Innovative &
Sustainable
Technology
Annual report and accounts 2022
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Welcome to Strix Group Plc
Annual report and accounts 2022
Our mission:
Innovating safety and design
for a sustainable future.
Our vision:
Establishing a world-leading
innovative and sustainable
technology business.
About us:
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).
Operational highlights
• Acquisition of Billi continues to
be successfully integrated in line
with plans to achieve the identified
operational benefits, opening new
sales channels for Strix. Trading
performance so far has been in
line with budget.
• Retained global kettle control
market share by value at c.56%
(excluding Russia and other
impacted territories).
• Manufacturing operations in China
are fully operational with efficiency
improved by 6.1% in 2022 versus 2021.
• Pipeline of new product launches
through 2023 including Perfect
Pour Dispenser and Aurora coffee
appliance.
• Updated ESG and Sustainability
report published on 28 March 2023.
For further operational information
please see pages 8 to 11
2022 financial highlights
Revenue
£106.9m
(10.5%)
2022
2021
Adjusted profit before tax
£22.2m
(31.1%)
£106.9m
£119.4m
2022
2021
£22.2m
£32.2m
Adjusted profit after tax
Adjusted EBITDA
£23.0m
£32.1m
(26.8%)
2022
2021
£23.0m
£31.4m
(20.7%)
2022
2021
£32.1m
£40.5m
Adjusted earnings per share
Total dividend per share for the year
10.9p
(28.3%)
2022
2021
10.9p
15.2p
6.00p
(28.1%)
2022
2021
6.00p
8.35p
• A new EMEA Sales Director
has been appointed and Global
Distributions & Logistics Director
role created to provide the
leadership team with additional
expertise in commercialisation
and cost optimisation.
For further strategy information
please see pages 28 to 33
Strategic highlights
• Completion of the transformational
acquisition of Billi in November at
a reported multiple of 3.8x EBITDA
at transaction date.
• The water and appliances
categories now account for almost
50% of pro forma Group revenue.
• Significant progress throughout
the year in improving the geographic
diversity of the business, reducing
reliance on any one territory.
• The Company has access to a range
of new sales channels including
to professional customers such as
restaurants, hotels and commercial
premises through Billi and a much-
improved B2C footprint.
• Strong progress throughout the
year for Aqua Optima driven by
the increasing popularity of the
Aurora range.
Contents
Strategic report
1
2022 highlights
2 Company overview
4 Chairman’s statement
7 Operations and automation
8 Chief Executive Officer’s statement
12 Strix investment case
14 Key performance indicators
18 Our people
22 Business model
24 Market review
28 Growth strategy
32 Delivering our strategy
34 New products roadmap
36 Billi
38 Case study: LAICA S.p.A
40 Case study: Water and Appliances
44 Strix Group website
48 Engaging our stakeholders
50 Risk management approach
51 Principal risks
57 Capital Allocation Framework
58 ESG and sustainable investing
60 Sustainability strategy
64 Task Force on Climate-related
Financial Disclosure (TCFD)
68 Responsible business
72 Chief Financial Officer’s statement
Governance report
76 Board of Directors
77 Senior management team
78 Board activities
79 Corporate governance statement
80 How we govern
82 QCA principles and Strix
86 Audit Committee report
87 Nomination Committee report
88 Directors’ remuneration report
96 Directors’ report
Independent auditor’s report
Financial statements
98 Statement of Directors’ responsibilities
99
103 Consolidated statement
of comprehensive income
104 Consolidated statement
of financial position
105 Consolidated statement
of changes in equity
106 Consolidated statement
of cash flows
107 Notes to the consolidated
financial statements
143 Legal and professional advisors
1
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Company overview
A global leader with a resilient portfolio
providing sustainable innovative
technology for everyday use
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 strategic acquisitions,
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.
Sustainable
Water category
Strix continues to enhance its water filtration portfolio, with
numerous product launches through its Aqua Optima, LAICA,
HaloPure and astrea brands, as well as through brand and
retail partners where it operates as a key OEM in the category.
The recent acquisition of Billi, a leading brand in Australia known
for its premium eco-friendly water solutions, enhances the
Group’s portfolio and unlocks new growth opportunities.
The Group continues to bring its product manufacturing
in-house to deliver superior quality and innovation. Strix offers
a multi-brand product portfolio, meeting all consumer water
filtration needs. Together, these brands deliver global solutions
for water filtration and sterilisation through the delivery of water
units, taps, bottles, jugs, filters and other related appliances.
Given increased consumer focus on health-conscious choices
and their preference for sustainable water solutions, the Group
is able to offer sustainable products that allow consumers to
make healthier choices for themselves and the planet.
New products and existing product enhancements
planned in 2023 and detailed in our New Product
Roadmap on page 34:
4
Strix global share of kettle
controls market value
56%
(excluding Russia and other
impacted territories)
Number of employees
850+
Revenue split by category
£106.9m
Seattle, US
– Sales
– Water Filtration
& Appliances
Kettle controls 2022: £68.2m (2021: £85.1m)
Water category 2022: £24.1m (2021: £21.4m)
Appliances category 2022: £14.6m (2021: £12.9m)
2022 (outer circle)
2021 (inner circle)
13.7%
22.5%
10.8%
17.9%
71.3%
63.8%
2
Isle of Man, UK
– Head Office, Manufacturing
- & Research & Development
– Kettle Controls
Wolverhampton, UK
– Rental of Water Products
Chester, UK
– Sales
– Water Filtration, Kettle
- Controls & Appliances
London, UK
– Showroom
Hong Kong
– Sales & Administration
– Kettle Controls, Water
- & Appliances
Shanghai, China
– Manufacturing & Sales
– Water
Taipei, Taiwan
– Sales & Administration
– Appliances
Melbourne, Australia
– Manufacture, Rental
& Sales of Water
& Appliances
Auckland, New Zealand
– Sales & Rental
of Water &
Appliance Products
Guangzhou, China
– Manufacturing
– Water, Kettle Controls
& Appliances
Valencia, Spain
– Sales
– Water &
- Appliances
Vicenza, Italy
– Manufacturing & Sales
– Water & Appliances
Innovative
Appliances category
Strix continues to focus its innovation efforts around solving
real problems and providing meaningful benefits to our
customers through convenient, simple and sustainable
solutions. Strix aims to excel and differentiate, applying our
water, temperature and steam management technologies
to relevant, value-driven consumer appliances that take the
frustrations out of everyday tasks.
Strix’s Research and Development team continues to focus
on enhancing the efficiency of its products by developing
modular solutions. This enables go-to-market routes via its own
brands and key partners, which in turn enables Strix to achieve
a greater impact in terms of sustainability and commercial return.
Whilst technology innovation is at the heart of the category
developments, Strix is also developing a fast-track sourced
product approach to bolster the appliances range under
LAICA and Aqua Optima brands.
Dependable
Kettle controls
Strix’s core product line of safety controls for small domestic
appliances (primarily kettles) continues to make up the majority
of the Group’s business. Strix remains the strong market leader
within the kettle controls market, gradually increasing its market
share to a currently estimated 56% (excluding Russia and other
impacted territories). Despite such a strong foothold in the
market, Strix remains rigorous in its category approach with
targeted initiatives across key regions, a focus on innovation
within the product space and ongoing cost reduction initiatives.
As the market leader in controls and with a reputation for safety,
the Group established a strong reputation for dependable
products that will achieve the highest level of performance
while meeting all of the relevant safety requirements. Increased
emphasis has also been placed on developing products which
reduce environmental wastage through minimising energy losses
during in-use consumption, as well as significantly reducing the
use of precious metals within the core components.
New products and existing product
enhancements planned in 2023 and detailed
in our New Product Roadmap on page 34:
7
New products and existing product
enhancements planned in 2023 and detailed
in our New Product Roadmap on page 34:
3
Regulated markets
Less Regulated markets
China
Seattle, US
– Sales
– Water Filtration
& Appliances
Isle of Man, UK
– Head Office, Manufacturing
- & Research & Development
– Kettle Controls
Chester, UK
– Sales
– Water Filtration, Kettle
- Controls & Appliances
Wolverhampton, UK
– Rental of Water Products
London, UK
– Showroom
Hong Kong
– Sales & Administration
– Kettle Controls, Water
- & Appliances
Guangzhou, China
– Manufacturing
– Water, Kettle Controls
& Appliances
Valencia, Spain
– Sales
– Water &
- Appliances
Vicenza, Italy
– Manufacturing & Sales
– Water & Appliances
Shanghai, China
– Manufacturing & Sales
– Water
Taipei, Taiwan
– Sales & Administration
– Appliances
Melbourne, Australia
– Manufacture, Rental
& Sales of Water
& Appliances
Auckland, New Zealand
– Sales & Rental
of Water &
Appliance Products
3
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Chairman’s statement
Significant strategic progress
in challenging market conditions
“The acquisition of Billi transforms the scale
of the Water and Appliance categories and
increases the growth profile of the Group.”
Gary Lamb
Non-Executive Chairman
Revenue
£106.9m
2021: £119.4m
(10.5%)
Adjusted EBITDA
£32.1m
2021: £40.5m
(20.7%)
Adjusted profit after tax
£23.0m
2021: £31.4m
(26.8%)
4
Introduction
2022 was yet another extraordinary year which saw the continued impact of the
pandemic recovery and a high inflationary environment resulting in significant economic
headwinds affecting the global economies as the world adapts to a new normal. Despite
these challenges, Strix was able to materially advance a number of its strategic goals in
the year, positioning Strix well as it looks to the future. Whilst we expect some headwinds
will continue to persist into 2023, recent sales data in 2023 indicates some green shoots
are appearing and the path to a return of growth is opening across all segments of the
business. The Board remains confident in its ability to steer through the challenges
ahead as it executes its growth strategies.
The Board would like to give credit and express gratitude to our people for their resilience
throughout the year, as they have continued to work diligently to support all of our stakeholders.
Strategic progress
In a challenging macro economic
environment, Strix has made significant
strategic progress. The Company
completed a transformational acquisition
of Billi, materially improving the growth
profile of the Group and increasing its
exposure to the higher growth water and
appliances categories. The Group has
become more diversified in the process,
reducing reliance on any one geography.
The Company now has access to a range of
new sales channels including to corporates
and a much improved direct to consumer
offering. Over the past few years, the
Company has made a number of
investments into the Aqua Optima brand,
notably the Aurora, and the popularity of
that device has driven almost 50% sales
growth in the year for Aqua Optima.
Financial performance
Revenue for 2022 fell by 10.5% from 2021
to £106.9m. Adjusted gross profit for the
current year was £41.5m, representing a
12.4% decrease from prior year. Adjusted
gross profit margin was 38.8% representing
a 0.9% margin dilution compared to last
year which predominantly related to lower
kettle controls sales in regulated markets
which command higher margins. Adjusted
EBITDA was £32.1m (2021: £40.5m),
showing a decrease of 26.7%. Adjusted
profit after tax fell by 26.8% to £23.0m
(2021: £31.4m).
Acquisition of Billi
On 30 November 2022, Strix completed
its acquisition of Billi following regulatory
approval in Australia, New Zealand and
the UK. Billi is a leading brand in Australia
for the supply of premium instant boiling,
chilled and sparkling filtered water systems.
It is a clear number two player in the space
within Australia, New Zealand and the UK.
With a 30+ year history, Billi is renowned
for its premium and innovative products.
Billi has a successful history of growth,
with double digit revenue CAGR over the
past five years, attractive margins and is
highly cash generative, delivering cash
conversion of >70%.
Billi was acquired from Culligan following
its merger with Waterlogic; the divestment
was a condition of that merger. The
acquisition multiple was 3.8x EBITDA
reflecting the unique circumstances that
Culligan found itself in and the progress
Strix had made with the competition
regulator in Australia, New Zealand and
the UK. As reported in the press, there
were other bidders at significantly higher
valuations than Strix, even at the very end
of the process. The transaction was funded
through a £13.0m equity raise and debt
refinance consisting of an extension of the
current RCF and a new acquisition facility.
The acquisition materially changes the
earnings profile of the Group and is a key
step for the Board in accelerating growth
plans for the water and appliances
categories and supports the medium-term
ambition to increase the contribution to the
Group from these categories. The hot tap
market had been identified by the Board
as a strategically important market for
Strix to have a presence and Billi adds
well-developed and premium products into
this category. The Board believes that there
are both revenue and cost synergies to be
unlocked through the acquisition, ranging
from utilising Strix’s world class technology
to further enhance Billi’s product suite
and driving efficiencies using Strix’s lean
operating model and Chinese procurement
operation. We also have substantial
opportunity to increase the organic growth
profile of the combined Group given the high
growth nature of the Billi proposition. We
expect Strix’s global footprint to be able to
transform Billi from a business with a high
proportion of its sales in Australia and
New Zealand into a global business.
The acquisition of Billi continues to be
successfully integrated in line with plans
to achieve the identified operational
benefits, as the business opened up
new sales channels for Strix and trading
performance has been in line with budget.
5
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Chairman’s statement continued
Capital allocation and
dividend policy
In light of the additional debt taken on by
Strix to complete the acquisition of Billi, the
Board has taken the decision to reprioritise
Strix’s capital allocation decisions to focus
on debt reduction in the short term. As a
result, there will be no further M&A activity
or investment into new factory builds, with
significantly reduced capex and working
capital over the medium term and hence
increasing free cash flow generation. Strix
has a clear plan to get net debt/EBITDA to
below 2.0x during 2023 and to below 1.5x
during 2024.
Outlook
Following a period of uncertainty across
a number of Strix’s key export markets in
Q4, recent sales data in 2023 indicates
that some green shoots are appearing and
the path to a return of growth is opening
across all segments. It is anticipated that
the Chinese economy will start to rebound
in 2023, given the change in COVID policy.
Whilst a number of headwinds continue
to persist, the Board is confident in the
strategic direction of the business and the
actions that are being taken to return the
Group to a highly cash generative and
growing business.
Gary Lamb
Non-Executive Chairman
As a result of the change in capital
allocation priorities, the Board decided
after reviewing the level of the net debt to
propose a final dividend of 3.25p per share
(2021: 5.60p) which would represent a total
dividend of 6.00p per share (2021: 8.35p).
The final dividend will be paid on 11 August
2023 to shareholders on the register at
30 June 2023 and the shares will trade
ex-dividend from 29 June 2023.
Annual General Meeting
The Company will be hosting its Annual
General Meeting on 4 July at 9:00am at
our registered office at Forrest House on
the Isle of Man, to which I welcome all of
our shareholders, and the notice of which
will be sent to shareholders in due course.
Further details will be set out in the formal
notice of meeting.
Impact of lockdowns in China
The second half of 2022 saw continued
lockdown restrictions implemented on a
regional basis within China. Whilst each
regional lockdown was relatively short in
length, there was significant disruption to
a number of Strix’s major OEM customers
during the critical Q4 trading period. As a
precaution, and to mitigate the impact of
any lockdowns on Strix’s ability to supply
products to customers, Strix reinstated
its secondary warehouse.
In late December, China lifted its zero-Covid
policy and it is anticipated that the Chinese
economy will rebound in 2023 in a similar
way that Western economies
did when they reopened.
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 how our consumers use them.
The Group re-examined its approach
to sustainability in 2020, in order to
establish a clear strategy in line with
the UN Sustainable Development Goals.
During 2021, we set up clearly defined
baseline key performance indicators
against which we can track progress and
monitor improvements going forward.
One of the most challenging and
differentiating goals is to achieve
Scope 1 & 2 net zero in 2023 (excluding
Billi). Key elements have been put in place
with long-term renewable power contracts
for all key facilities and head office, along
with investment in solar capacity. Indeed,
Strix now expects its own renewable
sources to generate around 10% of the
Group’s total energy requirements. As a
consequence, the Group started 2023
in-line with its net zero agenda.
6
Operations and automation
Operational highlights
• Production efficiency of core kettle products improved
with 77% of all assembly lines now fully automated.
• Mould machine capacity has grown to 500T coinciding with
the launch of our Perfect Pour range of water products and
to support our appliances manufacturing strategy.
• Metal pressing capacity grew by approximately 10% in 2022
to support core kettle control (KJC) growth and to support the
ambition to increase our appliances manufacturing abilities.
• The U9 series of controls continue to show strong growth
with 36 million manufactured in the period.
• Focus on continuous improvement, automation and refinement
of existing processes has delivered significant improvement in
customer quality parts per million (PPM) with zero customer
returns recorded in the period.
• Strix facilities achieved Scope 1 & 2 net zero from January 2023.
An additional £100k has been invested to expand the existing
solar power system in China which will now provide up to 15% of
the factory’s total requirement. The balance, including the Isle of
Man and LAICA, is sourced from certified green energy providers.
• The China facility has successfully been recertified to ISO9001,
ISO14001, ISO45001 and ISO50001. LAICA have added ISO14001
and ISO45001 to their certification portfolio.
Automation
The Group continues to benefit from fully automated assembly
solutions, 77% of main manufacturing lines are now fully automated,
with a further reduction in customer quality PPM.
Strix’s automation plan continues developing new innovative
manufacturing and assembly processes to support the Group’s
new product introduction (NPI) roadmap and increase capacity
for core product and the water and appliances divisions.
Fully automated
manufacturing lines:
77%
Metal processing
capacity:
+10%
Metal pressing capacity
growth in 2022:
10%
Machine
capacity:
500T
7
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Chief Executive Officer’s statement
Continued resilience underpinning
the Group’s performance despite
global headwinds
“Strix is focused on its highly cash
generative operating model and
the management team will prioritise
the integration and unlocking of
anticipated revenue and cost synergies
following the acquisition of Billi.”
Mark Bartlett
Chief Executive Officer
8
Revenue
£106.9m
2021: £119.4m
(10.5%)
Adjusted profit before tax
£22.2m
2021: £32.2m
(31.1%)
Financial performance
The Group reported revenue of £106.9m,
a decrease of 10.5% versus the same
period in the prior year driven predominantly
by a reduction in kettle controls due to
market environment.
Adjusted profit after tax was £23.0m
(2021: £31.4m), representing a 26.8%
decrease compared to the same period
last year driven by a reduced EBITDA and
an increase in SONIA through the year,
coupled with higher net debt post the
successful acquisition of Billi.
Adjusted operating profit margins were
diluted by 4.0% to 24.2% (FY 2021: 28.2%)
compared to last year. The main reasons
for the dilution in margin are attributable
to lower kettle controls sales in the
regulated markets that command higher
margins, partially offset by a price increase
implemented in the second quarter of
2022 across all kettle controls. In addition,
the water and appliances categories
showed margin improvements as
appliances that were launched in 2021
had a better sales mix, supported further
by Billi’s contributions post completion.
The Group’s net debt increased to £87.4m
(FY 2021: £51.2m).This represents a net
debt/adjusted EBITDA ratio (calculated
on a trailing twelve-month basis) of 2.2x.
Strix is focused on its highly cash
generative operating model and the
management team will prioritise the
integration and unlocking of anticipated
revenue and cost synergies following the
acquisition of Billi. There will be no further
merger and acquisition (M&A) activity or
investment into new factory builds, with
significantly reduced capex and working
capital over the medium term. Capital
allocation decisions will prioritise debt
reduction and free cash flow generation
with a clear plan to get net debt/EBITDA to
below 2.0x during 2023 and to below 1.5x
during 2024.
Kettle control category
Overall, the kettle control category
reported a decrease in revenue of 19.8%
to £68.2m in 2022.
The key characteristic in 2022 was a
continual and unprecedented worsening
of the macro backdrop in Q4, but in Q1
signs of green shoots are returning.
Overall market softened by c.18% in
2022, with volume and value reductions
experienced in all sectors. Key negative
drivers included the cost of living crisis
in Regulated markets, COVID shutdowns
in China and the Ukraine/Russia crisis
impacting Less Regulated markets.
In line with western government sanctions,
Strix’s key global brands withdrew from
Russia (a significant market for them)
and Strix also stopped trading directly
with Russian brands. It is worth noting
that excluding the affected regions,
Strix’s market share in kettle controls
remained at c.56%.
The kettle safety controls category remains
a resilient business and there is evidence
of green shoots returning in Q1 2023.
These include:
• estimated kettle sales through major
online retailer channel shows January
and February 2023 grew by 17% versus
the same period last year;
• after reduced usage at Strix’s top five
OEMs in H2 2022, the Group is now
seeing a recovery in Q1 2023 which
is particularly reassuring as this has
historically been a quieter trading
period; and
• signs of a pipeline refill are returning.
Historical data shows a small increase
in consumer demand can have an
outsized effect on the demand for
Strix’s components.
• successful launch of Strix innovations
under the LAICA brand with the launch
of the Dual Flo range. This newly
launched product utilises superior,
energy-efficient technology and is
believed to be the only combined kettle
and one cup hot water dispenser.
Key growth initiatives for the category
will be geographic expansion, optimising
product mix and vertical integration.
Strix has also continued to focus product
development on opportunities and design
improvements in a sustainable way to
reduce the overall manufactured product
footprint that will further strengthen
Strix’s position and support its market
share aspirations.
Examples include the Series Z controls
development which is maturing, with
the objective to drive cost and customer
benefits and the roll out of new electronic
kettle features and designs with a focus
on design trends, consumer energy saving
and OEM cost benefits.
Appliances category
Overall, the appliances category reported
growth in revenue of 12.8% to £14.5m
in 2022.
Strix’s Aqua Optima brand recorded 87%
growth in appliances, driven through
geographical expansion, successful
Aqua Optima expansion across Europe and
North America, Strix/LAICA cross selling,
and new innovative product launches.
The Billi acquisition helps diversify
positioning with a premium category
offering through new channels as well
as giving cross-selling opportunities to
drive additional growth.
Other notable achievements included:
• Aurora (Strix’s Instant Flow Heater
technology, delivering auto-dispensed
hot, boiled and chilled filtered water at
the touch of a button) won a housewares
award: Sustainable Product of the
Year 2022;
• successful launch of the world’s fastest
steriliser-dryer with a leading US baby
care brand; and
Water category
Overall, the water category reported a
growth in revenue of 12.8% to £24.1m in 2022.
Both Aqua Optima and LAICA water brands
have seen growth year-on-year due to initial
geographical expansion via Amazon sales
outperforming the private label business.
Strix now manufactures the majority of its
filters in-house in two locations, freeing us
from third party risk, whilst allowing a new
level of flexibility to offer our customers.
Integration of Billi into the portfolio will
enhance the total water solution offering
for Strix and unlocks new opportunities in
the ‘professional’ market.
Key growth initiatives for the category
will be geographic expansion (cross selling
existing LAICA and Aqua Optima products
into new territories), coffee filtration
expertise and using private label water
products as a way to open doors into
large retailers for other categories.
Transformational acquisition of Billi
Billi is a leading brand in Australia for the
supply of premium instant boiling, chilled
and sparkling filtered water systems.
A clear number two player in the space
within Australia, New Zealand and the UK.
With a 30+ year history, Billi is renowned
for its premium and innovative products.
Billi has a successful history of growth,
with double digit revenue CAGR over the
past five years, attractive margins and is
highly cash generative, delivering cash
conversion of >70%.
The acquisition of Billi was for £38.9m
cash and completed on 30 November
following regulatory approval in Australia,
New Zealand and the UK.
9
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Chief Executive Officer’s statement continued
Billi was acquired from Culligan following
its merger with Waterlogic; the divestment
was a condition of that merger. The
acquisition multiple was 3.8x EBITDA
reflecting the unique circumstances that
Culligan found itself in and the progress
Strix had made with the competition
regulator in Australia, New Zealand and
the UK. As reported in the press, there
were other bidders at significantly higher
valuations than Strix even at the very end
of the process. The transaction was funded
through a £13.0m equity raise and debt
refinance consisting of an extension of the
current RCF and a new acquisition facility.
Overview of strategic rationale
The acquisition materially changes the
earnings profile of the Group, accelerating
growth plans for the water and appliances
categories and supporting the medium-
term ambition.
It adds well developed and premium
products in the high growth and strategically
important hot tap market and increases
Strix’s position and portfolio of water
dispenser systems. The Board expects
Strix’s existing technology, resource and
expertise can be used to further enhance
Billi’s new product development roadmap.
Efficiencies were identified across Billi’s
product lifecycle and will be enhanced
utilising Strix’s Chinese operation to
improve procurement, insourcing of
certain key parts, and consolidation
of the marketing group.
There are also opportunities for
further organic growth. These include
residential sales, new product development
particularly in sparkling, internationalising
Billi’s revenue stream through Strix’s global
footprint, cross selling Strix products into
commercial applications and growing
aftermarket sales.
Progress since completion
The acquisition of Billi continues to
be successfully integrated in line with a
plan to achieve the identified operational
benefits, as the business opened up
new sales channels for Strix.
The trading performance so far has been
in line with budget.
Very positive progress has been made
at Billi UK with elements of the TSA
already removed:
• Head office established in
Wolverhampton with all staff
now transferred.
• Showroom in London (Farringdon).
• Stock was moved into Strix storage
locations during March/April.
• All HR functions now managed by
Strix HR team.
• Agreed to move forward with Microsoft
Dynamics for their ERP system with
target completion in July 2023.
NPD is on track for launch in Q2. This will
be a major opportunity for all markets,
particularly within the residential sector.
Good progress has also been made with
new sites identified as Strix procures
smaller storage locations in New
South Wales, Western Australia and
South Australia.
Barriers to entry and defence
of intellectual property
Strix constantly assesses the risks
posed by competitive threats and sees
the real benefits of market disruption.
This drives its determination to constantly
evolve its innovative technologies
in a sustainable way by investing in its
portfolio of intellectual property to protect
its new products and technologies.
The Group actively monitors the markets
in which it operates for violation of its
intellectual property rights. Strix has
unique relationships with its brands,
OEMs and retailers and provides its support
across the value chain and throughout
the product lifecycle, including product
design and advice on specification and
manufacturing solutions. These value-
added services and existing strong
relationships ensure brands, OEMs
and retailers continue to rely on Strix’s
components and support.
Strix remains committed to consumer
safety and continues to prompt regulatory
enforcement authorities to remove
unsafe and poor quality products from
its major markets. Nine such actions
were undertaken in 2021 resulting in
product recalls and withdrawal of
kettles from Bulgaria.
Defence of intellectual property and
regulatory enforcement remain core
activities of its business and there have
now been 66 in total since 2017 until the
end of 2021, with four further regulatory
and three intellectual property actions
conducted in 2022.
Sustainability
Strix core products are associated with the
consumption of critical resources, primarily
electricity and water, hence Strix’s drive for
continual improvement has aligned it with
a sustainability-led agenda. Recent years
have seen an increase in the emphasis and
broadening of the scope of its sustainability
agenda. This was highlighted by the
adoption of a wide range of KPIs and
associated targets in 2021.
One of the most challenging and
differentiating goals is to achieve Scope
1 & 2 net zero by 2023. Key elements have
been put in place with long-term renewable
power contracts for all key facilities and
head office, along with investment in solar
capacity. Indeed, Strix now expects its own
renewable sources to generate around 10%
of the Group’s total energy requirements.
As a consequence, the Group started 2023
in-line with its net zero agenda. This is
increasingly important as its customers
look to assess their own emissions
footprint, of which Strix forms part of their
Scope 3 inventory. Strix’s position as a
leader in low emissions therefore offers a
potential commercial advantage over its
competition. Efforts are being expanded
into analysing its own Scope 3 inventory
in 2023 to fully embrace its extended
emissions chain. This leads to additional
constructive conversation with suppliers
and customers including reassessment
of operational and supply chain practices.
The Group’s sustainability agenda is
sympathetic to changing consumer trends
and hence is key for driving the roadmap
and pace of new product development.
The Group’s sustainability strategy and
adopted KPIs are generating greater
emphasis and efforts on a broad range
of aspects. Employee training has been a
focus with significant increase in training
hours assisted by the adoption of a more
structured approach, including the Kallidus
e-learning system and a new training
management structure in China.
10
There will be no further M&A activity or
investment into new factory builds, with
significantly reduced capex and working
capital over the medium term. Capital
allocation decisions will prioritise debt
reduction and free cash flow generation
with a clear plan to get net debt/EBITDA
to below 2.0x during 2023 and to below
1.5x during 2024.
Over the past few years, Strix has made
significant investments in acquisitions,
a new factory and working capital. A primary
driver of the increased exceptional costs
is due to the number of acquisitions
and one-off costs relating to capital
expenditures.
HaloSource was acquired in 2019 and
contributed to the exceptional costs
through the associated transaction
fees. LAICA was acquired in 2020 and
included an earn-out clause which caused
exceptional costs in outer years, along
with the transaction fees in 2020. The new
factory in China was completed in 2021,
adding to exceptional costs from large
scale capital expenditure. Most recently,
Billi was acquired and its transaction fees
contributed to the 2022 total. As these
one-off costs are not recurring, we expect
cash conversion to materially improve in
coming years.
Net working capital which includes
inventories, trade and other receivables,
and trade and other payables (including tax
liabilities, but excluding short-term portions
of long-term liabilities) increased to £27.6m
(FY 2021: £18.0m), an increase on £9.6m.
The main driver behind this is an increase
in net working capital of c.£5.9m (including
tax liabilities) recognised as part of the
acquisition of Billi. The rest of the increase
relates to slightly higher inventory levels
from prior year as the Group looks to fuel
anticipated increase in demand in the new
year, evident from green shoots returning
in Q1 2023. Decreases in trade and other
payables were due to lower procurement
activities, partially offset by decreases in
trade and other receivables which were
largely due to collection of VAT receivables
from the Chinese government relating to
the construction and completion of the
new factory in China.
“The successful
integration of Billi
will propel the
Group into a new
growth phase,
further diversifying
away from the core
kettle controls
business...”
Outlook
Following a period of uncertainty across a
number of Strix’s key export markets in Q4,
recent sales data in 2023 indicates that
some green shoots are appearing and the
path to a return of growth is opening across
all segments:
•
It is anticipated that the Chinese
economy will start to rebound in 2023,
given the change in COVID policy.
• Estimated kettle sales through a major
online retailer channel shows January
2023 grew by 17% versus the same
period last year.
• After usage at Strix’s top five OEMs in
H2 2022, the Group is now seeing a
recovery in Q1 2023 which is reassuring
as this has historically been a quieter
trading period.
• Signs of a pipeline refill are returning,
as a small increase in consumer demand
can have an outsized effect on the
demand for Strix’s components.
• The Group has delivered consumer
goods business growth, despite the
underlying market softening and
positive contracts secured in Q1 2023.
The successful integration of Billi will
propel Strix into a new growth phase,
further diversifying away from the core
kettle controls business with strong
potential for greater top line growth
and improved margins going forward.
Mark Bartlett
CEO
Health & Safety continues to be a top
priority with the three-year average trend
continuing in a positive direction. The
Company values its employees and their
contribution and looks to develop their
wellbeing reflected in improved facilities
offered by the new Chinese facility.
Meanwhile, the West has seen changes
in the working week, which has also
increased holiday entitlement, and the
introduction of two charity days a year.
Strix’s sustainability agenda for 2023
remains high on the agenda as it delivers
on its Scope 1 & 2 targets, analyses its
Scope 3 emissions and continues to focus
on its other KPIs. The pace and delivery of
these goals reflects the strong employee
ethos and commitment to the agenda.
Dividend policy
As capital allocation decisions prioritised
debt reduction, the Board decided after
reviewing the level of the net debt to
propose a final dividend of 3.25p per share
(2021: 5.60p) which would represent a total
dividend of 6.00p per share (2021: 8.35p).
The final dividend will be paid on 11 August
2023 to shareholders on the register at
30 June 2023 and the shares will trade
ex-dividend from 29 June 2023.
Operations review
The factory within Zengcheng district in
Guangzhou, China, continues to be fully
operational with efficiency improved by
6.1% in 2022 versus 2021.
A new EMEA Sales Director was appointed
and a new Global Distributions & Logistics
Director role created to provide the
leadership team with additional expertise
in commercialisation and cost optimisation.
An updated ESG and Sustainability report
was published on 29 March 2023.
Strix continues to implement a range of
strategic initiatives to minimise the impact
of the headwinds it is facing, which includes
a functional streamlining programme and a
focus on the reduction of inventory in order
to maximise cash generation for the Group.
Financial Position
Strix is focused on its highly cash
generative operating model and the
management team will prioritise the
integration and unlocking the anticipated
revenue and cost synergies following the
acquisition of Billi.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Strix investment case
Strix is focused on its highly cash generative
operating model and management will prioritise
integration and unlocking anticipated revenue
and cost synergies.
1.
Maintained dominant
market position in
global kettle controls
with high barriers
to entry
• Global market value share of the kettle
controls remained at c.56% (excluding
Russia and other impacted territories)
as the Group retained dominance in
the market.
• Regulated segments market decreased
overall due to negative macroeconomic
drivers, predominantly being the cost
of living crisis for consumers and a
destocking cycle for retailers and brands.
• Less regulated segments slightly
underperformed from the normal average
CAGR growth levels due to declines
from similar economic weakness.
• The Chinese market saw a recovery
in the latter half of the year as COVID-19
restrictions finally eased and the zero
COVID policy was abandoned.
• A strong patent portfolio underpins
Strix technologies with successful
campaigns globally (including China)
to remove infringing products and
initiate regulatory enforcement actions.
2.
Significant growth
opportunities in
water and appliances
categories
• Acquisition of Billi transforms the
revenue base for Strix, materially
increasing the contribution from
water and appliances categories.
• Very positive progress has been made
on integration since the transaction
completed in November and on track
to unlock anticipated revenue and cost
synergies. Trading has been in line with
budget since acquisition with a solid
order book.
• Strix own brand products continuing
to outperform versus private label with
growth in own brand of 8% versus a
wider market decline and exceptional
growth in Aqua Optima of 49%.
• Continuing to expect 25% growth
across the two divisions in 2023
underpinned by a number of
signed contracts.
3.
Strong ESG credentials
with structural growth
tailwinds
• 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.
• Targeting to achieve net zero for Scope
1 & 2 emissions in 2023 (excluding Billi)
predominantly through solar or other
renewable energy.
• Focus turning to reducing Scope 3
emissions.
12
4.
Strong free cash flow
generation with unique
working capital cycle
• Customers typically pay in advance
for kettle controls, reducing non-
payment risk and increasing cash
conversion cycle.
• Low requirement for maintenance capex
(excluding investment in new factory
that completed in August 2021).
• Operating free cash flow (before
financing and tax) to EBITDA conversion
has historically been in the region of
70% and the Board is committed to
returning the business to this level
of free cash flow generation.
5.
Market-leading
adjusted EBITDA margin
• Significant investment in automation,
as well as ongoing focus on other
efficiency measures, strategic initiatives
and acquisition synergies underpinning
EBITDA margin uplift.
•
Increased capacity at the new factory
allows for in-sourcing of additional
products and components with
margin benefit.
• Extensive patent portfolio and safety
•
Increasing the appliances product mix
further boosts margins as these are
typically more complex technologies
that can command a higher price point.
actions underpin margins, with
campaigns to report infringements
and remove copyist products from
the market.
6.
Disciplined capital
allocation framework
• The Board maintains a disciplined
capital allocation framework which
balances investment for growth and
shareholder returns.
• The acquisition of Billi has materially
changed the earnings profile of the
Group as well as increasing leverage
above the Board’s medium term target.
• As such, the Board is now prioritising
debt reduction in the short term with
a clear plan to return leverage to below
2x by the end of 2023 and to below 1.5x
by the end of 2024.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Key performance indicators
We use financial and non-financial key performance indicators (‘KPIs’) to track
and measure our progress over time. In addition, during 2022 we established
clear ESG KPIs to track our improvements in line with our key sustainability pillars.
Financial KPIs
Kettle controls
revenues (£000)
68,243
(19.9%)
2022
2021
68,243
85,117
Water category revenues
(£000)
24,135
12.8%
2022
2021
24,135
21,404
Appliances revenues
(£000)
14,542
12.8%
2022
2021
14,542
12,889
Adjusted EBITDA1,2
(£000)
32,128
(20.7%)
2022
2021
32,128
40,540
14
Definition
2022 performance
Value of items sold during the year
within the kettle controls category.
The decrease is attributable to a reduction in
kettle controls due to the market environment.
The key characteristic in 2022 was a continual
and unprecedented worsening of the macro
backdrop in Q4. The negative drivers included
the cost of living crisis in Regulated markets,
COVID-19 shutdowns in China and the Ukraine/
Russia crisis impacting Less Regulated markets.
Definition
2022 performance
Value of items sold during the year
within the water category.
The increase is due to initial geographical
expansion via Amazon sales outperforming
the private label business and securing new
distribution through cross selling existing
LAICA and Aqua Optima products.
Definition
2022 performance
Value of items sold during the year
within the appliances category.
Revenue from appliances continues to grow,
driven by the continued launch of new innovative
products, geographical expansion across
Europe and North America and strengthening
of the Aqua Optima brand. There is continued
market penetration and new innovative projects
and launches within the appliances categories.
Definition
2022 performance
Adjusted EBITDA highlights the
underlying operational performance
of the Group after adjusting for
exceptional costs, the impact of
financing decisions and depreciation
and amortisation.
Adjusted EBITDA decreased by 21% in line
with the decrease in Kettle Controls due
to macroeconomic factors.
Adjusted gross profit1 (£000)
Definition
2022 performance
41,525
(12.4%)
2022
2021
41,525
47,424
Net cash generated from
operating activities (£000)
23,363
4.9%
2022
2021
23,363
22,290
Gross profit is the profit generated
from our sales after deducting the
costs associated with making and
selling our products, adjusting for
exceptional costs.
The decrease in adjusted gross profit is in
most part due to the impact of revenues for
kettle controls falling as described previously.
The decrease was slightly offset by increases
for both the water and appliances categories.
Definition
2022 performance
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.
Net cash flows from operating activities
showed a modest improvement despite the
softening of trading performance. This is largely
due to the improvement in the changes of net
working capital that offset the downside of cash
flows from operating profit.
Total R&D expenditure (£000)
Definition
2022 performance
Total research and development (R&D)
expenditure (including capitalised
costs) as a percentage of reported
revenue, which supports our investment
in future technologies and products.
Fairly constant R&D to net sales ratio
of 4%-5% year-on-year in line with the
medium-term goals.
4,888
(8.2%)
2022
2021
4,888
5,324
2022: (4.6% of net sales)
2021: (4.5% of net sales)
For further strategy information
please see pages 28 to 33
For further risk information
please see page 50
1 Adjusted results exclude exceptional items, which include share-based payment transactions, COVID-19 related costs, 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.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Key performance indicators continued
Non-Financial KPIs
Gender diversity
Definition
2022 performance
27.3%
0.0%
This refers to the number of women
in management roles expressed as
a percentage of all management-
level employees.
2022
2021
27.3%
27.3%
The percentage of women in management
roles across the Group remained stable at
27.3% (2021: 27.3%) whilst across the Group
we retained a positive balance with women
accounting for 50.8% of the overall workforce.
Energy usage (MWh)
14,052
(10.3%)
2022
2021
14,052
15,666
Definition
2022 performance
Electricity usage is expressed in terms
of the megawatt-hours utilised during
the year.
Energy usage decreased during the year by
10.3% mainly due to the significant operational
progress made in 2022 with all manufacturing
facilities and Group head office now using
renewable energy. China’s solar capacity
also expanded by a further 10%.
Business travel (tCO2e)
Definition
2022 performance
98
5.4%
2022
2021
Business travel is expressed as
the equivalent of the carbon dioxide
emissions (tCO2e) which is calculated
using the GHG Protocol for Scope 3
category.
98
93
We monitor our consumption of fossil fuels in
order to ensure our business travel emissions
are minimised. The emissions from business
travel remained low due to continued
curtailment of business travel following the
restrictions during the pandemic. The Group’s
target is to restrict business travel emissions
to below pre-pandemic levels which were at
1,014 tCO2e in 2019.
16
Water usage (m3)
Definition
2022 performance
34,482
(26.6%)
2022
2021
34,482
46,979
Water usage is expressed in
cubic meters.
We monitor our water usage on a monthly
basis to ensure minimal wastage through
recycled use. Water usage declined significantly,
assisted by the lack of commissioning
requirements in China.
Water intensity (m3/£m)
Definition
2022 performance
Water intensity is a measure of the
water usage per £1 overhead spend.
333
(15.1%)
2022
2021
333
392
Water is a key resource for our research,
design and testing facilities, reflecting the
nature of the liquid products which dominate
our portfolio. In line with the decrease in the
water usage, the intensity is also on a downward
trend and this improvement is currently ahead
of the KPI target.
Accidents – total lost time
Definition
2022 performance
9
(18.2%)
2022
2021
Lost time (hours)
0.22
(63.9%)
2022
0.22
2021
9
11
0.61
This refers to the total number of
accidents recorded that resulted in
employees missing work due to injury.
Total accidents continue to decrease
year-on-year and this is attributable to the
benefits of further automation of assembly
lines and a strong emphasis on prioritising
the health and safety of employees.
Definition
2022 performance
This refers to the total number of hours
lost due to accidents resulting in injury,
expressed per 1,000 hours worked.
Total lost time fell, reflective of the decrease
in accidents recorded, and also attributable
to benefits from further automation of
assembly lines.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Our people
What does HR at Strix mean?
As a Company, Strix prides itself on the
quality and safety of our 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.
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.
People development
Strix’s HR function, led by Group
HR Director Emma Cox, 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.”
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. Our people are given
the freedom and mechanisms to share
their ideas about how to keep improving
the business. We also reward excellence,
commitment and innovation and celebrate
the rich diversity that the Company has
in its multi-national workforce.
Diversity at Strix
The Company recognises that to achieve a
diverse workforce, a working environment
that empowers all of our employees to
18
As a global employer, spanning across
multiple continents, we pride ourselves
on the gender make up of our workforce
where 50.8% of employees are female,
and women have a 27.3% 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 workforce,
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 focuses on
creating opportunities for school leavers
and university graduates interested in
careers in engineering. We are also very
active participants in the Island’s Junior
Achievement programme, providing
mentors and tutors.
Our diversity continues to grow with our
strategic acquisitions and the purchase of
Billi in November 2022 exemplifies this. We
now have teams of Field Service Technicians
in Australia, New Zealand and the UK,
as well as dedicated customer support
executives and niche sales specialists.
The Strix HR team provide day-to-day
support and a payroll provision to Billi UK,
plus strategic input for the wider Billi Group.
Employee engagement
In 2022, working with our Managers in both East and West, we developed a set of core values:
R
E
C
A
P
Respect
We show respect and
treat others as they
wish to be treated
Extraordinary
We are beyond
ordinary, we are
extraordinary
Challenge
We own it, challenge
it and then win it
Adapt
We fail fast, learn
quicker, adapt
and move on
Passion
We have passion
for our people, our
planet, our products
and profit
Nominations are invited from across
the business for people who have
demonstrated these values. In Q4
alone, 70 nominations were made,
and these were eventually short-
listed to ten prize winners.
Our transparent job grading system for
all employees was designed to better
reflect current and future needs and
provide clarity on progression and/or
how people can vary their careers within
the organisation. Acknowledging the
proven benefits of having a vibrant
workplace in which people feel fully
engaged, we are actively ‘creating
a buzz’ at Strix, inviting ideas from
employees to have fun and give back.
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.
Whilst introducing new talent into the
workplace is about making sure people
are comfortable and confident to do their
job, and have all the information and tools
that they need, it is not about assimilation.
It is about making sure we gain the diverse
opinions and ideas of our new talents.
Fresh eyes are a gift in respect of bringing
new and innovative solutions to problems.
New starters also bring with them market
intelligence, whether it is about products,
processes or systems. These insights are
invaluable to Strix.
Gender diversity
Female management
27.3%
Female Board members
20%
Overall female workforce
50.8%
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Our people continued
Our Human Capital strategy
Recruitment &
Selection
Promotion/
Leave
as a Strix
Advocate
On-Boarding
Engagement &
Retention
Training &
Development
20
Underpinning this mission is a strategy
that is focused on value-added people
development which includes intensive
new starter orientation programmes where
new joiners are introduced to the Strix
culture, policies and procedures, plus key
product information so our people are fully
engaged in what we make and do. There
is continuous training for line leaders
to ensure they have the right skills to
coach, mentor and supervise new and
existing staff, as well as an online-based
learning platform called Kallidus and our
performance management process (‘PMP’).
“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.”
Emma Cox
Group HR Director
The performance management programme
(PMP) process is designed to give people
a clear line of sight as to how they can
progress their careers within Strix and it
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.
Through an e-learning platform, employees
have access to a wide range of mandatory
and other best practice and self-
development learning and training courses.
These enhance their skills and awareness
to ensure they deliver quality service in
their various roles and are kept up to date
on developments in their relevant fields.
Mandated training on the e-learning
platform ensures that employees are
familiar with our equal opportunities
policy and ethos, as well as our
environmental considerations. Similarly,
people are taught about our stringent
business ethics, including anti-bribery
and anti-competition legislation, and
how to report any issues through our
Whistleblowing mechanism.
Employee wellbeing
As well as having the right people doing
the right things, Strix is committed to
ensuring that our people feel right
physically, mentally and financially. In
the West, private health care is provided
to all employees, regardless of their
job role, and with this also comes the
Employee Assistance Programme. This
is an 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, many 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 making acquisitions, diversifying
our product ranges and our 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 our people.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Business model
Strix, as a service provider across the value chain, provides units,
components and value-added services to OEMs, brands and commercial
and residential retailers who utilise these and other components to
produce market leading products for consumers across the globe.
Kettle controls category
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 and produced to the highest safety
standards. Strix continues to enhance consumer
safety through our involvement with standard-setting
bodies and we use our in-house independently
accredited stage 3 Customer Test Facility (‘CTF’) to
streamline the kettle control accreditation process.
Long-term growth
Strix still holds a strong market leading position in
the kettle controls market. However, the Company
continues to reach out for further growth. 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 customers 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. Whilst the China market is
maturing, there is still growth potential 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 believe
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 labour costs.
22
Our USP
Strix continues to expand its portfolio of product
offerings as it operates as an OEM, technology provider
and consumer products business across its portfolio of
brands. This has been achieved through both in-house
developed brands such as Aqua Optima, and synergistic
acquisitions in the last two years of key brands such as
HaloPure, astrea, LAICA and Billi. The acquisitions further
complement Strix’s existing product portfolio and bolster
the Group’s product innovation, with chemistry and
engineering expertise in China, the US and Australia.
The addition of LAICA and Billi further expands the
Group’s reach into the category with the addition of
new product ranges such as taps, dispensers and
filters, and robust existing distribution channels.
The water category continues to benefit from
trade brand agreements with multiple large UK and
European retailers and brands. The Group has driven
increased consumer recognition for its four 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 within 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, taking advantage of a
wider market outreach gained through these strategic
acquisitions 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, Europe and in
Australia and New Zealand through Billi’s market footprint.
Appliances category
How we create value
Our USP
Our mission within the appliances category is to
develop products that allow consumers to live a safer,
more convenient and sustainable life at home. Our
portfolio across LAICA, Aqua Optima and the recently
acquired Billi brands spans various price points to
target consumer needs across Hot Water on Demand,
Baby Care, Beverage, Living and Health & Wellness, and
Premium Instant Filtered water systems. Strix continues
to invest in developing core technologies which will help
us drive differentiation and growth within our markets;
building on the success of the Tommee Tippee Perfect
Prep machine and the Aurora launches.
Long-term growth
The consumer is at the heart of our appliances and
technology developments with a focus on innovating
around real consumer problems. The recent acquisition
of Billi has expanded our product range and market
outreach, which will accelerate our growth plans in
the appliances category. Our continued investment in
R&D, together with the successful integration of LAICA,
has resulted in significant growth in the appliances
category over the last two years and ongoing initiatives
give the Group confidence in sustainable growth over
the coming years. Having successfully launched the
Aurora range of products and bolstered our position
within the Hot Water on Demand category, we are
quickly moving to expand our product mix to offer
our customers a coherent product range underpinned
by sustainability, strong design and thoughtful
user experience.
Strix
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.
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 2021, 2022 and into 2023.
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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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
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 medium term as communicated during the
Capital Markets Day in 2020. This will continue to be achieved primarily through
organic growth and strategic acquisitions in the Group’s water and appliances
categories, supported by its solid market-leading position in global kettle controls.
Kettle controls category
Overview
Strix estimates that in 2022 the global
market for kettle controls, including those
for Chinese multi-cooker appliances,
experienced a moderately strong H1
increase, and then a softening in H2
due to the cost of living crisis resulting
from the Russia/Ukraine conflicts. The
global kettle market reduced by c.18% to
c.£130m. Electric kettle penetration rates
provide an indicator of potential growth,
and in 2022 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 knowhow established
during more than 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 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
2022, the Regulated kettle control market
overall reduced as an indirect consequence
of the cost of living crisis resulting from the
Russia/Ukraine conflict, which had a direct
reductive impact on available disposable
income and therefore reduced spend on
household goods, particularly in the UK,
Europe and the Americas. The COVID-19
pandemic in H1 2022 caused costs to
increase and although the situation
improved in H2 2022, any benefit was
offset by the cost of living crisis resulting
from the Russia/Ukraine conflict.
Regulated markets:
c.70%
Market share
Strix is the key supplier to
the Regulated market, where
customers favour high-quality
controls to meet tighter
regulations. In this mature
market, Strix’s market share
remained above 70% of the
kettle controls market.
24
China domestic kettle market
China is generally considered to be a
Less Regulated market, but is developing
quickly with improving safety standards
and enforcement. In 2022, the Chinese
export market softened as the job market
worsened during the year, remnant from
the impact of COVID-19 lockdowns during
H1. The year ended at approximately
c.£25m market value.
China:
c.40%
Market share
Chinese market decreased by
c.4% in 2022 resultant from
COVID-19 lockdown experienced
during the first half of the year.
Strix’s value share in China
remains above 40%.
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, Middle East,
South East Asia, Africa and South
America. In 2022, the Less Regulated
market was entirely impacted by the
Russia/Ukraine conflict which had a
global ‘cost of living crisis’ impact.
The COVID-19 pandemic shifted consumer
demand more towards services and less
towards consumer household goods
(such as kettles) as demand shifted more
towards outdoor activities as the world
emerged out of lockdowns. For Strix, this
was further impacted by the events in
Ukraine in H2 and the resultant increase
in cost of living. The value of the Less
Regulated market at year-end sat at
c.£50m.
Less regulated
markets:
c.35%
Market share
In Less Regulated markets,
Strix slightly underperformed
the normal average CAGR
growth levels due to declines
in Russia and associated CIS
markets, mainly as a result of
the conflict in Ukraine. Strix’s
market value share dropped
slightly under 35% of the
kettle controls market.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Market review continued
“The Group plans to
offer a competitive
edge in the market
through further
launches of new
innovative and
sustainable products.”
Water category
Overview
The Group’s strategy within the water
category is to operate as an OEM,
technology provider and consumer
products business across its portfolio
of brands and partners. This is to deliver
sustainable filtration solutions and the
recently acquired premium drinking
water dispensing systems that allow
consumers to make healthier choices
for themselves and the planet.
Strix’s OEM business supplies major brands
and retailers, including commercial and
residential consumers with high quality
own-label consumer products, designed
and manufactured in our own factories
in China, Italy and the newly acquired
Australian operations. Its diverse range
of filtration technologies, premium water
dispensing systems and jug designs allow
flexible product configurations to suit
each market and price point. The Group
will launch numerous own-label product
ranges with key brands and retailers into
2023, further increasing its reach and
potential in key growth markets across
Europe and Australia. Further initiatives aim
to target own-label opportunities in North
America within the discounter channel.
As a technology provider in water filtration,
the Group continues to innovate and
deploy key technologies to address water
quality concerns in a range of applications.
The HaloPure technology, secured in the
acquisition of HaloSource in 2019, has
expanded the Group’s reach into China,
addressing key needs in the poultry farming
space where it can help increase yield and
production by eliminating water-borne
illnesses. The Group also continues to
develop bespoke filtration formulations
that power leading coffee machine and
water dispenser brands around the
world, delivering an enhanced product
performance with differentiated claims.
enthusiasts and utilises our patented HPAC
filter technology, and has achieved NSF
certifications for over 20+ contaminants
including herbicides, pesticides and
pharmaceuticals. The newly acquired Billi
brand is synonymous with award-winning
innovation and provides boiling, chilled
and sparkling drinking water dispensing
systems. Moreover, everything made under
this brand is of uncompromising quality
backed by a world class customer service
experience, and preferred by designers and
architects for timeless styling and space-
saving design.
As a consumer products business, the
Group operates four brands that deliver
on a strategic price point and performance
differentiation strategy. The Group’s Aqua
Optima Brand, which relaunched with
new brand positioning in H2 2022, targets
young professionals with simple, fast
and affordable filtration solutions to
tackle everyday water problems, and
curb the use of single-use plastics. The
LAICA brand focuses on the family unit,
reducing contaminates in water, while
also preserving essential minerals to help
improve health. Through a range of highly
specialised filters, the LAICA family of
products can also address specific water
concerns for the preparation of tea, coffee
and increased mineralisation. Our astrea
brand targets on-the-go wellness
The Strix roadmap of new products in this
category aims to further bolster its filtration
credentials with the further addition and
development of new filters addressing
water concerns in key markets such as the
US and China. In 2022 into 2023, the Group
will continue to further expand its range of
in-house manufactured jugs with a unique
range, including a counter-top dispenser
called ‘Perfect Pour’ offering elegant
designs and solutions to the challenges
of existing point-of-use water products.
The Group aims to further expand its
reach within the Aqua Optima line with
key distributor launches in China, North
America and Australia in 2023, as well as
further progress expanding the LAICA
and Billi footprint in these markets.
26
Strix innovation also continues to grow
its footprint with the Dual Flo appliance
launching under the LAICA brand in the UK
and Western Europe in 2022; 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.
Strix’s ambition within the Baby Care
category is to be the ‘go to’ technical
solutions provider for leading Baby Care
brands seeking innovative, new electrical
appliances. 2022 highlights include the
successful launch of the world’s fastest
steriliser-dryer with leading US Baby
Care brand Baby Brezza, powered by
patented Strix Technology. Our core
European business continues to perform
well and will be supplemented with further
launches across Europe and Asia over
the next 24 months.
Building on our core categories mentioned
above, Strix has continued to define and
develop the product roadmap within the
‘Strix Home’ category, inclusive of Beverage
& Breakfast, Health & Wellness and Food
Preparation & Waste. Our roadmap
considers various modes of execution –
from leveraging Strix in-house innovation
for highly differentiated propositions such
as Aurora and Dual Flo, to a fast track
sourced product approach whereby we
aim to build a highly credible, full product
line up underpinned by our brand direction
and values.
The LAICA brand will play a critical role
in achieving our growth ambitions within
the appliances category. Here we will focus
on launching family-focused innovation
designed in line with our Italian heritage,
with the overall objective to be recognised
as a leader in sustainable home solutions.
2023 will see us launch into several
adjacent categories under the LAICA
brand, for example with a new sparkling
water proposition and digital filter kettle
and matching toaster.
The LAICA roadmap has been built
with this foundation in mind; the range
will expand to offer consumers more
solutions that help them minimise waste,
save energy and reduce single-use plastics.
The success and growth of our vacuum
range of products that helps reduce waste
through optimising food storage conditions
gives us great confidence in the approach
and line-up going forwards. In parallel, we
will continue to improve and refresh the
core LAICA appliance range throughout
the coming years.
Under the newly acquired Billi brand, the
Group plans to maintain its key market
position as Australia and New Zealand’s
premium filtered water systems, with
its ‘must have’ product in the homes of
residential consumers. As Billi is integrated
further into the Group, we plan to expand
our market outreach into the UK, Europe,
Asia and also into North America.
Appliances category
Strix’s mission within the appliances
category is to launch products that allow
consumers to live a safer, more convenient
and sustainable life at home.
The Strix appliances category incorporates
a number of sub-categories including Hot
Water on Demand, Beverage & Breakfast,
Food Preparation and Health & Wellness,
Everyday Living and Premium Instant
Water Dispensing Systems.
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
partner factories and brands specifying
this technology within their products.
Strix has also developed its competitive
‘Next Generation IFH’ within 2022 which
will start to penetrate the market in 2023.
Strix’s IFH appliances offering continues
to grow aiming to capture the spectrum of
consumer needs across different market
price points. The Aurora range continues
to perform; sales of the initial Hot and Cold
model continued to grow throughout
2022, whilst we added more range variants
to offer a breadth of features and price
points. 2023 will see the launch of Aurora
Coffee, a combined coffee maker and hot
water dispenser, to address consumer
needs whilst opening up the extensive
coffee category across our primary
target markets, North America and
Western Europe.
For further information
please see pages 40 to 43
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Growth strategy
Performance; Product;
Process; and People
“Strix continues to implement a range of strategic initiatives to minimise the impact of the
headwinds it is facing, which includes a functional streamlining programme and a focus on the
reduction of inventory in order to maximise cash generation for the Group in the medium term.”
Mark Bartlett
CEO
The Group’s growth plans have been accelerated, particularly for the water and appliances categories due to recent
strategic acquisitions, with the objective of delivering medium-term targets to double the Group’s revenues remaining
on track. To achieve this, Strix continues to follow a divisional strategy, which is supported by our four ‘P’s’ of Performance,
Product, Process and People. The key pillars of our strategy are:
Strategic pillar #1
Growing market share
2022 progress
Key growth initiatives for the category will be geographic
expansion (cross selling existing LAICA and Aqua Optima
products into new territories), coffee filtration expertise
and using private label water products as a way to open
doors into large retailers for other categories.
In the appliances category, 2022 has seen our Aqua
Optima brand record an 184% growth, despite market
softening, driven through geographical expansion, Strix/
LAICA cross selling and new innovative product launches.
The Billi acquisition helps diversify positioning with a
premium product offering through new channels, as well
as giving cross-selling opportunities to drive growth.
People: In 2022, Strix maintained the family ethos of
its origins in its approach to diversity and inclusion,
employee engagement and welfare. We have continued
to implement internal restructuring to promote innovation
and harness talent from within the organisation.
Risks
The risk of not building and maintaining market share from
lower sales revenues for the Group could lead to reduced
future capital expenditure for product development.
The relevant principal risks are:
• reliance on key customers;
• reliance on key suppliers;
• competitors and market pressures;
• reputation with customer base; and
• external factors (including geopolitical influences
and macro-economic backdrop).
Product: The Group has maintained its market leading
value share of the global kettle controls market at 56%
(excluding Russia and other impacted territories) whilst
significantly expanding the size of its water and appliances
categories. For kettle controls, revenues decreased due to
a continual and unprecedented worsening of the macro
backdrop in the later part of H2. The overall kettle market
softened by c.18% in 2022, with volume and value reductions
experienced in all sectors. Key negative drivers included
the cost of living crisis in Regulated markets, COVID
shutdowns in China in the first half of the year, and the
Ukraine/Russia crisis impacting Less Regulated markets.
There was growth in Strix’s water category within various
regions despite a softening of the markets. This was
achieved through new distributor contracts and listings
with reputable distributors, retailers and brands. Some
of the notable wins include:
•
initial geographical expansion via Amazon sales
outperforming the private label business;
• successful Aqua Optima rebrand launch into UK,
Europe and North America for the first time;
• the Group continuing to see benefits from secured
long-term contracts with Europe’s largest consumer
electronics retailers for supply of Strix’s water filtration
technology, as well as more than 200 additional
new retail store listings for Aqua Optima across the
UK and Ireland with well-known high street and
independent retailers;
• new private label business launched into France
and other key parts of Europe; and
• Strix now manufactures the majority of our filters
in-house in two locations freeing us from third party
risk, whilst allowing a new level of flexibility to offer
our customers.
28
Strategic pillar #1 continued
2023 outlook
Product: The Group plans to offer a competitive edge in
the market through further launches of new innovative
products. Through continued new retail listings and
distribution contracts, the Group aims to grow its market
share by channelling its existing and new products to the
different market segments, delivering products that meet
consumer needs at various price points and functionality
levels. Green shoots were seen to return in the first quarter
of 2023, with sales having already been realised in 2023 on
some of the new products in the growing North American
and Asia-Pacific markets.
Performance: The new manufacturing factory in
Zengcheng district in Guangzhou, China, became fully
operational in 2021. The new factory is already showing
signs of doubling the Group’s manufacturing capacity,
enabling it to grow the business and deliver on its medium-
term strategy of doubling revenues and catering for the
needs of the core business and acquired subsidiaries.
Efficiencies and further in-sourcing achieved in 2022
arising from the new manufacturing facility have already
started to have a positive effect on margins.
Strategic pillar #2
Focus on safety
and quality
2022 progress
Performance: The factory within Zengcheng district
in Guangzhou, China, continues to be fully operational
with efficiency improved by 6.1% in 2022 versus 2021.
This has helped to drive production efficiencies while
maintaining high quality standards. The new factory
is already compliant under certifications for ISO9001
(Quality Systems), ISO14001 (Environmental), ISO45001
(Occupational H&S) and ISO50001 (Energy Management),
and more recently ISO50001 Energy Management.
Key focus remains on quality control, sustainability,
continuous improvement, automation and health and
safety in relation to the existing processes which have
delivered significant improvement in customer quality
parts per million (ppm). We have also seen a continued
decrease in accidents at the manufacturing facilities.
Process: The Group remains committed to consumer
safety as we continue to develop products that allow
consumers to live a safer, convenient and sustainable life
at home. The Group also initiate regulatory enforcement
actions to remove unsafe and poor-quality products from
the market utilising the European Rapid Exchange of
Information (RAPEX) alert system. We continue to actively
monitor the markets in which we operate for violation of
our intellectual property rights.
Strix remains committed to consumer safety and
continues to prompt regulatory enforcement authorities
to remove unsafe and poor quality products from its major
markets. Nine such actions were undertaken in 2021
resulting in product recalls and withdrawal of kettles from
Bulgaria. Defence of intellectual property and regulatory
enforcement remain core activities of its business and
there have now been 66 in total since 2017 until the end
of 2021, with four further regulatory and three intellectual
property actions conducted in 2022.
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; and
•
• disruption to supply chains.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Growth strategy continued
Strategic pillar #2 continued
2023 outlook
Performance: With the new factory now fully
operational, production capacity has significantly
increased, and 77% of main production lines are fully
automated, and efficiency improved by 6.1% in 2022
versus 2021. Improvement efficiencies are expected
to continue into 2023. Strix’s automation plan
continues developing new innovative manufacturing
and assembly processes to support the Group’s NPI
roadmap and increase capacity for core product
and the water and appliances divisions. Further
in-sourcing of production is underway in the short
to medium-term to support the ambition to increase
our water and appliances manufacturing abilities.
Process: We will continue to engage in regulatory
enforcement activities and, where appropriate, the
defence of our intellectual property rights across
all categories.
Registration and defense 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.
Strategic pillar #3
Explore new
technologies
2022 progress
Product: New product development remains a
fundamental driver in the Group’s core business
strategy. The Group has made significant headway
in 2022 having delivered on the targets outlined in
the product development roadmap with the launch of
multiple new products. The Group has also refocused its
commercialisation strategy, optimising cross category
synergies within both our higher value appliances and
water categories. Throughout 2022, in line with its medium-
term growth ambitions, Strix has launched multiple new
products and improvements in the kettle control category
including U7 and VQ OEM efficiency improvements and
U99 series refresh to target improved user experience.
The Group successfully launched new products within
the appliances category, namely the Aurora Chilled, the
LAICA-branded Dual Flo, and Eco (GlassSmart) Vacuum
containers, amongst other products. The Aurora Chilled
offers consumers a convenient and stylish way to maintain
a healthy, hydrated lifestyle. The LAICA-branded Dual Flo™ is
the first and only combined kettle and hot water dispenser
on the market. Both products have strong energy saving
and sustainability benefits.
Aurora Hot and Cold won a housewares award: sustainable
product of the year 2022. These appliances also allow
consumers to heat or cool down only the required amount
of water hence reducing energy consumption and wastage
in line with the Group’s sustainability strategy.
30
Strategic pillar #3 continued
The water category continued to develop a range of new
products under Aqua Optima, astrea and LAICA brands.
Some of the products premiered in 2022 include, amongst
others, an introduction of a North American version of the
Aqua Optima Range, Enhanced Tap Filter and the Perfect
Pour Jug Range. The Enhanced Tap Filter includes multiple
models offering various filtered, unfiltered and shower
jet functions, turning the tap into a multi-function filtered
water appliance.
Performance: The Group’s dedicated Project Management
team for the appliances category have focused on increasing
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; and
•
intellectual property.
2023 outlook
Product: The Group will continue to deliver best-in-class
products to the market through its global distribution
channels. Within the kettle control category, continued
efficiency management for the U7 control and VQ original
equipment manufacturers (OEMs) and improvement of the
15A fast-boil kettle on the backbone of Strix’s existing high
standards of quality and safety.
In the water category, this includes the launch of the Aqua
Optima range in new markets, new and improved taps,
filters and jugs.
Within the appliances category this includes the expansion
of the existing lines with additions to the Aurora range,
scales and baby products. The introduction of Billi into the
Group also expands our product portfolio in the premium
instant filtered dispense water systems.
People: The dedicated category managers continue
to expedite the commercialisation of new products and
technologies in line with the Group’s new product roadmap.
This consumer insight driven development of new products
will meet the market needs and ensure that sales have the
tools to obtain maximum market potential out of current
and future Strix technologies.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Delivering our strategy
Strix continues to make 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 growth in both of the
Group’s consumer goods categories.
The Group’s focus on longer-term
investment decisions and culture of
innovation has continued to support 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:
“The Board outlined its strategy of doubling revenues in
five years during the Capital Market Day in 2020. In this
second year (2022) of the five-year plan, Strix’s growth
plans have been accelerated, particularly for the water
and appliances categories due to the most recent
strategic acquisitions, with the objective of delivering
medium-term targets to double the Group’s revenues
remaining on track. The Group has shown a robust
business model and disciplined execution of our
strategies despite a challenging year from global
market softening in all sectors. We remain confident in
our ability to navigate the growing uncertainties ahead
and delivering on the medium-term strategic plan and
delivering against targets.”
Mark Bartlett
CEO
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.
Kettle controls category
Strix remains the market leading provider of kettle
control components within the global kettle control
market. The introduction of a number of key product
series in the last couple of years within this category
continues to strengthen Strix’s position in existing
markets and to penetrate new markets, while still
providing customers with a ‘good’, ‘better’ and ‘best’
classification that ensures Strix’s products are
aligned to customer needs and price points.
This includes the expansion of the U9 series and
the introduction of the new Next Generation Series
Z controls development which is maturing, with
the objective to drive cost and customer benefits
and the roll out of new electronic kettle features
and designs with a focus on design trends,
consumer energy saving and OEM cost benefits.
We continue patented launches of our core
products within both these ranges. The product
portfolio also continues to be enhanced through
the expansion of the StrixVQ range and brand,
which provides a lower cost alternative for the Less
Regulated market. In the medium-term, the Group
will continue to bring innovative new products
to market focused on cost improvements,
consumer benefits and sustainability.
32
Appliances category
Following the IPO in 2017, Strix has placed a strong
emphasis on the appliances category as a key pillar
for growth. The growth is grounded in the Group’s
unique capabilities and position across the supply chain;
from our ability to deliver new-to-market innovation and
foundational technologies such as the Tommee Tippee
Perfect Prep, as well as the Aurora Beverage Station, the
newly launched Aurora Chilled and the upcoming Aurora
Coffee, all of which use a 5-step filtration technology.
Following the introduction of the category management
team, there has been an increased focus on value-based
development centred around customer requirements,
building sustainable credentials and driving commercial
results. The focus on this approach alongside the
investment in the category and the LAICA acquisition
has seen the launch of several innovative products
in recent years, such as the cordless iron for Morphy
Richards, the Aurora Range mentioned above, a Hot
Water Dispenser for Philips, Dual Flo (LAICA-branded),
Steriliser-Dryer for a leading US Baby Care brand,
a sustainable Vacuum (Food Preservation) Range,
and more. The Billi acquisition also introduces a new
product range of premium instant filtered dispense
water systems and taps which expand the Group’s
product portfolio for future growth. The delivery of our
strategy is backed up with strong growth within the
category registering at 1,063% from 2019 – 2022.
Water
The water category has changed significantly since
the IPO in part driven by the acquisitions of HaloSource
and HaloPure brands in 2019, LAICA in 2020 and recently
Billi towards the end of 2022. These acquisitions enabled
expansion of the category’s product portfolio through
the addition of the astrea, HaloPure, LAICA and Billi
brands which increased manufacturing capabilities
to the category to support new product development.
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 and Europe (through our Aqua Optima and
LAICA distribution channels), new retail listings have
also been won, evident from Amazon sales outperforming
the private label business, growing the brands’ presence
across the region. There have been more than 200
additional store listings for our Aqua Optima brand
across well-known high street and independent retailers.
Throughout the period since IPO, Aqua Optima has
entered into contracts with a number of leading UK
retail brands to launch private label products, and it
has released a number of innovative filter products
to the market, such as the Aqua Optima Evolve+ fast flow
and the Perfect Pour. The brand is also still in strategic
partnerships contracts with the Terra Cycle recycling
initiative to increase the reputation and sustainability
of the brand.
The brands purchased through strategic acquisitions
(astrea, HaloPure, LAICA and more recently Billi)
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 the IPO to date, with a comprehensive
and innovative roadmap of new product launches and
cross selling across all brands to drive the current and
geographical distribution objectives in the coming years.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
New products roadmap
Strix continues to invest in its research and development (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 category and product
management teams will support the commercialisation of new technologies to
ensure Strix obtains the greatest value out of its R&D activities.
Kettle controls
2021
Further range expansion of
the U9 series (U9 11A)
P76 5 Pole Connector
(for improved spillage)
U90 Flying Lead
Water category
2021
MyLAICA Stainless Filter Bottle
In-House Manufactured Next
Generation OEM Filter Jugs
In-House Manufactured
Universal Style Filter
Evolve+ Multi-Fit Filter for China
LAICA Tap Filter Systems
Perfect Fit – Filter Adapter
Appliances category
2021
Dual Flo – North America
Aurora Beverage Station
Visione – Induction Kettle
34
2022
Fast Boil – Patented 15A range
expansion
U7 OEM efficiency improvement
(wire management)
VQ OEM efficiency improvement
(wire management)
U99 refresh targeting improved user
experience (eliminate appliance
rocking)
Multiple cost and efficiency
enhancements
2023
Next Generation Control Range
(Series Z)
Expanding applications for the
adjacent markets and the emerging
categories; travel kettles, milk
frothers, ECO appliances and other
portable appliances
Feature and process lead Product
Sustainability Strategy, driving cost
and environmental savings for both
the OEM and the consumer
2022
North American version of Aqua
Optima Range
Range of LAICA jugs and Filters
into UK
New Improved Evolve+ Multi-Fit Filter
(Rebranded)
Enhanced Tap Filter
Perfect Pour Jug Range
2023
Perfect Pour Dispenser
Evolve Long Life
Bi-Flux Alkaline
Range improvement: recyclable
filter bags
2022
Aurora Range Expansion
(two additional models)
Steriliser-Dryer
Dual Flo – LAICA
Eco (GlaSSmart) Vacuum containers
New kitchen scales range
New personal scales range
LAICA expansion to UK
Air treatment range
2023
LAICA Digital Water Filter Kettle
and Toaster Breakfast Set
Expansion of air treatment range
Sparkling water maker
Expansion of LAICA range to
UK market
Dual Flo Toaster
AO kettle range for NAM
Aurora Coffee
Aurora Chilled
Aurora Chilled launched in April 2022 and completes the first wave of the Aurora
(Hot & Chilled) Collection launches.
Aurora Chilled offers consumers a convenient and stylish way to maintain a healthy,
hydrated lifestyle. Consumers can have instant chilled, filtered water at the touch
of a button. With a large 3.8L capacity and eight auto dispense volume settings,
Aurora Chilled caters for all of the family.
Aurora Chilled has helped to grow the Aurora Collection and we have seen strong uptake
of this SKU, particularly in Europe. Further growth is expected in 2023, bolstered by the
unique Aurora Hot & Coffee launch in the later part of 2023, opening our addressable
market into the large filter coffee space.
Perfect Pour by Aqua Optima
Launched in the latter part of 2022, Perfect Pour is powered by our patented
Evolve+ 5-step fast flow filtration system, and brings a stylish, elegant design
into the heart of the Aqua Optima range.
In addition to the innovative, extremely compact shape, the new Perfect Pour
jugs are designed for quick and safe filling and also for a controlled, smooth
laminar flow intended to provide quality pour at any volume. No more spills or
drips thanks to the smoother dispensing provided by the easy pour spout.
An ergonomic control handle provides an easy grip, enhanced control and
comfort for the perfect pour.
Dual Flo™ (LAICA branded)
Following brand partner launches in North America and Northern Europe, Strix
launched the innovative Dual Flo™ kettle in 2022 under the LAICA brand.
Described as a ‘revolutionary kettle’, Dual Flo™ is the first and only combined kettle
and hot water dispenser on the market. Unlike other kettles, the innovative one cup
dispense automatically pours the desired volume of boiling water straight into a cup,
not only offering a hands free solution to making a hot drink but saving energy and
reducing water waste by only boiling the exact amount of water required.
Sales are expected to continue to ramp up in 2023 and further range expansion is
planned as we bring in the matching Dual Flo™ toaster to form a full ‘breakfast set’.
LAICA’s HYDROSMART + METAL STOP Filter
Launched in Q3 2022, the HYDROSMART + METAL STOP tap filter creates
great tasting water that is free of undesirable substances at ’zero km’,
direct from your home tap.
The HYDROSMART + METAL STOP tap filter retains the mineral salts
naturally present in the mains water and effectively reduce heavy metals,
such as lead and cadmium, microplastics, sand, rust and suspended
particles, chlorinated organic herbicides and pesticides, and chlorinated
organic solvents.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Billi
About Billi
Disciplined and highly targeted acquisitions remain an important part of the Group’s value
creation strategy. On 30 November 2022, the Group acquired Billi following regulatory
approval in Australia, New Zealand and the UK. Billi was acquired from Culligan following
its merger with Waterlogic, the divestment was a condition of that merger. The acquisition
materially changes the earnings profile of the Group, accelerating growth plans for the
water and appliances categories and supporting the medium-term ambition as well as
providing a platform for further organic growth in future years.
Well-established brand
Established in 1989 and headquartered
in Melbourne, with distribution channels
located across Australia, and internationally
in New Zealand, the UK, Hong Kong,
Singapore and China, Billi is renowned for
its premium filtered and temperature-
controlled water systems and
manufacturing innovation.
Product offering
Billi’s products are marketed under two
distinct ranges – ‘Billi for Work’ (commercial)
and ‘Billi for Home’ (residential) – and both
sets of products are fitted with industry-
leading features such as water-cooled
technology and space saving features.
The core product range is supported
by consumable offerings (filters, CO2
canisters and spare parts) and service
(plans and reactive).
ESG focus
The Billi products are first choice for
architects and designers for specifications
of products with an ESG focus, due to Billi’s
strong ESG credentials. Billi was certified by
Global Greentag, the WELL Building Institute
and Green Gas, and has positioned itself
at the forefront of ESG in the premium
filtered water systems category, with
various certifications and memberships
which contribute to the brand’s leading
ESG position.
36
Successful business with a
history of growth, profitability
and highly cash generative
Billi operates in the high growth and
strategically important hot tap and
water filtration markets. Businesses and
consumers are increasingly becoming
health and environmentally conscious and
so Billi has benefitted from the shift away
from bottled beverage consumption and
the perception of filtered water systems
being seen as a must-have product in
the home and office. As a result, Billi has
seen a c.6% CAGR growth in its commercial
channel and c.30% CAGR growth in its
residential channel.
Management team
Billi is led by a highly experienced
management team with over 50 years
experience in leadership positions to
deliver on the growth opportunities:
• Passionately driven management team
excited for the next stage of growth for
the Billi business under a new ownership.
• Dedicated head office support team and
staff that live the values and culture of
the business.
• The Billi team is driven by a corporate
culture that cares deeply about the
brand, product and end customer.
Carl Crowley
CEO – Billi Australia Pty Ltd
Carl joined Billi in 2017 as CEO of then Waterlogic
Australasia. Carl leads the organisation and is
responsible for global and regional strategies for
Billi. Prior to joining Billi, Carl was the Managing
Director of Chubb Security and held prior roles
at Coca Cola Amatil and Unilever.
Rachel Lu
CFO – Billi Australia Pty Ltd
Rachel has been the CFO for Billi since 2018. She
leads the finance and IT team across the three
regions. Rachel manages the short and long-term
financial planning, ensuring financial accounting
standard and tax compliance are met. Most
importantly, Rachel and her team are focused on
supporting the business growth and improving
productivity. Before joining Billi, Rachel worked for
other listed companies like Aristocrat Leisure and
United Technologies in Australia, the US and the UK.
Operational highlights
The acquisition of Billi continues to be successfully integrated in line with a plan to achieve the identified operational benefits.
Billi has a successful history of growth, with double digit revenue CAGR over the past five years, attractive margins and is highly
cash generative. The trading performance to date has been in line with budget.
Key features and benefits of the Billi brand and products
Billi accelerates the Group’s strategy within the water and appliances categories which is core to Strix’s five-year plan.
1. Established and renowned brand
• Established in 1989, Billi is renowned for premium filtered
water systems design and manufacturing innovation across
its 30+ year history.
• Billi was the first in Australia (over 30 years ago) to offer the
choice of filtered boiling and chilled drinking water from a
single tap with a concealed under bench unit.
• Over this time, Billi has built strong brand awareness and is
renowned amongst consumers, facility managers, plumbers
and architects.
2. Strong market position with positive
industry tailwinds
• Number two player in Australia and New Zealand for filtered
water systems
• 25% market share in Australia and New Zealand.
• Growth in the business is underpinned by strong industry
tailwinds:
ʂ Increase in premium commercial office fit outs.
ʂ Residential consumers viewing filtered water systems
as a ‘must have’ product in their home.
ʂ Consumer preference towards healthier (less sugary
beverages) and environmentally conscious (less plastic
waste) solutions.
3. Superior design and innovation
Billi prides itself on being the leading designer of filtered water
systems which are suitable for a wide range of commercial and
residential applications and environments. Industry leading
features include:
• Billi’s water-cooled systems utilising heat exchange and
energy reclaim technologies;
• space saving design, utilising up to 64% less space than
competitor products;
• greater energy efficiency which generates far less heat than
traditional air-cooled systems; and
• water-cooled systems that can be installed with no physical
change to joinery.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Case study
LAICA S.p.A
The acquisition of LAICA in 2020 considerably augmented Strix’s position in
the water category and provides a global platform to facilitate future organic
and inorganic growth, and its integration has progressed on track, despite
the challenges presented by the COVID-19 pandemic in the last few years.
Significant growth has been achieved under Strix ownership.
The Group made LAICA the European
centre of excellence for new product
development in the water and appliances
categories and since its acquisition in
October 2020, LAICA continues to provide
strategic consolidation of Strix’s water
treatment range. It complements the
Group’s appliances category by driving
efficiencies and providing a comprehensive
portfolio of products for the Group globally.
LAICA’s solid trading performance in
2022 can be attributable to an effective
commercial integration with the wider Strix
Group, achieved through the following:
Effective management with
an experienced team
Managed by a very strong team, led by
Riccardo Dolcetta as General Manager
and Nicolo Zanuso as Financial Director,
LAICA brings in a wealth of experience
within the water filtration and small
domestic appliances categories, working
hand-in-hand with the wider Strix Group to
realise a seamless commercial integration.
Wider senior management have been
given roles throughout the Strix Group,
deepening the integration.
Complementary product range
LAICA’s eminent market position in
point-of-use water filtration, kitchenware,
personal scales and healthcare products
significantly strengthens 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, as well as personal and kitchen
scales, kitchen appliances and health
and wellbeing products.
The new and expanded LAICA brand
portfolio for consumer goods has
already started providing cross-selling
opportunities for the wider Group, enabling
us to tap into those markets in which both
LAICA and Strix hold dominant positions,
and facilitating the platform for the
planned geographical expansion in the
medium-term to deliver double-digit
revenue growth.
LAICA revenues
£23.0m
FY 2022
Annualised growth
+1.3%
from FY 2021
38
“ LAICA has a considerable global presence, an
established product range and an advanced new
product roadmap. The acquisition continues to be
successfully integrated in line with plans to achieve
the identified benefits and the trading performance
has been resilient over the period.”
Mark Bartlett
CEO
A cross-fertilisation of the customers
of Aqua Optima and LAICA continued to
progress, with the latter promoting Aqua
Optima’s products in Southern and Central
Europe. The number of online retailers
listing both brands (and private label) rose
during H2 2022 and is set to grow further
during FY23. Further product launches
occurred during H2 2022, including ‘Perfect
Pour’ a new water filtration dispenser
initially targeting the US, the UK and
Europe, and these are expected to have a
greater impact on revenues during FY23.
Global presence and mature
distribution channels
LAICA has a strong heritage in household
products and has been one of the most
favoured and recognised brands in Italy for
almost 50 years. Taking advantage of this,
LAICA was able to initiate a process of
development and consolidation that led
to the opening of branches in Europe and
Asia and the creation of an international
distribution network. LAICA also provides
new potential routes to market for all Strix
products through long standing
distribution channels across the globe,
with a particular strength in the Middle
East, the Balkans and Southern Europe.
With planned integration well in progress,
Strix is already leveraging this robust
position to expand LAICA’s water
filtration and small domestic appliances,
with a reputation for quality, to both the
UK and the US.
Both Aqua Optima and LAICA water brands
have seen growth year-on-year due to
initial geographical expansion via Amazon
sales. The Group now manufactures the
majority of filters in-house in two locations
including the LAICA factory, freeing us from
third party risk, whilst allowing a new level of
flexibility to offer our customers.
Union, allowing better access to the
post-Brexit market. The manufacturing
plant has a Research and Development
centre, a Quality and Design facility, a CAD
Engineering office and production lines
for its water filtration products such as
filters, jugs and cartridges. Products are
characterised by the high quality of their
raw materials and production process, and
by attention to detail and creative designs.
Research and development into products
and solutions is constant and articulated,
as befits an organisation that is
distinguished for its technological
innovation and cutting-edge solutions.
LAICA pursues collaboration with technical-
scientific bodies, and participates in
community and national projects, which
are further drivers of its R&D activities.
Manufacturing and
engineering capabilities
The LAICA facility in Northern Italy brings
Strix state-of-the-art and automated
manufacturing, warehousing and a sales
and marketing office within the European
LAICA has a long list of quality certifications
from international organisations and
independent research laboratories.
The management of the quality system of
business processes is certified according
to the ISO 9001: 2015 regulatory standards.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Case study
An in-depth look into Strix’s
primary growth categories:
Water and Appliances
Water category
There are two guiding principles which help direct Strix on our corporate journey:
we aim to provide world-leading innovative and sustainable technological solutions.
These two principles of innovation and sustainability are particularly pivotal in our
work across the water category.
Currently, the livestock farming industry
relies on an ultrafiltration single-use
membrane to counter this, Strix offers
an unrivalled system which can be reused
and maintained over a number of years.
As a responsible business, we have an
established contract with TerraCycle and
drop-off points where consumers can
return our Aqua Optima filters for recycling.
Aqua Optima
Strix launched Aqua Optima in 2005
and since then the range has continued
to grow with more products added to the
portfolio each year. The Aqua Optima range
comprises water filters, filter jugs and
appliances and with consumer wellbeing
and sustainability at the core of its product
designs, the Aqua Optima range offers
innovative technology which is suitable for
everyday use with minimal footprint. The
Aqua Optima filters and reusable bottles
and jugs reduce ingestion of harmful
impurities from water and help combat
single-use plastic. As part of our efforts to
reduce the impact of our business on the
environment and communities, our Aqua
Optima range combines the superior power
of our filters and the compact and stylish
appliance designs to provide convenient
and energy saving sustainability solutions
to our consumers.
Innovative
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 through
the launch of our first Aqua Optima product
which enabled ‘fast flow’ filtration for
kettles. We continue to develop in this
category. In 2022, we continued to realise
growth through the launch of additional
innovative and sustainable products as
well as through our value creation strategy
of highly targeted acquisitions, namely
LAICA and Billi, acquired in 2020 and the
end of 2022 respectively.
Strix sold over
4.5m
filters in 2022
Each filter offers the capacity
of over 100 plastic bottles
suggesting that full utilisation
of our filters could have
potentially saved over 450
million plastic bottles.
40
Sustainable
Sustainability is an overarching ethos for
Strix which drives our culture and operating
environment. In light of the global call
on sustainability, we have identified and
aligned our sustainability strategy to the
key UN SDGs where we believe we can
make the greatest contribution through
our product offering and operational and
social engagement. Water is a limited
natural resource which is experiencing
ever greater pollution and demand, with
the latter expected to increase by 50% in
2030. In light of this devastating projection,
we continue to focus on our consumer
wellbeing as we strive to ensure our
consumers have access to quality water
through sustainable delivery mechanisms.
We provide water solutions which are
suitable for personal use at home or
on-the-go, as well as corporate and
commercial use including in agricultural
and health settings. Our innovative
point-of-use water solutions reduce the
ingestion of harmful micro-organisms and
micro-pollutants and they also help us
achieve our sustainability efforts to reduce,
reuse and recycle. Our filters and reusable
bottles and jugs combat single-use plastic
which is a global problem where 80% of
all plastic water bottles end up in landfills
and ultimately in the sea. In farming,
Strix’s HaloPure water purification and
sterilisation technology offers ongoing
microbial control and prevents pathogenic
microorganisms from reproducing. The
result is higher quality animals for the
end consumer.
In the UK, Aqua Optima filters are
100%
recyclable under the TerraCycle initiative
This strategy will allow the Group to
extend its global reach with the Aqua
Optima brand.
Outlook for Aqua Optima range
• The Group seeks to extend its market
share by expanding into new markets.
• 200-plus contracts with high end
retailers and distributors have been
secured during 2022.
• Continued enhancements to the
appliances, jugs and filters to keep
up with consumer demands.
Aqua Optima water filters
Aqua Optima’s Evolve+ range of filters
use a unique five-step filtration system
to remove impurities and unwanted
substances from tap water, including
microplastics, herbicides, pesticides,
lead and heavy metals. The Evolve+ filter
has gained traction as the number two
brand in the UK due to its unique multi-fit
compatibility which enables it to be used
in Aqua Optima products as well as the
market leading brand. Recently, the leading
brand implemented a new filter fit design
to prevent competitors from offering
compatible filters. In 2022, Strix continued
to make improvements to the adapter
that allows the Evolve+ range of filters to
be compatible with the leading brand’s
products well into the future.
Aqua Optima filter jugs
The unique formulation used in Aqua
Optima filter jugs extends life by reducing
the levels of limescale and chlorine and
it gives extra clarity to filtered water and
greatly improves the quality and taste of
water. All Aqua Optima filters and jugs are
BPA free.
Historically, the Group sourced its pitcher
jugs from a supplier in Eastern Europe.
However, with the in-sourcing production
facilities from the new Chinese factory,
the Group leveraged its new factory and is
now bringing the design and manufacture
of its range inhouse. The move allows the
Group to better secure its supply chain
and achieve efficiencies whilst maintaining
Strix’s established manufacturing
excellence and the quality of its products,
while securing more consistent pricing.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Case study
An in-depth look into Strix’s
primary growth categories:
Water and Appliances continued
Appliances category
Strix seeks to use its technology and innovation expertise to develop adjacent
products to solve problems in tangential markets in a sustainable way.
“Strix’s mission
within the appliances
category is to develop
products that allow
consumers to live a
safer, more convenient
and sustainable life
at home.”
Mark Bartlett
CEO
The Group looks to develop products
offering meaningful benefits to customers
which can then be commercialised through
existing relationships with experienced and
trusted OEM’s and consumer appliance
specialists. The below reviews some of
our successful product launches to date
within the appliances categories.
Aurora product range
Aurora is for families and eco conscious
consumers who live a busy lifestyle and
seek products that offer convenience,
environmental benefits and great tasting
drinks. Aurora is a premium water dispenser
that delivers instant hot, boiled or chilled
filtered water on demand. It features the
patented Strix IFH technology which, unlike
competitive solutions, delivers boiling water
for the perfect brew every time. Aurora is
one of the leading ‘plug & go’ hot and chilled
water dispensers on the market – helping
users save space in the kitchen by combining
the functionality of a kettle, water chiller
and filter – without them having to commit
to expensive ‘plumbed in’ alternatives.
As with our entire ‘Hot Water on Demand’
range, Aurora allows users to boil only what
they need, helping to reduce the 70 million
litres of water each year in the UK that is
boiled and not used.
Aurora’s success showcases our unique
position and adaptable go-to-market
approach. In 2022, Aurora appliance
products increased threefold year-on-year.
This is expected to increase significantly in
the following years through online marketing.
Superfast Steriliser-Dryer
The Steriliser-Dryer was launched in
August 2022 in the strategically important
US market with the leading Baby Care
brand, Baby Brezza. The world’s quickest
‘superfast’ steriliser-dryer is powered by
patented Strix technology and allows busy
parents to sterilise and dry baby bottles
and accessories in just 10 minutes – under
half the time of most other steriliser-dryers
on the market. Designed with parents in
mind, the superfast steriliser-dryer gives
parents peace of mind, killing 99.9% of
germs with natural steam. It has a high
six bottle capacity and is designed with
ease of use in mind.
To date, the product has exceeded
expectations with 4.5 star consumer
reviews and growing sales. Further
growth is expected in 2023 as we work
with Baby Brezza to roll out globally.
Smart Glass Vacuum Canisters
Launching in September 2022, the LAICA
smart vacuum canisters and accompanying
app is helping us in our goal to promote a
more sustainable cuisine and a balanced
diet that reduces food waste as much as
possible. In addition to helping keep food
fresh for up to four times longer, the new
smart canisters are made of 100% recyclable
glass which also better preserves the
characteristics of food versus traditional
plastic containers. With the free LAICA home
wellness app, we also help users organise
their fresh food, nudging them towards less
waste with convenient reminders relating
to expiry dates for the food in their fridge.
42
70m litres
The UK consumer over boils
70m litres of water per year.
The Aurora premium water
dispenser helps to combat
this waste.
Baby Brezza consumer
reviews.
Smart glass vacuum
canisters helps reduce
food waste.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Strix Group website
Improved functionality and
an optimised performance
During the year, the Group redesigned its website to enhance the user
experience through improved functionality and optimised performance,
providing a fresh look which is aligned to the Group’s branding guidelines
and giving users access to relevant, up-to-date content.
As a listed entity, we serve various
stakeholders with different information
needs and the new website appeals to
all stakeholders, while providing relevant
information about the Group’s business.
The website is accessible to the public
at the following URL: strixplc.com.
The redesign of the website is not just
a cosmetic change, but, as an innovative
and professional entity, it is a strategic
investment that promotes the Group’s
objective to adapt and evolve in this
ever-advancing digital era. Through the
new website the Group will be able to:
• strengthen its online presence and
brand identity;
• provide a reliable platform under
one banner where the Group can
communicate to its target audience
more effectively on matters such as
its solutions which are available in its
product portfolio, periodic financial and
non-financial reports, future outlook,
significant projects underway,
milestones and any other key matters;
• enhance its site performance and
provide a better user experience, while
making it easier for visitors to navigate,
find information and take action
(where necessary);
• attract, engage and convert more
prospects into customers, partners
and/or investors; and
• align with the current needs and goals
of the business and reflect its growth,
evolution and direction.
44
The key sections on our website are
as follows:
About Strix
“Safer by design”
Under the Company section
(which is accessible in the following
URL: strixplc.com/company), users
are introduced to the Group, its Board
of Directors and Senior Management
team, brands, partners and the key pillars
which drive the business, namely safety,
innovation and quality. The page offers
a detailed narrative of the Group’s rich
history and excellent achievements over
the years as well as some insight into the
vision, mission and values behind the
Group’s progression and success.
From the invention of the very first
revolutionary thermostat to control
heated flying suits, Strix has evolved over
the years to become a listed, global leader
in the innovation, design, manufacture
and supply of kettle safety controls,
heating and temperature controls,
steam management and water filtration
technologies with a wide reach around
the globe. Every day, Strix technology,
as represented by all of the Group’s brands,
is used more than 1 billion times, in more
than 100 countries.
The Group has retained its market leader
position in the kettle control market
with the recent build of the £20 million
manufacturing facility in China. This is
further cementing its objective to remain in
the lead. It has also engaged in disciplined
and targeted merger and acquisition
activities over the years with HaloSource,
LAICA and more recently Billi joining
the Group to accelerate its growth
opportunities in the water and appliances
market. And ow, more than ever, the Group
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.
Every day, Strix
Technology is
used over 1 billion
times globally.
Strix Technology
innovates safety
and design for a
sustainable future.
Our technology
Get more information about the Group’s
innovative technology on the following URL:
strixplc.com/our-technology.
The Group has dedicated brands for
pioneering technologies and adopts a
forward-thinking, innovative approach
when designing sustainable technologies.
The Group’s portfolio of brands and
specialist technology categories offer
best-in-class products and service
covering kettle safety controls, heating and
temperature controls, steam management,
water filtration and purification, wellness,
health and living.
Strix technology, via the key brands of Strix,
astrea, LAICA, Aqua Optima, HaloPure and
Billi, is featured in products from leading
brands around the world. Whether it is a
kettle, a formula maker or a water filter,
brands choose Strix Technology because
it is Safer By Design. The Group’s vision of
a sustainable future, delivered by safe and
innovative technology, is brought to life by
our partners around the world.
Our brands
45
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Strix Group website continued
Sustainability
The website gives an overview of the
Group’s sustainability efforts as well as
providing access to our most recent and
past ESG reports for users on the following
URL: strixplc.com/sustainability
The Group is headquartered in the
Isle of Man, a UNESCO-designated
biosphere and world heritage site, which
makes us even more committed to truly
putting sustainability at the core of our
business. The Group has operations in
other locations around the globe and
sustainability is an overarching ethos
which requires equal determination
and commitment at all levels across
the organisation.
To date, the Group’s appliances offer
simple sustainable solutions to reduce
water and energy waste, from the kettle
control devices, which save approximately
5 billion kg of CO2 a year, to the water
portfolio, which helps replace over 450
million single-use plastic bottles a year,
and our commitment to achieving a
net zero Scope 1 & 2 emissions by 2023.
We are committed to building TODAY the
world of TOMORROW. Whilst led from the
top, this overarching ethos requires equal
determination and commitment at all levels
across the organisation and is regulated
by a specific array of reporting criteria.
46
CO2 emissions saved per year
5bn kg
by our kettle control devices
Single-use plastic bottles
replaced per year
450m
by our sustainable appliances solutions
Investor section
One group of key stakeholders are our
investors, both existing and potential,
and our aim is to provide them, as well as
all other stakeholders, with the information
which they need for their investment and
other decisions. Users have access to
a series of in-depth interviews from the
Group’s Senior Management gives greater
insight into who we are, how we work, our
ethos and our vision for the future. The
interviews help users discover more about
the Group’s diverse portfolio, financial
policies, manufacturing strategies and our
plans for growth. They also give a greater
understanding of the Group’s sustainability
and diversity policies. Also in this section is
a collection of all financial and non-financial
reporting including the annual reports, ESG
reports, investor presentations, regulatory
news services announcements (RNS)
and documents and trading update, as
well as all other relevant compliance and
regulatory reports which are safe for public
access. Users also have access to reliable
share price data and share trades for
Strix Group Plc (AIM: KETL) on the new
website and this conveniently negates the
need for them to look for this information
from any other sites.
As a listed entity, the Group provides
various options through which users
who visit the website can contact
Strix where necessary.
Check out the Group’s informative
investor section on this URL:
strixplc.com/investors.
Whether you are a potential investor or partner,
or simply want to learn more about the Strix
brand, our aim is to give you all the information
you need, from the people who know us best.
47
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
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 Group considers 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
48
Risk
Our shareholders
Our employees
Our customers
Our suppliers
Our communities
The environment
Why do we
engage?
As ultimate owners of
the business, we engage
with our investors to provide
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 over 850 employees
across 11 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 the
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.
• An 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
and sustainable design and
efficiency of our products.
Constant engagement with
goal which brings value to
to the communities in which we
society and planet. Not only is
both parties. Forming strategic
operate. We aim to strengthen
managing our environmental
partnerships enhances the
our position as a global, socially
impact the right thing to do,
value of our business and plays
responsible employer, whilst
but delivering environmentally
customers is necessary in order
a major role in ultimately
reinforcing our corporate culture
friendly products is key to our
to continue meeting their needs.
satisfying the needs of our
and employee pride in our positive
growth strategy.
customers, whilst meeting
our sustainability targets.
contribution to all of our local
communities across the Group.
• Safety and sustainability.
• Innovation and efficiency.
• Quality and reliability.
• Long-term relationships
• Job creation, including
• Reduced carbon footprint.
and supply chain security.
apprenticeships.
• Pricing and related terms
• Charitable funding.
• Charitable funding.
• Preservation of our planet.
• Supply chain management.
of supply.
• Public health and safety.
• Cost effectiveness.
• Quality and audit standards,
• Education.
and related requirements.
• Preservation and restoration
• Governance and corporate
of the environment.
responsibility.
• Continual dialogue to
• Bi-annual audits.
• Communication of our
• Communication of our
understand their challenges
• Continual communications
sustainability strategy via ESG
sustainability strategy
supported by close R&D
alignment.
on our Supplier Code of
Business Conduct.
reports and presentations.
• Sponsorship of, and
via the Group’s annual
Sustainability Report.
• Maintaining close relationships
• Discussion on mutual working,
participation in, annual graduate
• Participation in local community
via regional sales or commercial
including understanding of
intern and youth development
projects focused on the
teams.
• Involving them in product
design and testing, and
sharing of knowledge and
their operations to improve
awareness on sustainability
programmes, including Junior
preservation of nature, including
Achievement programmes
voluntary work with charities
requirements in line with the
to enhance training and
such as the Manx Wildlife Trust.
Responsible Business Alliance.
development for children,
• Various initiatives to raise
understanding of products for
• Internal risk assessments on
young people and graduates.
awareness of environmental
faster product releases in line
policy awareness, quality,
• Participation and membership
preservation.
capacity and performance.
in local business networks,
• Alignment with the UN
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.
including chamber of commerce
Sustainable Development Goals.
committees and STEM groups.
• Continued research and
• Continued volunteering,
support and fundraising
development of energy efficient
kettles to reduce wasted energy.
activities for various charities
• Investment in plastic waste
including Save the Children, Isle
reducing products to reduce
Listen, Kidscape Chester, The
and eliminate the need for
Samaritans, Chester Aid to the
single-use bottles which end
Homeless, Isle of Man’s Children’s
up in a landfill or part of the
Centre, Manx Breast Cancer
millions of tonnes of plastic
and MacMillan Cancer Support
in the oceans.
Groups, and participation
• Ensuring availability of safe water
through our LAICA subsidiary,
and sanitation for all through the
including Surgery for Children,
development of the filtration
B.I.R.D Europe Foundation and
products to enhance water
RISE Against Hunger.
quality, removing lead, bacteria
• Awards earned from the various
and viruses.
contributions made to our
various stakeholders and society.
Risk
Our shareholders
Our employees
Our customers
Our suppliers
Our communities
The environment
Why do we
engage?
As ultimate owners of
With over 850 employees
the business, we engage
across 11 locations worldwide,
with our investors to provide
our employees are our greatest
transparency on our business
asset and the Group believes
model, strategies and
that the development and
performance, whilst obtaining
retention of talent is important
an understanding of their needs
to achieve the long-term
and priorities in order to deliver
strategic goals of the business.
value for their investment in
our business.
What are the
• Revenue growth
and profitability.
key areas of
interest?
• Health, safety and wellbeing.
• Training and development.
• Product and geographical
• Reward and recognition.
diversification.
• Career progression.
• Value creation and returns
• Culture, diversity and
on investments, including
community.
How do we
engage?
• Annual General Meetings.
• We communicate through a
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.
• Individual shareholders
Directors on all matters
relating to governance
and strategy via the
Company Secretary.
are encouraged to contact
other things.
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
• Periodic employee surveys
and annual reviews as a
feedback platform.
• An 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
and sustainable design and
efficiency 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, whilst meeting
our sustainability targets.
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 supply.
• Quality and audit standards,
and related requirements.
• Governance and corporate
responsibility.
• Job creation, including
apprenticeships.
• Charitable funding.
• Public health and safety.
• Education.
• Preservation and restoration
of the environment.
• Reduced carbon footprint.
• Charitable funding.
• Preservation of our planet.
• 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
sustainability strategy via ESG
reports and presentations.
• Sponsorship of, and
participation in, annual graduate
intern and youth development
programmes, including Junior
Achievement programmes
to enhance training and
development for children,
young people and graduates.
• Participation and membership
in local business networks,
including chamber of commerce
committees and STEM groups.
• Continued volunteering,
support and fundraising
activities for various charities
including Save the Children, Isle
Listen, Kidscape Chester, The
Samaritans, Chester Aid to the
Homeless, Isle of Man’s Children’s
Centre, Manx Breast Cancer
and MacMillan Cancer Support
Groups, and participation
through our 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.
• Communication of our
sustainability strategy
via the Group’s annual
Sustainability Report.
• Participation in local community
projects focused on the
preservation of nature, including
voluntary work with charities
such as the Manx Wildlife Trust.
• Various initiatives to raise
awareness of environmental
preservation.
• Alignment with the UN
Sustainable Development Goals.
• Continued research and
development of energy efficient
kettles to reduce wasted energy.
• Investment in 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.
49
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
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.
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 on the following pages 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
i
n
a
t
r
e
C
l
y
e
k
L
i
i
l
e
b
s
s
o
P
d
o
o
h
i
l
e
k
i
L
l
y
e
k
i
l
n
U
63
8
5
9
12
7
4
13
1
2
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
4. Raw material and commodity prices
and general cost inflation
5. External factors
6. Foreign exchange risk
7. Business taxation
8. Disruption to supply chain
9. Impact of COVID-19
10. New and existing manufacturing
facilities
11. Reputation with customer base
12. Intellectual property
13. Cybersecurity
e
r
a
R
10
11
Insignificant
Minor
Moderate
Major
Catastrophic
Consequence
50
Principal risks
Movement key:
Increase
Decrease
No change
Risk
Impact
Mitigation
Status
Strategic risks
Reliance
on key
customers
Reliance on
key suppliers
Competitors
and market
pressures
The Group has a number of key customer
relationships, including some of the largest
OEMs in the global market. The top 10
customers contributed c.42% of the
Group’s revenues in the financial year ended
31 December 2022 (2021: c.41%), with the
largest customer making up c.14% (2021:
c.12%) 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 position 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 would be
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.
Movement:
• 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.
• Dual sourcing where appropriate to reduce
Movement:
dependence on single suppliers.
• Monitoring of the financial and operational
viability of key suppliers.
• Ongoing monitoring of inventory levels to
ensure availability in times of production
volatility.
In-sourcing of production from our new
manufacturing plant to reduce reliability on
external suppliers, also thereby reducing
overhead costs.
•
Movement:
• 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 with a recently added
advantage of the adoption of lean and
automated manufacturing processes
with in-sourcing of commodities from
increased production capacity at the
new manufacturing plant.
• Targeted investment in engineering, and a
commitment to lean manufacturing, quality
and customer relationships.
51
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Principal risks continued
Movement key:
Increase
Decrease
No change
Risk
Impact
Mitigation
Status
We are exposed to fluctuations in the
prices of some raw materials, in particular
copper and silver, as recently seen in
major global supply chains in all industries
due to the remnant impacts of recovery
from the COVID-19 pandemic. The Board
monitors this closely and have put in place
appropriate steps to mitigate the impact.
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 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 the war in Ukraine, the US/China trade
tensions and any spill-over effects
of Brexit. Given the Group’s primary
customers are kettle OEMs located in
China, the disruption from these external
factors is expected to be relatively muted.
Due to the large degree of uncertainty
and volatility in macro-economic and
geo-political landscapes, the Group is
actively monitoring these situations and
continues to review the Group’s risks.
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 of our variable and fixed
cost bases, with a recent added advantage
of the adoption of lean and automated
manufacturing processes with in-sourcing
of commodities from increased production
capacity at the new manufacturing plant.
• As the market-leader we have the ability to
undertake a price increase if the inflation
of costs is prolonged and significant.
• Forward procurement of commodities to
secure future profits, and raw material
purchasing policy of buying up to twelve
months in advance for silver and copper,
with prices already secured in 2022.
Movement:
• 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.
• The Group is actively monitoring these
situations and continues to review the
Group’s risks and is taking targeted actions
where necessary.
Financial risks
Raw
material and
commodity
prices and
general cost
inflation
External
factors
52
Movement key:
Increase
Decrease
No change
Risk
Impact
Mitigation
Status
Movement:
• 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, forward
foreign currency exchange contracts can
be entered into 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.
Financial risks
Foreign
exchange risk
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. However, the
Group’s exposure to currency fluctuations
inherently exists due to trading in foreign
currency across multiple jurisdictions,
and also due to the consolidation of foreign
subsidiaries into the Group. The Group’s
payments and receipts are predominantly
in Pound Sterling (GBP), US Dollar (USD),
Chinese Yuan Renminbi (CNY), Euro (EUR),
Australian Dollar (AUD), New Zealand Dollar
(NZD) and Taiwan Dollar (TWD). Changes in
the rates of foreign exchange against the
GBP, the Group’s presentation currency,
could adversely impact margins earned.
In addition, under the current regulations
on foreign exchange control in China,
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 CNY 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.
53
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Principal risks continued
Movement key:
Increase
Decrease
No change
Risk
Impact
Mitigation
Status
Financial risks
Business
taxation
The Group currently operates across a
number of jurisdictions globally, 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. The main tax jurisdictions
for the Group are Italy, Australia and China,
with other tax jurisdiction for the Group in
the UK, the US, Hong Kong, Spain, New
Zealand and the Isle of Man. Particularly in
China, the taxation laws are complex and
subject to change, which may reduce the
returns available to investors in the future.
• We actively monitor changes in the direction
Movement:
of legislation and regulation in China,
and regularly engage with specialist tax
consultants in the respective jurisdictions
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 and
current years.
Operational risks
Disruption to
supply chain
The impact of recovery from the COVID-19
pandemic has caused major global supply
chain disruptions which have directly
affected the Group in the current year,
experienced in the form of possible
disruptions to normal operations and
increased carriage, freight, shipping
and transportation costs. The Group’s
operations facilitate the transfer and
movement of commodities and goods
across multiple jurisdictions, internally
amongst the Group’s various production
and distribution sites, and externally to and
from customers and suppliers. Therefore,
an inherent risk to the Group supply
chain exists in the form of disruptions to
operations from shortages of supplies,
delays in deliveries and increased costs of
carriage and freight, all of which directly
impact the Group underlying margins,
profitability and performance.
• The Group has continuously been monitoring
Movement:
global supply chain trends in order to reasonably
anticipate any hurdles, and thereby plan ahead
to ensure minimal disruptions to normal
operations, including seeking optimal shipping
and transportation arrangements if necessary.
• The Group successfully implemented price
increases on some of its legacy products in
both kettle controls and water categories,
as well as across the wider range, with effect
from 1 May 2022 to minimise the impact of any
cost inflations.
• Freight costs budgetary planning and analysis
is done on a monthly basis to assess the global
supply chain trends and any potential impacts
on the Group’s operations and finances.
• Forward procurement of commodities to secure
future profits, and raw material purchasing policy
of buying up to twelve months in advance for
silver and copper to ensure availability of stock
for minimal disruptions to operations.
• Holding of finished stock in different districts
in order to minimise any disruptions.
• Adoption of lean and automated manufacturing
processes with in-sourcing of commodities
from increased production capacity at the
new manufacturing plant.
• Dual sourcing where appropriate to reduce
dependence on single suppliers or supply
chain routes.
54
Movement key:
Increase
Decrease
No change
Risk
Impact
Mitigation
Status
Operational risks
Impact of
COVID-19
New and
existing
manufacturing
facilities
The Group currently manufactures
the majority of its products at the
manufacturing facility in Zengcheng,
China, and also in Italy and now Australia
(following the acquisition of Billi).
COVID-19 lockdowns persisted into
the second half of FY 2022, mainly
in China with more stability prevalent in
other territories. From an operational
standpoint, if the COVID-19 outbreak
is contracted by employees within our
factories, 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 interrupt outbound
logistics options.
In addition to facilities in the Isle of Man
and Italy, the Group recently completed
the construction of its new factory in
Zengcheng, China, and currently
manufactures the majority of its products
at this new manufacturing facility. If, for
any reason, including product mix
changes, a capacity constraint is created,
or should the operations at this and the
other sites become disrupted for
whatever reason (or reasons), and/or the
Group is unable to find suitable alternative
manufacturing sites, 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.
Movement:
Movement:
• The Group is continuously monitoring the
impact of COVID-19 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 aligned IT systems to support
evolving working requirements.
• Global vaccination efforts progressed
well in alleviating the severity of COVID-19
related illness.
• The new factory features automated
functionality and increased manufacturing
capacity and it has been constructed in a
modular way in order to reduce the risk
posed by any potential disruptions.
• Strix has put in place preventative
measures at all operational sites including
fire suppression and prevention systems,
periodic health and safety training for staff
and implementation of alternative energy
sources to ensure continuity in the event
of any disruption to normal power supplies.
• A detailed recovery plan has been
documented as part of the Group’s business
continuity plan which is overseen by the
Recovery Management Team. Procedures
relate to communications and information
exchange, recovery process phase,
clean-up process, pollution prevention and
restoration (including insurance claims and
compensations). Restoration procedures
include plan maintenance, back-ups, testing
and emergency sources of power generation.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Principal risks continued
Movement key:
Increase
Decrease
No change
Risk
Impact
Mitigation
Status
Movement:
Movement:
Movement:
Reputational risks
Reputation
with
customer
base
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 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.
Compliance risks
Intellectual
property
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 and use or sale of its existing
and proposed products.
• The Group vigorously defends 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 is sought.
Cybersecurity
Cybersecurity risks include risks from
malware and ransomware attacks by
third parties in an attempt to gain
unauthorised access to our IT systems.
The Group’s operations are heavily
reliant on IT infrastructure. Therefore,
any unauthorised access could result
in disruptions to operations, loss of
data, breach of privacy and loss of
assets and funds.
• Deploying security tools to limit the impact
and spread of ransomware, including the
use of endpoint security systems to monitor
and secure entry and end-points to our full
IT infrastructure.
• Ensuring firewalls and anti-virus software
are robust and up-to-date to block any
potential attacks.
• Employees across the whole Group have
received extensive training about IT security
and potential risks. This is supported by a
continuous awareness programme to further
explain what measures need to be taken to
ensure consequences are minimised.
• Should a cyber incident occur, such as one
the Group experienced in February 2022,
the Group has a detailed recovery plan that
has been documented as part of the Group’s
business continuity plan which is overseen by
the Recovery Management Team. Procedures
relate to communications and information
exchange, recovery process phase and
restoration (including insurance claims and
compensations). Restoration procedures
include plan maintenance, back-ups
and testing.
• Further strengthening of disaster recovery
(DR) plans to ensure that different
geographical locations may continue
if a breach occurred elsewhere.
56
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
Dividend policy
Value accretive
acquisitions
Conservative
balance sheet
The Group has invested
heavily in production
automation since IPO
to increase production
volumes, quality control,
efficiency and reliability.
The new manufacturing
operations in China are fully
operational with increased
efficiencies of 6.1% in FY 2022
as compared to FY 2021.
There will be reduced capital
expenditure and working
capital and no further
investment in new builds
in the medium term as the
Board’s capital allocation
priorities are focused on
reducing the net debt/
EBITDA ratio and increasing
cash flow generation.
Since IPO, the Group
has demonstrated a
progressive dividend
policy. Following feedback
from investors, and as
capital allocation decisions
prioritised debt reduction,
the Board decided after
reviewing the level of net
debt to propose a final
dividend of 3.25p per share
to give a total dividend of
6.00p per share for the year.
This represents a decrease
in the dividend growth rate
of 28.14% in comparison
to the dividend per share
which was declared in 2021.
The Group successfully
completed the acquisition
of Billi in FY 2022. Billi is a
premium brand with a
history of growth, with
double digit revenue CAGR
over the past five years,
attractive margins and is
highly cash generative.
The acquisition materially
changes the earnings profile
of the Group, accelerating
the growth plans for the
water and appliances
categories and supporting
the medium-term ambition
to increase the contribution
from these categories.
The management team
will prioritise the integration
of Billi to unlock anticipated
revenue and cost synergies
and thus maximise the
Group’s highly cash
generative operational
model. As a result there will
be no further acquisitions in
the medium term.
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 £87.4m to fund the Billi
acquisition as a drive
to achieve continued
investment in compelling
growth opportunities. This
represents a net debt/
adjusted EBITDA ratio
(calculated on a trailing
twelve-month basis) of
2.2x (2021: 1.3x).
As at 31 March 2023, the
Group continues to have
significant available liquidity,
consisting of a cash balance
of £15.1m.
Strix has applied its Capital Allocation Framework during 2022 as follows:
• The Group successfully
completed the
acquisition of Billi which
was funded through an
equity raise and a debt
refinancing consisting
of an extension of the
existing revolving credit
facility (RCF) and a new
term loan.
• For the year ended
31 December 2022, the
Board proposed a final
dividend of 3.25p per
share which results in
a total dividend of 6.00p
per share. This represents
a decrease of 28.14% in
comparison to the full
dividend for FY 2021. The
reduction was a result of
the Board’s capital
allocation priorities
which now focus on debt
reduction and cash flow
generation.
• Paid additional
• Funded net working
consideration of
£1.67m cash for the
acquisition of LAICA,
which continues to be
successfully integrated
in line with the Group’s
plan to achieve the
identified benefits and
synergies, with resilient
trading performance
in its second full year
post acquisition.
capital movements worth
£2.6m which represents
a decrease in cash
outflows compared
to the prior year. The
decrease was mainly
due to the net effect of
procurement outflows
towards stock purchases
and settlement of
creditor balances which
were partially offset by
receivables collections.
57
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
ESG and sustainable investing
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 and adhering to applicable ISO standards.
Management
The Chief Executive remains a key driver
for our sustainability journey, with the
support of key executive management,
and with Board representation through
our ESG committee led by Richard Sells,
our Non-Executive Director.
KPI commentary
During 2022, a key area of focus has been
on emissions. Our target still remains
for net zero Scope 1 & 2 emissions to be
achieved in 2023 (excluding Billi), which
continues to demonstrate our level of
ambition. Regarding emissions, these
declined in 2022 by 21% assisted by
the lack of dual plant operations seen
in 2021 as the new Chinese facility was
commissioned along with the benefit
of the Chinese solar array.
Regarding water usage, this significantly
declined assisted by the lack of
commissioning requirements in China,
consequently showing in improvement
in our water intensity which is currently well
ahead of KPI targets. Waste also improved
significantly, again benefiting from the
new Chinese facility and will continue
to progress assisted by higher levels
of automation and further product
miniaturisation.
From a personnel perspective, health
and safety remains an important focus for
the Group. The key measure of lost time
frequency rate continues on a downward
path with the three-year average, used
to eliminate the impact of short-term
fluctuations, less than half of the level
seen in 2019. ISO45001 Occupational
Health & Safety certifications were also
obtained at all sites, including LAICA,
in 2022. From a workforce and diversity
perspective, the proportion of women in
senior management remained stable at
27.3%, whilst across the Group we retain a
positive balance with women accounting
for 50.8% of the overall workforce.
The Group has aligned its strategy towards
sustainability within the core business
activities with the UN Sustainable
Development Goals (UN SDGs), and we
“Our sustainability
platform is delivering
improved KPIs and
benefits to all
stakeholders, helping
to promote our goal
to become a world
leading innovative
and sustainable
technology business.”
Mark Bartlett
CEO
have honed our key sustainability KPIs
through mapping of the identified SDGs.
Our strategy and progress are measured
against the following KPIs, with the related
targets and 2022 performance reviews:
Climate action
Our Scope 1 & 2 emissions targets still remain achievable in 2023 (excluding Billi), and based on the
2022 performance reviews as shown in detail in our recently ESG report available on our website
(strixplc.com/documents-reports.html), these are ahead of our targets.
Resource
intensity
Waste and
recycling
Regarding energy consumption and intensity, our target remains at a ‘3% reduction’ which has been
reached based on 2022 performance reviews (details in link above), with full year benefits realised from
initial China installations.
Focus is on implementing ISO 50001 and ISO 45001 certification across the key manufacturing sites.
Clean water
and sanitation
Our target of a 3% reduction on water usage and intensity has also been reached based on 2022
performance reviews, with full year benefits realised from initial China installations, meanwhile
preserving the target of a 2x growth in water business which continues in a positive trend.
Health and safety
Regarding health and safety, a continued positive trend (on a rolling three year basis to end-2023) can
be seen based on 2022 performance reviews evident from a reduction in the Lost Time Incident Rate
(refer to the detail in our ESG report in the link above).
Gender equality
and employees
On gender equality, we maintain, and continue to enforce, our policies regarding diversity thinking
throughout the organisation and we have maintained the same levels of diversity in senior management
from the previous year.
Innovation
Innovation remains key to our sustainability strategy, and we aim to continuously reduce precious
resources, including the increased use of recycled materials, in a research and development processes.
Based on 2022 performance reviews, we have managed to retain high levels of investment in R&D in
relation to sales, in addition to acquisitions made in recent years.
58
Billi was acquired at the end of November 2022, providing an extension to the Strix
product range and is fully aligned with the Group’s sustainability driven growth.
Billi’s product portfolio extends Strix’s capabilities and product offering through
its supply of premium filtered and non-filtered instant boiling, chilled and sparkling
water systems for domestic and commercial applications, accompanied by its supply
of recyclable filtration systems and aftercare services.
Billi’s unique thermodynamic heat-
exchange system uses change-of-state
technology which harvests the heat
energy generated during the chilling cycle
to preheat the water going into the boiling
tank. This enables Billi systems to achieve
substantial energy savings for customers.
Billi’s premium filters have been integrated
with Pentair’s unique three-layered
Fibredyne™ technology which retain
impurities to reduce blockages, hence
improving flow rates.
Safety is a concern in the hot tap sector,
particularly in the domestic environment.
Billi has designed and incorporated a range
of safety features including safety lock,
splash free cup filling systems and design
features for disabled users.
Billi’s major product ranges are recognised
as eco-friendly products by Global GreenTag
with a Trusted Brands – Gold Award, which
is one of the world’s most robust, trusted
and widely recognised ecolabels. They
independently assure that every product
is fitness tested and certified under
leading certification programmes that
use the world’s best scientific methods.
From an operational perspective, Billi
is advanced in many areas such as its
use of solar energy which accounted
for over 50% of electricity requirement –
seasonal variations providing the primary
limiting factor.
Billi integration with Strix
The preliminary work to align Billi with
the Strix sustainability metrics is already
underway. Work in 2023 will include a
roadmap to ensure full integration, including
Strix KPIs and targets. As with LAICA, this is
expected to be a two-way process; Strix is
more advanced in areas such as emissions
reporting and operational certification
(e.g. ISOs) but can benefit from Billi’s
strengths in product development
and product certification.
Billi has been a high quality addition
to the Group’s strategy to provide a
full range of sustainability orientated
products delivering high quality/
low environmental impact water
to consumers.
59
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Sustainability strategy – Planet, People & Purpose
Planet
Planet encompasses:
1. Emissions (including Scope 3) through energy usage
and renewable power generation
2. Water consumption
3. Waste and recycling
1. Emissions (including Scope 3)
through energy usage
Direct greenhouse gas emissions (Scope 1)
arise from sources that are in the
Company’s possession or under its control.
Indirect greenhouse gas emissions (Scope
2) arise primarily from the use of purchased
electricity. Scope 3 emissions reflect the
impact from our full value chain – both up
and downstream, from cradle to grave.
Emissions were down in the year assisted
by the closure of the old plant.
Overall energy consumption declined in
the year assisted by the closure of the old
Chinese facility. However, it must be noted
that the new larger plant inevitably requires
more energy given the significant expansion
in capacity and investment in areas such
as automation. The Chinese new factory
is now ISO50001 Energy Management
certified which will assist in developing
future plans to reduce energy consumption.
The new factory in China has proved to be
an ideal platform for the adoption of solar
technology with an additional investment
of c.£100k made in the year to increase
capacity by 10%. Internally, energy
generation accounted for over 10% of the
electricity required for the Chinese factory
and over 9% of total Group consumption.
Work continues on the potential for other
initiatives, including solar at LAICA in Italy
and even at Ramsey in the Isle of Man.
We note that this is an area where Billi is
already well advanced with over 50% of
60
electricity requirements supplied from
their own solar capacity.
– now 77% of lines up from 68% in 2020 –
have led to improved efficiency.
Regarding Scope 3, in 2022, the complex
process of measuring our emissions was
undertaken for the first time, developing
a full carbon inventory and profile of Strix’s
value chain, using GHG Protocol Corporate
Value Chain (Scope 3) Accounting and
Reporting Standard. Like many industrial
companies Scope 3 dominates Strix’s
overall carbon footprint, accounting for
nearly 99% of Strix emissions. Indeed,
we expect this number to rise towards
100% as we drastically reduce our
Scope 1 & 2 emissions from 2023. More
Scope 3 details are included in our ESG
report available at the following link:
strixplc.com/sustainability
2. Water consumption
Water consumption reduced significantly,
benefiting from the lack of new plant
commissioning, including testing, dual
running of the old facility and overall
lower volumes.
We are confident that our water is not
extracted from areas of water stress
and we are cognisant of the quality
of water returned from our facilities.
3. Waste and recycling
The overall reduction in waste has been
driven by the new Chinese facility and lack
of dual facility running seen in 2021.
Improved layout and processes combined
with the continued adoption of automation
Waste inherent in the manufacturing
process, such as swarf from machining,
is effectively ‘designed in’ at the production
stage requiring a redesign of the process,
normally associated with a new version of
a product, in order to address it. The lower
volumes inevitably lead to lower absolute
levels of waste, hence the importance
of the reduction in the waste intensity
reported.
“Strix philosophy and
sustainability ethos
follows the Planet,
People, Purpose.
These three Ps provide
the guidance as to
how the business is
developed to thrive
and serve all its
stakeholders from a
sustainability strategy
point of view, which
continues to follow
the UN SDG-compliant
eight pillars.”
Mark Bartlett
CEO
People
Our strategy is built on four key building blocks:
1. Health and safety in the workplace
2. Diversity and inclusion
3. People progression and development
4. Engagement and wellbeing
Strix maintains the family ethos of its
origins in its approach to employee
engagement and welfare. Not only do
our people provide the intellectual capital
which enables the Group to thrive, but they
also produce the physical products which
enable the Group to operate.
1. Health and safety in the workplace
The safety of all employees is paramount and
a key Group KPI, reviewed at every operations
board meeting. Continuous training and
awareness, along with a safety first culture,
are embedded in all our operations.
All Strix facilities have been certified with
ISO45001, a paramount health and safety
standard, including LAICA. Recorded
accidents reduced in 2022 from the prior
2021 reporting year. We continue to look
to work towards the ultimate goal of
zero accidents.
2. Diversity and inclusion
Strix is committed to being an equal
opportunities employer and prohibits
unlawful discrimination on the grounds of
age, disability, gender identity, gender (re)
assignment, marriage and civil partnership,
pregnancy and maternity, race, religion or
belief, sex or sexual orientation.
Strix diversity is best demonstrated by the
senior management group which includes
Chinese, Turkish, Greek Cypriot, Australia,
New Zealander, African, European, American,
and British nationals, spread across multiple
jurisdictional Strix locations.
We are proud of our gender equality
with 51% women and 49% men in the
Group, with 27.3% women in management
roles. Emissions were down in the year
assisted by the closure of the old plant.
3. People progression and
development
Significant resources and efforts have
been made to improve training (learning and
development) across the Group with a blend
of in-person training, including mentoring,
and an e-learning platform to provide
best-in-class programmes and flexibility.
E-learning
Key milestone on this path includes the
introduction of our e-learning platform,
hosted by the Kallidus platform. This has
enabled us to ensure a consistent message
and understanding of important ethical
and compliance principles, as well as
providing a wealth of soft skills and
personal development tutorials. In 2022,
learners participated in an average of 9
hours of learning on the platform, 2 hours
15 minutes of which were dedicated to
health, safety and the environment.
Face-to-face training
New hire and training investments were
made in China in October 2021, with a team
of 15 in-house trainers, covering a range of
specialist topics. All undertook a Train the
Trainer (TTT) programme. Also, of particular
note in our now comprehensive learning and
development resource is a programme for
operational team leaders and supervisors.
Progression – job grades
and career ladders
For career progression, or simply in-role
development, we have mapped and
signposted multiple paths, enabling
both technical and ‘soft’ skills acquisition,
depending upon individuals’ ambitions
and preferences. For career progression,
or simply in-role development, we have
mapped and signposted multiple paths,
enabling both technical and ‘soft’ skills
acquisition, depending upon individuals’
ambitions and preferences.
Future plans
The plan is to maintain the pace of
our transformation into a true learning
organisation. We will further enhance the
internal trainer team skills sets in China and
look to mirror the same in the Isle of Man,
Italy and now Australia and New Zealand
following the acquisition of Billi.
4. Engagement and wellbeing
We provide high quality off-site dormitory
accommodation in China. Transport is
provided through free shuttle buses for
daily commute to all the employees.
From a welfare perspective, we provide
free health checks to all the employees
every year and our employees are entitled
to above average levels of annual leave
plus parental leave, marriage leave and
compassionate leave.
Acknowledging local tradition, small gifts
are offered to employees at festivals,
such as Spring Festival, Mid- Autumn and
Women’s Day. In addition, in recognition
of the time often spent away from families,
we organise a range of employee trips.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Sustainability strategy – Planet, People & Purpose continued
Purpose
Strix mission for Purpose is to shape a safer, more sustainable future in the design
and supply of innovative products that enhance customers’ everyday lives.
This is achieved through:
1. Avoided emissions and plastic waste
2. Sustainability-driven products
3. Safety
4. Community projects
5. Biodiversity
6. Governance through the Board and policies
7. Certifications
1. Avoided emissions and
plastic waste
The key product for Strix is the kettle
control which enables safe functioning
of an electric kettle and the adoption of
water heating technology. This clearly
shows that the kettle is the most efficient
method to minimising emissions and
energy consumption, as Strix controls
enable switching from other forms of
heating to electric kettles, thereby
reducing emissions.
Regarding plastic waste, Strix, primarily
through its LAICA business and its Aqua
Optima brand, is playing its part in avoiding
the proliferation of ‘single-use’ plastics
whilst promoting recycling and responsible
disposal. Strix sold over 4.5 million filters
in 2022. Each filter offers the capacity
of over 100 plastic bottles suggesting
that full utilisation of our filters could
have potentially saved over 450 million
plastic bottles.
2. Sustainability-driven products
• For kettle switches, we look to reduce
energy consumption through a range of
developments such as variable switch-
off temperatures, increased accuracy
to avoid over-boiling and ‘keep warm’
functionality to reduce reboiling
energy consumption.
In the water category, the focus is on
filtration technologies to improve the
quality of water whilst reducing the
product footprint, hence ensuring
customers get premium water with
a reduced environmental impact.
•
62
•
In appliances, the focus is on creating
products for sustainable living. Often
this involves bringing together our
thermal and water capabilities as seen
in the range of single serving drinks
dispensers. These solutions will be
significantly enhanced through Billi
and their hot tap product range.
LAICA products are focused on the
health segment.
3. Safety
Strix remains committed to consumer
safety and continues to prompt regulatory
enforcement authorities to remove
unsafe and poor quality products from its
major markets. Four such actions were
undertaken in 2022 resulting in product
recalls and withdrawals.
4. Community projects
The introduction of two paid-for charity days
per employee in the West workforce has
significantly increased the Group’s ability
to interact with the community, targeted
at the less fortunate and the young.
We have raised money for a range of
charities including Save the Children,
MacMillan Cancer, Breast Cancer
Awareness and Movember. We supported
Isle Listen, a local charity during Mental
Health Week.
Strix employees undertook a variety
of activities including:
• supporting STEM Fest in the IOM;
• hosting a visit to our Headquarters
for 75 children from years 3 and 4
from a local primary school;
• participating in the IOM Graduate
Fair and Employment Skills Fair;
• supporting the Junior Achievement
Company of the Year Programme; and
• volunteering for the local charity Junior
Achievement.
5. Biodiversity
Sustainable development is crucial in
reducing the impact of human activities
on the planet and enhancing life for all in
line with the 17 UN SDG goals. Bringing
biodiversity onto the agenda promotes a
proactive mind set on how the Company can
enhance nature and the planet we inhabit
as much as addressing negative impacts.
As part of an ESG initiative for 2022, we
began to repurpose the gardens at our
Headquarters in the Isle of Man. This has
included the development of wildflower
plots, a dedicated bee yard and the
introduction of a composting area.
We introduced four beehives on the
grounds, with their own dedicated bee
yard. These bees were locally sourced
and relocated to the property.
China has been focused on commissioning
of the new facility and development of the
solar arrays.
2022 sustainability highlights
Event
2022
2021
Scope 1 & 2 emissions (tCO2e)
6,156
7,695
Energy usage (MWh)
14,052
15,666
Renewable electricity generation (MWh)
Waste generated (tonnes)
Lost time injury frequency rates per
200,000 hours
1,193
1,301
1.00
0
1,969
0.95
Diversity – Women in senior management roles
27.3%
27.3%
6. Governance, through the
Board and policies
At Strix, we set expectations of the highest
standards which we expect to be carried
out throughout the organisation. Our
policies include:
• zero-tolerance in our Anti- Bribery
and Corruption Policy Statement;
• zero-tolerance in our Anti-Harassment
and Bullying Policies;
• zero-tolerance in our Anti-slavery
and human trafficking; and
• an open, anonymous and fair
Whistleblowing policy.
The Board is committed to effective
corporate governance as the basis for
delivering long-term value growth and
for meeting shareholder expectations for
leadership and oversight of the business,
including its sustainability strategy. The
Company adheres to the QCA Code which
provides a strong foundation for delivering
shareholder value and serves to mitigate
and minimise risks.
The executive team’s long-term incentive
plans are aligned to our sustainability
agenda and targets, and the Remuneration
Committee has set an energy reduction
target, in line with the Group’s KPIs for
15% of the LTIP award.
The Board looks to continue two-way
dialogue with all shareholders through
presentations and meetings and to
incorporate their views as appropriate.
7. Certifications
The new Chinese plant achieved full
ISO accreditations in 2021 and 2022
(including ISO50001 for Energy
Management) whilst LAICA achieved
ISO14001 in 2022 and was awarded
ISO45001 in early 2023. Consequently, we
are pleased to have the key ISO standards
achieved at all our plants, with the focus
in the rest of 2023 to acquire full ISO
accreditation of the recently acquired
Billi operations.
“The level of ambition, the speed of action and the integration
of a sustainability lead philosophy continues to impress,
being on a par with far larger organisations.”
Richard Sells
Main Board Non-Executive Director and Head of the ESG committee
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Task Force on Climate-related Financial Disclosures (‘TCFD’)
Governance
Board oversight
Climate issues are assessed by the
full Board reflecting the weighting which
the Directors place on the risks and
opportunities along with the relative
size of the Board and scale of the Group.
Richard Sells, Non-Executive Director,
provides additional oversight on leveraging
his career at Electrolux and its long held
focus on sustainability. Along with the
CEO they provide the key conduit from the
operations to the Board. Board meetings
are held six times a year with sustainability,
including climate-related issues, both
opportunities and risk, a constant agenda
item. Climate risks are consolidated into the
annual Operational Board Risk Committee
review for the Group. The Board provides
the final sign-off on the Group’s
sustainability and hence climate targets
and the associated investment. The Board
is also responsible for overall strategy and
ensuring that investment is aligned to the
sustainability objectives with the recent
acquisition of Billi providing a high profile
example of such alignment.
The Remuneration Committee, comprised
of the three independent Board Directors,
is responsible for the executive team’s
remuneration including LTIPs. Within the
executive LTIPs this includes targets
associated with the Group’s sustainability
agenda, including emissions-related
elements, along with monitoring of
subsequent achievement.
Management’s role
The Operations Board provides the key
executive management forum for climate
change and sustainability. It is chaired
by the Chief Commercial Officer &
Managing Director Consumer Goods,
Harry Kyriacou, and includes personnel
responsible for engineering, commercial,
technology, health and safety, human
resources and finance. In terms
of climate risk matters, Matt Thomas,
Divisional Operations and Project Delivery
Director, has a key role in respect to climate
change, responsible for assimilating
climate-related data. He is supported
with both internal and external resources.
Climate opportunities for new products
are again prioritised across the Operations
Board. The Group continually looks to
enhance its new product development
programme along sustainability driven
corridors, enhanced by a through-the-life
cycle analysis, carbon accounting, circular
economy, consumer safety and potential
legislative changes.
Strategy
Climate-related risks and opportunities
In assessing our risks and opportunities we look to consider timescales of short (0-2 years), medium (2-8 years)
and long term (8+ years). However, given the timescales of environmental impacts it is arguably unrealistic to
compartmentalise into such distinct and relatively short time spans.
Event
Timescale
Impact
Mitigation
Extreme
weather events
Medium/
long term
There is a risk of physical damage
to property, plant, machinery and
equipment as a result of flooding,
storms, heatwaves, snow storms
and other extreme weather events
across the Group’s various locations.
Note that Zengcheng, Guangzhou
(where the Group’s main factory
is located) rarely sees typhoon
conditions due to its inland location,
although extreme wind conditions
were recorded in 2015. Therefore
such a risk has been included.
The new Chinese factory is designed to withstand
the local conditions, free from temporary
structures such as tin sheet roofing. Notification
will normally come from the local government
and/or media outlets meaning time to make any
additional arrangements to reduce risk and reduce
potential loss. If weather systems transpire to give
an increased likelihood of flooding, information
would be readily available from local government
or media outlets allowing for enough time to
put in place flood defences such as sandbags.
We also have the opportunity to move critical
equipment/materials/supplies to a higher floor.
Business
disruptions
Medium/
long term
There is a risk that manufacturing
operations will be halted due to
physical damage from extreme
weather occurrences at locations
where our factories are based
(Isle of Man, China and Italy).
A detailed recovery plan has been documented
as part of the Group’s Business Continuity Plan
which is overseen by the recovery management
team. Procedures relate to communications and
information exchange, recovery process phase,
clean-up process, pollution prevention and
restoration (including insurance claims and
compensations). Restoration procedures
include plan maintenance, back-ups, testing
and emergency sources of power generation.
64
Climate-related risks and opportunities continued
Event
Timescale
Impact
Mitigation
Financial outlay
for accessibility
to renewable
energy
Medium
term
Climate
policies
Medium
term
Medium/
long term
Changes to
technologies on
manufacturing
processes to
align to climate
change goals
Climate
opportunities
Medium
term
There is risk of significant financial
outlays in accessibility to renewable
energy, particularly at the Group’s
main manufacturing plant in
China given the Chinese climate
commitments (net zero by 2060).
To become carbon neutral through
purchasing carbon credits would
cost the Group over £1m a year at
current pricing levels, rising to over
£6m by 2050 assuming Network
for Greening the Financial System
(NGFS) pricing scenarios aligned
with the Paris Agreement.
As a result of measures introduced
during the Paris Agreement, various
jurisdictions resolved to take
measures to curb carbon emissions
through implementing and enforcing
policies relating to climate change
in order to achieve low-carbon
economies. These could include
carbon pricing. These actions
could increase costs and impact
margins if not passed on.
As a manufacturing and engineering
group, technological changes
relating to energy saving, low-carbon
transportation and an increasing
use of non-fossil fuels or other
technologies that help reduce
carbon emissions are needed to
meet policy goals, which would
therefore involve changes to current
existing manufacturing processes
and technologies that could be
more expensive.
National governments are pledging
to decarbonise energy consumption
requiring a shift toward renewables,
and therefore electricity as the
primary source of power. There
is also increasing legislation on
efficiency labelling and recycling.
This is mitigated by the Group avoiding purchase
of carbon credits and achieving its ESG strategic
KPI of net zero Scope 1 & 2 emissions by 2023.
Over 10% of the new factory’s energy is now
powered by solar energy, with the remaining
energy consumption from renewable energy
sources starting in 2022. All of the energy in our
Isle of Man office and factory is from renewable
energy sources. Plans are underway for solar
installations to provide 100% of required
electricity at LAICA by 2023/24. Financial
impacts have been included in our budgeting
process and forecasts.
Through investment in solar and long-term
contracts for renewable energy, Strix internal
operations have largely been protected from
such potential risks. The key area of exposure is
likely to be in the supply chain, hence our work
on Scope 3 and increasing dialogue with key
suppliers to ensure that they have mitigation
strategies in place where appropriate.
We continue our drive in the use of automation.
This requires greater energy usage but has other
significant benefits in improving quality, reducing
scrap, etc. Combined with the use of renewable
power, management see such a shift as a
double win in terms of sustainability. In addition,
the new factory has been successfully audited
and certified to ISO 9001, ISO 14001 and ISO 45001
with added ISO 50001 to the certification portfolio.
Kettles are the most efficient method of boiling
water and use electricity, hence are likely to
benefit from the decarbonisation shift away
from gas. As the technology leader in regulation
tends to be positive for Strix. The portfolio of
kettle switches is increasingly configured around
the opportunities for power saving and carbon
reduction. The acquisition of Billi in hot taps
provides Strix with a complete range of drinking
water heating products for the home. The
Company continues to work with customers
and monitor potential legislation (such as the
European Eco-design or ‘right to repair’
regulations) to ensure full and early compliance.
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Task Force on Climate-related Financial Disclosures (‘TCFD’) continued
Climate-related risks and opportunities continued
Event
Timescale
Impact
Mitigation
Financing
costs
Short/
medium
term
Increased
investor
scrutiny
Short/
medium
term
Lenders, both banks and
bondholders, are increasingly looking
to link debt coupons to achieving
sustainability targets. For industrial
companies at least one target is
generally linked to emissions. Hence
the potential penalised higher rate
or benefit of lower rates on the
Group’s debt.
There is increased focus on climate
change by our equity investors and
other stakeholders. This is evidenced
by the rise in ESG funds and the drive
to provide consolidated emissions
transparency for individual funds.
Early dialogue with key lenders combined with
a sustainability strategy designed to ensure that
relevant hurdles and targets are achieved.
Our sustainability agenda has been accelerated
in recent years, including establishing future
roadmaps and targets. From an emissions
perspective, we aim to achieve Scope 1 & 2
net zero by 2023 and started developing our
Scope 3 supply chain emissions inventory in 2022
which opens an additional avenue for making a
difference. With the ‘in use’ dominating Scope 3,
our new product direction includes improved
efficiency to reduce energy usage and hence
emissions. Our sustainability report provides
full transparency to all stakeholders.
Impact on the organisation’s
businesses, strategy and
financial planning
In terms of risk, Strix has developed a
range of business contingency plans,
including detailed recovery strategies for
all manufacturing operations. This includes
understanding both lengthy internal supply
lines and understanding and mitigating
risks within the supply chain. Our kettle
switches are key to the most efficient
method of boiling water which should
provide benefit from rising energy prices
and the shift from alternative fuels, e.g.
gas to electricity. New developments such
as Aurora and Dual Flo are designed to
produce single servings to provide greater
efficiency and reduce waste. Similarly,
our water category and associated filters
increase the quality of drinking water whilst
reducing the use of single-use plastic
containers and associated waste. These
trends are driving the direction of our new
product development with R&D expected
to grow alongside the business remaining
at around 5% of sales.
Resilience of the
organisation’s strategy
Our current assessment has been based
on the Paris Agreement 1.5°C scenario.
Management see little likelihood of
negative impact on Group assets but
are working on its resilience, in particular
suppliers and supply chains which are
relatively lengthy. From a risk operations
perspective, Strix has developed a range
of business contingency plans, including
detailed recovery strategies for all
manufacturing operations. A key risk to our
net zero strategy is access to renewable
energy (electricity) supply to our key
manufacturing plants, particularly China.
To counter such risks, Strix has invested
almost £1m in a solar system in China which
will provide over 10% of the electricity
supply required and signed long-term
contracts for renewable energy. A similar
strategy has been implemented in the
Isle of Man and with similar strategies
planned for LAICA in Italy. 2023 will see the
integration of Billi which includes a review
of their business interruption plans and
climate change mitigation strategy. Further
scenario analysis is planned for the 2023
financial year.
“Our kettle switches
are key to the most
efficient method of
boiling water which
should provide
benefit from rising
energy prices and
the shift from
alternative fuels,
e.g. gas to
electricity.”
66
Risk management
Identifying and assessing
climate-related risks
Internal research and external assistance
is combined to provide a full understanding
of the potential risk avenues and
opportunities. Input is garnered from
across the Group’s operations as well as
externally from customers and suppliers –
a process which will accelerate as work on
Scope 3 emissions expands. These risks
are incorporated into our risk software.
The Group assesses the potential financial
implication, where appropriate, and the
cost of mitigation. This is best evidenced
in the solar and renewable power purchase
agreements in China. Neither were the
lowest cost option of the status quo but
provided additional sustainability and
risk mitigation.
Managing climate-related risks
and opportunities
Risks are managed relative to the likelihood
and potential severity to the Group. Hence,
the global shift to reduce emissions is
highly likely (or happening) and hence
our accelerated actions in this area.
Weather-related impact has been assessed
and a more measured approach of a
contingency plan and insurance applied
to reflect the level of risk and mitigate
potential impact. These actions form part
of the Group’s overall risk policy with the
key risks identified logged within the
Group’s risk registry. Opportunities follow
a similar pattern based on the scale of
the opportunity and a set of metrics of
internal measures to assess our ability
to compete/benefit from such avenues.
Climate-related risk integration
Climate change has become a clear
reality and now seen in Strix as ‘business
as usual’ and part of the ongoing
environment in which the Company
operates. In addition, whilst complex,
we are a small business with a flat structure
and short lines of communication. The
focus on climate change risks has clearly
risen up our agenda in recent years, as
have our actions, and is now an integral
part of the overall business planning
and management.
Metrics and targets
Key metrics used
Significant work was undertaken in 2022
to expand our carbon footprint analysis
through the development of Scope 3
supply chain emissions, previously only
business travel was reported. This is in
addition to internal orientated Scope 1 & 2
emissions historically reported. These have
been calculated using the GHG Protocol,
the internationally recognised standard for
corporate carbon reporting. Absolute
and intensity (per £m) are used for both
emissions and energy consumption to
provide more prescient analysis as the
Group expands and ensures that our
focus remains on energy usage as well
as emissions. Historically, the Group has
used ‘location based’ analysis but have
added a ‘market based’ approach in 2022.
We believe that this provides a more
accurate picture of the Group’s emissions
and the impact of the recent investments
made and actions taken will also be
included. Our figures are externally verified.
The addition of a full, independent audit
is seen as unwarranted given the steps
in place to achieve net zero Scope 1 & 2
emissions from 2023.
Targets
Strix is targeting net zero Scope 1 & 2 by
2023 predominantly (latest expectations
over 97%) due to the removal of the use
of fossil fuels in the energy used. This
is being achieved through internally
generated solar power and the purchase
of renewable energy which are now in
place for all Strix facilities. In addition,
management is targeting 3% improvement
in energy intensity (energy use to sales)
to further reduce risk. These targets
exclude Billi which was acquired in
November 2022 where action plans will
be developed in 2023 and enunciated
in the next reporting cycle.
Our Scope 3 work in 2022 has given us a
good initial understanding of our footprint.
The key element is the ‘in use’ phase,
reflecting the kettle as an energy
consumptive heating device. The laws
of physics therefore limit the impact
which Strix can make on the Scope 3
inventory. We are therefore focusing on
other areas which may have less impact
but where Strix can actively make an
impact. However, given the dominance
of the ‘in-use’ element, we have not set
targets for the Group.
Full disclosure of our sustainability KPIs,
Performance and targets is shown on
pages 16 to 17.
Disclosures
Scope 1
Scope 2
Scope 1 & 2
Scope 3
Scope 1 & 2 intensity
Energy usage
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e/£m
MWh
Energy usage intensity
MWh/£m
2020
107
5,269
5,376
2021
261
7,430
7,691
2022
263
6,500
6,763
93
712,112
508,314
5,468
10,774
113.1
719,803
515,077
15,845
132.7
15,114
141.6
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Responsible business
Strengthening our position
as a global, responsible employer
Through one or more key pillars of our sustainability strategy, the Group’s mission is
to strengthen 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.
Corporate Social Responsibility
Embedded in Strix’s long-term growth
strategy is an emphasis on balancing the
interests of our customers, shareholders,
employees, suppliers, regulators and
the communities in which we operate.
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. We hold regular
discussions with our key stakeholders to
maintain these key relations which in many
cases have been in place for decades.
Number of employees
850+
across the globe
The Group believes that the
development and retention of
talent is important to achieve
the long-term strategic goals
of the business.
Employees
The Group currently employs 850-plus
people in multiple locations around the
globe and is committed to a strategy built
around the foundations of recruitment and
on-boarding, training and development,
engagement and retention, 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. As part of
the continuous value-added employee
development strategy, all employees have
access to Kallidus, which is an e-learning
platform which provides employees with
a wide range of online-based training
and learning covering numerous essential
topics from compliance, health and safety,
leadership and coaching and personal
effectiveness as well as technical
learning specific to employees’ roles.
Age, colour, race, gender, disability, ethnic
origin, national origin, marital status, sexual
orientation and 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, Town Hall meetings
and ‘Pulse of the business’ lunches with
the CEO. We 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.
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
charitable fundraising, apprenticeships,
internships and educational support,
involvement in Isle of Man business
networks and environmental sustainability
projects.
68
•
Involvement in STEM Fest Isle of Man
and scheduled regular events, including
assisting with STEM activities that
students can do at home. This support
is to inspire the younger generation
to consider careers in Engineering. In
2022, our Group Engineering Director,
Nick Gibbs, was appointed as the new
sector lead for the IOM Chamber’s STEM
Committee, having served as a STEM
Forum Committee member prior to the
appointment. In this role, Nick will lead
the Forum to continue to work together
to address common issues that impact
the manufacturing and engineering
industries on the Isle of Man, such as
apprentice/skills development, reducing
energy consumption, improving the
sustainability of our businesses and
health and safety matters.
• Undertaking research into IET
accreditation of the apprenticeship
scheme, and programmes that can be
run with primary schools. In 2022, the
Group hosted a visit to our head office
in the Isle of Man by 75 school children
from a local primary school. The
employees interacted with the children
and taught them about product design,
prototyping and manufacture.
• Participating in the Isle of Man Graduate
Fair and Employment Skills Fair where
our Group HR Director, Emma Cox,
featured on a CV surgery panel where
she offered tips to the local graduates
on how to write an effective CV.
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. In the Isle
of Man, our efforts are centred around
helping the Island’s young people gain
the essential skills they need to start
successful careers, for example internship
and graduate recruitment schemes,
participation in graduate fairs and
mentorship for programmes such as
the Junior Achievement network.
During 2022, we undertook a number
of graduate recruitment and internship
programmes. In the Isle of Man, four interns
and two university graduates joined the
workforce in the Finance, Design and
Research and Development teams. One
intern joined the Hong Kong office to gain
more exposure and offer support to project
management teams. These programmes
place interns and undergraduates into
placements within the Group and provides
students with the opportunity to undertake
practical work projects to further their
studies and gain entry-level work
experience after graduation.
We would like to express our thanks for
the valued work that all those involved in
the internship and graduate recruitment
programmes perform.
Strix further supports and sponsors the
education and development of future
Engineers in a number of other ways:
• Working with the AMTC (Advanced
Manufacturing Training Centre) at the
UCM (University College, Isle of Man)
to provide 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.
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Responsible business continued
• Through traditional and social media
platforms including its own websites, the
Group actively promotes awareness of
the benefits of our products in respect
of healthy living and protection of our
planet and environment, in collaboration
with our business partners. Campaigns
include promoting awareness of
reducing food waste, access to clean
water and eliminating pollution from
single-use plastics.
• Sponsorship of the ‘Outstanding Team
Member of the year’ award in support
of the Junior Achievement’s programme
which mentors a team of young adults
to run a business for a year.
Appointed Sector Lead for IOM
Chamber STEM Committee in 2022.
Involvement in Isle of Man
business life
Strix employees are actively involved in
the wider Isle of Man business life, primarily
through membership of 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 2022, the Group also engaged in
other various community activities as
detailed below:
• Through our LAICA office, the Group
continues to partner with Rise Against
Hunger (RAH), an international non-
profit hunger relief organisation.
Our efforts include packing meals for
distribution to schools in countries
suffering humanitarian crises.
• The Group’s other offices have been
engaged in fundraising activities
throughout the year, including themed
casual days in order to raise funds
for the benefit of various local and
international charities including
Save the Children, Isle Listen, The
Samaritans, Isle of Man’s Children’s
Centre, Manx Breast Cancer and
MacMillan Cancer Support Groups.
• A number of our staff members have
individually participated in various
fundraising challenge events, including
sponsored walks, bike rides and other
sporting events. Funds raised were
donated to a number of local charities
within our respective communities,
including the Isle of Man’s Children’s
Centre, North West Air Ambulance
Charity, Preston Royal Hospital (Bowland
House), Rebecca House Children’s
Hospice and the Manx Breast Cancer
Support.
70
71
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Chief Financial Officer’s statement
Solid results coupled with
a strategic acquisition,
despite turbulent times
“Profit after tax fell 26.7% to £23.0m reflecting
the challenging trading environment but
operating cash flow improved by £1.1m as a
result of management action, highlighting
the resilience of the Company’s cash flow.”
Raudres Wong
Chief Financial Officer
Revenue
£106.9m
2021: £119.4m
Adjusted gross profit margin
38.8%
2021: 39.7%
Financial performance
Revenues decreased by 10.5% year-on-
year to £106.9m (FY 2021 £119.4m). This was
predominantly due to a drop in sales within
our kettle controls category. As stated
previously in our trading updates released
both in July 2022 and November 2022,
revenues have been adversely impacted
by the ongoing conflict in Ukraine, and the
disruptive effect of ongoing lockdowns
which were enforced in China throughout
most of 2022, impacting two of our top five
major OEM customers. This resulted in a
decrease of c.£16.9m (19.8% decrease)
for kettle controls. Despite the drop in
overall sales, the water category showed
an improvement in sales from last year
reflecting the success of our performance
from online market place launches as Strix
continues to expand its online presence,
together with contributions from post-
acquisition sales in Billi. The appliances
category also showed an uplift
predominantly due to Billi’s acquisition,
where organic Strix appliances revenues
were flat against a market that declined.
72
Financial summary
Revenue
Gross profit
EBITDA2
Operating profit
Profit before tax
Profit after tax
Net debt3
Net cash generated from operating activities
Basic earnings per share (pence)
Diluted earnings per share (pence)
Total dividend per share (pence)
Adjusted results1
Reported results
FY 2022
£m
106.9
41.5
32.1
25.9
22.2
23.0
87.4
23.4
10.9
10.8
6.00
FY 2021
£m
119.4
47.4
40.5
33.7
32.2
31.4
51.2
22.3
15.2
14.9
8.35
Change
(22-21)
%4
-10.5%
-12.4%
-20.7%
-23.1%
-31.1%
-26.8%
+70.7%
+4.9%
-28.3%
-27.5%
-28.1%
FY 2022
£m
106.9
40.7
26.2
19.9
16.1
16.9
87.4
23.4
8.0
7.9
6.00
FY 2021
£m
119.4
43.8
30.6
23.7
21.5
20.6
51.2
22.3
10.0
9.8
8.35
Change
(22-21)
%4
-10.5%
-7.1%
-14.4%
-16.0%
-25.1%
-18.0%
+70.7%
+4.9%
-20.0%
-19.4%
-28.1%
1 Adjusted results exclude exceptional items, which include share-based payment transactions, COVID-19 related costs 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.
3 Net debt excludes the impact of IFRS 16 lease liabilities, pension liabilities, deferred tax liabilities and earn-out provisions on satisfaction of performance conditions
and providing post-combination services. Net debt including earn-out provisions was £94.9m.
4 Figures are calculated from the full numbers as presented in the consolidated financial statements.
Adjusted gross profit decreased by 12.4%
to £41.5m (FY 2021: £47.4m), in most part
due to the impact of revenues for kettle
controls falling as described above.
The decrease was slightly offset by
increases for both the water and
appliances categories of £1.0m (13.8%
increase) and £0.9m (18.0% increase)
respectively, reflective of the increases
in sales in these categories as described
above. Reported gross profits decreased
by 7.1% to £40.7m (FY 2021: £43.8m).
Adjusted gross profit margin in FY 2022 was
38.8% (FY 2021: 39.7%), showing a small
margin dilution of 0.9% compared to last
year. This dilution is mainly attributable to
lower kettle controls sales in the regulated
markets that command higher margins
but helped partially by the price increase
implemented in the second quarter of FY
2022 across all kettle controls. The dilution
in kettle controls was partially compensated
by the water and appliances categories that
showed margin improvements of 0.3% and
1.7% respectively. The appliances that were
launched in FY 2021 had better sales
mixes in FY 2022, and together with Billi’s
contributions post acquisition of one
month, helped to drive better margins.
Adjusted EBITDA was £32.1m (FY 2021:
£40.5m), showing a decrease of 20.7%
compared to last year. The decrease is
directly attributable to the decrease in
revenues as described above. Adjusted
EBITDA is defined as profit before
depreciation, amortisation, finance costs,
finance income, taxation and exceptional
items including share-based payments.
Reported EBITDA decreased by 14.4%
to £26.2m (FY 2021: £30.6m).
Adjusted EBITDA margin in FY 2022 was
30.0% (FY 2021: 33.9%), representing a
margin dilution of 3.9%. In addition to the
margin dilution in adjusted gross profit
margins described above, other various
factors which then contributed to the
dilution of adjusted EBITDA margins
included, amongst others:
• Billi costs incurred post acquisition;
•
investment in human resources in
our commercial areas to meet medium-
term targets;
• higher advertising and promotional
costs as the Group continued to
further promote water and appliances
products in the market; and
• higher stock handling and outward
carriage and freight costs due to global
inflationary pressures experienced in
the current year.
Adjusted operating profits decreased
by 23.1% to £25.9m (FY 2021: £33.7m),
a decrease of £7.8m, attributable mainly
to the drop in revenues. Reported operating
profits decreased by 16.0% to £19.9m (FY
2021: £23.7m) after deducting exceptional
costs of £5.9m (FY 2021: £9.9m) which
decreased mainly due to reasons described
in the ‘Costs’ section further below.
73
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Chief Financial Officer’s statement continued
Adjusted operating profit margins were
diluted by 4.0% to 24.2% (FY 2021: 28.2%)
compared to last year. Main reasons for the
dilution in margin are the same as those
attributable to the dilution in adjusted
EBITDA margins described earlier. Despite
the margin dilution, as disclosed in the
interim results released in September 2022,
accounting estimates changes were made
during the year relating to the
reassessment of the useful lives of certain
production and other assets which
resulted in lower depreciation and
amortisation charges of c.£1.8m being
recognised in the current year compared
to last year (excluding the change of
accounting estimates, adjusted operating
profit margins dilution year-over-year is
4.8%). Refer to notes 2, 11 and 12 of the
consolidated financial statements (pages
107-129) for full disclosures of the change
in accounting estimates.
Adjusted profit before tax was £22.2m
(FY 2021: £32.2m), a decrease of £10.0m
(31.1% decrease) from last year. This is
attributable to the reasons stated above
for decreases in operating profit, and also
increases in net finance costs. Net finance
costs (excluding the impact of exceptional
finance costs of £0.2m (FY 2021: £0.8m)
relating to the discount unwinding of the
present value of contingent consideration
recognised on acquisition of LAICA in 2020)
increased by £2.3m from last year due to
an increase in the net debt to fund the Billi
acquisition and a higher interest rates
environment. Reported profit before tax
was £16.1m (FY 2021: £21.5m).
Adjusted profit after tax was £23.0m
(FY 2021: £31.4m), a decrease of £8.4m
(26.8% decrease). The tax expense
significantly decreased in the current
year mainly due to tax incentive credits
granted in Italy during the year, and
continued adoption of certain tax
measures in China with the move of
operations to the new factory location
in 2021 which prompted the release
of previous years’ tax provisions.
Reported profit after tax was £16.9m
(FY 2021: £20.6m).
Costs
Costs in FY 2022 generally decreased
across the board compared to the prior
year, mainly reflective of the decrease
in the top line revenues.
Cost of sales (excluding exceptional costs)
decreased by 9.2% to £65.4m (FY 2021:
£72.0m) in line with the decrease in
revenues. Positive measures taken to
counter the costs pressure included
price increases implemented on our kettle
controls and water filtration products in
the first half of the year, improved margins
in our appliances category and efficiencies
realised from the use of automation and
lean production processes.
Distribution costs increased by 18.1%
to £10.8m (FY 2021: £9.2m) mainly due to
inflationary pressures causing higher stock
handling costs, higher outward carriage
and freight costs, higher payroll costs for
the Group’s sales and marketing function,
and increased advertising and promotional
costs as we continue our drive to expand
our reach in the market for our water and
appliances products. Billi’s consolidation
of one month also contributed to the
increase. Strix’s organic distribution
costs increased by 16%.
Administration costs (excluding
exceptional costs) increased by 9.0%
to £5.6m (FY 2021: £5.1m), increasing
mainly due to costs incurred in Billi post
acquisition. Strix’s organic administration
costs has reduced modestly by c.1%.
Exceptional costs (including exceptional
finance costs for the discount unwinding
of the present value of contingent
consideration recognised on acquisition
of LAICA in 2020, which are included in net
finance costs) decreased by 43% to £6.1m
(FY 2021: £10.7m). As previously stated in
the interim results released in September
2022, due to the completion of the new
manufacturing plant in China last year,
there were no material factory-related
exceptional costs incurred in the current
year, which is the main reason for the
decrease. Exceptional costs incurred in the
current year mainly related to the accrual of
the employment earn-out costs payable in
2023 to vendor shareholders of LAICA per
the supplemental consulting agreement
signed at acquisition, and costs relating
to the Billi acquisition. Other exceptional
items include disaster recovery costs
from the cyber incident reported in
February 2022, COVID-related costs due
to lockdowns in China in the earlier part
of the current year and reorganisation
costs relating to internal streamlining.
Cash flow
Cash flows from operating activities
showed a modest improvement of
£1.1m despite the softening of trading
performance. This is largely due to the
improvement in the changes of net
working capital (£8.8m) that largely
offset the downside of cash flows from
operating profit (£8.4m). Movements in net
working capital showed a decrease in cash
outflows compared to the prior year. Net
working capital cash outflows decreased
from £11.4m in FY 2021 to £2.6m in FY 2022.
The decrease in net cash outflows from
net working capital were mainly due to:
• Stocks: diligent measures were put
in place to optimise Strix’s core
supply chains and procurement levels,
including manufacturing and in-
sourcing, and this resulted in a reduction
of stock-related cash outflows to £0.7m
vs prior year cash outflows of £5.3m. The
increase of stocks in Billi was c.£0.5m
post acquisition. This resulted in a total
cash outflow of stock in the current year
of £1.2m to fuel an anticipated increase
in demand in the new year, evident from
green shoots returning in Q1 2023.
• Debtors: a significant improvement in
debtor cash flows due to concerted
efforts to tighten up accounts
receivables collections and to also
collect on c.£4.0m of new factory-
related VAT from the Chinese
government in the year, slightly offset
by increases in debtor balances in Billi
post acquisition (c.£0.8m).
• Creditors: the significant improvements
in cash flows from inventories and
debtors were, however, partially offset
(marginally) by lower creditors due to
lower procurement activities.
Tax-related cash outflows decreased from
£1.9m in FY 2021 to £1.2m in FY 2022 mainly
due to tax incentive credits granted in Italy.
Cash outflows for investing activities
significantly increased in the current year
from £17.0m in FY 2021 to £47.8m in FY 2022
mainly due to the acquisition of Billi, which
was paid for in cash and funded through
refinancing of our revolving credit facility
(see the next paragraph). This was partially
offset by a decrease in capital expenditures
because of the new Chinese manufacturing
plant which was completed in the second
half of the prior year.
74
Non-current liabilities (including short-term
portions) increased to £141.6m (FY 2021:
£85.0m), an increase of £56.6m, which is
mainly driven by the further drawdowns in
the year from the revolving credit facility
to fund the acquisition of Billi and for
payment of outstanding amounts accrued
as contingent consideration (earn-out
provisions set up in FY 2020) payable in
FY 2023 to the previous owners of LAICA
upon meeting certain performance and
employment conditions.
Net debt
The Group’s net debt position, excluding
earn-out provisions, as at 31 December
2022 increased to £87.4m (FY 2021: £51.2m).
Total committed debt facilities, net of
arrangement fees, at 31 December 2022
amounted to £117.8m, giving a liquidity pool
of £30.4m. Net debt equated to 2.18 times
trailing twelve months’ EBITDA, which
compares favourably to our debt covenant
threshold of 3.50 times.
Dividend
Given the increase in net debt due to the
strategic acquisition of Billi, and with the
high interest rates environment, the Board
continues to take precautions to balance
the capital allocation priorities. To be
prudent, the Board has decided to declare
a final dividend of 3.25p per share (FY 2021:
5.60p). With an interim dividend paid on
October 2022, the total dividend declared
for FY 2022 is 6.00p per share (FY 2021:
8.35p per share).
The final dividend will be paid on 11 August
2023 to shareholders on the register at
30 June 2023 and the shares will trade
ex-dividend from 29 June 2023.
Raudres Wong
Chief Financial Officer
Adjusted gross profit
£41.5m
2021: (12.4%)
Adjusted EBITDA
£32.1m
2021: (20.7%)
Adjusted operated profit
£25.9m
2021: (23.1%)
Adjusted profit before tax
£22.2m
2021: (31.1%)
Adjusted profit after tax
£23.0m
2021: (26.8%)
Net debt
£87.4m
2021: 70.7%
Net cash generated
from operating activities
£23.4m
2021: 4.9%
Cash inflows for financing activities
significantly increased by £37.1m compared
to the prior year, driven by an increase
in the net debt from refinancing of our
revolving credit facility to fund the
acquisition of Billi.
Balance Sheet
Property, plant and equipment increased
to £47.4m (FY 2021: £42.8m), presenting
a net increase of £4.6m (11% increase).
Part of the increase, amounting to £3.4m, is
attributable to assets recognised as part of
the acquisition of Billi. The remainder of the
increase in property, plant and equipment
is attributable to: (1) additions to plant
and machinery and production tools of
£3.8m for improvement of automation
and production efficiencies in the new
factory, and an increase of fixtures, fittings,
equipment (including computer hardware),
motor vehicles and right-of-use assets
totaling £2.1m, and (2) partially offset
de-recognition of assets worth £0.7m,
a significant amount of this being right-
of-use assets from streamlining of offices
overseas, and then also depreciation
charges of £4.2m (FY 2021: £4.6m).
Intangible assets increased to £73.4m
(FY 2021: £30.5m) reflecting a net increase
of £42.9m. The net increase is mainly due
to intangible assets (including goodwill) of
c.£40.1m recognised in the current year as
part of the purchase price allocation (PPA)
exercise from the acquisition of Billi. Other
notable additions to intangible assets were
relating to capitalised development costs
from new product development projects
of c.£3.3m, and computer software and
other intangible asset additions of c.£0.5m.
The total amortisation charges were £2.1m
(FY 2021: £2.3m), and foreign currency
movements of £1.1m were recognised on
translation of intangible assets
denominated in foreign currencies.
Net working capital balance which includes
inventories, trade and other receivables,
and trade and other payables (including tax
liabilities, but excluding short-term portions
of long-term liabilities) increased to £27.6m
(FY 2021: £18.0m), an increase on £9.6m.
The main driver behind this is an increase
in net working capital of c.£5.9m (including
tax liabilities) recognised as part of the
acquisition of Billi. The rest of the increase
relates to taxes, foreign exchange
revaluation, inventory and creditors
movements as largely explained above
in the cash flow section.
75
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Board of Directors
Gary Lamb (57)
Chairman 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 founding director
of Bladon Micro Turbine Limited, and is now
a Non-Executive Director of the Company.
For 11 years, prior to Bladon Micro Turbine
Limited, 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 30 years in public, private equity
and founder/manager-owned businesses.
Gary is also a board member of the Digital
Isle of Man Agency.
Mark Bartlett (58)
Chief Executive Officer 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 (60)
Chief Financial Officer Appointed: 2011 Nationality: Chinese
Experience: Raudres has over 30 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.
Raudres has a BComm and MBA from
McMaster University and qualified as
a Chartered Accountant in Canada.
Mark Kirkland (55)
Non-Executive Director Appointed: At IPO Nationality: British Committees: (A)(N)(R)
Experience: Mark’s initial career was in
corporate finance, predominantly spent at
UBS Limited. He has been CFO of numerous
public companies and latterly was CEO of
Delin Property, a pan-European logistics
developer, investor and manager. He is
currently an Executive Director of Kelso
Group Holdings Plc, a Non-Executive Director
of AEW UK REIT plc and an advisor to DP World.
Mark qualified as a Chartered Accountant with
PricewaterhouseCoopers in London and has
extensive corporate experience gained over
the last 30 years having held numerous senior
roles in public and private companies.
Richard Sells (64)
Non-Executive Director Appointed: March 2020 Nationality: British Committees: (A*)(R)(E)
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. Richard currently also serves
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 (E) Environmental, Social and Governance Committee
* Richard Sells was appointed by the Board to be a member of the Audit Committee in December 2022.
76
Senior management team
Frank Gao
Chief Operating Officer
Joined 2012
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 Kyriacou
Chief Commercial Officer &
Managing Director Consumer Goods
David Trustrum
Joined 2019
Commercial Director
Joined 1991
Harry joined Strix in 2019 and is responsible for
all our Commercial activities, Sales, Marketing,
Category Development and Strategic Planning
across our three product categories of Kettle
Controls, Water and Appliances. He is also
responsible for the Consumer Goods
business globally.
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
Neil Geoghegan
Engineering Director
Joined 1992
Director of Group Finance
Joined 2021
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.
Neil joined Strix in 2021 and directs the
Finance teams across all Group locations,
having worked at a number of multinational
companies in the UK, the US and elsewhere.
Neil directs the Finance team, responsible
for the accuracy of financial reporting and
financial controls.
Matt Thomas
Divisional Operations &
Project Delivery Director
Joined 2003
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.
Emma Cox
Group Human Resources Director
Joined 2020
Ceyda Gibson
Chief Technology Officer
Joined 2021
Riccardo Dolcetta
General Manager – LAICA
Joined 2021
Emma joined Strix in 2020 and drives the
Group’s human capital strategy focusing
mainly on attraction, recruitment, retention
and development of talented people across
the organisation. This is to ensure the Group
has the right people, doing the right things
to get the right results.
Ceyda joined Strix in 2021 and is responsible
for driving the Company’s growth through
innovation and technology solutions. She
has over 20 years of international experience
within Quality, Engineering, Regulatory
Compliance, Program Management and
Mergers & Acquisitions.
Riccardo manages the LAICA team with overall
leadership over the organisation’s operations
and strategic direction. He has responsibility
over the commercial, research and
development manufacturing, and engineering
operations. He brought with him a wealth
of experience, having held leading roles as
General Manager or CEO of companies such
as DWS and Ceccato and Salvagnini.
77
Strategic reportGovernance reportFinancial statements
Strix Group Plc Annual report and accounts 2022
Board activities
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
Chaired by
Mark Kirkland
The Audit Committee
report which lays out
the duties and
responsibilities of the
Audit Committee can
be read on page 86.
Nomination
Committee
Chaired by
Gary Lamb
The Nomination
Committee is
responsible for leading
the process for all
potential appointments
to the Board and making
recommendations to
the Board accordingly.
The Nomination
Committee report can
be found on page 87.
Remuneration
Committee
Chaired by
Gary Lamb
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 88 to 95.
ESG
Committee
Chaired by
Richard Sells
The ESG Committee was
put in place to ensure
that the Board exercises
sustainable governance
by staying focused and
proactive in supporting
sustainability initiatives
across the Group.
Refer to pages 58
and 59 for our report on
ESG and sustainable
investing.
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 Officers and Operational Board assist
the CEO in implementing the strategy as approved by the Board.
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 background that align to promote the
Group’s long-term sustainable success.
The Board has determined that all its
Non-Executive members are independent.
• Ensuring there is effective
• Reviewing Group financial information
communication between the Board,
management, shareholders and the
Group’s wider stakeholders, while
promoting a culture of openness
and constructive debate.
and ensuring there are effective
systems of governance, risk
management and internal controls.
• Ensuring there is regular, open and
constructive dialogue with shareholders.
• Ensuring Directors receive accurate,
timely and clear information.
• Overseeing the annual Board evaluation
and addressing any subsequent
actions.
Our CEO
• Day-to-day management of the Group.
• Responsible for commercial operational,
risk and strategy of the Group.
• Promoting the highest standards
• Developing and implementing strategic
of corporate governance.
• Ensuring the views of stakeholders
are taken into account when making
decisions.
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.
direction.
• Ensuring effective communication and
information to the Board and Chairman.
• Representing the Group to external
stakeholders.
• Responsible for the oversight of
the following key functions: Finance,
Engineering, Design, Marketing,
Supply Chain, Human Resources,
Ethics, Responsibility, Strategy and
Global Commercial.
Annually, the Board conducts an appraisal
evaluation of its own performance whereby
each Director will complete questionnaires
which are reviewed and feedback
discussed.
Our Chairman
• Chairing Board meetings, Nomination
and Remuneration Committee meetings
and the AGM, and setting the Board
agenda.
78
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.
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.
“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
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 103 to 142, 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 2024;
• the current financial position of the
Group, including its cash and cash
equivalents balances of £30.4m;
• the availability of further funding by way
of 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, despite
a dip in sales due to the global COVID-19
pandemic and the conflict in Ukraine; 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.
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Strategic reportGovernance reportFinancial statements 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 75 of the annual
report provide the information necessary
for shareholders to assess the Company’s
performance, business model and strategy.
The Board is aiming to achieve a mix of
institutional, retail and management
shareholders which is appropriate for Strix.
As at 8 March 2023, the Board considers
that the Company’s shareholders can be
categorised in the following manner:
2.3%
8.5%
0.8% 0.3%
1.5%
3.3%
83.2%
Domestic Institutions
Foreign Institutions
Employees, etc.
Domestic Brokers
Private Stakeholders
Corporate Stakeholders
Foreign Brokers
Strix Group Plc Annual report and accounts 2022
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.
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 2022. This was completed by
the use of questionnaires completed by
all Directors. The results of this exercise
were reviewed and feedback discussed in
full by the Board. Feedback was given by
the independent Non-Executive Directors
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 2022.
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 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 in the next
column and elsewhere in this statement.
80
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
‘Operational 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
which 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.
Substantial shareholding
As at 8 March 2023, 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
GAM London
Hargreaves Lansdown Asset Mgt
Premier Miton Investors
AEGON Asset Mgt
Close Asset Mgt
Rathbone Investment Mgt
Number
218,714,349
3.1%
Shares held
% holding
24,339,501
11,112,473
9,136,191
8,989,619
8,059,176
7,048,611
6,861,709
11.13
5.08
4.18
4.11
3.68
3.22
3.14
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 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.
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.
• 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 2022
For 2022 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 2022 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 2023 are set out on page 88.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
QCA principles and Strix
Governance principle
Strix response
Further reading
Disclosure of the Group’s
strategic pillars is included on
pages 28 to 31. This includes
a description of each part
of the strategy, together
with progress for the financial
year being reported on, the
associated risks of not carrying
out this part of the strategy,
and an outlook of actions for
the following year.
Strix’s value chain is explained
on pages 22 to 23 and the way in
which we deliver value for our
stakeholders is set out on
pages 48 to 49.
Strix’s risk management
framework is set out on
page 50. This sets out our
understanding and assessment
of the risks which the Group
faces in executing its chosen
strategy.
Our RNS notifications and
annual reports are available
on the Group’s website as
well as the results of the AGM
voting outcomes, showing
the percentage of votes for,
against and withheld for
each resolution.
Establish a strategy
and business model
which promote
long-term value
for shareholders
Strix has developed a clear strategy to act as a guiding
principle and to articulate how long-term value will be generated
for shareholders. The Board regularly updates and refines this
strategy to ensure it remains fit for purpose given the changes
in the environment in which the Group operates.
Strix has an established risk management framework which
assists the Board in achieving an appropriate balance between
risk and reward. In turn, this allows the Board to take actions to
mitigate unnecessary or undesirable risk and to safeguard the
long-term viability of the Group.
Strix also has significant resources available to create medium
to long-term value. These include:
• a market-leading share of the global kettle controls market;
• significant, long-standing customer relationships;
• a large portfolio of intellectual property; and
• a strong pipeline of new products.
The Executive Directors engage regularly with investors and
analysts at meetings and investor roadshows in order to
articulate the Group’s strategy, business model and performance,
and ensure they are clearly understood. This also provides the
Executive Directors with an opportunity to understand what
shareholders’ expectations and needs are.
This two-way dialogue is key to driving the Group forward and
informs the decision-making process that the Board undertakes
on key matters.
The Board also seeks to engage with shareholders throughout
the year, in particular via our regular reporting of performance
and key news announcements via RNS.
All members of the Board attend the Annual General Meeting and
the Board encourages shareholders to attend this meeting and
ask questions (where possible). In the event of a substantial vote
(more than 20%) against any particular resolution, the Board will
engage with shareholders in order to determine the appropriate
course of action.
The Board also engages with both institutional and private
shareholders to understand the needs and expectations of
both of these groups.
Seek to understand
and meet shareholder
needs and expectations
82
Governance principle
Strix response
Further reading
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 48 to 49
for further information on why
and how we engage with these
stakeholders.
Strix’s key stakeholder groups are:
• Shareholders (both institutional and private);
• Employees;
• Customers;
• Suppliers;
• Communities; and
• Environment.
As part of our HR strategy, management are committed to
making positive changes in the Group which will increase our
engagement index score.
Strix also holds regular discussions with its customers and
suppliers, many of whom have worked with Strix for decades,
which helps us to understand the importance of these
relationships in order to continue to succeed.
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
Maintain the Board
as a well-functioning,
balanced team led by
the Chair
Strix has in place a risk management framework which assists
the Board in identifying, assessing, and mitigating the risks
faced by the Group to an acceptable level. This is reviewed on
an ongoing basis and actions are taken as needed to reduce
the risks to an acceptable level, if required.
The risk management
framework is set out on
pages 50 to 56.
The Board includes three Non-Executive Directors, being
Gary Lamb, Mark Kirkland and Richard Sells.
In the Board’s judgement, Gary Lamb, Mark Kirkland and
Richard Sells are independent although it is noted in this regard
that Gary Lamb also chairs the Board, having been appointed on
a permanent basis on 6 March 2018.
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.
See page 78 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 96 and 97.
Ensure that between
them the Directors
have the necessary
up-to-date experience,
skills and capabilities
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.
A short biography of each
Director is provided on
pages 76 and 77.
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.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
QCA principles and Strix continued
Governance principle
Strix response
Evaluate Board
performance based
on clear and relevant
objectives, seeking
continuous
improvement
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
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; and
If their role is as an independent Director, that they remain independent.
•
All senior nominations, including nominations to the Board of Directors,
require approval by the Nominations Committee. The Company’s Articles
of Association require that one-third of the Directors must stand for
re-election by shareholders annually in rotation and that any new Director
appointed during the year must stand for election at the AGM immediately
following their appointment. Raudres Wong retired by rotation at the 2022
AGM and was duly re-elected.
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 a defined policy in place for anti-slavery and anti-human
trafficking, which is reviewed at least annually. Strix respects the dignity,
rights and aspirations of all people, and is committed to supporting and
promoting international and local laws which prohibit modern-day slavery
and human trafficking.
Strix has zero tolerance of violations of this policy, which applies equally to
all of our directors, officers, employees, apprentices, volunteers, agents,
consultants and other representatives. Strix also has in place policies
for anti-corruption and anti-bribery, in order to detect and prevent any
instances of corruption or fraud. This includes a whistleblowing facility
to report any suspected instances of corruption or bribery to one of
the Directors.
The Board normally meets not fewer than six 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 following matters are reserved for consideration and
approval by the Board:
• Strategy and management;
• Structure and capital;
• Financial reporting and controls;
•
• Contracts;
• Communication;
• Board membership and other appointments;
• Remuneration;
• Delegation of authority;
• Corporate governance matters; and
• Policies.
Internal controls;
84
Further reading
Further details
on corporate
governance are
provided on page 79.
Further details
on corporate social
responsibility,
including ethical
conduct and
sustainable
investing, is
provided on
pages 58 to 70.
Further details
on the Group’s
corporate
governance
including details
of the Audit,
Nomination and
Remuneration
Committees
are provided on
pages 78 to 98.
Governance principle
Strix response
Maintain governance
structures and
processes that are
fit for purpose and
support good decision
making by the Board
continued
Any Director is free to challenge any proposals put to a Board meeting,
and decisions are made democratically, after discussion. Senior members
of staff attend certain Board meetings by invitation to discuss matters in
relation to their specific areas of expertise.
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.
The Board is supported by the Audit, Nomination, Remuneration and
Environmental, Social and Governance (ESG) Committees in discharging
its responsibilities. The Board also has access to an Executive Assistant
to help the Directors fulfil their duties. Each of the Committees has access
to such resources, information and advice as it deems necessary, at the
cost of the Group, to enable the Committee to discharge its duties.
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.
Further reading
Further details
on the Group’s
corporate
governance
including details
of the Audit,
Nomination and
Remuneration
Committees
are provided on
pages 78 to 98.
Communicate how the
Company is governed
and is performing by
maintaining a dialogue
with shareholders
and other relevant
stakeholders
Strix communicates principally with its shareholders and other
stakeholders 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;
and
internal staff meetings or through written/email communication.
•
Refer to
pages 48 to 49.
The Board receives regular updates on the views of shareholders through
briefings and reports from the CEO, CFO and the Group’s joint brokers.
The Group communicates with institutional investors frequently through
briefings with management.
In addition, analysts’ notes and brokers’ briefings are reviewed to achieve
a wide understanding of investors’ views. Site visits are hosted with key
analysts in order to demonstrate the work being undertaken by the Group
to execute its strategy.
The Group completes an employee engagement survey on a biennial basis
and has created an ‘Employee Engagement Forum’, staffed by a diverse
mix of staff within the business, to act as the focal point between the
management team and the employees. This open dialogue continues to
result in positive changes being introduced. The outcome of the Employee
Engagement Survey is a KPI on which all of the management team’s
performance is assessed for over the two-year period.
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Audit Committee report
The Committee confirms that for the year ended 31 December 2022,
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, Gary Lamb and Richard Sells served as members
of the Committee for the year ended 31 December 2022.
Richard Sells was appointed by the Board to be a member of the
Audit Committee in December 2022.
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, including virtually, and through discussions
via multiple emails.
All Committee members are independent Non-Executive
Directors and the Board is satisfied that all members are suitably
qualified as they all have significant, recent and relevant
experience. Mark Kirkland and Gary Lamb have both held Chief
Financial Officer roles for significant periods and are considered
suitably qualified in accounting and auditing. Richard Sells brings
valuable experience and expertise to the Committee, having
served for over 30 years in both executive and non-executive roles.
The CEO, CFO and other senior finance staff 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.
“We are proud to confirm that
the Committee has continued
to uphold high compliance
standards and has carried out
its duties throughout the year
effectively.”
Mark Kirkland
Audit Committee Chair
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 processes or, if such a function does not exist, evaluate
the need to establish one;
• make recommendations to the Board, which can then be put to
shareholders for their approval in general meetings, 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 UK and Isle of Man professional
and regulatory requirements;
• develop and implement policies 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 2022 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.
86
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:
• consideration of the acquisition of Billi and the impact thereof
to the Group’s operations and financial reporting process;
• consideration of the funding options for the acquisition of Billi
including refinancing of the Group’s banking facilities and also
the equity raise through the stock exchange market;
• the assessment of exceptional costs recognised by the Group,
including review of the underlying accounting policy;
• the impact of the cyber incident that occurred in early 2022
(and the subsequent ongoing monitoring and review of the
IT environment);
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.
• the change of useful lives of currently existing tangible and
intangible assets within the Group;
• appropriateness of the use of the going concern assumption;
• determination of the functional currency for Strix (China)
Limited and Strix Guangzhou Limited;
• management’s impairment assessment of goodwill and other
intangible assets with an indefinite useful life; and
• review of the financial statements and disclosures thereof.
Mark Kirkland
Chairman of the Audit Committee
Nomination Committee Membership
The members of the Nomination Committee, all of whom
held office since listing and to the date of this report, are:
• Gary Lamb (Chairman)
• Mark Kirkland
There was no requirement for the Nomination Committee to meet
during the year.
Gary Lamb
Chairman of the Nominations Committee
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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 2022 and explains how we intend to implement the policy
for 2023. The key elements of our approach are summarised below.
The Remuneration Committee
The members of the Remuneration Committee during 2022 were
Gary Lamb (Chairman), Mark Kirkland and Richard Sells. All three
are independent Non-Executive Directors. Gary Lamb is also
Chairman of the Board.
The Committee held three meetings during 2022. All members of
the Committee attended all meetings.
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 2022
During the year under review, the remuneration policy was
implemented in line with the plans set out in last year’s Directors’
remuneration report. This included the addition of an ESG measure
linked to carbon emission reductions in the annual bonus scheme.
Due to Group performance during 2022, the Committee
determined that no bonuses would be payable for the year.
Similarly, the Long-Term Incentive Plan (‘LTIP’) award granted in
2020 lapsed following the assessment of EPS performance over
the three-year period ended 31 December 2022. The minimum level
of performance required for threshold vesting was not achieved.
A new grant under the LTIP was made in April 2022. The
performance conditions for this award were disclosed in last
year’s report. A total of 85% of the award is based on EPS growth
(with a requirement of 7% per annum growth for maximum vesting
of this element), with the remaining 15% based on a reduction in
energy intensity over the three-year performance period.
Proposed application of the remuneration policy
in 2023
The Committee has considered the appropriate levels of salary
increase for the Executive Directors for 2023 in the context of the
pay review for the wider workforce, Group performance in 2022,
the broader economic environment and other relevant factors. The
Committee has agreed an increase of 3% for the Directors, which
is considered appropriate in the context of an average increase of
4% for the wider workforce. The Committee also supported the
Company’s decision to make additional cash payments to certain
88
staff to help address the challenges posed by high levels of
inflation. These payments were deliberately targeted at lower-paid
employees as these colleagues have been most impacted by
increases to the cost of living.
The maximum annual bonus opportunity for the Executive
Directors will remain at 100% of basic salary for 2023. Any bonus
payment will be based on challenging financial targets linked to
profit (45% of the total bonus), cash (40%) and the achievement
of specific ESG targets (15%). The exact targets are currently
considered commercially confidential but will be disclosed in
next year’s Directors’ remuneration report.
The Committee continues to believe that long-term equity is an
effective way to incentivise long-term performance. As a result,
we intend to make a new LTIP grant in 2023. Awards will again be
made to the Executive Directors at a level of 100% of basic salary,
and vesting will remain subject to the achievement of performance
conditions linked to EPS growth (for 85% of the award) and
reductions in energy intensity (for 15% of the award) over the
following three-year period. For the EPS element, the target range
will be growth of between 3% per annum (for threshold vesting)
and 7% per annum (for maximum vesting). For the energy intensity
element, there will be a requirement for a reduction in energy
intensity of at least 5% per annum over the performance period.
Taken together, the EPS and energy reduction targets represent
a balanced mix of performance conditions which reflect key
priorities for the business over the coming years. The targets
are considered appropriately stretching by the Committee.
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
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Directors’ remuneration report continued
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
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 94.
Element
Base salary
Purpose and
link to strategy
Operation
To recruit and
reward high-calibre
executives for the
role required.
Benefits
To provide market-
competitive benefits
and to help ensure
the overall wellbeing
of employees.
Maximum opportunity
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 a variety of factors, including
market practice elsewhere.
Reviewed annually by the Committee,
taking account of Group performance,
individual performance, changes in
responsibility and levels of increase
for the workforce generally.
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; and
• other ancillary benefits, including
relocation expenses (as required).
Executive Directors are also entitled
to 25 days’ leave per annum.
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.
90
Operation
Maximum opportunity
Annual bonus payments are based on
performance against challenging targets
linked to the Group’s strategic objectives.
Maximum annual opportunity of 100%
of basic salary.
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.
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.
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 need to recognise, for example,
change in responsibility and/or time
commitments.
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Directors’ remuneration report continued
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 has an Isle of Man contract. Raudres Wong has 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 2022
Executive Directors
Mark Bartlett
Raudres Wong
Non-Executive Directors
Gary Lamb
Mark Kirkland
Richard Sells
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Salary
and fees
£’000
Benefits1
£’000
Pension
£’000
Annual
bonus
£’000
Long-term
incentives2
£’000
365
347
314
312
80
80
48
48
48
47
70
64
24
23
–
–
–
–
–
–
37
43
33
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
155
–
153
–
–
–
–
–
–
Total
£’000
472
609
371
517
80
80
48
48
48
47
1 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. The benefits number for 2021 has been restated to reflect the correct figure. Raudres Wong’s benefits include participation in the Company’s
medical insurance and permanent health insurance schemes.
2 The numbers in this column for 2021 reflect the value of the 2019 LTIP award based on the vesting level of the award (34%), and the share price on the exercise date,
21 April 2022 (£2.09), plus an amount reflecting the value of dividend equivalents. This award was based on performance measured up to 31 December 2021.
92
Annual bonus scheme outcome for 2022
Executive Directors had the opportunity to earn a maximum annual bonus for 2022 of 100% of basic salary. The bonus was based
on performance conditions linked to the achievement of challenging targets linked to profit after tax (45%), cash (40%) and the
achievement of net zero carbon emissions (Scope 1 & 2) (15%). Payment of the bonus required minimum PAT for 2022 of £32.8m.
Given a PAT outturn for the year of £23.0m, the Committee determined that no bonuses should be paid.
LTIP award granted in 2022
Executive Directors and other senior employees were granted an award of shares under the LTIP in April 2022. For the Executive
Directors, the award was granted at a level of 100% of basic salary. Vesting of 85% 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 2024.
The specific targets were disclosed in last year’s report and are also set out below.
Annual EPS growth to be achieved in the period ending 31 December 2024
Level of vesting
Below 3%
3%
Between 3% and 7%
7% and above
0%
25%
Vesting on a straight-line basis between 25% and 100%
100%
The remaining 15% is based on Strix achieving a reduction in energy intensity of at least 5% per annum over the three-year performance
period.
The awards are subject to malus and clawback provisions, as set out in the remuneration policy on page 88.
Performance under the LTIP award granted in 2020
Executive Directors and other members of senior management were granted an award of shares under the LTIP in April 2020. Vesting of
the awards was based on EPS performance measured over the period to 31 December 2022. The specific EPS targets, and the
performance achieved, are set out below.
Annual EPS growth to be achieved in the period ended 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 Committee assessed the level of performance achieved and determined that the targets had not been met, taking into account
the EPS of 10.9p reported for the year ended 31 December 2022. Given negative EPS growth over the performance period, the LTIP award
lapsed in full.
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 at the top of the next page.
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Directors’ remuneration report continued
Executive
Scheme
Grant date
Number of
LTIP shares at
31 December
2021
Exercise
price
Granted
during
year
Vested
during year
Lapsed
during
year
Number of
shares at
31 December
2022
End of
performance
period
Vesting date1
Mark
Bartlett
Raudres
Wong
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP
20 May 2019
6 Apr 2020
21 Apr 2021
21 Apr 2022
20 May 2019
6 Apr 2020
21 Apr 2021
21 Apr 2022
nil
nil
nil
nil
nil
nil
nil
nil
198,398
197,138
123,995
–
–
–
– 148,760
66,860 131,538
–
–
–
–
–
–
– 31 Dec 2021
1 Apr 20222
197,138 31 Dec 2022 1 Apr 20233
123,995 31 Dec 2023 1 Apr 2024
148,760 31 Dec 2024 1 Apr 2025
196,267
196,060
107,593
–
–
–
–
131,262
66,142 130,125
–
–
–
–
–
–
1 Apr 20222
196,267 31 Dec 2021
196,060 31 Dec 2022 1 Apr 20233
107,593 31 Dec 2023 1 Apr 2024
131,262 31 Dec 2024 1 Apr 2025
1 These LTIP options cannot be exercised until the Remuneration Committee determines the performance conditions have been met.
2 As explained in the 2021 Directors’ Remuneration Report, the performance conditions for this award were formally tested after the 2021 year end and it was deemed
that this award had vested at a level of 34%. The options were exercised on 21 April 2022.
3 As explained above, the performance conditions for this award were formally tested after the 2022 year end and it was deemed that the award had lapsed in full.
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. All Directors participated in the October 2022 placing:
Director
Mark Bartlett
Raudres Wong2
Gary Lamb3
Mark Kirkland
Richard Sells
Beneficially owned at
31 December 2022
Shareholding guideline achieved at
31 December 2022 as % of 2022 basic salary1
2,625,030
1,977,374
468,313
63,613
14,421
>200%
>150%
n/a
n/a
n/a
1 Based on the year-end share price of 82p.
2 Shares held in the name of her husband, Wing Yip Fong.
3 Shares registered in the name of GEL Holdings Limited, a company controlled by Gary Lamb.
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Application of the remuneration policy for 2023
Fixed remuneration
The salaries for the Executive Directors have been increased by 3% with effect from 1 April 2023, as set out in the table below.
This compares with the budgeted salary increase of 4% for the wider workforce.
Director
Mark Bartlett
Raudres Wong
Salary with effect
from 1 April 2023
£378,216
£328,025
% increase
3%
3%
The level of pension provision for both of the Executive Directors will remain at 10% of basic salary.
Annual bonus scheme
The annual bonus scheme will continue to incentivise the delivery of performance over the short term. The scheme will primarily be
based on the achievement of challenging financial targets linked to profit (45% of the total bonus), cash (40%) and the achievement
of specific ESG targets (15%).
We intend to disclose the specific bonus targets in the 2023 Directors’ Remuneration Report, alongside details of performance against
the targets.
The maximum annual bonus opportunity for the Directors for 2023 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.
A total of 85% of the award will be subject to the achievement of performance conditions based on the Group’s EPS performance over
the three financial years ending 31 December 2025. The performance targets to be used are set out below:
Annual EPS growth to be achieved in the period ending 31 December 2025
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 believes that the above targets are appropriately stretching when taking into account expectations of the Group’s
performance over the forthcoming three-year period.
The remaining 15% of the award will again be based on requiring a reduction in Group energy intensity over the three-year period.
For this element of the award to vest, there must be a minimum reduction in energy intensity of at least 5% per annum over the 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 88.
Chairman and Non-Executive Directors
The fees payable to the Board Chairman and the other Non-Executive Directors were last reviewed in detail in 2019 and would normally
have been subject to a further review three years later, in 2022. However, the Board agreed that such a review is not appropriate at the
current time. Fees for 2023 will, therefore, rise only by the 3% increase which has been agreed for the Executive Directors (see above)
and which is lower than the average salary increase across the Group more broadly.
As a result of this increase, Gary Lamb will receive a fee of £82,400 and Mark Kirkland and Richard Sells will each receive a fee of £49,440
for 2023. Later in the year, the Board will reconsider whether a more detailed review of the fees for the Board Chairman and the other
Non-Executive Directors is required. Any changes subsequently agreed will be disclosed in next year’s Directors’ Remuneration Report.
This report was approved by the Board of Directors and signed on its behalf by:
Gary Lamb
Chairman of the Remuneration Committee
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Directors’ report
For the year ended 31 December 2022
The Directors present their report together with the audited consolidated financial statements of Strix Group Plc (‘the Company’)
for the year ended 31 December 2022.
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, dispensers and appliances involving water heating and temperature control,
steam management and water filtration.
Business review and future developments
The Group has remained resilient during 2022 despite the global economic challenges that have persisted during the year. During the
year, the Board of Directors made a number of key strategic decisions to drive the Group forward. The following were some of the key
strategic decisions made by the Board during 2022:
• The Group acquired 100% of the share capital of Billi Australia Pty Ltd, Billi New Zealand Ltd, and certain assets and liabilities through a
newly acquired company, Billi UK Ltd (all together referred to as ‘Billi’) as detailed in note 14. The consideration for the acquisition was
all paid in cash. Billi is a leading brand supplying premium filtered and non-filtered instant boiling, chilled and sparkling water systems
with manufacturing operations based in Australia. This acquisition is aligned to the Group’s growth plans for its water and appliances
categories and will provide an entry into the high growth and strategically important hot tap market.
• The Group secured further financing to facilitate the acquisition of Billi (detailed above) as an add-on to its existing revolving credit
facility (note 19). This has resulted in an increase in the Group’s net debt position to £87.4m (2021: £51.2m), excluding the impact of
IFRS 16 lease liabilities.
Results and dividends
The Group recorded revenue in the year of £106.9m (2021: £119.4m) and a profit after tax of £16.9m (2021: £20.6m).
The Directors recommend a final dividend for the year of 3.25p per share which, if approved at the Annual General Meeting (‘AGM’)
on 4 July 2023, will be payable on 11 August 2023 to shareholders who are on the register at 30 June 2023 and the shares will trade
ex-dividend from 29 June 2023. Together with the interim dividend paid during the year of 2.75p per share, this will result in a total
dividend of 6.00p per share.
Financial risk management
Information relating to the financial risks of the Group have been included within note 22, ‘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
In accordance with emerging best practice for companies whose shares are admitted to trading on AIM, the Company has decided to
propose all Directors for re-election at the AGM on 4 July 2023. The Directors who held office during the year and as at 31 December 2022
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
96
2022
2021
2,625,030
63,613
468,313
1,977,374
14,421
2,410,878
8,710
250,000
1,802,075
–
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 2022
is shown below:
Mark Bartlett
Raudres Wong
2022
2021
272,755
238,855
519,531
499,920
The market price of the Company’s shares at the end of the financial year was 82.0p (2021: 303.5p) and the range of market prices in the
year was between 74.7p and 306.0p (2021: between 220.0p and 385.0p).
No changes took place in the interests of Directors between 31 December 2022 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 of 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
28 March 2023
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Statement of Directors’ responsibilities in respect of the financial statements
For the year ended 31 December 2022
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 IFRSs as adopted by the European Union, have been followed 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.
The Directors are responsible for the maintenance and integrity of the Group’s website. Legislation in the Isle of Man governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Raudres Wong
Director
28 March 2023
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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 2022 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 statement of financial position as at 31 December 2022;
• 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 statement of cash flows 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.
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Independent auditor’s report continued
to the members of Strix Group Plc
Key audit matters
Revenue Recognition
How our audit addressed the key audit matters
Our audit work included, but was not restricted to:
• Obtaining a detailed understanding of the standard flows
Refer to notes 2 and 7 to the financial statements.
of transactions for each material revenue stream;
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
• 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;
• 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;
• Testing a sample of licensing income recognised in the year
•
to underlying contracts;
Issuing instructions to and directing the work of the component
auditors in Italy and Australia in relation to the audit of revenue;
and,
• Holding regular meetings with and reviewing the working papers
of the component auditors to ensure that sufficient appropriate
audit evidence was obtained over the risk of fraud in revenue
recognition.
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
Refer to notes 2 and 14 to the financial statements.
accounting process;
The Group, through its subsidiaries, Strix UK Limited and newly
incorporated Strix Australia Pty Limited, acquired 100% of the
share capital of Billi Australia Pty Ltd, Billi New Zealand Ltd, and
certain assets and liabilities through a newly acquired company
Billi UK Ltd (all together referred to as ‘Billi’) on 30 November 2022.
The consideration for the acquisition was £38.9m in cash.
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 and liabilities assumed,
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 Billi acquisition. The Group has
elected to continue to record the acquisition related entries as
provisional as at 31 December 2022 as permitted under IFRS 3.
• 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; 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.
100
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.
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.
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.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Independent auditor’s report continued
to the members of Strix Group Plc
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 16 January 2023 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
Chartered Accountants
Douglas, Isle of Man
28 March 2023
102
Consolidated statement of comprehensive income
For the year ended 31 December 2022
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 losses from joint ventures
Other operating income
Operating profit
Analysed as:
Adjusted EBITDA1
Amortisation
Depreciation
Exceptional items
Operating profit
Finance costs
Finance income
Profit before taxation
Income tax credit/(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
Earnings per share (pence)
Basic
Diluted
Note
7
6
6
11
12
6
8
9
10
10
2022
£’000
106,920
(65,395)
(847)
2021
£’000
119,410
(71,986)
(3,578)
(66,242)
(75,564)
40,678
(10,824)
(5,570)
(5,101)
(10,671)
(18)
751
19,916
32,128
(2,063)
(4,201)
(5,948)
19,916
(3,925)
59
16,050
805
16,855
1,495
18,350
16,790
65
16,855
18,324
26
18,350
8.0
7.9
43,846
(9,168)
(5,107)
(6,363)
(11,470)
(50)
562
23,720
40,540
(2,310)
(4,569)
(9,941)
23,720
(2,226)
13
21,507
(860)
20,647
(1,693)
18,954
20,599
48
20,647
18,736
218
18,954
10.0
9.8
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 107 to 142 form part of these consolidated financial statements.
103
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Consolidated statement of financial position
As at 31 December 2022
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments in joint ventures
Net investments in finance leases
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current income tax receivable
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital and share premium
Share-based payment reserve
Retained earnings
Non-controlling interests
Total equity
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Contingent consideration
Current income tax liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Deferred tax liability
Borrowings
Contingent consideration
Post-employment benefits
Total non-current liabilities
Total liabilities
Total equity and liabilities
Note
2022
£’000
2021
£’000
11
12
15
16
16
17
24
23
18
19
26
14
18
26
9
19
14
5(c)
73,374
47,364
19
16
120,773
27,702
29,791
497
30,443
88,433
30,468
42,763
28
15
73,274
20,022
25,511
–
19,670
65,203
209,206
138,477
23,861
202
12,479
707
37,249
29,963
14,734
1,069
7,532
444
53,742
2,819
11,387
103,092
–
917
118,215
171,957
209,206
13,139
2,039
10,146
681
26,005
25,886
1,064
773
6,082
1,631
35,436
2,598
2,303
69,782
1,382
971
77,036
112,472
138,477
The consolidated financial statements on pages 103 to 142 were approved and authorised for issue by the Board of Directors on
28 March 2023 and were signed on its behalf by:
Mark Bartlett
Director
Raudres Wong
Director
104
Consolidated statement of changes in equity
for the year ended 31 December 2022
Balance at 1 January 2021
Profit for the year
Other comprehensive income/(expenses)
Total comprehensive income for the year
Dividends paid (note 25)
Dividends paid to non-controlling interests
Transfers between reserves (note 23)
Share-based payment transactions (note 23)
Total transactions with owners recognised
directly in equity
Other transactions recognised directly
in equity (note 23)
Share capital
and share
premium
£’000
Share based
payment
reserve
£’000
13,130
1,913
–
–
–
–
–
9
–
9
–
–
–
–
–
–
(1,249)
1,549
(174)
Retained
(deficit)/
earnings
£’000
6,290
20,599
(1,863)
18,736
(16,510)
253
1,240
–
Total Equity
attributable to
owners
£’000
Non-controlling
interests
£’000
21,333
20,599
(1,863)
18,736
(16,510)
253
–
1,549
716
48
170
218
–
(253)
–
–
Total
Equity
£’000
22,049
20,647
(1,693)
18,954
(16,510)
–
–
1,549
300
(15,017)
(14,708)
(253)
(14,961)
Balance at 1 January 2022
13,139
2,039
Profit for the year
Other comprehensive income/(expenses)
Total comprehensive income for the year
–
–
–
Dividends paid (note 25)
Share-based payment transactions (note 23)
Transfers between reserves (note 23)
Issue of shares (note 24)
Transaction costs (note 24)
–
–
7
13,000
(2,285)
–
–
–
–
(491)
(1,210)
–
–
137
10,146
16,790
1,534
18,324
(17,300)
–
1,203
–
–
(37)
25,324
16,790
1,534
18,324
(17,300)
(491)
–
13,000
(2,285)
Total transactions with equity holders
recognised directly in equity
Other transactions recognised directly
in equity (note 23)
Balance at 31 December 2022
10,722
(1,701)
(16,097)
(7,076)
–
23,861
(136)
202
106
(30)
–
681
65
(39)
26
–
–
–
–
–
–
–
(37)
26,005
16,855
1,495
18,350
(17,300)
(491)
–
13,000
(2,285)
(7,076)
(30)
The notes on pages 107 to 142 form part of these consolidated financial statements.
12,479
36,542
707
37,249
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
Consolidated statement of cash flows
for the year ended 31 December 2022
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 LAICA S.p.A (deferred consideration)
Purchase of Billi, net of cash acquired
Purchase of other 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, net of issuance transaction costs
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 107 to 142 form part of these consolidated financial statements.
Note
27
11
14
11
19
19
19
26
24
25
2022
£’000
2021
£’000
24,567
(1,204)
23,363
(4,749)
(3,326)
(1,671)
(37,658)
(484)
–
59
(47,829)
46,487
–
(3,263)
(833)
10,715
(17,300)
–
35,806
11,340
19,670
(567)
30,443
24,206
(1,916)
22,290
(12,049)
(3,609)
(1,605)
–
(1,487)
1,750
13
(16,987)
24,000
(5,820)
(1,170)
(1,562)
–
(16,510)
(254)
(1,316)
3,987
15,446
237
19,670
106
Notes to the consolidated financial statements
for the year ended 31 December 2022
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 registered number 014963V. 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, water filtration and small household
appliances for personal health and wellness.
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 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.
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 the Directors have considered the following:
• the strong historic trading performance of the Group;
• budgets and cash flow forecasts for the period to December 2024;
• the current financial position of the Group, including its cash and cash equivalents balances of £30.4m;
• the availability of further funding by way of 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, despite a dip in sales
due to the global COVID-19 pandemic and the conflict in Ukraine.; and
• that there has been minimal 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 consolidated
financial statements.
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 2022 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 2022 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.
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.
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Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
2. PRINCIPAL ACCOUNTING POLICIES (continued)
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. Consolidation of subsidiaries ceases from
the date that control also 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 statement of financial position, 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 statement of financial position.
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.
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 retrospectively to reflect the new information obtained about facts and circumstances that existed as at the
acquisition date, and if known, would have affected the measurement of assets and liabilities recognised at that 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.
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 Pound
Sterling, which is Strix Group Plc’s functional and presentation currency.
108
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 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.
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 statement of
financial position presented are translated at the closing rate at the date of that statement of financial position, 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 other comprehensive income. Such translation differences are reclassified to
profit or loss only on disposal or partial disposal of the foreign operation.
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. 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.
At the beginning of the year, Management reassessed the economic useful lives of certain property, plant and equipment. The
reassessment was performed in light of the Group’s historical usage of the assets, condition of the assets at the time of the assessment,
technical and or commercial factors as well as legal and contractual terms where applicable. Based on the reassessment, the assets’
useful lives were extended to appropriately reflect Management’s expected use of the assets. The revision to the accounting estimate
has been effected prospectively as from the beginning of the current year. Note 12 details the financial impact of the change in the useful
lives of these assets.
The revised useful lives are shown below:
Asset class
• Plant and machinery
• Fixtures, fittings and equipment
• Motor vehicles
• Production tools
• Right-of-use assets
• Land and buildings
Previous estimate
3-10 years
2-5 years
3-5 years
1-5 years
2-8 years (based on the lease term)
50 years
Revised estimate
3-25 years
2-10 years
unchanged
1-10 years
unchanged
unchanged
The asset class ‘Point-of-use dispensers’ were acquired on acquisition of the Billi entities (notes 12 and 14) and are depreciated over
4–10 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.
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2. PRINCIPAL ACCOUNTING POLICIES (continued)
Property, plant and equipment (continued)
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.
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. Refer to note 6(a) for details.
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 brands are recognised on acquisitions 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.
At the beginning of the year, Management reassessed the economic useful lives of certain intangible assets. The reassessment was
performed in light of the Group’s historical realisation of the economic benefits from the intangible assets, technical and or commercial
factors as well as legal and contractual terms where applicable. Based on the reassessment, the assets’ useful lives were extended
to appropriately reflect Management’s expected realisation of the economic benefits from the intangible assets. The revision to the
accounting estimate has been effected prospectively as from the beginning of the current year. Note 11 details the financial impact
of the change in the useful lives of these assets.
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Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 The revised useful lives are shown below:
Asset class
• Capitalised development costs
•
Intellectual property
• Technology and software
• Customer relationships
• Brands
• Goodwill
Previous estimate
2-5 years
Lower of useful or legal life
2-10 years
10-13 years
Indefinite useful life
Indefinite useful life
Revised estimate
2-10 years
unchanged
unchanged
unchanged
unchanged
unchanged
Brands have an indefinite useful life because there is no foreseeable limit on the period during which the Group expects to consume the
future economic benefits embodied in the asset.
The LAICA brand has been trading since inception and has been a well recognisable brand amongst the Group’s trading partners, and the
Group does not foresee a time limit by when these partnerships will cease.
The Billi brand is a well-established and competitive brand, being one of the top two brands in the Australian and New Zealand industries,
and well recognised in the United Kingdom among residential and commercial clientele. The Group does not foresee a time limit by when
this market presence will cease.
Amortisation is charged to the consolidated statement of comprehensive income on a straight-line basis over the estimated useful
lives above.
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.
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.
Intangible assets with indefinite useful lives impairment assessments
Intangible assets with indefinite useful lives arising on business combinations are allocated to the relevant CGU and are treated as the
foreign operation’s assets.
Impairment reviews are performed at least annually, or more frequently if there are indicators that goodwill might be impaired. The Group
has assessed the carrying values of goodwill and brands to determine whether any amounts have been impaired. The recoverable
amount of the underlying CGU was based on a value in use model where future cashflows were discounted using a weighted average
cost of capital as the discount rate with terminal values calculated applying a long-term growth rate. In determining the recoverable
amount, the Group considered several sources of estimation uncertainty and made certain assumptions or judgements about the
future. Future events could cause the assumptions used in the impairment review to change with an impact on the results and net
position of the group.
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2. PRINCIPAL ACCOUNTING POLICIES (continued)
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 a right-of-use (‘ROU’) 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.
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, and where substantially all the risks and rewards associated with the
leased asset remain with the Group, 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.
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Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 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.
Borrowing costs
Borrowing costs or arrangement fees, including option-type arrangements, are recognised initially at fair value. Borrowing costs
including option-type borrowing arrangements are subsequently measured at amortised cost. The establishment of such option-type
arrangements are recognised as a ‘right to borrow’ asset, and together with other borrowing costs or arrangement fees are amortised
over the period of the facilities to which the fees relate, and are deducted from the carrying value of the financial liability.
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.
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.
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2. PRINCIPAL ACCOUNTING POLICIES (continued)
Employee benefits (continued)
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 statement of financial position in respect of the defined benefit scheme is the present
value of the defined benefit obligation at the statement of financial position 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 in the consolidated statement of financial position 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.
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.
114
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 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 weighted average cost formula. Cost comprises expenditure which has been incurred in the normal course of business in
bringing the products to their present location and condition including applicable supplier rebates, 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.
Supplier rebates
The Group enters into agreements with suppliers whereby volume-related allowances and various other fees and discounts are received
in connection with the purchase of goods from those suppliers. Most of the income received from suppliers relates to commercially
agreed rebates based on historic sales volumes.
Rebates are recognised when earned by the Group, which occurs when all obligations conditional for earning income have been
discharged, and the income can be measured reliably based on the terms of the contract. The income is recognised as a credit within
cost of sales.
Where the income earned relates to inventories which are held by the Group at the year end, the income is included within the cost
of those inventories, and recognised in cost of sales upon sale of those inventories. Amounts due relating to supplier rebates are
recognised within trade and other receivables.
Revenue
The Group primarily recognises revenue from the sale of goods and services to its customers as well as from licensing arrangements.
The transaction price is based on the sales agreement with the customer. Revenue is reported net of sales taxes, discounts, rebates
and after eliminating intra-group sales. Rebates are based on a certain volume of purchases by a customer within a given period and
are recognised on an expected value approach.
Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and is
recognised when the performance obligations have been fulfilled. The Group recognises revenue from the sale of goods and services
either at a point in time or over time, based on the nature of the contract terms. The Group recognises revenue from three main categories
namely kettle safety controls, water and appliances.
Kettle safety controls
The performance obligation is the delivery of the goods to customers, and revenue is recognised on dispatch, otherwise it 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
Original Equipment Manufacturer (‘OEM’) or wholesaler. All of the amounts recognised as revenue are based on contracts with customers.
No element of financing is deemed present because the sales are made under normal credit terms, which is consistent with market price.
Payment terms for the majority of customers in this category are to pay cash in advance of the goods being delivered. The Group
recognises the advance payments within trade and other payables on the consolidated statement of financial position 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.
Water and appliances
The Group recognises revenue from the following major sources under water and appliances categories:
• Sale of components and devices involving water heating and temperature control, steam management and water filtration;
• Sale of Point-of-use (POU) water and coffee machines;
• Rental of Point-of-use (POU) dispensers and coffee machines;
• Servicing of Point-of-use (POU) units; and
• Sale of consumables
Sale of components, devices and consumables
Sales are either ‘direct’ to the end user customers or ‘indirect’ to wholesale and retail distributors. Revenue from the supply of goods is
recognised once control of the goods has been transferred to the customer, being when goods have been delivered to a customer site
or in the case of indirect sales, when the goods have been delivered to the wholesale distributor.
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2. PRINCIPAL ACCOUNTING POLICIES (continued)
Revenue (continued)
Rental of dispensers
Rental income is made up of revenue from the supply of goods where the Group is lessor in an operating lease and is recognised over
time, with the transaction price allocated to this service released on a straight-line basis over the period of the lease. Included in the
transaction price for the rental of dispensers, in some contracts, is the installation of those dispensers. The rental and installation
elements of the contract are considered to be one deliverable, as they are highly interrelated, and therefore there is no allocation
of a portion of the transaction price to the installation.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred
in negotiating and arranging an operating lease (except where immaterial) are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term. Commissions on new contracts are capitalised and depreciated over one and
a half times the initial lease term.
Rental agreements run for a minimum period of twelve months and typically for three to five years. Some rental agreements have no
fixed end date and may be cancelled by either party subject to a minimum notice period or early termination penalty. The average useful
economic life for a POU water device is approximately four to ten years whilst refurbishment can extend the life of some devices to eleven
years or more. For this reason, existing rental agreements are not judged to transfer substantially all of the risks and rewards of ownership
to the lessee.
Combined rental and service contracts
The Group has in place some contracts that cover both the rental and servicing and maintenance of dispensers. The transaction price
is allocated to each performance obligation to reflect the amount of consideration to which the Group is entitled to, in exchange for
transferring the promised goods or services to the customer. The Group allocates combined rental and service income to the separate
rental and service categories based on a percentage allocation method, which is calculated for each business unit. The percentage
allocation, which is recalculated periodically, is based on the transaction price being allocated to each performance obligation in
proportion to its stand-alone selling price.
Servicing of POU units
Sale of services are recognised proportionally over the duration of the service period, provided a right to consideration has
been established.
Deferred revenue
Revenue recognised in the consolidated statement of comprehensive income but not yet invoiced is held in the statement of financial
position within ‘Trade receivables. Revenue invoiced but not yet recognised in the consolidated statement of comprehensive income
is held on the consolidated statement of financial position within ‘Payments in advance from customers’.
Licensing income
The Group holds a substantial portfolio of issued and registered intellectual property rights relating to certain aspects of its hardware
devices, accessories, goods, software and services. This includes patents, designs, copyrights, trademarks and other forms of
intellectual property rights registered in the UK and various foreign countries.
From time to time, the Group enters into term-based and exclusive licensing arrangements with some of its customers in respect of its
intellectual property. Revenue from the licensing contracts is variable and is recognised at the amount to which the Group expects to be
entitled when control of the intellectual property is transferred to its customers. Control is generally transferred when the Company has
a present right to payment and title and the significant risks and rewards of ownership of the intellectual property, products or services
are transferred to its customers.
The licensing income is recognised at a point in time or over time based on the following assessment. Where the licensing arrangement
is a distinct performance obligation, Management assess whether the licensing contract gives the customer either:
• the right to access the Group’s intellectual property as it exists throughout the licence period; or
• right to use the Group’s intellectual property as it exists at the point in time at which the licence is granted.
Revenue from a licencing contract which is considered to provide a right to the customer to access the Group’s intellectual property
as it exists throughout the licence period is recognised over time, as and when the related performance obligation is satisfied.
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Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 A licensing contract gives the customer the right to access the Group’s intellectual property as it exists throughout the license period
when all the following are met:
• the contract requires, or the customer reasonably expects, that we will undertake activities that significantly affect the intellectual
property to which the customer has rights; and
• the rights granted by the licence directly expose the customer to any positive or negative effects of the entity’s activities identified
above; and
• those activities do not result in the transfer of a good or a service to the customer as those activities occur.
Revenue relating to a licensing contract which does not meet the above criteria is recognised at a point in time, which is usually the point
at which the licence is granted to the customer but not before the beginning of the period during which the customer is able to use and
benefit from the licence.
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 dispensers, taps, 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.
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 statement of financial
position as a capitalised development cost.
Finance income
Finance income comprises bank interest receivable on funds invested. Finance income is recognised using the effective interest
rate method.
Finance costs
Finance costs directly attributable to the acquisition or construction of a qualifying asset are capitalised. Qualifying assets are those
that necessarily take a substantial period of time to prepare for their intended use. All other borrowing cost are recognised in the
consolidated statement of income in finance costs. Finance costs comprise interest charges on lease liabilities, interest on borrowings,
the unwind of discounts on the present value of liabilities, and finance charges relating to letters of credit. Finance costs are determined
using the effective interest rate method.
Income tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
statement of financial position 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.
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.
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.
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.
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2. PRINCIPAL ACCOUNTING POLICIES (continued)
Income tax (continued)
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.
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 arising on the issue of shares 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.
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 initially recognised as deferred income liabilities when received, and subsequently recognised as other income in
profit or loss on a straight-line basis over the useful life of the related asset. 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 alternative performance measures
In the reporting of financial information, the Directors have adopted Earnings before Interest, Taxation, Depreciation and Amortisation
(‘EBITDA’) and adjusted EBITDA when assessing the operating performance of the Group. Exceptional items are excluded from EBITDA to
calculate adjusted EBITDA. The Directors primarily use the adjusted EBITDA measure when making decisions about the Group’s activities.
EBITDA and adjusted EBITDA are non-GAAP measures and may not be calculated in the same way and hence may not be directly
comparable to those reported by other entities. In determining the adjusting items, the following criteria is also considered:
•
if a certain event (defined as exceptional) had not occurred, the costs would not have been incurred or the income would not have
been earned; or
• the costs attributable to the event have been identified using a reliable methodology of splitting amounts on an ongoing basis; and
economic resources have been expended or diverted in order to directly contribute towards the related activities; and
• costs have been incurred that cannot be recovered due to the event and the related activities.
An item is treated as exceptional if it relates to certain costs or income that derive from events or transactions that fall within the normal
activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded from the Group’s Alternative Performance
Measures (APMs) by virtue of their nature or size, in order to better reflect management’s view of the underlying trends and operating
performance of the Group that is more comparable over time.
118
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
In the application of the Group’s accounting policies, which are described in note 2, the directors are required to make judgements (other
than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions
about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these
estimates. There is no change in applying accounting policies for critical accounting estimates and judgements from the prior year.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical judgements in applying the entity’s accounting policies
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 Pound 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 and LAICA Iberia Distribution S.L. which both have a Euro functional currency, and LAICA International Corp.; Taiwan LAICA
Corp. which both have a Taiwan Dollar functional currency, Billi Australia (Pty) Ltd which has an Australian Dollar functional currency
and Billi New Zealand Ltd which has a New Zealand 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.
Alternative performance measures (APMs) – Exceptional items
Management and the Board consider the quantitative and qualitative factors in classifying items as exceptional and exercise judgement in
determining the adjustments to apply to IFRS measures. This assessment covers the nature of the item, cause of occurrence, frequency,
predictability of occurrence of the item or related event, and the scale of the impact of that item on reported performance. Reversals of
previous exceptional items are assessed based on the same criteria.
An analysis of the exceptional items included in the consolidated statement of comprehensive income are disclosed in note 6(b).
Critical estimates in applying the entity’s accounting policies
Acquisition of Billi entities – fair value measurements
A determination of the provisional fair value of the assets acquired and liabilities assumed in the acquisition, and the useful lives of
intangible assets and property, plant and equipment acquired is required. This exercise is a substantial undertaking which requires the
use of various valuation techniques. Future events could cause underlying assumptions to change which could have a significant impact
on the Group’s financial results. Refer to note 14 for further details regarding the acquisition, including estimations used in determining
the provisional fair values for the acquired assets and liabilities assumed.
Impairment of indefinite lived intangible assets and goodwill
Determining whether goodwill and intangible assets with indefinite lives are impaired requires an estimation of the value in use or the fair
value less costs to sell of the cash generating unit (CGU) to which the goodwill or intangible asset has been allocated. The value in use
calculation requires management’s estimation of the future cash flows expected to arise from the CGU. Refer to note 11 for the sensitivity
analysis of the assumptions used in the impairment analysis of goodwill and intangible assets with indefinite lives.
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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, dispensers, jugs and filters, primarily to Original Equipment Manufacturers (‘OEMs’), commercial and residential
customers based in China, Italy, Australia, New Zealand and the United Kingdom.
The Board of Directors has identified three reportable segments from a product perspective, namely: kettle controls, water category
and appliances. 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.
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
Revenue
Cost of sales
Gross profit
Reported gross profit
2022
(£’000)
Kettle controls
Water category
Appliances
Total
68,243
(41,108)
27,135
24,135
(16,303)
14,542
(8,831)
106,920
(66,242)
7,832
5,711
40,678
Reported gross profit
2021
(£’000)
Kettle controls
Water category
Appliances
Total
85,117
(52,880)
32,237
21,404
(14,617)
6,787
12,889
(8,067)
4,822
119,410
(75,564)
43,846
Adjusted gross profit*
2022
(£’000)
Kettle controls
Water category
Appliances
Total
68,243
(40,306)
24,135
(16,277)
14,542
(8,812)
106,920
(65,395)
27,937
7,858
5,730
41,525
Adjusted gross profit*
2021
(£’000)
Kettle controls
Water category
Appliances
Total
85,117
(49,455)
35,662
21,404
(14,500)
6,904
12,889
(8,031)
4,858
119,410
(71,986)
47,424
* Adjusted gross profit excludes exceptional items as detailed in note 6(b). Adjusted results are non-GAAP metrics used by management and are not an IFRS disclosure.
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.
120
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022
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 and Italy.
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, Italy, Australia, New Zealand and the United Kingdom where the Group’s principle
subsidiaries are 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
2022
£’000
2021
£’000
11,354
3,151
14,505
62,020
44,213
106,233
9,756
2,742
12,498
20,712
40,021
60,733
120,738
73,231
Major customers
In 2022, there were two major customers that individually accounted for at least 10% of total revenues (2021: two customers).
The revenues relating to these customers in 2022 were £13,587,000 and £9,538,000 (2021: £15,390,000 and £12,133,000).
5. EMPLOYEES AND DIRECTORS
(a) Employee benefit expenses
Wages and salaries
Defined contribution pension cost (note 5(c)(i))
Employee benefit expenses
Share-based payment transactions (note 23)
Total employee benefit expenses
2022
£’000
27,500
782
28,282
2021
£’000
28,167
684
28,851
(491)
27,791
1,549
30,400
(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 Operational 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
2022
£’000
2,069
181
74
(348)
1,976
2021
£’000
2,025
149
–
311
2,485
There are no defined benefit schemes for key management. Pension costs under defined contribution schemes are included in the
post-employment benefits disclosed above.
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5. EMPLOYEES AND DIRECTORS (continued)
(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 £782,000 (2021: £684,000).
(ii) LAICA S.p.A. Termination Indemnity
LAICA S.p.A. 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.
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 re-proportioned 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 2022:
Liability as at 1 January
Current service cost for the period
Exchange differences on translation of foreign operations
Liability as at 31 December
The key actuarial assumptions used in arriving at these figures include:
• annual discount rate of 3.77% (2021: 0.87%);
• annual price inflation of 2.3% (2021: 1.6%);
• annual TFR increase of 3.2% (2021: 2.7%);
• demographic assumptions based on INPS published data.
2022
£’000
897
(113)
48
832
2021
£’000
898
58
(59)
897
The remainder of the post-employment benefit liability of £85,000 (2021: £74,000) as at 31 December 2022 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 (note 5(a))
Depreciation charges
Amortisation and impairment charges
Exceptional items (see below)
Foreign exchange losses
2022
£’000
28,282
4,201
2,063
5,948
188
2021
£’000
28,851
4,569
2,310
9,941
186
Research and development expenditure totalled £4,888,000 (2021: £5,324,000), and £3,326,000 (2021: £3,609,000) of development
costs have been capitalised during the year.
122
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 (b) Exceptional items
The main categories of exceptional items relate to major exceptional events or projects impacting the Group’s underlying operations,
namely strategic projects relating to mergers and acquisitions with particular reference to the acquisition of the Billi entities in the
current year and LAICA in 2020 and their continued integration into the Group, disaster recovery costs due to a cyber incident, COVID-19
related costs and related impacts on Group operations, reorganisation and restructuring projects, and the Group’s share incentive
initiatives for conditional share options and awards issued to certain employees of the Group (refer to note 23 for further details).
Exceptional items have been broken down as follows:
Exceptional items in cost of sales:
Assets written off due to relocation to new factory
Other costs relating to relocation to new factory
COVID-19 related costs
Reorganisation costs
Exceptional items in administrative expenses:
Share-based payments
Other costs relating to relocation to new factory
Mergers and acquisitions related costs
COVID-19 related costs
Disaster recovery
Reorganisation and restructuring costs
2022
£’000
–
–
485
362
847
(491)
–
3,992
673
377
550
5,101
2021
£’000
1,679
1,596
226
77
3,578
1,549
1,140
2,749
819
–
106
6,363
Total exceptional items
5,948
9,941
Also included as an exceptional item are finance costs of £180,000 (2021: £780,000) relating to the discount unwinding of the present
values of contingent liabilities recognised per note 14. These costs have been included within finance costs in note 8.
Mergers and acquisitions exceptional costs relate mainly to the accrual of consultancy and other acquisition related exceptional costs
amounting to £2,703,000 from the acquisition of the Billi entities in November 2022 as well as an accrual of £2,481,000 for 2022 as part of
a supplemental consulting arrangement with the vendor shareholders of LAICA relating to compensation for post-combination services
as these services are rendered to LAICA in 2022 (refer to note 14). Within the exceptional costs for mergers and acquisitions is a reversal
of £1,267,000 relating to the estimated contingent consideration which was recognised at acquisition date when the Group acquired
LAICA. The adjustment is due to a revision of the estimate in relation to the performance earn-out. LAICA’s performance in the current
year was lower than originally expected at the date of acquisition. Other mergers and acquisitions costs totalling £75,000 relate to legal
and consultancy fees incurred on integration of LAICA into the Group.
COVID-19 related exceptional costs are those items that are incremental and directly attributable to COVID-19. These are costs that
would not have been incurred if the COVID-19 pandemic had not occurred and are not expected to recur once the effects have largely
receded. In the current year, these mainly consisted of incremental labour costs as a result of the COVID lockdowns mainly in China
where the Group has significant operations. Other COVID-19 exceptional costs included mothballing of certain activities as resources
were reorganised in response to the impact of COVID-19 on the Group’s operations, additional cleaning and sanitation costs incurred
as part of combined infection control or prevention efforts, and exceptional freight and carriage costs paid to fill shortages of supplies,
materials and products directly caused by impacts of COVID-19 on shipping and freight supply chains.
Disaster recovery costs relate to staff and non-staff costs incurred in response to a cyber incident which occurred in February 2022.
The Group engaged external specialists, took precautionary measures with its IT infrastructure and implemented its business continuity
plan. The systems were successfully restored and are fully operational. The Group continues to monitor its exposure.
Reorganisation and restructuring costs include costs to re-qualify an alternative supplier due to a natural disaster in the form of flooding
at one of the Group’s suppliers as well as redundancy and relocation costs which arose during the year.
In the prior year, costs relating to the new Chinese factory project were made up of assets written off with a net book value of £1.7m
which could not be relocated as they would not be fit for the manufacturing operations at the new factory, and other relocation costs
totalling £2.7m relating to disassembly of machinery at the old factory, moving costs, reassembly of machinery at the new factory, labour
costs incurred for the relocation, set-up and cleaning costs, logistics services, approvals and inspections, consultancy and security
services, and other costs directly related to the relocation.
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Strix Group Plc Annual report and accounts 2022
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
Total revenue
2022
£’000
245
8
3
5
261
2021
£’000
201
8
56
4
269
2022
£’000
68,243
24,135
14,542
106,920
2021
£’000
85,117
21,404
12,889
119,410
Included within the revenue from the appliances category is licensing fee income relating to intellectual property amounting to
£1,442,000 (2021: nil).
8. FINANCE COSTS
Letter of credit charges
Right-of-use lease interest
Discount unwinding of present value of contingent consideration
Borrowing costs
Total finance costs
2022
£’000
94
92
180
3,559
3,925
2021
£’000
95
105
780
1,246
2,226
The discount unwinding of present values relating to the contingent consideration recognised on acquisition of LAICA S.p.A.
(see note 14). The amount has been included in finance costs as an exceptional item (refer to note 6).
9. TAXATION
Analysis of (credit)/charge in year
Current tax (overseas) and deferred tax
Current tax on overseas profits for the year
Adjustments to prior years’ overseas tax provisions
Movement in deferred tax assets and liabilities
Total tax (credit)/charge
2022
£’000
491
(1,323)
27
(805)
2021
£’000
1,115
–
(255)
860
Overseas tax relates primarily to tax payable by the Group’s subsidiaries in China, Australia, New Zealand, Italy and the UK.
In relation to the prior year’s tax provision adjustments, during 2015, the Group’s Chinese subsidiary took a prudent measure to make tax
provisions following a benchmarking assessment by the Chinese tax authorities relating to the contract processing model adopted by
the businesses in the years 2009 to 2014. The potential additional liabilities for 2015 to 2018 of £876,000 had been included within the
current tax liability balance up to the end of the prior year. Based on the independent recommendations, and as a more acceptable tax
model by the Chinese tax authorities, the Chinese subsidiary converted to an import processing model in 2019, which is also largely in
use by the majority of the OEMs in China. As result of this, the subsidiary obtained a tax certificate from the in-charge tax bureau in
the current year which confirmed that all tax matters in the subsidiary have been settled. As such the prior year tax provisions were
therefore released in the current year as they were no longer required.
124
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 In addition, withholdings taxes of £447,000 relating to anticipated dividends payable by the Chinese subsidiary to its immediate holding
company in the Isle of Man had been accrued in previous years. In light of the recent developments in the Group’s operations in China,
Management decided in the current year to invest more into the new China factory in terms of capital expenditure, thereby keeping
profits within the Chinese subsidiaries. As a result of this decision, the anticipated dividends were no longer payable and the relating
tax provisions were consequently released.
Reconciliation of the movement in deferred tax liabilities has been presented below:
Deferred tax liabilities:
Deferred tax liability on 1 January
Deferred tax liabilities recognised on acquisition of Billi (note 14)
Reversal of deferred tax on utilisation of temporary differences
Deferred tax liability as at 31 December
2022
£’000
2,303
9,011
73
11,387
2021
£’000
2,558
–
(255)
2,303
The balance comprises temporary differences attributable to intangible assets recognised on acquisition of LAICA in FY 2020 and Billi
in the current year.
The Group has an immaterial deferred tax asset. Refer to note 16 for details.
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 different to the standard rate of income tax in the Isle of Man of 0% (2021: 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% (2021: 0%)
Impact of higher overseas tax rate
Adjustments in relation to prior years’ overseas tax provisions
Total taxation (credit)/charge
2022
£’000
16,050
–
518
(1,323)
(805)
2021
£’000
21,507
–
860
–
860
The Group is subject to Isle of Man income tax on profits at the rate of 0% (2021: 0%), UK income tax on profits at a rate of 19% (2021:19%),
Chinese income tax on profits at the rate of 25% (2021: 25%), and Italian income tax on profits at a rate of 27.9% (2021: 27.9%). Following
the acquisition of the Billi entities, the group is subject to Australian income tax on profits at the rate of 30% and New Zealand income tax on
profits at the rate of 28%.
10. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is based on the following data.
Earnings (£’000)
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
2022
2021
16,790
20,599
209,911
2,585
206,271
3,381
Weighted average number of shares for the purposes of diluted earnings per share
212,496
209,652
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 share (1)
Diluted adjusted earnings per ordinary share(1)
8.0
7.9
10.9
10.8
10.0
9.8
15.2
14.9
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10. EARNINGS PER SHARE (continued)
The calculation of basic and diluted adjusted earnings per share is based on the following data:
Profit for the year
Add back exceptional items included in (note 6(b)):
Cost of sales
Administrative expenses
Finance costs
Adjusted earnings(1)
2022
£’000
2021
£’000
16,790
20,599
847
5,101
180
22,918
3,578
6,363
780
31,320
1 Adjusted earnings and adjusted earnings per share exclude exceptional items, which include share-based payment transactions, COVID-19-related costs reorganisation costs
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.
11. INTANGIBLE ASSETS
At 1 January
Cost
Accumulated amortisation and
impairment
Net book value
Period ended 31 December
Additions
Acquisition of Billi (note 14)
Transfers
Disposals (cost)
Disposals (accumulated
amortisation)
Amortisation charge
Exchange differences
Closing net book value
At 31 December
Cost
Accumulated amortisation and
impairment
Net book value
Development
costs
£’000
Software
£’000
Intellectual
Property
£’000
Customer
relationships
£’000
Brands
£’000
Goodwill
£’000
Intangible
assets under
construction
£’000
2022
15,971
4,186
1,128
2,232
6,174
8,736
(6,565)
(1,153)
(111)
(196)
–
–
9,406
3,033
1,017
2,036
6,174
8,736
3,326
3
–
(20)
1
(1,103)
99
11,712
178
4
–
–
–
(605)
25
272
–
–
–
–
(145)
82
–
15,912
–
–
–
(210)
108
–
13,283
–
–
–
–
328
–
10,885
–
–
–
–
446
2,635
1,226
17,846
19,785
20,067
103
73,374
19,428
4,452
1,482
18,549
19,785
20,067
103
83,866
(7,716)
(1,817)
(256)
(703)
–
–
–
(10,492)
11,712
2,635
1,226
17,846
19,785
20,067
103
73,374
Total
£’000
38,493
(8,025)
30,468
3,810
40,087
–
(20)
1
(2,063)
1,091
66
–
66
34
–
–
–
–
–
3
Amortisation charges have been treated as an expense, and are allocated to cost of sales (£1,707,000), distribution costs £NIL and
administrative expenses (£356,000) in the consolidated statement of comprehensive income.
The Group’s goodwill, customer relationships and brands predominantly relate to those arising on the acquisition of LAICA which was
completed in 2020, and also on the acquisition of the Billi entities (including pre-existing intangibles assets), which were acquired in
the current year (note 14). The goodwill, customer relationships and brands recognised on acquisition of the Billi entities have been
measured on a provisional basis to allow for any potential adjustments resulting from any new information obtained within one year
of the date of acquisition about facts and circumstances that existed at the date of acquisition.
126
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 In the current year, the carrying values of existing goodwill and brands have been subject to an annual impairment test, and the
recoverable amounts assessed at each cash generating unit (CGU) level determined on the basis of value-in-use calculations over
a five-year forecast period. The key assumptions applied in the value-in-use calculations for LAICA are a discount rate of 12%, variable
trading margins, variable revenue growth rates as well as the terminal growth rate of 2%. Based on these calculations, there is sufficient
headroom over the carrying values of goodwill and brands hence no impairment has been recognised in the current year and there were
no reversals of prior year impairments during the year (2021: same). An impairment test of the intangibles arising on the acquisition of
the Billi entities has not been performed given that they were acquired on 30 November 2022.
The results of the Group impairment tests are dependent upon estimates and judgements, particularly in relation to the key assumptions
described above. Sensitivity analysis to a reasonable and possible change in the most sensitive assumption, being the discount rate,
was undertaken. An increase of 1% would decrease the headroom by circa £3.4m but still leave headroom over the carrying values of
the goodwill and brands (circa £23.4m).
As highlighted in note 2, Management revised the useful lives of certain assets at the beginning of the year. As part of this assessment,
the useful lives of capitalised development costs were reassessed and extended with the resulting impact being a decrease in amortisation
of £694,000 for the full year 2022. Going forward, the amortisation charges will be in line with the revised useful life.
2021
Development
costs
£’000
Software
£’000
Intellectual
Property
£’000
Customer
relationships
£’000
Brands
£’000
Goodwill
£’000
12,346
3,286
834
2,406
6,643
9,906
(4,999)
7,347
(710)
2,576
(64)
770
–
–
–
2,406
6,643
9,906
Intangible
assets under
construction
£’000
–
–
–
Total
£’000
35,421
(5,773)
29,648
3,609
950
299
–
238
5,096
–
–
(29)
–
(1,563)
42
9,406
–
–
(8)
8
(495)
2
3,033
–
–
–
–
–
(205)
(165)
–
–
(1)
–
(47)
(4)
1,017
2,036
–
–
–
–
–
–
(469)
6,174
(487)
–
–
–
–
(683)
8,736
15,971
4,186
1,128
2,232
6,174
8,736
(6,565)
9,406
(1,153)
3,033
(111)
1,017
(196)
2,036
–
–
6,174
8,736
–
(172)
–
–
–
–
(487)
(172)
(38)
8
(2,310)
(1,277)
66
30,468
66
–
66
38,493
(8,025)
30,468
At 1 January
Cost
Accumulated amortisation and
impairment
Net book value
Period ended 31 December
Additions
Acquisition of LAICA S.p.A.
(note 14)
Transfers
Disposals (cost)
Disposals (accumulated
amortisation)
Amortisation charge
Exchange differences
Closing net book value
At 31 December
Cost
Accumulated amortisation and
impairment
Net book value
Amortisation charges were treated as an expense, and allocated to cost of sales (£2,029,000), distribution costs £NIL and administrative
expenses (£281,000) in the consolidated statement of comprehensive income.
£172,000 worth of intangible assets under construction were reclassified to property plant and equipment.
127
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
12. PROPERTY, PLANT AND EQUIPMENT
Plant &
machinery
£’000
Fixtures,
fittings &
equipment
£’000
Motor
vehicles
£’000
Production
tools
£’000
Land &
Buildings
£’000
Right-of-use
assets
(note 26)
£’000
Point of use
dispensers
£’000
Assets under
construction
£’000
Total
£’000
2022
At 1 January
Cost
Accumulated depreciation
26,093
(13,812)
5,833
(3,084)
218
12,829
(185) (10,564)
20,541
(529)
6,450
(3,203)
Net book value
12,281
2,749
33
2,265
20,012
3,247
–
–
–
2,176
–
74,140
(31,377)
2,176
42,763
Period ended
31 December
Additions
Acquisition of Billi (note 14)
Transfers
Disposals (cost)
Disposals (accumulated
depreciation)
Depreciation charge
Exchange differences
2,904
419
–
(90)
53
(1,402)
48
1,503
211
–
(237)
157
(883)
20
23
17
–
(1)
1
(23)
(6)
864
–
–
–
125
–
–
–
–
(484)
(1)
–
(426)
1
505
1,237
–
(698)
125
(920)
129
–
1,386
–
–
–
(63)
36
(78)
144
–
–
–
–
5
5,846
3,414
–
(1,026)
336
(4,201)
232
Closing net book value
14,213
3,520
44
2,644
19,712
3,625
1,359
2,247
47,364
At 31 December
Cost
Accumulated depreciation
29,988
(15,775)
8,124
(4,604)
375
13,693
(331) (11,049)
20,690
(978)
8,678
(5,053)
Net book value
14,213
3,520
44
2,644
19,712
3,625
1,430
(71)
1,359
2,247
–
85,225
(37,861)
2,247
47,364
Point-of-use dispensers were acquired as part of the acquisition of Billi. Refer to note 14.
Depreciation charges are allocated to cost of sales (£3,149,000), distribution costs (£184,000) and administrative expenses (£868,000)
in the consolidated statement of comprehensive income. In addition, borrowing costs of £nil (2021: £306,000), calculated at prevailing
rates of the revolving credit facility (note 19), have been capitalised to land and buildings in the year.
As highlighted in note 2, Management revised the useful lives of certain assets at the beginning of the year. As part of this assessment,
the useful lives of fixtures and fittings, plant and machinery and production tools were reassessed and extended with the resulting
impact being a decrease in depreciation of £1,098,000 for the full year 2022. Going forward, the depreciation charges will be in line
with the revised useful lives.
128
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 2021
Fixtures,
fittings &
equipment
£’000
Motor
vehicles
£’000
Production
tools
£’000
Land &
Buildings
£’000
Right-of-use
assets
(note 26)
£’000
Assets under
construction
£’000
Total
£’000
At 1 January
Cost
Accumulated depreciation
Net book value
Period ended 31 December
Additions
Transfers
Disposals (cost)
Disposals (accumulated
depreciation)
Depreciation charge
Exchange differences
Plant &
machinery
£’000
22,750
(12,686)
10,064
86
5,257
(7,021)
5,720
(1,776)
(49)
4,367
(3,428)
939
2,474
–
(1,238)
1,140
(568)
2
Closing net book value
12,281
2,749
137
(95)
42
20
–
(5)
4
(27)
(1)
33
14,013
(12,140)
3,737
(129)
6,533
(2,605)
1,873
3,608
3,928
16,751
–
16,751
68,288
(31,083)
37,205
1
1,183
(901)
833
(724)
–
–
18,386
(2,297)
322
(78)
71
1,474
–
(1,469)
772
(1,396)
(62)
10,086
(24,654)
–
–
–
(7)
14,141
172
(12,931)
8,791
(4,569)
(46)
2,265
20,012
3,247
2,176
42,763
At 31 December
Cost
Accumulated depreciation
26,093
(13,812)
5,833
(3,084)
218
(185)
12,829
(10,564)
20,541
(529)
6,450
(3,203)
Net book value
12,281
2,749
33
2,265
20,012
3,247
2,176
–
2,176
74,140
(31,377)
42,763
Depreciation charges in the prior year were allocated to cost of sales (£3,821,000), distribution costs (£90,000), and administrative
expenses (£658,000) in the consolidated statement of comprehensive income.
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
Sula Limited
Strix Limited
Strix Guangzhou Limited
Strix (UK) Limited
Strix Hong Kong Limited
Strix (China) Limited
HaloSource Water Purification
Technology (Shanghai) Co. Limited
Strix (US), Inc.
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
Strix Australia Pty Limited
Billi UK Limited
Billi Australia Pty Limited
Billi New Zealand Limited
Billi R&D Limited
Billi Financial Services Limited
Holding company
Manufacture and sale of products
Dormant company
Holding company and group’s sale
and distribution centre
Sale and distribution of products
Manufacture and sale of products
Country of
incorporation
IOM
IOM
China
United Kingdom
Hong Kong
China
% of ordinary
shares held by
the Group
%
100
100
100
100
100
100
Nature of
shareholding
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Manufacture and sales of products
Research and development, sales,
and distribution of products
Manufacture and sales of products
Sale and distribution of products
Sale and distribution of products
Sale and distribution of products
China
US
Italy
Spain
Taiwan
Taiwan
Sale and distribution of products
Holding and licensing of trademarks
Holding company
Manufacture and sale of products
Manufacture and sale of products
Manufacture and sale of products
Research and development
Financial Services
China
Hong Kong
Australia
United Kingdom
Australia
New Zealand
Australia
Australia
100
Subsidiary
100
100
100
67
67
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
45 Joint venture
45 Joint venture
Subsidiary
100
Subsidiary
100
Subsidiary
100
Subsidiary
100
Subsidiary
100
Subsidiary
100
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Strix Group Plc Annual report and accounts 2022
13. PRINCIPAL SUBSIDIARY UNDERTAKINGS AND JOINT ARRANGEMENTS OF THE GROUP (continued)
Incorporation of Strix Australia Pty Limited
On 26 October 2022, Strix Australia Limited was incorporated in Australia and is a wholly-owned subsidiary of Strix UK Limited.
The entity was incorporated for the purpose of effecting the acquisition of Billi.
Acquisition of Billi
On 30 November 2022, the Group completed the acquisition of the entire issued share capital of Billi Australia Pty Ltd, Billi New Zealand
Ltd and Billi UK Ltd (together ‘Billi’). 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 cash and cash equivalents
included within the consolidated financial statements to which these restrictions apply is £3,568,000 (2021: £3,681,000). 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. ACQUISITIONS
Acquisitions made in the current year
On 30 November 2022, the Group, through its subsidiaries, Strix UK Limited and newly incorporated Strix Australia Pty Limited, acquired
100% of the share capital of Billi Australia Pty Ltd, Billi New Zealand Ltd, and certain assets and liabilities through a newly acquired company,
Billi UK Ltd, (all together referred to as ‘Billi’). The total consideration for the acquisition was £38,912,000 paid in cash.
Goodwill of £10,885,000 has been recognised as the difference between the purchase consideration of £38,912,000 and the provisional
fair values of the net assets acquired of £28,027,000. The goodwill is attributable to new growth opportunities, workforce and synergies
of the combined business operations, and it is not expected to be deductible for tax purposes.
The objective of the acquisition is to accelerate the Group’s growth plans for its water and appliances categories and provide an entry
into the high growth and strategically important hot tap market. Billi is a leading brand supplying premium filtered and non-filtered instant
boiling, chilled and sparkling water systems with manufacturing operations based in Australia. The acquisition has been accounted for as
a business combination in accordance with IFRS 3. As at the date of these financial statements, the initial accounting for the acquisition
of Billi is preliminary, and fair values amounts are provisional, given the short period of time since the date the acquisition was completed.
Fair values approximate gross contractual amounts. A reassessment will be performed within twelve months post acquisition and final
amounts of fair values of assets and liabilities acquired will be reported in the next reporting period.
Certain intangible assets were recognised on acquisition including brands and customer relationships. The fair values of the intangible
assets were calculated using an income approach (multi-period excess earnings method for customer related assets and the royalty
relief method for brands) based on a discounted cash flow model that reflects the expected future income they will generate. The
discount rates applied to customer related assets were based on the assessed Weighted Average Cost of Capital for each territory
of operations ranging from 14.9% to 16.2%, with a 1% premium applied to brands, and a growth rate based on forecasted revenues.
The economic life of brands and customer relationships applied within the model range from 11 years to 15 years. A deferred tax liability
has been recognised on the fair value adjustments to intangible assets at the applicable corporate tax rates.
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.
Net cash flows on acquisition of the business are as follows:
Consideration transferred on acquisition
less: Net cash acquired with business
2022
£’000
38,912
(1,254)
37,658
Billi contributed revenues of £2.7m and an adjusted profit after tax of £0.6m to the Group for the period from 30 November 2022 to
31 December 2022. If Billi had been acquired at the beginning of the year its contribution to revenues and adjusted profits after tax would
have been £38.8m and £5.6m respectively.
130
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022
The following table details the Sterling equivalent provisional fair values of assets and liabilities as acquired:
Non-current assets
Intangible assets
Property, plant and equipment
Other non-current assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Lease liabilities more than 1 year
Deferred tax liability
Total non-current liabilities
Current liabilities
Trade and other payables
Lease liabilities more than 1 year
Total current liabilities
Total liabilities
Net assets acquired
Book values
£’000
FV Adjustments
£’000
Fair values
£’000
5,993
3,609
130
9,732
6,461
9,152
1,254
16,867
26,599
900
654
1,554
10,919
380
11,299
12,853
13,746
23,209
(195)
–
23,014
(376)
–
–
(376)
22,638
–
8,357
8,357
–
–
–
8,357
14,281
29,202
3,414
130
32,746
6,085
9,152
1,254
16,491
49,237
900
9,011
9,911
10,919
380
11,299
21,210
28,027
Values have been translated at the closing exchange rates as at the acquisition date.
Acquisitions in prior years:
Acquisition of LAICA
The Group acquired 100% of the issued share capital of LAICA S.p.A. in October 2020. The total consideration transferred for the acquisition
was £24.4m (€26.9m), made up of £11.7m (€13.0m) paid in cash, 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), and a further contingent consideration with a fair value of £5.4m (€5.9m) representing an amount payable
in cash subject to certain conditions being met, including threshold financial targets for the financial years ending 31 December 2021 and
2022. Based on a post year-end arbitration process which was finalised in February 2023 and the financial results of LAICA S.p.A. for the year
ended 31 December 2022, the actual fair value of the estimated contingent consideration payable to the vendor shareholders has been
recorded at £4.9m (€5.6m) (2021: estimated fair value (2021: £5.8m (€6.9m)).
In addition, a supplemental consulting arrangement was entered into with the vendor shareholders of LAICA under which total costs
amounting to £4.4m (€4.9m) were payable in the financial years ending 31 December 2021 and 2022, relating to compensation for post-
combination services contingent on the vendors remaining in service. These costs have been accrued as the services are rendered to
LAICA. As at 31 December 2022, £2.6m (€2.9m) (2021: £1.7m (€2.0m)) was accrued for services rendered to date.
The accruals relating to both the contingent consideration and the compensation for the supplemental consulting agreement are
reflected as current liabilities as at 31 December 2022.
15. INVENTORIES
Raw materials and consumables
Finished goods and goods in transit
2022
£’000
11,242
16,460
27,702
2021
£’000
12,139
7,883
20,022
The cost of inventories recognised as an expense and included in cost of sales amounted to £44,241,000 (2021: £52,396,000).
The provision for impaired inventories is £1,034,000 (2021: £2,063,000). There were no inventory write-downs in 2022 (2021: £246,000).
131
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16. TRADE AND OTHER RECEIVABLES AND CURRENT INCOME TAX RECEIVABLES
Amounts falling due within one year:
Trade receivables – current
Trade receivables – past due
Trade receivables – gross
Loss allowance
Trade receivables – net
Prepayments
Advance purchase of commodities
VAT receivable
Tax receivable
Other receivables
2022
£’000
2021
£’000
15,967
3,580
19,547
(158)
19,389
2,335
2,344
1,279
497
4,444
30,288
10,958
2,493
13,451
(104)
13,347
496
5,389
5,261
–
1,018
25,511
Trade and other receivables carrying values are considered to be equivalent to their fair values. The amount of trade receivables impaired
at 31 December 2022 is equal to the loss allowance provision (2021: same).
The advance purchase of commodities relates to a payment or payments in advance to secure the purchase of key commodities at an
agreed price to mitigate the commodity price risk.
Other receivables include receivables from licencing income recognised in the current year of £1,191,000 (2021: nil) and £2,184,000
(2021: nil) rebates receivable from suppliers from procurements made in prior years. Settlement of the rebates receivable from suppliers
will be via net cash settlement of future purchases.
Deferred tax assets as at year end were £313,000 (2021: £258,000).
Government grants due amounted to £nil (2021: £300,000). 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 10 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
Australian Dollar
New Zealand Dollar
Taiwan Dollar
2022
£’000
7,773
2,520
3,993
8,401
120
6,839
512
130
30,288
2021
£’000
5,471
9,465
1,478
8,668
118
–
–
311
25,511
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 2022 was
£158,000 (2021: £104,000).
132
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 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
Euro
Hong Kong Dollar
Australian Dollar
New Zealand Dollar
Taiwan Dollar
18. TRADE AND OTHER PAYABLES AND CURRENT INCOME TAX LIABILITIES
Trade payables
Current income tax liabilities
Social security and other taxes
Customer rebates provisions
Capital creditors
VAT liabilities
Other liabilities
Payments in advance from customers
Accrued expenses
2022
£’000
15,155
2,506
6,959
4,471
211
616
159
366
2021
£’000
4,424
3,622
8,183
2,584
207
–
–
650
30,443
19,670
2022
£’000
10,010
444
368
745
2,848
546
7,308
2,270
5,868
30,407
2021
£’000
11,060
1,631
352
2,152
2,256
130
3,204
1,936
4,796
27,517
The fair value of financial liabilities approximates their carrying value due to short maturities. Other liabilities include goods received
not invoiced amounts of £1,189,000 (2021: £2,123,000), and an accrual of costs incurred as part of the Billi acquisition of £3,356,000
(2021: nil). Deferred government grants amounted to £nil (2021: £583,000). There were no unfulfilled conditions in relation to these
grants at the year end. Movement in payments in advance from customers were all driven by normal trading, with the full amounts due
at beginning of the year released to revenues in the current year.
The carrying amounts of the Group’s trade and other payables are denominated in the following currencies:
Pound Sterling
Chinese Yuan
US Dollar
Euro
Hong Kong Dollar
Australian Dollar
New Zealand Dollar
Taiwan Dollar
2022
£’000
10,069
7,228
1,051
4,461
198
6,408
881
111
30,407
2021
£’000
13,604
7,249
1,951
4,030
253
–
–
430
27,517
133
Strategic reportGovernance reportFinancial statements Strix Group Plc Annual report and accounts 2022
19. BORROWINGS
Total current borrowings
Total non-current borrowings
2022
£’000
14,734
103,092
2021
£’000
1,064
69,782
Current bank borrowings comprise 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 £956,000 (2021: £181,000) and £1,770,000 (2021:
£513,000), respectively.
Term and debt repayment schedule for long term borrowings
Currency
Interest rate
Revolving Credit Facility
Term loan
Unicredit facility
Banco BPM
BNP Paribas
Credito Emiliano
Banco BPM
Banco BPM
Banco BPM
BNP Paribas
Banca Monte dei Paschi di Siena
Banco BPM
Hedging
GBP
GBP
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
SONIA + 2.15% to 4%
SONIA + 2.15% to 4%
EURIBOR 6M + 1,2%
1.45%
0.7945%
1.10%
1.69%
0.01692
1.00%
0.18%
0.19%
0.19%
Maturity date
25-Oct-25
30-Nov-25
28-Jun-24
30-Nov-23
03-Feb-23
04-Jan-23
03-Jan-23
03-Jan-23
28-Feb-23
30-Apr-22
31-Jan-22
31-Mar-22
31 December
2022
31 December
2021
80,000
39,000
133
167
436
221
112
54
432
–
–
–
(3)
120,552
70,000
–
210
329
–
–
–
–
–
172
414
404
11
71,540
In the current year, the existing revolving credit facility (‘RCF’) agreement was further refinanced and amended on 25 October 2022
as follows:
New lenders – Barclays Bank Plc and HSBC Bank Plc came on board as new lenders under the restated agreement.
Revolving credit facility – This relates to the RCF of £80,000,000. The termination date has been revised to three years after the fourth
restatement date, 25 October 2025, with an option to extend the term initially by twelve months and a further twelve months thereafter.
The purpose of the extended facility was to finance the acquisition of LAICA as well as other significant capital projects including the
new factory in China and ongoing working capital needs of the Group. Under the amended agreement, the purpose of the RCF remains
the same. As at 31 December 2022, the total facility available is £80,000,000 (2021: £80,000,000).
Term loan – The Company obtained further funding on 30 November 2022 in the form of a three-year term loan of £49,000,000 payable
initially by a lump sum of £10,000,000 followed by eleven fixed repayments thereafter with the first quarterly repayment of £3,545,000 due
and payable on 31 March 2023. The purpose of the term loan was to finance the acquisition of Billi. The £10m repayment was made towards
the term loan on 30 November 2022. As at 31 December 2022, the outstanding balance on the term loan is £39,000,000 (2021: £nil).
Interest applied to the revolving credit facility and term loan is calculated as the sum of the margin and SONIA. The margin under the
amended agreement shall be 3.5% until 31 March 2023, and then 2.85% from 1 April 2023 to 30 June 2023, and thereafter margin will be
dependent on the net leverage 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 (2021: same).
Transactions costs amounting to £2,324,000 (2021: £875,000) incurred as part of refinancing and amending the RCF agreement were
capitalised and are being amortised over the period of three years.
134
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 The various agreements contain 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 2022, the Group has not breached any of the financial
covenants contained within the agreements – see note 22(d) for further details. (2021: same).
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.
20. CAPITAL COMMITMENTS
Contracted for but not provided in the consolidated financial statements –
Property, plant and equipment
2022
£’000
2021
£’000
695
2,001
The above commitments include capital expenditure of £547,000 (2021: £1,639,000) relating to plant and machinery and production
equipment for the factory in China.
21. CONTINGENT ASSETS AND CONTINGENT LIABILITIES
There continues a number of ongoing intellectual property infringement cases initiated by the Group, as well as patent validation
challenges brought by the defendants. All of these cases are still subject to due legal process in the countries in which the matters have
been raised. As a result, no contingent assets have been recognised at 31 December 2022 (2021: same), as any receipts are dependent
on the final outcome of each case. There are also no corresponding contingent liabilities at 31 December 2022 (2021: 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 IOM, UK, EU, US, Australia, New Zealand 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 (GBP);
• Chinese Yuan (CNY);
• United States Dollar (USD);
• Euro (EUR);
• Hong Kong Dollar (HKD);
• Australian Dollar (AUD);
• New Zealand Dollar (NZD);
• Taiwan Dollar (TWD).
In December 2022, the Group entered into USD/GBP and USD/EUR forward exchange rate contracts to sell the notional amount of
US$8,500,000 and hence mitigate the risk and impact of volatile exchange rate movements seen during the year on group profits.
The fair value of these contracts at year-end is considered not material.
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 term loan and other borrowings
disclosed in note 19. The interest rates on the revolving credit facility are variable, based on SONIA 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.
135
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22. FINANCIAL RISK MANAGEMENT (continued)
(a) Market risk (continued)
(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 2022 or 2021 as they relate to physical commodities being purchased
for the Group own use. At 31 December 2022 and 2021, payments were made in advance to buy certain commodities at fixed prices, as
disclosed in note 16.
(iv) Sensitivity analysis
• Foreign exchange risk: The Group is primarily exposed to exchange rate fluctuations between GBP and USD, CNY, HKD, EUR, TWD,
AUD and NZD. Assuming a reasonably possible change in FX rates of +10% (2021: +10%), the impact on profit would be a decrease of
£319,000 (2021: a decrease of £751,000), and the impact on equity would be a decrease of £738,000 (2021: decrease of £1,877,000).
A -10% change (2021: -10%) in FX rates would cause an increase in profit of £390,000 (2021: an increase in profit of £918,000) and a
£902,000 increase in equity (2021: £1,603,000 increase 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 SONIA/EURIBOR rate of ±0.5% (2021: ±0.5%), the impact on profit would be an
increase/decrease of £476,000 (2021: £313,000), and the impact on equity would be an increase/decrease of £72,000 (2021:
£138,000). 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 ±13% for silver (2021: ±14%) and ±15% for copper (2021: ±14%) based on
volatility analysis for the past year, the impact on profit would be an increase/decrease of £1,346,000 (2021: £3,766,000). 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 (2021: 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 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 the 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 0.07% of revenue (2021: less than 0.08% 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. At year-end, £19,456,000 (2021: £11,490,000) was held
with one financial institution with a credit rating of BBB. The following table shows the external credit ratings of the institutions with
whom the Group has cash deposits:
AA
A
BBB
B
n/a
2022
£’000
797
4,132
25,450
27
37
30,443
2021
£’000
–
3,989
15,633
11
37
19,670
(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 revolving credit facilities to provide access to cash for various purposes. The facilities were fully
utilised as at 31 December 2022 (2021: headroom of £10,000,000).
136
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 The table below analyses the group’s financial liabilities as at 31 December 2022 into relevant maturity groupings based on their
contractual maturities for all non-derivative financial liabilities. There are no derivative financial liabilities. The amounts disclosed in
the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact
of discounting is not significant.
Trade and other payables
Borrowings
Lease liabilities
Contingent consideration
Total financial liabilities
Less than
6 months
£’000
30,407
8,478
535
7,532
46,952
6 – 12 months
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over
5 years
£’000
–
7,212
534
–
7,746
–
14,226
1,247
–
15,473
–
90,636
1,645
–
92,281
The table below analyses the respective financial liabilities as at 31 December 2021 (the prior year):
Trade and other payables
Borrowings
Lease liabilities
Contingent consideration
Total financial liabilities
Less than
6 months
£’000
27,517
2,540
548
6,081
36,686
6 – 12 months
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
–
1,551
533
–
2,084
–
1,666
963
3,994
6,623
–
70,635
2,427
–
73,062
Total
contractual
cash flows
£’000
30,407
120,552
3,961
7,532
162,452
Total
contractual
cash flows
£’000
27,517
76,392
4,764
10,075
118,748
Carrying
amount
(assets)/
liabilities
£’000
30,407
117,826
3,888
7,532
159,653
Carrying
amount
(assets)/
liabilities
£’000
27,517
70,846
3,371
7,464
109,198
–
–
–
–
–
Over
5 years
£’000
–
–
293
–
293
(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.
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 2022 these
ratios were as follows:
• Debt Service Cover ratio (DSCR): c.7.00x (2021: n/a) – minimum per facility terms is 1.1x; and
• Leverage ratio: 2.24x (2021: 1.31x) – maximum per facility terms is 3.5x.
(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.
137
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22. FINANCIAL RISK MANAGEMENT (continued)
(e) Fair value hierarchy (continued)
As part of the consideration for the acquisition of LAICA S.p.A. which occurred in October 2020, the Group agreed to pay a contingent
consideration of up to £6.4m (€7.1m) subject to certain conditions being met, including threshold financial targets for the financial years
ending 31 December 2021 and 2022. Based on a post year-end arbitration process which was finalised in February 2023, the actual fair
value of the contingent consideration payable to the vendor shareholders was set at £4,968,000 (€5,619,000) (2021: estimated fair
value of £5,785,000). In the previous year and prior to this final arbitration, the fair value was estimated by calculating the present value
of future probability weighted cashflows using a discount rate of 12.7%. The accrual for the contingent consideration as at year end
reflects the final amount payable which is considered to be the fair value. The contingent consideration has been classified as Level 3
(2021: same).
There have been no movements into or out of any levels during the year.
The carrying amounts reflected in these financial statements for cash and cash equivalents, current trade and other receivables/
payables and the fixed and floating rate bank borrowings approximate their fair values.
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, or share price targets for the three financial years from grant date. Further
awards have been made since August 2017 under the same scheme on similar terms, with additional ESG-related performance
conditions added on for certain senior members of management.
During 2020, 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.
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
2022
Number of
Shares
2021
Number of
Shares
3,054,161
600,131
(734,608)
(1,265,017)
3,590,383
1,095,107
(925,651)
(705,678)
1,654,667
3,054,161
The Group has recognised a total gain of £491,000 (2021: expense of £1,549,000) in respect of equity-settled share-based payment
transactions in the year ended 31 December 2022.
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 2022 was 8.7 years (2021: 8.4 years).
138
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 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
20 May 2019
06 April 2020
01 May 2020
06 May 2020
21 April 2021
01 January 2022
21 April 2022
Total Share Options
Share price on
grant date
(p)
157.80
170.00
183.40
181.00
290.00
303.50
208.50
Expiry date
20 May 2029
06 April 2030
01 May 2030
06 May 2030
21 April 2031
01 January 2032
21 April 2032
Weighted
average
probability of
meeting
performance
criteria
36.8%
100.0%
0.0%
0.0%
0.0%
100.0%
0.0%
Share options
outstanding at
31 December
2022
Share options
outstanding at
31 December
2021
–
–
–
–
803,919
9,164
382,359
525,602
310,867
502,495
36,364
820,285
–
–
1,195,442
2,195,613
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
20 May 2019
19 August 2019
24 February 2020
06 April 2020
01 May 2020
06 May 2020
21 April 2021
06 December 2021
06 December 2021
21 April 2022
Total conditional share awards
Total share options and conditional share awards
Share price on
grant date (p)
157.80
158.00
179.80
170.00
183.40
181.00
290.00
296.50
296.50
208.50
Vesting date
01 April 2022
01 April 2022
24 April 2022
06 April 2022
31 December 2022
31 December 2022
31 December 2023
31 December 2023
31 December 2024
31 December 2024
Weighted
average
probability of
meeting
performance
criteria
Conditional
share awards
outstanding at
31 December
2022
Conditional
share awards
outstanding at
31 December
2021
36.8%
28.0%
100.0%
100.0%
0.0%
100.0%
29.0%
0.0%
0.0%
0.0%
–
–
–
–
–
–
225,204
16,090
9,323
208,608
304,254
4,250
10,772
90,104
165,759
28,481
229,515
16,090
9,323
–
459,225
858,548
1,654,667
3,054,161
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 £nil (2021: £nil) and the expected charge over the life of the options by a total of £nil (2021: £nil).
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 £2.5719 (2021: £2.1217).
The movement within the share-based payments reserve during the period is as follows:
Shared-based payments reserves as at 1 January
Share-based payments transactions (note 5(a))
Other share-based payments
Share-based payments transferred to other reserves upon exercise/vesting
Shared-based payments reserves as at 31 December
2022
£’000
2,039
(491)
(136)
(1,210)
202
2021
£’000
1,913
1,549
(174)
(1,249)
2,039
Other movements
Other transactions recognised directly in equity include the settlement of dividend entitlements previously accrued as part of the LTIP
programme and employer contributions to national insurance for vested LTIPs.
139
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24. SHARE CAPITAL AND SHARE PREMIUM
Allotted and fully paid: ordinary shares of 1p each
Balance at 1 January 2022
Shares issues during the year
Transaction costs
Share options exercised during the year (note 23)
Balance at 31 December 2022
Number of
shares
(000s)
206,672
11,304
–
735
218,711
Par value
(000s)
2,066
113
–
7
2,186
Share
premium
(000s)
11,073
12,887
(2,285)
–
21,675
Total
(000s)
13,139
13,000
(2,285)
7
23,861
Under the Isle of Man Companies Act 2006, the Company is not required to have an authorised share capital.
The shares issued during the year consist of 11,304,347 shares issued to finance the acquisition of the Billi entities as noted in note 14
and the remaining shares relate to employee share-based payments as noted in note 23. £13,000,000 was raised on the share issue
to finance the acquisition of Billi with £113,000 recognised in share capital and £12,887,000 recognised as share premium. Associated
transaction costs recognised directly in share premium amounted to £2,285,000.
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.
25. DIVIDENDS
The following amounts were recognised as distributions in the year:
Interim 2022 dividend of 2.75p per share (2021: 2.75p)
Final 2021 dividend of 5.6p per share (2020: 5.25p)
Total dividends recognised in the year
2022
£’000
5,699
11,601
17,300
2021
£’000
5,679
10,831
16,510
In addition to the above dividends, since year end the Directors have proposed the payment of a final dividend of 3.25p per share
(2021: 5.6p). The aggregate amount of the proposed final dividend expected to be paid on 11 August 2023 out of retained earnings at
31 December 2022, 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 2022 dividend of 3.25p per share (2021: 5.6p)
Total dividends proposed but not recognised in the year, and estimated to be recognised in
the following year
26. LEASES
a) Amounts recognised in the consolidated statement of financial position
The consolidated statement of financial position shows the following amounts relating to leases:
Right-of-use assets
Land and buildings
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
2022
£’000
7,108
2021
£’000
11,574
7,108
11,574
2022
£’000
2021
£’000
3,625
3,625
1,069
2,819
3,888
3,247
3,247
773
2,598
3,371
Additions to the right-of-use liabilities during the 2022 financial year were £505,000 (2021: £1,474,000). Disposals of right-of-use
liabilities during the current year were £586,000 (2021: £735,000).
140
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 Short-term leases and leases of low values were recognised directly in the consolidated statement of comprehensive income,
amounting to £106,000 (2021: £209,000).
Total cash outflows relating to all lease payments, including short-term leases and leases of low values were £939,000 (2021: £1,771,000).
The movement in lease liabilities is as follows:
Balance as at 1 January
Additions
Disposals
Adjustments due to lease modifications
Acquisition of Billi entities (note 14)
Repayments
Interest expense (included in finance cost)
Sub-lease income
Foreign exchange differences
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
Short-term and low value leases
Interest expense (included in finance cost)
Foreign exchange gains
Total cost relating to leases
27. STATEMENT OF CASH FLOWS 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 losses from joint ventures
Loss on disposal of property, plant and equipment
Other non-cash flow items
Share-based payment transactions
Net exchange differences
Changes in working capital:
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Other non-cash flow items include accrual of amounts relating to compensation for post-combination services, which were accrued as
part of the acquisition of LAICA as the services were rendered (see note 14).
Share-based payment transactions include other transactions recognised directly in equity included in the statement of changes of equity.
141
2022
£’000
3,371
505
(586)
–
1,284
(833)
92
–
55
3,888
2022
£’000
(920)
(106)
(92)
–
(1,118)
2021
£’000
4,100
1,474
(735)
35
–
(1,562)
105
(40)
(6)
3,371
2021
£’000
(1,396)
(209)
(105)
6
(1,704)
Note
2022
£’000
2021
£’000
19,916
23,720
12
12
11
12
23
6(a)
3,281
920
2,063
18
–
1,275
(491)
188
3,173
1,396
2,310
50
1,679
1,703
1,400
186
27,170
35,617
(1,213)
3,159
(4,549)
24,567
(5,320)
(6,649)
558
24,206
Strategic reportGovernance reportFinancial statements
Strix Group Plc Annual report and accounts 2022
27. STATEMENT OF CASH FLOWS NOTES (continued)
b) Movement in net debt
Borrowings, net of loan arrangement fees
Lease liabilities
Total liabilities from financing activities
Cash and cash equivalents
Net debt
Non-cash movements
At 1 January
2022
£’000
(70,846)
(3,371)
Cash flows
£’000
(46,487)
833
(74,217)
(45,654)
19,670
11,340
(54,547)
(34,314)
Currency
movements
£’000
Other
movements
£’000
At 31 December
2022
£’000
(292)
(55)
(347)
(567)
(914)
(201)
(1,295)
(1,496)
(117,826)
(3,888)
(121,714)
–
30,443
(1,496)
(91,271)
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.
(b) Related party balances
Trading balances
Related party
Foshan Yilai Life Electric Appliances Co. Limited
LAICA Brand House Limited
(c) Related party transactions
The following transactions with related parties occurred during the year:
Name of related party
Transactions with related parties
Revenue earned from Foshan Yilai Life Electric Appliances Co. Limited
Revenue earned from LAICA Brand House Limited
Contributions paid to The Strix Limited Retirement Fund (note 5(c)(i))
Balance due from
Balance due to
2022
£’000
–
26
2021
£’000
165
25
2022
£’000
2021
£’000
–
–
–
–
2022
£’000
261
3
(782)
2021
£’000
298
3
(684)
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
The Group does not have any material events after the reporting period to disclose.
142
Notes to the consolidated financial statements continuedfor the year ended 31 December 2022 Legal and professional advisors
Registered office
Strix Group Plc
Forrest House
Ronaldsway
Isle of Man
IM9 2RG
Principal bankers
The Royal Bank of Scotland International Limited
2 Athol Street
Douglas
Isle of Man
IM99 1AN
The Governor and Company of the Bank of Ireland
40 Mespil Road
Dublin 4
Ireland
Barclays Bank PLC
1 Churchill Place
Canary Wharf
London
E14 5HP
HSBC Bank PLC
8 Canada Square
London
E14 5HQ
Share registrars
Link Market Services (Isle of Man) Limited
Peveril Buildings
Peveril Square
Douglas
Isle of Man
IM99 1RZ
Financial PR and IR
IFC Advisory Limited
24 Cornhill
London
EC3V 3ND
Independent auditor
PricewaterhouseCoopers LLC
Sixty Circular Road
Douglas
Isle of Man
IM1 1SA
Nominated advisor and broker
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
and
10 Old Burlington Street
London
W1S 3AG
Joint broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Solicitors
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London
EC4N 6AF
Company number
014963V (Isle of Man)
143
Strategic reportGovernance reportFinancial statements Welcome to Strix Group Plc
Annual report and accounts 2022
Our mission:
Innovating safety and design
for a sustainable future.
Our vision:
Establishing a world-leading
innovative and sustainable
technology business.
About us:
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).
Operational highlights
• Acquisition of Billi continues to
be successfully integrated in line
with plans to achieve the identified
operational benefits, opening new
sales channels for Strix. Trading
performance so far has been in
line with budget.
• Retained global kettle control
market share by value at c.56%
(excluding Russia and other
impacted territories).
• Manufacturing operations in China
are fully operational with efficiency
improved by 6.1% in 2022 versus 2021.
• Pipeline of new product launches
through 2023 including Perfect
Pour Dispenser and Aurora coffee
appliance.
• Updated ESG and Sustainability
report published on 28 March 2023.
For further operational information
please see pages 8 to 11
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.
41526 Strix AR 2022 Cover AW DC.indd 4-6
41526 Strix AR 2022 Cover AW DC.indd 4-6
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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