reports
Hybridan Small Cap Feast - 27 November 2024
Status of this Note and Disclaimer This document has been provided as a general market commentary and is issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as investment advice; a recommendation; an offer to sell; nor solicitation of any offer to buy any security or other financial instrument. Nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. The i...
- David O'Brien
Recent trading proves challenging
At the time of the interim results in September it was clear that Q3 trading had proven volatile. Unfortunately, this has continued into Q4, with the greatest weakness witnessed in the highest margin areas, compounding the impact of operational gearing. Should the share price decline further as this trading update is digested and test new lows, we feel this presents a strong medium-term opportunity. One should bear in mind that the Group owns one global brand and two premium regional brands (wit...
- Andy Hanson
Strix (KETL LN) - Weak operating environment in H2 - Corporate
Strix has released an update indicating that trading has remained weak since it announced its interim results (18 September). The weakness is focused on Regulated markets, and we note recent deterioration in macro data from the UK and particularly Germany, two of Strix’s most important and profitable end markets. Billi continues to maintain a strong market position and should achieve the double-digit growth run rate for Q4 FY24. Consumer Goods division is expected to be flat yoy in H2 which woul...
- Andy Hanson
Hybridan Small Cap Feast - 18 September 2024
18th September 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced, or it is a rumour *New product launch* In addition to our Small Cap Feast, which will continue to bring you the latest IPO news and stories across the small cap universe, we will shortly be launching “Friday Takeaway”. This will delve a little deeper on individual companies and focus on non-h...
- David O'Brien
Deleveraging picks up steam
Today’s interim results to June demonstrated strong progress overall, particularly at the margin level. Double digit growth in the regulated and less regulated kettle control markets was encouraging. Furthermore, the restructuring of the Consumer Goods division and the exit from price sensitive kettle control markets also underpinned the rise in margins. Indebtedness declined markedly, reflecting a combination of firm controls in place, positive cash flow and the placing of 5% of the shares duri...
Strix (KETL LN) - Strong H1 with net debt ahead of plan but macro infl...
Interim results show a strong operational performance and good progress in reducing leverage ahead of schedule in the first half of FY24. All three divisions showed gross margin progression leading to the Group margin increasing 310bps AER (+320bps CER) to 39.9%. This resulted in operating profit increasing 7.6% AER (+9.2% CER) and pre-tax profit up 13.0% (+15.9% CER) to £8.0m. Importantly the Kettle Control division has seen recovery in Regulated and Less Regulated markets resulting in division...
- David O'Brien
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 a...
- Andy Hanson
Strix (KETL LN)
Strix has released a trading update for the six months to June (H1 24) confirming that trading remains in line with expectations (Zeus FY24e PBT: £24.2m). Cash generation in the period has been strong and follows an exceptional performance in FY23, where management converted over 100% of EBITDA into operating cash flow. Net debt is now comfortably below 2.0x and Zeus forecast it to reach 1.7x by year end. Leverage risk has materially reduced in the last six to eight months and gearing could reac...
- Andy Hanson
- Carl Smith
- Robin Byde
Industrials Round-up - 08 July 2024
The UK industrial sector continues to strengthen with June output and order books increasing for a second consecutive month, albeit at a slightly slower pace than in May. We think it is too soon to declare conclusively a turnaround, but recent industrial and economic data have been reassuring, as inflation returned to the BoE’s 2% target and sentiment remained positive.
- David O'Brien
AGM statement offers encouragement to investors
Ahead of today’s AGM, Strix has issued a trading update. Encouragingly, management note signs of recovery within the kettle controls market ahead of peak season, and adj. PBT expectations for the full year remain unchanged. YTD cash conservation actions have resulted in cash generation running ahead of internal expectations which, combined with the recent placing, means reductions in net debt/EBITDA leverage are ahead of plan. We retain our prior estimates and a fair value of 167p/share almost t...
- Andy Hanson
Strix (KETL LN) - AGM - Trading inline
Strix has provided a trading statement ahead of its AGM confirming trading remains in line with market expectations. As mentioned at its FY23 results in March, the Kettle Controls market (c. 50% of Group revenue) is continuing to show some signs of improvements and Strix is well positioned to capitalise on the growth as and when it returns.
- David O'Brien
Successful placing to accelerate deleveraging
Strix has completed a new equity placing initiated by an investor that will raise approximately £8m of proceeds, with the placing shares expected to be admitted to trading on 14 June. The funds will accelerate the pace at which it achieves self-imposed targets on the level of headroom on its key banking covenant. As such, the refinancing of the Group’s banking facility set for 2025 should now be on more favourable terms. The group can now speed up investment in sustainable growth should suitable...
- Andy Hanson
- Carl Smith
- Robin Byde
Zeus Industrials Round-Up - 11 June 2024
As we approach the end of H1, recent industrial and economic indicators display an encouraging picture, cautiously supporting optimism for the latter half of 2024. UK manufacturing returned to growth in May, with many countries recording higher PMI readings. Inflation data across the globe was also encouraging, prompting the Bank of Canada and ECB to cut interest rates last week. UK GDP growth for Q1 was also positive and overall business confidence appears to have improved.
- David O'Brien
Billi drives top line growth
Positives emerged, particularly in H2, as the recovery commenced within the kettle controls market. Billi was the architect of the revenue improvement, with LAICA also delivering a double-digit increase in the top line. Margins improved, notwithstanding a change in the mix. Encouragingly, investor concerns on debt were allayed with the careful management of cash, and latterly as bankers raised the net debt/EBITDA covenant to 2.75x. With further emphasis on costs and cash conservation and a lik...
- Andy Hanson
Strix (KETL LN) - FY23 results, forecasts rebased
Strix has reported FY23 results to 31 December 2023 with adjusted PAT of £20.1m, in line with our updated forecast and company guidance provided in January. Revenue grew 35.2% to £144.6m, benefitting from the full year inclusion of the Billi acquisition, albeit slightly below our forecast of £151.0m. Its core Kettle Controls division also performed robustly, growing 2.7%, ahead of the broader market and indicating market share gain. Recent acquisitions have noticeably improved the Group’s growth...
- Andy Hanson
Audio Note: Strix - FY23 trading broadly in line, new CFO
In this audio note, Zeus’ Andy Hanson summarises the investment case for Strix. Strix has released a pre-close trading update for its full year results to 31 December highlighting adj. PAT will be £20.1m on a reported basis and £20.6m at constant currency. Listen to the audio note below, and read the full research here.
- David O'Brien
Strong H2 cash flow
There are several encouraging messages which jump out from Strix’s trading update released today, led crucially by the strong cash generation during H2. This has enabled the Group to come in below the year end banking covenant test, thereby removing significant risk from the rating. In addition, the strong performance of Billi and LAICA has largely offset the slower than expected recovery within the regulated kettle controls market, resulting in FY23 numbers modestly below expectations at the ad...
- Andy Hanson
Strix (KETL LN) - FY23 trading broadly in line, new CFO
Strix has released a pre-close trading update for its full year results to 31 December highlighting adj. PAT will be £20.1m on a reported basis and £20.6m at constant currency. This is broadly in line with Zeus estimates and company guidance of £21.0m. Importantly, the operational performance by the Group, particularly in H2, has resulted in year-end net debt of c. £83.7m (2.15x EBITDA). This is within its debt covenant agreement of 2.5x and better than the Zeus forecast (FY23: £86.9m). Whilst t...
- David O'Brien
Temporary relaxation of covenants
Strix has issued a brief statement that should ease investors’ concerns in the short-term. The Group’s consortium of lenders has agreed to temporarily ease its key banking covenant (net debt/EBITDA) from 2.25x to 2.5x at the Q3 period end, reverting to 2.25x in December. The Board has also confirmed the timing of the payment of the interim dividend of 0.9p / share on 29 December. Finally, the announcement reported the wish of the CFO, Raudres Wong to retire from the Group, effective immediately....
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