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Summary
- Strix Group reported 21 percent year on year decline in revenue in H1 FY20 following the challenging economic conditions.
- Kettle control business was severely impacted in H1 FY20 as close to 90 percent of kettles are manufactured in China.
- Xeros Technology Group generated revenue of £215,000 in H1 FY20, which declined by 82.6 percent year on year.
- The Company sold all its direct operation business, and it is currently focusing on the licensing business.
Strix Group PLC (LON:KETL) and Xeros Technology Group PLC (LON:XSG) are industrial stocks. Based on 1-year performance, KETL was up by around 39.35 percent, whereas shares of XSG were down by approximately 79.60 percent. Shares of KETL were down by nearly 0.21 percent, whereas shares of XSG were up by about 6.35 percent from the last closing price (as on 25 September 2020, before the market close at 1:00 PM GMT+1).
Strix Group PLC (LON:KETL) - Resilient performance after June 2020
Strix Group PLC is a UK based company that is engaged in the design and manufacture of kettle safety control. It also develops components and devices used in water heating, temperature control and water filtration. The Company has established a partnership with brands, retailers and original equipment manufacturers (OEM).
H1 FY2020 results (ended 30 June 2020) as reported on 23 September 2020
(Source: Company website)
In H1 FY20, the Company reported revenue of £34.7 million, which fell by 21 percent year on year from £43.9 million a year ago due to the covid-19 headwinds. The adjusted EBITDA declined from £14.9 million in H1 FY19 to £13.6 million in H1 FY20. The adjusted profit after tax was £9.8 million in H1 FY20, which declined by 9.6 percent year on year from £10.9 million in H1 FY19. Strix Group generated net cash from operating activities of £8.3 million. As on 30 June 2020, Strix Group had a liquidity headroom of £23.1 million and net debt of £36.9 million.
Performance by Category
The performance of the Kettle control segment was disrupted due to the pandemic as 90 percent of the kettles are manufactured in China. In Q1 FY20, the domestic sales volume in China decreased by 20 percent year on year. The online platform slightly supported the sales of Kettle control, but the in-store sales of the products remained weak.
The pandemic resulted in both supply and demand disruption. Water category revenue increased by around 2 percent year on year in H1 FY20, and it was supported by increased health concerns and reduced plastic waste. The Company continued the development of products in the Water category. In the Appliances category, Strix is working with the brand partners in the development of products. Some of the products under the Appliances category are undergoing development, or they are in the design phase. In H1 20, the Company signed ten deals for the appliances and baby care category.
Kettle Control Business
(Source: Company website)
Share Price Performance Analysis
1-Year Chart as on September-25-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Strix Group PLC's shares were trading at GBX 233.00 and were down by close to 0.21 percent against the previous closing price (as on 25 September 2020, before the market close at 1:00 PM GMT+1). KETL's 52-week High and Low were GBX 260.00 and GBX 110.80, respectively. Strix Group had a market capitalization of around £464.38 million.
Business Outlook
Strix Group would focus on improving the efficiency of the business and the commercialization of products. The Company would invest in automating the processes. It highlights that the Kettle market of the Company is stable despite the stifle between the US and China and the concerns over Brexit. The sales volume of Kettle control is expected to increase by 26 percent year on year in Q3 FY20 and report sales of £24 million. Water category is likely to strengthen following the acquisition of Lacia SPA in H1 FY20 and HaloSource in 2019. The business activity after June 2020 has built the confidence, and it expects the performance for the full year to be in line with the Company's expectation.
Xeros Technology Group PLC (LON:XSG) - Balance sheet remains debt-free
Xeros Technology Group PLC is a UK based company that provides solutions and technology for clothing and fabrics. The patented technologies of the Company include XDrum™ and XOrb™. XOrb™ reduces the amount of water used for dyeing of clothes, and XDrum™ is a low-cost machine drum design that allows XOrb™ to be introduced in the process. XFiltra™ is a proprietary in-machine filtration technology.
Solutions of Xeros Technology Group
(Source: Company website)
H1 FY2020 results (ended 30 June 2020) as reported on 23 September 2020
(Source: Company website)
The Company generated sales of £215,000 in H1 FY20, which declined by 82.6 percent year on year from £1,234,000 in H1 FY19. The revenue was impacted due to the sale of a significant portion of the US Hydrofinity commercial washing machine contracts to a third party as Xeros Technology is under the process of transforming the business model of the Company from direct operations to licensing. The adjusted EBITDA loss narrowed to £3.0 million in H1 FY20 from £7.5 million in H1 FY19.
The adjusted EBITDA loss declined due to lower administrative expense following the exit of direct operation business and headcount reduction. The operating loss was £3.5 million in H1 FY20. The net cash flow from the operation was £4.1 million in H1 FY20, and as on 31 August 2020, Xeros had cash of £6.2 million, and the balance sheet remained debt-free. Based on the segment revenue, Machine sales were £8,000, Service income was £172,000, and Licensing income was £35,000 in H1 FY20.
Operational Highlights
In H1 FY20, the design of XDrum machines was completed by SeaLion in China and IFB in India, which will be selectively trialled in Q4 FY20. The products are planned to be launched in early 2021 that is already three months behind the original timeline. Since the beginning of 2020, Xeros Technology has focussed on becoming a pure licensing company and sold all its direct operation business. Marken was the last direct operation business in the US that was sold in June 2020. The Company would only focus on the licensing business, and it expects to generate good streamflow of royalty income starting from 2021. The Company has more than 30 patents that are either approved or in the application.
(Source: Company website)
Share Price Performance Analysis
1-Year Chart as on September-25-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Xeros Technology PLC's shares were trading at GBX 1.34 and were up by close to 6.35 percent against the previous closing price (as on 25 September 2020, before the market close at 1:00 PM GMT+1). XSG's 52-week High and Low were GBX 6.80 and GBX 0.35, respectively. Xeros Technology had a market capitalization of around £25.20 million.
Business Outlook
The health crisis impacted the business activity of Xeros Technology as product launch have been deferred to Q1 FY21, and royalty income has been delayed by nearly three months. The Company is developing the industrial size product for the filtration platform technology, and it would focus on increasing its customer base. The Company is planning to consolidate the number of trading shares in H2 FY20 to reduce the volatility in the share price.
