Early operational recovery and net debt cut
We are encouraged by the H1 trading update. The highlight was the news that the decline in indebtedness/key covenant ratio has triggered a lower interest rate on outstanding debt. The update stated that the net debt/EBITDA ratio had fallen comfortably below the 2x level. We envisage this falling to modestly below 1.7x by the year end and achieving the Group’s target of 1.5x during FY25.Good progress was seen within Kettle Controls and Billi during the period. Shipments of kettle controls are ahead yoy, led by improvements in the regulated and less-regulated markets. The launch of a new range of low cost controls into the less regulated and Chinese markets during H2 should help Strix to further improve its market share. We note that UK housing transactions improved yoy from April, a key determinant in the replacement of small domestic appliances.
Billi should build on the positive progress witnessed during H1 as new products are launched and its expansion into Europe via sales and service partners. As such, we anticipate an acceleration in growth levels, commensurate with the double-digit uplift witnessed in previous years within Premier Filtration Systems.
With no change to financial estimates, as per guidance, we retain our fair value/share of 167p, suggesting that the shares remain materially undervalued.
Strix Group is a holding company. Through its subsidiaries, Co. is engaged in the designing, manufacturing and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration. Co.'s core products are kettle safety controls, which are responsible for disconnecting the power to the heating element when either water has boiled, operated with no water present, or in some products when the kettle is lifted off its base.
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