control, steam management and water filtration.
Strix is admitted to trading on the AIM Market of the London Stock
Exchange (AIM: KETL).
Our mission:
Shaping a safer, more sustainable
future in the design and supply
of innovative products that enhance
customers’ everyday lives.
2020 highlights
Financial highlights
Revenue
£95.3m
Adjusted profit before tax1
£30.9m
Adjusted profit after tax1
£29.5m
-1.6%
2020
2019
2018
+2.4%
£95.3m
£96.9m
£93.8m
2020
2019
2018
£30.9m
£30.2m
£29.2m
+2.3%
2020
2019
2018
£29.5m
£28.9m
£28.3m
Adjusted EBITDA1, 2
£38.1m
Adjusted earnings per share1
Total dividend per share for the year
14.9p
7.85p
+3.2%
2020
2019
2018
-2.0%
2020
2019
2018
£38.1m
£36.9m
£36.4m
14.9p
15.2p
14.9p
+2.0%
2020
2019
2018
7.85p
7.70p
7.00p
1. Adjusted results exclude exceptional items, which include share-based payment transactions and other reorganisation and strategic project costs. Adjusted results
are non-GAAP metrics used by management and are not an IFRS disclosure. A table which shows both Adjusted and Reported results is included in the Chief Financial
Officer’s review.
2. EBITDA, which is defined as earnings before finance costs, tax, depreciation and amortisation, is a non-GAAP metric used by management and is not an IFRS disclosure.
Business model
2020 highlights
Company overview
Chairman’s statement
COVID-19 timeline
Chief Executive Officer’s statement
Strix investment case
Key performance indicators
Strategic report
1
2
4
6
8
12
14
17 Our people
18
20 Market review
24 Growth strategy
27 New factory update
28 Delivering our strategy
30 New products roadmap
32 Water category
33 Water category: HaloPure
34 Water category: LAICA
36 Capital Allocation Framework
37 Automation
38
Engaging our stakeholders
40 Risk management approach
Principal risks
41
46
Sustainable investing
50 Responsible business
52 Chief Financial Officer’s statement
Senior management team
Governance report
56 Board of Directors
57
58 Board activities
59 Corporate governance statement
60 How we govern
62 QCA principles and Strix
65 Audit Committee report
66 Nomination Committee report
67 Directors’ remuneration report
75 Directors’ report
Financial statements
78
Statement of Directors’
responsibilities
Independent auditor’s report
Consolidated statement of
comprehensive income
79
82
83 Consolidated balance sheet
84 Consolidated statement of changes
in equity
85 Consolidated cash flow statement
86 Notes to the consolidated
financial statements
116 Legal and professional advisors
Operational highlights
• Production efficiency of core kettle products
improved with 67% of all assembly lines now
fully automated.
• The U9 series of controls showed strong growth
with 33 million controls sold to date. The new U90
automation line achieved labour and machine
efficiency targets, in line with original projections.
• Focus on continuous improvement, automation
and refinement of existing processes has delivered
significant improvement in customer quality parts
per million (ppm).
• The Group was awarded Supor’s ‘Best Cooperation’
and Xinbao’s ‘Most Outstanding Contributor’ in 2020.
• Continued compliance with a range of international
standards, solidifying the quality and safety of our
products and internal processes (ISO 9001, ISO 14001,
ISO 45001, ISO 50001, ISO 17025, ISO 13485).
• Successfully upgraded to SAP to improve real time
data and streamline internal processes.
For further Operational information, please see pages 8 to 11
Strategic highlights
• Updated medium-term targets to double the
Group’s revenues over the next five years primarily
through organic growth in its water and appliances
categories. Alongside this, the Group will continue
to grow market share in kettle controls.
• Expanded global market share by value of the kettle
controls market.
• Acquisition of LAICA successfully completed in
October 2020, expanding Strix’s Water category and
enhancing its presence in the health and wellness
market segment of the appliances category, both
of which are growth markets and core to Strix’s
sustainability strategy. Integration in line with plan
to achieve the identified benefits and the trading
performance has been strong over the period
delivering double-digit revenue growth.
• New manufacturing operations in China remain
on target to be on budget and fully operational
by August 2021 as originally scheduled.
• Launched HaloPure technology water purification
and sterilisation solution and signed a contract to
adopt it with Chia Tai Group, one of the leading
livestock companies operating in China.
• Continued to strengthen senior management,
engineering and commercial teams through strategic
recruitment to support medium-term objectives.
For further Strategy information, please see pages 24 to 29
1
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Isle of Man, UK
- Head Office, Manufacturing
- & Research and Development
- Kettle Controls
Chester, UK
- Sales
- Water Filtration, Kettle
- Controls & Appliances
Hong Kong
- Sales & Administration
- Kettle Controls, Water
- & Appliances
Shanghai, China
- Manufacturing & Sales
- Water
Taipei, Taiwan
- Sales & Administration
- Appliances
Company overview
A global leader with
sustainable growth from
diverse revenue streams
Strix’s long-term vision is to diversify
its revenue streams across the three core
categories through the implementation
of its growth and sustainability strategies.
The Group’s emphasis on its medium-term
targets achieved through organic and
acquisitive growth, and commitment
to providing a safer sustainable future
for its stakeholders, reinforces its focus
in expanding its revenue streams in
water and appliances categories, whilst
continuing to grow its market share in
kettle controls.
Revenue split by category – 2020 vs 2019
£95.3m
Kettle controls 2020: £79.81m (2019: £85.79m)
Water category 2020: £11.74m (2019: £9.83m)
Appliances category 2020: £3.75m (2019: £1.25m)
2020 (outer circle)
2019 (inner circle)
3.93%
12.32%
1.29%
10.15%
Seattle, USA
- Sales
- Water Filtration
& Appliances
Guangzhou, China
- Manufacturing
- Water, Kettle Controls
& Appliances
Valencia, Spain
- Sales
- Water &
- Appliances
Vicenza, Italy
- Manufacturing & Sales
- Water & Appliances
Water category
Strix continues to develop its specialist water filtration offerings,
improving the quality of water for human consumption through
its Aqua Optima and astrea brands, whilst making use of its
HaloPure offering as a water sterilisation bromine technology
within livestock farming eliminating bacteria and viruses.
Now, with the addition of the newly acquired LAICA brand, the
water category is strengthened further with a complementary
multi-brand product portfolio. Together, these brands deliver
global solutions for water filtration and sterilisation needs
through the delivery of water bottles, jugs, filters and other
related appliances, meeting all consumer water filtration needs.
Given the ever-increasing consumer focus on health-conscious
choices and in reducing plastic waste, Strix is able to offer
sustainable choices to the end consumer.
New products to be launched in 2021, which are detailed in our
new product roadmap on page 30:
88.56%
83.75%
8
2
Strix Group Plc Seattle, USA
- Sales
- Water Filtration
& Appliances
Strix’s global share of kettle
controls market value
Number of
employees
55%
850+
Isle of Man, UK
- Head Office, Manufacturing
- & Research and Development
- Kettle Controls
Chester, UK
- Sales
- Water Filtration, Kettle
- Controls & Appliances
Hong Kong
- Sales & Administration
- Kettle Controls, Water
- & Appliances
Shanghai, China
- Manufacturing & Sales
- Water
Taipei, Taiwan
- Sales & Administration
- Appliances
Guangzhou, China
- Manufacturing
- Water, Kettle Controls
& Appliances
Regulated markets
Less Regulated markets
China
Valencia, Spain
- Sales
- Water &
- Appliances
Vicenza, Italy
- Manufacturing & Sales
- Water & Appliances
Appliances category
Kettle controls
Strix continually seeks to develop innovative appliances within
its portfolio of water, temperature and steam management
technologies which take the frustrations out of everyday
tasks, and provide meaningful benefits to customers through
convenient, simple and sustainable solutions.
Strix’s research and development team continue to focus
on enhancing the efficiency of its products by working
closely with its key partners and own brands to bring product
innovation to the markets delivering core benefits in usability
and sustainability to the consumer. Innovation therefore drives
Strix’s future product roadmap in this category, which has
consequently enabled Strix to improve energy efficiency
within many of its products.
New products to be launched in 2021, which are detailed in our
new product roadmap on page 30:
Strix’s core products are safety controls for small domestic
appliances, primarily kettles, which make up the majority of
the business. Strix has positioned itself as the market leader in
the kettle controls market, gradually increasing its value market
share, currently estimated at c.55%. Strix is committed to the
continued growth of market share through ongoing focus on
product development and targeted growth in key regions.
As the market leader in controls, the Group has established
a strong reputation for safe, dependable products that will
achieve the highest level of performance whilst meeting all
of the safety requirements. Increased emphasis has also been
placed on developing products which reduce environmental
wastage through minimising energy losses and reducing
commodity wastage.
New products to be launched in 2021, which are detailed in our
new product roadmap on page 30:
5
3
3
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Chairman’s statement
Resilient
performance in a
challenging year
”The Group has been able to adapt quickly to
unprecedented times and focus on delivering
against our strategic commitments.”
Gary Lamb
Non-Executive Chairman
44
Introduction
2020 has been an extraordinary period
with substantial economic challenges
inflicted by the COVID-19 pandemic.
The Board is immensely appreciative of
the efforts of our people during these
uncertain times, who have continued
to work diligently to support not only
our customers, but also our local
communities and governments.
Strix has successfully delivered modest
growth in adjusted profit after tax for the
full year which is testament to how well
the Company has dealt with the challenges
of the pandemic and demonstrates the
resilience of the business.
Strix’s investment proposition is
underpinned by a high quality, resilient
and robust business model which
benefits from geographic and product
diversification. Its continued focus
on efficiency measures and strategic
initiatives to manage its highly variable
cost base and prudent investment
in compelling growth opportunities,
coupled with a solid balance sheet and
low leverage provides financial flexibility
for the medium term to navigate
headwinds and deploy capital consistent
with allocation of capital priorities.
The Group’s commitment to its increasing
dividend, in line with its progressive
dividend policy that is linked to underlying
earnings, reflects the Board’s confidence
in the outlook for the Group.
Medium-term strategy
At the recent Capital Markets Day in
November, the Group outlined its medium-
term strategy stating that the Group aims
to double revenues over the next five
years, primarily through organic growth
in its water and appliances categories.
Strix Group Plc Revenue
-1.6%
2020: £95.3m
2019: £96.9m
2018: £93.8m
Adjusted EBITDA
+3.2%
2020: £38.1m
2019: £36.9m
2018: £36.4m
The Group continues to pursue value-
adding opportunities in the form of new
acquisitions and technologies, which
will adhere to Strix’s strict financial criteria,
as well as following the Group’s capital
allocation priorities to further enhance
its growth potential within the water and
appliances categories.
Alongside this it will continue to grow
market share in kettle controls and invest
in compelling growth opportunities
with particular focus on new product
development and a commercialisation
strategy that supports the medium-term
growth ambition.
The Group’s sustainability commitments
are vital and are therefore embedded
into the business strategy in order to
provide a safer, more sustainable future
for our customers.
Financial performance
The Group experienced a marked
recovery in H2 2020 as anticipated, and
a strong order book has enabled it to
deliver £29.5m, c.2% growth, in adjusted
profit after tax for the full year versus the
previous financial year (2019: £28.9m).
Gross profit margin has further increased to
41.4% (2019: 40.9%), representing a 0.5%
increase, reflecting the combined impact
of product mix, a range of efficiency
measures including continued automation
and strategic initiatives. Adjusted EBITDA
increased to £38.1m (2019: £36.9m),
representing a 3.2% increase, despite the
softening top line, demonstrating Strix’s
ability to manage its overhead costs.
Impact of COVID-19
Despite the unprecedented global
macroeconomic disruption caused
by the COVID-19 pandemic, Strix has
successfully implemented a range
of efficiency measures and strategic
initiatives to manage its highly variable
cost base and cash resources prudently
and generated immediate savings to
mitigate the impact of the pandemic.
This has been done whilst continuing to
invest in compelling growth opportunities
including the acquisition of LAICA, as
well as the new product development
pipeline and the new manufacturing
operations in China.
The financial performance and operational
progress illustrates the resilience and
robustness of the Strix business model
and, following a period of continued
investment, means that it is well placed to
benefit from the acceleration in demand
as we emerge in the post-pandemic
environment as a stronger business.
Sustainability
Strix has a robust philosophy towards
sustainability and our goal is to embed
sustainability into our business strategy,
from the way we package our products to
the how our consumers use our products.
During the year, the Group re-examined
its approach to sustainability to establish
a clear strategy in line with the UN
Sustainable Development Goals. During
2021, we aim to implement the newly
defined strategy by establishing baseline
KPIs in order to track and monitor
improvements going forward.
Strix’s approach to sustainability involves
all areas and employees within the
Group. The CEO is the main conduit
for sustainability management, reporting
to the Board, alongside key executive
management.
Dividend policy
Given the Group’s robust performance
during 2020, and in line with our dividend
policy linked to underlying earnings, the
Board confirms its intention to increase
the total dividend to 7.85p per share
in respect of the 2020 financial year
(inclusive of the 2.6p per share paid
as an interim dividend).
The final dividend will be paid on 2 June
2021 to shareholders on the register at
7 May 2021 and the shares will trade
ex-dividend from 6 May 2021.
Board composition
During the period, we are delighted to
report the appointment of Richard Sells
as a Non-Executive Director who brings
a wealth of both advisory and board
experience, coupled with extensive
operational and commercial expertise to
the Strix Board. Richard will head an ESG
committee ensuring the Board is focused
and proactive in supporting sustainability
initiatives across the Group.
Annual General Meeting
The Company will be holding its Annual
General Meeting on 27 May 2021, notice
of which will be sent to shareholders in
due course. The format and arrangements
for that meeting are likely to be affected
by the continuing restrictions that apply
in response to the ongoing COVID-19
pandemic. Further details will be set out
in the formal notice of meeting.
Gary Lamb
Non-Executive Chairman
5
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements COVID-19 timeline
Throughout 2020, Strix implemented enhanced controls within its facilities to protect
its staff. The flexibility of its staff across all sites, moving from office to working from
home and back again, meant that ‘business as usual’ could be maintained, supporting
the business results.
JANUARY 2020
• World Health Organization (‘WHO’)
declares global emergency due to
COVID-19.
• UK’s first patients test positive.
•
Implemented sterilisation tent in the
Guangzhou facility, incorporating
HaloPure technology.
MARCH 2020
• WHO declares the COVID-19 virus
a pandemic.
• UK and Isle of Man Governments
commence daily press briefings
on COVID-19 response.
• UK and Isle of Man Governments
announce lockdown and new social
distancing rules.
• Strix supports local NHS with essential
PPE for key workers on the Isle of Man.
• Daily Operational Risk Committee
meetings to discuss the Group’s
response to COVID-19 are initiated.
• Group-wide measures to ensure
employee safety rolled out across
all locations.
FEBRUARY 2020
•
Italy sees major surge in cases and
introduces lockdown restrictions.
• First COVID-19 case transmitted
in the UK.
• Guangzhou facility returns
to full operation.
APRIL 2020
• Worldwide cases of COVID-19
surpasses 2 million.
• UK lockdown extended.
• Wuhan lifts lockdown.
• Our first virtual AGM held with
no physical attendees due to
travel restrictions.
MAY 2020
• Prepared Isle of Man, UK and USA
offices for a phased return to work,
with all safety measures to allow
adequate social distancing in place.
• Draw-down of £9m on credit facility
to focus on preserving cash amidst
the pandemic uncertainty, resulting
in £23.1m headroom.
COVID-19 – Second and third wave planning
Strix’s priority is the health and safety of its employees. As the extent of the
pandemic grew, and to allow “business as usual” through 2020, the Group
implemented the following precautionary measures:
1 Educate employees on
COVID-19 symptoms
and prevention
• Regular updates sent out to all
employees providing education
on COVID-19
• Reporting of daily COVID-19 impact
assessments to Strix’s Operational
Risk Committee
2 Reinforce screening protocols
• High quality sanitisation products
provided and made accessible to
all employees
• Risk assessments conducted for
all staff including mandatory daily
temperature checks
• Minimisation of cross-infection by
• Staggering of arrival/departure
appropriate workforce segregations
within each site
times and lunch-breaks to minimise
congestion and contact
• Mandatory use of face coverings within
public areas of facility during higher
risk periods
• Professional cleaning of all sites carried
out at increased frequencies
• All staff within our Guangzhou
manufacturing facility were required to
enter the premises through a specialist
sterilisation tent that uses HaloPure’s
patented technology
• Reduced visitors to sites and
procedures in place to minimise
contact with other staff
66
Strix Group Plc JUNE 2020
• No active cases of COVID-19 on
•
the Isle of Man.
Isle of Man Government removes
all social distancing requirements
and all staff return to work.
OCTOBER 2020
• A third rise in infections begins in the
USA in mid-October, however, most
staff already working from home.
• A second wave of the virus in Italy
results in new restrictions, however,
purchase of LAICA S.p.A. occurs and
all operations and manufacturing sites
remained open and fully operational
due to initiatives taken to ensure the
safety of employees.
JANUARY 2021
• Short circuit-break lockdown on the
Isle of Man after a second wave, staff
returned to established ‘work from
home’ protocols, until local restrictions
were quickly lifted after 3.5 weeks,
but all factories remained open and
fully operational.
SEPTEMBER 2020
• R number starts to rise in the UK
and lockdown restrictions are
implemented again. UK staff
return to working from home.
DECEMBER 2020
• Flu jabs offered to all employees
to curb the magnified impact of
flu-season.
MARCH 2021
• Third wave circuit-break lockdown on
the Isle of Man as the latest variant spread
through the community.
• Fourth rise in infections in the USA.
• At the end of March the situation in
the UK starts to improve and the stay
at home order comes to an end.
• Mass vaccination programmes
underway worldwide.
3 Prepare for loss of productivity
in locations where working
from home is not possible
4 Restrict non-essential travel
and promote flexible working
arrangements
6 Prepare succession plans
for key executive positions
• Key management geographically
• Expected absenteeism will increase
• All non-essential business travel
diversified
following health screening protocols.
Implementation of shared role
responsibility to ensure no stoppages
to critical processes
suspended until restrictions are lifted
and it is deemed safe to resume travel
• Employees, where appropriate, have
been encouraged to work from home
• Regular updates between the key
executive team
•
•
Issuance of laptops and remote
working guidance
Implementation of regular ‘wellbeing
calls’ for managers to check-in with
staff working from home
• Additional segregation of staff through
use of shifts to reduce possibility of
transmission across teams
5 Align IT systems and support
to evolving work requirements
• Flexible workforce arrangements
implemented with effective remote
working policies in place
7 Focus on cash flow
• Strong cash generation model which
incorporates a high ROCE and high
proportion of cash in advance payment
terms limiting risk of non-payment and
working capital fluctuations
• Group has available liquidity consisting
•
IT systems and support aligned with
latest work policies
of cash and undrawn facilities
throughout the period
• System stability, network robustness
and data security have been addressed
ensuring smooth operation, with some
investment in additional infrastructure
7
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Chief Executive Officer’s statement
Focusing on strategic
planning and
delivering results
”We are pleased to report another solid
performance in what has been a challenging
year for all, enabled by our product mix
as well as a range of efficiency measures,
including continued automation and
strategic initiatives.”
Mark Bartlett
CEO
Introduction
Strix has continued to deliver on its
strategic plans during 2020 which
has strengthened the Group’s position
across its three product categories; kettle
controls, water and appliances. The Group
has expanded its market leading value
share of the global kettle controls market
whilst significantly expanding the size of
its water category through both strong
organic growth and the strategically
compelling acquisition of Italian-based
LAICA in October which, despite the
disruption caused by the pandemic, has
delivered strong double-digit revenue
growth over the period. In addition,
the Group’s medium-term strategy was
updated at a Capital Markets Day hosted
in November outlining a path to double
Group revenues over the next five years,
primarily through organic growth in its
water and appliances categories.
Financial performance
The Group has delivered another
solid performance in 2020 given the
unprecedented trading environment. This
is a testament to our colleagues around
the globe, who have demonstrated their
dedication and adaptability to unparalleled
change in their daily working environment
arising from the COVID-19 pandemic.
The Group reported revenue of £95.3m,
a decline of 1.6% versus the same period
in prior year (2019: £96.9m), significantly
ahead of our COVID-19 scenario planning
expectations. The Group experienced
a marked recovery in H2 as anticipated,
which combined with efficiency measures
in H1, has enabled it to deliver c.2% growth
in adjusted profit after tax for the full year
versus the previous financial year
(2019: £28.9m).
8
Strix Group Plc Adjusted profit before tax
Final and interim dividend per share
+2.4%
2020: £30.9m
2019: £30.2m
2018: £29.2m
+2.0%
2020: 7.85p
2019: 7.70p
2018: 7.00p
This performance demonstrates the
resilience of Strix’s business model, which
benefits from geographical and product
diversification, and is strengthened further
by the Group’s high cash generation and
prudent control of its balance sheet. As at
31 December 2020, net debt was lower
than previous guidance for this financial
year at £37.2m, having successfully
implemented a range of efficiency
measures and strategic initiatives. This
represents a net debt/adjusted EBITDA
ratio of 1.0x.
This places Strix in a financially strong
position and with a disciplined approach
to investment, we will emerge from the
pandemic poised to continue to benefit
from a sustained market recovery.
In line with its progressive dividend policy
that is linked to underlying earnings, and
given the Group’s resilient performance
in 2020 and confidence in the continued
strength of its cash generation, the Board
confirms its intention to increase total
dividend to 7.85p per share in respect of
the 2020 financial year, inclusive of the
2.6p per share paid as an interim dividend.
New product development
New product development remains a
fundamental driver in the Group’s core
business strategy, with specific focus
on the identification of cross category
opportunities. Throughout 2020, the
Group has made significant headway
having delivered on the targets outlined
in the product development roadmap
with the launch of multiple new products.
The Group also refocused its
commercialisation strategy, optimising
cross category synergies within both our
higher value small domestic appliance
and water categories.
Our patented Instant Flow Heater (‘IFH’)
technology is gaining positive demand
and will see significant new launches in
the coming 12 months across multiple
brands globally with key launches
in EMEA, Asia and North America.
Additionally, our Lumi water chiller has
also seen accelerated success with
significantly increased sales volume.
Filter development has seen further
opportunities with several new products
being launched to the Group’s non-
wavering safety and quality standards. In
2020, the Group has started to introduce
the Aqua Optima brand to North America
with plans for a comprehensive filter,
pitcher and appliance range, positioned
to take advantage of the growing
‘Value Chic’ segment in the USA.
Throughout 2021, in line with our
medium-term growth ambitions, we
have multiple new product launches.
The Group will continue to focus its highly
skilled engineering resource towards
enhancing our core technologies and
innovating into new commercial markets.
Kettle controls category
The market experienced a strong bounce
back in the second half of 2020 to end
the year broadly flat after the COVID-19
pandemic disrupted both supply and
demand in the global kettle market
during H1.
Throughout this period, Strix has managed
to grow its market leading position of the
global kettle controls market, continuing
to grow the number of specifications
using its latest platform ranges and regions
which demonstrates how successfully the
Company has dealt with the challenges of
the pandemic.
The improved performance in the second
half of 2020 has continued into 2021. The
kettle controls category has a strong order
book for Q2 giving management the
confidence in delivering a stronger first
half versus last year.
Regulated segments grew with a strong
contribution from the UK, North America,
Australia and New Zealand offsetting
declines in Mainland Europe. Less
Regulated segments also grew with
strong growth in South East Asia, the
Middle East and Russia offsetting declines
in South Africa and Eastern Europe. Some
weakness was experienced within the
Chinese market last year which has begun
to show a marked recovery in 2021.
We have also continued to focus product
development on opportunities within
the Regulated, Less Regulated and
China markets that will further strengthen
Strix’s position and support our market
share aspirations.
Following the successful launch of the
U9 Series during 2017, the Group has
successfully produced over 33 million
controls to date. The Group continues
to develop this series with new variants
launched to target the smaller size and split
switch kettle appliances to further enhance
the portfolio of ‘best in class’ controls.
Lifetime energy footprint studies of kettles
show that the energy consumed in “use”
is estimated at 95% of the total product
lifecycle energy requirements. Strix’s goal is
to reduce wastage in this phase for existing
products and to design new, innovative
products which reduce environmental
wastage compared to the incumbent
technology or products. As a result, Strix
has successfully developed products and
designs to reduce the level of overfill in
traditional kettles as well as new ‘over-fill
proof’ water heating products.
9
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Chief Executive Officer’s statement continued
Water category
2020 was a transformational year for Strix’s
water filtration category with the acquisition
of LAICA in October and the Aqua Optima
brand delivering record sales for yet
another year. Overall, the water category
reported a significant growth in revenue
in 2020 with the combined contribution
of LAICA and HaloPure technology.
LAICA has a considerable global presence,
an established product range and an
advanced new product roadmap. The
acquisition will provide some strategic
consolidation of the water treatment
range, driving efficiencies and providing
a comprehensive portfolio of products
for the Group globally. Strix’s experienced
management team is working hard to
ensure the integration of LAICA is executed
effectively to achieve the identified benefits
and the trading performance has been
strong over the period, delivering double-
digit revenue growth. The new, expanded
brand portfolio will be used for the
planned geographical expansion in the
second half of 2021 for consumer water.
The Group expects many of the new
product launches in 2020 to accelerate
this year as the retailers introduce them to
both their in-store and online portfolios.
For professional water, Strix launched
the HaloPure technology and recently
announced that it was selected by Chia Tai
Group, one of the most specialised and
well-known livestock companies operating
in China, and Strix installed its full system in
January 2021. HaloPure’s technology has
become increasingly well recognised by
the market and the evolution of this
technology to offer farming solutions
for clean drinking water is likely to result
in significant incremental business
opportunities for the Group in the future.
Water remains a limited natural resource
experiencing ever-greater demand,
expected to increase by 40% by 2030.
Strix is focused on enhancing the quality
of water and providing sustainable delivery
mechanisms to replace the 7.7 billion
plastic water bottles used every year in
the UK alone. astrea and LAICA reusable
filtered water bottles offer significant
benefits from purchased bottled water in
terms of reusability of the container whilst
also significantly reducing transportation
costs. To complete the full product life
cycle, Aqua Optima has put a recycling
agreement in place in the UK with
specialist TerraCycle. The acquisition of
HaloSource has brought new technology,
including lead reduction and patented
bromine technology, that kills bacteria
and viruses. These technologies, coupled
with the enhanced new product roadmap
from LAICA enable Strix to offer improved
quality drinking water to both the
consumer and agriculture markets.
Appliances category
Strix seeks to use its technology to
develop adjacent products to solve
problems in tangential markets. The
Group looks to develop products offering
meaningful benefits to customers which
can then be commercialised through
existing relationships with experienced
and trusted OEMs and consumer
appliance specialists.
2020 has seen the acceleration of Strix
Global Brand partnerships on new
innovative project launches. There are now
multiple agreements in place within the
appliances and baby care categories for
exciting new launches across all regions.
2021 will see many of the appliances
created in 2020 penetrate the consumer
markets across the world with the most
notable being the Aurora (Instant Flow
Heater/Chiller) in the first half, and Dual Flo
and the expansion of the baby care
technology range in the second half.
“Strix continues to actively seek opportunities
that will add value across the Group through
niche acquisitions or technologies.”
Mark Bartlett
CEO
10
Strix will continue to work closely with
its key partners and own brands to bring
innovation to the markets delivering core
benefits in usability and sustainability to
the consumer.
Operations review
The relocation of Strix’s existing
manufacturing operations in China has
continued to make excellent progress
in line with the projected schedule. The
Group is pleased to report that Strix is
currently installing the press machinery
and test lab facilities and began the
transfer and commencement of some
of the production lines which are now
functional. The project remains on target
to be on budget and fully operational by
August 2021, as originally planned.
In addition, Strix continues to strengthen
its senior management, engineering and
commercial teams through strategic
recruitment of Harry Kyriacou as Chief
Commercial Officer, Neil Austin as Water
Category & Global Marketing Director
and Emma Cox as Group HR Director.
Following the successful acquisition of
LAICA, the Group enhanced the finance
function and internal controls through
the targeted recruitment of Nicolo Zanuso
as Chief Financial Officer and Riccardo
Dolcetta as General Manager to align a
previously family-owned entity with the
wider structure of the Group.
Defence of intellectual property
We remain committed to consumer safety
where we continue to initiate regulatory
enforcement actions to remove unsafe
and poor quality products from the
market utilising the European Rapid
Exchange of Information (‘RAPEX’) alert
system. Four such actions have again
been undertaken in 2020 resulting
in product recalls and withdrawal of
kettles from Poland and Germany with
surveillance and preparatory work being
widened to include Ukraine. We continue
to actively monitor the markets in which
we operate for violation of our intellectual
property rights and have again taken
action to limit online sales in Europe of
products that infringe our intellectual
property culminating in the taking down
of another electronic kettle. Defence
of intellectual property and regulatory
enforcement remain core activities of
our business and there have now been
57 in total since 2017.
Strix Group Plc Strix global share of kettle
controls market value
55%
Number of employees
850+
Outlook
At the Capital Markets Day in November,
the Group outlined its medium-term
strategy stating that the Group expects to
double revenues over the next five years
primarily through organic growth in its
water and appliances categories. Strix
continues to actively seek opportunities
that will add value across the Group
through niche acquisitions or technologies.
Acquisitions are subject to strict financial
criteria and consistent with the Group’s
capital allocation priorities, to further
enhance the Group’s growth potential
within the water and appliances categories.
Alongside this, it will continue to grow
market share in kettle controls and invest
in compelling growth opportunities
with particular focus on new product
development and commercialisation
strategy that support the medium-term
growth ambition.
Sustainability remains of critical
importance to the way the Group
operates and it reiterates its commitment
to embed sustainability into our business
strategy and provide a safer sustainable
future for its customers. In 2020, the
Group has reassessed its approach to
sustainability with a view of integrating a
sustainability strategy within core business
activities aligning ourselves with the
UN’s SDGs. In 2021, Strix aims to bring
sustainability strategy to life, establishing
baselines within our identified key SDGs,
which we will track improvements, and
monitor our progress year on year.
Despite the unprecedented global
macroeconomic disruption caused
by the COVID-19 pandemic, Strix has
successfully implemented a range of
efficiency measures and strategic
initiatives to manage its highly variable
cost base and cash resources prudently
and generated immediate savings to
mitigate the impact of the pandemic.
This has been done whilst continuing to
invest in compelling growth opportunities
including the acquisition of LAICA, as well
as the new manufacturing operations in
China and successfully upgrading to SAP
to improve real time data and streamline
internal processes.
The financial performance and operational
progress illustrates the resilience and
robustness of the Strix business model and,
following a period of continued investment,
means that it is well placed to benefit from
the acceleration in demand as we emerge
in the post pandemic environment as a
stronger business.
Despite the Group experiencing a
marked recovery in H2, it continues
to face the challenging backdrop of
increased commodity prices, shipping
and packaging costs, which it continues to
proactively manage and offset through a
range of efficiency measures and strategic
initiatives, as well as any further disruptions
resulting from imposed lockdowns.
Given the Group’s resilient performance
in 2020 and confidence in the continued
strength of its cash generation, the Board
confirms its intention to increase total
dividend to 7.85p per share in respect of
the 2020 financial year, inclusive of the
2.6p per share paid as an interim dividend
and in line with its progressive dividend
policy that is linked to underlying earnings.
Strix reiterates confidence in its 2021
commitments and executing on the
medium-term strategy to deliver against
its five-year targets.
Mark Bartlett
Chief Executive Officer
11
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Strix investment case
Strix offers an attractive investment case with its market leading kettle controls position
as well as significant growth opportunities in the water and appliances categories,
strongly underpinned by the Group’s focus on ESG and sustainability.
Dominant market
position in global kettle
controls with high
barriers to entry
Significant growth
opportunities in
water and appliances
categories
Strong ESG credentials
with structural growth
tailwinds
• Forecasting revenue
• Comprehensive, Board-led
sustainability strategy
embedded within core
business activities and
aligned with key and
relevant UN Sustainable
Development Goals.
• Range of initiatives that
focus on the full spectrum
of Environmental, Social
and Governance with
baselines established to
track improvements and
to clearly monitor progress
year on year.
• KPIs will be set in Q4
following the completion
of the new factory as this
will have a significant and
positive impact on these
measures.
CAGR of over 25% in both
categories over the next five
years, delivering a doubling
of Strix Group revenue.
• Transformational year for
Strix’s water category with
the acquisition of LAICA
in October and the Aqua
Optima brand delivering
record sales for yet
another year.
• Launch of the HaloPure
technology, recent contract
wins in China and the
evolution of this technology
to farming solutions for
clean drinking water is
likely to result in significant
incremental business
opportunities.
• Strong progress on five-year
strategy in the appliances
category through own
brand and third-party brand
launches as well as entering
into new categories such as
health and wellness.
• Expanded its global market
value share of the kettle
controls market from c.54%
to c.55% and medium-term
target to grow market share
to c.57%.
• Regulated segments grew
with a strong contribution
from the UK, North America,
Australia and New Zealand
offsetting declines in
Mainland Europe.
• Less Regulated segments
also grew with strong
growth in South East Asia,
the Middle East and Russia
offsetting declines in South
Africa and Eastern Europe.
• Recovery expected in the
Chinese market after a year
more affected by COVID-19
than other markets.
• Patent portfolio underpins
Strix technologies with
successful campaigns
globally (including China) to
remove infringing products
and initiate regulatory
enforcement actions.
12
Strix Group Plc Strong free cash flow
generation with unique
working capital cycle
Market leading adjusted
EBITDA margin of 40%
Low leverage with
disciplined Capital
Allocation Framework
• Customers typically pay in
advance, reducing non-
payment risk and increasing
cash conversion cycle.
• Low requirement for
maintenance capex
(excluding investment in
new factory that remains
on schedule to complete
in August 2021).
• Operating free cash flow
(before financing and tax
and exceptional factory
capex) to EBITDA conversion
of 73%.
• Significant investment
• The Group has a
in automation, as well as
ongoing focus on other
efficiency measures
and strategic initiatives
underpinning EBITDA
margin uplift.
• Numerous opportunities at
LAICA have been identified
to improve its margins as the
business transitions to Strix’s
standard corporate policies.
• Increasing the appliance
product mix further boosts
margins as these are typically
more complex technologies
that can command a higher
price point.
• Increased capacity at the
new factory allows for
in-sourcing of additional
products and components
with margin benefit.
• Extensive patent portfolio
and safety actions underpin
margins, with campaigns to
report infringements and
remove copyist products
from the market.
conservative balance sheet
which provides significant
flexibility.
• Investment in compelling
growth opportunities with
particular focus on new
product development and
commercialisation strategy
that support the medium-
term growth ambition
to prudently invest in growth
opportunities.
• The Board continues to
seek strategically compelling
acquisition opportunities
which further complement
its existing product portfolio
and R&D capabilities.
• Board commitment to
the progressive dividend
policy linked to underlying
earnings has been
maintained reflecting the
Board’s confidence in the
outlook for the Group.
13
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Key performance indicators
We use financial and non-financial key performance indicators (‘KPIs’) to track
and measure our progress over time. In addition, during 2021 we will establish
clear ESG KPIs to track our improvements in line with our key sustainability pillars.
Financial KPIs
Kettle controls revenues (£000)
Water category revenues (£000)
Appliances category revenues (£000)
79,816
11,744
-7.0%
2020
2019
79,816
85,799
19.5%
2020
2019
3,745
200.1%
11,744
9,829
2020
2019
1,248
3,745
Definition
Value of items sold during the year
within the kettle controls category.
Definition
Value of items sold during the year
within the water category.
Definition
Value of items sold during the year
within the appliances category.
2020 performance
Decrease in revenues was due to
disruptions in the global kettle market
caused by COVID-19 during H1,
although there was a strong bounce
back in the second half of the year
continuing into 2021.
2020 performance
Significant growth in revenue in the
year was due to a combination of
record sales for the Aqua Optima brand,
contribution of the newly acquired LAICA
brand, and increases from the HaloPure
technology as well as a full year effect
from astrea sales.
2020 performance
Revenues tripled in this category in the
current year due to the acceleration of
Strix Global Brand partnerships on new
innovative projects and launches within
the appliances and baby care categories,
with continued market penetration
expected into 2021, as well as the
acquisition of LAICA.
Adjusted EBITDA1,2 (£000)
38,080
Adjusted gross profit1 (£000)
39,409
3.2%
2020
2019
38,080
36,904
-0.5%
2020
2019
39,409
39,617
Definition
Adjusted EBITDA highlights the underlying
operational performance of the Group
after adjusting for exceptional costs,
the impact of financing decisions,
and depreciation and amortisation.
Definition
Gross profit is the profit generated
from our sales, after deducting the costs
associated with making and selling our
products, adjusting for exceptional costs.
2020 performance
Adjusted EBITDA increased by 3.2%
(2019: 1.5%) to £38.1m. This reflects
Strix’s strong ability to optimise the
overheads cost to accommodate the
‘slight’ softening of top line performance.
LAICA was acquired in October 2020
and contributed £0.5m in line with
expectations. The adjusted EBITDA
increase excluding LAICA was 1.7%.
2020 performance
Adjusted gross profit was relatively
flat versus the previous year showing
a modest £0.2m decline. This
incorporates a gross gain of £0.9m relating
to the acquisition of LAICA. However,
margins increased from 40.9% to 41.4%
supported by a strong product mix
and lower labour costs as a result of
our continued focus on automation.
14
1. Adjusted results exclude exceptional items, which
include share-based payment transactions and other
reorganisation and strategic project costs. Adjusted
results are non-GAAP metrics used by management
and are not an IFRS disclosure. A table which shows
both Adjusted and Reported results is included in the
Chief Financial Officer’s review.
2. EBITDA, which is defined as earnings before
finance costs, tax, depreciation and amortisation,
is a non-GAAP metric used by management and is
not an IFRS disclosure.
Strix Group Plc For further Strategy information pages 24 to 29
For further Risk information pages 40 to 45
Non-Financial KPIs
Net cash generated from
operating activities
31,212
Energy usage per head (Oil)
Energy usage per head (Electricity)
257
3,316
-9.2%
2020
2019
31,212
34,360
-9.2%
2020
2019
257
283
-13.4%
2020
2019
3,316
3,830
Definition
Net cash generated from operating
activities is a measure of the cash
generated by our operating activities,
excluding the cash impacts of longer
term financing and investing activities.
2020 performance
Decrease in net cash flows from
operating activities was mainly due
to net working capital outflows,
predominantly due to the acquisition
of LAICA, however, also attributable to
the slight decrease in revenues during
the current year.
Definition
Electricity and oil usage is expressed in kWh and litres, respectively, used per head per
year, based on the Isle of Man facilities. We monitor our energy usage on a monthly
basis in order to ensure the environmental impact of our usage is minimised.
2020 performance
Energy usage per head has further decreased at our Isle of Man facilities during
the year where headcount increased by 16% (2019: 27.5%), partly attributable to reduced
office use as a result of COVID-19 restrictions. Usage statistics at our locations in the
rest of the world have been excluded due to the building of the new production facility
which distorts a like-for-like comparison.
Total R&D expenditure (£000)
Water usage (m3)
Water intensity (m3/£m)
4,117
-7.3% (4.3% of net sales)
2020
2019
30,936
4,117
4,439
-15.1%
2020
2019
30,936
36,429
325
-13.6%
2020
2019
325
376
Definition
Total R&D expenditure (including
capitalised costs) as a percentage of
reported revenue, which supports
our investment in future technologies
and products.
2020 performance
R&D expenditure decreased by
7.3% in the current year, in line with
expectations, sales levels and COVID-19
scenario planning. Cost saving measures
implemented were attributable to the
decrease, in order to maintain a fairly
constant R&D to net sales ratio of 4%-5%
year on year in the medium-term.
Definition
Water usage is expressed in cubic meters.
We monitor our water usage on a monthly
basis to ensure minimal wastage through
recycled use.
Definition
Water intensity is a measure of the
water usage per £1 overhead spend.
We monitor our water usage on a
monthly basis to ensure minimal
wastage through recycled use.
2020 performance
There was approximately 15% reduction
in water consumption, mainly due to
reduction in R&D-related testing with
a move to production life testing as the
technology matured, as well as factory
shutdowns due to COVID-19 restrictions.
2020 performance
The decrease in water intensity is reflective
of the decrease in the water usage
coupled with Group-wide cost-saving
measures in line with our COVID-19
scenario planning.
15
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Key performance indicators continued
Non-Financial KPIs continued
Total lost time accidents
7
-72.0%
2020
2019
7
Lost time hours
0.26
-38.1%
2020
2019
25
0.26
0.42
Definition
This refers to the total number of
accidents recorded that resulted in
employees missing work due to injury
across the Group, expressed per 1,000
employees.
Definition
This refers to the total number of hours
lost as a result of accidents resulting in
injury across the Group, expressed per
1,000 hours worked.
2020 performance
Total accidents fell dramatically from
last year, attributable to the benefits of
automation of assembly lines and firm
health and safety protocols.
2020 performance
Total lost time hours fell, reflective of the
decrease accidents recorded, and also
attributable to benefits from automation
of assembly lines.
Gender diversity
23.0%
3.5%
2020
2019
23.0
19.5
Definition
This refers to the number of women
in management roles expressed as a
percentage of all management-level
employees.
2020 performance
Our percentage of women in
management roles across the Group
was 23.0% (2019: 19.5%), a further increase
from 2019. This compares favourably
with the UK statistics based on a 2009
to 2019 survey indicating that women
in management roles across all science,
engineering and technology roles
increased slightly from to 13%
in 2009 to 14% in 20191.
“We were a finalist for the 2020
Women Value Company award
celebrating Women in the Workforce.
The award is dedicated to companies
that stand out in promoting culture
and gender equality through
innovative development policies,
effective corporate welfare solutions
and the promotion of female
employment.”
Raudres Wong
Chief Financial Officer
1. https://www.wisecampaign.org.uk/statistics/2019-workforce-statistics-one-million-women-in-stem-in-the-uk/
16
Strix Group Plc Our people
What does Human Resources
(‘HR’) at Strix mean?
As a Company, Strix prides itself on the
quality and safety of its products, and whilst
the Company continues to introduce
automation, fundamentally, the delivery
of this is down to the dedication and
commitment of its well-trained people.
To this end, HR at Strix is not just about
the work of the dedicated and professional
team that Strix has in the function; it is
about the quality of the thousands of
human interactions that occur every
single day in the business. It is about hiring
the very best people, and then helping
them to become even better. It is about
giving Strix’s people the freedom and
mechanisms to share their ideas about
how to keep improving the business. It is
about rewarding excellence, commitment
and innovation; and it is about celebrating
the rich diversity that the Company has
in its multinational workforce.
People development
Strix’s HR function, led by Group HR
Director, Emma Cox who joined the
organisation in April 2020, is guided
by the following mission:
“Our role is to ensure that Strix has
the right people in the right place
at the right time, doing things in the
right way to get the right results.”
Underpinning this mission is a strategy
that is focused on value-added people
development which includes a new
performance management process
(‘PMP’) being introduced in 2021, along
with a transparent job grading scheme.
The latter is designed to give people a
clear line of sight as to how they can
progress their careers within Strix and
the PMP facilitates quality discussions
between employees and their managers
as to how to achieve their ambitions,
whilst also ensuring that they have
stretching objectives that are clearly
aligned to the Company strategy.
Employee wellbeing
As well as having the right people doing
the right things, Strix is committed to
ensuring that its people feel right –
physically, mentally and financially. In the
West, Private healthcare is provided to all
employees, regardless of their job role,
and with this also comes the Employee
Assistance Programme (‘EAP’). This is an
Diversity at Strix
advice service that is available 24/7 for
employees and their family members,
covering concerns about mental and
physical health, financial planning or legal
matters. Additionally, almost all employees
are shareholders in the Company which
not only provides them with a financial
benefit, but a vested interest in contributing
to the success of the organisation.
The long-term people strategy
Strix has ambitious growth plans, which
includes diversifying its product range
and routes to market. In some instances,
this requires recruiting for or developing
new skills sets, and the longer-term
people strategy for the Group is very
much focused on this. Talent retention
and acquisition is key for an organisation
growing and innovating at the pace Strix is,
and the wider strategy reflects this, with
emphasis on learning and development,
succession planning and flexible
remuneration models that meet the diverse
needs and interests of Strix’s people.
The Company recognises that to
achieve a diverse workforce, a working
environment that empowers all of its
employees to thrive and achieve their
potential is essential. The employee
population benefits from bringing to
bear a wealth of cultures, languages
and experiences. Whilst this diversity
is rich and celebrated, underpinning
it all is a set of shared values that are
seen being upheld across all areas of
the business every day.
As a global employer, spanning
across multiple continents, Strix prides
itself on the gender make up of its
workforce where 60% of its employees
are female, and women have a 23%
management representation.
Similarly, a wide range of ages are
represented throughout the business.
In a company which creates millions
of products each year, age really is
“just a number”. That said, in response
to the recognised challenges faced
by those people newly entering the
work force, Strix is a big advocate of
paid internships and apprenticeship
programmes. Being headquartered
on the Isle of Man, the Company
actively participates in the Island STEM
committee that focusses on creating
opportunities for school leavers and
university graduates interested in
careers in engineering.
Female
20%
Male
40%
Female
23%
Overall
Board
Management
Female
60%
Male
80%
Male
77%
17
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Business model
Strix, as a service provider across the value chain, provides
components and value-added services to OEMs, brands and
retailers, who utilise these and other components to produce
market leading products for consumers across the globe.
Kettle controls
Our USP
Water category
Our USP
Strix is unique in that it has direct relationships with
OEMs, brands and retailers within the kettle safety control
supply chain. Using Strix’s extensive market intelligence,
stakeholders regularly seek advice on product design,
specification and manufacturing solutions. This position
helps us to build and maintain market share and acts
as a barrier to entry for competitors by ensuring that
Strix controls are specified. Strix continues to enhance
consumer safety through its involvement with standard-
setting bodies and uses its in-house independently
accredited stage 3 Customer Test Facility (‘CTF’) to
streamline the kettle control accreditation process.
Long-term growth
Whilst Strix does already hold a strong market leading
position, the Company believes there is still significant
room for growth in the kettle controls category. We aim
to achieve this by adopting a split strategy approach
across our three market segments: Regulated, Less
Regulated and China. Within Regulated markets, our goal
is to increase our share and average selling price through
developing innovative new products with features our
customer’s value. Strix has over two times more share
in Regulated markets than the more fragmented
Less Regulated segment, hence, Strix aims to grow
aggressively in this area. We will achieve this through
leveraging our established partnerships with our OEM
base, and by further expanding our StrixVQ product
range and brand. The China market continues to grow in
volume and in diversity with consumers demanding new
solutions in a marketplace where traditional products are
being left behind. With this considered alongside the ever
more competitive market, we intend to grow through a
rigorous value-based approach to product development
and commercial execution with products based on
trends at extremely competitive pricing. Strix believes
its strategic investment in automation and process
improvements will continue supporting its competitive
advantage by increasing production efficiency and
quality management throughout the manufacturing
lifecycle, and mitigating the risk of rising wage costs.
Strix has progressed its offering within the water filtration
space with the addition of two synergistic acquisitions;
HaloSource in 2019 and LAICA in 2020. These acquisitions
compliment Strix’s existing product portfolio and bolster
the Group’s product innovation, with chemistry and
engineering expertise in both the US and Italy. The addition
of LAICA further expands the Group’s reach into the
category, with the addition of new product ranges such
as tap filters and robust existing distribution channels.
The water category continues to benefit from trade
brand agreements with multiple large UK retailers
and brands. The Group has driven increased consumer
recognition for its three consumer brands through
its investment in consumer marketing, building direct
consumer engagement across the digital landscape.
The category benefits from a diverse range of products
and distribution channels including a global e-commerce
footprint that further accelerates its branded route to
market. The HaloPure brand continues to penetrate
the livestock farming industry with innovative drinking
water solutions through successful pilots during the year.
Long-term growth
Strix aims to strengthen its competitiveness by leveraging
its R&D and manufacturing capabilities to bring innovative
and sustainable products to the market. Furthermore,
the Group intends to expand its reach into new markets
fuelled by its portfolio of new products and technologies
which will drive future category growth.
Strix continues to invest in the growing trade brand and
OEM segment, developing product propositions for
leading brands and retailers. The Group looks to expand
its position in this area with brands and partners in key
growth markets in the US, China and across Europe.
The Group is also actively seeking acquisition
opportunities within our core competencies that will
add value across any and all parts of the Group.
18
Strix Group Plc Water category
Appliances category
How we create value:
Our USP
Strix
Strix’s mission within the appliances category is to
develop products that allow consumers to live a safer,
more convenient, sustainable life at home. The principal
aim is to take frustrations out of everyday tasks with a
current focus on hot water on demand, baby care,
beverage, living and health and wellness.
Our business model allows us to make long-term, strategic
decisions due to the strength of our core business and its
ability to generate predictable cash flows. The strength of
our customer relationships allows us to pursue our passion
for research and innovation to deliver high quality, safe
products to our customers.
The use of Strix’s innovative patented technology has
allowed the Group to launch disruptive products within
the appliance market, such as the Tommee Tippee
Perfect Prep machine and the upcoming Dual Flo
and Aurora appliances.
Long-term growth
Strix will continue to drive the appliances category
with a focus on innovation and consumer experience.
Leveraging our R&D capabilities, unique network and
positioning in the supply chain, alongside additional
routes to market through the LAICA acquisition, Strix is
well set to deliver significant growth in the category over
the coming years.
With a strong focus on the beverage and hot water on
demand sub-categories, we seek to grow our current
product range before looking to expand the product
mix to adjacent categories.
The Group is also actively seeking acquisition
opportunities within our core competencies that
will add value across any and all parts of the Group.
Investors
Our business model helps us to achieve strong cash inflows
together with sustainable profits, allowing us to make
strategic acquisitions and deliver an attractive return to
our investors. Our global market coverage and number of
product lines also provide a buffer against geopolitical events,
such as those experienced in 2020 and onwards into 2021.
Customers
We share our knowledge and understanding of the kettle
and water filtration markets to help our customers achieve
faster product releases and to design products which are
in line with market trends. The value in these customer
relationships is demonstrated by the number of customers
who have traded with us for ten years or more.
Employees
We treat our employees with respect and provide them with
an environment in which product innovation can thrive.
We reward our employees appropriately, no matter where
they work in the world, and ensure they are acknowledged
for their contribution to the Group’s success. In turn, this
encourages our employees to strive for success and
maximise their potential.
Suppliers
We work closely with our suppliers to build strong
relationships that make doing business with us a long-term
goal which brings value to both parties. We listen carefully to
feedback from our suppliers and work with them to devise
solutions to any problem. We also support our suppliers
in achieving compliance with their own requirements,
such as supplier audits.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Market review
A real opportunity for future growth
Strix’s growth ambitions are at the forefront of all strategic decisions
with a view to double the Group’s revenues over the next five years.
This will be achieved primarily through organic growth in the Group’s
water and appliances categories, supported by its solid market leading
position in global kettle controls.
Kettle controls
Overview
Strix estimates that in 2020 the global
market for kettle controls, including
those for Chinese multi-cooker
appliances, experienced a sharp
contraction in H1 followed by a strong
bounce back in H2 to end the year
broadly flat at c.£160m. Electric Kettle
penetration rates provide an indicator
of potential growth, and in 2020 Strix
estimates global electric kettle
penetration remains around c.38%
of all households.
Strix continually innovates to develop
more effective kettle controls, doing
so by drawing on the know-how
established during over three decades
in the kettle market. It is only with
intricate knowledge of material
properties and precision engineering
that controls can be designed and
manufactured to operate repeatedly
and safely throughout the 12,000 cycles
that a kettle experiences during its life.
Regulated markets:
Strix is the key supplier to
the Regulated market, where
customers favour high-quality
controls to meet tighter
regulations. In this mature
market, Strix increased its
value share to c.75% of the
kettle controls market.
Regulated kettle market
Regulated markets are those where high safety and intellectual
property protection standards are in place and where those
standards are rigorously monitored and enforced. Examples
of Regulated markets include the UK, Western Europe, North
America, Australasia, Turkey and Japan.
In 2020, Strix estimates the value of the Regulated kettle
controls market grew by c.£2m to c.£70m. The key driver
behind Regulated market growth was strong demand from
Australia and New Zealand, North America and the UK which
was partly offset by declines in mainland Europe.
Market share –
Regulated markets
c.75%
20
Strix Group Plc Less Regulated markets:
In Less Regulated markets,
Strix slightly increased its value
share to c.35% of the kettle
controls market.
Less Regulated kettle market
Less Regulated markets are those where either high safety and/or
intellectual property standards are not in place, or where they are
in place but less rigorously enforced. Examples of Less Regulated
markets include the CIS, the Middle East, South East Asia, Africa
and South America. In 2020, Strix estimates the value of Less
Regulated kettle controls market grew by c.£4m to c.£63m.
The key drivers behind Less Regulated market growth was strong
demand in South East Asia, the Middle East and CIS which was
partly offset by declines in South Africa and Eastern Europe.
Market share –
Less Regulated markets
c.35%
China:
After strong share growth in
2019, our value share in China
reduced back to c.46%, still 2%
higher than 2018.
China domestic market
China is generally considered to be a Less Regulated market,
but is developing quickly with improving safety standards and
enforcement. In H1 2020, the China market was hit hard by the
COVID-19 lockdowns and whilst there was an improvement
in market performance in H2, the year still ended down by
approximately £5m at £26m. The value reduction was a
consequence of both a c.10% reduction in the sales quantity
of traditional and multi-cooker kettles, plus also a softening
in the average selling price (‘ASP’).
Market share –
China
c.46%
Water category
Overview
The Group’s strategy of growing
exponentially within the water category
took another significant step forward
with the acquisition of the LAICA S.p.A.
business. Strix now have a water filtration
solution to cover all demographics with
the LAICA brand providing a bridging role
between the Aqua Optima mass market
offering and the premium position of
the astrea brand. LAICA also significantly
increases Strix’s market access with
mature distribution channels in Southern
and Eastern Europe. With access to
best-in-class technology and a strong
footprint in global markets, the Group
aims to bring to market a portfolio of
consumer products that turn tap water
into great-tasting filtered water, improving
the taste of hot and cold drinks and
providing a healthier and more sustainable
option to disposable bottled water.
The category has also developed
the HaloPure technology within the
sterilisation sector, with the decision
to focus on point of entry water supply
sterilisation for the livestock Industry
starting to pay dividends.
Aqua Optima
The current Aqua Optima product range
includes water filter jugs and a range of
other filters and appliances. Aqua Optima
remains the number 2 brand in the UK
market, leveraging their multi-fit evolve
filters to continue to offer a budget-
friendly alternative to the leading brand.
Sales and partnership initiatives concluded
in late 2020 will lead to expanded
distribution opportunities for Aqua Optima
particularly in North America and the
growing Eastern European market.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Market review continued
Water category
continued
The core trade-brand filter replacement
business continues to provide a solid base
for the categories growth, with a 10%
increase in net sales over 2019. The Group
has strategically positioned itself as a
partner to a number of UK and global
brands, providing them with multi-fit
evolve filters that offer a wider accessible
market than Strix’s competitors.
2020 saw a further strategic shift within
the UK market to online retailers with
investment in e-commerce activities
reaping a 13% increase on 2019.
In total, Aqua Optima grew its net sales
by 5.9% during 2020 in the UK filter/jug
market.
astrea
The astrea product range includes
water bottles and filters that provide great
tasting water with the benefit of providing
a certified lead reduction. The brand
continues to find traction in the US market
through strategic distribution partners and
direct consumer sales. Highlights in 2020
include an on-air segment featuring and
selling the astrea bottle on a key home
shopping network as well as distribution
with a key national housewares retailer.
Moving forward into 2021, the brand is
set to move in to office supply, grocery
and pharmacy retailers.
LAICA
Through the dedication to the research
and development of new products, LAICA
is one of the first companies in Italy to
have developed a water filtration system
with a scientific approach.
LAICA has 30 years of experience in the
field of domestic water filtration and offers
a wide range of water filtration products
that meet the different consumer needs:
from the traditional water filter jugs
with the exclusive patented Bi-flux filter,
capable of reducing water hardness
while maintaining minerals useful for the
body, up to the new instant filtration that
improves the taste and smell of the water,
and the ultrafiltration, the most complete
filtration system capable of reducing also
microplastics, sand and rust that may be
present in tap water.
22
HaloPure
The HaloPure product range includes
patented bromine-based filters that kill
bacteria and viruses, and its unique
chemistry offers distinctive sterilisation
benefits, primarily being marketed within
the healthcare, livestock and agricultural
industries.
During 2020, the Group successfully
developed HaloPure-powered Intelligent
Poultry & Livestock Drinking Water
Treatment Systems which have been
installed in swine and chicken farms with
positive feedback, as well as developing
healthcare and dental applications of its
technology for sterilising rinse water lines.
In 2021, HaloPure has a strong pipeline of
customers and through our strengthening
of the HaloPure sales and distribution
network, the Group expects numerous
Intelligent Poultry & Livestock Drinking
Water Treatment Systems to be installed,
as well as planned R&D to continue to
rationalise the costs in order to gain wider
market appeal.
All LAICA filters are produced and tested
in LAICA headquarters in Barbarano
Mossano (Vicenza) and are 100% made
in Italy, with a mission to provide the best
filtering systems with the highest level of
quality and safety.
The domestic water filtration market in
Italy is worth approximately €22.5m and
the market share held by LAICA is c.26%
with continuous growth thanks to the
development of new products able to
meet consumer needs.
The latest addition to the market is the
range of the myLAICA steel filtering sports
bottles which, thanks to the FAST DISK™
filtering system allows to instantly filter
tap water, improving its taste and smell,
everywhere.
LAICA’s goal for the coming years is a
constant commitment in the R&D of new
products as well as in the use of eco-
sustainable materials for its products as
well as packaging. LAICA will continue to
optimise its Home Wellness app which
allows consumers to easily monitor the
data of all Smart LAICA products directly
to smartphones, such as notification of
filter replacements, avoiding the use of
electronic counters and disposable
batteries.
Strix Group Plc Appliances category
The Strix appliances category incorporates
a number of products within the hot water
on demand, baby care, beverage and
food preparation markets plus, now with
the addition of LAICA, also everyday living
and health and wellness markets.
Strix’s mission within the category is to
develop products that allow consumers to
live a safer, more convenient, sustainable
life at home.
The hot water on demand market has
grown significantly, particularly in China
where a combination of increasing
spending power and a consumer
requirement for boiled as well as filtered
water is creating a buoyant demand.
The Strix Instant Flow Heater (IFH)
offering, which has a unique ‘true boil’
USP, has proven popular with a number
of our Western and Asian partner brands
choosing appliances with this technology.
Through 2021-22 we expect to
significantly expand our IFH appliance
offering, aiming to capture the spectrum
of consumer needs across different
market price points.
Strix innovation also continues to be
showcased with the Dual Flo appliance
launching in 2021; this innovative twist on
kettle technology provides the market with
the first real kettle innovation since Strix’s
variable temperature control technology
– here the consumer benefits are
convenience, speed and sustainability
through water and energy reduction.
Baby care also continues to prove a
resilient category valued at over £150bn
worldwide, and it is our ambition to be
the ‘go-to’ technical solutions partner
for leading baby care brands seeking
innovative new electrical appliances.
Our core business in Europe continues to
perform well and will be supplemented
with new product launches in both North
America and Asia in the next 18 months.
The newly formed Strix home category
has the purpose of combining the
roadmap of innovation that Strix is famous
for; such as a market-leading cordless
iron partnership with the new range of
retail ready products now available to the
Group with the acquisition of LAICA.
Cross-selling opportunities will be built
upon through 2021 with new Strix
Group-branded propositions which
leverage the portfolios, innovation
roadmaps and distribution strengths
of the legacy businesses.
LAICA’s small appliances are characterised
by the high quality of their raw materials
and production processes and by the
attention to detail, creative designs and
shapes, in line with the best Italian design
traditions.
LAICA’s small appliances are divided into
two areas:
• Living: products for the kitchen –
the heart of every home. LAICA has
a range of reliable and easy-to-use
products that make everyday food
preparation and preservation easier
such as vacuum machines and
accessories, kitchen scales and
pasta machines.
• Health and wellness: A wide range
of safe and easy to use products for
taking care of your daily wellness with
personal scales, medical devices, baby
care and beauty products.
The small household appliance sector will
see an expansion of the LAICA range, with
products equipped with smart technology,
and development in food vacuum
technology, kitchen scales and personal
wellness products such as bathroom
scales and medical equipment for
domestic use.
As always, Strix’s commitment to
improving everyday sustainability with its
appliances is further supported through
the LAICA acquisition, demonstrated by
LAICA’s vacuum range designed to reduce
food waste through optimising food
storage conditions.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Growth strategy
Performance; Product;
Process; People
Strix has a divisional strategy, which is supported by our ‘four P’s’ of
Performance; Product; Process; and, People. The key areas of our strategy are:
Strategic pillar #1
Growing market share
2020 progress
2021 outlook
Product: The launch of the Aurora and Dual Flo
products will set the foundations for the hot water
on demand category to cement Strix’s position as
the go to technology partner for Instant Flow Heater
(‘IFH’) technology. The water category looks to expand
geographical distribution with the launch of the Aqua
Optima brand into North America and China driving
the strategic growth plan.
Performance: The addition of the LAICA distribution
network in Southern Europe extends the opportunity
for geographical expansion of the Strix appliances range
through tactical and strategic retail partnerships.
Product: We improved our market leading value share
in the global kettle controls market to c.55%, including
an increased value share in the Regulated market to
c.75% and in the Less Regulated market to c.35%,
and a 2% decrease in the China market to c.46%.
Aqua Optima achieved record sales for yet another year,
consolidating the brand’s position as the clear number 2
in the UK market.
The acquisition of LAICA has added significant brand
recognition and presence to the Group’s offering,
including a complementary product suite to Strix’s
water and appliances categories.
People: In 2020, Strix continued to strengthen
the leadership team by appointing a new Global
Marketing and Water Category Director and a new
Group HR Director.
Risks
The risk of not building and maintaining market share
is lower sales revenues and cash flows for the Group,
which could lead to reduced future capital expenditure.
The relevant principal risks are:
• Reliance on key customers
• Reliance on key suppliers
• Competitors and market pressures
• Reputation with customer base
24
Strix Group Plc Strategic pillar #2
Focus on safety
and quality
2020 progress
Performance: 2019 saw the Guangzhou facility achieve
ISO ‘Benchmark’ across four of the six identified
categories and the Isle of Man achieve this certification
status across all six identified categories. This is the
highest standard available within the scoring system
which very few audited companies achieve. The
re-certification audit for both locations is scheduled for
April 2021. In addition, significant efforts are being made
in preparation for the audit and certification for the new
factory for its first ISO 9001 (Quality Systems), ISO 14001
(Environmental), ISO 45001 (Occupational H&S) plus
a new ISO 50001 (Energy Management) in 2021.
Process: The Group remains committed to consumer
safety as we continued to initiate regulatory
enforcement actions to remove unsafe and poor quality
products from the market utilising the European Rapid
Exchange of Information (‘RAPEX’) alert system which
resulted in market recalls of kettles in both Poland
and Germany. We continue to actively monitor the
markets in which we operate for violation of our
intellectual property rights and again took action to
restrict online sales in Europe of products that infringe
our IP culminating in the taking down of another
electronic kettle webpage.
The Group continues to invest heavily in production
automation with four additional fully automated
assembly lines implemented during 2020 to support
the growth in the U90 and Electronic Control platforms.
This continued investment and focus on continuous
improvement is highlighted through a further 63%
reduction in customer quality PPM. Strix’s automation
plan continues developing new innovative
manufacturing and assembly processes to support
the Group’s NPI roadmap and increase capacity for
the core product that will in-turn further compliment
the new manufacturing facility which is on plan to be
completed in the summer of 2021.
Risks
The risk of not focusing on safety and quality is a loss
of reputation caused by product failures, leading to
a consequent loss of sales revenue and profitability.
The relevant principal risks are:
• Reliance on key customers
• Reputation with customer base
•
Intellectual property
2021 Outlook
Process: The total of main production lines expected
to be fully automated in 2021 is 73% (+5%), subject
to consumer demand and Strix continues to examine
the operational and financial benefits of automating
further lines.
Performance: We will continue to engage in regulatory
enforcement activities and, where appropriate, the
defence of our intellectual property rights across
all categories.
Registration and defence of intellectual property remain
core activities of our business and are vital in achieving
the Group’s growth potential. Europe-wide regulatory
enforcement actions remain important with surveillance
work to be widened to include Ukraine.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Growth strategy continued
Strategic pillar #3
Explore new technologies
2020 progress
2021 Outlook
Product: The Group will continue to deliver best-in-class
products to the market through its global distribution
channels. Within the kettle controls category this
includes range expansions to the U9, U7 and V8 control
series through enhanced manufacturing and engineering
improvements. In the water category this includes the
launch of the astrea Adventure bottle providing clean,
filtered water on the go for the outdoor adventurer and
the full launch of the Aqua Optima water filtration range
to North America. Within the appliances category this
includes the launch of the Dual Flo appliance, baby care
steriliser dryer, the Aurora water station and introduction
of the induction kettle.
People: The introduction of the category managers to
expedite the commercialisation of new products and
technologies to support the next phase of the Group’s
growth will continue to finalise the product roadmap.
This consumer insight driven development of new
products will meet the market needs and ensure that
sales teams have the tools to obtain maximum market
potential from current and future Strix technologies.
Product: Strix upholds a culture of innovation which
has continued to develop and launch a number of new
products into the market during 2020. This includes the
improved P76 wash proof control to support the Turkish
Cezve market and reduce significantly the number of
returns. Strix also expanded the U9 and U7 series of
controls with 15amp versions for the US and Japan
lower voltage markets.
The Group continued to launch new products within
the appliances category with the adaptation of an
existing connector to create the best-in-class wireless
iron, decreasing returns to the less than 1% average of
kettles, alongside the expansion of the Perfect Prep baby
formula range with a European version.
Finally, the water category continued to develop a range
of new products under both Aqua Optima and astrea
brands, in particular for the US and China markets,
such as the astrea ONE Triton bottle and the Evolve
filter with Ministry of Health (‘MoH’) approval in China.
Performance: During the year the Group introduced the
dedicated Project Management team for the appliances
category to increase efficiency, execution and budgeting
capabilities across the many new projects within the area.
Risks
The risk of not exploring new technologies is driven
by existing technologies becoming obsolete, either
through the advancement of competitor technology
or through changing consumer requirements, leading
to the Group having an insufficient product portfolio to
meet market needs.
The relevant principal risks are:
• Competitors and market pressures
• Reputation with customer base
•
Intellectual property
26
Strix Group Plc New factory update
Key milestones
Key achievement:
• The entire project is currently under budget and within expected timelines.
• The new factory will provide double the current capacity to grow the
future business.
November 2019
Construction was officially started
under the EPC business model in
November 2019.
July 2020
The main building was sealed
in July 2020 successfully.
December 2020
Building construction was successfully
completed in December 2020, despite
the impact of COVID-19.
January 2021
Regulation approval by local
government granted in January 2021.
March 2021
The factory move kicked off in March 2021 and
is expected to be completed by August 2021
with product approvals in place, the ISO certificate
issued and a renewed customs handbook.
27
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Delivering our strategy
”The Board has recently outlined its strategy of
doubling revenues in the next five years and we
remain confident in achieving this medium-term
target, primarily through organic growth in our
water and appliances categories whilst continuing
to grow market share in kettle controls.”
Mark Bartlett
CEO
Strix has made significant progress in delivering its
strategy since the Group’s initial listing on the AIM
market in August 2017.
The Group has made a number of key strategic
decisions over this time which has supported
the Group’s growth and added considerable
value to its shareholders from the initial £1.00
public offering.
The Group’s focus on longer-term investment
decisions and culture of innovation has supported
the development of market-leading patented
technology that will support the future growth
of the business.
Each of Strix’s core categories has evolved
considerably since the IPO with the following
key changes:
Water category
The water category has changed significantly since IPO partly
driven by the acquisitions of HaloSource in March 2019 which has
expanded the category’s product portfolio through the addition
of the astrea and HaloPure brands and of LAICA in October 2020
which expanded the brand and product portfolio as well as
adding manufacturing capabilities to the category. The successful
integration of these brands into the water category and the
combined strength of the category’s R&D team will support
the delivery of the Group’s ongoing strategy.
In the UK, Aqua Optima has built its market share to become the
second largest brand. During this time, Aqua Optima has entered
into contracts with a number of leading UK retail brands to launch
private label products and released a number of innovative
products to the market, such as the Lumi chilled water dispenser
which requires an Evolve filter. The brand has also signed strategic
partnerships with the Terra-Cycle recycling initiative and Park Run
to increase the reputation and sustainability of the brand.
The new brands (astrea, HaloPure and LAICA) have enhanced Strix’s
position and helped build the foundations to becoming a strong
competitor to the market leaders within the highly competitive
water filtration market. The category is well placed to deliver its
strategy for growth thanks to long-term investment decisions made
from IPO to date with a comprehensive and innovative roadmap of
new product launches across all brands to drive the current and
geographical distribution objectives in the coming years.
28
Strix Group Plc Kettle control category
Strix has solidified its position within the global kettle
controls market to remain the market-leading provider
of kettle control components. The introduction of a
number of key product series within this category has
allowed Strix to penetrate new markets and provides
customers with a ‘good’, ‘better’, ‘best’ classification that
ensures Strix’s products are aligned to customer needs
and price points.
This includes the introduction of the U6 series control
for electronic kettles in 2018 and the U9 range in 2017
which has already sold over 33 million units. The product
portfolio continues to be enhanced through the launch
of the StrixVQ range in 2019 which provides a lower cost
alternative for the Less Regulated market. Over the next
three years, the Group will continue to bring innovative
new products to market focused on cost improvements,
consumer benefits and sustainability.
Within this period, the Group has remained focused on
defending its intellectual property with particular success
within the China healthy eating kettle market which
is supporting growth within this segment. Strix has
increased its focus on identifying the sale of copyists and
unsafe kettles, particularly for online sales. This has led
to a number of actions being undertaken that include
product recalls, intellectual property enforcement raids,
unfair competition claims, patent infringement claims
and copyright claims.
29
Appliances category
Following the IPO in 2017, Strix has placed a higher
emphasis on the appliances category to derive
enhanced value from its existing and new patented
technologies. The category has worked with partners
to launch a range of appliances into the market,
including the Zwiling master water dispenser in China,
the award winning Tommee Tippee Perfect Prep Day
& Night, the Mr Coffee Single Serve (Pod Free) Coffee
Maker, the Aqua Optima Lumi chilled water dispenser
and the cordless iron for Morphy Richards.
Following the introduction of a category management
team, there has been increased focus on value-based
development directed toward consumer requirements
and commercial execution. The ability to place
long-term investment in this category has set the
foundations for growth in years to come, with plans
to launch truly innovative products such as the Aurora
beverage station (instant flow heater and chilled water)
and Dual Flo, offering the utility of a standard kettle
and the one cup capability of a Hot Cup machine
all in one in 2021. The Aurora technology will be
launched under Strix brands and global and local
brand partners and Dual Flo will launch through
global and local brand partners.
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements New products roadmap
Strix continues to invest in its R&D capabilities to deliver innovative new
technology into each of its core categories. The Group is focused on
delivering products that meet consumer needs at a variety of price points
and functionality levels. The introduction of a category management team
will support the commercialisation of new technologies to ensure Strix
obtains the greatest value out of its research and development activities.
Kettle controls
2019
StrixVQ product and
brand launch
U68 electronic control
U7 kettle control
Mini U9 kettle control
Water category
2019
Lumi filter water chiller
Amazon basics filters
Private label branded
Evolve+ filters
2020
StrixVQ Mk3 Control for China
P76 5Pole washproof adaptor
EK Connector (Glass Version)
U9 Control (15A Version)
U7 Control (15A Version)
2021
Further range expansion
of the U9 series (U9 11a)
P76 5Pole Connector
(for improved spillage)
U90 Flying Lead
2020
astrea ONE Next Generation
Bottle Filter
astrea ONE TRITON Bottle
Aqua Optima Evolve+ Filter
2021
astrea Adventure filter bottle
MyLaica stainless filter bottle
In-house manufactured Next
Generation OEM filter jugs
Aqua Optima Evolve filter
for China
In-house manufactured
Universal style filter
Bespoke Kettle Filter
HaloPure Industrial Water system
Appliances category
2019
Mr Coffee Hot Cup coffee
machine
Instant flow heater appliance
for China market
2020
Perfect Prep Day & Night
for Europe
Dual Flo for USA
P72Adaptor for cordless iron
30
North American version of
Aqua Optima range
North American version of the
Laica range
New improved Evolve+
multi-fit filter
Evolve+ multi-fit filter for China
2021
Dual Flo for Europe
Aurora Beverage Station
Aurora range expansion
(2 additional models)
Induction kettle
Steriliser-dryer
Strix Group Plc Strix cordless iron adaptor
The Strix cordless iron adaptor gives
our partner factories and brands peace
of mind; Strix kettle control reliability
within the iron category, minimising
product returns. Paired with an
increasing consumer adoption of
cordless technology, we realised
almost 200,000 sales in 2020.
Aurora water station
Powered by Strix Instant Flow Heater technology,
the Aurora delivers auto-dispensing hot, boiled,
and chilled filtered water at the touch of a button.
It features Evolve+ 5-stage filtration, and with
49 size and temperature select combinations,
delivers the perfect temperature drink every time.
Aurora is part of a continued expansion of the
Aqua-Optima portfolio, focused on delivering
budget friendly water filtration solutions that are
powered by best-in-class Strix technology.
Next generation astrea ONE bottle filter
Further expansion of its technology performance with more
certifications, now offering NSF/ANSI certifications against
23 water contaminants, including lead, herbicides, pesticides,
and pharmaceuticals, and increasing the lifetime of the filter
by 50% drastically improving the sustainability impact.
Dual Flo
The innovative Dual Flo appliance is now off
tool and commercialised. Partner brands across
North America and Europe are set to launch
the appliance in 2021.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Water category:
An in-depth look into one of Strix’s primary growth categories
There are two guiding principles which help direct Strix on our corporate journey:
driving technological innovation and considering the environmental and social
implications of our operations.
These two principles of innovation and sustainability are particularly important in our work across the water category.
With LAICA S.p.A. also joining the Strix
Group, we now boast four locations
across the globe working on different
R&D projects, led by our PhD water
innovation centre in Seattle.
ENVIRONMENTAL
RESPONSIBILITY
Recent media coverage has highlighted
the global climate crisis and the
devastating impact of ocean pollution
as areas of much needed attention.
Strix is supporting that ideal by placing
them at the forefront of our business and
by offering more sustainable hydration
solutions for consumers.
Strix’s heritage water jug filters
replace on average 100 single-use
plastic bottles.
The innovative astrea ONE water
bottle filter offers an ‘on the go’
option for consumers and replaces
up to 225 single-use plastic
water bottles.
A UK-wide recycling programme
is in place which offers consumers
over 650 drop off locations and
a free of charge postal service to
ensure that their used water filters
can be processed and reused.
INNOVATION
Throughout our history, Strix has
understood the benefits of market
disruption. For example, our founder,
Eric Taylor, provided bomber pilots with
thermal suit technology when these were
new innovations. This desire to develop
something newer, better and different
was also present when Strix made its first
tentative steps into the water category
market more than 15 years ago. This first
Aqua Optima product enabled ‘fast flow’
filtration for kettles, and we have continued
to develop within this category, with the
fifth generation of that first filter ready to
launch in late 2021.
When the Group took the decision to
acquire HaloSource in 2019, the Sino-
American group’s NPD roadmap was a
huge part of the appeal. Its astrea ONE
product means we have the only filtered
water bottle that is certified to reduce lead,
pesticides, pharmaceuticals, antibiotics
and over 20 contaminants. By removing
these harmful materials, we are helping
make our customers healthier and this
was recognised through our award of
an NSF/ANSI 53 certification.
Another element of the HaloSource
acquisition was the opportunity to
repurpose its HaloPure technology.
This has allowed us to bring innovation
to livestock water supplies, providing
economic efficiencies and sustainability
to that industry.
Water contaminants filtered
out through astrea ONE, which
also filters out lead, pesticides,
pharmaceuticals and antibiotics
from drinking water
20
Group locations across the globe
focusing on R&D
4
32
Strix Group Plc
Water category:
HaloPure
In 2020, Strix primarily focused the development of our HaloPure technology
for use within the Chinese poultry and livestock farming market.
HaloPure is unique in allowing incoming
water to be sterilised instantly when
it flows through and comes into contact
with the HaloPure media within its filter
tank. This simultaneously sanitises the
water line, further preventing secondary
microorganism and biofilm growth,
and uses the safe and highly efficacious
hypobromous acid released from the
HaloPure media.
The successful development of this
HaloPure-powered Intelligent Poultry
& Livestock Drinking Water Treatment
System, which has since been installed
in several swine and chicken farms,
has received positive feedback
from customers.
HaloPure’s strong efficacy against
pathogenic bacteria and viruses has been
validated by third-party labs within China.
For example, their testing has shown
the technology’s effectiveness against
the African Swine Fever virus in porcine
drinking water systems.
These encouraging test results
demonstrate HaloPure’s potential
to prevent the spread of pathogenic
microorganisms in commercial farming,
preserving the health of livestock and
creating a clear commercial opportunity
for our product.
HaloPure technology has also been
developed to treat healthcare and dental
rinse water, assisting the prevention of
healthcare-associated infection. HaloPure-
powered filters have been installed in
numerous hospital and dentistry clinics’
water lines to provide patients with
safer and cleaner water. The HaloPure
technology is also well-positioned to
respond to the anticipated regulation
changes in China that will require safer
medical and dental rinse water for use in
hospitals and clinics across the country.
Sales agents employed to promote
HaloPure across the market
8
Product development
roadmap
The livestock system has been
developed into good/better/best
product categories to meet
the different level of customer
expectation in terms of price
and function.
Discussions are ongoing with
numerous large customers who
have registered a strong interest in
the HaloPure solutions.
Strix has employed eight sales
agents who have been aggressively
promoting the products to the
market.
The HaloPure technology will be
showcased in the upcoming national
and Asia exhibitions.
Strix will continue to research and
develop lower cost solutions to
continue gaining wider market
appeal.
33
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Water category: continued
LAICA S.p.A.
“We are delighted with the addition of the LAICA
team following the successful acquisition in
October which will serve to expand Strix’s water
category and enhance its presence in the health
and wellness segment of the appliances category,
both of which are growth markets and enhance
Strix’s sustainability strategy.”
Mark Bartlett
CEO
The Group acquired LAICA on
26 October 2020, providing strategic
consolidation of Strix’s water treatment
range, by driving efficiencies and providing
a comprehensive portfolio of products for
the Group globally. Key to the success of
this acquisition and to driving LAICA’s
target revenue growth will be the effective
commercial integration of LAICA within
the wider Strix Group, achieved through
the following:
2020 contribution to Group
revenues for c.2 months
post-acquisition
£4.1m
2020 annualised LAICA
revenues
£21.6m
Complementary product ranges
LAICA’s eminent market position
in point of use water filtration,
kitchenware, personal scales and
healthcare products significantly
strengthen Strix’s proposition in these
areas, providing both a complete ‘at
home’ and ‘on the go’ water filtration
range for all demographics to the
Strix family of products, such as its
tap filters, water filter carafes and
fast flow filtration bottles.
The new, expanded, LAICA brand
portfolio will provide the platform for
the planned geographical expansion in
the second half of 2021 for consumer
water and appliances, and the Group
expects many of the new product
launches in 2020 to accelerate into
2021 as the retailers introduce them to
both their in-store and online portfolios.
34
Strix Group Plc Experienced team and cross selling opportunities
LAICA brings with it a very strong management team with a wealth of experience
who are working hand-in-hand with Strix to realise a seamless commercial
integration into the wider Group. In particular, their ability to take advantage of
short-term cross selling opportunities to deliver double-digit revenue growth,
including bringing Strix’s hot water on demand technology to its partners.
LAICA-branded products in the UK and USA
LAICA has a strong heritage in household products and has been one of the
most favoured and recognised brands in Italy for over 50 years. Strix plans to
leverage this robust position to bring LAICA’s water filtration and personal scales,
with a reputation for quality, to both the UK and USA.
Leveraging mature distribution channels
LAICA provides new routes to market for all Strix’s products through long-standing
distribution channels across the globe, with a particular strength in the Middle East,
the Balkans and Southern Europe, with a number 2 position in its home market
of Italy, behind the global leader.
Optimising LAICA’s manufacturing and
distribution network within the EU
The LAICA hub in Northern Italy brings Strix state-of-the-art, automated
manufacturing, warehousing and a sales and marketing office within the
European Union, allowing better access to the post-Brexit market.
35
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Capital Allocation Framework
Strix’s Capital Allocation Framework is used to prioritise the use of cash
generated by the Group. Our framework addresses the investment needs
of the business, regular dividend payments and additional returns to
shareholders. The framework also seeks to maintain an appropriate
capital structure and a robust balance sheet.
Operating
capital
expenditure
The Group has invested
heavily in production
automation since IPO
to increase production
volumes, quality control,
efficiency and reliability
whilst managing to
control rising labour
costs in China.
Relocation of the current
manufacturing facility
will support the Group’s
strategy for growth with
a significant increase in
facility capacity.
Progressive
dividend policy
Value accretive
acquisitions
Conservative
balance sheet
In line with the
communicated dividend
policy, the Group declared
a dividend growth of 2%
from the dividend per
share declared in 2019.
The Group has
demonstrated a
progressive dividend
policy since IPO which
demonstrates the Group’s
strong cash generation
and high ROCE.
2020 was a
transformational year
for Strix’s water filtration
category with the
acquisition of LAICA
in October. LAICA has
a considerable global
presence, an established
product range and an
advanced new product
roadmap. The acquisition
will provide some strategic
consolidation of the water
treatment range, driving
efficiencies and providing
a comprehensive portfolio
of products for the
Group globally.
The Group operates
a stable, recurring and
resilient business model
which benefits from
high ROCE and a high
proportion of cash in
advance payment terms.
This helps the Group to
limit the risk of non-
payment and working
capital fluctuations.
At year end, the Group’s
net debt had increased to
£37.2m to fund the LAICA
acquisition (excluding the
impact of IFRS 16 lease
liabilities and LAICA
deferred considerations)
bringing net debt to
adjusted EBITDA ratio
to 1.0x (2019: 0.7x).
As at 31 March 2021,
the Group continues to
have significant available
liquidity, consisting of cash
and undrawn facilities
of £40.0m.
Strix has applied its Capital Allocation Framework during 2020 as follows:
In 2020, the Group declared a final
dividend of 5.25p per share following
the 2.6p interim dividend paid in
October 2020, bringing the full year
dividend to 7.85p, representing a 2%
growth from 2019. The Board has
previously communicated its dividend
policy is to increase the dividend in
line with future underlying earnings.
Paid £10.1m cash and £7.3m equity
for the acquisition of LAICA. The
acquisition will significantly expand
Strix’s water category and bring
a number of strategic benefits
and synergies, to considerably
augment Strix’s position within
the water market.
Construction contract for the new
factory within Zengcheng district,
China, for the second phase of £9.0m.
Total factory project is on target to be
fully operational by August 2021 and
remains on budget at the previously
guided £20.0m.
Strix is committed to further investment in its capital projects which includes
automation of a further two lines planned for 2021 subject to consumer
demand that will bring the fully automated lines to 73% (FY20: 67%).
36
Strix Group Plc Automation
The Group continues to invest heavily in production automation with
four additional fully automated assembly lines implemented during
2020 to support the growth in the U90 and Electronic Control platforms.
This continued investment and focus on continuous improvement is
highlighted through a further 63% reduction in customer quality PPM.
Strix’s automation plan continues developing new innovative
manufacturing and assembly processes to support the Group’s
NPI roadmap and increase capacity for the core product that
will in-turn further compliment the new manufacturing facility
which is on plan to be completed in the summer of 2021.
The total of main production lines expected to be fully
automated in 2021 is 73% (+5%), subject to consumer demand,
and Strix continues to examine the operational and financial
benefits of automating further lines.
Continuous improvement initiatives in our manufacturing,
measurement and testing processes are a key focus to improve
stability of the manufacturing process, enhancing product
performance to help our customers improve their product
quality and reduce costs. We are pleased to report a 63%
improvement in customer quality ppm for 2020 as a result
of this.
U90 platform manufacturing
capacity up by
150%
33m
U90 series platform controls
manufactured
37
73%
of all main assembly lines will be
automated in 2021
63%
reduction in customer quality PPM
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Engaging our stakeholders
Strix’s business model is
predicated on understanding
and serving the needs
of all our stakeholders as
developed through continual
and responsive dialogue.
The Strix Group takes into account the
impacts our business decisions have on
stakeholders, with the aim of addressing
any concerns they might have, as we
actively engage with them to nurture
relationships that underpin the long-term
success and sustainability of the Group.
The Group considers six key stakeholders
that drive our strategy:
“Strix promotes
innovative
thinking
throughout
its workforce
reinforced by both
our ‘Think Twice’
and our ‘Lean
Initiative’ schemes.
Both schemes
encourage
ideas aimed at
maintaining a
culture and way
of working for
continuous
improvement.”
Mark Bartlett
CEO
38
Our
shareholders
Our
employees
Our
customers
Our
suppliers
Our
The
communities
environment
Why do we
engage?
As ultimate owners of the
business, we engage with our
investors for transparency on
our business model, strategies
and performance, whilst
obtaining an understanding
of their needs and priorities in
order to deliver value for their
investment in our business.
With 850+ employees across
ten locations worldwide, our
employees are our greatest
asset and the Group believes
that the development and
retention of talent is important
to achieve the long-term
strategic goals of the business.
What are their
key areas of
interest?
How do we
engage?
• Revenue growth and
profitability
• Product and geographical
diversification
• Value creation and returns
on investments,
including dividends
• Market share and leadership
• Sustainability through our
ESG strategy
• Annual General Meetings
• Capital Markets Days
• Investor roadshows and
presentations
• Direct meetings with
institutional investors via
various media, including
video conference calls
• Written communications,
including Annual Reports
and results releases
• Independent investor
feedback reviews
• Individual shareholders
are encouraged to contact
Directors on all matters
relating to governance and
strategy via the Company
Secretary
• Health, safety and wellbeing
• Training and development
• Reward and recognition
• Career progression
• Culture, diversity and
community
• We communicate through a
variety of channels including
internal meetings, video and
call conferencing, email and
written communication
• Quarterly newsletters with
business updates and news
on finances, social events,
and employee interests
and profiles, amongst
other things
• A global intranet platform
with notices and
announcements, workflows
processes and employee
directory, amongst other
things
• Periodic employee surveys
and annual reviews as a
feedback platform
• Employee assistance
programme, including
counselling, to assist on
issues impacting wellbeing
and performance
• Encouraging employee
participation through “Think
Twice” and “Lean Initiative”
schemes
• Internal training and
certification including
relevant ISOs
In line with our mission
statement, the value of the
We work closely with our
suppliers to build strong
As a financially successful
business, we are in a strong
business is created based on
relationships that make doing
position to give back and
Human impacts on the
environment are increasingly
recognised as harmful to the
how we enhance customers’
business with us a long-term
acknowledge our responsibility
long-term sustainability of our
lives through the innovative
design and efficient supply
of our products. Constant
goal which brings value to
to the communities in which
society and planet. Not only is
both parties. Forming strategic
we operate. We aim to
partnerships enhances the
strengthen our position as a
global, socially responsible
managing our environmental
impact the right thing to do,
but delivering environmentally
engagement with customers
value of our business and
is necessary in order to
plays a major role in ultimately
employer, whilst reinforcing
friendly products is key to our
continue meeting their needs.
satisfying the needs of our
our corporate culture and
growth strategy.
customers.
employee pride in our positive
contribution to all of our
local communities across
the Group.
• Safety and sustainability
• Innovation and efficiency
• Quality and reliability
• Long-term relationships and
• Long-term relationships
• Reduced carbon footprint
supply chain security
and supply chain security
• Charitable funding
• Pricing and related terms of
• Pricing and related terms
• Preservation of our planet
• Supply chain management
supply
of supply
• Cost effectiveness
• Quality and audit standards,
• Quality and audit standards,
and related requirements
and related requirements
• Governance and corporate
• Governance and corporate
responsibility
responsibility
• Continual dialogue to
• Bi-annual audits
• Communication of our
• Communication of our
understand their challenges
• Continual communications
sustainability strategy via
supported by close R&D
on our Supplier Code of
ESG and Capital Markets Day
sustainability strategy via the
Group’s annual Sustainability
alignment
• Maintaining close
relationships via regional
sales or commercial teams
• Involving them in product
design and testing, and
sharing of knowledge and
understanding of products
for faster product releases
in line with market needs
• Regular participation in
self-organised seminars
and exhibitions
• Engage with consultants to
handle customer relations
for large group companies
who request to deal with
manufacturers
• Effective order and supply
chain process, simplifying
order execution and
product delivery
Business Conduct
• Discussion on mutual
working, including
understanding of their
operations to improve
presentations
• Annual graduate intern
programme to enhance
training and development
• Participation and
awareness on sustainability
membership in local
requirements in line with
the Responsible Business
Alliance
business networks, including
chamber of commerce
committees and STEM
• Internal risk assessments on
groups
policy awareness, quality,
capacity and performance
• Continued support of
various charities through
our newly acquired LAICA
subsidiary, including Surgery
for Children, B.I.R.D. Europe
Foundation and RISE
Against Hunger
• Awards earned from the
various contributions made
to our various stakeholders
and society
• Alignment with the UN’s
Sustainable Development
Report
Goals
• Continued research and
development of energy
efficient kettles to reduce
wasted energy
• Investment into plastic waste
reducing products to reduce
and eliminate the need for
single use bottles which end
up in a landfill or part of the
millions of tonnes of plastic
in the oceans
• Ensuring availability of safe
water and sanitation for all
through the development
of the filtration products
to enhance water quality,
removing lead, bacteria
and viruses
Strix Group Plc Our
Our
shareholders
employees
Our
customers
Our
suppliers
Our
communities
The
environment
Why do we
engage?
As ultimate owners of the
With 850+ employees across
business, we engage with our
ten locations worldwide, our
investors for transparency on
employees are our greatest
our business model, strategies
asset and the Group believes
and performance, whilst
that the development and
obtaining an understanding
retention of talent is important
of their needs and priorities in
to achieve the long-term
order to deliver value for their
strategic goals of the business.
investment in our business.
What are their
key areas of
interest?
• Revenue growth and
profitability
• Health, safety and wellbeing
• Training and development
• Product and geographical
• Reward and recognition
• Career progression
• Culture, diversity and
community
How do we
engage?
• Annual General Meetings
• We communicate through a
diversification
• Value creation and returns
on investments,
including dividends
• Market share and leadership
• Sustainability through our
ESG strategy
• Capital Markets Days
• Investor roadshows and
presentations
• Direct meetings with
institutional investors via
various media, including
video conference calls
• Written communications,
including Annual Reports
and results releases
• Independent investor
feedback reviews
are encouraged to contact
Directors on all matters
relating to governance and
strategy via the Company
Secretary
• Individual shareholders
announcements, workflows
variety of channels including
internal meetings, video and
call conferencing, email and
written communication
• Quarterly newsletters with
business updates and news
on finances, social events,
and employee interests
and profiles, amongst
other things
• A global intranet platform
with notices and
processes and employee
directory, amongst other
things
• Periodic employee surveys
and annual reviews as a
feedback platform
• Employee assistance
programme, including
counselling, to assist on
issues impacting wellbeing
and performance
• Encouraging employee
participation through “Think
Twice” and “Lean Initiative”
schemes
• Internal training and
certification including
relevant ISOs
In line with our mission
statement, the value of the
business is created based on
how we enhance customers’
lives through the innovative
design and efficient supply
of our products. Constant
engagement with customers
is necessary in order to
continue meeting their needs.
We work closely with our
suppliers to build strong
relationships that make doing
business with us a long-term
goal which brings value to
both parties. Forming strategic
partnerships enhances the
value of our business and
plays a major role in ultimately
satisfying the needs of our
customers.
As a financially successful
business, we are in a strong
position to give back and
acknowledge our responsibility
to the communities in which
we operate. We aim to
strengthen our position as a
global, socially responsible
employer, whilst reinforcing
our corporate culture and
employee pride in our positive
contribution to all of our
local communities across
the Group.
Human impacts on the
environment are increasingly
recognised as harmful to the
long-term sustainability of our
society and planet. Not only is
managing our environmental
impact the right thing to do,
but delivering environmentally
friendly products is key to our
growth strategy.
• Safety and sustainability
• Innovation and efficiency
• Quality and reliability
• Supply chain management
• Cost effectiveness
• Long-term relationships and
supply chain security
• Pricing and related terms of
• Long-term relationships
and supply chain security
• Pricing and related terms
• Reduced carbon footprint
• Charitable funding
• Preservation of our planet
supply
of supply
• Quality and audit standards,
and related requirements
• Governance and corporate
• Quality and audit standards,
and related requirements
• Governance and corporate
responsibility
responsibility
• Bi-annual audits
• Continual communications
on our Supplier Code of
Business Conduct
• Discussion on mutual
working, including
understanding of their
operations to improve
awareness on sustainability
requirements in line with
the Responsible Business
Alliance
• Internal risk assessments on
policy awareness, quality,
capacity and performance
• Continual dialogue to
understand their challenges
supported by close R&D
alignment
• Maintaining close
relationships via regional
sales or commercial teams
• Involving them in product
design and testing, and
sharing of knowledge and
understanding of products
for faster product releases
in line with market needs
• Regular participation in
self-organised seminars
and exhibitions
• Engage with consultants to
handle customer relations
for large group companies
who request to deal with
manufacturers
• Effective order and supply
chain process, simplifying
order execution and
product delivery
• Communication of our
• Communication of our
sustainability strategy via
ESG and Capital Markets Day
presentations
sustainability strategy via the
Group’s annual Sustainability
Report
• Annual graduate intern
• Alignment with the UN’s
programme to enhance
training and development
• Participation and
membership in local
business networks, including
chamber of commerce
committees and STEM
groups
• Continued support of
various charities through
our newly acquired LAICA
subsidiary, including Surgery
for Children, B.I.R.D. Europe
Foundation and RISE
Against Hunger
• Awards earned from the
various contributions made
to our various stakeholders
and society
Sustainable Development
Goals
• Continued research and
development of energy
efficient kettles to reduce
wasted energy
• Investment into plastic waste
reducing products to reduce
and eliminate the need for
single use bottles which end
up in a landfill or part of the
millions of tonnes of plastic
in the oceans
• Ensuring availability of safe
water and sanitation for all
through the development
of the filtration products
to enhance water quality,
removing lead, bacteria
and viruses
39
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Risk management approach
Effective management of risk is essential for delivering our strategic
objectives. As such, risk management is built into our day-to-day
activities and forms an integral part of how we operate.
Risk assessment
Risks are categorised as either strategic,
financial, operational, reputational or
compliance risks and are assessed on
a residual basis according to the Board’s
current view of their potential severity
(being the combination of likelihood and
consequence), assuming that existing
controls in place are effective.
Ongoing monitoring
Identified risks included within the Risk
Register are reviewed periodically by the
senior management team, and at least
annually by the Board. The review includes
an assessment of each risk to address any
changes in circumstance, a reappraisal
of the residual risk and the effectiveness
of mitigating actions taken to date.
The Board recognises that there are
risks and uncertainties that could have
a material effect on the Group. Where
the reduction or removal of the risk is
not possible, the Group formulates a
management action plan to respond to
the risk should the risk materialise (e.g.
the Business Continuity Plan). The Board
agrees the appetite for risk, and endorses
that of the senior management team.
New risks are added to the register on
identification, via a number of processes
which seek to capture risks not already
included on the Risk Register.
Following a re-evaluation of the Group’s
risk monitoring software it has adopted a
new system that will improve the quality
and consistency of risk reporting.
Risk appetite
To strengthen our competitive
advantage and culture of innovation,
the Board recognises that employees
are encouraged to take considered risks
that drive product innovation and support
the growth potential of the business.
The list below is not an exhaustive list
of all of the risks that the Group faces.
Our operating environment is subject
to change, and new risks may arise,
the potential impact of known risks
may increase or decrease and/or our
assessment of these risks may change.
Included below is an explanation of
how each risk is being mitigated.
Principle risks are highlighted by a bold
typeface, whilst less critical risks are
highlighted in an italicised typeface.
Risk heat map
n
i
a
t
r
e
C
l
y
e
k
i
L
l
e
b
i
s
s
o
P
d
o
o
h
i
l
e
k
i
L
l
y
e
k
i
l
n
U
12
3
5
4
11
6
2
13
8
7
e
r
a
R
10
9
Identify risk
The risks identified in the heat map
highlight those risks which could
have the greatest impact on the
Group’s operations and viability.
1 Reliance on key customers
2 Reliance on key suppliers
3 Competitors and market
pressures
1
4 Raw material and commodity
prices and general cost inflation
5
Foreign exchange risk
6 Business taxation
7 External factors
8 New factory project
9 Existing manufacturing facilities
10 Reputational risks
11
Intellectual property
12 COVID-19
13 Cyber security
Insignificant
Minor
Moderate
Major
Catastrophic
Consequence
40
Strix Group Plc Principal risks
Increase
Decrease
No change
Risk
Impact
Mitigation
Movement
Strategic risks
Reliance
on key
customers
Reliance on
key suppliers
Competitors
and market
pressures
The Group has a number of key customer
relationships, being some of the largest
OEMs in the global market. The top 10
customers contributed c.55% of the Group’s
revenues in the financial year ended
31 December 2020 (2019: c.58%), with the
largest customer making up c.14% (2019:
c.22%) of the Group’s revenues. The loss
of any of these key customer relationships
could have a material adverse effect on the
Group’s business, financial condition and
results of operations.
The Group relies upon certain key suppliers,
although dual source arrangements are in
place across the supplier base. As a result, if
alternative supply sources could not fulfil the
required demand, the Group is exposed to a
number of risks, including the risk of supply
disruption, the risk of key suppliers increasing
prices and the risk of a key supplier suffering
a quality issue which impacts upon the
quality of the Group’s products. All of these
risks, which apply across the marketplace,
could have a negative impact on the Group’s
business and, if required, the engagement
of alternative suppliers may increase the
Group’s cost base.
The Group operates in competitive and
price sensitive markets, and a number of low
cost competitors exist that may attempt to
increase their market share by undercutting
Strix on pricing or launching new brands,
amongst other tactics. If a significant shift
in market pricing occurs and the Group is
not able to mitigate this by reducing costs
accordingly, the Group’s revenues and
profitability may be negatively affected.
The markets in which the Group operate
in may become more price sensitive.
• Strix undertakes regular dialogue with
its key customers, building strong
commercial and engineering
relationships.
• Strix is fully integrated in the entire value
chain for our key products and provides
a number of value-added services to our
customers to protect these key customer
relationships.
• Strix regularly reviews and manages key
customer credit exposures.
• Monitoring of the financial and
operational viability of key suppliers.
• Ongoing monitoring of inventory
levels to ensure availability in times
of production volatility.
• Dual sourcing where appropriate to
reduce dependence on single suppliers.
• We constantly monitor our competitors
and market trends to understand the
dynamic forces which shape our
competitive landscape.
• We have undertaken a number of
automation projects to mitigate the risk
of labour cost inflation and reduce the
costs of production wherever possible,
particularly in China where the majority of
our manufacturing employees are located.
• We are active in a wide variety of markets
across the world, which provides some
protection from targeted competitive
activity in specific markets.
• Careful management of our variable
and fixed cost bases.
• Targeted investment in engineering, and
a commitment to Lean manufacturing,
quality and customer relationships.
41
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Principal risks continued
Risk
Impact
Mitigation
Movement
• We have undertaken a number of
automation projects to mitigate the risk
of labour cost inflation and reduce the
costs of production wherever possible,
particularly in China where the majority
of our manufacturing employees
are located.
• Careful management or our variable
and fixed cost bases.
• As market leader we have the ability to
undertake a price increase if the inflation
of costs is prolonged and significant.
• Raw material purchasing policy of
buying up to 12 months in advance for
silver and copper, with 2020 prices
already secured.
• The geographical spread of our business
across the world limits our exposure to
this risk.
Where required, we have increased stock
levels to mitigate the risk of increased
raw material and customer shipment
lead times.
•
We are also exposed to fluctuations in the
prices of some raw materials, in particular
copper and silver. The Board monitor this
closely and have put in place appropriate
steps to mitigate the impact of this.
However, a significant change in the cost
of certain raw materials, particularly silver
and copper, if sustained for a prolonged
period may increase our material costs
without necessarily allowing a corresponding
increase in the sales price of our products,
which could affect the Group’s margins and
ultimate profitability.
Any change in the costs of operating
the Group could impact on the Group’s
profitability. Such cost increases could be
incurred from increments in supplier costs
(including, amongst other things, raw
materials and energy costs, particularly
electricity costs), employment costs or wage
inflation, or increases in costs to be incurred
due to regulatory change. Although such
costs are accounted for, where these can be
estimated, in future budgets for the Group,
not all cost increases are capable of being
estimated adequately in advance.
We continue to monitor the ever-changing
political landscape with particular focus on
Brexit in the UK and US/China trade tensions.
The potential trade implications of Brexit are
relatively unknown, especially for the Isle
of Man, until the final position is agreed,
and there may be some disruption to our
supply chains. Given the Group’s primary
customers are kettle OEMs located in China,
the disruption is expected to be relatively
muted. Due to the large degree of
uncertainty and volatility in discussions, the
Group is actively monitoring these situations
and continues to review the Group’s risks.
Financial risks
Raw material
and
commodity
prices and
general cost
inflation
External
factors
42
Strix Group Plc Risk
Impact
Mitigation
Movement
Financial risks
Foreign
exchange risk
Business
taxation
The Group has a natural hedge in place as
our sales and costs are generally balanced
across the various currencies in which the
Group operates. Following the acquisition
of LAICA in October 2020, the Group’s
currency exposure has increased due to the
consolidation of foreign subsidiaries into the
Group. The Group’s payments and receipts
are predominantly in Sterling, US Dollars,
Yuan Renminbi, and now Euros and Taiwan
Dollars and changes in the rates of foreign
exchange against Sterling could adversely
impact margins earned.
In addition, under the current regulations
on foreign exchange control in the PRC,
foreign investment enterprises are allowed to
distribute their profits or dividends in foreign
currencies to foreign investors through
designated foreign exchange banks without
the prior approval of the State Administration
for Foreign Exchange of China. However, the
exchange of CNY into foreign currencies for
capital items such as direct investment, loans
and security investment, is subject to strict
controls and requires the approval of the
State Administration for Foreign Exchange of
China. The distribution of the Group’s profits
and dividends may be adversely affected if
the Chinese Government imposes greater
restriction on the ability of the Renminbi
to be exchanged into foreign currencies.
If there are any changes to the current
regulations, there can be no assurance that
the Group will be able to obtain sufficient
foreign exchange to pay dividends or satisfy
other foreign exchange requirements in
the future.
The Group currently operates across a
number of jurisdictions in the world, each
with different tax regimes. The risk arises
from operating in countries where the tax
regimes are likely to undergo significant
change, and therefore there may be an
unknown impact on the amount of business
taxation that the Group is required to pay.
In particular, in China, the taxation laws are
complex and subject to change, which may
reduce the returns available to investors in
the future.
• Our natural hedge by virtue of generating
income and incurring costs in broadly
balanced currencies is monitored by the
Finance function to detect any changes
in this balance and make appropriate
adjustments if required.
If risks are outside of tolerance, derivative
foreign currency contracts can be
undertaken in order to mitigate the risk
to an acceptable level.
•
• The amount of the Group’s cash in China
is minimised in order to reduce the risk of
any future inability to distribute profits or
dividends.
• We actively monitor changes in the
direction of legislation and regulation
in China, where the highest risk of
change exists.
• A formal taxation review on our China
operations was undertaken in 2018 in
order to understand potential future
changes and to put in place mitigating
actions where appropriate. Following
the review, Strix converted its contract
processing model to an import
processing model during 2019, meaning
this risk was mitigated to a sufficiently
low level in the prior year.
43
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Principal risks continued
Risk
Impact
Mitigation
Movement
Operational risks
Impact of
COVID-19
With the outbreak of COVID-19 in 2020,
Strix has been continuously monitoring the
impact of the outbreak on the Group, from
both an operational and financial standpoint.
The Group currently manufactures
the majority of its products at its main
manufacturing facility in Guangzhou,
China. From an operational standpoint
if the COVID-19 outbreak is contracted by
employees within our factory, this could
lead to disruption within the manufacturing
cycle and ultimately lead to capacity
constraints in meeting customer demands.
Any major disruption will put global supply
chains at risk and could impact our ability to
meet customer demand due to shortages/
downtime further down our supply chain
and furthermore interrupt outbound
logistics options.
New factory
project
During 2018, the Group undertook a review
of its existing manufacturing facilities. The
outcome of this review was to proceed with
a planned purchase of land on which a new
manufacturing facility will be constructed.
There is a risk of disruption to the Group if
the project is not effectively managed, or is
not completed in the planned timescale.
Any significant disruption could negatively
impact the Group’s relationships with its
customers and/or its workforce, and could
also impact the Group’s profitability if costs
exceed the planned budget.
• The Group is continuously monitoring
the impact of the pandemic – from both
an operational and financial standpoint.
• The Group has put in place numerous
preventative measures at all sites,
emphasising workplace hygiene,
including making medical supplies such
as face masks, thermometers and hand
sanitisers readily available as well as
implementing workforce rotas when
necessary to ensure social distancing
is maintained and manufacturing
operations are not disrupted significantly
through loss of staff to illness/isolation.
• The Group has created an emergency
response team and released guidance
to all employees stipulating best
practices and mitigating the spread
of misinformation.
• The Group has suspended all
non-essential business travel until
restrictions are lifted and it is deemed
safe to resume travel.
• The Group has used its newly acquired
HaloSource product within the
sterilisation zone at the factory entrance
to enhance its preventative measures.
• The Group has aligned IT systems to
support evolving working requirements.
• Global vaccination efforts are
progressing well.
• A project team have been appointed
internally to manage the construction
project and ensure it is delivered on time
and within budget. Incentives have been
provided to key employees to motivate
them to achieve a positive outcome for
the Group and its shareholders.
• A robust project plan with suitable
contingency planning has been created.
The project team is pleased to confirm
the project is progressing on schedule.
• Detailed due diligence will be completed
on potential suppliers in order to ensure
that a cost effective outcome will be
delivered within the specified timescales.
44
Strix Group Plc Risk
Impact
Mitigation
Movement
Operational risks
Existing
manufacturing
facilities
Reputational risks
Reputation
with customer
base
Compliance risks
Intellectual
property
The Group currently manufactures
the majority of its products at its main
manufacturing facility in Guangzhou, China.
If for any reason, including product mix
changes, a capacity constraint is created,
or should the operations at this site become
disrupted for whatever reason (or reasons),
and/or the Group is unable to find a suitable
manufacturing site, the Group’s ability
to meet the demands of its customers
could be affected. Any of the above could
negatively impact the Group’s relationships
with its customers.
• The new factory project referred to
above is nearing target completion
in 2021 and will mitigate this risk by
providing a purpose-built factory,
increasing automation and capacity.
We have constructed the factory in
a modular way in order to be able to
reduce the risk posed by any potential
disruptions.
• A small temporary factory has been
rented to support business capacity
needs until the end of the current
factory lease.
The Group’s reputation for and delivery of
high quality products with high standards
of safety is key to a number of direct and
indirect customers in choosing to specify
Strix products. Should Strix suffer product
quality or safety issues, leading to a negative
impact on its reputation with customers,
future performance could be significantly
impaired.
• Robust engineering design and
validation processes from initial design
and development through production
and into service.
• High levels of quality assurance are
embedded in robust manufacturing
systems.
• Engagement with external certification
bodies in order to ensure our products
have already passed certification with
key standard setting bodies.
The Group relies on a combination of
patents, design registrations, trademarks,
trade secrets, copyright and other
contractual agreements and technical
measures to protect its proprietary
intellectual property rights. The Group’s
success will in part depend on its ability to
establish, protect and enforce proprietary
rights relating to the development,
manufacture, use or sale of its existing
and proposed products.
• The Group vigorously defend our key
intellectual property in order to derive the
maximum economic benefit from our
portfolio of intellectual property assets.
• The Group actively monitors new
products introduced in markets where
intellectual property protection is in place
to ensure our designs and trademarks
are not being infringed and where they
are, restitution sought.
Cyber security
Cyber security risks include risks from
malware, accident, statutory and legislative
requirements, malicious actions and other
unauthorised access by third parties.
NEW
• Deploying security tools to limit the
impact and spread of ransomware.
• Ensuring firewalls are robust and
up-to-date.
• Further strengthening of DR plans
to ensure that different geographical
locations may continue if a breach
occurs elsewhere.
45
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Sustainable investing
“Our goal is to embed
sustainability into our
business strategy, from
the way we package our
products to how our
consumers use them.”
Gary Lamb
Chairman
Strix is an environmentally
conscious organisation,
which minimises the impact
of its operations on the
environment. The Group fully
complies with all applicable
legal and other compliance
obligations, whilst at all times
striving for best practice,
specifically by maintaining
an external approval to the
ISO 14001:2015 standard.
During 2020, Strix reassessed
its approach to sustainability
with a view of integrating
a sustainability strategy within
the core business activities to
align with the UN’s Sustainable
Development Goals. In doing
so, Strix identified eight key
pillars of its sustainability
strategy.
Solutions for
sustainable
living
Promote
customer
wellbeing
Doing more
with less
Wellbeing
and equality
in the
workplace
Community
engagement
Supply chain
Certifications
Governance
In 2021 we aim to bring our sustainability strategy to life, establishing
clear KPI baselines to track improvements against 2020, and to monitor
our progress year on year.
46
Strix Group Plc Solutions for sustainable living
Our mission
To develop products that reduce the
impact on the environment, particularly
reduction in energy consumption in our
key kettle market, and promote benefits
to customers.
How do Strix products help
to achieve this?
Kettles
• Relative to the most common alternative
forms of boiling water, we estimate that Strix
kettle control products save c.5 billion kg CO2
a year, which is equivalent to emissions from
1 million cars.
• Global Kettle penetration from 38% to 50%
would save c.14 billion kg of CO2 a year.
• Two second saving in steam switch off time
would save 44GWh p.a., equivalent to £9m
every year in the UK alone.
• USA kettle penetration from 14% to 50%
would save 6,600GWh p.a.
Water
• Strix sold c.5.8 million filters in 2020
equivalent to saving 580.4 million single-use
plastic bottles.
• Aqua Optima filters are 100% recyclable in
an initiative with TerraCycle.
Appliances
• New Dual Flo appliance will address
•
c.£300 million wasted on boiling excess
water p.a. in the UK alone.
It is estimated that 60 billion disposable
coffee pod capsules are sold every year,
with the majority ending up in landfill, which
are not required for Strix’s single cup hot
coffee dispenser unit.
Promote customer wellbeing
Our mission
Our efforts are encompassed within Strix’s
Company motto of ‘safer by design’ as we
look to improve the wellbeing of our end
users through our entire product range.
How do Strix products help to
achieve this?
Kettles
• As the market leader in controls and with a
reputation for safety, Strix has a long running
policy of highlighting issues with both
regulators and distributors. Our expertise
has led to unsafe competitor product recalls
and withdrawal of kettles from sale in
Chile, Bulgaria, Sweden and Germany
incorporating four European Rapid
Exchange of Information (‘RAPEX’) alerts.
Water
• Strix’s specialist water filtration offerings
improve the quality of water for human
consumption by removal of lead and
contaminants, as well as within livestock
farming by eliminating bacteria and viruses
through the use of its bromine technology.
Improved quality of water offers health
benefits for consumers significantly reducing
the amount of unwanted substances found
in water such as the removal of micro
plastics, limescale, chlorine, heavy metals,
herbicides and pesticides.
•
Appliances
•
In baby care, the Tommee Tippee Perfect
Prep machine offers not only perfect
temperature baby milk but the initial hot shot
system ensures the cleanliness and quality
of the final product. The energy used in the
Perfect Prep machine is 10x less than that of
the traditional formula preparation methods,
which includes kettle heating and cooling
bottles under water.
• The Hot Water Cup encourages sustainable
thinking in our end consumers, addressing
the biggest energy wastage of over-filling
kettles. Strix has sold c.3 million Hot Cups to
date. Assuming consumers use the product
five times per day, and have boiled only the
water they need through a Hot Cup as
opposed to boiling double, the total energy
saving is enough to power 34,000 UK
households for a year.
“Our innovative approach during development
helps us to reduce the overall manufacturing
footprint of our products.”
Richard Sells
Non-Executive Director
Doing more with less
Our mission
This encompasses our internal operations
and final product design. We look to
reduce the overall manufactured product
footprint, taking into account the total
corporate footprint including materials,
production, waste and Company
infrastructure.
How does Strix plan to achieve this?
The Group has a number of schemes and
strategies to improve this performance
including:
• Strix’s next generation 3-Pole control, which
is designed to be suitable for all markets
(Regulated, Less Regulated and China),
has been designed to save 27-30% materials
in the production process.
• Strix has been trialling Correx packaging
for internal supplies from the Isle of Man to
China. This more durable packaging will
increase reuse by 10x and adds little to no
cost or carbon footprint on the empty return
trip, utilising vacant container space which
the Company already has.
• As part of the Group’s “Lean Initiative”
scheme we have updated the blade
production process from a “Shake” method
to an upgraded “Auto Ultrasonic” process
resulting in a 75% reduction in contamination
liquid used. All contamination liquid is
professionally removed from the factory
by an environmental protection company.
• Strix has focused on reducing resource
•
intensity by engineering out precious and
semi-precious metals with a reduction
of silver and copper consumption in five
years by 85% (equivalent to 2 tonnes)
and 10%, respectively.
Increased automation in Strix’s new
manufacturing plant, with an expected
move during the summer of 2021, will bring
significant production benefits such as
improved layout, reduced transportation
and increased automation improving
overall efficiency.
• The energy recovery system implemented at
Strix’s headquarters on the Isle of Man now
recycles the excess heat energy from our
water testing into heating the building.
• Reduced business travel expected going
forward. 2020 saw significant development
to the ways in which the world can work
remotely and lessons learned in business
practices are expected to lead to
improvements going forward from
2019 levels.
• Strix is in the process of adopting ISO 5001
energy management systems into its
key sites.
47
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Sustainable investing continued
Community engagement
Our mission
Strengthening our position as a global,
socially responsible employer, reinforcing
our corporate culture and employee pride
in our positive contribution to all of our
local communities across the Group.
How does Strix plan to achieve this?
• Strix employees are actively involved in the
wider Isle of Man community, primarily
through charity support and participation
within the IOM Chamber of Commerce
STEM Committee.
• LAICA’s support of various charities such
as the Surgery for Children Association,
B.I.R.D. Europe Foundation Onlus and
RISE Against Hunger.
Supply chain
Our mission
Communicate sustainable practices to
all of our direct suppliers, in line with the
Responsible Business Alliance (‘RBA’).
How does Strix plan to achieve this?
• 70% of Strix’s suppliers have signed up to our
RBA requirements. We regularly audit our
suppliers on compliance with our Company
policy and adherence to ISO standards,
as well as their ESG performance.
• Our key production facility as well as our
new facility is in Guangzhou, China,
providing proximity to our key customer
base with c.93% of all kettles manufactured in
China, thereby reducing transportation costs,
delays and emissions.
Wellbeing and equality in the
workplace
Our mission
Employee equality, welfare and
engagement are critical for developing
our key asset. We look to pro-active
actions including internal training,
certifications (relevant ISOs), and
employee engagement through
listening, survey and involvement.
How does Strix plan to achieve this?
Diversity
• Age, colour, race, gender, disability, ethnic
origin, national origin, marital status, sexual
orientation, religious or political views are
not seen as barriers to employment and
are evidenced in the Group’s diverse
employment base. The Group is committed
to providing equal opportunities for
individuals in all aspects of employment.
The Group has a broad diversity with
females making up 60% of the overall Group
workforce and management and Board
representation at 23% and 20%, respectively.
Development
• As a Group, who is proud of its innovators,
we remain committed to investing in our
workforce, which is evidenced by the
increasing number of interns we take on
globally every year, the apprenticeships
programmes we are involved in and
educational support we offer to our
employees.
Health & Safety
• We help our employees work safely and
productively, empowering them to maintain
a strong health and safety culture at all of our
global facilities/offices through continuous
review of our policies, global offering of flu
vaccinations, training and closely monitoring
lost time accidents.
Employee engagement
• The Group operates a culture of open
communication through a range of mediums
including: a global intranet platform;
newsletters; Town Hall meetings; and ‘Pulse
of the Business’ lunches with the CEO.
Ethical behaviour
• The Group has a number of defined
policies in place to cover anti-slavery,
anti-human trafficking, anti-corruption and
anti-bribery, with a zero-tolerance policy
against violations.
Employee wellbeing
• The Group has implemented a new
employee assistance programme (‘EAP’)
which provides counselling and expert
support on personal, physical, financial
or social issues.
48
Strix Group Plc Certifications
Our mission
Continued compliance with a range of
international standards, solidifying the
quality and safety of our products and
internal processes.
Governance
Our mission
Continue to embed our values into
our culture which are fundamental
to our business specifically diversity
and inclusion.
How does Strix plan to achieve this?
ISO Quality Assurance Provider, Intertek, has
•
awarded both of Strix’s Isle of Man locations
a ‘Benchmark’ score within all six ISO
categories, representing the highest ISO
standards available. Our larger Guangzhou
manufacturing facility also received
exceptional results where four out of the six
criteria were ‘Benchmark’ and the remainder
‘Mature’, a top industry ranking.
How does Strix plan to achieve this?
• The tone is set at the top. Our decision-
making process is governed by the principles
of ethics, integrity and respect for our people
and for the environment. Reinforced by our
Board’s continued commitment to support
the successful oversight of Strix’s business
strategy, which is essential for maximising
long-term value creation for our
shareholders.
“Defining our
sustainability KPIs
is of paramount
importance to
benchmarking
and tracking
our progress.”
Mark Bartlett
CEO
Our NEW Duality appliance
will address
c.£300m
wasted on boiling excess water
p.a. in the UK
Strix sold c5.6m filters in 2019
equating to
Gender
diversity
56m
19.5%
single-use plastic bottles
+3.4%
Global kettle penetration from
38% to 50% would save
14bn kg
CO2
of energy p.a.
USA kettle penetration from
14% to 50% would save
Two second saving in steam
switch off time would save
6.6bn
kWh
of energy p.a.
1%
energy
or 44GWh or £9m p.a. in UK
alone
49
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Responsible business
To fulfil our mission of shaping a safer
and more sustainable future in the design
and supply of innovative hot water and
filtration systems, the Group must
ensure that it behaves in a socially and
environmentally responsible manner.
Corporate Social Responsibility
Strix recognises that long-term success
relies upon balancing the interests of its
customers, shareholders, employees,
suppliers, regulators and the communities
in which it operates. Management of
the Group’s impact on society, the
communities within which it operates
and the environment are key factors in
the Group’s strategy for success and in the
practice of good corporate governance.
Strix’s long history has enabled it to
develop a good understanding of its
key stakeholders which supports the
Board and senior management to
make well-informed business decisions
to deliver on our strategic objectives.
Strix holds regular discussions with its
customers and suppliers to maintain
these key relations which in many cases
have been in place for decades.
Employees
The Group currently employs 850 people
in ten international locations and is
committed to a strategy built around the
foundations of recruitment and retention,
performance management and
development, reward and recognition,
and people policies. The Group believes
that the development and retention of
talent is important to achieve the long-
term strategic goals of the business.
Employees are therefore encouraged
and supported to undertake ongoing
training to develop their skills and reach
their full potential.
Age, colour, race, gender, disability,
ethnic origin, national origin, marital
status, sexual orientation, religious or
political views are not seen as barriers
to employment and are evidenced
by the Group’s diverse employment base.
The Group is committed to providing
equal opportunities for individuals in
all aspects of employment.
The Group operates a culture of open
communication through a range of
mediums including: a global intranet
platform, newsletters, and “Think Twice”
and “Lean Initiative” schemes. Employee
engagements encourage ideas aimed at
maintaining a culture and way of working
for continuous improvement, specifically
rethinking the current performance of
processes and ways in which these can be
repurposed for the better. In addition, the
Group conducts employee engagement
surveys with the last survey undertaken
in the earlier part of 2021. As part of our
HR strategy, Strix is committed to making
positive changes in the Group which will
increase our engagement index score.
Ethical behaviour
The Group has a number of defined
policies in place to cover anti-slavery,
anti-human trafficking, anti-corruption
and anti-bribery. Strix is committed to
supporting and promoting international
and local laws which prohibit modern-day
slavery, human trafficking and support the
detection and prevention of corruption
and fraud. Strix has a zero tolerance of
violations to these policies, which apply
equally to all of our Directors, officers,
employees, apprentices, volunteers,
agents, consultants and other
representatives.
All of these policies are reviewed and
updated periodically to ensure our policies
remain fit for purpose, take into account
evolving risks, and are specific to the
locations in which the Group operates.
Social contribution
At Strix we support a number of social
causes, both on the Isle of Man and further
afield. This includes sponsorship and
fundraising, apprenticeships, internships
and educational support, and involvement
in Isle of Man business networks.
As a group which is proud of its
innovators, Strix is committed to help
support and invest in our workforce of
engineers and leaders for the 21st century.
On the Isle of Man, one such scheme
is the King William’s College Barrovian
Alumni Internship, which allows an alumni
of the College aged 18 to 25 to spend
three months during the summer working
for Strix in Hong Kong. This includes
working on business critical projects to
support the business. Due to COVID-19-
related travel restrictions in 2020, this
scheme was placed on hold, however, it
will be resumed when restrictions are lifted.
During 2020, we undertook a number of
internship programmes across the globe,
including multiple internships on the Isle
of Man, in Hong Kong and in Guangzhou.
This places undergraduates from the Isle
of Man, the UK, Hong Kong and China
50
Strix Group Plc into placements and provides students
with the opportunity to undertake practical
work projects to further their studies.
In July 2020, two interns joined the
Group’s engineering department for
practical work experience as part of
their final year of undergraduate study
at leading UK universities. In September
2020, the Group offered placement
to one of our interns within the HR
department as part of the Isle of Man
Government Summer Internship
programme, an offer which has proven
successful for both the business and
the intern as part of their Business
Management degree. Additionally, we
have had one intern working alongside
our finance team in Hong Kong.
We would like to express our thanks for
the valued work that all those involved
in the internship programme perform.
The below represents a selection of those
involved in our global initiative.
Strix further supports and sponsors the
education and development of future
engineers through:
• Working with the AMTC (Advanced
Manufacturing Training Centre) at the
UCM (University College, Isle of Man) in
providing a number of work experience
opportunities for apprentices.
• Supporting the ACE (Awareness of
•
Careers in Engineering) programme
on the Isle of Man, which provides a
number of local events throughout the
year to encourage students to consider
future careers in engineering.
Involvement in STEM Fest Isle of Man
and scheduled regular events, including
monitoring presence on social media
during the COVID-19 pandemic and
assisting with STEM activities that
students could do at home.
• Undertaking research into IET
accreditation of the apprenticeship
scheme, and programmes that can be
run with the primary schools, planning
for events that will take place through
2021, both in the schools and with
university students.
Involvement in Isle of Man
business life
Strix employees are actively involved in the
wider Isle of Man business life, primarily
through membership in the Isle of Man
Chamber of Commerce and its
committees. Strix is currently represented
on the STEM Committee which supports
Chamber members and the sustainability
of science, technology, engineering and
manufacturing businesses on the Isle of
Man by providing the voice of industry into
government and associated bodies.
Involvement in efforts to support
the communities during the
COVID-19 pandemic
During the year, the Group was involved
a number of projects within the local
community to assist with efforts in curbing
the spread of the coronavirus. These
projects included:
• Assisting the Isle of Man Government
to increase capacity of safe and
reliable PPE on the island by using our
connections, technical teams and
supply chains from our Chinese plants.
• Repurposing of parts from our product
outputs to help in the local community’s
effort to tackle the virus.
• Co-ordinating with other local
•
businesses in the making and assembly
of PPE used by local hospitals during
the pandemic.
One of our valued Workshop
Supervisors making nose clips, in
their own time using their 3D printing
facilities at home, for face masks to be
used by key workers in exchange for
donations to local charities, Rebecca
House children’s hospice and Manx
Breast Cancer Support.
51
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Chief Financial Officer’s statement
Financial strength and robust
business model demonstrated
our ability to maintain an
increased dividend
”Adjusted profit after tax increased to £29.5m,
up by 2.3% from 2019, demonstrating Strix’s
ability to overcome challenging conditions,
through our strategic product diversification
and efficiency initiatives.”
Raudres Wong
Chief Financial Officer
52
Financial performance
Revenue for 2020 has declined by a
modest 1.6% to £95.3m despite the
disruption of the pandemic worldwide.
LAICA’s addition of two months’ revenue
since completion in October was £4.1m.
Strix has continued to increase its market-
leading position despite the softened top
line. Revenue on a constant currency basis
was down 1.3%.
Adjusted gross profit was relatively flat
versus the previous year showing a
modest £0.2m decline. This incorporates
a gross gain of £0.9m relating to the
acquisition of LAICA. Adjusted gross profit
margin has further increased from 40.9%
to 41.4% reflecting the addition of LAICA,
supported by a strong product mix and
lower labour costs, as a result of our
continued automation.
Adjusted EBITDA increased to £38.1m
from £36.9m, representing a 3.2%
increase, reflecting Strix’s strong ability
to optimise the overheads cost to
accommodate the softening top line
performance. Excluding the acquisition
of LAICA, adjusted EBITDA increased 1.7%
to £37.6m. Adjusted EBITDA is defined as
profit before depreciation, amortisation,
finance costs, finance income, taxation,
and exceptional items including share-
based payments.
Adjusted operating profit was impacted by
higher depreciation including right-of-use
asset and amortisation (2020: £6.0m;
2019: £5.5m) and hence, a lower increase
of 1.8% to £32.1m (2019: £31.5m) was
delivered in the reported period. LAICA’s
depreciation and amortisation was £75k
for the two months and its operating profit
of £0.4m was included.
Strix Group Plc Financial summary
Revenue
Revenue – constant currency basis2
EBITDA3
Gross profit
Operating profit
Profit before tax
Profit after tax
Total comprehensive income
Net debt4
Net cash generated from operating activities
Basic earnings per share (pence)
Total dividend per share (pence)
Adjusted results1
Reported results
2020
£m
95.3
95.6
38.1
39.4
32.1
30.9
29.5
29.6
37.2
31.2
14.9
7.85
2019
£m
96.9
96.9
36.9
39.6
31.5
30.2
28.9
28.8
26.3
34.4
15.2
7.70
Change
%5
-1.6%
-1.3%
+3.2%
-0.5%
+1.8%
+2.4%
+2.3%
+2.9%
+41.2%
-9.2%
-2.0%
2.0%
2020
£m
95.3
95.6
32.6
38.9
26.6
25.5
24.1
24.1
37.2
31.2
12.2
7.85
2019
£m
96.9
96.9
29.6
39.4
24.2
22.9
21.5
21.4
26.3
34.4
11.3
7.70
Change
%5
-1.6%
-1.3%
+10.2%
-1.4%
+10.0%
+11.3%
+11.8%
+12.7%
+41.2%
-9.2%
+8.0%
2.0%
1.
Adjusted results exclude exceptional items, which include share-based payment transactions and other reorganisation and strategic project costs. Adjusted results are
non-GAAP metrics used by management and are not an IFRS disclosure.
2. Revenue – constant currency basis, which is defined as 2020 revenue restated at the exchange rates prevailing in 2019, is a non-GAAP metric used by management and
is not an IFRS disclosure.
3. EBITDA, which is defined as earnings before finance costs, tax, depreciation and amortisation, is a non-GAAP metric used by management and is not an IFRS disclosure.
4. Net debt excludes the impact of IFRS 16 lease liabilities, pension liabilities, deferred taxes and earn-out provisions on satisfaction of performance conditions.
5. Figures are calculated from the full numbers as presented in the consolidated financial statements.
Adjusted profit before tax increased to
£30.9m with a 2.4% growth (2019:
£30.2m) despite the softening market
conditions. LAICA’s contribution was
£0.3m. Net finance costs decreased by
£0.2m to £1.2m with a reduction in loans
prior to the acquisition of LAICA. The
Group’s reported profit before tax was
£25.5m (2019: £22.9m).
Adjusted profit after tax increased to
£29.5m (2019: £28.9m), which included
LAICA’s contribution of £0.2m, an increase
of 2.3%. Taxes were held at roughly the
same level, at an effective tax rate of 4.5%
(2019: 4.4%) of the Group’s adjusted profit
before tax. This is following a change in
tax basis from contract processing to an
import processing model in China during
2019. The Group’s reported profit after tax
was £24.1m at 11.8% growth (2019:
£21.5m).
Adjusted diluted earnings per share and
reported diluted earnings per share were
14.3p (2019: 14.2p) and 11.7p (2019: 10.6p)
respectively. Weighted average number
of diluted shares has increased 1.7% due
to the vesting of the 2017 IPO LTIPs, new
equity raised for the acquisition of LAICA
and Zeus warrants being exercised. Basic
earnings per share were reported at 12.2p
(2019: 11.3p), and adjusted for exceptional
costs were 14.9p (2019: 15.2p).
Capital expenditure and
capitalised development costs
Tangible assets had additions to net book
value of £17.2m in 2020, compared to
£15.4m in 2019. This includes £9.1m of
new factory construction (2019: £6.0m),
plant, machinery and tooling of £3.9m
(2019: £3.4m), and LAICA’s addition of
£3.7m. This continued to demonstrate
Strix’s investment in its manufacturing
and development assets to support our
strategic growth objectives.
Intangible assets had additions to net
book value of £14.6m (excluding goodwill)
in 2020, compared to £3.2m in 2019.
This includes £2.8m (2019: £2.4m) of
capitalised development costs relating to
our R&D investment, £2.4m (2019: £0.3m)
of software due to our new ERP and MES
system, and £0.4m (2019: £0.5m) of
intellectual property rights. LAICA’s
acquisition added three more intangible
valuations; Customers relationships
£2.4m, Brand name £6.6m and Goodwill
£9.5m.
53
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Chief Financial Officer’s statement continued
Share-based payments
The total charge incurred in the
consolidated statement of comprehensive
income in 2020 for share-based payments
was £1.9m (2019: £5.9m). The charge was
reduced in 2020 due to the tranche of
IPO share options being vested. Some
additional share awards were also granted
during 2020 to incentivise and retain the
Directors and other employees whom the
Board consider critical to the achievement
of the Group’s strategic objectives.
Foreign exchange
The Group is naturally hedged against
movements in USD and CNY as it both
generates revenues and incurs costs in
these currencies. The impact of foreign
exchange in 2020 is a loss of £0.5m (2019:
loss of £0.2m). Despite significant currency
fluctuations in 2020, the foreign exchange
loss is equivalent to only 0.5% (2019: 0.2%)
of revenue.
Taxation
The effective tax rate for the year is
equivalent to 4.5% (2019: 4.4%) of the
Group’s adjusted profit before tax. In 2019,
in order to mitigate the risk of higher tax
charges in the future, the Group changed
its tax basis in China from the contract
processing to the import processing basis.
Balance sheet
Property, plant and equipment increased
to £37.2m (2019: £25.5m). Capital
additions include £9.1m for the new
factory under construction in Guangzhou
(2019: £5.7m), £3.9m of plant machinery
and tooling (2019: £3.4m), and a £3.7m
increase due to the acquisition of LAICA.
Depreciation increased to £4.5m (2019:
£4.2m), mainly linked to the increased
plant machinery and tooling (£2.2m) and
right-of-use assets (£1.5m) (2019: £2.1m
and £1.3m respectively). Net intangible
assets (comprising capitalised
development costs, goodwill, software
and intellectual property rights) increased
by £22.6m (2019: £2.3m) driven by a
£18.8m increase due to the acquisition
of LAICA, £2.2m increase in investment
in ERP system and £1.5m increase in
capitalised development costs in line with
the Group’s strategic growth objectives.
Current assets increased to £51.3m
compared to £32.5m in 2019 primarily due
to LAICA’s acquisition of current assets
valued at £16.8m. Inventory increased
by £5.7m which was largely due to the
addition of LAICA of £4.5m. Non-current
assets increased by £34.4m from £32.6m,
where LAICA’s addition was £13.0m, with
the remainder mainly attributed to new
factory construction (£9.1m), increased
automation facilities (£3.9m), and goodwill
from the acquisition of LAICA (£9.5m).
Current liabilities increased to £33.7m
(2019: £21.2m) primarily due to the
addition of LAICA (£9.2m) that is made up
of trade payables, deferred consideration
and short-term borrowings.
Non-current liabilities increased to £62.6m
(2019: £43.0m), primarily related to the
LAICA acquisition; LAICA’s contingent
consideration (£5.4m) which is payable
on the achievement of performance
conditions in 2021 and 2022, deferred tax
liability arising from acquisition accounting
(£2.6m), LAICA’s defined benefit plan
(£1.4m) and bank loans (£1.1m). A further
£10.0m was drawn down from the
revolving line facility to finance the
LAICA acquisition which brought the
total financing amount to £50.0m.
Cash flow and net debt
The net increase in cash and cash
equivalents over the year was £1.9m
(2019: £0.6m). This was primarily due
to the proceeds from Zeus’ exercise of
warrants of £3.8m offset by higher
dividend payment of £1.4m.
Net cash generated from operating
activities was down £3.2m in 2020 to
£31.2m (2019: £34.4m) with net working
capital outflows of £1.7m, predominately
due to the addition of LAICA. Net cash
used in investing activities has increased
£7.8m (2019: £8.9m) to £24.2m due
to the acquisition of LAICA; and the
increased investment in both tangible
and intangible assets.
Net debt (excluding the impact of
IFRS 16 lease liabilities) has increased from
£26.3m in 2019 to £37.2m to fund the
LAICA acquisition, investment in capital
expenditure and new factory construction.
We expect the Group’s net debt and
leverage to maintain at roughly the same
level with the Group’s strong cash
generation ability to fund any incremental
operating capex. Including the impact of
IFRS 16 lease liabilities, which was adopted
from 1 January 2019, net debt has
increased to £41.3m (2019: £30.8m).
The Group has a revolving credit facility of
£80.0m (2019: £49.0m) of which £50.0m
(2019: £40.0m) is drawn down as at
31 December 2020. The net debt
(excluding the impact of IFRS 16 lease
liabilities) to adjusted EBITDA ratio as at
31 December 2020 was 1.0x (2019: 0.7x).
Raudres Wong
Chief Financial Officer
“Adjusted EBITDA increased to £38.1m
from £36.9m, representing a 3.2% increase,
reflecting Strix’s strong ability to optimise
the overheads cost to accommodate the
softening top line performance.”
Raudres Wong
CFO
54
Strix Group Plc 5555
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Board of Directors
56
Gary Lamb
Chairman (54) Appointed: At IPO Nationality: British Committees: (A)(N)(R)
Experience: Gary is currently the CEO of Manx
Telecom, a leading communication solutions
provider on the Isle of Man. Prior to this, he
was a founder director of Bladon Micro Turbine
Limited, and remained a Non-Executive
Director until July 2017, later rejoining the
Board in March 2020. For 11 years, prior to
Bladon Jets, Gary was the Finance and IT
Director of Strix, leaving in 2007.
Gary is a qualified accountant (CIMA) who
has gained extensive business experience over
the past 25 years in numerous senior roles,
including both private, public as well as private
equity backed businesses.
Mark Bartlett
Chief Executive Officer (56) Appointed: 2006 Nationality: British
Experience: Mark joined Strix in 2006. He leads
the organisation, setting the strategic direction
and policy and works closely with his
leadership team to translate Strix’s strategy into
tangible results. His experience includes various
positions ranging from Engineering Director
through to Managing Director for multinationals
in Europe and the Americas, with his most
recent positions being Managing Director
of a company within the Ametek Inc. Group
and latterly ABS Waste Water Limited.
Raudres Wong
Chief Financial Officer (58) Appointed: 2011 Nationality: Chinese
Raudres has a BComm and MBA from
McMaster University and qualified as
a Chartered Accountant in Canada.
Experience: Raudres has over 25 years of
international experience in corporate finance,
business management and mergers and
acquisitions. She has worked in Toronto, Japan,
Beijing and Hong Kong for multinationals such
as IDT International Ltd, Nortel Networks Inc.,
Level 3 Communications Inc., Nike
International Ltd and ASSA ABLOY Ltd, holding
senior finance and strategic planning positions.
Mark Kirkland
Non-Executive Director (53) Appointed: At IPO Nationality: British Committees: (A)(N)(R)
Experience: Mark’s initial career was in
corporate finance, predominantly spent at UBS
Limited. In 2003, as part of the founding team,
he became CFO of Raven Mount plc (now part
of Raven Property Group Limited, formerly
Raven Russia Limited) and later became
CFO of Marwyn Management Partners plc.
Mark is currently CEO of Delin Capital Asset
Management.
Mark qualified as a Chartered Accountant with
PricewaterhouseCoopers in London and has
extensive corporate experience gained over the
last 25 years having held numerous senior roles
in public and private companies.
Richard Sells
Non-Executive Director (62) Appointed: March 2020 Nationality: British Committees: (R)
Experience: Richard previously served as
Chairman of AMDEA, the Association of
Manufacturers of Domestic Appliances, and
was on the Board of London-listed Alba plc.
Additionally, he has worked with a number of
entrepreneur-led private companies and served
as a deal advisor for a large private equity firm.
He currently serves on the Advisory Board of
Evrythng, an IoT data analytics business, and is
as an Associate at The Foundation, a growth-
consulting firm.
Richard is an experienced company director
and advisor with over 30 years’ experience
working across multinational corporations,
public companies, entrepreneur-led SME
enterprises and private-equity backed
businesses. He was previously Chief Innovation
Officer at Electrolux AB, ran Electrolux’s
refrigeration business and was Group
Managing Director for Electrolux in the UK.
(A) Audit Committee (N) Nomination Committee (R) Remuneration Committee
Strix Group Plc Senior management team
Frank Gao
Chief Operating Officer
Harry Kyriacou
Chief Commercial Officer
David Trustrum
Commercial Director
Frank joined Strix in 2012. He directs and
leads the global operations team which spans
Strix’s Guangzhou and Ramsey facilities, and
oversees the Group’s overall manufacturing,
supply chain and technology footprint.
Harry joined Strix in 2019 and directs and leads
the Sales, Marketing, Engineering, Commercial
Operations and Water Category functions as
well as the commercialisation of new products
and technologies to support the next phase of
the Group’s growth.
David joined Strix in 1991 and directs the
Commercial Operations department,
optimising commercial activities through
IPR and product safety, market intelligence
and pricing management.
Nick Gibbs
Engineering Director
Peter Taylor
Director of Group Finance
Matt Thomas
Director of Group Manufacturing, Engineering
and Customer Quality
Nick joined Strix in 1992 and directs the global
engineering team, which includes the research
and development facility in the Isle of Man and
the Engineering Department at Guangzhou.
Peter joined Strix in April 2018, having worked
at a number of multinational companies in
the UK, the US, and elsewhere. Peter directs
the Finance team, responsible for the accuracy
of financial reporting and financial controls.
Matt originally joined Strix in 2003. Based in
Guangzhou, he leads the global manufacturing
engineering teams looking for innovative
methods of manufacture, including automation
and customer quality teams.
Neil Austin
Director, Water Category and Global Marketing
Emma Cox
Director of Human Resources
Neil joined Strix in 2020 and has a dual role
heading up the Global Marketing teams and
leading the water category. He has extensive
commercial experience, primarily in the
consumer electronics industry, and most
recently was the Chief Commercial Officer
for a Medical Neuro stimulation company.
Emma joined Strix in 2020 and focuses on all
things to do with the attraction, recruitment,
retention and development of talented people
across the organisation. Emma and her team,
based both on the Isle of Man and in China,
work closely with managers to ensure that they
have the right people in the right place, doing
the right things at the right time to get the
right results.
57
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Our CEO
• Day-to-day management of the Group;
• Responsible for commercial operational,
risk and strategy of the Group;
• Developing and implementing
strategic direction;
• Ensuring effective communication
and information to the Board
and Chairman;
• Representing the Group to external
stakeholders; and
• Responsible for the oversight of the
following key functions: Finance,
Engineering, Design, Marketing, Supply
Chain, Human Resources, Ethics,
Responsibility, Strategy and Global
Commercial.
Board activities
Board roles
Our current Board is made up of three
Non-Executive Directors, including the
Chairman, and two Executive Directors,
the CEO and CFO. All members have
been selected for their diverse experience,
which draws from a range of industries
and backgrounds that align to promote
the Group’s long-term sustainable
success.
• Ensuring Directors receive accurate,
timely and clear information;
• Overseeing the annual Board
evaluation and addressing any
subsequent actions;
• Promoting the highest standards
of corporate governance; and
• Ensuring the views of stakeholders
are taken into account when making
decisions.
The Board has determined that all its
Non-Executive members are independent.
Our Non-Executive Directors
• Providing effective and constructive
challenge to the Board and scrutinising
the performance of management;
• Assisting in the development and
approval of the Group’s strategy;
• Reviewing Group financial information
and ensuring there are effective systems
of governance, risk management and
internal controls; and
• Ensuring there is regular, open and
constructive dialogue with shareholders.
Annually, the Board conducts an appraisal
evaluation of its own performance
whereby each Director will complete
questionnaires which are reviewed and
feedback is provided to each Director.
Our Chairman
• Chairing Board meetings, Nomination
& Remuneration Committee meetings
and the AGM, and setting the Board
agenda;
• Ensuring there is effective
communication between the Board,
management, shareholders and the
Group’s wider stakeholders, while
promoting a culture of openness
and constructive debate;
BOARD
The Board is committed to effective corporate governance as the basis for delivering long-term value growth and meeting shareholder
expectations for proper leadership and oversight of the business.
AUDIT COMMITTEE
NOMINATION COMMITTEE
REMUNERATION COMMITTEE
Chaired by Mark Kirkland
Chaired by Gary Lamb
Chaired by Gary Lamb
The Audit Committee report can be read
on page 65.
The Nominations Committee is
responsible for leading the process for all
potential appointments to the Board and
making recommendations to the Board
in relation to potential appointments.
The Nomination Committee report can
be found on page 66.
The Remuneration Committee reviews
the Group’s remuneration policy for
the Executive Directors and senior
management on an annual basis to
ensure continued alignment with the
principles set out within the Directors’
remuneration report on pages 67 to 74.
CEO AND EXECUTIVE COMMITTEE
The Board delegates the day-to-day responsibility of running the Group to the CEO, who is responsible for all commercial, operational,
risk and financial elements. He is also responsible for the management and development of the strategic direction for consideration and
approval by the Board. The Executive Board assists the CEO in implementing the strategy as approved by the Board.
58
Strix Group Plc Corporate governance statement
The Board is committed to effective
corporate governance as the basis for
delivering long-term value growth and
for meeting shareholder expectations
for proper leadership and oversight of
the business.
Strix applies the principles of the
Quoted Companies Alliance Corporate
Governance Code (the ‘QCA Code’) as
the Board believes that adherence to the
QCA Code provides a strong foundation
for delivering shareholder value and serves
to mitigate and minimise risks.
Directors of companies incorporated in
the Isle of Man are required to comply
with certain duties that are contained in
the Isle of Man Companies Act, and the
Directors comply with those duties.
Going concern basis
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position,
are set out in the Group financial
statements on pages 82 to 115, together
with the financial position of the Group,
its cash flows, liquidity position and
borrowing facilities. In addition, note 22 to
the Group financial statements includes:
the Group’s objectives, policies and
processes for managing its capital; its
financial risk management objectives;
details of financial instruments and
hedging activities; and its exposure to
price, interest rate, credit and liquidity risk.
Accordingly, the Directors have a
reasonable expectation that the Company
and the Group have adequate resources
to continue in operational existence for
the foreseeable future based on the
following factors:
• The strong historic trading
performance of the Group;
• Budgets and cash flow forecasts for
the period to December 2023;
• The current financial position of the
Group, including its cash and cash
equivalents balances of £15.4m;
• The availability of further funding
should this be required (including the
headroom of £30.0m on the revolving
credit facility and the access to the AIM
market afforded by the Company’s
admission to AIM);
• The low liquidity risk the Group is
exposed to;
• The fact that the Group operates within
a sector that is experiencing relatively
stable demand for its products, amidst
the global COVID-19 pandemic; and
• That there has been no disruption to the
Group’s manufacturing or supply chain.
On the basis of the above, the Directors
continue to adopt the going concern basis
of accounting in preparing the annual
Group financial statements.
Forward-looking statements
This Annual Report and Accounts contains
forward-looking statements that involve
risk and uncertainties. The Group’s actual
results could differ materially from those
estimated or anticipated in the forward-
looking statements as a result of many
factors. Information contained in this
Annual Report and Accounts relating to
the Company should not be relied upon
as a guide to future performance.
Annual General Meeting –
voluntary disclosure
The business to be conducted at the
Annual General Meeting of the Company
is set out in the separate Notice of Annual
General Meeting which accompanies the
Annual Report and Accounts. Resolutions
put before shareholders at the Annual
General Meeting will usually include
resolutions for the appointment of
Directors, approval of the Directors’
remuneration report, declaration of the
final dividend and authorisation for the
Board to allot and repurchase shares. At
each Annual General Meeting there is an
update on the progress of the business
over the last year and also on current
trading conditions.
” For Strix plc, ‘best-in-class’ underpins our
whole business model. Effective and transparent
corporate governance is a fundamental part of Strix
encapsulating our Group’s nature, culture and values.”
Gary Lamb
Non-Executive Chairman
59
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements How we govern
Board composition and operation
The Board is made up of three Non-
Executive and two Executive Directors.
The Board meets frequently throughout
the year to consider strategy, performance
and the framework of internal controls. To
enable the Board to discharge its duties, all
Directors receive appropriate and timely
information. Briefing papers are distributed
to all Directors in advance of Board
meetings.
reliability of financial information that
is used within the business and for
publication and the safeguarding of assets.
There are inherent limitations in any
system of internal control and accordingly
even the most effective system can
provide only reasonable, and not absolute,
assurance against material misstatement
or loss. Some examples of internal
controls operated by the Group are given
below and elsewhere in this statement.
All Directors have access to the advice
and services of the Chief Financial Officer,
who is responsible for ensuring that the
Board procedures are followed, and that
applicable rules and regulations are
complied with. In addition, procedures are
in place to enable the Directors to obtain
independent professional advice in the
furtherance of their duties, if necessary,
at the Group’s expense.
The Board has conducted an appraisal
of its own performance and that of each
Director for 2020. This was completed by
the use of questionnaires completed by all
Directors. The results of this exercise were
reviewed and individual feedback was
provided for each of the Directors, and the
Board as a whole. Feedback was given by
an independent Non-Executive Director
in respect of the Chairman, and by the
Chairman in respect of assessments of
each of the other Directors and the Board
as a whole. The outcome of the appraisal
is that the Board has been effective in
discharging its duties during 2020.
Internal control
The Board has overall responsibility for
ensuring that the Group maintains a
system of internal control, to provide it
with reasonable assurance regarding the
The Group’s organisational structure has
clear lines of responsibility. Operating
and financial responsibility for subsidiary
companies is delegated to functional
management, which is in most cases
the members of the senior management
team (internally referred to as the
“Trading Board”).
The Board has an ongoing process for
identifying, evaluating and managing
the Group’s significant risks. The process
includes:
• Preparation and approval of budgets
and regular monitoring of actual
performance against budget;
• Preparation of monthly management
accounts for each subsidiary and for
the Group, including investigation of
significant variances from budget;
these are summarised and reviewed
at Board level;
• Preparation of updated profitability
and cash flow forecasts to reflect actual
performance and revised outlook
as the year progresses, including an
assessment of the adequacy of funds
for the foreseeable future; and
Investment policy acquisition proposals
and major capital expenditure projects
are authorised and monitored by the
Group Board.
•
Throughout the year, the Board has
carried out assessments of internal
controls by considering documentation
from the Executive Directors and the
Audit Committee as well as taking into
consideration events since the year end.
The internal controls extend to the
financial reporting process and the
preparation of the consolidated accounts.
The Group continues to take steps
to embed internal control and risk
management further into the operations
of the business and to deal with areas
for improvement which come to the
attention of management and the Board.
The Group has ethical guidelines
and a defined fraud reporting and
whistleblowing process which are issued
to all employees within the Group.
The Group’s risk management
programme, which assesses key risks
and the required internal controls that
are delegated to Functional Directors is
reviewed regularly in order to ensure
that it continues to meet the Board’s
requirements.
Shareholders
The Chairman and the Non-Executive
Directors will always make themselves
available to meet with shareholders.
Normal relationships with shareholders
are maintained by the Executive Directors
who brief the Board on shareholder issues
and who relate the views of the Group’s
advisors to the Board. The Board believes
that the disclosures set out in the Strategic
Report on pages 2 to 54 of the Annual
Report provide the information necessary
for shareholders to assess the Company’s
performance, business model and
strategy.
60
Strix Group Plc Substantial shareholdings
As at 21 April 2021, the Company has been advised, in accordance with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority, of the following notifiable interests in 3% or more of its voting rights:
Number of securities in issue:
AIM securities not in public hands:
Identity of significant shareholders (over 3%) as follows:
Registered shareholder
Octopus Investments
Schroder Investment Mgt
Canaccord Genuity Wealth Mgt
AEGON Asset Mgt
Premier Miton Investors
Close Asset Mgt
The Board is aiming to achieve a mix of
institutional, retail and management
shareholders which is appropriate for Strix.
As at 21 April 2021, the Board considers
that the Company’s shareholders can be
categorised in the following manner:
ensure continued alignment with the
principles set out below. In doing so, we
will consult with our major shareholders
where necessary and where required,
independent, specialist advice is sought.
0.2%
3.2%
0.2%
0.2%
10.5%
1.5%
84.2%
Domestic institutions
Foreign institutions
Employees, etc.
Domestic brokers
Private stakeholders
Corporate stakeholders
Foreign brokers
Share capital structure
Details of the Company’s share capital
can be found in note 24 to the Group
financial statements.
Remuneration policy
The Remuneration Committee reviews
the Group’s remuneration policy for
the Executive Directors and senior
management on an annual basis to
Our objective is to ensure that
remuneration incentivises and rewards the
growth of shareholder value through full
alignment with the Company’s strategy
and with the interests of shareholders.
We have been guided by a number of
fundamental principles:
• Remuneration should be set by taking
into account pay levels in the various
jurisdictions in which the company
operates, whilst complying with UK
PLC structural norms and good
practice;
• The policy should attract, retain
and motivate high calibre Executive
Directors and senior management
through a significant weighting on
performance-related pay;
Incentive plans should be robust and
include metrics and targets which
are directly relevant to Strix;
• Pay should be simple and
•
understandable, both externally
and to colleagues;
• Good practice features such as
clawback and malus arrangements
should be included;
• Share ownership should be
encouraged across the executive
team to ensure a long-term focus
and alignment of interest with
shareholders; and
Number
206,496,375
15.68%
Shares held
% holding
22,722,629
12,192,276
11,350,000
11,071,062
9,157,357
6,557,325
11.00
5.90
5.50
5.36
4.43
3.18
• Pay structures should not reward
behaviour that inappropriately increases
the Company’s exposure to risks
outside of the Company’s risk appetite.
Application of the remuneration
policy in 2020
For 2020 minimal changes were made
to the remuneration policy set out at the
time of admission to trading on AIM, being
a mix of fixed pay, annual bonus scheme
and LTIP.
In respect of the annual bonus scheme,
targets are based on profit before tax
(‘PBT’). PBT is a key measure of profitability
for Strix and this change aligns with a
metric which is closely followed by our
shareholders. In addition, if a separate
free cash flow target is not met, then the
maximum award payable will be reduced
by 50%.
The 2020 LTIP grant is based on the
achievement of stretched EPS targets
and will involve the measurement of
performance over a conventional
three-year period, consistent with
industry practice.
Full details of how we intend to operate
the policy for 2021 are set out on page 73.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements QCA principles and Strix
Governance principle
Strix response
Further reading
Establish a strategy and business
model, which promote long-term
value for shareholders.
Seek to understand and meet
shareholder needs and expectations.
Disclosure of the Group’s
strategic pillars is included
on pages 24 to 26.
Strix’s value chain is
explained on page 19.
The way in which we
deliver value for our
stakeholders is set out
on pages 38 and 39.
Our RNS notifications
are easily located on the
Group’s website. This
includes the results of the
AGM voting outcomes,
showing the percentage
of votes for, against and
withheld for each
resolution.
Strix has established a well-documented strategy
and business model to create value for shareholders
through slow and steady growth primarily through
organic growth in its water and appliances categories
alongside expansion of its market share in kettle
controls.
Strix has significant resources available to create
medium to long-term value, including:
• a market-leading share of the global kettle
controls market
• significant, long-standing customer relationships
• a large portfolio of intellectual property
• a strong pipeline of new products.
Consistent, ongoing two-way dialogue between
the Strix executive team and shareholders is key to
driving the Group forward and informs our decision-
making process. This is undertaken throughout the
year via regular reporting of performance and key news
announcements via RNS as well as roadshows
and investor presentations.
Where possible subject to COVID-19 restrictions, all
members of the Board attend the AGM and the Board
encourages shareholders to attend and ask questions.
Where attendance is not possible, questions may be
submitted in advance with answers later published on
our website.
The Board engages with both institutional and
private shareholders to understand the needs and
expectations of both of these groups.
Take into account wider stakeholder
and social responsibilities and their
implications for long-term success.
Strix’s long history has enabled it to develop a
good understanding of its key stakeholders. This
understanding helps the Board and the management
team make well-informed business decisions and to
deliver on our strategic objectives.
Please refer to pages
38 and 39 for further
information on why and
how we engage with
these stakeholders.
Strix’s key stakeholders are its:
• Shareholders
• Employees
• Customers
• Suppliers
• Communities
• Environment.
Embed effective risk management,
considering both opportunities and
threats, throughout the organisation.
Strix has a risk management framework in place which
assists the Board in identifying, assessing and mitigating
the risks faced by the Group to an acceptable level
alongside the Group’s growth plans. This is reviewed
on an ongoing basis and actions are taken as needed
to reduce the risks to an acceptable level.
The Group’s risk
management framework
is set out on page 40.
62
Strix Group Plc Governance principle
Strix response
Maintain the Board as a well-
functioning, balanced team led
by the Chairman.
The Board includes three Non-Executive Directors,
being Gary Lamb, Mark Kirkland and Richard Sells
who was appointed to the Board on 18 March 2020.
Ensure that between them the
Directors have the necessary up-to-
date experience, skills and capabilities.
Evaluate Board performance based on
clear and relevant objectives, seeking
continuous improvement.
Given the relatively small size of the Board (five
Directors), the Directors consider that the Board
has an appropriate balance between Executive and
Non-Executive Directors, and that this is sufficient for
the Board to be considered independent as a whole.
The Directors consider that this structure is appropriate
for the size and nature of the Group, although this is
kept under regular review.
The Board is composed of individuals with an
appropriate mix of experience and skills, including
experience serving on the boards of listed companies.
The Board is represented by an appropriately diverse
mix of individuals, given its size.
The Board is not dominated by any one person or
group of people. All Directors have the ability to
challenge proposals put forward to the meeting
and decisions are reached democratically.
During the year, the Board has undertaken an
assessment of its own performance, and the
performance of each Director, in order to conclude
that it has an appropriate balance of skills and that
the composition of the Board remains appropriate.
The key assessments made in relation to the
effectiveness of the Directors are:
• Their contributions are relevant and effective
• Their skills remain current and relevant for their
role on the Board
• They are committed and able to devote a suitable
amount of time to undertaking their duties as
a Director
If their role is as an independent Director, that they
remain independent.
•
The Board composition has changed following
the appointment of Richard Sells on 18 March 2020.
The appointment is in line with the Board’s vision for
succession planning as Richard Sells brings a wealth
of commercial experience to the Board which will
support the Group’s growth ambitions.
Further reading
See page 58 which
covers Directors’
independence, time
commitment and its
key committees.
Further information on
Directors’ independence
and interests is included
in the Directors’ report on
pages 75 and 76.
A short biography of
each Director is provided
on pages 56 and 57.
Further details on
corporate governance
are provided on page 59.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements QCA principles and Strix continued
Governance principle
Strix response
Strix has a responsibility towards its employees and
partners. The Group is proud to provide opportunities
for the next generation and is passionate about
supporting social causes, both on the Isle of Man
and beyond.
The Group has defined zero-tolerance policies in place
for anti-slavery, anti-human trafficking, anti-bribery and
anti-corruption efforts.
There are whistleblowing facilities in place to report any
suspected instances of corruption or bribery to one of
the Directors.
The Board normally meets on a monthly basis
and not fewer than ten times a year, supplemented
by additional meetings as and when required. The
Board discusses strategy, performance and internal
controls based on a formal agenda, which is circulated
in advance of each meeting. The Board is also
responsible for the approval of RNS announcements
and the annual and interim results.
The Chairman is responsible for running the business
of the Board and for ensuring appropriate strategic
focus and direction. The CEO is responsible for
proposing the strategic direction to the Board,
implementing it once approved, and managing the
performance of the Group through the management
team. Senior members of staff attend certain Board
meetings by invitation to discuss matters in relation
to their specific areas of expertise.
The Board is also supported by the Audit,
Remuneration and Nomination Committees in
discharging its responsibilities.
The Board believe this structure is appropriate for the
current size of the Group and the nature of its business,
but this is assessed at least annually as part of the
review of the Board’s performance as well as by the
Nomination Committee.
Strix communicates principally with its shareholders
and other stakeholders on governance and
performance through:
• the Annual Report and Accounts
• half-year announcements
• the London Stock Exchange’s Regulatory News
Service (‘RNS’)
• the Annual General Meeting (‘AGM’)
• one-to-one meetings with large existing or potential
•
new shareholders
Internal staff meetings or through written/email
communication
Promote a corporate culture that is
based on ethical values and behaviours.
Maintain governance structures and
processes that are fit for purpose
and support good decision-making
by the Board.
Communicate how the Company
is governed and is performing
by maintaining a dialogue with
shareholders and other relevant
stakeholders.
64
Further reading
Further details on
corporate social
responsibility, including
ethical conduct and
sustainable investing,
is provided on pages 46
to 49.
Details of Nomination
Committee meetings
held during the year can
be found on page 66.
Please refer to pages
38 and 39 for further
information on how we
communicate with each
of our key stakeholders.
Strix Group Plc Audit Committee report
The Committee confirms that for the year ended 31 December 2020, the Group fulfilled
its Audit Committee responsibilities, as set out in this report, and fulfilled its mandatory
audit processes.
The Committee has an open and constructive relationship with management and I thank the management team on behalf of the
Committee for their assistance during the year. I am confident that the Committee has upheld its high standards and effectively
carried out its duties throughout the year.
Audit Committee membership
Mark Kirkland and Gary Lamb served as members of the
Committee through the year ended 31 December 2020.
The Committee met formally twice throughout the year with
all members attending scheduled meetings. In addition to the
formal meetings, Committee members also attended additional
ad hoc meetings as required.
All Committee members are independent Non-Executive
Directors and the Board is satisfied that Mark Kirkland and Gary
Lamb have significant, recent and relevant financial experience.
Furthermore, both members have held Chief Financial Officer
roles for significant periods and are considered suitably qualified
in accounting and auditing.
The CEO, CFO and other senior finance staff will attend
meetings of the Audit Committee by invitation. The external
auditors attend the meetings to discuss the planning and
conclusions of their work and have the option to meet with
the members of the Committee without any members of the
executive team present after each meeting.
The Committee is able to call for information from management
and consults with the external auditors directly if required. The
objectivity and independence of the external auditors is safeguarded
by reviewing the auditors’ formal declarations of independence,
assessing the level of non-audit fees payable to the auditors, and
monitoring relationships between key audit staff and the Group.
The role of the Committee
The role of the Audit Committee is set out in a terms of reference
document and is to:
• monitor the integrity of the financial statements of the
Company and any formal announcements relating to the
Company’s financial performance, reviewing significant
financial reporting judgements contained in them;
• review the Company’s internal financial controls and,
unless expressly addressed by a separate Board risk
committee composed of independent Directors, or by
the Board itself to review the Company’s internal control
and risk management systems;
• monitor and review the effectiveness of the Group’s internal
audit function or, if such a function does not exist, evaluate
the need to establish one;
• make recommendations to the Board, for it to put to the
shareholders for their approval in general meeting, in relation
to the appointment, reappointment and removal of the
external auditor and to approve the remuneration and terms
of engagement of the external auditor;
• review and monitor the external auditor’s independence
and objectivity and the effectiveness of the audit process,
taking into consideration relevant professional and
regulatory requirements;
• develop and implement policy on the engagement of the
external auditor to supply non-audit services, taking into
account relevant ethical guidance regarding the provision
of non-audit services by the external audit firm; and
• to report to the Board, identifying any matters in respect of
which it considers that action or improvement is needed
and making recommendations as to the steps to be taken.
Significant issues considered in relation
to the financial statements
At the request of the Board, the Audit Committee considered
whether the 2020 Annual Report and Accounts were fair,
balanced and understandable and whether they provided the
necessary information for shareholders to assess the Group’s
performance, business model and strategy. The Committee
was satisfied that this is the case.
The Audit Committee assess whether suitable accounting
policies have been adopted and whether appropriate estimates
and judgements have been made by management. The
Committee also reviews accounting papers prepared by
management, and reviews reports by the external auditors. The
specific areas reviewed by the Committee during the year were:
• The impact of the acquisition of LAICA S.p.A. on the Group;
• Consideration of the going concern basis of preparation
adopted in the financial statements; and
• Appropriateness of the disclosures in the financial statements.
Mark Kirkland
Chairman of the Audit Committee
“I am confident that the Committee has upheld its high standards and
effectively carried out its duties throughout the year.”
Mark Kirkland
Chairman of the Audit Committee
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Nomination Committee report
Role of the Committee
The role of the Committee includes reviewing the composition of the Board, succession planning for the Board and, together
with the CEO, succession planning for senior leadership positions throughout the Group. It also considers:
• The structure, size and composition of the Board and its Committees including evaluating the balance of skills, experience,
independence and knowledge of its members.
• The independence and time commitments of Non-Executive Directors.
• The Board’s policy on diversity as it relates to appointments to the Board.
• Succession planning for the Board and the Executive Committee roles.
• The Committees’ effectiveness.
• The Committees’ terms of reference.
Nomination Committee membership
The members of the Nominations Committee, all of whom held office since listing and to the date of this report, are:
• Gary Lamb (Chairman)
• Mark Kirkland
The Nomination Committee met twice during the year. Mark Kirkland was unable to attend one of the meetings, but an alternate was
appointed in his place. The purpose of the meetings was to approve the appointment of Richard Sells as an additional Non-Executive
Director and to appoint him to the Remuneration Committee. In addition, during the year the Committee reappointed Gary Lamb
and Mark Kirkland to the Audit, Nomination and Remuneration Committees for a further three-year term.
Gary Lamb
Chairman of the Nominations Committee
66
Strix Group Plc Directors’ remuneration report
Statement from the Chairman
of the Remuneration Committee
This report sets out the Directors’ remuneration policy, the basis for the remuneration
paid to Directors in respect of 2020 and explains how we intend to implement the policy
for 2021. The key elements of our approach are summarised below.
The Remuneration Committee
The members of the Remuneration Committee during 2020
were Gary Lamb (Chairman) and Mark Kirkland, both of whom
are independent Non-Executive Directors. Gary Lamb is also
Chairman of the Board. Richard Sells, also an independent
Non-Executive Director, joined the Committee with effect
from 1 March 2021.
The Committee held four meetings during 2020. Mark Kirkland
was unable to attend two meetings due to restrictions imposed
in response to the COVID-19 pandemic but appointed an
alternate to attend in his place. He reviewed the Committee
papers ahead of each meeting as normal and provided input
into Committee deliberations through prior discussions with
the Committee Chairman.
Duties
The main duties of the Remuneration Committee are set out in
its Terms of Reference and include:
• determining the remuneration policy for the Chairman and
all Executive Directors, having regard to the risk appetite of
the Company and alignment to the Company’s long-term
strategic goals;
• reviewing the ongoing appropriateness and relevance of the
remuneration policy, having regard to pay and employment
conditions across the wider Group;
• approving the design of, and determining targets for any
performance-related pay schemes operated by the Company
and approving the total annual payments made under such
schemes;
• reviewing the design of all share incentive plans for approval
by the Board and shareholders;
• determining the policy for, and scope of, pension arrangements
for each Executive Director and other senior executives;
• approving the terms of the service contracts for Executive
Directors and other senior executives, and determining the
policy for and scope of termination payments;
• determining the total individual remuneration package of each
Executive Director and other designated senior executives
including bonuses, incentive payments and share awards; and
• establishing the selection criteria, selecting, appointing and
setting the terms of reference for any remuneration
consultants who advise the Committee.
Remuneration policy
The Committee’s objective is to ensure that remuneration
incentivises and rewards the growth of shareholder value
through full alignment with the Company’s strategy and with
the interests of shareholders. We are guided by a number of
fundamental principles:
• remuneration should be set by taking into account pay levels
in the various jurisdictions in which the Company operates,
whilst complying with UK PLC structural norms and good
practice;
• the policy should attract, retain and motivate high-calibre
Executive Directors and senior management through a
significant weighting on performance-related pay;
incentive plans should be robust and include metrics and
targets which are directly relevant to Strix;
•
• pay should be simple and understandable, both externally
and to colleagues;
• good practice features such as clawback and malus
arrangements should be included;
• share ownership should be encouraged across the executive
team to ensure a long-term focus and alignment of interest
with shareholders; and
• pay structures should not reward behaviour that
inappropriately increases the Company’s exposure to risks
beyond the Company’s risk appetite.
We will keep the remuneration policy under review and will
make changes as required to ensure continued alignment with
the principles set out above. In doing so, we will consult with our
major shareholders where necessary.
Application of the remuneration policy in 2020
The start of 2020 was a period of considerable uncertainty
for the business and its stakeholders in light of the outbreak
of the COVID-19 pandemic and resulting restrictions imposed
throughout the world. As discussed throughout this Annual
Report, Strix’s performance over the year as a whole was resilient,
and after a marked recovery in the second half of the year the
Board was pleased to report a growth in adjusted profit after
tax compared to the prior year. The Group has benefited
from diversification and the extension into new product lines,
supported by high cash generation and a strong balance sheet.
Dividend payments have been maintained and the ongoing
strength of the business was demonstrated in impressive share
price performance after a correction early in the year as markets
reacted to the impact of the pandemic.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Directors’ remuneration report continued
Early in the year, and as disclosed in last year’s report, proposals
to adjust the salaries of the Executive Directors in light of the
growth and development of Strix since the IPO in 2017 were
suspended due to the uncertainties caused by the spreading
pandemic. This was kept under review throughout the year
but it was ultimately agreed to keep the CEO and the CFO
at the same salary levels for the duration of 2020.
After the 2020 year end, the Committee reviewed the
performance of the business and made decisions regarding
the level of payout of annual bonuses and the level of vesting
of LTIP awards. The Committee agreed a bonus payment of
16.5% of basic salary for the Executive Directors in recognition
of the resilient performance achieved during 2020. Vesting
of the LTIP award granted in 2018 depended on the level of EPS
growth achieved over the three years to the end of 2020. The
Committee agreed a final vesting level of 53.2% for this award,
which was deemed to be consistent with the overall level of
performance over the three-year performance period.
A new LTIP grant was made in April 2020, with performance
measured over the three years to the end of 2022. Awards were
granted to the Executive Directors at a level of 100% of basic
salary. Last year, we reported that the Committee would apply
the same EPS target range to this award as was in place for
the awards granted in prior years. After further consideration,
however, the Committee decided to make a small adjustment
to the targets to ensure that the award provides a suitable
incentive to drive performance over the next few years. While
the requirement to achieve a minimum level of 3% per annum
EPS growth for a threshold level of vesting remains, the target
for the maximum level of vesting was reduced from 7% to 5%
per annum growth. The Committee believes that this new upper
target, which is consistent with the ambitious growth strategy for
the business communicated at the Capital Markets Day in 2020,
remains appropriately challenging.
Proposed application of the remuneration
policy for 2021
As noted above, proposed salary adjustments for the Executive
Directors for 2020 were not implemented during the course
of the year. After the year end, the Committee reviewed the
situation and decided that, in light of the success of Strix during
2020, its resilience in a challenging environment, and the
ongoing growth of the business, it was appropriate to finally
put in place the changes that were initially envisaged last year.
In reaching this decision, the Committee again noted the
exceptional leadership of Mark Bartlett, the CEO, over the
period since IPO, a time when Strix has become a bigger and
more complex company, extending into new technologies
and expanding its global footprint. Strix is now a genuinely
international company, operating in multiple jurisdictions, and
this requires considerable time and commitment from the CEO.
Mark has demonstrated this repeatedly during 2020 as Strix has
adapted to the challenges posed by the pandemic. Mark is critical
to the success of the business and the Committee believes that it
is only fair that his commitment is appropriately rewarded as the
Company enters the next crucial stage of its development.
As a result, the Committee has agreed to increase Mark’s salary
from £311,508 to £360,000 with effect from 1 April 2021, an
increase of 15.6%. This change was originally intended to apply
from January 2020 but, as noted above and in last year’s report,
we made the prudent decision to put the increase on hold
given the market uncertainties following the outbreak of
the pandemic. The Committee is aware that the increase is
significant in percentage terms and would like to make it clear
that this is a special adjustment and not indicative of the likely
level of annual increase in future years. At the present time, we
anticipate that future increases will be limited to those applicable
to the wider workforce.
Separately, the Committee has also considered the broader
debate about executive pension provision which has followed
the implementation of the 2018 UK Corporate Governance
Code. While the Code does not apply to Strix, the Committee
seeks to comply with good practice in corporate governance
and has therefore agreed with Mark that his pension contribution
rate will be reduced from 20% of basic salary to 10% with effect
from 1 April 2021. This level of pension contribution is now
consistent with that of the CFO and other members of Strix’s
management team.
For the CFO, Raudres Wong, the Committee has agreed a 2.5%
salary increase with effect from 1 April 2021.
The annual bonus opportunity for 2021 will remain at 100% of
basic salary for the Executive Directors, with bonus payments
primarily based upon the achievement of a profit before tax
target. In addition, we intend to introduce an ESG measure to
apply to 15% of the maximum bonus, consistent with the Group’s
focus on ESG as a critical priority for the business. Our intention
is that the performance targets will be disclosed in next year’s
Directors’ remuneration report when they are no longer
considered commercially sensitive.
The LTIP grant to be made in 2021 will again be at a level of 100%
of basic salary for the Executive Directors. This award will vest
subject to performance conditions to be met over the three years
to the end of 2023. After consideration, the Committee has
decided to continue using an EPS metric for this award, ensuring
that vesting requires demonstrable growth over the performance
period. Full details of the targets to be used are set out on page 73.
Engagement with shareholders
The Remuneration Committee would welcome any feedback
from shareholders on any matter to do with Directors’
remuneration; please contact me if you have any comments.
In line with our normal practice, we will again present
shareholders with the opportunity to vote on this Directors’
remuneration report by way of a separate resolution at the
forthcoming AGM. I hope that you will support the resolution.
I will also be available at the AGM to answer any questions you
may have.
Gary Lamb
Chairman of the Remuneration Committee
68
Strix Group Plc Directors’ remuneration policy
The objective of the remuneration policy for Executive Directors is to ensure
remuneration incentivises and rewards the growth of shareholder value through full
alignment with the Group’s strategy and with the interests of shareholders.
The total remuneration package is structured so that a significant
proportion is linked to performance conditions measured over
both the short and long term. A high proportion of the potential
The total remuneration package is structured so that a significant
proportion is linked to performance conditions measured over
both the short and long term. A high proportion of the potential
remuneration is paid in shares, thereby ensuring that executives
have a strong ongoing alignment with shareholders through the
Company’s share price performance.
When setting the levels of short-term and long-term variable
remuneration and the balance of cash and share-based
elements, consideration is given to obtaining the appropriate
balance so as not to encourage unnecessary risk-taking, whilst
ensuring that performance hurdles are suitably challenging.
In addition to the elements of remuneration set out in the
table below. Executive Directors are required to work towards
meeting share ownership guidelines. Further details are provided
on page 73.
Purpose and
link to strategy
Operation
Maximum opportunity
Element
Base salary
To recruit and
reward high-calibre
executives for the
role required.
Reviewed annually by the Committee,
taking account of Group performance,
individual performance, changes in
responsibility and levels of increase
for the workforce generally.
Benefits
To provide market-
competitive benefits
and to help ensure
the overall wellbeing
of employees.
Reference is also made to comparator
benchmarks from time to time.
The Committee considers the impact
of any basic salary increase on the total
remuneration package.
The Group typically provides:
• car allowance
• medical insurance
• health insurance
• cost-of-living allowance
• other ancillary benefits, including
relocation expenses (as required)
Executive Directors are also entitled
to 25 days’ leave per annum.
There is no prescribed maximum
annual increase. The Committee is
guided by movements in market rates,
the performance of the business and
the general salary increase for the
broader employee population, but
on occasions may need to take into
account factors such as development
in role, change in responsibility, and/or
specific retention issues.
Benefits provision is set at a level
considered appropriate taking into
account in a variety of factors,
including market practice elsewhere.
Pension
To provide market-
competitive benefits
and to assist post-
retirement financial
planning.
A Group contribution to a defined
contribution pension scheme or
provision of cash allowance in
lieu of pension.
Up to 10% of basic salary.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Operation
Maximum opportunity
Directors’ remuneration report continued
Element
Annual bonus
scheme
Purpose and
link to strategy
To encourage and
reward excellent
performance over
the course of the
financial year.
Long-Term
Incentive Plan
(‘LTIP’)
To encourage and
reward delivery of
the Group’s long-
term strategic
objectives and
provide alignment
with shareholders
through the use
of share-based
remuneration.
Annual bonus payments are based
on performance against challenging
targets linked to the Group’s strategic
objectives.
Bonuses are currently paid in cash.
The Remuneration Committee may
review on an ongoing basis whether
a proportion of the bonuses should
be deferred into shares.
A recovery and withholding mechanism
applies in the event of a material
misstatement of the Group’s accounts
and also for other defined reasons.
The Company makes annual awards
of nil-cost options.
Awards are released subject to
continued employment and satisfaction
of challenging performance conditions
measured over three years.
A recovery and withholding mechanism
applies in the event of a material
misstatement of the Group’s accounts
and also for other defined reasons.
Non-Executive
Director fees
To attract and retain
a high-calibre
Chairman and
Non-Executive
Directors.
Fee levels are set as appropriate for the
role and responsibility for each Non-
Executive Director position and with
reference to market levels in comparably
sized public companies. Fees are paid
in cash.
The Chairman is paid a single fee for all
his responsibilities. Other Non-Executive
Directors are also paid a single fee.
70
Maximum annual opportunity of 100%
of basic salary.
There is no formal individual limit
within the LTIP rules. However, the
Remuneration Committee applies a
limit of 100% of basic salary to grants
made under the LTIP to Executive
Directors.
25% of the award is payable for
threshold performance.
In line with the LTIP rules, the
Committee may decide to allow
participants to receive dividend-
equivalent payments.
There is no prescribed maximum
annual increase. Any increases to fee
levels are guided by movements in
market rates and the general salary
increase for the broader employee
population. On occasion, however, fee
increases may be needed to recognise,
for example, change in responsibility
and/or time commitments.
Strix Group Plc Service contracts and payments for loss of office
The Remuneration Committee is responsible for approving the terms of the service contracts for Executive Directors and other
senior executives. Directors’ service contracts are available for inspection at the Company’s registered office.
Mark Bartlett and Raudres Wong have both entered into two service agreements with the Company, one governed by the law
of the Isle of Man and the other governed by the law of Hong Kong.
The service agreements for Mark Bartlett and Raudres Wong are terminable on 12 months’ notice from either side. Other than
payment of salary and benefits in lieu of notice, the Executive Directors’ service agreements do not provide for benefits upon
termination of employment.
The Non-Executive Directors have entered into letters of appointment with the Company which can be terminated by either party
providing three months’ prior written notice.
Directors’ remuneration for 2020
Executive Directors
Mark Bartlett
Raudres Wong
Non-Executive Directors
Gary Lamb
Mark Kirkland
Richard Sells4
Salary and fees1
£k
Benefits2
£k
Pension
£k
Annual bonus
£k
2020
2019
2020
2019
2020
2019
2020
2019
2020
312
312
305
305
72
70
46
45
32
68
65
12
6
–
–
–
–
–
64
64
31
31
–
–
–
–
–
51
–
51
–
–
–
–
–
–
Long-term
incentives3
£k
338
6,935
311
3,468
–
–
–
–
–
Total
£k
833
7,376
710
3,810
72
70
46
45
32
1. As disclosed in last year’s report, the 2020 fee for Gary Lamb for serving as Chairman of the Board and Non-Executive Director was increased from £70,000 to £80,000
with effect from 1 January 2020 following a review. The fee for Mark Kirkland for serving as a Non-Executive Director was increased from £45,000 to £48,000. In light of the
COVID-19 outbreak, both Directors agreed that their fees would revert to their former levels with effect from March 2020. Following a further review later in the year, and in
recognition of the overall resilience of the Company against the backdrop of the pandemic, it was agreed that the fees would be restored to the January 2020 levels with effect
from 1 January 2021.
2. Mark Bartlett’s benefits include participation in the Company’s private medical insurance scheme, a car allowance and a cost-of-living allowance reflecting his residence in
Hong Kong. Raudres Wong’s benefits include participation in the Company’s medical insurance and permanent health insurance schemes.
3. The numbers in this column for 2020 reflect the value of the 2018 LTIP award based on the vesting level for the award (53.2%) and the share price on the exercise date, 21 April
2021 (£2.90), plus an amount reflecting the value of dividend equivalents. This award was based on performance measured up to 31 December 2020. The numbers in this
column for 2019 reflect the value of the 2017 LTIP award at the exercise date, 6 April 2020 (£1.70), plus an amount reflecting the value of dividend equivalents. This award was
based on performance measured up to 31 December 2019. Full details of the performance conditions for this award and the vesting outcome were included in the 2019
Directors’ remuneration report.
4. Richard Sells was appointed to the Board on 18 March 2020 as a Non-Executive Director and for the year under review his annual fee was set at £40,000 for this role.
Annual bonus scheme outcome for 2020
Executive Directors had an entitlement to an annual bonus up to a maximum opportunity of 100% of basic salary for 2020.
Achievement of the bonus was based on performance conditions linked to the achievement of challenging PBT and cash
flow targets.
In light of the level of PBT reported for 2020 being 2.4% higher than that achieved for 2019, the Committee agreed bonus payments
at a level of 16.5% of basic salary for both Executive Directors.
71
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Directors’ remuneration report continued
LTIP award granted in 2020
Executive Directors and other senior employees were granted an award of shares under the LTIP in April 2020. For the Executive
Directors, the award was granted at a level of 100% of basic salary. Vesting of the award is subject to the achievement of performance
conditions based on the Company’s EPS performance over the three financial years ending 31 December 2022, as set out below.
The maximum EPS target has been set at 5% per annum growth, which differs from the 7% target set out in last year’s Directors’
remuneration report. This is as a result of the Committee deciding, after further consideration, that an adjustment was required to
provide an appropriate incentive to participants in the current business environment. The Committee believes that the new upper
target remains appropriately challenging and is consistent with the ambitious growth strategy for the business communicated at the
Capital Markets Day in 2020.
Annual EPS growth to be achieved in the period ending 31 December 2022
Level of vesting
Below 3%
3%
Between 3% and 5%
5% or above
0%
25%
Vesting on a straight-line basis between 25% and 100%
100%
The awards are subject to malus and clawback provisions, as set out in the remuneration policy on page 67.
Performance under the LTIP award granted in 2018
Executive Directors and other members of senior management were granted an award of shares under the LTIP in November 2018.
Vesting of the awards was based on EPS performance measured over the period to 31 December 2020. The specific EPS targets, and
the performance achieved, are set out below.
Annual EPS growth to be achieved in the period ended 31 December 2020
Level of vesting
Below 3%
3%
Between 3% and 7%
7% or above
0%
25%
Vesting on a straight-line basis between 25% and 100%
100%
The Committee assessed the level of performance achieved after the year end (having made an appropriate adjustment to reflect
the impact of the HaloSource acquisition to ensure EPS was measured fairly on a like-for-like basis) and determined that the targets
had been partially met. As a result, the LTIP award vested at a level of 53.2%. As determined at the start of the performance period,
EPS was calculated on the basis of 190 million shares in issue. The Committee considered that the level of vesting was appropriate in
light of the overall performance of the Group over the performance period noting, among other things, the impressive level of Total
Shareholder Return achieved over the period.
Dividend equivalents were also payable on vested awards. Clawback provisions apply to the awards for a period of two years
following vesting.
Directors’ participation in the LTIP
Details of the numbers of shares held by the Executive Directors under the LTIP are set out in the table below.
Executive
Scheme
Grant date
Mark Bartlett
LTIP 08 Aug 2017
LTIP 01 Nov 2018
LTIP 20 May 2019
LTIP 06 Apr 2020
Raudres Wong LTIP 08 Aug 2017
LTIP 01 Nov 2018
LTIP 20 May 2019
LTIP 06 Apr 2020
Number of
LTIP shares at
31 December
2019
Exercise
price
Granted
during year
Vested
during year
Lapsed
during year
Number of
shares at
31 December
2020
End of
performance
period
Vesting date1
Nil 3,800,000
208,417
Nil
198,398
Nil
–
Nil
Nil 1,900,000
191,870
Nil
196,267
Nil
–
Nil
– 3,800,000
–
–
–
–
–
197,138
–
–
–
196,060
1,900,000
–
–
–
–
–
–
–
–
–
–
–
– 31 Dec 2019 1 Jan 20202
208,4173 31 Dec 2020 1 Jan 20213
198,398 31 Dec 2021
1 Apr 2022
197,138 31 Dec 2022 1 Apr 2023
– 31 Dec 2019 1 Jan 20202
191,8703 31 Dec 2020 1 Jan 20213
196,267 31 Dec 2021
1 Apr 2022
196,060 31 Dec 2022 1 Apr 2023
1. These LTIP options cannot be exercised until the Remuneration Committee determines the performance conditions have been met.
2. As explained in the 2019 Directors’ remuneration report, the performance conditions for this award were formally tested after the 2019 year end and it was deemed that this
award had vested in full. The options were exercised on 6 April 2020.
3. As explained above, the performance conditions for this award were formally tested after the 2020 year end and it was deemed that this award had vested in part.
72
Strix Group Plc Directors’ shareholding guidelines and share interests
To align their interests with shareholders, Executive Directors are required to work towards meeting specific shareholding guidelines.
These guidelines require the Directors to retain at least 50% of the net of taxes gain arising from any shares vesting or acquired under
the LTIP until such time as the share ownership target has been met. The guidelines require the CEO to build a holding equivalent in
value to 200% of basic salary, and the CFO to build a holding equivalent in value to 150% of basic salary.
The Chairman and Non-Executive Directors are encouraged to hold shares in the Company but are not subject to a formal
shareholding guideline. Details of the Directors’ interests in shares are shown in the table below:
Director
Mark Bartlett
Raudres Wong2
Gary Lamb
Mark Kirkland
Richard Sells
1. Based on the year end share price of £2.20.
2. Shares held in the name of her husband, Wing Yip Fong.
Beneficially owned at
31 December 2020
Shareholding guideline achieved at
31 December 2020 as % of 2020 basic salary1
3,400,000
2,200,000
500,000
–
–
>200%
>150%
n/a
n/a
n/a
Application of the remuneration policy for 2021
Fixed remuneration
As explained in detail in the statement from the Chairman of the Remuneration Committee on page 68, the Committee has decided
to increase the salaries of the Executive Directors with effect from 1 April 2021 after no increases were implemented during 2020. The
salary levels for 2021 are set out in the table below.
Director
Mark Bartlett
Raudres Wong
Salary with effect
from 1 April 2021
£360,000
£312,378
% increase
15.6%
2.5%
In addition, and in line with general market trends, the level of pension provision for the CEO with effect from 1 April 2021 will reduce
from 20% to 10% of basic salary. This level of pension contribution is now consistent with that of the CFO and other members of
Strix’s senior management team.
Annual bonus scheme
The annual bonus scheme will continue to incentivise the delivery of performance over the short term. The scheme will again
primarily be based upon the achievement of a challenging profit before tax target. In addition, we intend to introduce an ESG
measure to apply to 15% of the maximum bonus, consistent with the Group’s focus on ESG as an important priority for the business.
We intend to disclose the specific bonus targets in the 2021 Directors’ remuneration report, alongside details of performance against
the targets.
The maximum annual bonus opportunity for the Directors for 2021 will be 100% of basic salary, payable in cash.
LTIP
The Committee intends to grant LTIP awards over shares with a value equivalent to 100% of basic salary for the Executive Directors.
The awards will be subject to the achievement of performance conditions based on the Group’s EPS performance over the three
financial years ending 31 December 2023. The performance targets to be used are set out below.
Annual EPS growth to be achieved in the period ending 31 December 2023
Level of vesting
Below 3%
3%
Between 3% and 6%
6% or above
0%
25%
Vesting on a straight-line basis between 25% and 100%
100%
73
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Directors’ remuneration report continued
The Committee believes that the above targets are appropriately stretching when taking into account expectations of the Group’s
performance over the forthcoming three-year period.
A payment equivalent to the value of the dividend paid over the vesting period will also be payable at the time of vesting. The awards
will be subject to malus and clawback provisions, as set out in the remuneration policy on page 67.
Chairman and Non-Executive Directors
As disclosed in last year’s report, the fees for Gary Lamb, the Board Chairman, and Mark Kirkland, the other Non-Executive Director in
post since 2017, were increased with effect from 1 January 2020 following a review. The Chairman’s fee was increased from £70,000
to £80,000 and the fee for Mark Kirkland was increased from £45,000 to £48,000. This was the first time since the IPO in 2017 that
the fees for these Directors had been increased. As also disclosed last year, the Chairman and Mark Kirkland agreed in March 2020
for the fees to revert to their previous levels in light of the COVID-19 outbreak. This temporary reduction applied for the rest of 2020.
Following a review later in the year, and in recognition of the overall resilience of the Company against the backdrop of the pandemic,
it was agreed that the fees would be restored to the January 2020 levels with effect from 1 January 2021.
Richard Sells was appointed to the Board on 18 March 2020 on a fee of £40,000 per annum. The Board has approved an increase to
this fee to £48,000 per annum, with effect from 1 March 2021. This aligns his fee with that of Mark Kirkland and recognises his recent
appointment to the Remuneration Committee and his work leading the Board’s approach to ESG matters.
This report was approved by the Board of Directors and signed on its behalf by:
Gary Lamb
Chairman of the Remuneration Committee
74
Strix Group Plc Directors’ report
For the year ended 31 December 2020
The Directors present their report together with the audited consolidated financial
statements of Strix Group Plc (“the Company”) for the year ended 31 December 2020.
Principal activities of the Group
The principal activities of Strix Group Plc and its subsidiaries (together “the Group”) are the design, manufacture and supply of kettle
safety controls and other components and devices involving water heating and temperature control, steam management and
water filtration.
Business review and future developments
The Group has delivered a solid performance across the Group during 2020 despite the global impact of the COVID-19 pandemic
on businesses and the economy. Obtaining access to more revolving credit facilities as a result of the LAICA S.p.A. acquisition resulted
in the Group’s net debt position increasing to £37.2m (2019: £26.3m), excluding the impact of IFRS 16 lease liabilities.
The Group has made significant progress during the year with respect to the construction of the new factory, which is expected
to be completed on time and within budget.
Results and dividends
The Group recorded revenue in the year of £95.3m (2019: £96.9m) and a profit after tax of £24.1m (2019: £21.5m).
The Directors recommend a final dividend for the year of 5.25p per share which, if approved at the Annual General Meeting (‘AGM’)
on 27 May 2021, will be payable on 2 June 2021 to shareholders who are on the register at 7 May 2021 and the shares will trade
ex-dividend from 6 May 2021. Together with the interim dividend paid during the year of 2.6p per share, this will result in a total
dividend of 7.85p per share.
Financial risk management
Information relating to the financial risks of the Group have been included within note 22 to the financial statements, “Financial
risk management”.
Directors and their interests
The Directors of the Company who were in office during the year and up to the date of signing the consolidated financial
statements were:
• Mark Bartlett
• Mark Kirkland
• Gary Lamb
• Raudres Wong
• Richard Sells
Mark Kirkland will retire by rotation in accordance with the Company’s Memorandum and Articles of Association and will be proposed
for re-election at the AGM on 27 May 2021. The Directors who held office during the year and as at 31 December 2020 had the
following interests in the number of ordinary shares of the Company:
Name of Director
Mark Bartlett
Mark Kirkland
Gary Lamb
Raudres Wong
Richard Sells
2020
2019
3,400,000
–
500,000
2,200,000
–
300,000
–
500,000
300,000
–
75
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Directors’ report continued
In addition to the interests in ordinary shares shown above, the Group operates a performance share plan (‘the LTIP’) for senior
executives, under which certain Directors have been granted conditional share awards. Subject to achieving performance targets,
the maximum number of ordinary shares which could be issued to Directors in the future under such awards at 31 December 2020
is shown below:
Mark Bartlett
Raudres Wong
2020
2019
603,953
584,197
4,206,815
2,288,137
The market price of the Company’s shares at the end of the financial year was 220.0p (2019: 195.0p) and the range of market prices
in the year was between 134.8p and 245.5p (2019: between 135.0p and 200.0p).
No changes took place in the interests of Directors between 31 December 2020 and the date of signing the consolidated financial
statements.
Directors’ indemnities and insurance
The Articles permit the Board to grant the Directors indemnities in relation to their duties as Directors, including third-party indemnity
provisions (within the meaning of the Isle of Man Companies Act 2006) in respect of any liabilities incurred by them in connection
with any negligence, default, breach of duty or breach of trust in relation to the Company. Deeds of indemnity have been granted to
each Director, but do not cover criminal acts. Directors’ and Officers’ liability insurance cover is in place at the date of this report. The
Board remains satisfied that an appropriate level of cover is in place and a review of the levels of cover takes place on an annual basis.
Going concern
After making appropriate enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future and for at least one year from the date of issue of these
consolidated financial statements. As a result the Directors continue to adopt the going concern basis in preparing the consolidated
financial statements.
Further details are provided in note 2 to the financial statements.
Independent auditor
The auditor, PricewaterhouseCoopers LLC, has indicated its willingness to continue in office and a resolution concerning
reappointment will be proposed at the AGM.
On behalf of the Board
Raudres Wong
Director
23 March 2021
76
Strix Group Plc 77
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Statement of Directors’ responsibilities
Statement of Directors’
responsibilities in respect
of the financial statements
For the year ended 31 December 2020
The Directors are responsible for preparing the consolidated financial statements in accordance with applicable laws and regulations.
The Directors have elected to prepare the consolidated financial statements in accordance with International Financial Reporting
Standards (‘IFRSs’) as adopted by the European Union.
In preparing the consolidated financial statements, the Directors are responsible for:
• selecting suitable accounting policies and applying them consistently;
• stating whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
• making judgements and accounting estimates that are reasonable and prudent;
• preparing the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group
will continue in business; and
• preparing consolidated financial statements which give a true and fair view of the state of affairs of the Group and of the profit or
loss of the Group for that period.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group’s transactions
and disclose with reasonable accuracy at any time the financial position of the Group. They are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Raudres Wong
Director
23 March 2021
78
Strix Group Plc
Independent auditor’s report
Independent auditor’s report
To the members of Strix Group Plc
Our opinion
In our opinion the consolidated financial statements give a true and fair view of the consolidated financial position of Strix Group Plc
(the “Company”) and its subsidiaries (together the “Group”) as at 31 December 2020 and of its consolidated financial performance and
its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the
European Union.
What we have audited
Strix Group Plc’s consolidated financial statements (the “financial statements”) comprise:
• the consolidated balance sheet as at 31 December 2020;
• the consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of changes in equity for the year then ended;
• the consolidated cash flow statement for the year then ended; and
• the notes to the financial statements, which include significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards
are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including
International Independence Standards) issued by the International Ethics Standards Board for Accountants (“IESBA Code”). We have
fulfilled our other ethical responsibilities in accordance with the IESBA Code.
Our audit approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we
also addressed the risk of management override of internal controls, including among other matters, consideration of whether there
was evidence of bias that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
79
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Independent auditor’s report continued
To the members of Strix Group Plc
Key audit matter
How our audit addressed the key audit matter
Our audit work included, but was not restricted to:
• Obtaining a detailed understanding of the standard flows of transactions for each
material revenue stream;
• Employing data analytics tools to trace revenue transactions to cash receipts; and
to identify transactions which did not follow the standard flows, which were verified
to originating documentation to confirm that the entries were valid;
• Considering the stated accounting policy in respect of revenue recognition and
whether it is compliant with International Financial Reporting Standard (IFRS) 15
“Revenue from contracts with customers”;
• Testing significant controls in relation to the sales process, including the
automated generation of invoices and packing-lists, and approval of changes
to standing data;
• Testing revenue cut-off around the year end by selecting a sample of
transactions from either side of the year end to supporting documentation, as
well as reviewing post year end credit notes issued for indications of revenue
manipulation; and
• Testing a sample of revenue transactions back to the purchase order, the invoice
and proof of receipt from the client to confirm occurrence and accuracy of
the transaction.
Based on our work we did not identify any evidence of inappropriate management
override in respect of the amount of revenue recorded
through inappropriate journal entries.
Our audit work included, but was not restricted to:
• Obtaining a detailed understanding of the acquisition accounting process;
• Risk assessing, appropriately scoping and testing the opening balance sheet
and any fair value adjustments recorded for the acquired business;
• Reviewing the intangible asset valuation reports, including calls with
management and the Group’s advisors to critically challenge the valuation
methodology and key underlying assumptions;
• Testing and challenging the key inputs used in the valuation models;
• Testing the fair value of consideration, including contingent and deferred
consideration; and
• Reviewing the disclosures in the financial statements.
Based on our work we are satisfied that the provisional carrying value of assets
and liabilities recorded are appropriate as permitted under IFRS 3.
Revenue recognition
Refer to notes 2 and 7 to the financial statements.
Fraud Risk – Revenue recognition through
inappropriate manual journal entries.
The Directors and management participate
in reward and incentive schemes, including
share-based payment programmes that may
incentivise or place pressure on the Directors and
management to manipulate revenue recognition.
There is a risk that management may override
controls to intentionally misstate revenue
transactions by recording fictitious revenue
transactions through inappropriate manual
journal entries.
Acquisition accounting
Refer to notes 2 and 14 to the financial statements.
The Group acquired 100% of the share capital
of LAICA S.p.A. (“LAICA”) on 26 October 2020 for
£24.4 million resulting in goodwill of £9.5 million.
This transaction falls under the scope of IFRS 3
“Business Combinations” which requires significant
management judgement in determining the fair
value of consideration transferred and assets
acquired, including intangible assets which are
inherently judgemental.
Our key audit matter focuses on the valuation
of assets acquired (including intangibles) and
the completeness of liabilities associated with
the LAICA acquisition.
The Group has elected to continue to record
the acquisition related entries as provisional as at
31 December 2020 as permitted under IFRS 3.
The final entries will be presented in the 30 June
2021 half yearly report.
Other information
The other information comprises the Directors’ report and the Statement of Directors’ responsibilities (but does not include
the financial statements and our auditor’s report thereon), which we obtained prior to the date of the auditor’s report, and the
other information to be included in the annual report and accounts, which is expected to be made available to us after that date
The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When
we read the other information to be included in the annual report and accounts, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the Directors.
80
Strix Group Plc Responsibilities of the Directors for the financial statements
The Directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with
International Financial Reporting Standards as adopted by the European Union and Isle of Man law, and for such internal control
as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the
audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with
our engagement letter dated 26 February 2021 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Nicholas Halsall
For and on behalf of PricewaterhouseCoopers LLC
Sixty Circular Road, Douglas, Isle of Man
23 March 2021
81
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Consolidated statement of comprehensive income
For the year ended 31 December 2020
Revenue
Cost of sales – before exceptional items
Cost of sales – exceptional items
Cost of sales
Gross profit
Distribution costs
Administrative expenses – before exceptional items
Administrative expenses – exceptional items
Administrative expenses
Share of profits from joint ventures
Other operating income
Operating profit
Analysed as:
Adjusted EBITDA1
Amortisation
Depreciation
Right-of-use depreciation
Exchange differences on translation of foreign operations
Other exceptional items
Operating profit
Finance costs
Finance income
Profit before taxation
Income tax expense
Profit for the year
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Profit for the year attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year attributable to:
Equity holders of the Company
Non-controlling interests
Note
7
6
6
11
12
12
6
8
9
2020
£000s
95,305
(55,896)
(504)
(56,400)
38,905
(5,001)
(3,479)
(4,952)
(8,431)
61
1,101
26,635
38,080
(1,477)
(3,042)
(1,470)
–
(5,456)
26,635
(1,194)
13
25,454
(1,384)
24,070
31
24,101
24,049
21
24,070
24,120
(19)
24,101
2019
£000s
96,876
(57,259)
(171)
(57,430)
39,446
(5,287)
(3,385)
(7,152)
(10,537)
–
587
24,209
36,904
(1,256)
(2,903)
(1,323)
110
(7,323)
24,209
(1,351)
19
22,877
(1,339)
21,538
(110)
21,428
21,538
–
21,538
21,428
–
21,428
Earnings per share (pence)
Basic
Diluted
10
10
12.2
11.7
11.3
10.6
1.
Adjusted EBITDA, which is defined as earnings before finance costs, tax, depreciation, amortisation, and exceptional items, is a non-GAAP metric used by management and is
not an IFRS disclosure.
The notes on pages 86 to 115 form part of these consolidated financial statements.
82
Strix Group Plc Consolidated balance sheet
As at 31 December 2020
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in joint ventures
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital and share premium
Share-based payment reserve
Retained earnings/(deficit)
Non-controlling interests
Total equity
Current liabilities
Trade and other payables
Borrowings
Future lease liabilities
Current income tax liabilities
Total current liabilities
Non-current liabilities
Future lease liabilities
Deferred tax liability
Borrowings
Contingent consideration
Post-employment benefits
Total non-current liabilities
Total liabilities
Total equity and liabilities
Note
2020
£000s
2019
£000s
11
12
15
16
17
24
23
18
19
26
18
26
14
19
14
5(c)
29,648
37,205
92
66,945
15,224
20,672
15,446
51,342
118,287
13,130
1,913
6,290
716
22,049
27,151
2,220
1,254
3,048
33,673
2,846
2,558
50,426
5,380
1,355
62,565
96,238
118,287
7,068
25,525
–
32,593
9,497
9,333
13,658
32,488
65,081
1,900
13,063
(14,052)
–
911
17,773
–
1,508
1,929
21,210
2,960
–
40,000
–
–
42,960
64,170
65,081
The consolidated financial statements on pages 82 to 115 were approved and authorised for issue by the Board of Directors on
23 March 2021 and were signed on its behalf by:
Mark Bartlett
Director
Raudres Wong
Director
83
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Total equity
£000s
(12,376)
(270)
(12,646)
21,538
(110)
21,428
(13,870)
5,921
(7,949)
78
78
911
24,070
31
24,101
(15,310)
–
843
–
11,230
1,869
(1,368)
(1,595)
22,049
–
–
–
–
–
–
–
–
–
–
–
–
21
(40)
(19)
–
(108)
843
–
–
–
735
–
716
Consolidated statement of changes in equity
For the year ended 31 December 2020
Share capital and
share premium
£000s
Share-based
payment reserve
£000s
Retained (deficit)/
earnings
£000s
Total equity
attributable to
owners
£000s
Non-controlling
interests
£000s
Balance at 1 January 2019
Transition to IFRS 16 (note 2)
Balance at 1 January 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends paid (note 25)
Share-based payment transactions (note 23)
Total transactions with owners recognised
directly in equity
Post-employment benefit transactions
(note 5(c))
Other transactions recognised directly
in equity
Balance at 1 January 2020
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends paid (note 25)
Dividends paid to non-controlling interests
Acquisition of LAICA S.p.A. (note 14)
Transfers between reserves (note 23)
Issue of shares (note 24)
Share-based payment transactions (note 23)
Total transactions with equity holders
recognised directly in equity
Other transactions recognised directly
in equity (note 23)
Balance at 31 December 2020
1,900
–
1,900
–
–
–
–
–
–
–
–
6,904
(21,180)
(12,376)
–
6,904
–
–
–
–
6,159
(270)
(21,450)
21,538
(110)
21,428
(13,870)
(238)
(270)
(12,646)
21,538
(110)
21,428
(13,870)
5,921
6,159
(14,108)
(7,949)
–
–
78
78
1,900
13,063
(14,052)
–
–
–
–
–
–
–
–
–
–
11,230
–
–
(13,019)
–
1,869
24,049
71
24,120
(15,310)
108
–
13,019
–
–
78
78
911
24,049
71
24,120
(15,310)
108
–
–
11,230
1,869
11,230
(11,150)
(2,183)
(2,103)
–
13,130
–
1,913
(1,595)
6,290
(1,595)
21,333
The notes on pages 86 to 115 form part of these consolidated financial statements.
84
Strix Group Plc Consolidated cash flow statement
For the year ended 31 December 2020
Cash flows from operating activities
Cash generated from operations
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Capitalised development costs
Purchase of HaloSource Inc. assets net of cash acquired
Purchase of LAICA S.p.A. net of cash acquired
Purchase of intangibles
Proceeds on sale of property, plant and equipment
Finance income
Net cash used in investing activities
Cash flows from financing activities
Drawdowns under credit facility
Repayment of borrowings
Finance costs paid
Principal elements of lease payments
Proceeds from issue of new shares
Dividends paid
Dividends paid to non-controlling interests
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of foreign exchange on cash and cash equivalents
Cash and cash equivalents at the end of the year
The notes on pages 86 to 115 form part of these consolidated financial statements.
Note
27
11
14
14
11
19
19
19
26
23
25
2020
£000s
2019
£000s
32,120
(908)
31,212
(12,999)
(2,808)
–
(6,735)
(1,642)
–
13
(24,171)
22,193
(12,339)
(1,951)
(1,455)
3,800
(15,310)
(63)
(5,125)
1,916
13,658
(128)
15,446
35,345
(985)
34,360
(12,565)
(2,358)
(953)
–
(518)
4
19
(16,371)
9,000
(10,000)
(1,198)
(1,301)
–
(13,870)
–
(17,369)
620
13,521
(483)
13,658
85
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Notes to the consolidated financial statements
For the year ended 31 December 2020
1. GENERAL INFORMATION
Strix Group Plc (“the Company”) was incorporated and registered in the Isle of Man on 12 July 2017 as a company limited by shares
under the Isle of Man Companies Act 2006 with the name Steam Plc and with the registered number 014963V. The Company changed
its name to Strix Group Plc on 24 July 2017. The address of its registered office is Forrest House, Ronaldsway, Isle of Man, IM9 2RG.
The Company’s shares were admitted to trading on AIM, a market operated by the London Stock Exchange on 8 August 2017. The
principal activities of Strix Group Plc and its subsidiaries (together “the Group”) are the design, manufacture and supply of kettle safety
controls and other components and devices involving water heating and temperature control, steam management and water filtration.
2. PRINCIPAL ACCOUNTING POLICIES
The Group’s principal accounting policies, all of which have been applied consistently to all of the years presented, are set out below.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and
International Financial Reporting Standards Interpretation Committee (‘IFRS IC’) interpretations as adopted by the European Union.
The financial statements comply with IFRS as issued by the International Accounting Standards Board (‘IASB’). The financial
statements have been prepared on the going concern basis.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in note 3.
Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
• contingent consideration – measured at fair value
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and all of its subsidiary undertakings.
Subsidiaries are fully consolidated from the date on which control commences and are deconsolidated from the date that
control ceases. The financial statements of all group companies are adjusted, where necessary, to ensure the use of consistent
accounting policies.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed to or has the rights to variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, consolidated statement of changes in equity and the consolidated balance sheet, respectively.
Joint ventures
Joint ventures are joint arrangements of which the Group has joint control, with rights to the net assets of those arrangements.
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the parties sharing control. Interests in joint ventures are accounted for using the equity
method of accounting (detailed below) after being recognised at cost in the consolidated balance sheet.
Equity method of accounting
Under the equity method of accounting, investments in joint ventures are initially recognised at cost and adjusted thereafter to
recognise the Group’s share of the post-acquisition profits or losses from the joint arrangement in profit or loss, and the Group’s share
of movements in other comprehensive income of the joint arrangement in other comprehensive income. Dividends received from
joint ventures are recognised as a reduction in the carrying amount of the investment.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest
in these entities.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the impairment of assets policy
as described below in this note.
86
Strix Group Plc Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
Transactions eliminated on consolidation
Intra-group balances, and any gains and losses or income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date with the assets and liabilities of
subsidiaries being measured at their fair values. Any excess of the cost of acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
•
• the fair value of the identifiable assets acquired and liabilities assumed.
if the business combination is achieved in stages, the fair value of the pre-existing interest in the acquiree; less
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity
on an acquisition-by-acquisition basis at the non-controlling interest’s proportionate share of the fair value of the acquired entity’s net
identifiable assets. Transaction costs that the Group incurs in connection with a business combination are expensed as incurred.
If the initial accounting for a business combination is preliminary by the end of the reporting period in which the business
combination occurs, provisional amounts are reported. Those provisional amounts are adjusted during the measurement period,
or additional assets or liabilities recognised to reflect the facts and circumstances that existed as at the acquisition date.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value, with changes in fair value recognised in profit or loss.
Going concern
These consolidated financial statements have been prepared on the going concern basis.
The Directors have made enquiries to assess the appropriateness of continuing to adopt the going concern basis. In making this
assessment they have considered:
• the strong historic trading performance of the Group;
• budgets and cash flow forecasts for the period to December 2023;
• the current financial position of the Group, including its cash and cash equivalents balances of £15.4m;
• the availability of further funding should this be required (including the headroom of £30.0m on the revolving credit facility and
the access to the AIM market afforded by the Company’s admission to AIM);
• the low liquidity risk the Group is exposed to;
• the fact that the Group operates within a sector that is experiencing relatively stable demand for its products, amidst the global
COVID-19 pandemic; and
• that there has been no disruption to the Group’s manufacturing or supply chain.
Based on these considerations, the Directors have concluded that there are no material uncertainties that may cast significant doubt
on its ability to continue as a going concern and the Group has adequate resources to continue in operational existence for the
foreseeable future. As a result, the Directors continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
Foreign currency translation
Functional and presentational currency
Items included in the financial information of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Sterling,
which is Strix Group Plc’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets
and liabilities denominated in foreign currencies at year end exchange rates, are recognised in the consolidated statement of
comprehensive income within cost of sales.
87
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
Foreign currency translation continued
Group companies
The results and financial position of foreign operations that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets, including intangible assets and goodwill arising on acquisition of those foreign operations, and liabilities for each balance
•
sheet presented are translated at the closing rate at the date of that balance sheet, or at historic rates for certain line items;
income and expenses for each statement of comprehensive income presented are translated at average exchange rates (unless
this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognised in the consolidated statement of comprehensive income.
Standards, amendments and interpretations adopted
There are no standards, amendments to standards or interpretations that the Group has applied for the first time in the reporting
period commencing 1 January 2020 that have had a material impact on the financial statements.
Standards, amendments and interpretations which are not effective or early adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future transactions.
Property, plant and equipment
Initial recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes the
original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. When
parts of an item of property, plant and equipment have different useful lives, the components are accounted for as separate items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying value of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during
the reporting period in which they are incurred.
Subsequent measurement
Depreciation is calculated using the straight-line method to allocate the cost of the assets, net of any residual values, over their
estimated useful lives as follows:
• Plant and machinery
• Fixtures, fittings and equipment
• Motor vehicles
• Production tools
• Right-of-use assets
• Land and buildings
3–10 years
2–5 years
3–5 years
1–5 years
2–8 years
50 years
The Group manufactures some of its production tools and equipment. The costs of construction are included within a separate
category within property, plant and equipment (‘assets under construction’) until the tools and equipment are ready for use at which
point the costs are transferred to the relevant asset category and depreciated. Any items that are scrapped are written off to the
consolidated statement of comprehensive income.
The assets’ residual values and useful lives are reviewed at the end of each reporting period.
Fixtures, fittings and other equipment includes computer hardware.
Derecognition
Property, plant and equipment assets are derecognised on disposal, or when no future economic benefits are expected from use
or disposal. Gains or losses arising from derecognition of property, plant and equipment, measured as the difference between net
disposal proceeds and the carrying amount of the asset, are recognised in the consolidated statement of comprehensive income
on derecognition.
88
Strix Group Plc
Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
Impairment
Tangible assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use.
Intangible assets
Initial recognition and measurement
The Group’s intangible assets relate to goodwill, capitalised development costs, intellectual property, customer relationships,
brands and computer software. Goodwill is the excess of the consideration paid over the fair value of the identifiable assets, liabilities
and contingent liabilities in a business combination and relates to assets which are not capable of being individually identified and
separately recognised. Goodwill acquired is allocated to those cash-generating units (‘CGUs’) expected to benefit from the business
combination in which the goodwill arose. Goodwill is measured at cost less any accumulated impairment losses and is held in
the functional currency of the acquired entity to which it relates and remeasured at the closing exchange rate at the end of each
reporting period, with the movement taken through other comprehensive income. The CGUs represent the lowest level within the
Group at which goodwill is monitored for internal management purposes.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.
Internal costs that are incurred during the development of significant and separately identifiable new products and manufacturing
techniques for use in the business are capitalised when the following criteria are met:
•
it is technically feasible to complete the project so that it will be available for use;
• management intends to complete the project and use or sell it;
•
• adequate technical, financial, and other resources to complete the project and to use or sell the project output are available; and
• expenditure attributable to the project during its development can be reliably measured.
it can be demonstrated how the project will develop probable future economic benefits;
Capitalised development costs include employee, travel and other directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended by management.
Intellectual property is capitalised where it is probable that future economic benefits associated with the patent will flow to the Group,
and the cost can be measured reliably. The costs of renewing and maintaining patents are expensed in the consolidated statement of
comprehensive income as they are incurred.
Customer relationships, intellectual property and a brand have been recognised on the acquisition of LAICA S.p.A. where it is
probable that future economic benefits will flow to the Group.
Computer software is only capitalised when it is probable that future economic benefits associated with the software will flow to the
Group, and the cost of the software can be measured reliably. Computer software that is integral to an item of property, plant and
equipment is included as part of the cost of the asset recognised in property, plant and equipment.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Subsequent measurement
The Group amortises intangible assets with a limited useful life using the straight-line method over the following periods:
• Capitalised development costs
•
• Technology and software
• Customer relationships
• Brands
2–5 years
Lower of useful or legal life
2–10 years
10–13 years
Indefinite useful life
Intellectual property
Amortisation is charged to the consolidated statement of comprehensive income on a straight-line basis over the estimated
useful lives above. Given proximity of the LAICA S.p.A. acquisition to the year end, the intangible assets arising on acquisition
have not been amortised in the period and amortisation will be charged straight-line basis over the estimated useful lives
commencing 1 January 2021.
Derecognition
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains
or losses arising from derecognition of intangible assets, measured as the difference between the net disposal proceeds and the
carrying amount of the asset, and are recognised in the consolidated statement of comprehensive income when the asset is
derecognised. Where a subsidiary is sold, any goodwill arising on acquisition, net of any impairment, is included in determining
the profit or loss arising on disposal.
89
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
Intangible assets continued
Impairment
Intangible assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than
goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
Leases
Leases in which a significant portion of the risks and rewards of ownership were not transferred to the Group as lessee were classified
as operating leases.
The leasing activities of the Group and how these are accounted for
The Group leases office space, workshops, warehouses and factory space. Rental contracts are typically made for periods of
3–10 years, but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Leases are recognised as right-of-use assets and a corresponding liability at the date at which the leased asset is available for
use by the Group. Each lease payment is allocated between the liability, finance costs and foreign exchange (where the lease is
denominated in a foreign currency). The finance cost is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter
of the asset’s useful life and the lease term on a straight-line basis.
Measurement of future lease liabilities
Assets and liabilities arising from a lease are initially measured on a present value basis. Future lease liabilities include the net present
value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that options; and
• the payment of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the consolidated statement of
comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
Measurement of right-of-use assets
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
90
Strix Group Plc Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in
the consolidated statement of comprehensive income. Short-term leases are leases with a lease term of 12 months or less. Low-value
assets comprise primarily IT equipment.
Extension and termination options
Extension and termination options are included in a number of property leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts.
Lease income
Lease income from operating leases where the Group is a lessor is recognised in other income on a straight-line basis over the
lease term.
Financial assets
Classification
The Group classifies its financial assets as financial assets held at amortised cost. Management determines the classification of its
financial assets at initial recognition.
The Group classifies its financial assets as at amortised cost only if both of the following criteria are met:
• the asset is held within a business model whose objective is to collect the contractual cash flows; and
• the contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets held at amortised cost are initially recognised at fair value, and are subsequently stated at amortised cost using the
effective interest method. Financial assets at amortised cost comprise cash and cash equivalents and trade and other receivables
(excluding prepayments and the advance purchase of commodities). Trade receivables are amounts due from customers for
products sold performed in the ordinary course of business. They are due for settlement either on a cash in advance basis, or
generally within 45 days, and are therefore all classified as current. Other receivables generally arise from transactions outside the
usual operating activities of the Group.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised
cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The Group applies the expected credit loss model to financial assets at amortised cost. For trade receivables, the Group applies the
simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the
receivables. Given the nature of the Group’s receivables, expected lifetime losses are not material.
Financial liabilities
With the exception of contingent consideration, the Group initially recognises its financial liabilities at fair value net of transaction
costs where applicable and subsequently they are measured at amortised cost using the effective interest method. Financial liabilities
comprise trade payables, payments in advance from customers and other liabilities. They are initially recognised at transaction price,
unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the
future payments discounted at a market rate of interest. Contingent consideration is measured at fair value with changes in fair
value recognised in profit or loss.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current
liabilities. Other liabilities include rebates.
Borrowings, including option-type arrangements, are recognised initially at fair value. Option-type borrowing arrangements are
subsequently measured at amortised cost. Fees paid on the establishment of such option-type arrangements are recognised as a ‘right
to borrow’ asset, and are capitalised as a prepayment for liquidity services and amortised over the period of the facility to which the
fees relate. This prepayment has been deducted from the carrying value of the financial liability at 31 December 2020. In the prior year
the amount is included within prepayments. The prior year amounts have not be restated as they are not considered to be material.
Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying
assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income
earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the
borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.
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2. PRINCIPAL ACCOUNTING POLICIES continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with a maturity of three months or less. While cash and cash
equivalents are also subject to the impairment requirements of IFRS 9, impairment losses are not material.
Employee benefits
The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday entitlements and defined
benefit and contribution pension plans.
Short-term benefits
Short-term benefits, including holiday pay and similar non-monetary benefits, are recognised as an expense in the period in which
the service is rendered. The Group recognises a liability and an expense for bonuses where contractually obliged or where there is
a past practice that has created a constructive obligation.
Pensions
Subsidiary companies operate both defined contribution and defined benefit plans for the benefit of their employees.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group
has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees
the benefits relating to employee service in the current and prior periods. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee benefit expense when they are due. A defined benefit
plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent
on one or more factors, such as age, years of service or compensation.
The liability recognised in the consolidated balance sheet in respect of the defined benefit scheme is the present value of the defined
benefit obligation at the balance sheet date less the fair value of the scheme assets, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit obligation is calculated by qualified independent actuaries using
the projected unit method. The present value of the defined benefit obligation is determined by discounting the estimated future
cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will
be paid, and that have terms to maturity approximating to the terms of the related pension liability.
The net pension finance cost is determined by applying the discount rate, used to measure the defined benefit pension obligation
at the beginning of the accounting period, to the net pension obligation at the beginning of the accounting period taking into
account any changes in the net pension obligation during the period as a result of cash contributions and benefit payments.
Pension scheme expenses are charged to the consolidated statement of comprehensive income within administrative expenses.
Actuarial gains and losses are recognised immediately in the consolidated statement of comprehensive income. Net defined
benefit pension scheme deficits before tax relief are presented separately on the face of the consolidated balance sheet within
non-current liabilities.
Share-based payments
The Group has issued conditional equity settled share-based options and conditional share awards under a Long-Term Incentive Plan
(‘LTIP’) in the Parent Company to certain employees. Under the LTIP, the Group receives services from employees as consideration
for equity instruments of the Group. The fair value of the employee services received in exchange for the grant of the options is
recognised as an expense.
The total amount to be expensed is determined by reference to the fair value of the options granted:
•
including any market performance conditions such as the requirement for the Group’s shares to be above a certain price for
a pre-determined period;
• excluding the impact of any service and non-market performance vesting conditions, including earnings per share targets,
dividend targets, and remaining an employee of the Group over a specified period of time; and
including the impact of any non-vesting conditions, where relevant.
•
These awards are measured at fair value on the date of the grant using an option pricing model and expensed in the consolidated
statement of comprehensive income on a straight-line basis over the vesting period, after making an allowance for the estimated
number of shares that will not vest. The level of vesting is reviewed and adjusted bi-annually in the consolidated statement of
comprehensive income, with a corresponding adjustment to equity.
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Strix Group Plc Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
If the terms of an equity settled award are modified, at a minimum, an expense is recognised as if the terms had not been modified.
An additional expense is recognised for any modification that increases the total fair value of the share-based payment, or is
otherwise beneficial to the employee, as measured at the date of modification.
If an equity award is cancelled by forfeiture, where the vesting conditions (other than market conditions) have not been met, any
expense not yet recognised for that award as at the date of forfeiture is treated as if it had never been recognised. At the same time,
any expense previously recognised on such cancelled equity awards is reversed, effective as at the date of forfeiture.
The dilutive effect, if any, of outstanding options is included in the calculation of diluted earnings per share.
Further details on the awards is included in note 23.
Inventories
Inventories consist of raw materials and finished goods which are valued at the lower of cost and net realisable value. Cost is
determined using the first in, first out (‘FIFO’) method. Cost comprises expenditure which has been incurred in the normal course of
business in bringing the products to their present location and condition, and include all related production and engineering overheads
at cost. Net realisable value is the estimated selling price in the ordinary course of business, less applicable selling expenses. At the end
of each reporting period, inventories are assessed for impairment. If inventory is impaired, the identified inventory is reduced to its
selling price less costs to complete and an impairment charge is recognised in the consolidated statement of comprehensive income.
Revenue
The Group primarily recognises revenue from the sales of goods to its customers. The amount of revenue relating to the provision
of services is minimal and the Group does not undertake any significant long-term contracts with its customers where revenue is
recognised over time.
The transaction price is based on the sales agreement with the customer. Revenue is reported net of sales rebates, which are based
on a certain volume of purchases by a customer within a given period. Other than sales rebates, there is no variable consideration.
Rebates are contractually agreed taking into consideration the type of customer, the type of transaction and the specifics of each
arrangement. No element of financing is deemed present because the sales are made under normal credit terms, which is consistent
with market practice.
The performance obligation is the delivery of goods to customers, and revenue is recognised on dispatch for most revenue
transactions. Otherwise, revenue is recognised when the products have been shipped to a specific location, or when the risks of
obsolescence and loss have been transferred to the OEM or wholesaler. There are a very small number of revenue transactions
where different performance obligations and/or recognition patterns occur. All of the amounts recognised as revenue are based
on contracts with customers.
The Group does not create any contract assets or contract liabilities and all amounts are recognised as trade receivables as there are
no performance conditions other than the passage of time. Payment terms for the majority of customers are to pay cash in advance of
the goods being delivered. The Group recognises these balances within trade and other payables on the consolidated balance sheet
as “Payments in advance from customers”. At the point the revenue is recognised, these balances are transferred from “Payments in
advance from customers” to revenue. For the majority of other customers payment is normally due within 30 to 45 days from the date
of sale.
Due to the simple nature of the Group’s revenue no significant judgements have been made in the application of IFRS 15.
All revenue is derived from the principal activities of the Group.
Cost of sales
Cost of sales comprise costs arising in connection with the manufacture of thermostatic controls, cordless interfaces, and other
products such as water jugs and filters. Cost is based on the cost of purchases on a first in, first out basis and includes all direct costs
and an appropriate portion of fixed and variable overheads where they are directly attributable to bringing the inventories into their
present location and condition. This also includes an allocation of non-production overheads, costs of designing products for
specific customers and amortisation of capitalised development costs.
Exceptional items
Items that are material in size, unusual or infrequent in nature are included within operating profit and disclosed separately as
exceptional items in the consolidated statement of comprehensive income. The separate reporting of exceptional items helps
provide an indication of the Group’s underlying performance, and includes restructuring costs, exit costs, share-based payment
transaction costs and costs relating to certain strategic projects.
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2. PRINCIPAL ACCOUNTING POLICIES continued
Research and development
Research expenditure is written off to the consolidated statement of comprehensive income within cost of sales in the year in which it is
incurred. Development expenditure is written off in the same way unless the Directors are satisfied as to the technical, commercial and
financial viability of the individual projects. In this situation, the expenditure is classified on the consolidated balance sheet as a capitalised
development cost.
Finance costs
Finance costs comprise interest charges on pension liabilities, interest on non-current borrowings, and finance charges relating to
letters of credit. Finance costs are recognised when the right to make a payment is established.
Finance income
Finance income comprises bank interest receivable on funds invested. Finance income is recognised when the right to receive a
payment is established.
Income tax
Income tax for the years presented comprises current tax. Income tax is recognised in profit or loss except to the extent that it relates
to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the
balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income, and any
adjustment to tax payable in respect of previous years.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised
if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting
nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively
enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
The deferred tax liability in relation to investment property that is measured at fair value is determined assuming the property will be
recovered entirely through sale.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and
where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity
as a deduction from the proceeds. Share premium has arisen on the issue of shares during the year and is distributable. Share capital
and share premium have been grouped for the purposes of financial statement presentation.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when
declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the AGM.
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Strix Group Plc Notes to the consolidated financial statements continued
2. PRINCIPAL ACCOUNTING POLICIES continued
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing the performance of the operating
segments, has been identified as the Board of Directors. The Board of Directors consists of the Executive Directors and the Non-
Executive Directors.
Government grants
Subsidiary companies receive grants from the Isle of Man and Chinese Governments towards revenue and capital expenditure.
Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received and all
attached conditions complied with.
Revenue grants are recognised as income over the period necessary to match the grant on a systematic basis to the costs that
it is intended to compensate. The grant income is presented within other operating income in the consolidated statement of
comprehensive income.
Capital grants are recognised by deducting the carrying amount of the asset. The grant is recognised in profit or loss over the life of
a depreciable asset as a reduced depreciation expense. The grants are dependent on the subsidiary company having fulfilled certain
operating, investment and profitability criteria in the financial year, primarily relating to employment.
EBITDA and adjusted EBITDA – non-GAAP performance measures
Earnings before Interest, Taxation, Depreciation and Amortisation (‘EBITDA’) and adjusted EBITDA are non-GAAP measures used by
management to assess the operating performance of the Group. Exceptional items charges are excluded from EBITDA to calculate
adjusted EBITDA.
The Directors primarily use the adjusted EBITDA measure when making decisions about the Group’s activities. As these are non-
GAAP measures, EBITDA and adjusted EBITDA measures used by other entities may not be calculated in the same way and hence
are not directly comparable.
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s financial statements under IFRS requires the Directors to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are
continually evaluated and are based on historical experience and other factors including expectations of future events that are
believed to be reasonable under the circumstances.
Critical judgements in applying the entity’s accounting policies
Going concern
The Directors have prepared the consolidated financial statements on a going concern basis. In making this judgement the Directors
have considered the Company’s and the Group’s financial position, current intentions, profitability of operations and access to financial
resources and analysed the impact of the situation in the financial markets on the operations of the Group, as set out in the paragraphs
entitled ‘Going concern’ in note 2.
Functional currency
The Directors consider the factors set out in paragraphs 9, 10 and 11 of IAS 21, “The effects of changes in foreign currency” to
determine the appropriate functional currency of its overseas operations. These factors include the currency that mainly influences
sales prices, labour, material and other costs, the competitive market serviced, financing cash flows and the degree of autonomy
granted to the subsidiaries.
The Directors have applied judgement in determining the most appropriate functional currency for all entities to be Sterling, with
the exception of Strix (Hong Kong) Ltd which has a Hong Kong Dollar functional currency, Strix (USA), Inc. which has a United States
Dollar functional currency, HaloSource Water Purification Technology (Shanghai) Co. Ltd which have a Chinese Yuan functional
currency, LAICA S.p.A. which has a Euro functional currency and LAICA International Corp. which has a Taiwan Dollar functional
currency. This may change as the Group’s operations and markets change in the future.
Capitalisation of development costs
The Directors consider the factors set out in the paragraphs entitled ‘Intangible assets – initial recognition and measurement’ in note
2 with regard to the timing of the capitalisation of the development costs incurred. This requires judgement in determining when the
different stages of development have been met.
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3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES continued
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are disclosed below.
Acquisition of a subsidiary
In performing the acquisition accounting, the fair value of the consideration transferred (including contingent consideration) and fair
value of the assets acquired and liabilities assumed have been measured. Initially, these are measured on a provisional basis and if new
information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition
identifies adjustments to the above amounts, or any additional provisions that existed at the date of acquisition, then the accounting
for the acquisition will be revised. The key inputs used are disclosed in note 14.
4. SEGMENTAL REPORTING
Management has determined the operating segments based on the operating reports reviewed by the Board of Directors that
are used to assess both performance and strategic decisions. Management has identified that the Board of Directors is the chief
operating decision maker in accordance with the requirements of IFRS 8 ‘Operating segments’. The Group’s activities consist of
the design, manufacture and sale of thermostatic controls, cordless interfaces, and other products such as water jugs and filters,
primarily to Original Equipment Manufacturers (‘OEMs’) based in China. The Group has been managed as one entity and
management have consequently reported internally on the Group’s performance as one segment.
The Board of Directors has identified three reportable segments from a product perspective, namely: kettle controls, water category
and appliances category.
The Board of Directors primarily uses a measure of gross profit to assess the performance of the operating segments, broken down
into revenue and cost of sales for each respective segment which is reported to them on a monthly basis. Information about
segment revenue is disclosed below, as well as in note 7.
A prior year comparative analysis has not been provided has no such analysis had been presented to the Board of Directors previously
for monthly management reporting purposes. Consequently, the prior year comparative analysis of gross profit has been not been
disclosed in this note.
Revenue
Cost of sales
Gross profit
2020 (£000s)
Kettle controls
Water category
Appliances category
Total
79,816
(44,022)
35,794
11,744
(9,387)
2,357
3,745
(2,991)
754
95,305
(56,400)
38,905
Assets and liabilities
No analysis of the assets and liabilities of each operating segment is provided to the Board of Directors as part of monthly
management reporting. Therefore no analysis of segmented assets or liabilities is disclosed in this note.
Non-current assets (i) attributed to country of domicile and (ii) attributable to all other foreign countries
A geographical analysis of revenue from external customers has not been presented, as the OEMs to whom the majority of sales are
made are primarily based in China.
In accordance with IFRS 8, the following table discloses the non-current assets located in both the Company’s country of domicile
(the Isle of Man) and foreign countries, primarily China, where one of the Group’s principle subsidiaries is domiciled.
Country of domicile
Intangible assets
Property, plant and equipment
Total country of domicile non-current assets
Foreign countries
Intangible assets
Property, plant and equipment
Total foreign non-current assets
Total non-current assets
96
2020
£000s
8,888
2,958
11,846
20,760
34,247
55,007
66,853
2019
£000s
6,137
3,381
9,518
931
22,144
23,075
32,593
Strix Group Plc Notes to the consolidated financial statements continued
4. SEGMENTAL REPORTING continued
Major customers
In 2020, there were two major customers that individually accounted for at least 10% of total revenues (2019: two customers).
The revenues relating to these customers in 2020 were £13,683,000 and £11,618,000 (2019: £20,816,000 and £11,064,000).
5. EMPLOYEES AND DIRECTORS
(a) Employee benefit expenses
Wages and salaries
Defined contribution pension cost (note 5(c)(i) and 5(c)(iii))
Employee benefit expenses
Share-based payment transactions (note 23)
Total employee benefit expenses
2020
£000s
18,347
631
18,978
1,869
20,847
2019
£000s
17,981
646
18,627
5,944
24,571
(b) Key management compensation
The following table details the aggregate compensation paid in respect of the key management, which includes the Directors and
the members of the Trading Board, representing members of the senior management team from all key departments of the Group.
Salaries and other short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payment transactions
2020
£000s
1,673
160
99
404
2,336
2019
£000s
1,787
160
100
4,525
6,572
There are no defined benefit schemes for key management. Pension costs under defined contribution schemes are included in the
post-employment benefits disclosed above.
(c) Retirement benefits
(i) The Strix Limited Retirement Fund
The Strix Limited Retirement Fund is a defined contribution scheme under which the assets of the scheme are held separately from
those of the Group in an independently administered fund. The pension cost charge represents costs payable by the Group to the
fund and amounted to £611,000 (2019: £646,000).
(ii) The Strix Limited (1978) Retirement Fund
The Strix Limited (1978) Retirement Fund is a defined benefit scheme providing benefits based on final pensionable pay. The assets
of the scheme are held separately from those of the Group. The trustees of the pension fund are required by law to act in the interest
of the fund and of all relevant stakeholders in the scheme. The trustees are responsible for the investment policy with regard to the
assets of the fund.
The scheme is closed to new members and future accruals. During 2019, all retirement benefit plan obligations relating to the
defined benefit scheme were transferred to Aviva. On transfer, income of £78,000 was recognised directly in equity.
The remainder of the disclosures required by IAS 19 have not been included in these financial statements as the scheme is not
material to the Group.
(iii) LAICA S.p.A. Termination Indemnity
LAICA S.p.A., acquired by the Group on 26 October 2020 (note 14), operates a defined benefit plan for its employees in accordance
with the Italian Termination Indemnity (named “Trattamento di Fine Rapporto” or “TFR”) provisions defined by the National Civil Code
(Article 2120). In accordance with IAS 19, the TFR provision is a defined benefit plan, which is based on the principle to allocate the
final cost of benefits over the periods of service which give rise to an accrual of deferred rights under each particular benefit plan.
The calculation of the liability is based on both the length of service and on the remuneration received by the employee during that
period of service. Article 2120 states that severance pay is due to the employee by the companies in any case of termination of the
employment contract. For each year of service, severance pay accruals are based on total annual compensation divided by 13.05.
Although the benefit is paid in full by the employer, part (0.5% of pay) of the annual accrual is paid to INPS by the employer, and is
subtracted from the severance pay accruals for the contribution reference period. As of 31 December of every year, the severance
pay accrued as of 31 December of the preceding year is revalued by an index stipulated by law as follows: 1.5% plus 75% of the
increase over the last 12 months in the consumer price index, as determined by the Italian Statistical Institute.
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5. EMPLOYEES AND DIRECTORS continued
(c) Retirement benefits continued
(iii) LAICA S.p.A. Termination Indemnity continued
In accordance with IAS 19, the determination of the present value of the liability is carried out by an independent actuary under the
projected unit method. This method considers each period of service provided by workers at the company as a unit of additional
right. The actuarial liability must therefore be quantified based on seniority reached at the valuation date and reproportioned based
on the ratio between the years of service accrued at the reference date of the assessment and the overall seniority reached at the
time scheduled for the payment of the benefit. Furthermore, this method provides to consider future salary increases, due to any
cause (inflation, career, contract renewals, etc.), up to the time of termination of the employment relationship.
The below chart summarises the defined benefit pension liability of LAICA S.p.A. at 31 December 2020:
Liability as at date of acquisition by the Group (26 Oct 2020)
Current service cost for the period
Liability as at 31 December 2020
The key actuarial assumptions used in arriving at these figures include:
• annual discount rate of 2.5%
• annual price inflation of 6.0%
• annual TFR increase of 2.1%
• demographic assumptions based on INPS published data
2020
£000s
878
20
898
The remainder of the post-employment benefit liability of £457,000 (2019: £nil) as at 31 December 2020 is made up of contractual
post-employment liabilities within LAICA S.p.A. that do not meet the definition of a defined benefit plan in accordance with IAS 19.
6. EXPENSES
(a) Expenses by nature
Employee benefit expense
Depreciation charges
Right-of-use depreciation charges
Amortisation and impairment charges
Exceptional items – reorganisation costs
Exceptional items – strategic projects
Exceptional items – share-based payment transactions
Foreign exchange losses
2020
£000s
18,978
3,042
1,470
1,477
334
3,253
1,869
505
2019
£000s
18,627
2,903
1,323
1,298
171
1,208
5,944
266
Research and development expenditure totalled £4,117,000 (2019: £4,439,000), and £2,808,000 (2019: £2,358,000) of development
costs have been capitalised during the year.
(b) Exceptional items
Strategic project costs relate to certain projects being undertaken to support the achievement of the Group’s strategic plans including
the acquisitions of LAICA S.p.A. and HaloSource disclosed in note 14, COVID-19 costs of £630,000 and the implementation of a new
global Enterprise resource planning system.
The share-based payment transactions relate to conditional share options and awards issued to certain employees. Further details are
provided in note 23.
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Strix Group Plc Notes to the consolidated financial statements continued
6. EXPENSES continued
(c) Auditor’s remuneration
During the year, the Group (including its subsidiaries) obtained the following services from the Company’s auditor as detailed below:
Fees payable to Company’s auditor and its associates for the audit of the consolidated
financial statements
Fees payable to Company’s auditor and its associates for other services:
– the audit of Company’s subsidiaries
– other assurance services
– tax compliance and other
7. REVENUE
The following table shows a disaggregation of revenue into categories by product line:
Kettle controls
Water category
Appliances category
Total revenue
8. FINANCE COSTS
Letter of credit charges
Right-of-use lease interest
Borrowing costs
Total finance costs
9. TAXATION
Analysis of charge in year
Current tax (overseas)
Current tax on overseas profits for the year
Adjustments in respect of prior years – overseas
Total tax charge
2020
£000s
2019
£000s
178
24
12
7
221
124
4
9
5
142
2020
£000s
79,816
11,744
3,745
95,305
2019
£000s
85,799
9,829
1,248
96,876
2020
£000s
89
103
1,002
1,194
2020
£000s
1,384
–
1,384
2019
£000s
65
110
1,176
1,351
2019
£000s
1,265
74
1,339
Overseas tax relates primarily to tax payable by the Group’s subsidiary in China. During 2016, the Group’s Chinese subsidiary
paid additional tax of £1.1m following a benchmarking assessment by the Chinese tax authorities relating to contract processing
businesses in the years 2009 to 2014. The potential additional liabilities for 2015 to 2018 of £0.9m (2019: £1.2m), has been included
within the current tax liability balance in the consolidated balance sheet as a result. The Chinese subsidiary converted to an import
processing model in 2019.
A deferred tax liability of £2,558,000 (2019: £nil) has been recognised as part of the fair value acquisition accounting of LAICA S.p.A.
(note 14) relating to the timing differences arising on the recognition of intangible assets.
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Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Notes to the consolidated financial statements continued
9. TAXATION continued
As the most significant subsidiary in the Group is based on the Isle of Man, this is considered to represent the most relevant standard
rate for the Group. The tax assessed for the year is higher than the standard rate of income tax in the Isle of Man of 0% (2019: 0%).
The differences are explained below.
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the rate of income tax in the Isle of Man of 0% (2019: 0%)
Impact of higher overseas tax rate
Adjustments in respect of prior years – overseas
Total taxation charge
2020
£000s
25,454
–
1,384
–
1,384
2019
£000s
22,877
–
1,265
74
1,339
The Group is subject to Isle of Man income tax on profits at the rate of 0% (2019: 0%), Chinese income tax on profits at the rate of 25%
(2019: 25%) and Italian income tax on profits at a rate of 27.9% (2019: n/a), following the acquisition of the Italian subsidiary LAICA
S.p.A. on 26 October 2020.
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the following data.
Earnings (£000s)
Earnings for the purposes of basic and diluted earnings per share
Number of shares (000s)
Weighted average number of shares for the purposes of basic earnings per share
Weighted average dilutive effect of share awards
Weighted average number of shares for the purposes of diluted earnings per share
Earnings per ordinary share (pence)
Basic earnings per ordinary share
Diluted earnings per ordinary share
Adjusted earnings per ordinary share (pence)1
Basic adjusted earnings per ordinary share1
Diluted adjusted earnings per ordinary share1
The calculation of basic and diluted adjusted earnings per share is based on the following data:
Profit for the year
Add back:
Reorganisation costs/exit costs
Strategic project costs
Share-based payment transactions
Adjusted earnings1
2020
2019
24,049
21,538
197,432
8,947
206,379
190,000
12,845
202,845
12.2
11.7
14.9
14.3
11.3
10.6
15.2
14.2
2020
£000s
2019
£000s
24,049
21,538
334
3,253
1,869
29,505
171
1,208
5,944
28,861
1.
Adjusted results exclude exceptional items, which include share-based payment transactions and other strategic project costs. Adjusted results are non-GAAP metrics used by
management and are not an IFRS disclosure
The denominators used to calculate both basic and adjusted earnings per share are the same as those shown above for both basic
and diluted earnings per share.
100
Strix Group Plc Notes to the consolidated financial statements continued
11. INTANGIBLE ASSETS
At 1 January
Cost
Accumulated amortisation and impairment
Net book value
Period ended 31 December
Additions
Acquisition of LAICA S.p.A. (note 14)
Disposals (cost)
Disposals (accumulated depreciation)
Amortisation charge
Exchange differences
Closing net book value
At 31 December
Cost
Accumulated amortisation and impairment
Net book value
Development
cost
£000s
Software
£000s
Intellectual
property
£000s
Customer
relationships
£000s
Brand name
£000s
Goodwill
£000s
Total
£000s
2020
9,837
(4,006)
5,831
2,808
–
(300)
267
(1,260)
1
7,347
12,346
(4,999)
7,347
922
(540)
382
2,363
–
–
–
(170)
1
2,576
3,286
(710)
2,576
488
(17)
471
140
214
–
–
(47)
(8)
770
834
(64)
770
–
–
–
–
2,406
–
–
–
–
2,406
2,406
–
2,406
–
–
–
–
6,643
–
–
–
–
6,643
6,643
–
6,643
384
–
384
–
9,522
–
–
–
–
11,631
(4,563)
7,068
5,311
18,785
(300)
267
(1,477)
(6)
9,906
29,648
9,906
–
9,906
35,421
(5,773)
29,648
Amortisation charges have been treated as an expense, and are allocated to cost of sales (£1,410,000), distribution costs £nil and
administrative expenses (£67,000) in the consolidated statement of comprehensive income.
£861,000 (2019: £nil) of assets from property, plant and equipment (note 12) have been reclassified to intangible assets. These
amounts are included within the additions of software and intellectual property.
At 1 January
Cost
Accumulated amortisation and impairment
Net book value
Period ended 31 December
Additions
HaloSource acquisition
Impairment
Amortisation charges
Exchange differences
Closing net book value
At 31 December
Cost
Accumulated amortisation and impairment
Net book value
Development
costs
£000s
Software
£000s
2019
Intellectual
property
£000s
Goodwill
£000s
Total
£000s
12,886
(8,324)
4,562
2,358
–
(42)
(1,036)
(11)
5,831
9,837
(4,006)
5,831
579
(337)
242
343
–
–
(202)
(1)
382
922
(540)
382
–
–
–
175
316
–
(18)
(2)
471
488
(17)
471
–
–
–
–
384
–
–
–
384
384
–
384
13,465
(8,661)
4,804
2,876
700
(42)
(1,256)
(14)
7,068
11,631
(4,563)
7,068
Amortisation charges in the prior year were treated as an expense, and were allocated to cost of sales (£1,153,000), distribution costs
£nil, and administrative expenses (£103,000) in the consolidated statement of comprehensive income.
There were no reversals of prior year impairments during the year (2019: same).
101
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Notes to the consolidated financial statements continued
12. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery
£000s
Fixtures,
fittings and
equipment
£000s
Motor
vehicles
£000s
Production
tools
£000s
Land and
buildings
£000s
Right-of-use
assets
(note 26)
£000s
Assets under
construction
£000s
Total
£000s
2020
At 1 January
Cost
Accumulated depreciation
Net book value
Period ended 31 December
Additions
LAICA S.p.A. acquisition
Transfers
Disposals (cost)
Disposals (accumulated depreciation)
Depreciation charge
Exchange differences
Closing net book value
At 31 December
Cost
Accumulated depreciation
Net book value
21,924
(14,444)
4,126
(2,935)
7,480
1,191
130
(66)
64
13,298
(11,291)
2,007
1,996
(33)
1,963
–
1,769
7
–
–
(96)
(35)
5,386
(1,135)
4,251
–
1,150
–
–
–
(1,470)
(3)
8,569
55,429
– (29,904)
8,569
25,525
13,094
–
(4,822)
–
–
–
(90)
13,507
3,732
(861)
(3,345)
3,333
(4,512)
(174)
–
–
715
–
–
(849)
–
1,873
3,608
3,928
16,751
37,205
14,013
(12,140)
3,737
(129)
6,533
(2,605)
16,751
–
68,288
(31,083)
1,873
3,608
3,928
16,751
37,205
–
769
3,239
(3,136)
3,125
(1,367)
(46)
10,064
413
37
–
(209)
208
(701)
–
939
22,750
(12,686)
10,064
4,367
(3,428)
939
–
7
–
–
–
(29)
–
42
137
(95)
42
Depreciation charges are allocated to cost of sales (£3,601,000), distribution costs (£137,000) and administrative expenses (£774,000)
in the consolidated statement of comprehensive income.
During the year, 861,000 (2019: £nil) of assets under construction have been reclassified to intangible assets. These amounts are
included within the additions in note 11. In addition, borrowing costs of £190,000 (2019: £54,000) have been capitalised to land
and buildings in the year.
Plant and
machinery
£000s
Fixtures,
fittings and
equipment
£000s
Motor
vehicles
£000s
Production
tools
£000s
Land and
buildings
£000s
Right-of-use
assets
(note 26)
£000s
Assets under
construction
£000s
2019
At 1 January
Cost
Opening balance at adoption of IFRS 16
Accumulated depreciation
Net book value
Period ended 31 December
Additions
HaloSource acquisition
Transfers
Disposals
Depreciation charge
Exchange differences
Closing net book value
At 31 December
Cost
Accumulated depreciation
Net book value
20,624
–
(14,695)
5,929
3,673
–
(2,595)
1,078
–
135
2,545
(9)
(1,119)
(1)
7,480
743
93
–
–
(758)
35
1,191
141
–
(51)
90
–
1
–
–
(27)
–
64
13,484
–
(11,377)
2,107
–
49
819
–
(966)
(2)
2,007
21,924
(14,444)
7,480
4,126
(2,935)
1,191
130
(66)
64
13,298
(11,291)
2,007
–
–
–
–
1,996
–
–
–
(33)
–
1,963
1,996
(33)
1,963
–
3,343
–
3,343
2,344
–
–
–
(1,323)
(113)
4,251
5,386
(1,135)
4,251
Total
£000s
39,811
3,343
(28,718)
14,436
15,124
300
–
(9)
(4,226)
(101)
1,889
–
–
1,889
10,041
23
(3,364)
–
–
(20)
8,569
25,525
8,569
–
8,569
55,429
(29,904)
25,525
Depreciation charges in the prior year were allocated to cost of sales (£3,453,000), distribution costs (£355,000), and administrative
expenses (£418,000) in the consolidated statement of comprehensive income.
102
Strix Group Plc Notes to the consolidated financial statements continued
13. PRINCIPAL SUBSIDIARY UNDERTAKINGS AND JOINT ARRANGEMENTS OF THE GROUP
A list of all subsidiary undertakings controlled by the Group, and existing joint arrangements the Group is currently part of, which are
all included in the consolidated financial statements, is set out below.
Name of entity
Nature of business
Country of
incorporation
% of ordinary
shares held by the
Group
Sula Limited
Strix Limited
Strix Guangzhou Limited
Strix (U.K.) Limited
Strix Hong Kong Limited
Strix (China) Limited
HaloSource Water Purification
Technology (Shanghai) Co. Limited
Strix (USA), Inc.
Strix Italy S.R.L.
LAICA S.p.A.
LAICA Iberia Distribution S.L.
LAICA International Corp.
Taiwan LAICA Corp.
Foshan Yilai Life Electric
Appliances Co. Limited.
LAICA Brand House Limited
Holding company
Manufacture and sale of products
Manufacture and sale of products
Group’s sale and distribution centre
Sale and distribution of products
Construction of manufacturing facility
IOM
IOM
China
UK
Hong Kong
China
Manufacture and sales of products
Research and development, sales,
and distribution of products
Holding company
Manufacture and sales of products
Sale and distribution of products
Sale and distribution of products
Sale and distribution of products
China
USA
Italy
Italy
Spain
Taiwan
Taiwan
100
100
100
100
100
100
100
100
100
100
100
67
67
Nature of
shareholding
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Sale and distribution of products
Holding and licensing of trademarks
China
Hong Kong
45 Joint venture
45 Joint venture
Incorporation of Strix Italy S.R.L.
On 26 August 2020, Strix Italy S.R.L. was incorporated in Italy and is a wholly-owned subsidiary of Strix (U.K.) Limited. The entity was
incorporated for the purposes of effecting the acquisition of LAICA S.p.A.
Acquisition of issued share capital of LAICA S.p.A.
On 26 October 2020, the Group completed the acquisition of the entire issued share capital of LAICA S.p.A., including its subsidiaries
and interests in joint ventures. Details of the acquisition are disclosed in note 14 below.
Group restrictions
Cash and cash equivalents held in China are subject to local exchange control regulations. These regulations provide for restrictions
on exporting capital from those countries, other than through normal dividends. The carrying amount of the assets included within
the consolidated financial statements to which these restrictions apply is £4,618,000 (2019: £2,300,000).
There are no other restrictions on the Group’s ability to access or use the assets and settle the liabilities of the Group’s subsidiaries.
14. ACQUISITION OF LAICA
On 26 October 2020, the Group completed the acquisition of 100% of the issued share capital of LAICA S.p.A. (‘LAICA’) through its
newly incorporated subsidiary, Strix Italy S.R.L. (‘Strix Italy’). LAICA is an Italian company focused on water purification and the sale
of small household appliances for personal health and wellness. The Group entered into a share purchase agreement with vendor
shareholders of LAICA, pursuant to which it has acquired control of LAICA, including its subsidiaries and interests in joint ventures.
The total initial consideration for the acquisition was £11.7m (€13.0m), of which £10.1m was paid upfront in cash and the remaining
£1.6m was settled 8 March 2021 (note 18), and the issue of 3,192,236 Strix Group plc ordinary shares of £0.01 each with a total fair
value of £7.3m (€8.0m).
A further contingent consideration of up to £6.4m (€7.1m) is payable in cash subject to certain conditions being met, including
threshold financial targets for the financial years ending 31 December 2021 and 2022. The fair value of the contingent liability is
£5.4m and was estimated by calculating present value of the future expected cash flows using a discount rate of 12.7%. In addition,
a supplemental consulting arrangement has been entered into for £4.4m (€4.9m) related to compensation for post-combination
services, which will be expensed in future years as the services are rendered to LAICA.
The Board considered the acquisition to represent an expansion of the Group’s water category, as well as an enhancement of its
presence in the health and wellness market, thereby capitalising on the double-digit growth of global sales for both the small
domestic appliance and water markets, driven by increased consumer demand. LAICA has a considerable global presence, an
established product range and an advanced new product roadmap. The acquisition will also provide some consolidation of the
water treatment range, driving efficiencies and providing a comprehensive portfolio of products for the Group.
103
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Notes to the consolidated financial statements continued
14. ACQUISITION OF LAICA continued
As at the date of these financial statements, the initial accounting for the acquisition of LAICA is preliminary given the short period of
time since the date the acquisition was completed and the impact of COVID-19 restrictions. The provisional fair value of the assets
and liabilities acquired were as follows:
Non-current assets
Intangible assets
Property, plant and equipment
Investment in joint ventures
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Long-term borrowings
Post-employment benefits
Lease liabilities
Deferred tax liability
Total non-current liabilities
Current liabilities
Current borrowings
Lease liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets acquired
Book values
£000s
Fair value
adjustments
£000s
437
3,732
20
4,189
5,543
7,869
3,371
16,783
20,972
1,182
1,322
895
–
3,399
2,513
255
5,403
8,171
11,570
9,402
8,826
–
–
8,826
–
–
–
–
8,826
–
–
–
2,558
2,558
–
–
–
–
2,558
6,268
Fair values
£000s
9,263
3,732
20
13,015
5,543
7,869
3,371
16,783
29,798
1,182
1,322
895
2,558
5,957
2,513
255
5,403
8,171
14,128
15,670
The fair value of the intangible assets were calculated based on a discounted cash flow model, based on the expected future income
they will generate. The discount rate applied was the Group’s Weighted Average Cost of Capital, and a growth rate of 2% was assumed
in perpetuity, based on the target inflation rate of the European Central Bank. A deferred tax liability has arisen on the fair value
adjustments to intangible assets at the Italian corporate tax rate.
The fair value of acquired receivables shown in the table above and gross contractual amounts differs by a loss allowance of
£95,000.
Acquisition costs included within ‘Administration expenses – exceptional items’ in the consolidated statement of comprehensive
income amounted to £2.6m. These have been designated as a ‘separate transaction’ per IFRS 3 and therefore not included as part
of the purchase consideration.
The acquired business contributed revenues of £4.1m and an adjusted total comprehensive income of £0.2m to the Group for
the period from 26 October 2020 to 31 December 2020. If LAICA had been acquired at the beginning of the reporting period,
its contribution to revenue and profit for the year of the Group would have been £21.6m and £1.6m respectively.
The goodwill of £9.5m, calculated as the purchase consideration of £24.4m less the fair value of the net assets acquired of £15.7m
less non-controlling interests of £0.8m is attributable to intangible assets that do not qualify for separate recognition, such as the
cumulative skills and knowledge of the members of staff who became employees of the Group at the date of acquisition, together
with the synergies expected to be generated by the Group following the acquisition, particularly within the water and small
appliances categories. None of the goodwill is expected to be deductible for tax purposes.
104
Strix Group Plc Notes to the consolidated financial statements continued
14. ACQUISITION OF LAICA continued
The following acquisitions were made in the year ending 31 December 2019:
Acquisition of specified assets from HaloSource
On 7 March 2019, the Group completed the acquisition of specified assets from HaloSource Corporation (‘HaloSource’), following
approval by HaloSource shareholders at a general meeting held on 26 February 2019. The Group entered into an asset purchase
agreement with HaloSource, pursuant to which it has acquired specified assets relating to HaloSource’s HaloPure division and its
astrea product, for total consideration of US$1.33m (£1.01m) payable in cash.
HaloSource has now been fully integrated into Strix systems and operations.
15. INVENTORIES
Raw materials and consumables
Finished goods and goods in transit
2020
£000s
9,154
6,070
15,224
2019
£000s
5,071
4,426
9,497
The cost of inventories recognised as an expense and included in cost of sales amounted to £39,052,000 (2019: £35,037,000). The
provision for impaired inventories is £2,513,000 (2019: £302,000). There were no reversals of previous inventory write-downs.
16. TRADE AND OTHER RECEIVABLES
Amounts falling due within one year:
Trade receivables
Trade receivables past due
Loss allowance
Trade receivables – net
Prepayments
Advance purchase of commodities
Other receivables
2020
£000s
11,565
1,790
(159)
13,196
1,108
2,788
3,580
20,672
2019
£000s
4,286
502
(50)
4,738
1,042
2,174
1,379
9,333
Trade and other receivables carrying values are considered to be equivalent to their fair values.
The amount of trade receivables impaired at 31 December 2020 is equal to the loss allowance provision (2019: same).
The advance purchase of commodities relates to a payment in advance to secure the purchase of key commodities at an agreed
price to mitigate the commodity price risk.
Other receivables includes government grants due of £433,000 (2019: £392,000). There were no unfulfilled conditions in relation to
these grants at the year end, although if the Group ceases to operate or leaves the Isle of Man within ten years from the date of the
last grant payment, funds may be reclaimed.
The Group’s trade and other receivables are denominated in the following currencies:
Pound Sterling
Chinese Yuan
US Dollar
Euro
Hong Kong Dollar
Taiwan Dollar
Other
2020
£000s
5,110
4,356
1,863
8,210
114
1,019
–
20,672
2019
£000s
3,430
2,952
2,464
344
123
–
20
9,333
Movements on the Group’s provision for impairment of trade receivables and the inputs and estimation technique used to calculate
expected credit losses have not been disclosed on the basis the amounts are not material. The provision at 31 December 2020 was
£159,000 (2019: £50,000).
105
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Notes to the consolidated financial statements continued
17. CASH AND CASH EQUIVALENTS
The carrying amounts of the cash and cash equivalents are denominated in the following currencies:
Pound Sterling
Chinese Yuan
US Dollar
Hong Kong Dollar
Euro
Taiwan Dollar
2020
£000s
4,594
3,851
3,228
108
2,058
1,607
2019
£000s
4,712
1,409
7,091
247
199
–
15,446
13,658
Cash and cash equivalents includes £401,000 (2019: £380,000) of cash deposits held as a guarantee to China SuiDong Customs office.
18. TRADE AND OTHER PAYABLES
Trade payables
Current income tax liabilities
Social security and other taxes
Other liabilities
Payments in advance from customers
Accrued expenses
Consideration payable
2020
£000s
10,499
3,048
316
8,242
2,955
3,620
1,519
30,199
2019
£000s
6,779
1,929
98
5,620
1,286
3,990
–
19,702
The fair value of financial liabilities approximates their carrying value due to short maturities.
Other liabilities includes deferred government grants of £709,000 (2019: £333,000) There were no unfulfilled conditions in relation
to these grants at the year end.
Consideration payable are amounts due in relation to the acquisition of LAICA S.p.A. (note 14). This amount was settled on
8 March 2021.
The carrying amounts of the Group’s trade and other payables are denominated in the following currencies
Pound Sterling
Chinese Yuan
US Dollar
Hong Kong Dollar
Euro
Taiwan Dollar
Other
19. BORROWINGS
Total current borrowings
Total non-current borrowings
2020
£000s
8,414
12,493
1,800
6,460
383
649
–
30,199
2019
£000s
6,025
10,216
2,669
364
427
–
1
19,702
2020
£000s
2,220
50,426
2019
£000s
–
40,000
All of the current bank loans comprise of small individual short-term arrangements for financing purchases and optimising cash flows
within the Italian subsidiary and were entered into by LAICA S.p.A. prior to acquisition by the Group.
Current and non-current borrowings are shown net of loan arrangement fees of £175,000 (2019: £nil) and £700,000 (2019: £nil),
respectively.
106
Strix Group Plc
Notes to the consolidated financial statements continued
19. BORROWINGS continued
Term and debt repayment schedule for long-term borrowings
Currency
Interest rate
Maturity date
Total
£000s
Revolving credit facility
Unicredit facility
Banco BPM
GBP
EUR
EUR
LIBOR
+1.50% to
+2.85%
EURIBOR
+1.10% to
+3.60%
EURIBOR
+1.10% to
+3.60%
Bank Sinopac Co. Ltd
TWD
1.57% fixed
29 May 2027
27 May 2025
50,000
28 June 2024
317
30 November
2023
536
273
51,126
On 27 July 2017, the Company entered into an agreement with The Royal Bank of Scotland Plc (as agent), and the Royal Bank of
Scotland International Limited and HSBC Bank Plc (as original lenders) in respect of a revolving credit facility of £70,000,000, of which
£40,000,000 was drawn down as at 31 December 2019. During 2020, the Company refinanced this by entering into an agreement
with The Royal Bank of Scotland Plc (as agent), along with the Bank of China (UK) Limited and the Bank of Ireland in respect of a
revolving credit facility of £80,000,000, with materially the same terms and covenants as the existing facility.
On 27 May 2020, the first facility available with Royal Bank of Scotland Plc through the addition of the Bank of China (UK) Limited
increased to £60,000,000, and has continued to increase by a further £20,000,000 on 1 October 2020 by applying for a further
facility with Bank of Ireland through the same. As at 31 December 2020, the total facilities available are £80,000,000 (2019:
£49,000,000).
The initial drawdown of £50,000,000 allowed for the refinancing of the existing revolving credit facility as well as being used to fund
the acquisition of LAICA S.p.A. (note 14). Additional amounts may be drawn under the agreement for financing working capital and
for general corporate purposes of the Group.
All amounts become immediately repayable and undrawn amounts cease to be available for drawdown in the event of a third party
gaining control of the Company. The Company and its material subsidiaries have entered into the agreement as guarantors,
guaranteeing the obligations of the borrowers under the agreement (2019: same).
Transactions costs amounting to £875,000 incurred as part of the debt financing with the new facility entered into during the year
have been capitalised in the current year and will be amortised over the period of the five-year facility.
The various agreements contains representations and warranties which are usual for an agreement of this nature. The agreement
also provides for the payment of a commitment fee, agency fee and arrangement fee, contains certain undertakings, guarantees and
covenants (including financial covenants) and provides for certain events of default. During 2020, the Group has not breached any of
the financial covenants contained within the agreements – see note 22(d) for further details (2019: same).
Interest applied to the revolving credit facility is calculated as the sum of the margin and LIBOR. The margin is a calculated based on
the Group’s leverage as follows:
Leverage
Greater than or equal to 2.5x
Less than 2.5x but greater than or equal to 2.0x
Less than 2.0x but greater than or equal to 1.5x
Less than 1.5x but greater than or equal to 1.0x
Less than 1.0x
Annualised
margin
%
2.85%
2.50%
2.20%
2.00%
1.50%
At 31 December 2020, the margin applied was 2.00% (2019: 1.50%).
The fair values of the borrowings are not materially different from their carrying amounts, since the interest payable on those
borrowings is either close to current market rates or the borrowings are of a short-term nature.
107
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Notes to the consolidated financial statements continued
20. COMMITMENTS
(a) Capital commitments
Contracted for but not provided in the consolidated financial statements – Property, plant
and equipment
2020
£000s
2019
£000s
4,307
12,559
Construction of new factory
The above commitments include capital expenditure of £2,810,000 (2019: £10,472,000) relating to the construction of a new factory
in Zengcheng district, China. Strix (China) Limited entered into a contract with Shanghai Installation Engineering Group Co. on
2 September 2019 for CNY 128,000,000 (£14,450,000).
21. CONTINGENT ASSETS AND CONTINGENT LIABILITIES
The Group has a number of ongoing legal intellectual property cases, including legal actions initiated by the Group, as well as
invalidation challenges brought by the defendants. A number of these cases are still in the process of going through the due legal
process in the countries in which the matters have been raised. As a result, no contingent assets have been recognised as receivable
at 31 December 2020 (2019: same), as any receipts are dependent on the final outcome of the ongoing legal processes in each case.
There are no contingent liabilities at 31 December 2020 (2019: same).
22. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and commodity price
risk), credit risk, liquidity risk and capital management risk.
Risk management is carried out by the Directors. The Group uses financial instruments where required to provide flexibility regarding
its working capital requirements and to enable it to manage specific financial risks to which it is exposed. Transactions are only
undertaken if they relate to actual underlying exposures and hence cannot be viewed as speculative.
(a) Market risk
(i) Foreign exchange risk
The Group operates predominantly in the UK and China and is therefore exposed to foreign exchange risk. Foreign exchange risk
arises on sales and purchases made in foreign currencies and on recognised assets and liabilities and net investments in foreign
operations.
The Group monitors its exposure to currency fluctuations on an ongoing basis. The Group uses foreign currency bank accounts to
reduce its exposure to foreign currency translation risk, and the Group is naturally hedged against foreign exchange risk as it both
generates revenues and incurs costs in the major currencies with which it deals. The major currencies the Group transacts in are:
• British Pounds
• United States Dollar
• Chinese Yuan
• Hong Kong Dollar
• Euro
• Taiwan Dollar
Exposure by currency is analysed in notes 16, 17 and 18.
(ii) Interest rate risk
The Group is exposed to interest rate risk on its long-term borrowings, being the revolving credit facility and other borrowings
disclosed in note 19. The interest rates on the revolving credit facility are variable, based on LIBOR and certain other conditions
dependent on the financial condition of the Group, which exposes the Group to cash flow interest rate risk which is partially offset
by cash held at variable rates. Other borrowings are made up of both fixed rate loans and variable loans based on EURIBOR. This
exposure is not considered by the Directors to be significant.
(iii) Price risk
The Group is exposed to price risk, principally in relation to commodity prices of raw materials. The Group enters into forward
commodity contracts or makes payments in advance in order to mitigate the impact of price movements on its gross margin.
The Group has not designated any of these contracts as hedging instruments in either 2020 or 2019. At 31 December 2020 and
2019, payments were made in advance to buy certain commodities at fixed prices, as disclosed in note 16.
108
Strix Group Plc
Notes to the consolidated financial statements continued
22. FINANCIAL RISK MANAGEMENT continued
(iv) Sensitivity analysis
• Foreign exchange risk: The Group is primarily exposed to exchange rate fluctuations between GBP and USD, CNY, HKD, EUR
and TWD. Assuming a reasonably possible change in FX rates of +10% (2019: +10%), the impact on profit would be a decrease of
£805,000 (2019: a decrease of £361,000), and the impact on equity would be an increase of £1,232,000 (2019: an increase of
£2,230,000). A -10% change (2019: -10%) in FX rates would cause an increase in profit of £1,832,000 (2019: an increase in profit of
£442,000) and a £1,505,000 decrease in equity (2019: £2,726,000 decrease in equity). This has been calculated by taking the profit
generated by each currency and recalculating a comparable figure on a constant currency basis, and by retranslating the amounts
in the consolidated balance sheet to calculate the effect on equity.
• Interest rate risk: The Group is exposed to interest rate fluctuations on its non-current borrowings, as disclosed in note 19.
Assuming a reasonably possible change in the LIBOR/EURIBOR rate of ±0.5% (2019: ±0.5%), the impact on profit would be an
increase/decrease of £234,000 (2019: £204,000), and the impact on equity would be an increase/decrease of £37,000 (2019:
£125,000). This has been calculated by recalculating the loan interest using the revised rate to calculate the impact on profit, and
recalculating the year end loan interest balance payable using the same rate.
• Commodity price risk: The Group is exposed to commodity price fluctuations, primarily in relation to copper and silver. Assuming
a reasonably possible change in commodity prices of ±23% for silver (2019: ±8.2%) and ±37% for copper (2019: ±4.4%) based on
volatility analysis for the past year, the impact on profit would be an increase/decrease of £3,353,000 (2019: £1,043,000). The
Group does not hold significant quantities of copper and silver inventory, therefore the impact on equity would be the same as the
profit or loss impact disclosed (2019: same). This has been calculated by taking the average purchase price of these commodities
during the year in purchase currency and recalculating the cost of the purchases with the price sensitivity applied.
(b) Credit risk
The Group has no external concentrations of credit risk. The Group has policies in place to ensure that sales of goods are made to
clients with an appropriate credit history. The Group uses letters of credit and advance payments to minimise credit risk. Management
believe there is no further credit risk provision required in excess of normal provision for doubtful receivables, as disclosed in note 16.
The amount of trade and other receivables written off during the year amounted to less than 0.04% of revenue (2019: less than 0.05%
of revenue).
Cash and cash equivalents are held with reputable institutions. All material cash amounts are deposited with financial institutions
whose credit rating is at least B based on credit ratings according to Standard & Poor’s. The following table shows the external credit
ratings of the institutions with whom the Group has cash deposits:
AA
A
BBB
BB
B
n/a
2020
£000s
–
5,497
9,909
–
14
26
15,446
2019
£000s
636
2,169
10,824
–
–
29
13,658
(c) Liquidity risk
The Group maintained significant cash balances throughout the period and hence suffers minimal liquidity risk. Cash flow forecasting
is performed for the Group by the finance function, which monitors rolling forecasts of the Group’s liquidity requirements to ensure
it has sufficient cash to meet operational needs and so that the Group minimises the risk of breaching borrowing limits or covenants
on any of its borrowing facilities. The Group has put into place revolving credit facilities to provide access to cash for various purposes,
and headroom of £30,000,000 (2019: £9,000,000) remains available on this facility at 31 December 2020.
The Group’s non-derivative financial liabilities include trade and other payables (less payment received in advance) substantially all
have a contractual maturity date of less than three months. The Group’s borrowings are represented by several credit facilities detailed
in note 19, including current borrowings due for repayment in 2021 of £2,395,000 (2019: £nil), and the remainder falling due between
two and seven years. The contingent consideration payable in relation to the acquisition of LAICA S.p.A. as disclosed in note 14, will
only become payable in 2022 after 2021 performance criteria have been assessed.
(d) Capital risk management
The Group manages its capital to ensure its ability to continue as a going concern and to maintain an optimal capital structure to
reduce the cost of capital. The aim of the Group is to maintain sufficient funds to enable it to make suitable capital investments whilst
minimising recourse to bankers and/or shareholders. In order to maintain or adjust capital, the Group may adjust the amount of cash
distributed to shareholders, return capital to shareholders, issue new shares or raise debt through its access to the AIM market.
109
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Notes to the consolidated financial statements continued
22. FINANCIAL RISK MANAGEMENT continued
(d) Capital risk management continued
Capital is monitored by the Group on a monthly basis by the finance function. This includes the monitoring of the Group’s gearing
ratios and monitoring the terms of the financial covenants related to the revolving credit facilities as disclosed in note 19. These ratios
are formally reported on a quarterly basis. The financial covenants were complied with throughout the period. At 31 December 2020
these ratios were as follows:
• Interest cover ratio: 33.4x (2019: 26.7x) – minimum per facility terms is 4.0x; and
• Leverage ratio: 1.1x (2019: 0.7x) – maximum per facility terms is 2.5x
(e) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are
recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used
in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the accounting
standards. An explanation of each level is as follows:
• Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities)
is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the
group is the current bid price. These instruments are included in level 1.
• Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
• Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This
is the case for unlisted equity securities.
The resulting fair value estimate for contingent consideration payable recognised during the year, where the fair values have been
determined based on probability estimates of meeting threshold financial targets for the financial years ending 31 December 2021
and 2022 and discounted using a rate of 12.7%, has been classified as a level 3. There have been no other movements into or out of
any levels during the year.
Description
Contingent consideration
2020
£000s
2019
£000s
Unobservable
inputs
2020
2019
Relationship of unobservable inputs
to fair value
Probability weighted inputs
5,380
–
Risk
adjusted
discount
rate
12.7%
n/a
Probability
weighted
cash flows
£nil –
£6,425,000
n/a
A change in the discount
rate by 100 bps would
increase/decrease the
FV by £69,000.
If actual EBITDA is 10%
higher the FV would
increase by £1,030,000
or if it is 10% lower it
would decrease by
£1,615,000
23. SHARE-BASED PAYMENTS
Long-term incentive plan terms
As part of the admission to trading on AIM in August 2017, the Group granted a number of share options to employees of the Group.
All of the shares granted are subject to service conditions, being continued employment with the Group until the end of the vesting
period. The shares granted to the executive Directors and senior staff also include certain performance conditions which must be
met, based on predetermined earnings per share, dividend pay-out, and share price targets for the three financial years 2017 to 2019.
Further awards have been made since August 2017 under the same scheme on similar terms.
During 2019, the Group amended the terms of the Isle of Man share options to conditional share awards.
Participation in the plan is at the discretion of the Board and no individual has a contractual right to participate in the plan or to receive
any guaranteed benefits. Where the employee is entitled to share options, these remain exercisable until the ten year anniversary of
the award date. Where the employee is entitled to conditional share awards, these are exercised on the vesting date.
The dividends that would be paid on a share in the period between grant and vesting reduce the fair value of the award if, in not
owning the underlying shares, a participant does not receive the dividend income on these shares during the vesting period.
110
Strix Group Plc Notes to the consolidated financial statements continued
23. SHARE-BASED PAYMENTS continued
All of the options and conditional share awards are granted under the plan for nil consideration and carry no voting rights. A summary
of the options and conditional share awards is shown in the table below:
At 1 January
Granted during the year
Exercised during the year
Forfeited during the year
As at 31 December
Vested and exercisable at 31 December
2020
Number of Shares
2019
Number of Shares
11,173,522
1,230,358
(8,754,059)
(59,438)
10,295,525
1,189,813
–
(311,816)
3,590,383
11,173,522
124,793
–
The Group has recognised a total expense of £1,869,000 (2019: £5,944,000) in respect of equity-settled share-based payment
transactions in the year ended 31 December 2020.
For each of the tranches, the first day of the exercise period is the vesting date and the last day of the exercise period is the expiry
date, as listed in the valuation model input table below. The weighted average contractual life of options and conditional share awards
outstanding at 31 December 2020 was 8.5 years (2019: 6.7 years).
Valuation model inputs
The key inputs to the Black-Scholes-Merton model for the purposes of estimating the fair values of the share options outstanding at
the end of the year are as follows:
Grant date
15 August 2017
12 February 2018
01 November 2018
26 November 2018
04 March 2019
20 May 2019
21 August 2019
06 April 2020
01 May 2020
06 May 2020
Total Share Options
Share price on
grant date
(p)
133.38
138.00
146.80
136.00
155.00
157.80
161.80
170.00
183.40
181.00
Expiry date
15 August 2027
12 February 2028
01 November 2028
26 November 2028
04 March 2029
20 May 2029
21 August 2029
06 April 2030
01 May 2030
31 December 2029
Weighted average
probability of
meeting
performance
criteria
Share options
outstanding at
31 December
2020
Share options
outstanding at
31 December 2019
100.00%
100.00%
51.16%
100.00%
100.00%
54.00%
100.00%
100.00%
50.00%
100.00%
124,793
19,500
748,853
10,760
200,215
525,602
7,288
339,567
502,495
36,364
7,862,873
35,336
755,344
10,760
215,651
544,140
7,288
–
–
–
2,515,437
9,431,392
The key inputs to the Black-Scholes-Merton model for the purposes of estimating the fair values of the conditional share awards
outstanding at the end of the year are as follows:
Grant date
15 August 2017
12 February 2018
12 February 2018
01 November 2018
20 May 2019
19 August 2019
24 February 2020
06 April 2020
01 May 2020
06 May 2020
Share price on
grant date
(p)
133.38
138.00
138.00
146.80
157.80
158.00
179.80
170.00
183.40
181.00
Total conditional share awards
Total share options and conditional share awards
Expiry date
03 January 2020
03 January 2020
01 January 2021
01 January 2021
01 April 2022
01 April 2022
24 April 2022
06 April 2022
31 December 2022
31 December 2022
Weighted average
probability of
meeting
performance
criteria
Conditional share
awards
outstanding at
31 December
2020
Conditional share
awards
outstanding at
31 December
2019
100.00%
100.00%
100.00%
43.15%
54.00%
100.00%
100.00%
100.00%
50.00%
100.00%
–
14,000
60,500
348,233
304,254
4,250
15,500
101,381
198,347
28,481
985,143
29,000
60,500
348,233
304,254
15,000
–
–
–
–
1,074,946
1,742,130
3,590,383
11,173,522
111
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Notes to the consolidated financial statements continued
23. SHARE-BASED PAYMENTS continued
Long-term incentive plan terms continued
The reduction in the fair value of the awards as a consequence of not being entitled to dividends reduced the charge for the options
granted during the year by £47,000 (2019: £30,000) and the expected charge over the life of the options by a total of £420,000 (2019:
£427,000).
The other factors in the Black-Scholes-Merton model do not affect the calculation and have not been disclosed, as the share options
were issued for nil consideration and do not have an exercise price. The weighted average fair value of the options outstanding at the
period end was £1.4120 (2019: £1.3180).
The movement within the share-based payment reserve during the period is as follows:
Share-based payments transactions (note 5(a))
Other share-based payments
Share-based payments transferred to other reserves upon exercise/vesting
Total share-based payment transactions
2020
£000s
1,869
–
(13,019)
(11,150)
2019
£000s
5,944
215
–
6,159
Zeus warrant
As part of the admission to trading on AIM in August 2017, the Group granted Zeus Capital Limited a warrant for 3,800,000 ordinary
shares at an exercise price of £1.00. The warrant was not reliant on any service conditions and was exercisable between 8 August
2019 and 8 August 2027. This warrant was exercised by Zeus on 27 November 2020.
Valuation model inputs
The key inputs to the Black-Scholes model for the purposes of estimating the fair value of the warrant include an admission share
price of £1.00, a risk free rate equivalent to the price of a two-year United Kingdom Gilt, a two-year vesting period, and volatility based
on the share price of a selection of peer companies for the two years prior to admission equating to 10.74%.
Other movements
Other transactions recognised directly in equity include the settlement of dividend entitlements previously accrued as part of the LTIP
programme, a release of Zeus warrant share options held in the prior year that have been exercised and amounts released from
forfeited LTIP shares.
24. SHARE CAPITAL AND SHARE PREMIUM
Allotted and fully paid: ordinary shares of 1p each
Balance at 1 January 2020
Shares issues during the year
Balance at 31 December 2020
Number of shares
(000s)
Par value
£000s
190,000
15,746
205,746
1,900
157
2,057
Total
£000s
1,900
157
2,057
Under the Isle of Man Companies Act 2006, the Company is not required to have an authorised share capital. The issued capital of
the Company on incorporation was one A ordinary share of £1, issued to Darbara Limited. This share was transferred to Strix Group
Limited prior to admission to trading on AIM, and was repurchased and cancelled by the Company as part of the pre-admission
Group reorganisation.
On 8 August 2017, the Company issued 190,000,000 ordinary shares of £0.01 each.
During the year, the Company issued shares for a total value of £11,230,000, which included 3,192,236 shares at nominal value of
£31,922 issued as part of the total consideration paid for the acquisition of LAICA S.p.A. on 27 October 2020 (note 14), 3,800,000
shares at a nominal value of £38,000 issued to Zeus Capital Limited on exercising their warrant (note 23), and the remainder relate
to employee share-based payments (note 23). Accordingly, £11,073,000 was recognised as share premium.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company. All shares rank pari passu in all respects including voting rights and dividend entitlement.
See note 23 for further information regarding share-based payments which may impact the share capital in future periods.
112
Strix Group Plc
Notes to the consolidated financial statements continued
25. DIVIDENDS
The following amounts were recognised as distributions in the year:
Interim 2020 dividend of 2.6p per share (2019: 2.6p)
Final 2019 dividend of 5.1p per share (2018: 4.7p)
Total dividends recognised in the year
2020
£000s
5,167
10,143
15,310
2019
£000s
4,940
8,930
13,870
In addition to the above dividends, since year end the Directors have proposed the payment of a final dividend of 5.25p per share
(2019: 5.1p). The aggregate amount of the proposed final dividend expected to be paid on 2 June 2021 out of retained earnings at
31 December 2020, but not recognised as a liability at year end, is shown in the table below. The payment of this dividend will not
have any tax consequences for the Group.
Final 2020 dividend of 5.25p per share (2019: 5.1p)
Total dividends proposed but not recognised in the year, and estimated to be recognised in the
following year
2020
£000s
10,802
2019
£000s
9,725
10,802
9,725
26. LEASES
(a) Amounts recognised in the consolidated balance sheet
The consolidated balance sheet shows the following amounts relating to leases:
Right-of-use assets
Offices & warehouses
Total right-of-use assets
Current future lease liabilities (due within 12 months)
Non-current future lease liabilities (due in more than 12 months)
Total future lease liabilities
Additions to the right-of-use assets during the 2020 financial year were £1,150,000 (2019: £2,338,000).
The movement in lease liabilities is as follows:
Balance as at 1 January
Additions
Repayments
Interest expense (included in finance cost)
Sub-lease income
Foreign exchange gains
Balance as at 31 December
(b) Amounts recognised in the consolidated statement of comprehensive income
The statement of consolidated comprehensive income shows the following amounts relating to leases:
Depreciation of right-of-use assets
Interest expense (included in finance cost)
Foreign exchange gains
Total cost relating to leases
2020
£000s
3,928
3,928
1,254
2,846
4,100
2020
£000s
4,468
1,150
(1,455)
103
(160)
(6)
4,100
2020
£000s
(1,470)
(103)
6
(1,567)
2019
£000s
4,251
4,251
1,508
2,960
4,468
2019
£000s
3,613
2,338
(1,301)
110
(121)
(171)
4,468
2019
£000s
(1,323)
(110)
171
(1,262)
113
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements
Notes to the consolidated financial statements continued
27. CASH FLOW STATEMENT NOTES
(a) Cash generated from operations
Cash flows from operating activities
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Share of profits from joint ventures
Impairment of intangible assets
Loss on disposal of property, plant and equipment
Government grants relating to capital expenditure
Pension contributions made
Share-based payment transactions
Net exchange differences
Changes in working capital:
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
(b) Movement in net debt
Borrowings
Loan arrangement fees
Lease liabilities
Total liabilities from financing activities
Cash and cash equivalents
Net debt
At
1 January 2020
£000s
(40,000)
–
(4,468)
(44,468)
13,658
(30,810)
Cash flows
£000s
(9,854)
798
1,455
(7,601)
1,916
(5,685)
Note
12
12
11
11
12
5(c)
23
2020
£000s
2019
£000s
26,635
24,209
3,042
1,470
1,477
(61)
–
12
–
–
687
505
2,903
1,323
1,256
–
42
5
(40)
(89)
5,944
156
33,767
35,709
(138)
(4,294)
2,785
32,120
1,318
(1,750)
68
35,345
Non-cash movements
Currency
movements
£000s
Other movements
£000s
At
31 December
2020
£000
(53,521)
875
(4,100)
(56,746)
15,446
(3,695)
77
(1,093)
(4,711)
–
(4,711)
(41,300)
28
–
6
34
(128)
(94)
Included in the non-cash movements are balances that were acquired as part of the LAICA S.p.A. acquisition.
28. ULTIMATE BENEFICIAL OWNER
There is not considered to be any ultimate beneficial owner, as the Company is listed on AIM. No single shareholder beneficially owns
more than 25% of the Company’s share capital.
29. RELATED PARTY TRANSACTIONS
(a) Identity of related parties
Related parties include all of the companies within the Group, however, these transactions and balances are eliminated on consolidation
within the consolidated financial statements and are not disclosed, except for related party balances held with joint ventures which are
not eliminated.
The Group also operates a defined contribution pension scheme which is considered a related party.
114
Strix Group Plc Notes to the consolidated financial statements continued
29. RELATED PARTY TRANSACTIONS continued
(b) Related party balances
Trading balances
The Strix Limited Retirement Fund
Foshan Yilai Life Electric Appliances Co. Ltd
(c) Related party transactions
The following transactions with related parties occurred during the year:
Name of related party
Transactions with other related parties
Revenue earned from Foshan Yilai Life Electric Appliances Co. Ltd
Contributions paid to The Strix Limited Retirement Fund (note 5(c)(i))
Balance due from
Balance due to
2020
£000s
–
94
2019
£000s
–
–
2020
£000s
–
–
2019
£000s
72
(611)
2019
£000s
(66)
–
2018
£000s
–
(735)
Further information is given on the related party balances and transactions below:
• Key management compensation is disclosed in note 5(b).
•
Information about the pension schemes operated by the Group is disclosed in note 5(c), and transactions with the pension
schemes operated by the Group relate to contributions made to those schemes on behalf of Group employees.
Information on dividends paid to shareholders is given in note 25.
•
30. Post balance sheet events
Other than the deferred consideration payment made on 8 March 2021 in relation to the acquisition of LAICA S.p.A. disclosed in
note 14, the Group does not have any material events after the reporting period to disclose.
115
Annual report and accounts 2020Strategic reportGovernance reportFinancial statements Legal and professional advisors
Registered office
Strix Group Plc
Forrest House
Ronaldsway
Isle of Man
IM9 2RG
Independent auditor
PricewaterhouseCoopers LLC
Sixty Circular Road
Douglas
Isle of Man
IM1 1SA
Principal bankers
The Royal Bank of Scotland International Limited
2 Athol Street
Douglas
Isle of Man
IM99 1AN
Nominated advisor and broker
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
Bank of China (UK) Limited
1 Lothbury
London
EC2R 7DB
and
10 Old Burlington Street
London
W1S 3AG
The Governor and Company of the Bank of Ireland
40 Mespil Road
Dublin 4
Ireland
Joint broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Share registrars
Link Market Services (Isle of Man) Limited
PO Box 227
Clinch’s House
Lord Street
Douglas
Isle of Man
IM99 1RZ
Financial PR and IR
IFC Advisory Limited
24 Cornhill
London
EC3V 3ND
Solicitors
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London
EC4N 6AF
Company number
014963V (Isle of Man)
116
Strix Group Plc The outer cover of this report has been
laminated with a biodegradable film.
Around 20 months after composting,
an additive within the film will initiate
the process of oxidation.
S
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2
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2
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Strix Group Plc
Forrest House
Ronaldsway
Isle of Man
IM9 2RG
Tel: +44 (0)1624 829 829
Email: info@strix.com
www.strixplc.com