Strix Group is the World’s No.1 manufacturer of kettle controls, the global leader in the design and supply of kettle safety controls and other components involving water heating and temperature control, steam management and water filtration. Strix has sold over 1.9 billion units, and management estimate that Strix safety controls are used over 1 billion times per day by consumers in more than 100 countries, and by over 10% of the world’s population.

The stock was not immune from the October to December sell-off seen in global equity markets, dropping from around 170 pence to just below 130 in November, but this was in no way a reflection of the company itself and has given us a great opportunity to buy a solid defensive position at a 15% discount. Whilst 2018 saw significant volatility, the global kettle market still posted growth of 7%, with strong progress in America, Russia and Asia. A combination of steady top line expansion, operating margins fully supported by technological excellence and unique product experience, all support the case for Strix to deliver profit growth to shareholders.

Recent results have shown that Strix has delivered a strong performance across the Group including 5% revenue growth over the course of 2018 to boost both adjusted pre-tax profits and EPS by 8% to £29.1m and 14.8p, respectively. During the period, the Group maintained its global market leading share of the kettle controls market at 38% with growth in less regulated markets and ongoing strong performance in the USA offsetting a slight softening within the China domestic market. Ongoing growth also reflects the fact that Strix has relationships with more than 400 brands and retailers around the world, including multinationals Siemens, Philips, Walmart, Supor, Tesco and a collaboration with ParkRun. As a result, Strix brand Aqua Optima has increased its combined brand and private label volume share to over 25% of the UK market, nearly doubling in size in the first half (+88%) and is close to 9% of group revenue. Around two-thirds of its top 30 clients have traded with Strix for more than a decade, illustrating the high standing it has in the industry, supporting its market-leading position and acts as a strong barrier to entry for rivals.

Given the Group’s performance in 2018 and the continued strength of its cash generation, we see substantial headroom for growth. The longer-term growth story still looks compelling to us and, within this context, our analysis suggests that Strix remains attractively valued, trading at a modest P/E of 11. Price target –  180p.