Strix Group Plc

Good morning and thank you to those of you who are joining us today to hear from Strix PLC, who announced their interim results earlier this week. If you haven't seen it already, you can find an updated note and forecasts on our website at equitydevelopment.co.uk. But the purpose of today is to hear from the management team who will talk you through their half-year presentation, and then there'll be an opportunity for Q&A at the end. Feel free to submit questions as we head through the presentation via the Q&A box on the Zoom application. But for now, I will hand over to Mark Bartlett, CEO.

Thank you very much, Hannah. Welcome, everybody. Good to see a very strong turnout. As Hannah says, we're here to actually present the interim results for the period ending 30th of June. I think the best way to describe this, we'll start with the highlights first, obviously, is it's been a half year of quite mixed fortunes. There's been a lot going on in the business, and over the course of the next 30 minutes or so, we will try and give you as much detail as possible. As always, we'll run through relatively quickly to make sure we can allow some time at the end. However, if I start with just some very high-level points, I think, first of all, let's start with Billy. Billy has a very strong performance in the first half of the year, maintaining its double-digit growth performance, as we've all come to expect, which has been supported by both new products and also some further geographical expansion. I'll get into more detail as we go through the divisions. It has also been very good to see consumer goods also performing well in the first half of the year, delivering a solid 7% growth. following all the previous restructuring and despite what is still a very volatile global small domestic appliance market. Unfortunately, the controls division has continued to face some challenges, and despite what was a very strong quarter one, the geopolitical instability and the macroeconomic uncertainties, due primarily to the indirect and direct impact of tariffs, decreased revenues by 24.2%, more than offsetting the successes of the other divisions. Clearly, I'll get into much more detail on the control division as we get into that part of the presentation. You'll see on the slide there, some more numbers there. I'm going to leave those for a little bit later on for Claire to be able to go through those in detail as she goes through the financials. But just one other point I'd like to cover on the next slide, if I may, Helen, and that is actually looking at the year end. So after much discussion in the board, we have decided to change the financial year end from the 31st of December to the 31st of March, 2026. As many of you will know, there are two very important industrial fairs in China, known as the Canton Fair, and these are held in April and October, both just around our current roadshows. These shows really do provide us very significant market data and intelligence for the Controls Division. We get a better understanding of the market dynamics, consumer demand, which will allow us to get much more accurate information to update the market on future forecasts and in the market trends. Right now, we come out to see you in March and in September, as we are now, and literally two weeks later, we go to China, gather all this information, and then come back and report again. And obviously, that is not the most efficient way to actually update the market, and it gives it very last-minute information. So changing the year end will actually allow us to give better and smoother information and more accurate information to the market, both on our reporting and on our forecasting as well. So as part of this change, we will be providing an update in November on both our trading and our accelerated debt reduction plans, which Claire will cover in some more details, including some metrics for the six months to 30th of September 2025. Analysts are currently updating the modelling to reflect the 15-month period, and hopefully you'll see those changes going through in the next few days. Some have already actually achieved that already. So with that, I will pass over to Claire to go through the financials and the refi.

Thank you very much, Mark. And before we get into any detail of divisional margins and movements in net debt, as normal, I want to take us through the high-level financial highlights of the half year just gone. As you can see here, and as Mark has already spoken about, we have undoubtedly seen some macro challenges in this half year period, which have impacted our results and have led to that 6.4% reduction in adjusted revenue. I'm not going to say any more about that because Mark's already spoken about it, and I know he'll take us through in a little bit more detail in a few slides' time. As expected, when we look at gross margin, we've seen a decrease in the period, reflecting some of the commercial changes that we have made, especially in the consumer goods division. However, it's fair to say that the unsettled trading conditions and controls have exaggerated this further. I'll give a little bit more detail on the next slide as we have the information shown divisionally there. Adjusted EBITDA has unsurprisingly also decreased at both the margin and the pound note level. This largely reflects the reduced gross margin. But as you can see there in the basis points differential between 360 basis points and 280 basis points, we have been working hard to offset the impact of this by a prudent cost control, bringing overheads down around about a million against the prior half year, despite the ongoing strategic investments, particularly in Tbilisi. And I am going to be bold, naive and controversial here when I say this, but still being able to secure gross margins in the mid-30s and an EBITDA margin of more than 20%, given such extraordinary macro conditions in the controls part of the business, really does speak to the underlying resilience of this group. Turning to cash generation, in the bottom right-hand corner, it's fair to say that the speed of the tariff-led town turn in controls has knocked us off our 75% to 85% target. The biggest impact to this is the increase in control stock, as we've struggled to second-guess the timing of the recovery, production levels have somewhat inevitably overshot sales demand. In fact, without the increase in stock, cash conversion would have been around 95%. We expect this to be a temporary impact, and as you would expect, reducing this back down will be a key element of the accelerated debt reduction strategy that we will speak a bit more about in a couple of slides' time. Although it is just the other side of the cash conversion, I do think it's also worth mentioning the net debt leverage position. The macro conditions and controls and the impact these have had on both trading levels and working capital has reduced the business's ability to keep leverage within our net debt appetite of one to two times. So despite the ongoing careful control of OPEX and CAPEX investments, we have ended the half-year 25 at 2.21 times. This is obviously not where the business wants to be and plans are already under development with the support of our existing lenders to ensure that we can accelerate debt reduction in the short term and get that comfortably into range. So that is the highlights. If we can move on to the next slide, Hannah. Thank you. And here we can talk a little bit more about gross margin. Now, before we go any further and in the spirit of full disclosure, we have adjusted the way that we calculate divisional gross margins here. For the first time, we have reclassified certain costs, including those relating to group departments, as central costs, rather than allocate them out into the divisions. The specific impact of this is made clear in Note 3 of the R&S for those of you who want to go and look at the detail. This change allows for better analysis of underlying divisional training performance, effectively with less distractions. Obviously, comparatives and also obviously overall gross margins have been restated and the overall gross margin continues to take all costs into account, so there is no change to be seen there. If we look back at the half-year 25 results, as mentioned, and in part as expected, we have seen a decrease in our overall gross margin of 360 basis points. The main reasons for that decrease relate to the controls and the consumer goods divisions, as you can see here, with our highest gross margin division, Billy, continuing to secure gross margins in excess of 45%. For controls, gross margins have decreased by 340 basis points. As we have discussed, half-year 25 has been a challenging time for the controls market, and the gross margin has seen the negative impact of three main factors. The first and the most important is simply lower sales over what is a semi-fixed cost phase. On top of that, the ongoing weakness in the US dollar has had an impact as we sell about 50% of our export controls revenue in US dollars. And finally, we've seen a shift in market mix with a high margin REG and less REG export markets more impacted by the tariff concerns, as you would imagine, than the lower margin Chinese domestic market. Looking ahead, it is the market settling that will have the biggest impact on marginality and controls, and obviously if the US dollar continues to strengthen, then we would expect to see a positive impact as a result. As I said at the beginning, for Billy, margins will remain broadly in line with half-year 24, and we expect this to continue, supported by high underlying growth and a markedly lower price sensitivity across Billy's main end markets. Our consumer goods division has also seen a decrease in gross margin, down 450 basis points. However, we were expecting this. And in fact, this was something that we've already spoken about in the context of the 2024 announcement. It is due to the ongoing rollout of appliance manufacturing, which started in quarter four of 2024. And we've seen manufacturing levels further ramp up in the period and also the launch of additional products. Now, this is a real driver for revenue growth, which Mark will provide more detail on later. However, inevitably, it does not generate the same margins as the original product sales do, and therefore it's had an overall dilutive effect on margins in the division. As we look ahead, we continue to see gross margins remaining broadly consistent at around 25% to 30% in our consumer goods division. So, that's the income statement. If we turn over to the next slide, we can see what's happened on the balance sheet side. and to understand that and also more importantly where the business is from a net debt point of view we have included our usual net debt bridge as we said at the beginning of the presentation underlying cash generation and therefore continued net debt reduction has been more challenging in the face of the significant macro uncertainty in our controls division and as a result of this we have seen net debt increase by just over 5 million in the first half of 2025 However, notwithstanding that, we do continue to generate substantial operating cash inflows of £12 million, as you see there, albeit this is lower than the £15 million we secured in half year 24. If we turn to the third bar on the graph, this predominantly illustrates the impact of that temporary stock increase in the controls division that we spoke about a couple of slides ago, with £5.7 million of that £6.8 million shift being led by higher inventory levels. and therefore giving us a clear area of focus as we look to pull together our accelerated debt reduction strategy, which I'll speak about a bit more in the next slide. As you would expect, when it comes to cash, we haven't stood idly by in the face of the controls trading challenges. We already touched on our ongoing careful control of OPEX earlier. Well, not only has that allowed us to reduce overhead spending over the course of half-year by £1 million, but as it says here, we have also reduced CAPEX spend by a further around £1 million against half-year 24. And where we are spending money, this has been strictly focused on our key strategic drivers, such as the build and the next-gen production lines. It is also pleasing to see that all the hard work we put into net debt reduction in financial year 24 has been paying off, as net finance costs have continued to reduce, ending up over 25% lower than in half year 24 at 3.6 million. Now, seeing an increase in net debt is very clearly not where we want it to be right now, and it has had wider implications on, among other things, our refinancing plans. So if we turn over to my final slide, I want to take us through where we are in terms of the refinance process and what our current planning looks like in this regard. And I have put something a reminder on the left hand side of this slide as it really does provide important context of where we were and where we've come over the course of this year. As you know, we've been on a journey over the last couple of years, effectively laying the foundations down to enable us to secure cost-effective and flexible funding to best support our medium-term growth aspirations. The strong focus on cash generation and conservation reduced net by £20 million in financial year 24 and brought leverage back into range at 1.87 times. And we've also just seen one of the key immediate benefits of this in the reduced finance costs that we spoke about on the previous slide. A lot of time has also been spent further developing our existing banking relationships and, to be fair, also looking outwards in order to identify other potential lending partners. And in September 2024, we got full support from the existing banking group to extend our facilities for one year up to October 2026. And this was to give us appropriate time to run a sensible refinance process. And on top of that and simplifying the refinancing ask, we have also almost paid off the Billy term loan with the last payment going out in November of this year. In fact, to all intents and purposes, we exited financial year 24 on track to initiate a full competitive refinance process over the course of 2025. And as announced in July 2025, that is exactly what we had done. Despite the high degree of interest with nine lending banks involved in the process, it became obvious that the group would not be able to secure new, appropriate, cost-effective and flexible funding in the context of the unsettled macro conditions. And as a result, we have sensibly put the refinance process on hold. However, that is not the same as saying nothing has changed. As soon as that decision was made, we have been in proactive and supportive conversations with our existing lending group, and with full lender support, we've been able to amend the current facilities to ensure that they can more appropriately support business in the short term. This has culminated in two things. One, a resetting of the DSCR covenant to an interest cover metric, which is more fitting for a purely RCF extension. And two, a temporary relaxation of the leverage ratio to three times from 30th of September to provide additional flexibility to better support the group's short-term commercial strategies. But perhaps the most important thing to come out of this process is that in the context of the current macro conditions and to further support a future refinance process, we are committing to an accelerated net debt reduction programme. in order to get comfortably back within leverage range with a more cost-effective funding structure as quickly as possible. Detailed plans are currently under development in this regard, and we look forward to reporting back on progress alongside our trading update in November 2025. And with that, I will hand you back over to Mark to take you through each of the divisions in a bit more detail.