Half-year Results

Financial Summary

• Adjusted results from continuing operations exclude adjusting items, see note 16 and results from discontinued operation, Halosource see note 15
• Net debt is as defined by our bank facility agreement and excludes the impact of IFRS 16 lease liabilities
• "CER" being Constant Exchange Rate, is calculated by translating the HY24 figures by the average HY23 exchange rate, and "AER" being Actual Exchange Rate.

Financial Highlights

Mark Bartlett, Chief Executive Officer of Strix Group Plc, commented: "Strix has made considerable progress on a number of fronts in the first half of the year, namely the continued rebasing of the business and the reduction of our debt position which I'm very pleased to report is ahead of our target. Operational improvements have been made across the Group, better positioning us for medium and long term growth opportunities including new product launches, rationalisation of the Consumer Goods division and the roll out of Billi in key markets.

We continue to see profitable growth opportunities in all of our core markets and look forward to executing on our strategy in the second half of the year, further improving our competitive position, strengthening the balance sheet and delivering profit growth. Notwithstanding the macro uncertainties, including the relatively lower trading for parts of Q3 in regulated Kettle Controls, the Board expects to deliver full year results for the year in line with market expectations."

Analyst & Investor Presentation

Strix will be hosting a presentation for analysts later this morning, at 09:30am (BST). Analysts wishing to attend should email strix@gracechurchpr.com for details.

Strix will also be conducting an online Investor Presentation on Monday 23 September 2024 at 11am (BST), providing an update to investors following today's results and to answer questions submitted by viewers.

The webinar is open to all existing and potential shareholders, and registration is free. You can sign up to register here: https://www.equitydevelopment.co.uk/news-and-events/strixgroup-investorpresentation-23sept2024

The Group intends to release a further update to the market in November 2024 following attendance at the autumn trade fairs and feedback from our key partners and customers.

Information on Strix

Strix is quoted on the AIM Market of the London Stock Exchange (AIM: KETL).

CEO's Report

Introduction

Strix continues to execute against its stated objectives, and I am pleased to report the progress the Group has made in the first six months of the year. As announced in March 2024, the rebasing and restructuring of the business has continued into HY24 to build strong foundations for medium-term growth opportunities as the market continues to recover. While the global economic backdrop remains volatile, Strix remains resilient as a result of the Group's revenue diversification strategy.

As stated on 25 July 2024 in the Company's Trading Update, Strix is seeing growth in its key Small Domestic Appliance ("SDA") markets which is encouraging. Progress has been made across all three of Strix's divisions in the period. The completion of the restructuring and rebasing of the business, and the return to a strong balance sheet will see the Group continue the pay down of its debt, aid in the renegotiation of its banking facilities and support further investment in Strix's technology and innovation, future proofing the Group for the long term.

Deleveraging

Reducing Strix's net debt leverage position remains a key priority for the Group, with a previously reported target to achieve less than 2.0x leverage by the end of FY24 and 1.5x leverage by the end of FY25. Over the course of HY24, the management team successfully implemented a number of self-help actions to conserve cash, via enhanced working capital management and a careful deceleration of capital expenditure. In addition, as announced on 12 June 2024, the Group raised £8.7m via an Equity Placing to further accelerate these efforts.

Pleasingly, at the end of HY24, the self-help initiatives resulted in net debt leverage dropping below 2.0x, with the funds secured in the Equity Placing bringing this position down further to 1.76x. As a result of this success, progress towards the Group's stated target of 1.5x leverage, has been effectively accelerated and we now expect to see this being achieved before the end of FY25.

Management have exercised prudence to balance the reduction of the leverage position with the essential continuation of investment into the business. This includes focusing spend on areas such as new product development and other growth supporting initiatives, to ensure the long-term growth prospects of the Group remain protected.

Restructuring

As part of the planned rebasing of the business, the Board has remained focused on maximising cash generation to support debt reduction. Resources have been selectively allocated to optimise commercial success, realigning efforts from commercially less sustainable projects to more attractive ones, to best support improved margins and the Group's medium term growth aspirations.

Over the course of HY24, Strix has undertaken a number of actions including streamlining of the Consumer Goods division through further rationalising of product lines and groups, and reducing headcount. This provides greater flexibility to selectively invest time and resources in projects with higher returns, allowing commercial focus to be redirected, so as to better support short and medium term high margin product launches across the Group.

The Group has also relocated parts of its manufacturing capabilities to its China facility from the Ramsey factory, namely the press production lines, while keeping the core technology of blades production, a key part of its heritage, on the Isle of Man. This allows for the transportation of raw materials and components to be more cost effective and efficient, as well as enhancing Strix's environmental footprint.

Following a comprehensive review of the Premium Filtration Systems (PFS) division, it was concluded that Strix would look to dispose of Halopure as it was not considered complementary to the Group's focus on smaller scale domestic filtration products. The growth prospects of Halopure in the medium term are limited, while also requiring additional investment. Disposal via sale is expected to complete in the second half of FY24 for a nominal value. This will allow the PFS division (now renamed Billi) to solely focus on capitalising on the significant growth opportunities presented by Billi, now that it has been fully integrated into the wider Strix Group offering.

As a result of the restructuring and rebasing of the business through the activities above, there have been a number of impairments and other adjusting items that have been booked in the period (see note 16).

The segmental reporting structure outlined in the Group's Interim Results now comprises:

• Kettle Controls
• Billi (previously PFS)
• Consumer goods

Market Overview

The global economic backdrop and geopolitical tensions remained volatile through the first half of the year, providing Strix with a mixed trading backdrop.

For the Kettle Controls division, the UK and Germany form the most important regulated markets. According to Deloitte, consumer confidence in the UK has risen by over ten percentage points in the first half of the year, returning to levels last seen before the latest wave of high inflation, and is expected to continue rising. Reports from JP Morgan suggest that it expects the UK economy to grow 0.4% between July and September 2024, up from a previous estimate of 0.3%.

According to the Royal Institute of Chartered Surveyors ("RICS"), Britain's housing market in March 2024 saw the strongest levels of interest among buyers in more than two years, and a gauge of house prices also touched its highest level since 2022 as a recovery gathers more momentum. Figures from the RICS added to recent signs of stabilisation in the UK's housing market, driven by cooling inflation and falling mortgage costs after their rise hit demand in 2022 and 2023. We have seen further stability in the UK economy following the General Election and the IMF has noted that UK interest rates should fall to 3.5% by the end of 2025.

Reports from the European Union suggest that the German economy went through a recession in 2023 when real GDP declined by 0.2%. Despite continued headwinds, it recovered slightly at the start of 2024, with economic activity expected at 0.2% growth quarter on quarter in Q1 of 2024 which is encouraging.

Global trade has been under significant pressure since October 2023, when the Israel-Hamas war commenced. The disruption that this conflict has brought to transport routes in the Red Sea has meant higher freight costs and increased expenses for insuring commercial trade goods.

After three years of extreme volatility, commodities prices are set to broadly stabilise yet remain high in 2024, according to the Economist Intelligence Unit. However, adverse weather conditions, escalating geopolitical tensions and increased shipping costs are among the risks to commodity price forecasts to watch. On the foreign exchange side, these trading results have been negatively impacted by fluctuations in the AUS dollar and Euro.

Kettle Controls

Kettle Controls contributed revenues of £30.5m at both CER and AER (HY23: £28.8m), up 5.9%, on the first half of 2023. The Group has continued to see growth and a stronger sales mix, with a focus on the higher margin regulated and less regulated markets. The regulated market, has seen underlying growth in the period in the USA, the Netherlands and the UK, with similar positive trends being seen in less regulated markets. Chinese market volumes have reduced against HY23, as Strix has pivoted away from some of the less profitable product lines, in line with its strategy. The successful launch of the new low cost control series is expected to facilitate the improvement of market share in this key strategic market for the future, with initial sales in Q3.

It is still too early to confirm whether the improvement in sales across the regulated and less regulated markets is due to stock refill or an underlying improvement in consumer demand. We are encouraged by the trends we have seen in the first six months of the year, although note that trading levels have been more volatile during Q3, in part due to factory shut downs at a number of Chinese OEMs. We will continue to monitor this closely and expect to have clearer visibility of true consumer demand across the whole market as we get further into the second half. This will also be supported by Strix's involvement at the Canton Fair, which provides important engagement opportunities with the Group's key customers and partners.

Following planned capital investments in the second half of FY24, the Group will be launching its next generation series of controls in FY25. Further supporting regulated market sales and protecting the long-term resilience of the division through product diversification.

Copper and silver make up a significant portion of Strix's consumption of raw materials. Strix sees these prices remaining high in the short term, adding pressure to gross margins. To mitigate these risks, the Group enters into forward commodity contracts or makes payments in advance where possible.

Billi

The integration of Billi into the Strix portfolio is progressing well. The division contributed £22.2m (HY23: £21.4m) to Group revenue at CER (AER: £21.4m), up 3.7%, with 76.6% of that revenue generated in the Australia market. According to KPMG, the Australian economy "staggered" into 2024, edging close to recession with just 0.1% growth over Q1 2024. Notwithstanding these macro challenges, Billi is performing well against its previously stated strategy of new product development and geographic expansion. Strix has secured initial distribution agreements in Europe and first sales to this key region were reported in HY24. Although subject to some short delays, the Group has successfully launched a number of new products in the period, including the Multi-Function Tap, compatible with the full range of Billi under-counter modules and the new Omni-One under-counter unit, with more in the pipeline.

The Group is in discussions with strategic partners and distributors to establish a comprehensive platform in Europe to provide the foundation for ongoing growth in this key region. Due to short delays in the roll out of new products, Strix now expects the division to grow slightly slower in FY24, to achieve high single digit growth on a constant currency basis vs FY23.

Consumer Goods

The Consumer Goods division reported a slight decrease in revenues, down by (1.4)%, to £14.5m at CER (AER: £14.2m; HY23: £14.7m). Strong progress has been made in HY24 in terms of restructuring the division for future profitable growth predominantly through the ongoing rationalisation and streamlining of product lines.

Progress in further expanding our OEM partnerships with new relationships as well as reinforcing connections with our existing partners has been successful in the period. This has resulted in the creation of new appliances and products being developed and manufactured by Strix to be launched in the second half of the year and continuing into 2025. By expanding our OEM and ODM partnership base, we expect new product development projects to continue as well as allowing us to access routes to new markets.

New distribution agreements have been secured for our LAICA brand, opening a sales channel for Italian manufactured filtration products in China. Progress has also been made in positioning LAICA as the European leader in products for consumers wanting to achieve "wellness at home". Product development has continued at pace and will see a number of products released to the market in the second half of FY24.

The Group was also delighted to celebrate LAICA's 50th Anniversary in June of this year, representing an important milestone for such a key brand within the Group's portfolio.

Barriers to Entry and IP

Strix evaluates the risks and threats from the competitive landscape on an ongoing basis. As a result, the innovative technology produced by Strix is constantly evolving, supported by a solution led R&D team. Strix protects its new products and solutions through a robust IP strategy and sustainable investment, and remains committed to consumer safety. We continue to prompt regulatory enforcement authorities to remove unsafe and poor quality products from our major markets. Strix has successfully taken such actions in the first half of FY24 with more identified for the second half of the year. The Group also continues to defend its intellectual property, initiating litigation in China against a control manufacturer it believes to be infringing on patents.

The relationships that Strix has cultivated with its brands, OEMs and retailers are unique, contributing to its market leading position. The Group's extensive market knowledge allows it to provide support across the value chain and throughout the product lifecycle, including product design and advice on specification and manufacturing solutions. These solution-led and customer focused services help to foster strong relationships, ensuring brand strength and positioning Strix as a trusted partner in the market.

Sustainability

Sustainability remains a priority for Strix across its divisions and we continue to make progress against our stated targets. Strix achieved its ambitious net zero Scope 1 and 2 targets in 2023 with a reduction in emissions of 95% over two years and investment to supply 10% of the Group's requirements from its own solar infrastructure. Scope 1 focus remains on how to further reduce emissions with investment in more efficient infrastructure such as boilers and the use of electric vehicles. Scope 2 is now concentrated on the Group's 100% use of green power or self-generated solar energy; hence the focus has shifted to absolute reduction in consumption of energy usage and intensity (both per piece and per £m).

The restructuring of the Group and the relocation of manufacturing capabilities from Ramsey to China has been positive for all Scopes, including Scope 3 through reduced transportation emissions.

In 2024 greater focus has been given to biodiversity and nature to ensure compliance with the forthcoming Taskforce on Nature-related Financial Disclosures initiative, aligning Strix with the Global Biodiversity Framework. Furthermore, additional resource will be given to progressing Strix's social agenda through structure and incentivisation, significantly increasing employee community engagement and events. Strix's consumer focused subsidiary, LAICA, is developing a stand-alone sustainability capability and reporting to assist relationships with local stakeholders including financially focused audiences.

ISO roll-out across the Group continues with Billi applying for both ISO14001 (Environmental) & ISO45001 (OHSAS) by the year end while work is underway to evaluate the adoption of ISO14064 (reporting & validation of GHG emissions).

Outlook

The rebasing of the business has made significant progress in the first half of the year and we expect to see this continue to the year end. The Board is very pleased with the accelerated rate in which the leverage position has been reduced and we now expect the target of 1.5x to be achieved before the end of FY25.

Following relatively lower trading for parts of Q3, Strix expects to have further clarity on the sales trends in the Kettle Controls markets as it moves into its peak season, supported by further product launches to increase the Group's target addressable market. Billi's expansion sales strategy is on track, generating initial sales in Europe with the division now expected to report single digit growth for FY24, following the slightly delayed roll out of new products to the market.

Currency headwinds and commodity prices continue to present obstacles, the Group is actioning various strategies to mitigate the effect of these where possible.

The Group's return to balance sheet strength and its resilient cash flows will allow for the continued pay down of debt as well as ongoing investment in its technology and innovation, thereby future proofing the business.

CFO's Review

Financial performance - continuing operations

• Adjusted results from continuing operations exclude adjusting items, see note 16 and results from discontinued operation, Halosource see note 15
• "CER" being Constant Exchange Rate, is calculated by translating the HY24 figures by the average HY23 exchange rate, and "AER" being Actual Exchange Rate.

Revenue

Group revenues reached £67.2m, representing a 3.5% increase (at CER) against the prior half year. At AER, growth was lower at 1.8%, reflecting foreign exchange headwinds in the form of a weaker AUD and EUR.

Kettle Controls has shown positive growth in the first six months, up 5.9% at CER to £30.5m (AER: 5.9% to £30.5m). China sales have experienced a marked decrease of (25.9)%, reflecting both a slowdown in this part of the kettles market and a degree of market share reduction as the Group continues to walk away from non-profitable business in this highly price sensitive sector. More than offsetting this, we have seen strong growth of 11% in the higher margin regulated/less regulated markets in HY24.

Billi (previously PFS) continues to report growth, up 3.7% at CER to £22.2m (AER: 0.0% to £21.4m). As expected, this is running below double digit growth in the first half year, following on from a strong start to HY23, and ahead of new product introductions and the push into Europe. Both of which are expected to drive higher growth levels in the second half of the year.

Our Consumer Goods division has seen a small decrease in the first six months, down (1.4)% at £14.5m at CER (AER: (3.4)% to £14.2m) as ongoing restructuring activities have continued (see note 16). Looking ahead, actions taken will see this part of the Group able to focus more effectively on its core higher margin growth areas.

Trading profit

The Group has performed well at a gross margin level, with a strong increase of 320bps to 40.0% (AER: 39.9%; HY23: 36.8%) and maintaining margins at FY23 levels, despite lower seasonal trading levels in the first half of the year. Reflecting the increases in both trading and margin, gross profit of £26.9m is 12.6% up at CER (AER: 10.5% up at £26.4m; HY23: £23.9m).

Regionally, our Consumer Goods division is showing the biggest improvement in gross margin with a 740bps increase on HY23 at CER (AER: 730bps). This is predominantly due to an improved sales mix, with a greater degree of higher margin sales to key OEMs and lower online trading, improved overhead recovery and the positive impact of sale price increases secured over the last 12 months.

In Kettle Controls GP% has increased 100bps to 38.2% (HY23: 37.2%), largely reflecting the positive mix shift to the regulated/less regulated sector. Our Billi division continues to report the highest gross margin in the Group, with gross margin increasing by a further 280bps to 49.1% at CER (AER: 49.5%; HY23: 46.3%) as higher margin sales in the UK part of the business continue to grow.

Net overhead and distribution costs are running ahead of the prior half year at £13.9m at CER (AER: £13.6m; HY23: £12.0m) as a result of additional costs in Billi UK (annualisation of investments made in FY23), higher freight costs due to the issues in the Middle East, increased advertising and promotional spend to support online sales in the Consumer Goods division and the impact of inflation.

Despite the increase in overheads, operating profits at CER remain 9.2% up at £13.0m (AER: 7.6% up to £12.8m) HY23: £11.9m) as the positive impacts at the gross profit level more than offset the increased overhead and distribution costs.

The Group's adjusted EBITDA margin remains strong at 25.1% at CER (AER: 25.3%; HY23: 24.0%) reflecting the robust underlying profitability of the Group.

Reflecting all of the commentary above and the impact of finance costs, we have seen a strong increase in adjusted profit before tax, up 15.9% to £8.0m at CER (AER: £7.8m; HY23: £6.9m).

Finance costs

Finance costs remain in line with the prior half year at £5.0m (HY23: £5.0m). We expect costs to be lower in the second half of the year due to the significant reduction in gross debt following on from the part repayment of the RCF facility of £9.0m in June, in addition to the ongoing amortising term loan repayments of £3.6m per quarter.

Lower net debt leverage, has also brought the Group into a lower interest rate ratchet for the remainder of the year, decreasing the interest margin on the Group's facilities by 50bps to 2.35%.

Adjusting items from continuing operations

As announced in our FY23 presentation and as part of the Group's subsequent updates to the market, the restructuring and rebasing of the business has continued in 2024 to allow us to build strong foundations to support the Group's medium-term growth opportunities.

A key part of this process has been the ongoing commercial review of product lines/groups (predominantly within the Consumer Goods division) with the intention of providing the business with the flexibility to selectively invest time and resources in those projects with higher returns. As a result of this process, the business has approved the cessation of a number of product lines/groups and associated capital development projects, which has resulted in the impairment of certain items on the balance sheet including capital development assets, stock and some licensing debtors.

As a result of these activities, in continuing operations the Group has reported non-recurring adjusting items of £10.9m for the first six months of the year (HY23: £1.8m) (see note 16).

The largest element of these costs relates to impairments in our Consumer Goods division of £5.8m, including tooling/intangibles, inventories and licensing agreements associated with product lines/groups where the Group does not intend to place further commercial focus or allocate resources. These decisions have been made based on the level of additional investment in both time and resources required to ensure specific product lines/groups can be successfully marketed, including the provision of suitable marketing and promotional strategies, versus the expected timing and profitability of that product line/group. Additional personnel costs of £0.6m, relating to the restructuring of the Consumer Goods division have also been incurred in the period.

Non-recurring adjusting items have been recognised in our Kettle Controls division of £1.2m. Certain Kettle Controls capital expenditure projects were deferred to allow the business to retain additional cash within the group and reduce net debt levels. This timing change has resulted in the £0.8m impairment of specific fixed term licensing debtors that related to this technology. Restructuring costs related to the announced part-closure of our Ramsey manufacturing site totalled £0.4m.

Central restructuring costs of £0.2m (HY23: £nil) relate to personnel changes.

The £3.1m of settlements relate predominantly to the Group being in the final stages of negotiating a commercial settlement with one of its key OEM customers. The Group expect this process to be completed in the coming weeks, leading to an estimated settlement amount of £2.2m. We have accrued for this amount within the 30 June 2024 balance sheet as an adjusting post balance sheet event for HY24. As this is a non-recurring and material amount, this has been presented as an adjusting item in the HY24 income statement. The other £0.9m largely relates to a final settlement agreement with all parties to the LAICA acquisition, regarding the transfer of a Taiwanese property.

Adjusting items from discontinued operations

Following a comprehensive review of the Group's business unit Halopure (previously part of our PFS division), it was concluded that the Group would look to dispose of this business. Disposal is expected to be via sale at a nominal value in the second half of the year. The net assets of the business have been reclassified as assets held for sale in the Group's balance sheet and have been impaired by £2.3m to £nil, reflecting the minimal expected fair value less costs to sell on disposal. This number will continue to be reviewed ahead of eventual sale, but is not expected to change significantly. In addition to this, we have also recognised £0.2m (HY23: £nil) of redundancy costs.

Cash flow

The Group has maintained consistently high operating cash generation, with a strong adjusted operating cash conversion ratio of 115.4% in the current period (HY23: 98.7%; FY23: 106.4%).

Ongoing improvements in working capital management have reduced net working capital by a further £2.8m in the first half year. Reflecting our success in this area, working capital as a % of sales has reduced significantly to 7.6% (FY23: 16.7%). A measured and careful deceleration of organic capital expenditure has further aided cash conservation, leading to reduced investment outflows of £3.9m (HY23: £6.5m).

Net proceeds from the reverse equity placing generated £8.4m of cash in the first half of the year, allowing the part repayment of the Group's RCF. As at 30 June 2024, the Group has access to £9.0m of unutilised RCF facilities (FY23: £nil), providing a much greater security and flexibility of funding.

Net debt and capital allocation

Prioritising cash generation and net debt reduction remains a top priority for the Group. As a result of that focus, and reflecting all the successes discussed above, the Group's net debt position (as defined in our banking facility agreement), decreased by £14.9m to £68.8m (FY23: £83.7m).

Net debt leverage reduced significantly in the period, to 1.76x (FY23: 2.19x), providing substantial headroom against a covenant of 2.75x. The Group continues to prioritise cash retention and net debt leverage reduction in the short term in line with its capital allocation framework. As a result of this process, a target of initially reducing net debt leverage to 1.5x has been put in place. After which, leverage appetite will remain at between 1.0x to 2.0x for the medium term.

The Group has continued to work proactively with its banking partners to enhance flexibility and security of funds within the existing agreement. Step one of that process was the March 2024 normalisation of the Group's net debt leverage covenant to 2.75x for the duration of the remaining facility (previously: 2.25x). This has been followed up by the approval of a one year extension on 11 September 2024, for the full £80m of RCF facility, providing the Group with funding security out to 25 October 2026.

Looking ahead, the Group intends to initiate a full competitive refinancing process in FY25 to provide appropriate cost effective and flexible funding to support the Group's medium term investment driven growth aspirations.

Condensed INTERIM consolidated statement of comprehensive income

for the period ended 30 June 2024 (unaudited)

Total comprehensive (expense)/income for the period attributable to Equity holders of the Company arises from:

* Prior period numbers have been restated as a result of discontinued operations, see note 15

Condensed INTERIM consolidated statement of comprehensive income

for the period ended 30 June 2024 (unaudited) (continued)

* Prior period numbers have been restated as a result of discontinued operations, see note 15

Condensed INTERIM consolidated balance sheet

as at 30 June 2024 (unaudited)

Cash and cash equivalents at the end of the period include £2k (HY23: £145k) relating to discontinued operations and included in assets held for sale.

Notes to the condensed INTERIM cONSOLIDATED financial statements

for the PERIOD ended 30 June 2024 (unaudited)

Basis of preparation

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union. However, explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and its financial performance compared with the comparative periods ended 31 December 2023 and 30 June 2023. These interim financial statements should be read in conjunction with the last annual consolidated financial statements as at 31 December 2023.

The Group's annual financial statements are prepared in accordance with IFRS Accounting Standards ("IFRS") and International Financial Reporting Standards Interpretation Committee ("IFRS IC") interpretations as adopted by the European Union. The interim financial statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts for the year ended 31 December 2023, which is available at www.strixplc.com. The comparative figures for the financial year ended 31 December 2023 have been extracted from the full Annual Report and Accounts for that financial year. Those accounts have been reported on by the Company's auditor. The Independent Auditor's report was unqualified. These condensed consolidated interim financial statements are unaudited.

At the date of approval of the interim financial statements, there are no new standards and interpretations which are relevant to the Group which were in issue but not yet effective.

Non-current assets held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are measured at the lower of carrying amount and fair value less costs to sell, with the exception of assets which are scoped out

of the measurement requirements of IFRS 5 'Non-current assets held for sale and discontinued operations', for example financial assets, which continue to be measured in accordance with IFRS 9 'Financial instruments'.

Where the carrying amount of a non-current asset or disposal group held for sale exceeds its fair value less costs to sell, a loss is recognised. This is allocated firstly against any goodwill attributable to the disposal group, and then to other non-current assets in the disposal group that are in scope of IFRS 5's measurement requirements. Any excess loss remaining is recognised against the remaining assets of the disposal group as a whole.

A component of the Group that is held for sale or disposed of is presented as a discontinued operation either when it is a subsidiary acquired exclusively with a view to resale; or it represents, or is part of a coordinated plan to dispose of, a separate major line of business or geographical area of operations. The net results of discontinued operations are presented separately in the Group income statement (and the comparatives restated).

Going concern

These interim financial statements have been prepared on the going concern basis. The Directors have made enquiries to assess the appropriateness of continuing to adopt the going concern basis.

In making this assessment they have considered:

Based on these considerations, the Directors have concluded that there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The key entities in the Group have traded profitably, excluding non-cash adjusted items, for an extended period of time. As a result, the Directors continue to adopt the going concern basis of accounting in preparing the interim financial statements and consider there are no material uncertainties about the Group's ability to continue as a going concern.

Seasonality of operations

The Group's revenue and profit after tax is subject to a degree of seasonality due to the occurrence of the Chinese New Year public holiday during the first half of the year and the seasonality of small domestic appliance markets. In the financial year ended 31 December 2023, 45% (FY22: 42%) of the Group's revenue and 24% (FY22: 37%) of the Group's profit after tax accumulated in the first half of the year.

Critical accounting judgements and estimates

In the application of the Group's accounting policies, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty include those disclosed in the consolidated financial statements for the year ended 31 December 2023.

Alternative performance measures (APMs) - Adjusting items

Management and the Board consider the quantitative and qualitative factors in classifying items as adjusting items and exercise judgement in determining the adjustments to apply to IFRS measures. This assessment covers the nature of the item, cause of occurrence, frequency, predictability of occurrence of the item or related event, and the scale of the impact of that item on reported performance.

For the six months to 30 June 2024, the presentation as discontinued operations and the fair value of assets being held for sale in relation to discontinued operations is a new key judgement area, due to the planned disposal of Halosource (see note 15). We have assessed fair value less costs to sell to be minimal, due to the nominal expected sales price and therefore have impaired all related non-current assets to £nil, excluding lease ROU assets. We consider Halosource to be a separate major line of business, as this represents a discrete business line for the Group, that operates outside of our normal markets in the industrial farming space, with exclusive manufacturing facilities located in Shanghai and a separate workforce. Halosource was the first acquisition that the Group made and we recognise that the underlying trading results of this business are therefore of specific and greater interest to stakeholders, notwithstanding its relatively low level of trading in the period.

Critical accounting judgements and estimates (continued)

Alternative performance measures (APMs) - Adjusting items (continued)

The ongoing restructuring and rebasing activities undertaken in HY24, have also led to additional new judgements and estimates being made with regards to the impact of the de-prioritisation of specific product lines & groups, predominantly within the Group's Consumer Goods division. A key area of focus being the estimation of the fair value of underlying assets, and their related impairment in the 30 June 2024 balance sheet (see note 16). Creditors relating to settlement claims have also been recognised in the 30 June 2024 balance sheet where we consider that the business has a constructive obligation to pay monies over to third parties at the balance sheet date, to the extent that amounts are considered to be reasonably certain.

SEGMENTAL REPORTING

Management has determined the operating segments based on the operating reports reviewed by the Board of Directors that are used to assess both performance and strategic decisions. Management has identified that the Board of Directors is the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating segments'.

The Group's activities consist of the design, manufacture and sale of thermostatic controls, cordless interfaces, and other products such as water dispensers, jugs and filters, water heating and temperature control, steam management, water filtration and small household appliances for personal health and wellness, primarily to Original Equipment Manufacturers ("OEMs"), commercial and residential customers based in China, Italy, Australia, New Zealand and the United Kingdom.

The Board of Directors has identified 3 reportable segments from a product perspective, namely: Kettle Controls, Billi (previously classified as Premium Filtration Systems), and Consumer Goods (made up of water products and appliances).

The Board of Directors primarily uses a measure of gross profit to assess the performance of the operating segments, broken down into revenue and cost of sales for each respective segment which is reported to them on a monthly basis. Information about segment revenue, cost of sales and gross profit is disclosed below.

Reported Results

Period ended 30 June 2024

(£000s)

Results from discontinued operations are not included in these numbers and were previously reported under Billi.

Below is the geographical analysis of adjusted revenue from external customers.

Assets and liabilities

No analysis of the assets and liabilities of each operating segment is provided to the Board of Directors as part of monthly management reporting. Therefore, no analysis of segmented assets or liabilities is disclosed in this note.

SEGMENTAL REPORTING (continued)

Non-current assets (i) attributed to country of domicile and (ii) attributable to all other foreign countries

In accordance with IFRS 8, the following table discloses the non-current assets located in both the Company's country of domicile (the Isle of Man) and foreign countries, primarily China, Italy Australia, New Zealand, and the United Kingdom where the Group's main principle operating subsidiaries are domiciled.

Major customers

In the first half of 2024, no customer individually accounted for at least 10% of total revenues (HY23: one customer). The revenues relating to this customer in 6 months ended 30 June 2023 were £6.9m.

finance costs

Further information about the Group's borrowings is provided in note 10.

Results from discontinued operations are not included in these numbers.

(LOSS)/Earnings per share

The calculation of basic and diluted (loss)/earnings per share is based on the following data.

Period ended 30 June 2024

The weighted average dilutive effect of conditional share awards of 4,653,581 are not included in the weighted average calculation for diluted loss per ordinary share for HY24 because they are anti-dilutive since there is a loss after tax. These were however considered for diluted adjusted earnings per ordinary share.

(LOSS)/Earnings per share (continued)

The calculation of HY24 basic and diluted adjusted earnings per share is based on the following data:

Period ended 30 June 2024

(LOSS)/Earnings per share (continued)

The calculation of HY23 basic and diluted earnings per share is based on the following data.

Period ended 30 June 2023

The calculation of HY23 basic and diluted adjusted earnings per share is based on the following data:

Period ended 30 June 2023

The denominators used to calculate both basic adjusted and diluted adjusted earnings per share are the same as those shown above.

Intangible assetS

*Equal to 31 December 2023 values

Amortisation charges for continuing operations allocated to cost of sales are £0.8m (HY23: £0.9m) and administrative expenses £0.8m (HY23: £0.2m).

Amortisation charges for discontinued operations allocated to cost of sales are £0.1m (HY23: £0.1m) and administrative expenses £nil (HY23: £nil).

There were no reversals of prior year impairments during the period (HY23: none).

Property, plant and equipment

*Equal to 31 December 2023 values.

Depreciation charges for continuing operations allocated to cost of sales are £2.0m (HY23: £1.9m), distribution costs £0.2m (HY23: £0.1m), and administrative expenses £0.7m (HY23: £0.5m).

Depreciation charges for discontinued operations allocated to cost of sales are £66k (HY23: £42k), distribution costs £1k (HY23: £nil), and administrative expenses £1k (HY23: £1k).

Inventories

The cost of inventories recognised as an expense and included in cost of sales amounted to £24.8m (HY23: £24.5m). Included in this amount is adjusting items from continuing operations of £0.8m arising from impairment due to restructuring/rebasing activities (HY23: £nil) and £0.4m (HY23: £nil) relating to discontinued operations.

Trade and other receivables

Adjusting items from continuing operations of £1.4m (HY23: £nil) relating to the impairment of trade and other receivables were recognised in administrative expenses in relation to restructuring/rebasing activities and £0.3m (HY23: £nil) relating to discontinued operations.

Trade and other receivables carrying values are considered to be equivalent to their fair values.

The advance purchase of commodities relates to a payment in advance to secure the purchase of certain key commodities at an agreed price to mitigate the commodity price risk.

Borrowings

Current and non-current borrowings are shown net of loan arrangement fees of £1.0m (FY23: £1.0m) and £0.4m (FY23: £0.9m) respectively.

Borrowings (continued)

Net debt as defined in our banking facility agreement is £68.8m (FY23: 83.7m) as it excludes accrued interest of £1.7m (FY23: £2.0m).

In March 2024, the Group received approval from its banking syndicate to normalize its net debt leverage covenant to 2.75x (FY23: 2.25x). On 11 September 2024 a one-year extension was approved for the Group's £80m RCF facility, taking maturity out to 25 October 2026 (FY23: 25 October 2025). In HY24, the Group has taken a number of actions to prioritise cash generation and conservation.

As a result of the actions taken, as at 30 June 2024 the Group has:

• significantly improved facility headroom of £9.0m (FY23: £nil)
• reduced net debt to £68.8m (FY23: £83.7m)
• lowered net debt leverage to 1.76x (FY23: 2.19x), providing substantial covenant headroom
• reduced interest costs on borrowing by 50bps to a margin of 2.35% (previously: 2.85%)

All of the above, have led to a reduction in the Group's liquidity risk.

The fair values of the Group's financial instruments continue to be not materially different from their carrying amounts.

CAPITAL Commitments

The above commitments relate to production line automation in the Group's factory in China in HY24 and FY23.

Dividends

As a result of the Group's publicly announced dividend pause during calendar year 2024, no dividends have been paid or proposed in the period.

The aggregate amount of £7.1m for the proposed final dividend for FY22 was paid on 11 August 2023 out of retained earnings at 31 December 2022. The Directors also approved the payment of an interim dividend of 0.9p per share on 9 October 2023. This was paid on 29 December 2023 but not recognised as a liability in HY23.

• Cash flow statement notes
• Cash generated from operations

Other non-cash flow items include inventory provision of £0.9m (HY23: £nil), receivable write off of £1.8m (HY23: £nil), provision for settlements of £3.1m (HY23: £nil), redundancy costs associated with discontinued operations of £0.2m, reductions in warranty provision of £0.7m (HY23: £nil) and others of £0.1m (HY23: £(14)k).

Movement in net debt

Non-cash movements

Net debt as defined in our banking facility agreement is £68.8m (FY23: £83.7m) as it excludes accrued interest of £1.7m and right-of-use lease liabilities of £4.5m (FY23: accrued interest of £2.0m; right-of-use liabilities of £4.8m).

SHARE BASED PAYMENTS

A summary of the share options awarded is shown in the table below.

DISCONTINUED OPERATIONS

On 16 May 2024, the Board of Directors approved the disposal of HaloSource Water Purification Technology (Shanghai) Co. Ltd (known as HSS), a wholly owned subsidiary. This was announced to the wider business in June 2024. Following a commercial review, it was determined that the primary product line of HSS, industrial scale water filtration branded as Halopure, does not align commercially with the rest of the Group's main focus on smaller scale water filtration products. The sale of HSS is expected to be completed within a year from the reporting date. As at 30 June 2024, HSS was classified as a disposal group held for sale and as a discontinued operation. Before classification as discontinued, HSS formed part of our Premium Filtration Systems division, which has been subsequently renamed as Billi (see note 3).

The results of HSS for the period ended are presented below:

DISCONTINUED OPERATIONS (Continued)

The major classes of assets and liabilities of HSS classified as held for sale as at 30 June are, as follows:

£000s

Assets

Included within the above are assets, which had a carrying value at point of classification to assets held for sale of £2.3m (intangibles: £1.6m; PPE: £0.1m; inventories: £0.4m and debtors: £0.3m). These have been subsequently impaired to £nil in line with IFRS5 - Non-current Assets Held for Sale and Discontinued Operations, to reflect the expected fair value less costs to sell of the disposal group. Net intercompany creditor positions have been excluded from the above analysis, as these will be finalised ahead of disposal.

The net cash flows incurred by HSS are, as follows:

1 £1.1m (HY23: £0.1m) of adjusting items from restructuring are included in cost of sales and the balance of all other adjusting items are in administrative expenses.

2£2.2m (HY23: £nil) of adjusting items in settlements are against revenue, in line with IFRS 15 Revenue from Contracts with Customers.

3Amortisation charges on acquired intangibles have been presented as adjusting items in HY24 in line with the change in disclosure at FY23. Also in line with FY23, comparatives have not been restated.

ADJUSTING ITEMS (continued)

Reconciliation of profit before taxation to Non-GAAP Measures

ADJUSTING ITEMS (continued)

Adjusting Items:

As announced in our FY23 presentations and as part of the Group's subsequent updates to the market, restructuring and rebasing of the business has continued into HY24 to build strong foundations for medium-term growth opportunities as the market continues to recover. The Board is focused on maximising cash generation to support debt reduction, allocating resources to optimise commercial success and realigning efforts from commercially less sustainable projects to commercially more attractive ones.

A key part of this process has been the ongoing commercial review of product lines/ groups (predominantly within the Consumer Goods division) with the intention of providing the business with the flexibility to selectively invest time and resources in those projects with higher returns. As a result of this process, the business has approved the cessation of a number of product lines/groups and associated capital development projects, which has resulted in the impairment of certain items on the balance sheet, including capital development assets, stock and some licensing debtors.

Adjusting items non-recurring from continuing operations:

• Restructuring/rebasing of £7.8m (HY23: £nil), includes the following
• Consumer Goods £6.4m (HY23: £39k) - Impairments amounting to £5.8m (HY23: £nil) including tooling/intangibles, inventories and licensing agreements associated with product lines in the Consumer Goods division where the group does not intend to place further commercial focus or allocate resources. Decisions have been made based on the level of additional investment in both time and resources required to get to an end product that can be successfully marketed, including the provision of a suitable marketing and promotional strategy versus the expected timing and profitability of that product line/group.

Additional personnel costs relating to the restructuring of the Consumer Goods division totalling £0.6m (HY23: £39k).

• Kettle Controls £1.2m (HY23: £66k) - Certain Kettle Controls capital expenditure projects were deferred to allow the business to retain additional cash within the Group and reduce net debt levels. This timing change has resulted in the £0.8m (HY23: £nil) impairment of specific fixed term licensing debtors that related to this technology.

Additional restructuring costs related to the announced part-closure of our Ramsey manufacturing site have totalled £0.4m (HY23: £nil)

• Central costs of £0.2m - Additional personnel costs relating to the restructuring of the central team totalling £0.2m (HY23: £nil).
• Settlements - The £3.1m of non-recurring adjusting costs relates predominantly to the Group being in the final stages of negotiating a commercial settlement with one of its key OEM customers. The Group expect this process to be completed in the coming weeks, leading to the payment of an estimated £2.2m settlement amount. We have accrued for this amount within the 30 June 2024 balance sheet as an adjusting post balance sheet event for HY24. As this is a non-recurring and material amount, this has been presented as an adjusting item in the HY24 income statement as a reduction in revenue. The other £0.9m relates to a final settlement agreement with all parties to the LAICA acquisition, regarding the transfer of a Taiwanese property.

Adjusting items from discontinued operations:

Following a comprehensive review of the Group's business unit Halopure (part of our Premium Filtration Systems division, now classified as Billi), it was concluded that the Group would look to dispose of this business on the open market. As an industrial farming filtration product, the Halopure technology does not fit well with the rest of the group's focus on smaller scale domestic filtration products. The business has been loss making since acquisition and is forecasting to continue to be for the medium term, whilst requiring additional investment to support ongoing growth. Disposal is expected to be via sale at a nominal value which has led to Halopure being disclosed as a discontinued operation in the Group's HY24 numbers. The net assets of the business have been reclassified as assets held for sale in the Group's balance sheet and have been impaired by £2.3m (HY23: £nil) to reflect the minimal expected fair value less costs to sell on disposal. This number will continue to be reviewed ahead of eventual sale, but it is not expected to change significantly. Redundancy costs of £0.2m have also been recognised in line with efforts to dispose of the business.

RELATED PARTY TRANSACTIONS

Key management compensation

The following table details the aggregate compensation paid in respect of key management, which includes the Directors and the members of the Operational Board, representing members of the senior management team from all key departments of the Group.

There are no defined benefit schemes for key management.

Post balance sheet events (non-adjusting)

On 11 September 2024 a one-year extension was approved for the Group's £80m RCF facility, taking maturity out to 25 October 2026 (FY23: 25 October 2025). See note 10 for further details.