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The All Points West podcast meets leaders from some of the most innovative and influential small and mid-cap UK-listed companies to learn more about them and their businesses. Hosted by former Sunday Times business journalist, Karl West.
Want to get in touch? Send an email to allpointswestpod@gmail.com.
Nothing in this podcast is intended as investment advice and the people in this podcast may hold positions in the stocks they talk about. Do not buy anything based solely on a tip or recommendation. Please do your own research.
Welcome to the All Points West podcast. Today we are talking to Mark Bartlett, chief executive of aim listed Strix Group, the global leader in the manufacture and design of kettle safety controls and components for water heating and filtration products. Mark joined Strix in 2006, becoming CEO in 2015. He led the Isle of Man based business to an IPO in 2017, which valued the company at 190 million pounds. His experience includes various positions ranging from engineering director through to managing director for multinationals in both Europe and the Americas, including as managing director of a company within, within the Amatek Inc group and ABS Wastewater. Mark, thanks for joining me. Strix is a bit of a hidden gem, isn't it? Um, I read that, uh, and again, we're going to, you know, I'm going to bamboozle people now with a lot of stats. I read that Strix components are used. In more than 1. 2 billion times a day in more than a hundred countries. And by 10 percent of the world's population. And in the UK, where we obviously love a brew more than 70 percent of households use a Strix product every day. Tell us how you came to join the company in 2006 and how has it changed since that time?
Yeah, thanks. Thanks, Carl. Um, it is, or it was very much a hidden gem, um, particularly before it would be listed back in 2017. Um, I, I joined the company, um, having been headhunted to come into it, actually, um, interviewed a couple of times, you know, I was, I was told the company produced kettle controls, um, and to be honest, you know, Thought quite a lot before I wanted to to sort of jump ship from where I was.
Um, you know, it gave you a lot of opportunities. You know, it obviously had a, um, a very wide coverage. Um, but you really didn't understand the complexity of the market and how it works within kettles. And it just some of the intricacies of, of that business. Um, When I did join, I was flown to the Isle of Man for the interview.
I guess I'd be honest and say I really didn't know where the Isle of Man was at that point in time. Um, but have really never looked back since then. Um, and yeah, it is, it is a great company. Uh, as you say, Hidden Gem, the statistics you mentioned speak for themselves. Um, pretty much, you know, most people are using one of our products, even if they don't know that they're actually using it.
It's astonishing really, isn't it? You know, those statistics really do, you know, jump back at you. Yeah.
um, you know, the company itself has got very, very wide coverage in all parts of the world as well. You mentioned the UK. You're clearly we, we like our brew, as you say, over 100 percent household penetration in the UK. There's other markets that are still growing very strongly. Places like America is a really good example where only 14 percent of households actually have an electric kettle.
So still plenty of opportunities of growth. I think today only just over 40 percent household penetration worldwide. So yeah, still great opportunities out there.
Tell me, what is Strix's USP? What makes the technology so good? And, and I guess, you know, from a layman's point of view, how can we tell on our kettles if it's fitted with a Strix control?
That's um, that's a very complex question and it took me a number of years to really understand the sort of real benefits of Shrex. I mean, I think we started as a cattle control company. You know, we've got three decades of history, you know, on the Isle of Man. Um, and yeah, there's a number of things that are quite unique to strokes.
I mean, first of all, I think the controls themselves made effective their mechanical switches, say, go back three decades in terms of when they were actually invented. Um, but they are very, very complex and the tolerances are very, very fine when you're trying to build something to make sure that it's safe.
And we rely on these, these controls to switch the kettle off if you don't put water in it and it boils, you know, so for any of those, those issues. Potential sort of hazards. Yeah, we are providing the safety control with two or three different safety mechanisms to protect consumers. There's other things that we do.
So we, we are involved in the whole value chain when it comes to kettles here. We're working with over 450 brands and retailers around the world. Uh, we're working with over 200 OEMs in China and today around 90 percent of kettles are made in China. So clearly that's a very important base for us. Um, we will do things like testing the first off kettles off production lines to make sure that they're safe, make sure that they don't wobble, make sure that the kettle itself is good enough for the brands.
So you do, you do that work for the brands.
Sorry, we did it for the OEMs and for the brand. So we'll do it for either actually. So we we've sort of been come known as the consultants in the cattle market for that part of our business. And I think the most unique part for us is a lot of the China based OEMs don't have any remote salespeople.
So if they make a cattle, often to our design, cause we design cattle as well with a strict control in it, we will then introduce them to various brands and retailers around the world and make up that link so that we can sell more cattle controls and for me, I don't think I've seen any other It's particularly in the small domestic appliance category, which is where we sell the work in that way.
So that does give us quite a significant barrier to entry.
Yeah. How much, um, how much work did you and the senior team do on trying to make sure that your technology is protected and that copycats are not, um, you know, trying to, um, you know, copy and make a kind of a lesser version, if you like, of, uh, of the Strix controls?
Yeah, that's a, that's a really important, um, um, piece of work for us. And it's something that we do take very seriously. We, we have a number of patents in the business and we're always looking to refresh those patents. Um, yeah, that's, that's a big part of our business model, um, particularly in the early years of launch of products.
Uh, we also actually enforce those patents very strongly. And we, one of the first Western companies back in 2010 to take action against, um, manufacturers in China that were producing. effectively copy format controls and successfully won those cases. Since then, you, we've, I think, gained quite a bit of a reputation that we will, we will protect our patents.
Um, but just as important as the patents is actually the safety testing we do. So we will regularly go and buy products off the shelves, you know, um, in various countries around the world, particularly in what we call the regulated markets. You will analyze them in our own laboratory on the Isle of Man or in China.
Um, show that they don't meet regulations or that they they're unsafe. And then we'll go back to the sort of regulatory bodies in those countries to get those products withdrawn. So you were doing a lot of work behind the scenes to, in our view, to protect consumers, but obviously also to support our brands and protect market share as well.
I think as I might have mentioned, you joined, before you became CEO, you took, took over as CEO in 2015. So pre IPO you, you iPod in 2017. What was your brief at the time when you took over as, uh, as chief exec? Was it to IP to see the company through an IPO?
Um, the brief was to sell the company. Um, not, not actually at the time necessary for an IPO. In fact, yeah, we went through processes from 2015 looking at private equity, looking at trade sales. Um, and, The IPO actually came into the mix very late in the day. Uh, we were owned by a private equity company that were going into runoff mode.
Um, so yeah, they, they had a sort of timeline in which they wanted to sell the company. Um, and yeah, we did look at all the options and actually an IPO was probably the least attractive to, to the, um, the PE company at the time. Um, we went through a process. A very fast process, in fact, to go through IPO to convince them that it was the best thing for the company.
Um, and you know, the resulting, the resulting output was we actually managed to, to sell the company within a sort of, it was around three months it took us to go through that whole process. Um, and they were bought out a hundred percent. So yeah, I think all parties were very happy at the end.
You've had a pretty decent year, financially. Uh, Strux recently reported annual results for the year ending December 31st, 2023, uh, with revenues up 35 percent to 144. 6 million and a 10. 3 percent hike in pre tax profits to 17. 7 million. Uh, you've also managed to reduce debt, but you are pausing the dividend for 2024 in order to cover that. cut debt further and to bolster the balance sheet with a view to reinstating dividend payments in 2025. Um, talk to us a little bit about what was behind the decision on this year's dividend because obviously that's a tough call to make Talk to us about how tough that was. How was it received by investors as well?
You're absolutely right. It was it was it was a tough call. A lot of discussion around around the boardroom in terms of what we should do. Yeah, I think there was a number of events that sort of got us to this page. I mean, the most important one being an acquisition we made of company called Billy in Australia.
Um, it was a fantastic acquisition, you know, has been a fantastic acquisition since, but it took our debt levels to, uh, to a peak of, of over 2. 6 times EBITDA, which, yeah, I think was a little bit uncomfortable for some of our investors. And it was a particularly bad time with interest rates going up in the UK as well.
So we always sort of say it was probably the, the. The best deal we could ever have achieved, but probably the worst possible time in history for an acquisition. And we did, we did get some negative responses here in terms of the debt coverage, and that's been something that has been conveyed to us by shareholders over the last.
12, 18 months. So, yeah, that that's been a priority. So we've really looked at that capital allocation. Um, and yeah, there does seem to be this, magic point, if you like, you get below two times debt, your people become more comfortable. Uh, we are a company that generates significant amounts of cash and actually the acquisition of Billy, they generate similar amounts of cash as well.
So as a business, you. We're very comfortable that we can pay that down very quickly. However, we decided as a board that we needed to put that as a priority to get down below that two times year within the course of this year. Uh, and that that is a clear priority. We've communicated to the market. I mean, in terms of how it was received, I would say it was received extremely positively.
Um, I think you're pretty much Mhm. 98 percent of our investors have all agreed absolutely the right thing to do. Even our income investors have said the same and actually encouraged us to do that. Um, I think they're all very, um, happy that we've, we've, we've stated that we're going to reinstate that, um, you know, in, in 2025.
Um, so they can sort of see that, that coming back, but they all believe it's the right thing for us to do, um, given where the business is today.
Yeah. So I'm guessing by the fact that you've already said that you're going to reinstate in 2025, you're pretty confident that you'll be able to get debt down below that two times level that you're kind of targeting.
Yeah, we've, we've put that out of the market. You're very, very confident, Carl. You know, I think you just need to look at the history of this company and you know how we've managed to pay down debt in the past. When I joined the company, um, around 18 years ago now, we were at seven and a half times EBITDA.
And yeah, this, this business generates a significant amount of cash. So yeah, very confident we can get that down.
Yeah. It hasn't been all plain sailing for you recently though, has it? I mean, you are starting to see some green shoots emerge across a number of key markets, but it's been a tough few years brought about by a combination of cost of living crisis, COVID 19 shutdowns in China, which severely impacted two of the manufacturers that struck supplies. And the withdrawal from Russia of Strix's key global brands. How tough was that period for you over the last few years? What action have you been forced to take to sort of reshape the business and get it back fighting fit?
Yeah, you're right. It's been tough. I mean, yeah, the pandemic, you know, was seen as tough. And actually, in the first part of the pandemic, it was not so bad for us because a lot of people were staying at home, buying kettles, coffee machines and devices that, you know, use some of our controls. So the early part of the pandemic was okay.
But as that's continued to drag out and spread through Europe, that caused problems. And as you say, the, uh, the Cost of living crisis probably has dragged that out significantly. Um, and we only really started seeing a little bit of market recovery in the back end of 2023. Um, so yeah, it was, um, a tough two years to do that.
Yeah, we have had to take some, some, you know, Business in terms of where we want to focus. Um, we've had to make some, some careful strategic decisions to make sure we're actually focusing on the right new product developments that will bring and add value quickly. Um, so, yeah, those times have been quite difficult.
I think over the last two years. Yeah, I do think as we sort of said at the last, um. Reports, you know, things are starting to settle down. I think we've got, uh, we've rebased the business for 2024. Um, you know, we've got a new CFO come on board. Uh, we've managed to, to work with our, um, lending syndicate to make sure we've got sensible covenants in place.
So we've, we've drawn any threats of any, uh, um, covenant, um, issues at all. So I think that's made quite a big difference to the business. And you're really now what we're doing is, is, is focusing on that. There's possible parts of our business and really being very careful to make sure that we are spending money in the right areas to, to maximize the short term gains.
presumably that Russian sanctions, uh, piece of Western brands is still, that's still an ongoing issue for you guys, presumably.
It is. I mean, we, we tend to sell through brands. Um, so we have no, obviously I have no direct, um, sales through, through Russia and its counterparts. However, a lot of the major brands, as we all know, have, have stopped selling into those regions. So yes, there, there's certainly been an impact from that. Um, yeah, which obviously has had a, um.
An impact in reducing the overall market. I mean, one thing that's quite interesting with the kettle market in particular is normally if you look over the last two decades when you have a financial crisis or things like SARS or pandemics, you get a very sharp drop and being a fourth tier supplier, but then you get a very, very fast recovery, usually two to four quarters.
Yeah, this one took over nine quarters in in what we would call those regulated markets because you had a sequence of bad events. Um, and that regulated market is still actually quite a slow recovery. Have not seen the normal rebound. Yeah, we expect to see a recovery. Um, and, you know, one of the issues we have is trying to forecast when that recovery would come back.
You know, we've now decided to just take a long term view and assume it's going to be a long, slow process. Obviously, if it recovers quickly, everyone will be very happy. Um, but yeah, we've, we've been prudent, conservative, whatever you want to use, you know, in our forecasting to make sure that we can, we can achieve the numbers we've got out there in the market.
You've already mentioned it. Um, Strix bought Billy, the Australian water filtration and hot tap company for 38 million pounds in October, 2022. Just talk us through what was the strategic logic to that deal? Um, I'm kind of curious because don't hot taps make kettles redundant? Um, how has, how has Billy performed so far?
So, yeah, for us, it was, it was, uh, actually quite an important strategic, um, acquisition for us. And it really was on our roadmap of products, but probably sort of seven or eight years down the line. So, when you're looking at our business model, yeah, we obviously make controls that make kettles and you can get things like electronic kettles that will give you different temperatures for teas and coffees and so on.
In our consumer goods division, we have a hot water system, which is effectively a standalone unit, which gives you boiled water. It starts in just five seconds, chilled water and filtered water. So very much like the hot tap type systems, but as a standalone system on your on your on your countertop. So this was a natural evolution to go into sort of the.
Built in systems and Billy is without doubt a premium system. It's the one if not the only water cooled hot tap system. So it's very energy efficient. It's very tidy on the sinks, like having a mini fridge actually underneath your sink. So you don't have any of the holes in your cupboards or anything.
You know, it's kept very cool. Uh, and, and as I say, is, is one of the premium products. For us, you know, it's performed extremely well. We've had double digit growth in top and bottom line in the local currencies, which is what they what we predicted it would deliver in the first place. I think the nice thing about Billy, it sort of fits very closely with the cattle in terms of its financial model, but it's also got substantial growth opportunities.
Today we're selling in UK, Australia and New Zealand with direct sales. Billy. Um, a few distributors elsewhere, but it's clearly some very significant geographical opportunities, growth opportunities in firstly in Europe and then later moving into America as well with our sort of geographical footprint.
Now correct me if I'm wrong, but Billy, also produces, own brand products as well. Doesn't it? Is that an opportunity that you see that you can, that you can exploit going forward?
I mean, Billy, Billy itself is, when you say own brand products, you mean the, the private label type products.
Yeah.
No, Billy, Billy itself is only producing the Billy branded products. The consumer goods division does some, um, white label products for for coffee machine manufacturers, for instance, for some of the baby formula type systems.
We do filtration as well. So that's more in the consumer goods division rather than in the Billy division. But again, a very important part of our business and certainly something we're looking to expand.
Yeah. Uh, how's the, how's the, um, how's that performed so far? Have you, what have you had to do in terms of integration? You know, um, has there been, you know, many kind of difficult layoff decisions or anything like that, that you've redundancies that you've had to make or, or has it been quite complimentary?
In the, with the Billy, with the Billy acquisition you're referring to, yes? Yeah. No, Billy has been, um, been really, really good. So we've, we've made some, some, some changes. There's been a few management changes during the course of the process where we sort of strengthen some of the positions. And we certainly promoted people within the Billy Group, which has been really successful for us as well when we bought Billy, you know, there was a need for some additional resource.
In fact, so we put a lot more technicians in the UK also in Australia as well, because a lot of that was being outsourced and that that has a detriment mental impact to sort of service in some cases. So we've certainly improve that. So actually, we've expanded over that period of time. From an integration point of view, again, it's, it's, it's gone well.
I mean, we are not necessarily integrating the sales channel because it's quite a different route to market. They're selling to sort of surveyors and architects and so on. Whereas we're selling more to, to OEMs in the cattle side, but there's a lot of integration going on on things like procurement on the engineering side of the business, you know, as you, as you sort of alluded to, we have a lot of patented technology within Strix and that will give us a lot of opportunities to further differentiate some of those belly products in the future.
Um, and that's, yeah, that's really important part of our sort of development roadmap as well.
what's next for Strix? Have you got Ambitions to do more acquisitions, more consolidation in this, uh, in this sector.
Joe, there's, there's all sorts of things that we're looking to do. We've made a commitment to the market that, you know, we are, we are focused on the capital allocation at the moment. So, certainly in the short to medium term, our priority is to get down to 1. 5 times EBITDA. Um, and we have a target to do that by the end of 2025.
Um, in that period of time, yeah, we have a host of opportunities with the acquisitions that we made with Belli earlier. Um, Um, for organic growth. So we're very much focused on that. You're working on some new technologies, which will help to expand those as well. But certainly, when we get the, um, the, the debt down, we will then be looking back onto the, to the acquisition trial.
And certainly we continue to track opportunities. There are some quite interesting opportunities that would be linked to that Billy acquisition. And that debt acquisition. Did open up further opportunities. Now we're actually going into offices. We're going into homes. You're clearly that gives us other opportunities for some of the other products.
We've got infiltration as well.
thanks for that. Um, Mark, can I now take you back to the start? Where did you grow up and what was that like?
I'm born in Scotland. Um, I've lost the accent. I left there when I was three years old. Um, moved gradually South, but most of my time living in Brighton, Southampton and Portsmouth way. So that's where I, I grew up, went to school and college and so on. From there, I've managed to get a sponsorship into a company in materials testing industry in Southampton, um, did 18 years career there, starting as an apprentice, finishing there as the managing director.
Took a couple of years out after that, into ABS, which is sort of wastewater company, part of the CARDO group at the time, and then came into STRIX. And that was quite an interesting time. So when I was working with the, materials testing company, I did spend quite a lot of time in America.
So I spent three years living out pretty much out in Florida, which was an interesting experience. Obviously moved into Strix and then spent just over 10 years living in Hong Kong here working with the China distributors and OEMs out there. So it's been quite a diverse experience, but very interesting as well.
Yeah, it sounds like a bit of a whirlwind. I'm keen to kind of keep you, on childhood if I could do for a bit. What did mom and dad do when you were growing up and do you have any siblings?
Um, yes. So my, my mother was in the Navy to start the rent. Obviously, well, before my time, and then she went into sort of six secretarial type services. And my father worked in one of the large petrochemical groups, and then moved into be a Methodist minister. So, yeah, most of a lot of my child was was brought up living in living in a manse, which was quite different.
Very supportive all the way through, through my career. Obviously, helped me through my education days and certainly my father was very much a mentor to me in those early days with his worth work ethics in particular.
Yeah, yeah. And what about siblings? Are you, uh, do you, do you have any?
I do, I have two sisters, um, both, both in the UK.
Older or younger?
both older. One is, um, sort of into these days, at least into doing, um, audits for all sorts of different companies, ISO audits and so on. Um, the other now is semi retired was, was in the nursing, um, industries.
And what about school days? Where did you go to school? Um, you mentioned the South Coast, uh, which is kind of where you predominantly were based. Um, and what sort of a pupil were you?
So, yeah, early days, I was, uh, I was started in, in a, in a school in Hawley, and then I moved into Brighton College, um, at the age of around, I must have been around 10 when I moved into, to Brighton College and stayed there through the rest of my educational years at least. And then I went to what was then Brighton Polytechnic, um, yeah, now moved into being Brighton University and got sponsored, by a company called Lloyd Instruments out of the, out of the university.
What, what sort of subjects were you generally good at? Was it mainly sort of sciency?
yeah, I think generally, I mean, yeah, maths, maths, certainly in later years, which was pure maths. I really did. Enjoy quite a lot. Um, you know, physics side. Yes, was was was very good for me. And yeah, I didn't mind the English side and French was probably the only language I did. Um, so yeah, it's sort of quite a range.
I won't say I was I was top of the class for any of them. But, but, you know, I enjoyed a number of different topics. Definitely like my sport. I mean, that that was a school that did encourage sports. So, you know, rugby, cricket, football, you know, all of those things I got heavily involved in. And latterly into badminton as well, quite heavily.
Okay. Good. Good. Um, you mentioned then, uh, Brighton Polytechnic. What, uh, what did you study there?
Electrical and electronic engineering.
What were the, what were those years like at, uh, Brighton Poly? Were they, uh, enjoyable? Did you, were you studious or, uh, were you more into partying and, uh, and the socializing?
No, no, I was, I was actually quite studious to be fair. And it was, it was, um, I would say a very enjoyable time with very hard work. And, um, you know, the hours you had to put in, in, in that, in that course was, was, was a lot. It was, it was a sandwich course. one of these thin sandwich courses. So you did six months of polytechnic and six months in industry, which I think was quite challenging, but I think was actually really rewarding because I actually stayed and got sponsored by the company I was working with through those.
Yeah, there's six months periods as well, but I really enjoyed the polytechnic. They were very well respected by the IEEE at the time, which is one of the reasons I went to that particular polytechnic. But no, they were great years, actually.
Yeah. What was your first job after uni? Did you go straight to work or did you go off and travel for a little bit? Yeah.
straight to work because I was doing the thin sandwich course, the company wanted me there. So I think I may have had a week off at the end of university if that was about it. So no, there was absolutely no time off at all at that point.
Mark, what do you enjoy doing outside work and how do you dare I say switch off?
I know my wife would say I don't switch off. I enjoy my downtime to be honest. I do enjoy, um, funnily enough, one of the things I enjoy a lot is flying and doing absolutely nothing on the flight. So long haul flights for me are a breeze. I still play a bit of badminton, you know, do a little bit of work in the gym, although you wouldn't, you wouldn't notice if you saw me.
Obviously, the family life is also very important as well. We've now moved to the Isle of Man. Very, very different lifestyle there. So, I do like to just take some down time and enjoy that down time as much as I possibly can.
Yeah. How, um, how serious is the badminton these days? Are you in a, are you in a league or, um, or is it just for, just for fun with friends now? Yeah.
years ago. I still enjoy playing. Um, my son enjoys playing with me. And unfortunately, he's got to an age now where he can beat me. So it's less interesting than it used to be because I'm a very competitive individual.
Yeah, good stuff. Mark Bardler of Strix Group, thank you for joining me in the All Points West podcast, and good luck with everything.
Thanks very much, Carl. Appreciate your time.