Financial performance

 

Revenue increased significantly by 57.6% to £54.7m (H1 2020 £34.7m). This was partly due to the inclusion of LAICA revenues of £10.1m in H1, with the remaining increase of £9.9m (representing a 28.5% increase from comparative prior period) realised from organic growth as the Group bounced back to higher than pre-pandemic levels. Revenue increased by 24.6% in comparison to H1 2019 period.

 

Revenue on a constant currency basis and organic basis showed an increase of 34.6%. This is influenced by weaker foreign currencies against Pound Sterling in H1 compared to prior comparative period, which effectively increases the Pound Sterling value of revenues for products that are priced in foreign currency.

 

Adjusted gross profit increased by 48.6% to £20.5m (H1 2020: £13.8m), partly due to LAICA's inclusion of £3.0m, and also driven mainly by kettle controls sales volumes which were 36% higher up on the prior comparative period due to increased customer demand linked to the market recovery from 2020. Reported gross profits increased by 31.9% to £18.2m (H1 2020: £13.8m).

 

Adjusted gross profit margin in H1 was 37.5% (H1 2020: 39.8%), showing a margin dilution of 2.3% attributable mainly to the inclusion of LAICA product ranges which have lower gross profit margins.

 

Adjusted EBITDA was £17.4m, an increase of 27.9% (H1 2020: £13.6m), partly due to LAICA which brought in £1.7m, with the remainder of the increase of £2.1m resulting from organic growth of 15%.  Adjusted EBITDA is defined as profit before depreciation, amortisation, finance costs, finance income, taxation, and exceptional items including share based payments. Reported EBITDA increased 14.4% to £12.7m (H1 2020: £11.1m).

 

Adjusted EBITDA margin in H1 was diluted to 31.8% (H1 2020: 39.2%), representing a dilution of 7.4%. Part of the dilution is as a result of LAICA's inclusion which had a 3.4% dilutive impact, leaving an organic dilution of 4.0%. The following factors played a role in organic dilution: (1) higher outward carriage and freight costs experienced globally with the recovery from the pandemic, (2) higher payroll costs as the Group increased its headcount in line with management expectations and medium-term targets, and (3) higher advertising and promotional costs as the Group diversifies its product range with growth in its water and appliances categories. These cost implications have a similar effect on dilution of the other adjusted KPI margins of operating profit, profit before tax and profit after tax.

 

Adjusted operating profits increased by 31.1% to £13.9m (H1 2020: £10.6m), an increase of £3.3m. LAICA contributed £1.4m to the increase, giving organic growth of £1.9m (17.9%). Reported operating profits were higher by 12.3% to £9.1m (H1 2020: £8.1m) after deducting exceptional costs of £4.8m (H1 2020: £2.5m) which increased mainly due to the removal and write-off of assets, and land and factory relocation costs associated with the move from the old factory to the new manufacturing plant, and LAICA acquisition-related strategic project costs (see note 6 of the financial statements).

 

Adjusted profit before tax was £13.2m, an increase of £3.1m (30.7%) from prior comparative period (H1 2020: £10.1m), of which LAICA contributed £1.1m. Interest charges were fairly constant, with a minor increase to reflect the increase in the Net Debt. Reported profit before tax was £8.5m (H1 2020: £7.5m).

 

Adjusted profit after tax was £12.3m (H1 2020: £9.8m), an increase of £2.5m (25.5%) and this represents an impressive 12.8% growth to the pre-pandemic performance in 2019. LAICA adjusted profit after tax of £0.9m contributed to this increase. There was an increase in the tax expense, partly due to the inclusion of LAICA. The effective tax rate on adjusted profit before tax in H1 was 6.8%. Excluding the impact of LAICA, the effective tax rate drops down to 5.9%.

 

Costs

 

Costs in the current period increased compared to the prior period all in support of the increase in the top line as the Group recovered from impacts of the COVID pandemic.

 

Cost of sales (excluding exceptional costs) increased to £34.2m (H1 2020: £20.9m), driven by the increase in revenues, however with a dilutive effect on gross margin percentages mainly due to impact on pricing of adverse foreign exchange movements, higher commodity prices, and adverse sales mixes particularly linked to margin dilutions from LAICA's product ranges as the Group expands its water and appliances categories.

 

Distributions costs increased to £3.9m (H1 2020: £2.1m) mainly due to higher outward carriage and freight costs, higher payroll costs, and increased advertising and promotional costs, also taking into consideration the inclusion of LAICA in the Group.

 

Administration costs (excluding exceptional costs) were £3.0m (H1 2020: £1.4m), increasing mainly due to the inclusion of LAICA, and also as a result of higher payroll costs as the Group increased its headcount in line with management expectations and medium-term targets.

 

Exceptional costs increased mainly due to LAICA acquisition-related strategic project costs, the removal and write-off of assets, and land and factory relocation costs associated with the move from the old factory to the new Chinese manufacturing plant as of 27 August 2021, which was completed within the budget of circa £20m.

 

Cash flow

 

Net cash generated from operating activities rose to £13.5m (H1 2020: £8.3m) mainly due to an increase in operating profits driven by increases in sales. Net working capital movements in H1 2021 improved, showing an outflow of just £0.4m compared the prior comparative period (H1 2020: £2.8m outflow), demonstrating a continued trend of the Group's continued policy on maximizing its operating cash resources. Net working capital cash outflows decreased in H1 2021 mainly due to an increase in stocks held at period-end to fund the anticipated increase in demand in H2, which had the consequential effect of increased trade and other payables due to negotiated payment terms with suppliers to allow leeway for the Group to realise cash inflows from the anticipated increased demand in H2. 

 

Cash outflows for investing activities have increased by £3.2m from the prior comparative period mainly due to the capital costs associated with completion of the new factory, and further investment in LAICA. The new manufacturing plant in China is now fully operational as of the 27^th August 2021, with production and assembly lines installed, and having been completed on budget and on time. Total factory construction costs were in line with budget of circa £20m.

 

Cash flows for financing activities remained fairly constant compared to the prior comparative period, driven in both periods by mainly drawdowns from the revolving credit facility and payment of final prior year dividends.

 

Balance Sheet

 

Property, plant and equipment increased to £40.4m (FY 2020: £37.2m), a net increase of £3.2m. This net increase was due to: (1) £9.7m (H1 2020: £5.6m) of additions attributable mainly to net capital expenditure of £5.1m on the completion new factory in China,  new ROU asset additions worth £1.4m, and new plant and machinery additions of £2.5m, (2) partially offset by the write-off of old assets from the old factory with a net book value of circa £1.6m, the sale of LAICA building with a net book value of circa £1.7m in a leaseback arrangement, and depreciation charges of £2.6m (H1 2020: £2.2m).

 

Intangible assets increased to £31.6m (FY 2020: £29.7m) reflecting a net increase of £1.9m. The net increase is due to additions of circa £3.2m, the majority of which are capitalised development costs from the new product development projects of circa £1.6m. The total amortisation charge was £1.0m (H1 2020: £0.7m).

 

Current assets increased to £40.8m (FY 2020: £35.9m), an increase of £4.9m. Broken down, inventories increased by £4.2m due to higher stock held at period-end to meet demand in H2 and also due to disruptions in supply chains as the global economy recovers from the pandemic. LAICA also purchases stocks in bulk to maximize economies of scale, and holds these in preparation for anticipated increases in demand of their products in the second half of the year. Trade debtor and prepayments remained fairly constant, with a slight increase of £0.7m.

 

Current liabilities (including tax liabilities, but excluding short-term portions of long-term liabilities) increased to £33.7m (FY 2020: £30.2m), and increase of £3.5m. Part of the increase is from LAICA trade creditors, which increased by £0.5m evident from the higher stock purchases and stock levels held at period-end. Trade and other creditors, and accruals increased mainly due to increases in purchases and various operational expenditures keeping in pace with recovery from the pandemic.

 

Non-current liabilities (including short-term portions) increased to £74.7m (FY 2020: £66.0m), an increase of £8.7m, which is mainly driven by the further drawdowns in the period from the revolving credit facility to fund the completion of the new manufacturing plant in China.

 

Net debt

 

The Group's net debt position, excluding earn-out provisions, as at 30 June 2021 increased to £46.0m (FY 2020: £37.2m). 

Total committed debt facilities at 30^th June 2021 amounted to £61.0m, giving a liquidity pool of £34.0m. Net debt equated to 1.1 times trailing twelve months' EBITDA, which compares favourably to our debt covenant of 2.50 times. This continues to underpin the Group's strong cash generation ability. 

 

Dividend

 

The Board declares an increase in the interim dividend to 2.75p per share (H1 2020: 2.6p) and given the Group's performance in H1 2021, confidence in the continued strength of its cash generation it reiterates its intention to implement a progressive dividend policy that is linked to underlying earnings at the full year.

 

The interim dividend will be paid on 7 October 2021 to shareholders on the register at 1 October 2021 and the shares will trade ex-dividend from 30 September 2021. 

 

 

 

 

 

 

 

 

Condensed INTERIM consolidated statement of comprehensive income

for the period ended 30 June 2021 (unaudited)

 

				(unaudited) Period ended 30 June 2021		(unaudited) Period ended 30 June 2020
		Note		£000s		£000s
Revenue		7		54,666		34,712
Cost of sales - before exceptional items				(34,206)		(20,948)
Cost of sales - exceptional items		6		(2,280)		-
Cost of sales				(36,486)		(20,948)
Gross profit				18,180		13,764
Distribution costs				(3,949)		(2,121)
Administrative expenses - before exceptional items				(2,950)		(1,416)
Administrative expenses - exceptional items		6		(2,476)		(2,517)
Administrative expenses				(5,426)		(3,933)
Share of (losses) / profits from joint ventures				(10)		-
Other operating income				355		402
Operating profit				9,150		8,112
Analysed as:
Adjusted EBITDA1				17,438		13,589
Amortisation		8		(952)		(748)
Depreciation (excluding Right-of-use asset depreciation)		9		(1,772)		(1,491)
Right-of-use asset depreciation		9		(808)		(721)
Exceptional items		6		(4,756)		(2,517)
Operating profit				9,150		8,112
Finance costs		5		(686)		(585)
Finance income				6		8
Profit before taxation				8,470		7,535
Income tax expense				(893)		(217)
Profit after taxation				7,577		7,318
Other comprehensive income:
Exchange differences on translation of foreign operations				(388)		134
Total comprehensive income				7,189		7,452
Profit for the period attributable to:
Equity holders of the Company				7,526		7,318
Non-controlling interests				51		-
				7,577		7,318
Total comprehensive income for the period attributable to:
Equity holders of the Company				6,993		7,452
Non-controlling interests				196		-
				7,189		7,452
Earnings per share (pence)
Basic		6		3.7		3.7
Diluted		6		3.6		3.6

 

1.     Adjusted EBITDA, which is defined as profit before finance costs, tax, royalty charges, depreciation, amortisation and exceptional items, is a non-GAAP metric used by management and is not an IFRS disclosure.

 

 

Condensed INTERIM consolidated balance sheet

as at 30 June 2021 (unaudited)

 

	Note	(unaudited) As at 30 June 2021	(unaudited) As at 31 December 2020
ASSETS		£000s	£000s
Non-current assets
Intangible assets	8	31,541	29,648
Property, plant and equipment	9	40,447	37,205
Investments in joint ventures		73	92
Total non-current assets		72,061	66,945
Current assets
Inventories	10	19,446	15,224
Trade and other receivables	12	21,391	20,672
Cash and cash equivalents		15,409	15,446
Total current assets		56,246	51,342
Total assets		128,307	118,287
EQUITY AND LIABILITIES
Equity
Share capital and share premium		13,138	13,130
Share based payment reserve		1,425	1,913
Retained earnings		4,435	6,290
Non-controlling interests		912	716
Total equity		19,910	22,049
Current liabilities
Trade and other payables	13	30,820	27,151
Borrowings	14	626	2,220
Future lease liabilities	17	1,241	1,254
Contingent consideration		3,880	-
Current income tax liabilities	13	2,863	3,048
Total current liabilities		39,430	33,673
Non-current liabilities
Future lease liabilities	17	3,079	2,846
Deferred tax liability		2,458	2,558
Borrowings	14	60,823	50,426
Contingent consideration		1,671	5,380
Post-employment benefits		936	1,355
Total non-current liabilities		68,967	62,565
Total liabilities		108,397	96,238
Total equity and liabilities		128,307	118,287

 

 

 

Condensed INTERIM consolidated statement of changes in equity

as at 30 June 2021 (unaudited)

	Share capital and share premium	Share-based payment reserve	Retained (deficit)/ earnings	Total equity attributable to owners	Non-controlling interests	Total equity
(unaudited)	£000s	£000s	£000s	£000s	£000s	£000s
Balance at 1 January 2020	1,900	13,063	(14,052)	911	-	911
Profit for the period	-	-	7,318	7,318	-	7,318
Other comprehensive income	-	-	134	134	-	134
Total comprehensive income for the period	-	-	7,452	7,452	-	7,452
Dividends paid (note 16)	-	-	(10,126)	(10,126)	-	(10,126)
Share-based payment transactions	89	480	-	569	-	569
Total transactions with owners recognised directly in equity	89	480	(10,126)	(9,557)	-	(9,557)
Other transactions recognised directly in equity	-	-	-	-	-	-
Balance at 30 June 2020	1,989	13,543	(16,726)	(1,194)	-	(1,194)
(unaudited)
Balance at 1 January 2021	13,130	1,913	6,290	21,333	716	22,049
Profit for the period	-	-	7,526	7,526	51	7,577
Other comprehensive income	-	-	(533)	(533)	145	(388)
Total comprehensive income for the period	-	-	6,993	6,993	196	7,189
Dividends paid (note 16)	-	-	(10,831)	(10,831)	-	(10,831)
Transfers between reserves	8	(975)	967	-	-	-
Share-based payment transactions	-	487	-	487	-	487
Total transactions with owners recognised directly in equity	8	(488)	(9,864)	(10,344)	-	(10,344)
Other transactions recognised directly in equity (note 11)	-	-	1,016	1,016	-	1,016
Balance at 30 June 2021	13,138	1,425	4,435	18,998	912	19,910

 

 

 

 

 

 

 

Condensed INTERIM consolidated cash flow statement

for the PERIOD ended 30 June 2021 (unaudited)

 

		(unaudited) Period ended 30 June 2021	(unaudited) Period ended 30 June 2020
	Note	£000s	£000s
Cash flows from operating activities
Cash generated from operations	18(a)	14,620	8,988
Tax paid		(1,109)	(676)
Net cash generated from operating activities		13,511	8,312
Cash flows from investing activities
Purchase of property, plant and equipment		(8,137)	(4,294)
Capitalised development costs	8	(1,529)	(1,231)
Consideration paid in relation to the purchase of LAICA S.p.A		(1,605)	-
Purchase of intangibles	8	(627)	(1,458)
Proceeds on sale of property, plant and equipment	9	1,750	-
Finance income		6	7
Net cash used in investing activities		(10,142)	(6,976)
Cash flows from financing activities
Drawdowns and new loans / (repayments) of non-current borrowings	18(b)	8,697	9,000
Finance costs paid		(271)	(691)
Principal elements of lease payments		(855)	(800)
Transaction costs related to borrowings		-	(480)
Dividends paid	16	(10,831)	(10,126)
Net cash used in financing activities		(3,260)	(3,097)
Net decrease in cash and cash equivalents		109	(1,761)
Cash and cash equivalents at the beginning of the period		15,446	13,658
Effects of foreign exchange on cash and cash equivalents		(146)	206
Cash and cash equivalents at the end of the period		15,409	12,103

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the condensed INTERIM cONSOLIDATED financial statements

for the PERIOD ended 30 June 2021 (unaudited)

 

1. General information

Strix Group Plc ('the Company') was incorporated and registered in the Isle of Man on 12 July 2017 as a company limited by shares under the Isle of Man Companies Act 2006 with the name Steam Plc and with the registered number 014963V. The Company changed its name to Strix Group Plc on 24 July 2017. The address of its registered office is Forrest House, Ronaldsway, Isle of Man, IM9 2RG.

The Company's shares were admitted to trading on AIM, a market operated by the London Stock Exchange on 8 August 2017.

The principal activities of Strix Group Plc and its subsidiaries (together 'the Group') are the design, manufacture and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration.

These condensed interim consolidated financial statements ('interim financial statements') were approved for issue on 22 September 2021. The interim report will be available 22 September on the Group's website www.strixplc.com and from the registered office. These interim financial statements are unaudited.

2. Principle accounting policies

The Group's principle accounting policies, all of which have been applied consistently to all of the periods presented, are set out below.

Basis of preparation

The Group's annual financial statements are prepared in accordance with International Financial Reporting Standards ('IFRS') and International Financial Reporting Standards Interpretation Committee ('IFRS IC') as adopted by the European Union.

These interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union. However, explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and its financial performance compared with the comparative period ended 31 December 2020 and 30 June 2020 respectively. These interim financial statements should be read in conjunction with the last annual consolidated financial statements as at 31 December 2020 and the comparative interim results for the period ended 30 June 2020.

The preparation of Group 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.

Accounting policies

The interim financial statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts for the year ended 31 December 2020, which is available at www.strixplc.com.

Basis of consolidation

The consolidated interim financial statements comprise the financial statements of the Company and all of its subsidiary undertakings. Subsidiaries are fully consolidated from the date on which control commences and are deconsolidated from the date that control ceases. The financial statements of all Group companies are adjusted, where necessary, to ensure the use of consistent accounting policies.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed to or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

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 interim financial statements.

 

Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date with the assets and liabilities of a subsidiary 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
·	if the business combination is achieved in stages, the fair value of the pre-existing interest in the acquiree; less
·	the fair value of the identifiable assets acquired and liabilities assumed.

Transaction costs that the Group incurs in connection with a business combination are expensed as incurred.

The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.

Standards, amendments and interpretations which are not effective or early adopted:

At the date of approval of the interim financial statements, there are no new standards and interpretations which are relevant to the Group which were in issue but not yet effective.

Going concern

These interim financial statements have been prepared on the going concern basis.

The Directors have made enquiries to assess the appropriateness of continuing to adopt the going concern basis.

In making this assessment they have considered:

·	the strong historic trading performance of the Group;
·	the current and past profitability of the Group;
·	budgets and cash flow forecasts for the period to December 2023;
·	the current financial position of the Group, including its cash and cash equivalents balances of £15.4m (YE 2020: £15.4m);
·	the availability of further funding should this be required (including the headroom of £19.0m (YE 2020: £30.0m) on the revolving credit facility and the access to the AIM market afforded by the admission to AIM);
·	the current and past ability of the Group to meet its debt covenants;
·	the low liquidity risk the Group is exposed to; and
·	the Group operates within a sector that is experiencing relatively stable demand for its products.

Based on these considerations, the Directors have concluded that there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The key entities in the Group have traded profitably for a long period of time. As a result, the Directors continue to adopt the going concern basis of accounting in preparing the interim financial statements and there are no material uncertainties about the Group's ability to continue as a going concern.

As a Company, the dividend-paying entity, Strix Group Plc, has sufficient reserves from which to make distributions to shareholders, although the retained reserves of the Group show a deficit.

 

 

EBITDA and adjusted EBITDA - non-GAAP performance measures

Earnings before interest, taxation, depreciation and amortisation ('EBITDA') and adjusted EBITDA are non-GAAP measures used by management to assess the operating performance of the Group. EBITDA is defined as profit before finance costs, finance income, taxation, depreciation and amortisation. 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. As these are non-GAAP measures, EBITDA and adjusted EBITDA measures used by other entities may not be calculated in the same way and hence are not directly comparable.

Seasonality of operations

The Group's revenue and profit after tax is subject to a degree of seasonality due primarily to the occurrence of the Chinese New Year public holiday during the first half of the year ('H1'), when the Group's major customers and suppliers based in China cease operations for a period, as well as the impact of the COVID pandemic in the first half of 2020. In the financial year ended 31 December 2020, 36% (2019: 45%) of the Group's revenue and 30% (2019: 32%) of the Group's profit after tax accumulated in H1.

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 interim financial statements are presented in Sterling, which is Strix Group Plc's functional and presentation currency.

Transactions and balances

Foreign currency balances are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the condensed interim 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 and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet, or historic rates for certain line items;
·	income and expenses for each condensed interim consolidated statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
·	all resulting exchange differences are recognised in the condensed interim consolidated statement of comprehensive income.

 

Leases

Leases in which a significant portion of the risks and rewards of ownership were not transferred to the Group as lessee were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

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 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 determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

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

 

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. 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.

3. Critical accounting judgements and estimates

The preparation of these interim financial statements under IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty are the same as those that applied to the Group's Annual Report and Accounts for the year ended 31 December 2020.

 

 

 

 

 

4. Segmental reporting

Management has determined the operating segments based on the operating reports reviewed by the Board of Directors that are used to assess both performance and strategic decisions. Management has identified that the Board of Directors is the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating segments'. The Group's activities consist of the design, manufacture and sale of thermostatic controls, cordless interfaces, and other products such as water jugs and filters, primarily to Original Equipment Manufacturers ("OEMs") based in China.

The Board of Directors has identified 3 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, cost of sales and gross profit is disclosed below.

	Reported Results
	Period ended 30 June 2021
	(£000s)
	Kettle controls	Water Category	Appliances	Total
Revenue	39,407	9,978	5,281	54,666
Cost of sales	(24,679)	(7,747)	(4,060)	(36,486)
Gross profit	14,728	2,231	1,221	18,180
	Period ended 30 June 2020
	(£000s)
	Kettle controls	Water Category	Appliances	Total
Revenue	29,132	5,039	541	34,712
Cost of sales	(16,507)	(4,051)	(390)	(20,948)
Gross profit	12,625	988	151	13,764

 

	Adjusted Results
	Period ended 30 June 2021
	(£000s)
	Kettle controls	Water Category	Appliances	Total
Revenue	39,407	9,978	5,281	54,666
Cost of sales	(22,628)	(7,555)	(4,023)	(34,206)
Adjusted gross profit	16,779	2,423	1,258	20,460
	Period ended 30 June 2020
	(£000s)
	Kettle controls	Water Category	Appliances	Total
Revenue	29,132	5,039	541	34,712
Cost of sales	(16,507)	(4,051)	(390)	(20,948)
Adjusted gross profit	12,625	988	151	13,764

Assets and liabilities

No analysis of the assets and liabilities of each operating segment is provided to the Board of Directors as part of monthly management reporting. Therefore no analysis of segmented assets or liabilities is disclosed in this note.

Non-current assets (i) attributed to country of domicile and (ii) attributable to all other foreign countries

A geographical analysis of revenue from external customers has not been presented, as the OEMs to whom the majority of sales are made are primarily based in China.

In accordance with IFRS 8, the following table discloses the non-current assets located in both the Company's country of domicile (the Isle of Man) and foreign countries, primarily China, where one of the Group's principle subsidiaries is domiciled.

	30 June 2021	31 December 2020
	£000s	£000s
Country of domicile
Intangible assets	9,309	8,888
Property, plant and equipment	2,938	2,958
Total country of domicile non-current assets	12,247	11,846
Foreign countries
Intangible assets	22,232	20,760
Property, plant and equipment	37,509	34,247
Total foreign non-current assets	59,741	55,007
Total non-current assets	71,988	66,853

 

Major customers

In the first half of 2021, there were two major customers that individually accounted for at least 10% of total revenues (2020: two customers). The revenues relating to these customers in 6 months ended 30 June 2021 were £6,624,000 and £4,598,000 (2020: £13,683,000 and £11,618,000).

Geographical

A geographical analysis of revenue from external customers has not been presented, as the OEMs to whom sales are made are primarily based in China.

5. finance costs

	Period ended 30 June 2021	Period ended 30 June 2020
	£000s	£000s
Letter of credit charges	43	51
Lease liability interest	51	53
Borrowing costs	592	481
Total finance costs	686	585

Further information about the Group's borrowings is provided in note 14.

6. Earnings per share

The calculation of basic and diluted earnings per share is based on the following data.

 

	Period ended 30 June 2021	Period ended 30 June 2020
Earnings (£000s)
Earnings for the purpose of basic and diluted earnings per share	7,526	7,318
Number of shares (000s)
Weighted average number of shares for the purposes of basic earnings per share	206,041	198,878
Weighted average dilutive effect of conditional share awards	3,487	2,872
Weighted average number of shares for the purposes of diluted earnings per share (000s)	209,528	201,750
Earnings per ordinary share (pence)
Basic earnings per ordinary share	3.7	3.7
Diluted earnings per ordinary share	3.6	3.6
Adjusted earnings per ordinary share (pence) 1
Basic adjusted earnings per ordinary share	6.0	4.9
Diluted adjusted earnings per ordinary share	5.9	4.9

 

  The calculation of basic and diluted adjusted earnings per share is based on the following data:

 

	Period ended 30 June 2021	Period ended 30 June 2020
	£000s	£000s
Profit for the period	7,526	7,318
Add back:
Share-based payments	649	1,030
COVID-19 net exceptional costs²	332	456
Strategic projects	1,295	673
Reorganisation costs	2,480	358
Adjusted earnings 1	12,282	9,835

 

^{1. Adjusted results exclude exceptional items, including share-based payments. Adjusted results are non-GAAP metrics used by management and are not an IFRS disclosure.}

^{2. COVID-19 net exceptional costs include certain employment costs and Government support grants.}

 

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.

7. REVENUE

The following table shows a disaggregation of revenue into categories by product line:

	Period ended 30 June 2021	Period ended 30 June 2020
	£000s	£000s
Kettle controls	39,407	29,132
Water Category	9,978	5,039
Appliances	5,281	541
Total revenue	54,666	34,712