Strix Group PLC (AIM:KETL) shares tumbled 11.35% to 125.5p today after lowering expectations for full year adjusted post-tax profits to reflect what it called “significant and well-publicised macro headwinds” which have resulted in a reduction in demand in its key export markets.
Broker Shore Capital cut its forecast to £28mln, down 11%, following the news which came as the group reported a 7.3% fall in revenues in the six months to June 30th to £50.7mln, hit by the ongoing conflict in Ukraine which also dented pre-tax profits which fell 12.1% to £11.6mln.
The broker said EPS growth could be even more difficult to achieve in full year 2023 with rising costs, weaker demand from a potential recession and a normalised underlying tax rate.
“We believe the company is exposed to an economic downturn, given that the Water & Appliances categories, which sell consumer discretionary products, now generate c.30% of group revenue” it said.
“Potential lockdowns in Guanghzhou, where the company is heavily dependent on for its manufacturing operations, could pose a risk of material downgrades” it added.
The group which manufactures and markets kettle controls for appliances worldwide said it remained on track to deliver its medium-term targets to double the group's revenues primarily through growth in its water and appliances categories.
Mark Bartlett, chief executive officer said: “The macro headwinds have resulted in a reduction in demand in the kettle control category in the key export markets but offsetting this has been a recent improvement in trading conditions within China which has already started to come through.”
“In the appliances category, there has been some promising signs of consumer market penetration of product ranges and in the water category, new distribution and private label contracts have been secured with reputable distributors, retailers and brands” he said.