Strip Tinning Holdings (LSE:STG) — Full year Results

0:00 Good morning and welcome to the STRIP TINNING HOLDINGS PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would

0:30 now like to hand you over to CEO Mark Perez. Good morning to you. Good morning. Thank you. Thanks for the introduction. So welcome to our twenty twenty four annual accounts presentation. We have some slides to take you through and look forward to receiving your questions at the end. I'll hand you over to Kevin. Good morning. Hi. This is our p and l for 2024 and, 2023. I guess the key highlights are our margins. Our margins increased by just under 3%, which was very good as we worked really hard to move our margin up reduce

1:10 costs wherever we can. The other thing is we have increased costs mainly in the engineering section as we increase our R and D and our engineering content of our components with the three new projects that that engineering content is coming through, which is helping us to drive more value into the components of the products that we make, which is, you know, very good for the future. The other thing to bring your attention to is the other operating income. This was largely due to grants in 2023, which we didn't have in 2024. We are working on further grants. However, and I'll talk about this in a later slide.

1:59 All in all, that brought us down to 1,900,000 adjusted EBITDA loss for the year and so that was in line with expectations on market. The other thing in the accounts is the derivative fair value loss which is really on the new convertible loan note that we have in the business. The accounting treatment of the valuation of that is split into a debt element and an equity element. And as you can see on the face of the P and L, there's a 905,000 loss due to the equity elements or derivative elements of this CLN, which is a non cash item.

2:50 Okay, so as explained in the outset, sales were down from 10,800,000 in 2023 to 9,000,000 in 2024, which was in line with our forecast. But this bridge really just explains the main movers up and down for that change. So our busbar and tungsten, we had some benefit from some improved pricing. Volumes were down, which is the next bar. You can see the biggest impact was CX seven twenty seven. So this was one of our connector projects where we, back in 2022, with the price increases we knew this one would be resourced elsewhere. However, there were some delays at our customer end which resulted us in keeping that product for the whole of 2023 And therefore it means that '24 has quite a delta compared to 2023 as that project moves away.

3:51 The other ones are relatively minor. You can see all the connector volume is down. That's largely in line with most OEM volumes being down. And that gets us to 2024 of 9,000,000. In the little table below, you can see some of the productivity improvements we've made. So obviously you would expect direct labor to reduce in line with sales, but we were able to improve the ratios on that. So the revenue per head is increased in 2024 versus 2023.

4:31 The only other thing maybe to mention is that our battery tech revenues are stable. And with the key nominations we've won, we expect them to ramp as we go into 2026. I'll hand you over to Kevin, who's going to talk a little bit about the divisional split between battery tech and glazing.

4:53 Hi there. So this is a divisional split, our two divisions being glazing and battery technology. Our glazing division remains profitable. Despite lower revenues, we've worked hard to reduce the costs in this area, which means glazing has remained profitable. Our BT sales are in line with 2023 as we gear up for the new contracts, and they will kick in in 2026. BT recruitment of engineers, as I said before, has increased the staff costs in in BT to $1.1800000, which was up on 2023. And that's as we again, as we really push that content in the product and the R and D the R and D content in the product and develop more intellectual property in the business.

5:54 So overheads, yeah, overheads again, you know, we're working very hard on overheads to keep them down and and to reduce the content, sorry, reduce the reduce the cost in the business. I'll I'll pass you back to Mark. The next slide. Okay. Thank you. In terms of with with the sort of headwinds that the automotive sector has faced, the management team have focused very hard on cutting our cloth accordingly and ensuring that we remain lean and able to move forward. These are just some of the key areas that we focused on. So with regard to capital expenditure, we've got the three main projects that we won, that we mentioned.

6:40 We've reduced all CapEx outside of those projects to just focus in on them. We've scaled back the nice to haves really just focusing on the must have items. So that could be equipment for capacity improvement. It could be end of line test, a whole range of equipment. But some of the nice to haves of additional controls, we've reduced those and pushed them out until outer years. We've built those nice to haves into 2026 and '27 whereas they were in 2025. We've also phased some of the CapEx in line with volume ramp up as opposed to all being upfront.

7:26 We have got a small amount to support some sales growth. In terms of headcount, as shown before, we've continued to flex down our direct labor in line with sales and that unfortunately has meant some redundancies. We've also reduced 14 engineers and managers saving circa a million pounds

7:50 in line with where we are in terms of revenue right now. Other overheads we've tried to trim here and there. Nothing too significant, but they've all helped. In terms of further revenue, Kevin's now gonna talk to you about some funding going forward. So as we work hard to stand alone to feed over the 2025 and the early part of twenty twenty six. As we look to the volume ramp up of our new contracts, further funding will be required. We're looking at a number of ways in which to do this. So we have two grants applications open at the moment that we will be submitting. One is submitted and we're waiting for confirmation, and the other one will be submitted by the end of July.

8:42 And we've already passed two hurdles on this particular grant. So we are hoping for a favorable outcome. This will help us with further funding for further projects also to help us with our current projects and the scale up of those projects towards the back end of twenty twenty six. We're also looking for debt funding where we can. And so as the business becomes profitable, we'll look for debt funding in order to help us to cover some of the shortfall in the later parts of 2026. We also are open to equity funding if the opportunity arises and the metrics make sense. And of course, we continue to look at cost savings wherever we can in order to reduce down the cost of the business and in order to cover some of the funding shortfall at the end of twenty twenty six within our own remit ready.

9:50 Next slide, please. This is a slide on net debt and how net debt has developed in the business in 2023 to 2024. As you may know, we had a convertible loan note in the early part of twenty twenty four, which is the primary reason for the increase in net debt in 2024. You can see there the 4,200,000 of net debt. And as I said, the derivative elements of the CLN, increasing that by another 900,000. This will change as depending on the share price and the volatility of the share price in the market will change that derivative elements of the CLN over the next number of years as we move towards the closing, the exit event of that CLN, which is in January 2029.

10:45 But as you can see, net debt overall has, if you take out the CLN and you take out the FRS 16 lease liabilities, our net debt has actually reduced to just over £1,000,000 from 1.4 where it was in 2023.

11:04 I'll hand you back to Mark for the, outlook section of the presentation. Thank you. Okay. So so as touched on earlier with the three major projects we've won, it's absolutely fundamental that we launch those smoothly as they double the size of the business in the next couple of years. We therefore launched our x '25, which is all about execution. So 2025 being a year of execution. So there's a whole cascade down of objectives linked linked to that. In terms of the the three major projects, the the Zoox robotaxi is progressing well. We've completed the c phase. D phase is expected later this year, stroke, next year, and SOP in q two twenty twenty six.

11:55 In terms of our PDLC projects, we've had both customers audit us in terms of our progress and readiness with very scoring very highly with good results from from those audits, which give us some confidence. Going forward, we will be selective with our resource allocation. So we have quite a strong pipeline, which is good and enables us to be selective, but we have some limited resources to deploy and therefore will be selective of which projects that we work on. We do have some additional hires planned in 2026 to work on those projects. They also add to some contingency for us should there be a further market slowdown. In terms of our sales expectations, for 2025, they are slightly lower than forecast previously on the back of OEM volumes, but only of a small magnitude things seem to be stabilizing.

12:58 We still, as mentioned, expect to be double our 2024, 2025 level of sales by the end of twenty twenty seven. And our pipeline remains strong, particularly within the battery tech division. We continue to supply a number of customers with samples and support their design and development material choices, etcetera, DVP activities. And by being very close to those customers supplying parts, we expect some future growth in particularly battery tech. In terms of our profitability goals, we expect 2025 to hit our adjusted EBITDA target, and we expect to become EBITDA positive in 2026.

13:46 2027 is when we expect to generate cash. And in terms of our market expectations, those are all as per. And thank you for your time. And now we will move to some questions, I think. Mark, Kevin, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Mark, Kevin, as you can see, we have received several questions throughout today's presentation. Mark, if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so. And I'll pick up from you at the end.

14:33 Thank you. Thank you. Okay. So, the first question from Ben, thank you very much for for submitting that. The question is with a substantial amount of sales in '25, '26 contracted, what level of revenue growth beyond '27 can we expect, and what are the biggest levers for continued

14:52 expansion? Yeah. Okay. So in terms of we we've got visibility out, on some of the projects. Obviously, we have a pipeline for others. To answer this question specifically is quite difficult because it depends on the level of funding that we can attract. So in terms of what's out there, we could see sales between 50 and 60,000,000 in the outer years beyond 2027.

15:22 But our ability to support the early stages of development is linked to our funding. So there's not a lack of opportunity there. We, in fact, turn down sales opportunities. It's really more what levels of funding we can secure to to deliver those projects. It's harder to answer more specifically than that because it depends where we get over time with with that fundraising. Moving on to the second question of what milestones should we look to gauge the success of the battery tech division. So certainly with the major ZUTS project then there's of course the milestones we mentioned we've completed C phase. So D phase would be the next stage which is off tool, off process And then SOP, obviously, internally, we have a whole raft of milestones and deliverables against those milestones that we measure ourselves.

16:20 And as mentioned with two glazing projects, we've had the customers recently audit us. So one of those projects was only an audit last week. Again, we would expect the same on that battery tech project and we'll be able to give you some updates on that as we move forward. Also, the success of the Battery Tech division, you could judge in terms of new nominations. As we mentioned, we're very much focused on executing the three big projects we have. During 2025, we are, of course, working on our sales pipeline, and we do expect some further nominations to talk to you about. Okay. Moving on to the next question. In battery technology, what are your key advantages over others in the market as we see increase in electrification?

17:11 So in terms of battery technology, we have some good synergies and crossovers from our glazing division. So things like lamination, We've been laminating our connectors for the glazing industry, our electrical connectors for many years. Things like soldering, welding, electrical testing of electrical components are all core competencies which carry over nicely to the battery tech division. In terms of our know how, a lot of this sort of field is in Asia. Clients like the fact we're in Europe, so that does give us some advantages over a lot of the market, which as I mentioned tends to be in Asia.

17:58 Okay. Moving on to the next question.

18:02 What preparations are the board making to reduce the cost rise impact of raw materials for their products? Okay. Thank you for that. As I mentioned earlier in the presentation, we have been taking a lot of steps to anticipate the challenges in automotive, be that reduced volumes, tariffs. We some of our contracts, certainly the newer contracts, we have built in escalators for things like metals, copper and alloys are certainly a key part of our products and therefore we have those on a price escalator so we're able to adjust up and down with our customers.

18:48 We're also very active in our supply chain and purchasing on supplier selection and auditing, constantly reviewing our panel to ensure we've got the most effective suppliers delivering the best possible pricing for us and terms. We continue to work with that and that includes both Europe, Asia and the rest of the world with that sourcing. Do you want me to add to that? No. We're working hard in our cost base and, you know, every opportunity we can, we're working on we're working on trying to find the best the best cost to match what we need to do while maintaining quality, because quality is key in this business.

19:37 Thank you, Kevin. That's great. If I may just jump back in. Mark, Kevin, thank you for addressing those questions from investors today. And, course, the company can review all questions submitted today. I will polish those responses on the Investing Me Company platform. But before redirecting investors to provide you with their feedback, which one is particularly important to the company, Mark, can I please ask you for a few closing comments? Yes. Thank you. So really to sum up, 2024 was a good year for us, building on the foundations of 2022 and '23 of improved quality delivery and efficiencies. We were able to go out in 2024 and win in the region of £70,000,000 worth of new business across both of our divisions. We continue to see a strong pipeline.

20:25 We've adjusted our costs according to the near term macroeconomic picture and believe that we have good foundations to kick on in '25, '26 and beyond. Thank you for your time. Thank you. Thank you, Mark. Kevin, once again for updating investors today. Can I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of STRIP TINNING HOLDINGS PLC, we'd to thank you for attending today's presentation, and good morning to you all.