Strix Group (LSE:KETL) — Preliminary Results Presentation For The Year Ending 31 December 2020

0:01 Good afternoon, ladies and gentlemen, and welcome to the STRIX GROUP PLC Preliminary Results Presentation for the Year Ended 12/31/2020. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself.

0:24 However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Mark Bartlett, CEO and Rogers Wong, CFO of STRIX. Good afternoon. Thank you very much, and and good morning, everyone. Welcome to, the STRIX PLC results presentation for 2020. In the next thirty minutes or so, Rogers and I are gonna take you on a flying tour of STRIX and show you just how exciting kettles and water really can be. What a way to to get it into the Easter holiday. There's a lot to go through, and and I do want to make sure we leave time for your questions.

1:10 So Rogers and I will run through this presentation relatively quickly. So so brace yourself, and we'll start just with a little bit of history in terms of the company itself. So our roots actually go right back to the the nineteen fifties. Oops. I'm sorry. Just a slight change here. To the nineteen fifties, where actually Eric Taylor started Castle Town Thermostats based here on the Isle Of Man. Core technology was actually invented during the second world war and and used in flying suits. So in those days, the the pilots were trying to get to much higher altitudes, but unfortunately, as it as they went higher up, it got colder and and they passed out. Clearly not very good when you're actually flying an airplane. So they came up with a solution to actually put heaters in the flying suits, and these were using a resistive technology. So as they went up, they gradually started to switch on these these heaters. Unfortunately, that started to interfere with the, communications and and the sort of instrument panel on the plane. So again, not a very good solution.

2:06 And then Eric came up with a solution, which was actually a bimetallic snap action blade. And this is a very small blade, about the size of a contact lens. When it gets to a very specific temperature, it effectively inverts and and provides enough force to be able to switch something on mechanically. And to believe it or not, today, that same technology is still used in in kettles all over the world and and has been a very successful technology to keep those products very, very safe in in some quite dangerous conditions at times. In the early nineteen eighties, there was a a bit of a split within the family, and John Taylor, Eric's son, set up STRIX, vowing to become the market leader. To be honest, he did a really great job. Yeah. We are now sitting here with around 55% global value share, nearly four times larger than our nearest competitor.

2:53 And in fact, you know, 70% of you on this call are using STRIX products every day, so so thank you very much for that 70%. We estimate STRIX controls are used more than 1,200,000,000 times per day by consumers in more than 100 countries around the world and by over 10% of the world's population. So some pretty impressive statistics, you know, for a company based here on the Isle Of Man. In 2005, the business was sold to private equity, a company called AAC Capital Partners, who held the business, through until August 2017 when we successfully listed on AIM. You're buying them out 100%. And frankly, that listing was was probably the best thing that could happen for STRIX. And in three years, we have grown the share price from £1 to today's around the £2.70 mark with significant opportunities for for the future as we highlighted in a recent Capital Markets Day, and I'm sure you'll see more of that during the course of this presentation as well. And frankly, prior to 2017, your STRIX was a bit of a hidden gem. You're based here on the other man, very limited, information on the financials.

3:57 But actually, from an investment proposition, STRIX does offer, you know, a really great deal as I think you'll see. It's a very, very robust and resilient business, which has been demonstrated by our performance throughout this pandemic. We have manufacturing in China, Italy, and on the Isle Of Man, all of which have remained operational throughout the pandemic other than a very short, one week additional shutdown in China at the very start. We have very strong focus on costs and continuous improvement. It is embedded within our culture. We are extremely cash generative, typically with a cash to EBITDA ratio greater than 70%, yeah, and and very profitable. We also have a a very attractive progressive dividend linked to underlying earnings, which with our current plans will remain attractive, and the board is committed to delivering this as we did throughout the pandemic.

4:44 We operate in a number of different growth markets with plenty of opportunity. And if that's not enough, we also have an excellent ESG position with products that save energy, remove viruses and bacteria, and reduce the amount of single use plastics. So let's move on and and look at 2020, first of all. What a year it's been. You know? Extremely challenging period for for many companies. But to be honest, for STRIX, this has been a really pivotal year, given us a chance to sort of step back and really build some strong foundations, and we really continue to transform our business with a number of key strategic initiatives that are going to support our midterm growth opportunities.

5:30 In the first half, we saw the core business hit with China moving into lockdown first during their Chinese New Year. That disrupted the local sales and then the supply channels to the rest of the world, and then that obviously was quickly followed by more and more global lockdowns, yeah, and a further dip in demand within that cattle business. However, thanks to, you know, the work of our dedicated teams, we have responded very, very quickly. And in May, as we had anticipated, the business was showed its resilience, and we saw a very, very significant rebound for the remainder of the year with almost every month from May being a record month for us, in the business. That was particularly in the regulated sector, and that strength, I'm very pleased to say, has continued into 2021, probably with with many of you drinking a lot more tea at home and a lot of students now, you know, stuck in their bedrooms rather than going to communal kitchens. All of that has has helped to drive growth in the KETL market.

6:24 We also saw a very positive position with our filtration and appliance categories, both of which demonstrated growth throughout the the year of the pandemic, and so that's been very positive. And the overall outcome for the business is that we actually, with the with the strong financial controls in place, you know, we only saw a very slight decline of about 1.6% in revenue, but we actually were able to post a 3% growth year on year in EBITDA whilst continuing to invest in the business. Given the confidence and the liquidity we have in our business, we've also been able to commit firmly to our stated progressive dividend, which is linked to the underlying earnings. So we saw an increase to 7.85p per share for the full year. From an operations perspective, just a couple of highlights. You know, we continue to to work to implement automation, raising the the bar, if you like, making it harder for our our competitors to follow us and compete. We now have two thirds of our lines fully automated, and we can make a control on those lines every one point eight seconds. You bear in mind, maybe five to six years ago, that was every eight to ten seconds. So some really significant improvements in technology that have gone on over in our China factory.

7:33 We also successfully implemented SAP into the business, improving our real time data, and that was done in q four, you know, again through the pandemic period. And we were very proud to win, a couple of awards from our key OEMs, one for best cooperation and one for the most outstanding contributor. Yeah. These are are very large OEMs, you know, world leaders in small domestic appliances. And I think that really demonstrates our position within the value chain. You're providing, you know, quite exceptional support to our customers.

8:01 From a strategic point of view, you know, during the pandemic, we managed to acquire Leica. You know, really not an easy task with all the travel restrictions and lockdowns that were going on. Yeah. That is gonna prove to be an excellent addition to the group, and we'll certainly talk about more more about that further in the presentation. We're also really excited about the progress of our new factory in China. Yeah. I know Roger will cover that shortly, but very much on on budget and and still on track, and that will be fully operational by August of this year. We spent time, looking at a a team here. We didn't have to go through any of the furloughs or anything else, fortunately, but we have actually taken time to restructure our business and really strengthen our management and engineering and our marketing teams in particular to support that five year growth ambition. And we also have successfully developed a record number of products for STRIX, using new technologies, and that really will set the benchmark for the future.

8:54 So with that, I'm going to, hand over sorry. With that, I'm gonna move on just to talk about the five year plan. Sorry. First of all. So we communicated in November that we had the intention to double the size of our business and primarily through organic growth in the next five years. And we are very confident that we have built the foundations to achieve that. And clearly, we wouldn't have gone to the market unless we were very confident of of being able to deliver those numbers. And certainly, we'll give you a bit more detail on that as we go through. But just a bit of an update as to where we are on that since sort of October, November last year. First of all, we have grown our share in our core markets. So we've grown by 1% value share in the cattle market, and we've acquired LICA, which would certainly enhance both our appliance and water categories going forward, both of which are growth markets in themselves.

9:42 Based on that positive recovery last year and the acquisition of LICA and a very strong start to the year so far. Yeah. We are very confident we'll be able to achieve your 30% plus revenue growth in 2021. That demonstrates your ability to grow the business and obviously gives us a very good sort of stepping stone into that five year target, in the first year. We've done a lot of work implementing, a sustainability strategy within the business. Last year, we did a lot of publications on ESG, showing the work that we have done, and we continue to do that. We set up a dedicated committee on the board now led by one of our NEDs. So the board is also very, very focused on those initiatives, and we'll touch on that later on during the presentation. And as I reported, we've also committed to our dividend, which will also be a focus for the remaining five years of this particular strategy as well. So all of that has been done during the pandemic when we have successfully managed costs while really continuing to prudently invest in the key strategic initiatives of the business.

10:40 So with that, I will hand over to Rogers and let Rogers go through the financials for 2020 just a little bit more detail. Thank you, Mark. Onto the financial highlights. So revenue declined 1.6% reported at 95,300,000. It's very solid set of results despite of the pandemic. Absolute gross profit held flat versus last year at a modest 0.5% decline, but with the gross profit margin increased by 50 basis point to 41.4%, which was very well supported by stronger product mix in the second half and operational efficiency as well as the addition of LICA. So with the higher growth coming coming in from water, we would expect the gross profit margin to swing a couple of percentage plus or minus depending on the weight of the product mix.

11:33 But with the new and expanded operations in China, we will see more insourcing opportunities to buffer any potential margin solution. And, obviously, our key strategic focus is to grow absolute profit as we have demonstrated resilience in our product and our model to buffer any potential shocks. Adjusted EBITDA increased 3.2% and with adjusted EBITDA margin reported at 40%, which was 1.8 points higher than last year. So this again reflect a highly flexible variable cost base along with our continued improvements in operations. Adjusted profit before tax reported 2.4% at 30,900,000, which is well ahead of our CMD day projection last year in November.

12:22 Net debt reported at 37,200,000, an increase of 10,900,000, and that's that's largely used to fund the acquisition of LICA. So if we can turn on to the next page, a few highlights on the profit and loss. So revenue overall declined 1.6%, but we were supported by the addition of likely with the growth in the water of 20% and as well as appliances, which which have doubled, albeit from a lower base. KETL controls declined over last year due entirely to a weak first half as impact by COVID disruption. As expected in our COVID scenario planning, we saw much recovery in h two where the full year decline was reduced to 7%, and our market share and value was very well maintained.

13:13 Our operating cost before exceptional was reduced by 2%, and this just continue to show our strength to manage cost under a challenging pandemic environment while supporting top line growth.

13:26 Exceptional cost for the year was mainly due to acquisition related cost of 2,500,000. We have also expensed share based payment cost of 1,900,000, and but that was substantially reduced from the previous years of the 6,000,000 where the 2,017 IPO batch of outtake was food expense. Onto taxes, the we have now two jurisdiction that pay taxes. One is China. The other one is Italy. So China, we changed to an import processing license in 2019, which is a far more preferred tax model with the Chinese authority. And since then, the effective tax rate stabilized at 4.5%. And with the addition of LICA, we would look to increase the effective tax rate to 6.5% this year with the Italian tax rate at 28%.

14:21 Our our main headquarter tax rate remained at 0%.

14:31 So some highlights on the cash flow. This is a net debt waterfall slide that shows major movements of cash and debts. We like to illustrate the how we allocate capital to the core priorities that underpins the group's strong cash generation ability. So with the acquisition, we have renewed and expanded our RCF facility now to 80,000,000 with three banks and at the same competitive rates as before for five years. Our networking capital requirement remained relatively low and stable, so the STRIX core group was at a half a million outflows before the addition of LICA. With LICA, it added 1,200,000 outflow to a total of 1,700,000.

15:17 I have previously communicated in a CMD day that there is substantial room in improvement in the Leica supply chain, and we are now working with all the functions to integrate Leica, and we are hopeful to see gradual improvement in the coming months. This will also be very well supported by our newly appointed general manager and finance director of LICA that will work together to drive high cash conversion. So the exceptional cost here are are cash related where it involves acquisition related cost and but it was very well funded by the proceeds of warrants warrants that were exercised by. CapEx here largely pertained to the factory construction of 9,000,000. The rest is operating CapEx, roughly approximate 6% of sales.

16:07 We have we have slowed down CapEx on automation first half of last year to match our lowest sales forecast and also to preserve cash, But we have resumed our normal speed to automation in the second half and continue on this year, where we expect our normal cash CapEx to go back to 8% of sales. 67% of all the assembly lines are now fully automated, and we'll we'll expect expect this to go up to 73% by the end of the year. And in terms of CapEx spending, normally, our CapEx is about six to 8%. But with our continued drive to automation, it will stay at 8% this year, and we will have a 5,000,000 of CapEx on the factory auto factory construction, which is a very last spend that we have to do for the factory.

16:56 And so going into the future, we will expect that to go down to 7% in the next couple of years and likely go down to 6% in the in the in the outer five years. And on a separate note, within the CapEx, last year, we have implemented SAP as Mark alluded to. And this year, we're gonna we want to we'd like to implement the CRM system, which is gonna integrate with SAP, and therefore, that we can have a much more collaborative platform. Acquisitions of LICA was funded by 10,100,000 cash, and then there is a 7 there was a 7,300,000 equity. OCF conversion to EBITDA was 45%, and that included the factory CapEx as well as the acquisition cost.

17:45 If we exclude those, it would be 73%, which is very much in line with the normal STRIX cash generation model. That that here increased 11,000,000 from the previous year, and this number included all the borrowings, but it doesn't include any of the deferred considerations on LICA or IFRS 16 ROE leases. The reasons, the reason for those exclusion was that the contribution from LICA was only 200 k last year, and it's just not justified to include the entire deferred considerations as a fair measure of net debt multiples. And then for reference, the maximum deferred considerations are 5,400,000 respectively for the outer two years payable in f y twenty two and '23.

18:36 The net debt EBITDA multiple track at one time multiple last year end. We projected that to stay on one time multiple this year as well as the deferred consideration is expected to be largely self financed. So our total liquidity pool at 24,000,000 last year end, we have plenty of headroom to meet any of the peak net networking capital draw of 7,000,000 in any time during the year.

19:04 So here, I'd like to illustrate that the I'll emphasize that the group has a four core capital allocation priorities, where during the year, we have prudently allocated fundings to the three capital pots, and they are the CapEx for expanded operations and automation, acquisition, and progressive dividends. We did not pay down any loans last year, but we will continue to deleverage with any excess cash not not using any other priorities. Our RCF facility is very flexible that allow us to pay down and draw very short notice, so that would surely help us with our cash flow planning. So a few highlights on the factory.

19:49 We have embarked on our land and factory acquisition project in late two thousand nineteen, and since then, it has progressed amazingly well on time and on budget despite of the disruption last year. So the new location is within the same Guangdong province as our current site. It is 22 kilometers away from our existing factory, and it is within the same one to three hours radius of our customer space. The new facility could more than double our current capacity, but it's gonna be at the same operating cost, and we are looking for more insourcing opportunities. The factory construction itself was completed in January, and relocation is already underway. It will take us six months till August to complete as we initially planned.

20:38 We have prudent material and stock building in the plan to ensure there's no disruption to sales during the relocation. And we are also investing in renewable energy for all the assembly lines. With the new facility, we are also modernizing the dorms to improve the welfare of all the workers. So as I mentioned earlier, we have a very large investment of 5,000,000 for the factory that we have to spend this year, and that will bring it to a total of 20,000,000, which is well within the budget. And now I'd like to pass back to Mark to continue with the business update.

21:14 Great. Thank you very much, Rogers. So with that, what we'll do is is move into the the various categories of the business. I can see sort of quite a number of questions coming through, I think, yeah, going through the categories here will will probably help to to answer a few of those. First of all, let's start with sort of the cattle control part of the business, which is obviously the sort of the core of the business historically. You're coming out of 2020, that represented something like 85% of the overall revenues. In terms of the market itself, ended broadly flat year on year, but with very positive growth in the regulated, less regulated markets, offsetting some weakness in the China market. For STRIX itself, we saw an increase in value share with growth in our key markets, was The UK, USA and Australia as well as some quite strong growth within the less regulated market, particularly in Russia, in fact, driven by the latest new controls that we positioned in the market to be more competitive. This more than offset the the slight weakness in China. And yet in China, it's not not surprising for STRIX. We tend to be in the more, high end brands in China, and these are normally sold through the physical stores in the first instance. At least, People like to go and sort of look and feel how the quality differs of those products before perhaps going to buy online. However, I'm pleased to say we are seeing quite a strong rebound in China this year given the relaxation of those restrictions, and we will see that come back to normal levels during the second quarter of this year as well.

22:41 In terms of visibility, the OEMs are reporting very, very good visibility. And we hold a very strong order book, giving us very good confidence for the first half of this year. Of course, there are headwinds here, commodities, foreign exchange, Brexit. In truth, most of those are not a major concern to us. Brexit really doesn't impact us that much. From an FX point of view, we have a very good natural hedge in the business. Commodities certainly are something that is seeing a bit of a fluctuation at the moment. We have a policy whereby we will buy up to a year in advance. So we're very well covered up until August of this year so far. And if we were to see continuation of sort of that volatility in commodities, we would pass that on to the OEMs with a price increase in the second half of this year, a decision we'd make quite quickly in the coming weeks and months.

23:31 If you move into sort of the growth aspirations for KETLES, one point sort of question being raised on this. In terms of our five year plan to double the revenues, that is all organic growth. We'll talk about sort of acquisitions later on in the package, but all of the plans we have in this presentation so far at least will show you that growth plan against the doubling of business, but all organically. So in this part for KETLES, we're looking to grow the segment by about 3% CAGR. That will give us a very modest 3% gain in value share, taking us from what was 54% to 57%. As I said, we've already achieved 1% of that in in 2020, so well on the way. And that's going be achieved through the evolution of our our U9 series controls, which came out of the back end of 2017.

24:16 We've already sold more than 33,000,000 of those units since its launch. We're also bringing out new variants for different geographies and applications, you need to expand the addressable markets at places like America, for instance, and Japan that have different power ratings and different requirements. We are continuing to use innovation and technology to really bring in the next generation of controls and to reduce the raw materials being used whilst driving cost reductions to make sure we can actually secure that incremental share. If I move on to the the road map, you can see, in that left hand quadrant, how the the controls are evolving. And then that's actually quite key for us as well. Yeah. We're obviously working with different materials and different technologies to be able to achieve the level of accuracy and tolerances. It is really much harder to build, you know, these smaller controls, and we couldn't do that without the high level of automation and the high level of technology we have in our manufacturing sites.

25:11 So, actually, what we are doing here is moving the goalposts, making it much, much harder for some of the China copiers' products to be able to actually compete, and be able to get their cost base down to the same level. There's also a move to high end appliances, which is providing increased functionality and connectivity. You can even, you know, get Alexa to boil your kettle if you want during half time of the football match, although I think you'll find that's more likely to be applied to some of the appliances you'll see later in this presentation. And we have a very clear focus on sustainability, reducing the energy required, reducing raw materials whilst maintaining the highest specifications. So that sort of covers the the KETL part of the business. It really is that core business. For us, it's really business as usual. Robust business has performed very, very well during the pandemic and a very, very strong start to 2021.

25:59 So moving into the, the water category. Clearly, this is an area that we expect to get quite significant growth over the next five years. We've launched seven new products during 2020 alone. As you can see from the, the the chart in front of you there, a huge opportunity, and the acquisition of LICA will certainly support our growth ambitions, enhancing our product offering and providing, yeah, a really quite exciting road map of new products and technologies in a market that really doesn't have much innovation at this time. And our aim, yeah, really is to make us the clear number two within the market. At least that's our our starting aim. Looking at the growth, when you first look at the growth here, 27% CAGR, you know, it seems quite high, but we consider that to be a very realistic target given some of the things going on within the business. First of all, in 2020, we grew our water division by 20%.

26:48 The market growth itself is something like 15% CAGR for that point of use application,

26:54 and the addition of Leica will obviously give us a very, very good kickstart in 2021. We also have, you know, a very, very strong portfolio of products coming through and a very good sales channel in The UK, Italy, USA and in China, both with our factories over in China as well as the joint venture that we acquired with Leica as well, and a very strong roadmap of new products and technologies, which will really start to challenge the other players in the market, particularly, the market leader. In terms of the, the product roadmap, brief sort of four elements we put into this roadmap. So first of all, you have the at home segment, a range of jugs and water stations that really do support various geographies. As an example, the chiller, that's a product called Lumi, which we actually have experienced growth in 2020 of over a thousand percent with returns well below the industry standard for such electrical appliances.

27:47 And then you've got the on the go category. You we have now an extensive range of bottles that we can now take to market ourselves rather than just relying on other brands. You'd like it in particular brings some great additions to the portfolio and are already being very well received by brands and retailers as they start to be introduced. The filters, you know, we have one of the most extensive ranges of filters for this segment. You're removing metals, chemicals, plastics, viruses, bacterias, as well as some quite unique patented pour through filters, ideal for the use in portable bottles. And we also have a very unique position of being able to offer a universal filter that will fit a wide range of competitive appliances to provide, you know, a significant addressable market in addition to just the ones that we supplied ourselves with the fridge jugs and some of those appliances.

28:35 Then the fourth quadrant there is commercial, which has received quite a lot of press over the last, six or seven months. And this is a technology we actually acquired, in 2018 from Halo Source, and and it's a technology called Halo Pure. We now have two systems in place with two of with the largest livestock companies in China. And this is a really significant opportunity with the government in China really looking to eliminate the use of antibiotics within the farming sector. We would expect to secure another 10 systems during the course of this year, and we've established a network of distributors to promote and support this opportunity. In the Capital Markets Day, we actually put a number a figure in there of £10,000,000 revenue, cumulative in the five years, and we were called out as being quite conservative.

29:21 Actually, the addressable market in this sector just in China alone is £500,000,000. So, certainly, we have taken a very conservative approach. The technology itself is is highly suited to this application and is very unique because not only does it actually kill the viruses and bacteria and cysts in the water, but it leaves a residue, a safe residue in the the pipes and in the drinking troughs such that it continues to kill the viruses and bacteria even after that that water has been consumed. So it's very different from other technologies within that segment, although it is a new technology for the farming sector. So we do believe there's a significant growth opportunity as we continue to expand into other markets. And to give you an example, the two farms we've gone into are two of the largest farms in in China. Each of those farms could easily take 30 to 40 systems from STRIX for the the size of the farms that they have. So, yeah, it's significant opportunity for growth.

30:15 And if we move into the appliance category, yeah, that's been very positive for us. We've doubled in sales, as Rogers mentioned, albeit from quite a low base. And for me, this is perhaps one of the most exciting categories. You as you can see, a huge opportunity again, and we are just scratching the surface in this segment. The acquisition of Leica further expands our addressable market, moving us into food preparation and health and wellness, both of which performed really exceptionally well during the pandemic period. We also now have several agreements in place

30:46 for what we call the hot water on demand technology and for the baby care categories providing a global footprint as we develop further products in those areas. Looking at the, the growth, you're aiming to triple the size of this category over the next five years with a really exciting roadmap of new products both from within STRIX and also from the addition of Leica. The market itself already exit exhibits double digit growth, and we are seeing excellent traction for some of the core technologies, particularly some of the water stations that I'll I'll come on to in a second. Route to market for us now will be a combination of our own brands as well as using our existing partner brands to maximize the opportunity and increase the speed to market. You bear in mind that within our KETL market, although we sell to the OEMs, we have relationships with over 450 brands and and retailers around the world. So we have some really strong positive connections with most of the major brands, that can help to bring some of these products to market with us.

31:43 And if we look at the road map, you can see we're we're very active at the moment. Some exciting new products bringing innovation and real consumer benefits in terms of both functionality and also with benefits to the environment. So in that top left hand quick quadrant, you've got the hot water on demand. These are things like water stations providing chilled boiling water at any temperature in yeah, at any temperature in between and with no preheating of water. They deliver true boiled water. A lot of a lot of claims out there in the market to to giving your boiling water where they're really not quite getting to that limit. But not only does it do that, it does that without any preheating of water, and it will take your room temperature water to start giving you boiled water in just five seconds. So, you know, very, very positive environment environmental point of view. Yeah. It clearly is a very efficient system, and we're getting some really strong traction from brands. And you will start seeing that come to the market in about five to six weeks. It's on see at the moment.

32:41 That's a standalone unit, although, you know, going looking forward into the long term, could easily be adapted to be a a plumbed in, do it yourself type system as well. And first of all, launching with Aqua Optima, and then very soon after, it will be launched by one of the the top five brands, global brands that is in the marketplace as well. So you'll certainly start to see some some positive benefits from that in the second half of this year. In the baby care, your continued expansion into sterilization systems with very strong patented technology that does again provide very efficient operation and and significantly improved performance. And then the food preparation, yeah, this is really the addition of Leica. You're bringing items such as sous vide and vacuum packs. Today, are sourcing those products and then selling them into Italy and into other markets. Clearly, STRIX has a very, very strong presence and a very good relationship with over 200 OEMs in China. So we will be using our purchasing power to obviously improve the profitability within that segment as we consolidate that range.

33:42 So moving nicely into the Leica acquisition. Already, we've talked quite a lot about Leica, you can see how important it is to our growth plans. Yeah. This is an exceptional addition to our business, bringing a very well recognized and established brand, a high quality range of products in both water and plants categories, very, very strong and dedicated workforce, and a state of the art filter production site. I mean, that certainly shouldn't be underestimated. We now have, you know, a manufacturing location over in in Italy. And so from a filter point of view, we can actually produce and sell filters to Europe from within Europe, obviously, any of those logistics from the Brexit point of view as well. During the pandemic, your light STRIX Leica was extremely resilient in both filters and in the appliances, particularly items such as food preparation, thermometers, and other health care applications, and it did achieve double digit growth despite all of the disruptions last year, and it's certainly on track with the with strong performance in q one.

34:43 Integration of of the business is is very much on track with us even, you know, with the pandemic. Obviously, we're using a lot of of, video conference calls and so on get the teams working together, and we have separate work streams for each of those functions and very, very clear financial targets to make sure we can maintain the focus. Primary focus has been on the commercial groups to really make sure that we can maximize the cross selling opportunities, particularly particularly between Leica and and Aqua Optima between Italy and The UK. And I think it's very important to recognize those brands are actually very different in terms of how they are perceived. Your Leica is very much on a par with with the likes of someone like Brita, so it's a premium brand. Yeah. Aqua Optima has been seen to be more of the challenger brand being used in some of the, the the sort of the trade brands such as in in Tesco's, as an example in The UK.

35:30 So that gives us very much a good, better, best type, group of products, which will allow us to have a much better product offering for many of the larger retailers in places like The US. We're also going to launch our first joint product with with LICA. This is a STRIX developed, technology, very disruptive. We will be launching an induction kettle, later this year, which should be branded as as Leica and initially sold into the Italian market. Very, very strong passenger technology. And as far as I'm aware, it's the only, induction kettle will be the only induction kettle available on on the market. And then we're moving to, ESG. As I said, we've spent quite a lot of time, in this this last year, and we did put quite a lot of presentation out in the Capital Markets Day. Which STRIX has a very attractive ESG proposition, and we are working really hard to bring this to life and increase the communications to the wider markets.

36:25 The environmental element, yeah, has had quite a lot of press. Yeah. And our products really do provide significant benefits by reducing energy, reducing the use of single use plastics, providing clean water, drinking water around the world, and making products safer with a longer lifespan. All of those here tick the boxes and have been very well received. We're really pleased to see how many of our existing investors, in fact, have put us into their ESG funds. In addition to our products, we also have a very strong position within our operations and are working to implement renewable energy, as Roger said, the new factory that will be in place by August for all of our assembly lines. We're finding ways to reuse the wastewater used during the testing. Obviously, with kettles, you test a lot of a lot of boiling water. So, yeah, we can use that for heating of the of the of the, the various factories as well, as well as a number of other initiatives to reduce our overall carbon footprint.

37:17 To date, we have not put out the the benchmarks. And the reason for that is we're waiting for the factory to be up and running. I mean, that will make a significant difference to the benchmarks. And what we didn't want to do is is to come out and show this this massive difference year on year. We'd much rather come out with some very clear targets in September when we come back to the next road shows and then report on those on a regular basis, yeah, for the next sort of three to five year plan. Yeah. In terms of the S and G parts, yeah, obviously, they are of equal importance, you know, to us and to our investors. And here, we are also still very well positioned with our strategy and core business activities clearly aligned to the relevant UN sustainable development goals. From a governance point of view, you know, we are very well positioned. We work very closely to all of the relevant ISO standards across our business and therefore have a strong culture of continuous improvement.

38:07 For the last two years here on the Isle Of Man, we've we've actually achieved the benchmark status on our ISO audits, which is the highest standard that you can achieve. And that will be implemented for quality, for health and safety, and for all the environmental initiatives. Our approach to sustainability comes right from the top with myself as the CEO driving the initiatives internally, supported by a dedicated committee at board level led by Richard Sales at NED. So you have very strong fit focus from throughout the business. And we're also committed to developing our people and to the diversity within our business. We currently have 60% of our employees being female and obviously operate equal rights for all of our shareholders. So moving into, the outlook. This is really, as I said at the beginning, a exciting and quite pivotal period for STRIX. The business that we launched in 2017 is very different to the one we have today. We have a very resilient business with strong financial performance, and I believe, to deliver on a sort of growth commitments for the five year plan. Yeah. As a business, yeah, we have spent the last year rebuilding foundations and and are structured for that growth. We've got a new factory providing double the capacity.

39:16 We have the acquisition of Leica, a highly competent and dedicated workforce, and a very, very strong and exciting roadmap of new products coming forward. Of course, as I mentioned, we've got those headwinds, but as I said, we're very, very confident that we can overcome those and we have certainly far better place than many of our competitors to be able to overcome them and actually put in commercial initiatives to make sure that we can secure our targets for 2021 and beyond. At the end, we as as a management team are very, very confident both of our 2021 commitments, but also executing on those medium term strategies to deliver the five year targets. And then finally, from from the slide point of view, just looking at the investment itself, I hope you agree from the very short presentation we've had here. We believe, certainly, we have a very compelling investment proposition. We have delivered growth during the pandemic, whilst continuing to invest in strategic initiatives in the business.

40:12 We have a very high quality, resilient and robust business that benefits from geographical and product diversification, and we are poised for growth with some very compelling opportunities. We have a very solid balance sheet, low leverage, really does provide us very strong financial flexibility to navigate any headwinds and deploy capital consistent with the allocation of capital priorities. And we remain, as a management team and a Board, committed to that attractive progressive dividend policy linked to the underlying earnings of the business. So with that, I finish talking, and I will go back to open up for answering some of those questions. Fantastic. Myra Rogers, thank you very much indeed for the presentation. Really comprehensive. And ladies and gentlemen, do please continue to submit your questions using the q and a tab situated on the right hand corner of your screen. But just while the company take a few moments to review those investor questions submitted already today, I'd like to remind you that recording this presentation, along with a copy of the slides and the published q and a, can be accessed via investor dashboard on the investor.me company platform.

41:15 I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback in order the company better understand your views and expectations. Mark Rogers, just touching on those, investors have submitted a number of questions during the presentation. Perhaps if I could just hand back to you to click on that q and a tab, and and read out the question where appropriate to do so, that'd be great. Yes. Certainly. Thank you. So a few questions come in here. I'd like to see we've answered some of those going through, but let me just sort of run through them and and try and answer them in a bit more detail if we haven't done so already. So I think the first one on there is is from Chris asking about the competitive advantage in water heating and filtration versus the kettle controls. So they they are they are very, very different technologies. Obviously, the kettle control has been around for years. Actually, kettles are extremely efficient in the way they're used. The biggest issue with kettles is that people overfill them. And, yeah, there's lots of statistics to say on average people would put 30% more water in than they actually need, you know, in fear that they're going to run out. You know, a lot of these new technologies we're working on only heat the the water that you actually need or any boil the water you actually need, and therefore, yeah, there's a very significant saving almost immediately.

42:29 And, also, the way they that they actually, achieve the the heating is is very different as well. Rather than having your your pot of water below above a heating element, in most of these sort of other cases, you're actually pushing water through the inside of an element. So the efficiency of that heating is is much, much higher as well. So, hopefully, that that that answers your question, Chris. Next one I've got on here was, from James asking how much of the 30% of the revenue growth in 2021 is organic and how much is LICA. You I think you people who who have followed STRIX will understand that we are we are very conservative in in the communications we give. Clearly, we we want to make sure we achieve all of those numbers. You know, we obviously are are confident with that 30%. You know, and LICA being added for a full year is going to give us something between 1618% growth without doing anything in terms of synergies or anything else. So right now, when you look at those numbers, Leica is somewhere in the order of 16% to 18% of that 30% revenue growth in 2021.

43:32 But, yeah, plenty of opportunities on on some of the other products there as well. Next one we've got there was from from Nick Jay. They're asking, yeah, doubling your revenue is a very strong statement. Can you break down how you plan to get there and how much will be organic versus m and a? I think we covered that during the presentation. A 100% of the plan is actually organic growth as we sort of break down from the numbers we had there. So today, our revenue is 85% KETLES and 15% others. By the end of five years, we'll be looking somewhere in the order of 55% KETLES, 30% water filtration and 15% in the appliance sector, just as a sort of a rough guide overall for that. Also on the M and A, we have not included any m and a inside that number.

44:20 That doesn't mean to say we're not looking for them. Of course, we are. However, you know, we, we would be looking for quite a niche player in the marketplace. You know, we have very high market share, highly profitable business. To find something that that is accretive and fits with all our strategic plans. Yeah. There's not hundreds of hundreds of those companies out there. I mean, there are a few, but we don't know when they're going to hit, so we have not put those in the numbers today. Just to clarify that a little bit, we've been very clear with the market that we would want to fund that from our current facility and through the cash that we generate. So typically, we'd be looking at a sort of a size of acquisition somewhere in the order of GBP 30,000,000 to 40,000,000. And we would not want our debt to EBITDA ratio to go above around 1.8 times. We're very comfortable in that one to 1.8 times. And I think we've proven that we can pay that down very quickly as well.

45:12 Next one I've got here is from Simon. You given the quality of this business and your market share, do you feel there would be any benefit to move your listing from AIM to the full list? It's it's not something, we spend much time with today. Yeah. We've grown from sort of a 190,000,000 market cap to, you know, 600. So, yeah, it's it's been a very, very fast growth for us, and we certainly have, you know, done well through that period of time. And we came to the market purely really as an investment fund. And over the three years, we've transitioned now to be sort of more of a sort of growth in ESG fund as well as still providing very strong dividends, obviously, linked to that underlying earnings. So, right now, I think the answer to that probably is no. We still have quite a number of people that take advantage. You have IHT and so on, which obviously would not be the same.

46:05 And, obviously, we're we've got a domicile here on the Isle Of Man. So I think short to medium term, we are very happy where we are on the AIM listing. And then I've got a I think that maybe the questions are still coming in, so bear with me. We've got one here from Ian, which I think is the the last one on the list, actually. What is your view on share buybacks? It's something that that that had had been discussed in the past, particularly actually in the early days when we listed. Frankly, I think, yeah, there's much better ways of using, yeah, the the facilities that we have. Obviously, if the shares, you know, or the market drops significantly on a period of time, you know, something that would be worth considering. But right now, I think from a board perspective, yeah, we feel there's better investments to be made, yeah, with any of the spare cash that we have here in things like the the acquisitions or automation, you know, improving our business as it stands today.

46:59 Fantastic. Thank you, Mark. You actually have covered off those all those questions. And if there are any questions that do come through, the company can review those, and we'll we'll submit and publish responses where appropriate to do so. Mark, just as we go into to to closing up, perhaps I could ask you just for a few final words just to wrap up, please. That'd be great. No. Thank you very much. And then, yeah, I'd also like to thank everybody for the time on the call today. Yeah. We're always open to to answer any any questions. Yeah. Hopefully, you can sort of tell from from from the tone of the company. Yeah. This is, this is a really exciting business, yeah, I really do believe that we are ready and very well positioned to maximize our opportunities as we emerge from the pandemic. And we certainly, as a management team, intend to realize our full potential delivering that five year plan. And sort of historically, yeah, I think, yeah, we've been quite frustrated that we've not been able to realize our full potential. And under, you know, the listing from 2017, I think, yeah, we really have changed the business. You've built some really strong foundations, You are now are are able to deliver, you know, the full potential of this company.

48:01 Mark Rogers, thank you very much indeed for updating investors today. Really great presentation. Could I please ask investors not to close this session as you're now automatically redirected for the opportunity to provide your feedback. If you've accessed this meeting from our website, the feedback page will appear. But if you've accessed the meeting via the link sent to you in an email, it's gonna asked just to log back in and give your feedback. And it takes a few seconds, and it's greatly appreciated by the company. On behalf of the management team of STRIX GROUP PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you.