- Second disappointment in as many months
- Full year earnings forecast cut by 18%
- Shares fall by a third as investors bolt
Kettle safety controls group Strix (KETL:AIM) served up its second profit warning in two months in an unscheduled trading update on Wednesday, sending the shares crashing by a third to 83.5p which leaves them down 72% for the year.
The company said ongoing lockdowns in China had ‘adversely impacted’ two of its top five major OEM (original equipment manufacturers) customers, with further disruption anticipated.
WHAT IS THE FINANCIAL IMPACT?
As a precaution, the firm has reinstated its secondary warehouse to minimise disruption. Due to continued macroeconomic and political uncertainty across several of its key export markets, the company now expects pre-tax profit for the year ending 31 December to be around £23 million.
This represents an 18% downgrade from the mid-point of the prior range of £27 million to £29 million which management provided at the half-year results in September.
The timing of the current disruption could not be worse with December being a ‘significant’ period for the group due to active trading ahead of the Chinese New Year public holiday when several suppliers and customers cease trading.
BILLI ACQUISITION COMPLETED
The company also confirmed today the acquisition of Australian water systems company Billi, announced on 5 October, is now complete.
The addition of Billi ‘materially accelerates Strix's growth plans for its Water & Appliance categories and provides an entry into the high growth and strategically important hot tap market’ the company added.
The £38 million acquisition was funded by debt and a discounted £13 million share placing at 115p per share.
EXPERT VIEW
Shore Capital analyst Tom Fraine said he continued to see downside risks despite recent weakness in the shares.
Fraine commented: ‘We believe management’s targets for the 2025 financial year will be difficult to achieve without significant M&A and further share dilution.
‘We consider many of the Water Category’s products that generate a material portion of the category’s revenue to have only marginal advantages over competing products.’
