Strix Group Plc (KETL) Earnings Call Transcript & Summary

Good morning, and thank you to those of you who are joining us today to hear from Strix Group, who announced their full year results earlier this week, in fact, I think yesterday. If you haven't seen it already, we have published an updated research note, which you can find on our website. But the purpose of today is to hear from the management team and indeed, of course we have a new member with us today. Hello, Andy. But I will allow Gary to do the introduction. So over to the Chairman, Gary Lam.

Good morning, everyone, and thank you very much for joining us today. As Hannah said, I'm Gary Lam. I'm the Chairman. What I'm going to do is just a very brief introduction ahead of starting to go through the slides. So you'll be aware that over the past few months, I've had the opportunity to spend some time in the business to support the exec team and especially Clare following the announcement of Mark Bartlett's departure. I found this time very helpful and insightful, enabling me to get a clear understanding of the challenges and opportunities the business faces and importantly, making sure we recruit the right person to lead the company. We will cover some of the challenges and opportunities as we run through the slides. But I would like to say that there was -- that what has come very clear to me over the past few months is the need for a step change in leadership, market engagement and commercial focus. These are the areas we have to improve, and I believe Andy's addition will make a significant difference. Over the past year, we have focused on stabilizing the business. And of course, the sale of Billi helped us improve our balance sheet and set the foundation for the future. So we're now in a position where we have some cash to invest. We have fewer distractions and an ability to focus on rebuilding this company under Andy's leadership. So that was a brief introduction. What I'm now going to do is I'm going to turn to the first slide. So this year has been a year of transition. You will know from the changing of our year-end that we're going to be covering a longer-than-normal trading period, the 15-month period ended the 31st of March this year. Changing the year-end gives us a clearer and more consistent view of the seasonality across our end markets and importantly, should help us improve forecasting accuracy going forward, something which is vitally important. In terms of financial performance, group total revenue for the period increased by 6.2% to GBP 153 million due to the longer trading period. Looking at the underlying 12-month period to the 31st of March 2026 compared with the 12 months to 31st of March 2025, we saw revenue in our Controls division declined by close to 24%. This reflects the challenging macroeconomic environment during the period alongside increased competition within the sector, which we will talk about in more detail later. Against this, Consumer Goods performed strongly with revenue increasing by 12%, supported by higher volumes of bespoke filters and appliances. Billi also delivered a stronger performance during the period with a pre-disposal growth of just under 10%. Despite the challenging macro or market backdrop, profit before tax remained within our forecast range at GBP 10.1 million. We also completed the disposal of Billi for an enterprise value of GBP 110 million. This represented around 3x our original investment for when we acquired the business back in 2022. The disposal a number of important benefits for the group, including strengthening our balance sheet. The net cash of almost GBP 40 million gives us greater flexibility and the ability to invest in the future of the business. And importantly, we were pleased to have returned GBP 13.7 million to shareholders through a tender offer and a buyback as a result of this transaction. Again, more on that later. Alongside this, our cost optimization program remains on track, and we now expect to secure savings in excess of our original target of GBP 2 million. So overall, we are pleased with the progress we have made, both in the work we've completed and the initiatives we put in place for the future. We believe Strix is now better positioned for the future with a clear focus on our core operations and a strong platform from which to deliver growth over the coming years. Finally, since the period end, we announced the appointment of Andy Rainforth, our new Chief Executive Officer, following the departure of Mark Bartlett. So I'm delighted to introduce Andy, who has joined us this morning. I'm going to hand over to Andy now to give a brief introduction.

Good morning, everybody. Thank you, Gary. Yes, so I'm Andy Rainforth, and I thought it would be useful and pertinent to just give you a little bit of background as to who I am sort of some of the roles I've held before and really my approach and why I've joined Strix at this point, my approach going forward. So I have a background as a mechanical engineer I've worked in manufacturing my whole career, manufacturing physical products. So I understand the importance of operations globally, product development and product portfolio management. After becoming or moving into commercial roles, I've had a variety of sales and commercial roles and management roles that are focused on both commercial strategy, but leading commercial sales teams as well, primarily in complex international businesses. They have typically been complex portfolios in complex geographies, so manufacturing a global footprint and selling a global footprint. So a lot of familiarity when I look at Strix and its current portfolio, its current footprint. There are a lot of things that are familiar to me. In terms of why Strix and why now. I think the timing is crucial. I think that post Billi, the business is in an inflection point, a really exciting opportunity with dry powder and financial assets at our disposal to deploy as we look for the next growth engine and reposition our business. I think in terms of the technology is interesting to me, I look at this in 2 parts. One, our human capital and our know-how, our subject matter expertise in the markets we play in today and also the ambition and entrepreneurial spirit to move forward into new white spaces. but also in terms of our manufacturing technology, our world-class facilities that we have in China and Italy and how we can leverage those and the capabilities that lie within them to attack new markets, particularly, but also get better at what we do. And I think really in terms of team, I think, is the important thing. We were very deliberate and very incremental in the recruitment, the way that I joined this business. I had opportunity to speak to everybody in the executive management, the senior leadership team and our divisional leaders in our controls business and in our consumer goods business and spend a lot of time with Gary and with Clare. And I think the important thing in that is that because Gary has been sailing the ship for the past few months. He is able to offer insights that a normal Chair may not be able to an incoming CEO. So that is incredibly useful as I hit the ground and predominantly, the conversations I have with Clare that seem somewhat endless at times about our joint desire to move this business forward. So this will not be a relationship where I sell things, Clare counts things. This is a relationship where we are literally shoulder to shoulder and conjoined almost with our approach to the market. I think in terms of where we go from here as an organization, I always look at things from a market-first perspective and a customer-first perspective. I always ask the questions as we approach any challenge with how does this impact the customer? How does this make our customers' lives better? How do we win new customers. So I think there are some areas that immediately strike me as being able to be better at what we do right now in terms of our existing products and services to existing clients. But I also think our immediately adjacent spaces leave us opportunity. I think we can be better at selling new things to existing clients and existing things to new clients. But I also think that there is opportunity to sell new things to new clients in terms of white spaces in both of our current divisions. I think there are some relatively obvious things that we should investigate that, again, are a little bit different to what we do today, but leveraging the technical capabilities that we have in our organization. So 3 weeks and 3 days in, I have a lot more questions than answers at this point. My next few weeks are going to be spent continuing to interview everybody who works on the Isle of Man and the U.K. with plans to visit our Italian facility in September and our Chinese facility in October, which will coincide with the Canton fair. So we are very much working on strategy as well at the same time as making immediate incremental improvements to the business. The executive management team has done an awful lot of work on a strategy document that says this is the areas that we should be investigating. I'm currently validating that, hopefully adding some value to that and being a little provocative about some of the areas we may be able to move into as well to test the validity of that. That work is ongoing, working towards Capital Markets Day later in current fiscal year, where we'll be able to share a lot more news about the future direction of that part. So I'm going to hand over to Clare to run through some of the results.

Thank you, Andy, and thanks, Gary. Before we get into any of the details of divisional results and balance sheet movements, as normal, I wanted to take us through the high-level financial highlights for the period that's gone. Now it is a little different this year because of the change in financial year-end to 31st of March. In line with accounting guidance, the numbers in the financial statements are very much focused on the 15-month period ended 31st of March 2026, which we are calling PE26 versus the year ended 31st of December 2024. However, comparing a 15-month period to a 12-month period makes it much more difficult to understand shifts in underlying trading. And of course, the other circumstance we've had this year is the disposal of Billi, which brings its own complexity to the group's results. To counter those challenges, I will be presenting some PE26 numbers, but I will also be presenting some numbers for the 12-month period ended 31st of March 2026 versus 12-month period ended 31st of March 2025. In addition, I will make it clear when I'm speaking about only our continuing operations, i.e., controls and consumer goods, when I am speaking about the total group trading results, i.e., still including Billi. You will see if you look at the CFO review in the annual report that we have also presented far greater analysis this year in terms of tables and narrative to make this period more comprehensible. But in that build up, let's run through this slide. As previously reported and as mentioned by Gary, we have undoubtedly seen some macro market challenges in this 15 months in the controls market, which have impacted on our results. However, we are still reporting a revenue increase of 6.2% at constant exchange rate for PE26, albeit that is really due to the longer trading period. However, if we instead look to continuing revenues for the shorter 12-month period to 31st of March 2026, we see that these have reduced by 12.8%. We will talk about divisional trading a bit later. But in summary, this reduction is all coming out of the Controls division due to the unsettled macro environment and increasing competitive pressure. In contrast, consumer goods have reported double-digit growth, particularly in the bespoke water filtration and appliance manufacturing part of the business. As expected, when you look at continuing gross margin, we are also seeing a decrease in the period. Again, this is predominantly to do with the trading challenges in the Controls division. As usual, more detailed divisional slide is coming next on this. Continuing adjusted EBITDA for the 12 months ended 31st of March 2026 has also decreased at both margin and pound note level. This largely reflects the reduced gross margin. However, it has also been impacted by negative operational gearing. The business has worked hard in the period to keep overheads level despite investments being made in certain key commercial areas, especially in the Consumer Goods division. However, maintaining level overheads against lower revenues does have a naturally negative effect on EBITDA margins. Looking ahead, the business is not standing idle on costs. As Gary has mentioned and we have been working hard on cost optimization, and we are already on track to secure gross annualized savings, i.e., before investments in excess of our previously announced GBP 2 million target. Looking at the last 2 boxes, the change in our balance sheet position has obviously been marked as a result of the disposal of Billi, taking us from a net debt position to a net cash position of just shy of GBP 40 million. However, I don't want us to lose sight of the rest of the good cash generation work that has been achieved in the period as the business has continued to drive balance sheet efficiency even given the now net cash position. Over the last 3 years, the Strix business has consistently secured extremely high levels of cash conversion. I remember telling you guys when we hit 106% cash conversion in financial year '23 that there were limits to how sustainable this could be. However, the truth is that as a result of the accelerated debt reduction plans we put into place following the half year announcement in September, continuing operating cash conversion has climbed even higher, achieving just shy of 120% in PE26. We told you the around 50% operating cash conversion reported at half year was a temporary flip and my goodness, we have held to our word. So that is the highlights. If we move on to the next slide. We can speak about gross margin in a bit more detail. And here, we are looking at PE26 versus financial year 2024. Now before we go any further in the spirit of full disclosure, consistent with the half year, we have adjusted the way that we calculate divisional gross margins here. We have reclassified certain costs, including those relating to group departments as central costs rather than allocating them out into the divisions. This change allows for better analysis of underlying trading performance effectively with fewer distractions. Overall, gross margin obviously continues to take all costs into account, so there is no change there. And equally, obviously, we have restated comparatives so that we are comparing like with like. So going back to the PE26 results, as mentioned and in part as expected, we've seen a decrease in our overall gross margins of 590 basis points. As you would expect, the main reason for that decrease relates to our Controls division, as you can see here. For Controls, gross margins have decreased by 610 basis points. As we've discussed, PE26 has been a challenging trading period for the Controls division and the gross margin has seen a negative impact of 2 main factors. The first and the most important is simply lower regulated, less regulated sales over a semi-fixed cost base. On top of that, the ongoing weakness in the U.S. dollar has had an impact as we sell around about 50% of our export controls revenue in U.S. dollars. Looking ahead, we do expect to see pressure on Controls gross margins continue due to the ongoing volatility in commodity prices, the U.S. dollar and the continued rollout of new lower-priced products, which are affecting our average selling price. That's not the same as saying we expect to see gross profit at a pound note level decline, and we'll talk more about expected market share growth opportunities in a few slides' time. On the other hand, our Consumer Goods division has seen a good uptick in margins, increasing nearly 300 basis points on '24. Approximately half of this is the opposite effect of higher sales over a semi-fixed cost base due to the accelerated 12% growth in the period. The other half reflects an ongoing shift towards higher-margin business, especially due to higher volumes in the bespoke water filtration market. Looking ahead, we expect to see gross margins remain broadly consistent in our Consumer Goods division at around about 30%. Finally, and it is worth touching on this as Billi remains part of the group for 13 months of the 15-month period. As expected, we saw margins remain around the 45% in the Billi division prior to disposal. So if that is the income statement. If we turn on to the next slide, we can see what has happened on the balance sheet slide. And to understand this, we have included our usual net debt bridge. So I'm very pleased to report has, of course, become a net debt to a net cash bridge this year. As we said at the beginning of the presentation, the disposal of Billi has brought a marked change to the group's balance sheet with GBP 102.5 million of net cash proceeds coming in, in the period. We have moved very resoundingly from a net debt position of GBP 63.7 million to a net cash of GBP 38.7 million. But this isn't the only thing that has happened. We spoke about exceptionally high continuing operating cash conversion earlier. But the biggest part of that, as it says there was the GBP 8 million reduction in the manufactured stock at our China site. This was against an end of September 2025 peak, but it still represents a GBP 4 million decrease on the opening position. We don't see the benefit of all of that in here in the GBP 2.8 million on that bridge as this reflects the total group position. And before we disposed of Billi, we did see a planned increase in stock to get them ready for the head office and manufacturing site move in Australia. One metric that we like to keep an eye on is working capital as a percentage of sales. And as you can see here, due to the concerted efforts made for the continuing group and using the 12 months ending 31st of March revenues as a basis, we have seen this reduce significantly from around 15% in March '25 to just under 10% in March '26. This is a fantastic achievement, especially for a business that derives around 1/3 of its revenues in the Italian market while known for its heavily extended credit terms. Capital investment in the period has remained highly targeted and relatively low against prior year at GBP 8 million for the 15 months versus GBP 8.2 million in the last calendar year. This has been focused predominantly on key investments into the low-cost and next-generation production platforms and the Billi site move that we did at the end of the year. Whilst lower than 2024 interest in the period was still GBP 7.4 million, it is worth noting that given the now net cash position, we would consider only about GBP 0.5 million of this to be recurring in future years, removing a significant drain on cash retention obviously provides a huge positive to the group's overall liquidity. I'll talk about shareholder returns today in a couple of slides' time. So that's a high-level financial results. Over the course of the next couple of slides, I want to take you through a few other topics, starting with a little more detail around Gilly and the disposal. One of the first things I wanted to do is remind you all that this wasn't a simple acquisition and disposal. Strix created a huge amount of value in the Billi division whilst it was under group ownership. Following acquisition, we strengthened the Billi leadership team and operational teams globally. We put in over 100 new heads into the business. We invested a lot of time in enhancing customer service infrastructure. You may well remember the Trustpilot scores here in the U.K. increasing to 4.9 as a result. We built the Billi U.K. team of business from the ground up, recruiting new people, finding new premises, putting in a new IT system and building out the commercial customer base and Billi brand in the market. We also opened the flagship London showroom in Barrington in May 2023, which proved instrumental in establishing Billi's place in the high-end commercial water filtration market in the U.K. We accelerated international expansion with focus on the U.K. and Mainland Europe, but also with an eye on the rest of the world, most specifically in Southeast Asia. And finally, at the end of 2025 calendar year, we supported the Billi headquarters and manufacturing site to relocate into brand new premises in Melbourne, Australia. Having said all that, disposing of something for approximately 3x original investment value after only 3 years of ownership remains a very good rate of return. And just as importantly, that successful disposal has been transformational for the group. It allows us to repay GBP 80 million of RCF debt back in full and exit the year with just under GBP 40 million of net cash, giving us a very strong financial foundation and the resources and financial flexibility to invest in tomorrow's growth. It's not just cash resources that were restricted over the last 3 years, it is also management time and capacity. Post the Billi disposal, Strix has left a simpler group and one that allows for a more enhanced strategic focus. We have 2 great divisions still within this group in Controls and Consumer Goods. And the first time in a fair while, we have the opportunity to give those 2 businesses the management focus the time and the energy that they deserve to drive profitable growth and value creation. I'll leave Gary to take you through that in a bit more detail later on. Turning on to the next slide. I only want to touch on this one reasonably briefly as we are currently in a period of transition in regard to capital allocation. But I do want to make it clear that the strict capital allocation is something that is hugely important and putting in place the right fit-for-purpose comprehensive capital allocation framework is going to be instrumental to the medium-term success of the group and our value creation plans. However, this is not something that we can conclude on in isolation as it needs to naturally evolve over the course of the coming months as we further review, align and focus the strategic direction of the group, taking into account investment in growth opportunities, but also balancing capital discipline and shareholder returns. Ahead of that comprehensive process and due to the scale of disposal proceeds, the Board felt confident to take some short-term actions, which have already led to the return of GBP 13.7 million to shareholders to date by both the tender offer and the share buyback program. As you know, following the successful tender offer, we have currently forced that buyback program simply to allow the wider commercial reassessment and strategic planning process to complete. Once that happens, as it says there, and as Andy mentioned earlier, we very much look forward to coming back to speak to you all about strategy and capital allocation as part of the Capital Markets Day later in the financial year. And if we move on to the next slide, what I want to do now is just take us through the trading in our 2 trading divisions. Starting with Controls. I will cover the next couple of slides, which take us through the year just gone and a bit of history, and then I'll hand over to Gary, who will give a bit more of a flavor about what tomorrow looks like and how we are looking to build for the future. But let's focus on the year just gone first. And here to aid understanding, I am talking about the 12 months ended 31st of March 2026 versus March '25, where we reported revenues of just under GBP 53 million and around 24% down on the comparative 12-month period. As previously reported, there can be no doubt that this has been a challenging 12-month period, most especially across both regulated and less regulated markets. The introduction of U.S. tariffs at the beginning of April 2025 significantly disrupted customer ordering patterns and reduced volumes in the market. And at the same time, it provided the perfect breathing ground for competition to increase, bringing with it higher pricing pressures in some of the more price-sensitive parts of the market. And this is pressure from top-tier Chinese control manufacturers. I'm not going to call them [indiscernible], who have begun to operate more aggressively in what has been a multiyear period of sustained marketplace uncertainty. As previously reported, we saw the impact of this over the course of the year in a reduced regulated market share. The majority of this has been felt in the fast-growing, more price-sensitive U.S. regulated market. However, it was not exclusively there. And we have seen some market share erosion in other Western markets outside of the U.K. We've also seen a degree of erosion in the more price-sensitive, less regulated market. The final headwind in the year came in the form of the weaker U.S. dollar that I mentioned earlier. We transact about 50% of our controls revenues in U.S. dollar, and therefore, weaker dollar does impact negatively on the relative values of those revenues. However, whilst it is important to recognize what has happened over the course of the period, it is not all doom and gloom. We have already taken action to navigate these challenges and to position ourselves for the future. The successful launch of low-cost range and next-gen controls gives us the ability to approach the market in a different and more relevant way. These lower-cost products enhance our competitiveness, expand our addressable market and are already showing some signs of supporting a recapture of market share. We have continued to be disciplined in how we approach the China market. There is no point in selling volume at a loss. However, it is fair to say that with the new low-cost controls, again, we do have more avenues opened up to us in this market than before. The targeted price surcharge program that we successfully implemented around period end has gone a long way to offsetting elevated copper and silver costs. And the fact that we and the competition went through similar processes in this regard shows that while sales price does matter, customers are willing to understand and respect that inflationary costs cannot simply be met at the supplier level. And similarly, it is clear that our competitors are also not prepared to swallow cost inflation in order to gain share. As a final piece of positive, the other thing to note is that whilst volumes did remain lower than in prior years, we did also start to see an improved trading momentum towards the end of the period, just carried on into quarter 1 of 2027. So that is the year just gone, if we turn over to the next slide, for the first time, I wanted to take us through a little bit more detail in terms of the longer-term market view. The first thing I want to do before we get into any detail on this slide is to draw your attention to the comment at the bottom of this slide as it is important context. There is no perfect information out there on the kettle controls market. You can Google KETL controls rates and you will get an answer. I think it's around 5% at the moment. And whilst that answer is not entirely incorrect, it is also not entirely useful in order to understand our results as we do not play evenly in all markets. As a market leader, we have perhaps the best combination of internal and external data sets at our disposal, and we have combined those to come up with the high-level view you see on this page. However, this is a high-level view across multiple years, global markets, customers and brands. It is unlikely to fully align with other information that is publicly available, but it is our best high-level estimate. Since Strix reported peak pandemic controls revenues in 2021 due to extremely high consumer demands, the KETL control market has seen a consistently unsettled macro for all sorts of reasons. In fact, in line with many other ultimately consumer-facing industries, the only consistency we have seen is a sustained uncertainty due to conflicts, cost of living crisis, supply chain issues, commodity costs, tariffs, you name it, we've seen it. And what that means is that it has been increasingly difficult to understand the controls market and Strix position in it by looking just at the year-on-year movements. Therefore, to assist understanding and to help better inform future directions, we are presenting a graph on this page that shows the main revenue movements over the last 5 years. And there are 4 main elements to this, all of which we have talked about before, but not perhaps with the degree of clarity that this bridge provides. The first one, average selling price, we've spoken about ASP reduction for a number of years and the fact that this is part of the controls market dynamic. This is not due to product price deflation. It is to do with product mix shifts. To remain relevant and protect market position, Strix has continued the introduction and rollout of innovative lower price and cost of products into the market over recent years. The original gen became second gen, second gen becomes next gen or low cost and so on. The impact of this over the last 5 years has seen to allow Strix to maintain its market-leading position, but it has also led to ASP reductions of 2% to 3% per annum. The second point is market contraction, which again, we have spoken to you about before. Now this is not across the board, but our best estimates do show that excluding the U.S., the regulated markets, i.e., including U.K. and Germany, contracted after the 2021 peak, and they have never recovered, remaining around about 10% below that peak volume level. As previously discussed, we've also seen a reduction in market share. In reality, the biggest part of this reduction was in the 15-month period that we're talking about this week. as what started as a macro tariff event shifted into market share loss as volumes started to recover. As previously reported, in the regulated market, the majority of this was in the U.S. market, but we did also see some impacts in the less regulated space. In a large part, this reflects relative price sensitivity. Wherever this is naturally higher, either in the U.S. or in the less reg market, we have seen increased competitive pressure. The final element, again, we have spoken to you about before, is Strix's reduced focus on the China domestic market. Over the course of those 5 years, we've seen a marked revenue impact due to the disciplined profit-led approach to what is a highly price-sensitive market. As I said at the beginning, this is not a perfect science, but hopefully, despite that caveat, the information on this slide provides useful clarity, context and understanding. I will now hand you over to Gary, who's going to focus on what we're doing about those market challenges and how we plan to build for the future.

Thanks, Clare. You can now breathe.

Thank you very much.

So looking ahead, our focus is on repositioning the controls business for growth. Our aim is to recapture market share across both the regulated and less regulated markets. We plan to do this through the development and launch of new differentiated control products that strengthen our competitive position. These new products will give us a strong platform to actively target and recapture market share while we continue to expand our existing product portfolio and the less regulated market, creating further opportunities for growth. The launch and expansion of our low-cost range also provides us with an opportunity to rebuild our presence in the domestic Chinese market, creating additional potential revenue streams for the business. Beyond our new products, we will also be exploring the broader thermal technology markets and considering where Strix can play a role and leverage its existing capabilities. Operationally, following an internal review, we will continue to roll out lean manufacturing automation and efficiency programs across the business. The aim is to reduce our cost base, improve operational efficiency and strengthen our competitive position through better engagement with the market and improved commercial focus. We're already seeing encouraging signs that these initiatives are having the desired effect. Importantly, we have started to see positive momentum across the Controls business with performance improving from 2025 into the first quarter of FY '27. We've also already secured a number of key project wins, providing further confidence in the opportunity ahead. Finally, our active pricing actions during the period have been successfully implemented. These are helping to offset commodity pressures while ensuring that we remain competitive in the market and protect our market share. So overall, we're seeing positive momentum across the Controls business, supported by new products, operational efficiencies and sharper commercial focus to rebuild market share and deliver growth. And I think it's back to you, Clare.

Indeed Gary. Last slide for me. And it is a good one to end on. Our Consumer Goods division has been through a fair few changes and some restructuring in recent years. That restructuring completed in 2024. And for the 12 months ended 31st of March '26, Consumer Goods reported strong double-digit revenue growth driven primarily out of the continued expansion of water -- bespoke water filtration programs and the continued rollout of appliance manufacturing to premium global brands. We also launched a patent pending FSAS Forever chemicals filter range. And as a number of you saw last year, we expanded our Light Water and Well-being brand into the U.K. market. How are we positioned for the future? Well, we continue to invest into water filtration technologies, which are the bread and butter of our Consumer Goods division, including ongoing developments into antibacterial and additive technologies. We have made additional investments in automation and packaging capacity in our site in Italy to support growing demand and to improve production efficiencies. But just as importantly, we continue to focus on higher-margin routes to market. It started with the product portfolio restructuring in 2024, it remains one of our key drivers for the long-term profitable growth of this division. And on that positive note, I will hand back over to Gary, who's going to take us through how we see the consumer goods journey continue to build.

Thank you. So as Clare outlined, consumer goods has performed strongly over the period. Looking ahead, we'll be focused on building on that momentum and further strengthening our competitive position within the sector. Our premium brand OEM customers across both water filtration and appliances remain a priority, supported by targeted investment to strengthen our team and commercial capabilities, giving us the platform to develop new strategic partnerships while at the same time expanding our existing customer relationships. We will also continue to develop our water filtration range in direct response to growing consumer demand for products that can remove contaminants, including what we call ferlla chemicals, which is becoming an increasingly important issue internationally. At the same time, we will continue to develop and strengthen our private label relationships within water filtration. This will provide us with a strong foundation to protect and broaden our market access, particularly in markets where customers increasingly trade down to lower cost alternatives. We also see a significant opportunity to expand Lyca with a particular focus on Europe, the U.K. and Asia, where we believe there's a strong demand for our products. This expansion will be supported by an enhanced marketing strategy, helping to broaden the reach of the brand and support the rollout across these markets. And overall, we're positioning the Consumer division for sustainable growth over the long term. Our priorities are clear: to strengthen our position in the water filtration, deepen our strategic customer relationships and improve operational leverage across the business. We believe this provides us with a strong platform to build on the performance we've delivered to date and capture the opportunities ahead. So I'm finally going to turn to the outlook, which I believe is on the screen, Slide 18. So turning to our outlook. While the external environment remains challenging, we believe Strix entered the year with positive momentum. You'll understand that the macroeconomic backdrop remains difficult to predict. Geopolitical developments continue to create uncertainty around commodity prices, currencies and consumer demand, while competition in the controls market remains heightened. We see these factors as a natural evolution of the market, and we remain focused on managing them proactively. Against that backdrop, we've encouraged by the way we started the new financial year. Control volumes continue to stabilize compared to 2025 and the rollout of our lower cost and next-generation product ranges are beginning to help us recover market share. In consumer goods, we're continuing to improve the quality of our revenue through a greater focus on higher-margin routes to market. We've also taken decisive action to protect profitability. Our price increase program has now been successfully completed and is helping to mitigate the impact of higher commodity costs. At the same time, our cost optimization program remains on track to deliver at least GBP 2 million of annual savings with further opportunities being identified through our goal of continuous improvement. Looking beyond the near term, now that Andy is in place, we're undertaking a comprehensive commercial assessment of the business. This forms part of a broader strategic planning process aimed at ensuring is well positioned for its next phase of growth. Alongside this, we're developing a clear capital allocation framework that will balance disciplined investment in growth opportunities with shareholder returns supported by the refinancing of our debt facilities. As Clare mentioned, we all look forward to sharing the outcomes of this work at a Capital Markets Day that's planned for later this financial year, where we'll set out our strategy, capital allocation priorities and medium-term ambitions in greater detail. Overall, while there is still work to do, we believe the actions we've taken over the past year have created a stronger, more focused business with a solid platform from which to deliver sustainable long-term value and growth. Thank you. So over to Hannah.

Thank you to both -- to you all, in fact all 3 of you. Could I ask that you put your camera on for the Q&A? Would that be alright. [indiscernible] Could you please repeat and give a little bit more detail on the recurrent investment needs that you're expecting in the coming years?

That's Hannah, as I suspect some other questions we might have, we need to go away and have a look at that. That's the work that we're doing at the moment. So obviously a comprehensive answer. We'll follow in due course at the Capital Markets Day. If it helps the audience at all, what I would say is that in terms of maintenance spend, we tend to be around GBP 3 million to GBP 4 million a year just in order to keep the lights on and keep things working. This year, we predominantly invested, as you saw, into low-cost controls, NextGen and the Billi site move. So we will pick things up and target investments in the right places alongside that routine maintenance spend.

It might be worth adding actually because we know the last number of years have been particularly challenging sort of managing the debt. So our opportunity to invest has actually been limited. So the fact that we now do have cash, we will make sure that we do invest and target the areas of the business where we'll deliver the greatest return.

Thank you. The like water filter business offers various filters targeting specific pollutants. Considering that most consumers don't have a lab report showing what's in their water, is there an opportunity to do performance claims? And do these customers buy these immaterial volumes?

Yes. I think that, yes, is the short answer to that. I think we could do a much better job, and we will do a much better job of articulating the value add. I think that's the key thing that a consumer needs to be able to understand when we claim there is no filter like a like a filter, we need to be able to back that up with good quality evidence of what does that mean and what does that mean to their health and their well-being. So I think there is a greater opportunity to create and articulate a message around that. And I think that the second half of that question in terms of the volumes, I think there is -- there is an opportunity for us to investigate how we leverage a recurring revenue model with the supply of filters. I think that is interesting to all of us. And I think that the -- when we talk about consumers, it assumes that our main channel to market there is almost a B2B2C. And I think there is a good valid market there for us to leverage. But I also think that the whole area of water filtration opens up a whole new section of adjacent markets and white spaces for us. It is a big broad topic water filtration. And I think when one considers the professional and commercial application of water filtration, that may open up an even more exciting opportunity for us because I think the consumer market will always be -- it will vary by geography and by channel, but it will always be fragmented and challenging to serve and inevitably lower margin than some of the professional and commercial filtration which could be state-sponsored or larger projects going into projects such as universities or hospitals or housing estates or things that are much bigger in terms of their -- first of all, the capital employed in the projects, but also they tend to be higher margin because you further up the value chain. So I think there is a lot for us to investigate around that. But it is -- I agree, Hannah, it's a really exciting area to investigate.

Okay. Thank you. Ping around a bit here, we've got a question here on controls. In technical terms, are the new generation and low-cost controls are they catching up with competitors? Or are they actually establishing an advantage? And supplementary to that, what stops the Chinese competitors cloning the new products within the next 12 months?

I think the answer to that is dependent on which part of our launch you look at. So the next generation does give advantages over existing technologies that are ours at the moment and that are either patented or we have patented. That includes, and we've spoken about this before, a smaller size, a smaller footprint, which then gives producers and OEMs more flexibility in how they design the underlying appliances that they want to use our controls in. So that does represent a step forward. When it comes to our low-cost controls, it's less about step forward or catching up. It's about ensuring that we have a cost base that is entirely aligned with how our competitors are doing their production as well. Now that doesn't mean we're now producing controls that are not safe and do not meet compliance. But it means we can look to different raw materials. We can look to different cycle counts in terms of how long -- how many times you can use a control over the lifetime of your kettle. So what the low cost does is it makes a product not technically more advanced, but more market fit for purpose to allow us to compete against that market on a more level.

Let me just add one thing, actually. When it comes to the next-generation control, I think the question was, could the Chinese copy it? Well, in fact, that control has IP around that. So that means that if they were to try it, then in fact, we can take legal action against that IP, which is something that St has done very successfully for many years. So it's not just about a low-cost control. It's also trying to get further protection on those controls because over time, previous controls they will lose that protection over something like 20 years. So that's also an important part of what we're doing here.

Very helpful. Well, sticking to controls then. Are the new controls expected to drive revenues, margins or both?

They will drive -- we are looking them as a driver for revenue first and foremost. This is about Strix going out there and recapturing market share and then building beyond that previous market share where possible. And so this is a revenue engine. When it comes to margins because of the lower ASP, it is likely that margins will be negatively impacted. But as I think I said at some point in the presentation, that is not the same as saying we are going to be negatively impacted at the pound node level. Just because our gross margins go down does not mean that our gross profit goes down. It is all relative to the amount of volume and the revenue increase that we can get out into the market.