Ilika plc (IKA) Earnings Call Transcript & Summary

Well, a very warm welcome to all of you. Many thanks for choosing to spend the morning hearing about solid-state batteries and participating in the discussion. I'm sure it will be lively. And there'll be plenty of opportunities to ask questions as we go through the morning. We've got a fun-filled agenda to stimulate everybody today. So we're going to kick off with a bit of an overview from myself, and then we're going to go into a presentation of an update of the Stereax part of our business. And you guys are actually going to see a world premiere of a video, which has been recorded by our partners over in the U.S., Cirtec, who are going to update you on their view of the market for Stereax and where we are with the implementation of that. And then we're going to have a bit of a break, have a Q&A to allow people to ask any questions that they might have about the Stereax business. And then we'll move into Goliath in the second part of the morning. We'll have a Q&A on that. And a coffee break before we have an EV industry panel where we've got some experts from the industry alongside myself, and we'll have a bit of a discussion of the dynamics of the industry and some of the challenges that the industry is facing. And then you'll have an update on the finances from Jason, a final Q&A to wrap up, and then we'll have a slap-up gourmet lunch provided by our host at Berenberg in a bit of networking before you can get on your way. So first of all, a bit of a recap for those of you who are perhaps new to the story. First of all, Ilika is a global expert, one of that small cohort of companies that specializes in solid-state batteries. We've got 2 product lines. On the one hand, we've got our miniature Stereax solid-state batteries, which are designed for miniature medical devices and industrial Internet of Things or wireless network devices. And then on the other hand, we've got our Goliath large format cells, which are targeted at the EV industry and also for cordless consumer appliances. And we're differentiated because of our choice of cell chemistry and architecture using a safe nonflammable oxide electrolyte combined with silicon anode. A couple of key stats. The company was a spin out of the University of Southampton back in the day. And we built the company from those initial routes. We've now got a substantial portfolio of 62 granted patents and targeting massive markets. And actually, just this morning, we had a trading update. I think our cash balance is slightly ahead of where analysts had suggested we might be at the end of April, giving us a reasonably strong balance sheet. So maybe a few introductions, actually, to make sure that we network as effectively as possible. Not everybody is in the room at the minute. So apologies if it becomes a bit of a squeeze later on. We can always throw out some of the advisers to create a bit of space. But apart from Jason and myself, who you probably know quite well, we've got Keith Jackson, who is going to be arriving shortly. His train is slightly delayed. So he will be with us soon. But we have got Jeremy and Monika, who are the other Board Members in the second back row. Do you want to just stick your hands of guys? There you go. Then we've got Louise and John with us. Guys, just make yourselves known. And we're also really delighted to have some delegates from the automotive industry. I saw Julian come in from the APC just a few minutes ago. We're going to have Thomas Bartlett on the panel as well from the Faraday Battery Challenge. And also actually not currently in the audience, but he'll be joining shortly is Tom Ashfield from Agratas, so you'll be able to network with him during the break. Good. So first, a few words on our business model because, of course, there's all sorts of different ways of getting a technology to market, and I want to emphasize that Ilika has got an asset-light business model, which means that actually we see ourselves as being experts in developing new products and demonstrating that the products can be made in an industrially relevant process at pilot scale. And then we transfer that know-how for mass manufacturing to partners who are typically either Tier 1 manufacturers. So that means that they sell their product to the big brands, the OEMs or we license directly to the OEMs. And we develop our products with support not only from those companies, but also from the grant bodies, the government agencies who are responsible for stimulating technical development and creating markets. And we get to the point where we have an industrially robust product and process, and we transfer that technology under license to a partner. So last year, you all have seen that we achieved a strong outcome for the Stereax business by licensing with Cirtec, our manufacturing partner, headquartered in the U.S., and we'll hear a bit more about that as John goes through his slides on Stereax. And, of course, we're engaging with a number of industry players on the Goliath side of the business as well as we move forward through the remainder of this year. So at this point, I'm going to hand over to my colleague, John Tinson, who is going to talk to you about the Stereax business. Thank you.

Thank you, Graeme. It's actually one of the things you want to do when you're working at a technology company is to working on something which is globally an issue and then offer up an enabling technology to be part of a solution to that problem. So this is Stereax. This is small tiny batteries. We're aiming at the med tech sector initially, although IoT will follow on from that. But these are some of the issues. Obviously, as a human race across the world, we're living longer lives, but not necessarily healthier lives. And this is putting tremendous pressure on the health care systems around the world. We know that. We read it all the time, particularly in the U.K. And so what can we do about that? These health care systems are looking at how can they increase productivity, how can they increase efficacy, and potentially -- or not even potentially in reality, active implantable medical devices are one of the solutions, one of many solutions, but one of the key solutions that these health care bodies are thinking about. And then the question lies well, if that's a solution, how I get more of them into the body in a lower-cost way so they could be a more widespread solution? So we're aiming at a product here that is the battery that goes in these active implantable medical devices. And just a few things that are treated, you'll see later on some of the applications, but in general, quite often related to aging. We've got chronic pain. We know about this opioid crisis in America where they thought it was a good idea to hand out drugs as a solution to pain, and then realize this really expensive thing to do ultimately. And we've got sort of obesity, but you'll see later on many other areas of widespread condition that potentially an active implantable medical device is going to be working on. But of course, there are already active implantable medical devices. So what's the problem? What are we doing that's disruptive and enabling it at Ilika? Well, most of the devices, I mean, many of you may know people, but most of the devices that people carry around in the body have got a large primary battery, which will last X years. I mean, let's take this as a sort of pacemaker as an example, 10 years might be a good time in the body, but very often then has to be explanted to change the battery. And in the case of my father, explanting at the 90 years old is not a thing that you do lightly. But there are some small batteries. You can see there a tiny battery. So it's not like we're the first guys to come along and say, here's a tiny battery. But these batteries, again, they're using traditional lithium-ion technology. And one of the issues or a couple of the issues of that is power, the rate at which you can charge and discharge, but in particular, discharge because we're trying to power Bluetooth radio. So you need to -- if you've got a tiny amount of power, you need to be able to magnify that power in order to give that signal. But also, cycle count. These might be only a few hundred cycles, these tiny batteries. And if you got a small amount of power and you want to charge it maybe every few days, and you want to be in the body for 10 to 15 years, you need thousands of cycles. So there's a problem with existing small technology that isn't being met, and that's obviously what a company like Ilika should be addressing problems that aren't met, but a widespread. And that's what the Stereax battery is aiming to do. So we just put it in a bit of a table there. The table being what would Stereax do? What does it do? Well, yes, it's thin, and it's small. You can charge it and discharge it because it's got a high power ratio. It's safe because it's solid and it's got a high temperature tolerance. So these are all features, but what are they enabling? On the right-hand side, you can see what we really want to do here is increase the rate of implantation. One of the things -- I mean electroceuticals is a thing. People are putting impulse generators into the body, but it's slow because actually it's costly to do that. And the rate of doing it is dictated by, in America, in particular, the actual cost of doing it to the health care system. So we can do it quicker and more cheaply. That's going to increase the pickup. And that would come from -- for example, rather than having to place the object in only 1 of 2 spaces in the body that you can currently do that, the buttocks space or the heart space, these are the only 2 areas of the body big enough to take a primary battery. If you could put it subcutaneous or right next to the point of therapy, it will be lower cost and more comfortable for the patient. So increasing the rate of implantation is going to be enabled by something that's very small. Putting the device right next to the point of therapy, it can be uncomfortable to carry something in the buttocks space that actually is operating on the vagus nerve. You've got trading wires going through your body, you've got a fair large object in your body, you do get people requiring explantation because of discomfort. So putting it right next to the point of therapy because it's very, very small, is going to increase the efficacy. What about long life? Well, if you can have it in the body for longer periods of time, then you're going to reduce the rate of explantation. It costs multiples more to take a thing out there does to put it in. And then a key thing, of course, is to be able to power that Bluetooth radio. Bluetooth radios are now millimeter square, tiny little chips. But they take 2 milliamp to power them. So you need a device that's got the ability to do that. So Stereax is this technology. As we can see, traditional technology has some full shots and we're addressing those areas where traditional technology is falling short. And it's very large markets. It's not everything. We're not going to do quite a few applications that a large primary battery can only do because that battery might be hundreds of milliamp hours or very at least tens of milliamp hours. So it requires a different design concept. But we have been talking for 2 or 3 years now to the industry in collecting advanced orders. And these are the areas where our technology is enabling. So Neuromodulation, there are -- I've got a slide later on, many applications in this space. Big market growing quite fast. This is what we want to be seeing. Cognitive disorders, we're talking about Alzheimer's and a wide range actually of cognitive disorders as well as chronic pain, et cetera. I've got more slides on that, but big and growing fast. I think move across just general implanted sensors, just taking data from the body and then relaying it to the doctor, so the doctor can see live data coming from the body. It's a more general area. Very large area of orthopedics, knees, hips, shoulders, and then ophthalmic. What we're doing with the eye, a very futuristic there really, and an orthodontic what are we doing in the mouth. But all of these areas would be better enabled by a very small battery technology. We got a picture there of the vagus nerve -- device sitting next to the vagus nerve that will only really happen is a device is very small. And Denis, my colleague in product marketing, will be showing you an active device of that kind of size. So here is the device, a nice big picture there, but on the right-hand side, showing reality. It's pretty small. And about 3 or 4 years ago, Ilika created its own fab foundry in [indiscernible]. So there's some pictures there of some of the machinery, which is creating these tiny small devices, very much based on semiconductor technology. There's a 6-inch glass wafers that we're depositing in a vacuum with depositing materials onto those wafers and then simulating them and stacking them. One of the key things, I mean, some of you following the story may have heard about various competitors that we've had along the way and maybe even heard that some of them have fallen to one side along that journey, they typically weren't stacking. A key thing in this is it's not enough to simply create a fantastic die and singulate it. You also have to stack it, so you're getting enough energy storage into a small device. And so this device here actually is 6 layers. That's a 6-layer battery, Denis sort of expanded for you. But -- and these are the production techniques along the way in the far right-hand side, you're seeing the stack being created. The first device, the M300 device shown there, which is the device that in 2025, Cirtec will be putting commercially onto the market. That's 0.3 of the milliamp and then we'll be expanding upon that probably up to about 1 milliamp device in the years after that. But this is the first one that will come to market. So on to Cirtec, you'll be hearing from Brad Womble, who's their Strategy Director, straight after me. He got a video of him from the U.S. Really a good partnership. And a few reasons for that. One is, I mean, they're big and they've got big production facilities, so they're going to address the issue of scale for us. But also look at that capability set on the left-hand side, that's their -- they do ASICs. For example, every active device has an ASIC in it. Every active device needs welding than hermetic sealing, and these are the skill sets that they've got at various facilities across the U.S. So companies will be going to them and then also enjoying the fact that they've got novel battery technology as well. They even have their own Neurostimulation technology platform. So they're not somebody -- they're not the OEM. They're not selling you the finished device. But if you wanted to create your own impulse generator, you can go to them and their platform, you could put your secret sauce in it, which will be the algorithms and the stimulation codes, et cetera. But the fact that they've created a small device that can be weld and sealed and it's got its own ASIC, et cetera, you've taken out 2 or 3 years of development time. So that's an exciting area. Again, you're going to hear more of that from Brad Womble at Cirtec. And the picture on the right-hand side of their lower facilities. So this is the area we've sent our machinery to currently being installed in a technology transfer program, and that's in Lowell in the sort of Boston area in the East Coast U.S. So this is a very good partnership for us. It isn't just simply a manufacturing partnership. They are in the right position in the med tech markets to take customers, the big guys, the Medtronics, the Abbotts, et cetera and actually speed up their time-to-market because of the skill sets that they actually have. So first to the applications we talked about Neuromodulation. Yes, there are about 8 billion or 9 billion people on the planet. I mean this is sort of a -- it seems like 2/3 of them have got a problem. I think the answer is they will have a problem at some point in their lives. Sadly, it won't be something that will be necessarily addressed by active implanted medical devices because most of the world can't afford them. This is obviously largely driven in America and more so coming up in Europe as well. But these conditions are endemic across humanity. We're all going to probably have them at some point in time, and tiny and cheap active implanted medical devices are going to be a solution where the health care system can afford that solution. But from our point of view, we're aiming at something which is global and endemic in people around the world. So this is pretty exciting. And you can see there that it's a vagus nerve application there where in the past it would have been a very large primary battery as I say, in the buttocks space or heart space area and now something much more tiny, potentially right next to the point of therapy. Another thing, which is very widespread, of course, is knees, hips and shoulders, et cetera. This is -- the product you see down the bottom has not got our battery and it's actually a Zimmer Biomet knee implant. Zimmer Biomet have had the idea of what have we captured data from the implant and sent it to a doctor so that over the first year or 2 of having your knee the doctor can check up on pressure points, they can check up on heat. Is there inflammation? Is there pressure? As your walking condition okay? In actual reality, what they're probably saying is, are you taking the physio treatment that you were told to take because the cost of explantation is huge to the industry. It may be only 2% there, but that 2% is a lot of money. And if the insurance company can blame it on the patient for not taking the physio, it probably helps them in some way financially. But either way, they want to take data directly from that knee implant via wireless Bluetooth to your phone and on from the phone to the doctor. This is actually happening right now. But it's actually quite an uncomfortably large implant because of the battery. So again, an application that would benefit a lot from smaller. It's currently mostly happening in the knee. It would happen in the shoulder and other areas if the implant was smaller if it could be more comfortable. So again, a very wide-ranging application. We've got backorders in this field. For all of the application slides I'm showing you because we've got customers already in that area, waiting for the batteries from Cirtec so they can commence. I mean they've had some batteries from us already, but they need more batteries to carry on their journey in development. This is pretty exciting, too, actually, it's a French company. We've got a brand name there showing the name Cairdac. We talked about the issue with pacemakers. The pacemakers typically take tens of milliamp hours. You can't resolve them using the battery of Ilika's size. But actually, what this company has said, well, actually, the body has a fantastic source of energy. It's called the heart. The heart is not working, you're dead. Pacemaker does not keep your heart going. It just sets the rhythm of your heart. So while the heart is going, it could be the power source. So these guys have created a harvesting device that harvest the energy from your heart and charges the pacemaker. So they don't need a battery, fantastic. Well, what is the harvester fails? So the FDA has said, well, you need to have a backup, the battery backup. If your harvester fails, you need to give the patient 3 months to get the hospital to fix the device. So that requires a very small battery because it's 3 months. It just needs to sit there for 10 or 15 years and kick in at the moment that the harvester fails and just give you enough time to get to the hospital. And that is a battery of the size of Ilika's. So this is unique at the moment. I think only one company in the world is looking at a perpetual pacing, but pretty significant considering people currently after 10 years, typically, you have to have their pacemaker battery changed. The idea of perpetual pacemaking is going to be disruptive to the sector. I'm sure it will take a long time to get through FDA approval, but it will be disruptive to the sector. The other concept that is pretty enabling is the ability to insert the entire active device by a catheter, pretty big catheter to be fair. So they're going to go into certain areas of the body. But if you can get this tubular active device into the catheter, again, you're dramatically reducing. It becomes a day patient operation rather than an overnight. And there's a big deal between a day patient operation, cost-wise and speed wise versus an overnight where you've taken up a bed. So insertion of active device by catheter because the device is very small is an important thing. Here, we have one which we like because of time to market. I mean, to be fair, the others we've got sort of FDA compliance. We're going to have to take the active device through all those compliance steps. Much less so in this case. Still medical. We're still looking at sort of taking biology-based information for your mouth and feeding it back and making assessments about health condition from that. But in this case, by simply putting a mouth garden. So again, not much compliance in this case. Really, this application is simply waiting for Cirtec to make the first deliveries. So that can go forward. And you can see the picture and the brand names. And Resonant Link, there is the company that's setting up the charging. They're a sort of company that charges the battery. Obviously, there's our battery and then there's the electronics from Lura. And the nice thing about this 1 also is Lura Health were already working with Cirtec. So it's a very sort of tidy relationship in this case. And here's when we've got some -- I think we talked before about Eyelid-worn applications. We said that the FANGs in particular, in West Coast America were all working on ARV, our applications, the next generation after the contact lens, all the contact lens after the glasses, et cetera. That's hard to take a bit of a step back, AR/VR by contact lens. Well, it is the battery that's holding that one back. And the battery has to be even more angidense than we're currently developing. So it is definitely -- we've got back orders. They're definitely waiting for us to sort of get there. But in the meantime, actually -- and there are other applications more medical orientated where you can check on diabetic and other conditions, using far less battery power. So we see sort of conditions on the right-hand side that will come first, diabetic and intraocular eye pressure and maybe even some site correction. AR/VR being a little bit further down the line. But as an Israeli company that was going to show you a quick video of that we said, well, okay, okay. It's not perfect, but we could actually put electronics on the eyelid, and that will then talk to the contact lens. So we'll just show you a little sequence of that. [Presentation]

So I think he's looking down quite a lot, so you can see the electronics. And when it does look up, it's -- you don't see as much as you think you're going to see. But yes, it's a solution. And again, look at batteries on back order to power that solution. So looking commercially, geographically, not hugely surprising that the vast majority of what we're dealing here is in the U.S. It tends to be where active devices are developed, and most of the large companies in the world are -- and that's because their insurance-led health care system can afford these devices. So the rest of it is largely European. And then as we said before, everything that we showed you today, we have customers on backorder waiting for the Cirtec deliveries to carry on with their developmental journey. Okay. Thank you very much.

Thanks, John. Right. I think we're going to switch now to the Brad Womble video, and he is going to hopefully build on some of the themes that you just heard from John and give you Cirtec's perspective on the market opportunity.

I'm Brad Womble. I work for Cirtec, and I'm responsible for strategy and our platform development projects. We're seeing a lot of change happening from a technology perspective in the health care space. A lot of it is taking technology from other industries and figuring out how to use those technologies in a safe environment in health care. But I would say that we're seeing an increased need for data. We're also seeing an increased need for sensors to actually start recording different biometric readings from different patients. But all of these things require better power management solutions. And we're also seeing that not only are we having to pull more data, adding more sensors, better power management solutions, but these are all happening within smaller and smaller form factors. So the Stereax technology, in my mind, is something that's really going to help enable the latest smart implantable devices that are coming out in the market. And certainly, as those progress into the future, the Stereax technology is going to be crucial for that. So in the space of smart implantable devices, I would say the cardiology space is one area that we're going to see use of that device, whether it's in an implantable cardiac stimulator of some sort. Neurology is also an area within Neuromodulation. There are so many different areas of the Neuromodulation, whether it's deep brain stimulation or whether it's spinal cord stimulation or vagus nerve stimulation. But a lot of these devices are getting smaller and smaller and will need to be recharged more frequently. But I would say that, that's one of the key areas that we're going to see a lot of opportunities to use Stereax battery technology. I would say the one other area that would be good, obviously, to keep in mind would be some of the -- maybe less invasive consumer health-oriented type solutions, where could be quicker to market and it could open up the door for other types of applications that aren't even in existence today. So that's something to keep a watchful eye on to. One of the areas that we really see a huge opportunity is really within the smart implantable device space that Cirtec is currently focused on. That's a space that we feel like the Stereax battery could really work well. But it's not necessarily the first application that would necessarily make it to market. Smart implantable devices can take years to develop it, as you would imagine. However, if there's opportunities for us to explore more sort of less Class 3, more Class 2, Class 1 type consumer health-oriented devices, we could definitely see a market entry for Stereax even sooner than some of the smart implantable applications just because of the time that it takes to market, it would take less time say, than a Class 3 implantable device. So some of the areas that Ilika is already exploring, for instance, around some of the oral health sensing capabilities with respect to saliva, but not just that, I mean, it could be other applications within consumer health, wearable devices that might use that technology. But definitely, there's opportunities outside of just the implantable space we're talking about where the market entry point could be a lot quicker. But I would say, certainly, the consumer health area would be a key area for us to stay on top of because we see a lot of advances happening there. We see a lot of new sensors coming into that market that haven't been there before. And it's definitely an exciting space and possibly one that's moving a little bit quicker than implantable space. I would say that when I think about ramp-up times in our business and thinking about ramp-up times in terms of the devices that we use, the Stereax technology, these typically could take 1 to 2 to 3 years in order for the devices to reach sort of that full sort of ramp cycle. In some cases, it's because there's predicate devices that are already on the market and the new devices are cannibalizing the old devices, or perhaps it's even a new market where we see just the ramp-up takes us a little bit of time for the physicians and the clinicians to actually use these devices. But I would say typically 2 to 3 years for ramp up time to get to full volumes typically in our business. No, I definitely think that in some of the other industries, particularly around like the consumer health industry, we could see ramp-up times happening a lot, a lot quicker, perhaps within a year to 2 years. But regardless in health care, we definitely see ramp-up times that are generally a little longer than other industry types for that particular reason. The way that we think about the addressable market in health care in particular that we're focused on with respect to smart technologies. We look at the broader landscape of medical devices worldwide to get an understanding of what that addressable market is. And when you're looking at it from that perspective, the total medical device [ wearable ] market is roughly about $550 billion to $600 billion of revenue for all of our OEM or medical device customers. Now the addressable market, of course, would be a subset of that. And the way we think about that is, we look at all of those different devices that are in the medical device universe. And what we do is we try to make an estimate in terms of which one of those are smart devices. And not just smart devices, but smart devices that are generally worn by the patient, not necessarily a machine or a device that's plugged in a hospital setting. And from our perspective, there's roughly about $50 billion of revenue of devices that really fit within that landscape in health care. And that's really the addressable market that we're focused on. We do focus a lot on the neurology, neuromodulation and cardiology spaces, but we really are open to other addressable areas within the health care market that represent that $50 billion of target. So in a nutshell, it really is a huge addressable market as we see it. Obviously, the addressable market is at the device revenue level and not necessarily specific to the battery level. But from there, one can make some assumptions in terms of if it is a $50 billion market. Okay, what does that mean in terms of rechargeable Solid State or Stereax technology -- battery technology. So from my perspective, the addressable market in health care is huge. And it's an awesome opportunity for both us and Ilika in terms of really targeting it. And we only think that it's going to be even more smarter solutions in the future. So that addressable market and in our minds, is definitely growing, and growing at a rate faster than the overall health care market in general. With respect to Stereax and the battery technology in terms of how it relates to the devices that are in development today and will be in production in the future. We work with different batteries of different types, depending upon whether it's rechargeable or nonrechargeable. And a lot of the neurostimulation devices that we have today, we have rechargeable batteries, but we also have primary cells that are not rechargeable. And so Stereax actually really adds a new application and a new platform for us. And the reason -- one of the reasons why -- there's many reasons. But one of the reasons why we think the Stereax technology is really incredible is that it allows us to get to some of the miniaturization on some of these implantable devices, that we can't get to using the existing battery technology that we're used to today. In some cases, we need batteries that are super small, that can fit literally on board with an implantable devices. And Stereax is really going to help us enable more of those types of devices to be manufactured in the future. So yes -- so in essence, really, it really is an enabler for us. And that's one of the reasons why we're extremely attracted to the Stereax technology. Although we've seen other solid-state battery technologies that have been in the health care market for a little while. Stereax's technology is one, in our opinion, in terms of miniaturization, being able to get it to the scale that we need, but with also the same battery density, is super helpful, super valuable. And it's something that we see as being extremely important in the future. And from our perspective, the more that we can see the Stereax technology being incorporated in some of these areas that we're focused on, like the neuromodulation space or the implantable cardiology space, once these technologies are then incorporated and then approved by the FDA, what's exciting to us then is that now there's a precedent, right? And we're going to see a lot of other customers that are going to want to leverage that technology and incorporate it into their devices as well. So we see sort of a snowball effect happening as Stereax's solid-state battery technology gets incorporated into more of these implantable health care implantable technologies. So from our perspective, we're working with the right group. There is anything out there that we've seen that really competes with Stereax and we're excited to help bring it to the market. What's really interesting in our industry, in particular, is that competition isn't as clearly defined as one might think. In a lot of cases, our customers are actually producing and manufacturing a lot of the products that they currently sell and on the market that we could perhaps produce for them. So in a lot of cases, it's really working with our customers. And as we provide them greater solutions, more diverse technological solutions, the easier it is to work with them and to manufacture their products. Direct competition, there are a few groups within the neuromodulation space that we compete with, and then on the cardiology space, which is the market that we're really attune to. So yes, there is competition in some of those areas, but a lot of the spaces that we're playing in, there isn't a massive amount of competition. And really, at the end of the day, it's really working with our customers and hopefully providing them the best solutions that allows us to get more business. As has been previously discussed, Ilika and Cirtec are in a long-term relationship, both in terms of like a co-marketing agreement in terms of us working together to sell the technology into the devices that we manufacture, but also from a manufacturing perspective. We have the opportunity and we're excited about the opportunity to actually manufacture the Stereax battery technology at our low Massachusetts site. So that's super exciting to be able to work both on the marketing side of the fence with Ilika as well as being able to manufacture this battery technology. And the great news about it is that the more that we understand the technology-related to these batteries, understanding how the evolution of these batteries will work, it's certainly helpful for us in terms of working with our customers to provide the right custom solutions for their devices. When it comes to technology, we're definitely thinking 5 to 10 years out as it relates to devices we manufacture. Although we're in all industries within health care, we're definitely focusing on certain ones. And within the neurology space and the cardiology space in particular, there are a lot of smart implantable devices that we work on. And the attraction to us and developing a long-term relationship with Ilika is that we can start working on this technology today and help refine the development of it, thinking about how it's going to work for different types of devices, implantable devices, non-implantable devices. And we know that this is -- this is a technology that's going to be even more important in the future than it is today. So from our perspective, this is going to be a long journey that we have with Ilika and we're excited to work on the new technologies and to see where this advances. But we do know that there's only going to be a need for more data. There's [indiscernible] for more sensing capabilities, and thus, there's going to be a huge need for power management solutions. And for us, it's important to work together in a long-term agreement so that we really are kind of paving the way for the next generation of health care devices.

Thank you, Brad. So my colleague, Denis has been absolutely begging me to give him 5 minutes to demonstrate some of our Stereax batteries. So it's a special concession to them, we brought them along today, and I hope you'll give him support as he unveils some of the magic of Stereax.

Thank you very much, Graeme. I'm going to enjoy this. Okay. So as we're waiting for Cirtec to actually integrate our batteries in medical devices, here, Ilika we built some little demonstrators to show you what we can do with our batteries. So this device mimics an electroceutical device. It's a pill size. Look, it's not much bigger than about 2 centimeters long. It's less than 1 centimeter diameter, so that really reflects the miniaturization of those new medical devices that John was talking about. So you could see that implanted in the neck, implanted throughout your ears, in your lungs, actually. Now that's the side aspect. It has got one of our early prototype of the Stereax M300. And some of here different -- probably more lucky than those at the back. But there is a couple of LEDs flashing. I don't know if you could see that earlier, that is powered by the battery, the Stereax battery, indeed. Why are we flashing LEDs? It's nothing to do with any medical condition or therapy. It's just that it represents a very similar energy requirement as a medical device. So a medical device would provide electrical pulses to a nerve or something like that. And LED is very similar. So for those on the back who can't see very much, I'm going to leave the device here at the front, and if you want to talk to me during the break, and I can show you this again. Thank you.

Thanks, Denis. That was great. Right. So I think we're pretty much ready for our Stereax audience Q&A. So if anybody has any burning questions that they'd like to ask after that tsunami of information, please put your hands up, and we'll give you the opportunity to ask a question. Yes, one actually, since you guys are probably in the firing line. Louise, why don't you join John, that's great. And Denis as well, please. That's great.

Any questions from the floor? Colin?

Colin Smith from Capital Access Group. We see there's a lot of development going on. You've talked about all of the applications you've shown today having customers, could you talk a little bit about when Cirtec actually expects to be able to supply batteries for those customer requirements?

Yes. So indeed, so the guidance that we've given, analysts that are covering us is that actually by the end of this year we should have completed the commissioning and qualification of the equipment that we sent across to the U.S. and that they will start production of the initial batches of our batteries in 2025. And as you've heard from Brad, they expect that the ramp-up of production volumes will take between 1 and 3 years. It is a bit driven by the uptake of the actual devices themselves. So things like the orthodontic applications, they have a faster FDA approval pathway than, say, an active implantable medical device that may be, say, a neurostimulator. So something like an aligner, so something that measures the alignment of teeth could get to market pretty quickly, whereas a neurostimulator has probably got 3 or 4 years of FDA approval ahead of it. And just to clarify that, actually, it's the OEM that is in charge of the FDA approval process rather than either Cirtec or Ilika. So we get audited by the OEMs, but actually the burden of the approval process falls with the OEM that markets the product.

A couple of questions. Just following on from that. If you -- is there much of a retrofit opportunity? And if there is what gets the FDA approval if the device has the approval? Can you get an approval just for the sale? And the second question, just comments on the video about primary battery applications. Do you tweak your technology for a primary application where perhaps cell life isn't the dominant factor -- cycle life isn't the dominant factor?

Graeme, you like I'll step in on that.

Absolutely. Well, done, John.

We like the retrofit. It's got a 510(k). So what that means is they've already got the device through the FDA. So the efficacy of the actual treatment is because that's actually the bigger thing for the FDA is, is it an effective treatment. And then the second thing is it safe. Well, as I assure it isn't that way around but anyway. But if the device actually already is approved for that particular application, but you want to change the battery, it's got a faster route, call the 510(k) where you're making an application to substitute the battery, which we look for those because it's going to be a faster route for us to market. I forgot the second question. Yes. I mean it's interesting when we're sitting in front of designers, we're trying to change their entire mindset because they've got this sort of image of -- in fact, mostly what they do is they design some electronics and then they find the battery big enough to power it. And what we say to them is too late by that time for us. You have to think of the battery and design the electronics around it, which they find very unusual. But they do after -- we've met them enough times, they do get the idea that let's start with what the battery can do and then put the electronics around it, but what that will give you is many years in the body. So yes, it's a new way of thinking for quite a few designers.

James Carmichael from Berenberg. Just a couple. Just, I wonder if you could sort of maybe give us a bit more detail on the exclusivity you've got Cirtec maybe any other sort of target markets that you're looking at with Stereax? And then just secondly, I guess following on from the commentary around ramp-up on volumes, sort of hard, I guess, to look this far out, but what might that mean in terms of revenue per [indiscernible].

Well, we've already informed the market that actually it is a limited exclusivity that we have granted to Cirtec. And the reason that we've done that is actually to make sure that the equipment set that Cirtec has deployed is fully utilized because that will train the equipment and fill the equipment capacity to the point that we can start to drive down unit costs of production and therefore, enhance the profit margin that we get from the product. In the instance that one of the applications that we have in our pipeline, and as John was alluding to actually in his presentation, that one of those applications with a -- say a FANG, so a large, let's say, largely consumer electronics-oriented organization, might drive volumes to beyond the capacity of what Cirtec is really set up to deal with, then there is the opportunity for us to issue further licenses to be able to accommodate that demand. So you can imagine if there is a mass market device that has rolled out and the numbers end up being in the millions very rapidly, then yes, it may well be the different supply chain solution is more suitable in order to address that demand. So in terms of level of revenue in forecasts and what this initial interaction could be worth for Ilika, we've discussed with analysts, including yourself, James, that we might expect that level of revenue to reach USD 10 million to USD 15 million to -- so that's Ilika revenue that comes out of this initial relationship. Simon?

Simon Fickling at Liberum. I'm following on for James' question. Our Cirtec's initial capacity, will it just be the machines that you're sort of transferring through Cirtec transfer, or is there sort of, is there quite a sort of lump of initial CapEx for them to get up into this kind of nameplate the initial slug of capacity?

Yes. So Cirtec actually is in the middle of a clean room expansion in order to accommodate the equipment that we've sent across. We have actually principally sent across the equipment that is used to make the batteries from the cathode onwards -- I'm sorry, I'm getting a bit technical here, but the catheters, the positive electrode in the battery. And that's the layer that we put down first on the substrate, which happens to be a glass wafer, and we send those across 2 Cirtec for further processing. So they put down the other layers, including the electrolyte and the anode and the current collectors and encapsulation. And all of that is done with the equipment set that we have relocated, that we've transferred, plus accessing the equipment set that Cirtec currently have installed at their facility. So the Lowell facility in Massachusetts is a thin film facility. And what that means is that they've got the microfabrication capability that we need in order to make those tiny little batteries that Denis was showcasing. So there's a lot of synergy with the skill set that's already Cirtec and that gives them the capability to be able to build on the initial production capacity that we've transferred.

If I can ask a follow-up. You mentioned Lura as an example, and I imagine that was one of the sort of 15 or 20 that you presented sort of a couple of years ago. What's happened to your existing customers that you had sort of developed in-house? Have you passed those largely over to Cirtec to then sort of progress, and I am sure a lot of those cases they'll have existing relationships? Or are any of those you're still directly in touch with and soon they're developing aside from the Cirtec relationship?

Yes. Good question. John, do you want to handle that one and maybe talk some of the co-marketing that we've done.

Yes. I mean we're actually keeping -- not keeping, but so we're keeping the relationship with those customers because rather than ask them to replace all the orders, what will happen is Cirtec will deliver the batteries to us and then we'll deliver them to the particular named OEM in the first instance to the first round of clearing out that backlog will be via us. But we're also holding pretty much monthly cohorts to hand across customers in a relationship sense. And then [indiscernible] as the U.S. Sales Director. We work very closely at conferences, exhibitions and in general, to just make sure that we're touching all the right people at the right time. So it is a co-marketing thing. But I don't want to go back to medical device companies and say can you replace that order because sometimes that can go wrong, where they just don't.

When do you think you're going to get the first FDA approval to be able to become a commercial operation?

It's not us that gets to the approval. So when is our first prospect past that period. It's clear to us that the -- a lot of them have actually got their devices going through already, and therefore, it will be 510(k)s rather than FDA approvals, which could be done in 1 to 2 years. So from the minute they finish, well, they will have finished their development, got the product to market, got the FDA approval on that particular thing. And then they'll come back for a 510(k) using our battery, which could be done about 1 year, 1.5 years. Still quite a lot of money for us to do it, but they can do it in 1 year, 1.5 years. So really, the key thing is to get Cirtec getting those batteries out and then probably 1.5 years to 2 years after that.

But bear in mind that for us, from Ilika's selfish perspective, actually, our sales start before the FDA approval because we have to sell batteries in order to support that approval process. And although the mass market, of course, comes after there, it may well be that tens of thousands of batteries are required in order to get that approval in the first instance.

So you get the approval and then there's 18 months between substantial commercialization. You've just got a pre-commercial sales ramp. So perhaps if we back up then, when do you think it's probable that your customers will get their first approvals that you can then, that we can then add 18 months to?

Yes, I think they'll start applying when they start receiving the batteries that are commercial -- down a commercial line. They'll start their application for the 510(k) as I said, it can be a year to get that application through. So each one will be slightly different. They'll have their own slightly different story, but I'm saying how quick it can be a 510(k) can be done in a year. So -- and they can start when they start receiving the batteries from Cirtec. But then there'll be, I say, the non-FDA ones like the mouthguard thing where they just simply just go. They don't need -- there's almost no regulation on that one at all.

It's really the middle of '28 is the earliest.

For what?

There'll be sales from...

Commercial ramping for sales.

Well, our commercial ramp will start next year when Stereax start delivering batteries to customers. They need the batteries to even go for the approval.

Those are from research.

No, they're for approval. So you have to go through preclinical, clinical trials and then initial launch after that.

[ Sam Thomas from Cordis ]. I just had a quick question on the TAM side of things. If I'm right and if I heard it correctly, I think Brad talked about GBP 550 billion to GBP 600 billion market, which then sort of whittles down to GBP 50 billion for the sort of smart device side of things. But if I heard it correctly, is that on the revenue side for these medical devices. So when we're thinking about the TAM for Ilika, it should be based off the cost base of that. So you should be thinking along the COGS line as a TAM.

But I think on my slide, you had a current penetration of active implanted medical device is about GBP 6 billion. So that's the -- that was up like growing at 18% CAGR. So probably moving into that space, he was describing the space of GBP 50 billion space of which active devices are increasing at 18% per year. And as you say, we would then be a component in that device, probably the most expensive component, I imagine for a component in that device.

Yes. Okay. That's helpful. And that was actually going to be my follow-up is could you give us an idea of what proportion of the cost base the battery accounts for within sort of a medical device, I appreciate it's probably a broad range, but just anything you can give us on that would be useful.

They got low hundreds. So if you wanted to buy a battery now from one of the Eagle picture or one of the sort of medical battery guys there, low hundreds of dollars. But there's a point here about how enabling you might be as well if you are significantly enabling to that particular application. You might not just charge the market rate, you might charge the fact that you are very enabling to that particular application. But some -- but yes, these batteries are typically low hundreds of dollars. We're missing something on the revenue side here where there's a lot of requirement for bespokeness, I guess. If you go to the big medical device -- the big battery companies who currently pay medical device industry, they're charging NRE quite often to either prove that their battery is correct for that particular application or in terms of conducting specific tests that show that it will be correct for that application or in some way modifying the battery. So some of our revenue is expected to come from that nonrecurring engineering as well as from unit sales in those early days. A lot of people that we speak to, say, yes, it's fantastic. But I just wanted as high or something, and that will be an opportunity for us to sort of charge nonrecurring engineering in the early days.

Fantastic. Right. Well, many thanks for all of those questions. All very relevant. Let's change gear a little bit and talk about Goliath and Louise. If you could come and take the podium. Over to you.

Thank you. Okay. So I'm going to talk a bit about our Goliath product line and just go through our journey so far and where we're taking it next. So a number of countries are targeting net zero emissions. At the moment, there's over 19 governments that have targeted net zero by 2050. The European Union has also banned the sale of internal combustion engines by 2035. So transport continues to be one of the largest emitting sectors. That's of greenhouse gases. That's equivalent to 26% in the U.K. So the adoption of electric vehicles is going to be -- is going to play an important role in this transition. So EV sales momentum remains strong, although there's been a slowdown in terms of year-on-year percentage growth, overall in 2024 projected sales are expected to continue to grow. But as, I guess, so in future our sales momentum transfers from being policy-driven to product-driven. Its one of the main obstacles will be overcoming some of the reasons why consumers remain hesitant to buying an electric vehicle, but one of the top reasons being the limited driving range. So yes, there exists really a good strong market for the Goliath battery technology. So what is it about the Goliath technology that will allow us to alleviate some of the consumers' anxieties? So we'll be removing -- by removing the liquid electrolyte and making the cells non-flammable, we'll also be making sure that we maintain competitive performance versus current lithium-ion technology and have the ability to operate over a wider temperature range. With these features, we can target a number of benefits. So by providing a safer cell that can also work over a wider temperature range allows us to optimize the cell-to-pack ratio by removing some of the pack level engineering. It also perhaps allows some additional space to accommodate cells and in turn, delivering a lighter vehicle, which enables us to have a longer range for the technology. So before -- so here, we're just looking at the solid-state battery market forecast where solid-state battery market share is expected to increase to around 45% in 2035. So Goliath is targeting the luxury performance market. This is less cost sensitive than some of the larger volume segments. And that equates to a total addressable market of 183 gigawatt hours per annum. So there exists a fast-growing market for the Goliath technology. So I'm just going to talk through some of our progress to date. So in 2023, we were awarded the history program. That was an GBP 8.2 million total project value. The project is focused on the incorporation of a silicon anode within the Goliath technology to enable automotive cell level performance. We're over halfway through the project at the moment, and we're making good progress with our partners. Towards the end of last year, we also achieved our lithium-ion parity and D4 performance milestone, which I'll talk about in a bit more detail in the next slide. Whilst focusing on the technology, we've also been looking ahead to our manufacturing processes. We've also conducted a number of trials that equipment vendors to derisk some of the scale-up activities on our road map. And that's resulted in the successful delivery of our roll-to-roll coater, which we've now installed and completed commissioning. We're also working on the design or completed the design of our automated assembly line for stacking of cell electrodes, and that's due for delivery towards the end of this year. So we've really been pushing forward and hit a number of milestones and we're working hard to continue to meet our technical milestones to enable the delivery of our MVP in 2025. So this is our technology road map. One of the important parameters that we're tracking is the cell energy density and watt hours per kilo. So as I mentioned, we reached our D4 performance point, which was an important milestone delivering the energy density as well as power characteristics that were required. This was an important milestone as it was really a design freeze for our P1 prototypes. So we've been busy developing our P1 prototypes to enable us to work with selected OEMs and get them into their hands, really for testing and to start that feedback and learning cycle. We also hit our lithium-ion equivalence point at the end of last year of 250-watt hours per kilo, which was a really great milestone on the way to D8 and our MVP. So we're not just looking at the technology. We're also looking at our production and scale-up road map. So we're targeting a 1.5 megawatt hour per annum facility that will allow us to deliver A samples to customers. We will also be -- so that's -- sorry, we're delivering A samples, which is from 2025. From 2026, we're looking at licensing opportunities, although this could happen earlier. And we will be looking further ahead to take the scale up and development process to deliver B and C samples as we continue to develop the product maturity and that will be in conjunction with an OEM or a Tier-1 supplier. But by getting to that first point of having A samples will really allow Ilika to start to enter into RFQs with OEMs and it's a really important milestone. So working with an automotive OEM is a really important step in terms of the -- to get -- to bring in the Goliath technology to market. So far, we've interacted with 17 companies at an MTA and NDA level. And at the moment, 70% of our interactions are within Europe that means the most of the countries that we're -- companies -- sorry, that we're interacting with within Europe. So I'm just going to talk through a bit of the U.K. grant funding. So since 2018, Goliath has been in receipt of a number of grant funding from the Faraday battery challenge, the Faraday Institute and the Advanced Propulsion Center. So we talked about our history program earlier. So we're working with our partners to incorporate the silicon anode as well as get into our D8 milestone and that resulted in GBP 2.8 million to Ilika. We've also been looking at the industrialization and at the moment, we've got the system project, which is active, and we're working with both NPAC and UKBIC. We're working with NPAC to deliver the automated cell assembly and stacking line which will allow us to deliver the 1.5 megawatt hours per annum capacity to deliver the A samples in 2025. We're also working with the UKBIC to allow us to demonstrate the Goliath electrode coatings at giga scale, and that represented a GBP 400,000 grant to Ilika. So by the time we finish the history project and achieve our D8 cell performance, we'll have reached the limit really of the technology readiness level for the Faraday battery challenge. So we're looking ahead to the next level to continue our industrialization of the Goliath product. So we're already starting to look ahead at an APC-funded program. We expect the total project cost to be in the region of GBP 15 million, but we're still working through some of the planning at the moment and don't have a full breakdown of the cost and what that means for Ilika. But yes, we're looking ahead to make that project submission. So to summarize, we've made some really fantastic progress on Goliath, and we're working really hard to continue that journey with the delivery of A samples in 2025. Thank you.

Yes. So I think Denis gets another moment to shine and he's got a slightly larger demonstrator for our Goliath cells. I think you've got 2 P1 prototypes on the side, that's right, Denis?

So I'm hoping this is a demonstrator that doesn't need quite so much explaining. I just need to turn it on. And then here you go. Okay. And it does work. They need an expert in driving, but all right. So why I'm showing you this is because this device is actually, device -- this toy car is powered by one of the Goliath batteries. In fact, 2 of them. There are -- sorry, I'm managing a tight corner here. That's right. So there are 2 prototype batteries. Now I'll stop here for a minute to show you what they look like. I can open it later and show you. So this is not a real battery, but that's -- we have 2 of them in there. These has the energy of a mobile phone battery, more or less. I mean you put 2 of them in parallel and in series, you get the voltage required to power this defender toy car. Only the beginning, we really want to be powering much larger cars when we get to this device in the end next year. So this is an intermediate prototype. And yes, I think that's all I have to say. It's 7.4 volt. So our chemistry provides about 3.6 volts -- 3.5, 3.7 volts. So you didn't need 2 of them in series, and it's about -- so this prototype is 2 amp powers. We got 2 of them and this is the prototype that we are discussing evaluation but with OEMs currently. I could carry on playing. I think you've seen me if you've got any questions. I'll just put it back in the garage.

Denis, actually, that's a great segue into our Goliath Q&A. So John and Louise, if you'd like to sit at the front. Taking questions from the floor.

Just on the density figures you showed in your density targets. I think that's at the cell level. When you were talking about essentially you can get more electricity per cell, but also you can get more batteries per car. Could you give a -- can you map an equivalent number to give a sort of effective density? And what sort of number would that be?

So that's one of the things that we're really looking at now into the next program. So for -- really to take onboard some of the unique features that we're targeting with our solid-state battery and to really make the most of them and allow the next-generation solid-state batteries to reach their full potential and full capability, there's no point just taken our cell and putting it in what is an existing pack. So it's -- we're starting to have some of those -- well, we are having those discussions, but really starting to target that now with our next submission to really continue the industrialization. And that's what that APC project will be focused on is taking it from the cell level to the pack level, working really closely with the pack engineers to make sure that we can maximize that pack level density and not just, yes, swap something in and out because it won't really make the best of the cell.

I guess just looking at the S-curve that you showed for Goliath, I think it's quite flat, and it gets very steep and then it gets quite flat against it. What are the sort of, I guess, the biggest challenges you've got on during that steep section to go from your P1 to your P2 product? I guess, maybe a bit of it is what you discussed there, but it's obviously more than just making it bigger. So what are the sort of things you're working on over the next 12 months to get there?

Well, I think the interesting thing about that S-curve is you'll notice that the lithium-ion equivalent point is quite high at it. And we've achieved that already. And that was achieved through increasing the number of layers that we put into one of those pouches. Confusingly, although those pouch cells are called cells, they, in fact, contain multiple electrochemical cells and actually by putting more active material into the pouch design and reducing the relative proportion of parasitic weight associated with packaging, then you get a very steep increase in the energy density of the component, the product that you're making. And then as we go through to D8, actually, what we're optimizing there are less the energy density because that's only one dimension of the overall picture. And more just testing some of the safety aspects of the pouches, optimizing the power density to the speed at which you can charge the battery and discharge it and also demonstrating that temperature window. So there's some development time in our road map associated with that whole test program. And of course, all of the cells that we need to make in order to feed that program. So there's quite a production demand actually to run our pilot line and make sure that we've got sufficient evidence, submission data to be able to unleash the creative genius of the pack designers and then start to put the modules and the packs inside much larger vehicles.

In relation to the testing work that you're doing with the OEMs and the prototypes in the same way of Stereax to receiving fees for the batteries that you're providing, are you receiving similar to these for the batteries with the modern OEMs?

Yes. So actually, that pipeline that we talk about, let's just flash that up again. When we engage with these OEMs, John is very much -- has a cold face. Do you want to comment on some of those interactions, John?

In some ways, we probably raised some of the Stereax model of putting the price that shows that they have to be serious to want to engage, but doesn't put them off. We're not trying to stop things happening. We've tried to make things happen. But we have to make sure that they've talked to their senior management, and they're fully engaged and therefore, the price has to be written around that. But yes, it's the same thing. They paid to test and you've got a pipeline there of the measure, I mean all the top ones in the world, although maybe less so in China, but certainly in the States and Europe. We're getting into a pipeline. They've got different points of engagement. Some of them would prefer a slightly more mature item to test. Some of them are happy to test early and learn more earlier. So I think we just have a continuous trip feed of people moving into that test regime, but I think it will look quite similar to Stereax when we actually stand back and look at it in the future.

Yes. Just interested to know whether things like the Inflation Reduction Act and the agreed text now on the Net Zero Industry Act makes a difference in terms of your ability to move the whole plan -- development process forward on Goliath. And also in connection with that, design -- I mean, basically, as I understand it, Goliath essentially been funded through grant funding, whereas most of your -- or a lot of your competitors trying to do solid-state EV batteries have got significant investments from auto manufacturers. Could you maybe talk a little bit around that and connected to the first part of the question?

Yes. Good question. Would you like to kick off with that, John?

So yes, I think it's true that the government agencies in the U.K. and thank you, Julian, for coming along today to support us, those agencies have been really instrumental in encouraging us to collaborate, supporting us financially. Of course, I think it's only fair to also mention our loyal shareholders who have put up the rest of the money to match the funding that we've had through grant funding. But yes, I think in terms of deploying capital relative to some of the breathtaking sums, perhaps that have been deployed through SPAC mechanisms elsewhere in the world that we've been extremely efficient and with a relatively modest investment in the context of what other technology developers may have put into solid-state batteries. I think the progress that you've seen today and that we've highlighted to the market has been extremely efficient. So I think we can be really proud of the technical team for having delivered where we've got to with the resources that we've had available. Our mission going forward though is actually because we're the asset-light business model, is to collaborate increasingly more closely with OEM and Tier-1 partners in order to help finance that next stage of the commercial rollout of Goliath because the sums involved in manufacturing Goliath batteries at scale are quite eye-watering, frankly, right? The numbers that are in the public domain for the -- a greatest investment in Bridgewater are that 40 gigawatt hour per year of capacity will cost GBP 4 billion. And I think there's GBP 400 million coming from the U.K. government. It's only 10%, actually, of the investment that's required. So rough numbers, for every 10 gigawatt hours per year of investment in the Giga Factory, you need about $0.5 billion. So some of our competitors in the U.S. have said, actually, we're going to build an entry-level Giga Factory in order to commercialize their technology. And actually, they need those sums that they've raised through SPAC in order to finance that. We don't need that. Actually, we're financing a development program here. And then the technology will be licensed for commercialization, and we'll work closely together with those partners in the same way that we're working with Cirtec in order to bring about that commercial outcome that we're looking for. Does that answer your question?

Quite a bit at the [indiscernible] because different to achieving that disengagement?

Yes. I think it's a good question. And I think regulatory-driven uptake of vehicles is really important in order to encourage people to make that, let's say, emotional step from an ICE to an EV. And I think that's really been important to get certainly, the U.K.'s adoption rates to where they are right now. And I hope that, that will continue going forward because I think that's still needed. In terms of impact on the supply chain, whether we like it or not, most of the raw materials for batteries are still manufactured, certainly refined in China. And you've only got to look at some of the data for mine ownership and refining, particularly of cathode materials to see what a globally dominating position they have. And clearly, there's some discomfort around the world in terms of our dependence on that supply chain for this industry. And some of the legislation that you've hinted at is enabling the supply chain to start restructuring itself to allow some more independence and diversity of supply. And actually, in Europe, we're quite lucky to have 2 pretty big chemical companies that are active in the supply of cathode materials. So Umicore and BASF are very successful and are producing high-quality materials. When you look under the hood, there's probably still some dependence on China even actually when you go to those front-end suppliers, but you're starting to see investment in refining here in Europe as well.

Just also stepping in, it really isn't going to be a winner takes all situation. I mean, there is lots of money going into 2 or 3 well-known U.S. solid-state battery developers funded by European car companies. But these European car companies are very happy to talk to us and very happy to take us along, a, because there won't simply be a single solution because there are several different types of car and vehicle, the attributes of one particular battery might lend itself better to a particular type of vehicle, but also because nobody has yet cracked it, however much they might talk about things as if they have. And so there's no company that I know that won't talk to us at a very detailed level as well. Because I just can't be sure how it might go. And I'm old enough and there's not many of us are to have understood how armed again in the U.K. They began by almost starving themselves to death, which is maybe a traditional British model of how companies develop, but they didn't start with huge amounts of funds from the American market on NASDAQ. They funded on a shoestring and they became what they became partly because of the efficiency of thought and activity that comes from doing things in a certain way. I'm sure if we had a lot of money in the bank, we'd spend lots of money. It doesn't mean you're spending it wisely. You're just spending it because you've got it and me and Jason here wouldn't have that anyway. So we think carefully about how we spend money, but it leads to an efficiency.

Great. I don't think there are any further questions. Graeme, John and Louise, Denis, thank you very much indeed. That concludes the first half of today's Capital Markets Day. There's coffee and pastries just in the room across and if I could maybe ask you to come back in about 20 minutes' time. Thank you. [Break]

Okay. Thanks, everyone. Welcome back to second half of the Capital Markets Day. I'm James [ Macron ], Berenberg's Energy and Environment Research team and on the panel. I have to have obviously -- we know Graeme, CEO of Ilika; Julian Hetherington from the U.K.'s Advanced Propulsion Center; and Thomas Bartlett from the Faraday Battery Challenge. I think, obviously, most of you know Graeme, but maybe it might be worth just putting a bit of context around Julian and Thomas, maybe a quick intro of who you are and what your organizations do might be helpful for the audience.

Sure. So I'm Julian Hetherington. I'm Automated Transformation Director at an organization called the Advanced Propulsion Center. We've been around as an organization since 2013, set up out of a joint initiative between government and the U.K. as Automotive Council to run a program of research and development funding in the kind of mid- to late-stage technology readiness level. So helping get things towards industrialization readiness. We've deployed about GBP 1.5 billion of funding over the last 10 years. And then in 2020, we were asked by government to be the front door and deploy the -- up to GBP 1 billion automotive transformation fund, which was largely focused on capital investments in establishing manufacturing capacity. So the large battery factories that you've seen in the press have been as a result of the funding that we've deployed on government's behalf. My own background actually is automotive for actually nearly 35 years now. Initially, with Ford, Jaguar, Land Rover, where I was responsible for a variety of programs over my life and most recently responsible for globalization program, so dealing with major capital projects in overseas locations. So that's my background.

That's great. Hi, everyone. I'm Thomas Bartlett, so I'm Deputy Chinese Director for the Faraday Battery Challenge, which is a GBP 610 million government initiative to help grow U.K. battery supply chain. So we first -- sort of just before Advanced Propulsion Center, be looking in terms of technology development. We support everything from early-stage research to something that we set up for the Faraday institution, which has invested about GBP 200 million into, I'd say, world-leading research. You've got about 500 researchers, 20 universities, generating really good research focus in industry problems. And I think that's the key bit for that but also supporting business innovation. Companies like Ilika has started programs, get sort of R&D funding to support obviously, their journey towards market. But also holistic as well. We cover everything from skills programs, developing skill set, manufacturing skill centers, doing international engagement, trying to get companies out into markets and lots of other things that we also read in some engagement with investors as well. We also invest heavily in [indiscernible] as well. So one of the things we've done is invest in the U.K. Battery Industrialization Center, which is now north of GBP 200 million investment into Giga Factory sale equipment and basically a Giga Factory that is open access for U.K. PLC because when you're looking at -- I'm sure you cover points today that when you're developing batteries capital, the capital you need for the equipment is expensive. We're trying to derisk that for U.K. industry, and we've got a safety at facility, something that is world-leading and about 3 years ahead of its closest competition in terms of the scale it can operate the equipment is there and also its readiness to support businesses in the U.K. So I'd say that's sort of where my best potential is. My personal background is I dealt with electrochemistry, worked with a few companies developing battery materials and also solid-state battery programs for companies in [indiscernible] before joining government.

All right. Thank you. I guess -- I probably guess from the intros that we're focusing on Goliath here. I guess we'll dive straight into the first question on EV and the EV markets. And I guess, it's been a bit of press coverage recently around slowing sales in that space. And I think broadly speaking, coming into the year, the expectation was that growth in EV sales was going to slow through 2024. So maybe just helpful to get a bit of context around whether you think that's a short-term trend or a long-term trend, how concerned should we be maybe, Julian?

Yes, it's a very interesting position to be in actually because we've seen certainly in the first phases of EV adoption, the technology for conventional lithium-ion cells have started to play out and become more commercially ready with larger established battery companies, including those supplying the likes of Nissan, for example, and Volkswagen. Sales actually kind of rose quite rapidly, helped by incentives around Europe and in the U.K., in the U.K. focused around plug-in car grant, which disappeared a couple of years ago and also around company car tax incentives which still apply today benefiting car taxation for quite a significant part of the U.K. market really helps drive the early adoption of certain types of vehicle. And we see similar sort of picture unfolding around the EU 27 as well. If you look over the last couple of years, we've seen EV penetration in the U.K. market for passenger cars get to about 16% or 17%. And it might not have escaped your attention that this year is the first year that the zero-emission vehicles mandate [ bites ]. We're the target of 22% of the market for passenger cars being zero-emission vehicles that really means battery electric vehicles. And you can also do this with fuel cell vehicles, but there are very few of those on the market. So that's a bit of a gap to close. Next year, of course, that starts to step up again. You've got to get to 28% and then it starts to ratchet up until you get to 2030 when 80% of the new passenger cars sold in the U.K. must be zero emission. That's putting quite a bit of pressure on the automakers who frankly had quite a lot of strife through late regulatory definition. So the zero-emission vehicles mandate was really only finalized in November of last year to be effective in January of this year. The industry needs a longer planning horizon than that. Government probably not been very fair. But the one thing that government did do was it did take some feedback from industry about how the mandate that was originally consulted upon the year before, ought to be written. And actually, they found an accommodation that works for the industry as well. So we've seen early adoption driven by financial incentives. And actually, if you look at the vehicle segment, there's a bit of a story here. If you look at the D segment, which is basically larger passenger vehicles, the more expensive ones. Actually, last year, electric vehicles outsold petrol and diesel vehicles 2:1. Hybrid vehicles sit in the middle. But if you look at the smaller end of the market, the kind of Ford Fiesta size that they no longer make, actually, petrol cars outsold battery electric vehicles 2:1, the other way around. And that's a function of 2 things. Firstly, the availability of models. There are many more models available in the larger passenger car sizes because, frankly, they have greater tolerance, the higher price and battery electric vehicles are more expensive today until the cost of the technology starts to come down as volume starts to grow. So it's more easy to sell into that higher-priced market and still actually have a reasonable return. And they're also typically the vehicles that are incentivized by company car schemes. If you look at the smaller end of the scale, you used to be able to buy a Ford Fiesta or equivalent for about GBP 15,000 or GBP 16,000, not very long ago. Until very recently, the cheapest small electric vehicle you could get was not far off GBP 30,000 for something electric [ coaster ] sized. So that's a major disincentive at that smaller end of the market for people to adopt. And frankly, the carmakers aren't making any money at that level either, so they don't want to make them. So they're only going to do it under duress or when the cost structure starts to change. So what we're expecting -- what we expected to see was some contraction of the market in the near term until costs start to come down and the vehicle makers can start to afford to make the smaller vehicles, which is where the mass market is. So that's essentially why the market is almost plateaued over the first few months of this year. But we do fully expect it to recover. The automakers have got no choice. They have to comply with the mandate, which means they're going to have to develop more models that will be more accessible and they will be deploying technologies that are starting to reduce the cost. So we see this definitely is a transitional thing and not something that is going to upset the trajectory towards 2030, by which we think, according to our latest quarterly demand forecast, which we do every quarter and publish on our website, the U.K. will need about 91 gigawatt hours of batteries for electric vehicles in 2030, which is about 11% or 12% of the total European and U.K. demand combined.

I guess, maybe just going to Graeme picking up a stat there around the mix of sales at the high-value end of the market, which is obviously where sort of glass targeting. So I suppose these sort of short-term -- haven't really had any impact on the conversations you're having with.

That's right. The reality is that when you have a new technology like solid-state batteries will be, you need to make sure that because it's manufactured at a relatively modest scale relative to the incumbent technology, so normal lithium-ion batteries in this case, that you launch that technology, you commercialize it into a sector that is more price-tolerant. And for exactly the same reason actually that larger luxury vehicles are still out selling from an EV perspective. That will be our initial launch market, and that is the market that most of the OEMs that we're talking about see solid-state batteries playing in where you can emphasize the unique selling points of the technology, but not worried too much about being competitive with, let's say, commoditized battery alternatives. And Thomas, I don't know if there's anything you want to add to any of that around any impact on the -- just in terms of the sort of the market.

No, not too much but I think the key thing is, I think, actually, I think when you look at some of the forecasts that the APC that they come out with, which are passed out. I'm not saying [indiscernible], I think really, really good amount of forecast. I think we're actually, I think, even globally, we're still looking actually at a bit of an uptick, I think, in 2030. So it's not just a here's a store, there's a correction that's where we were. The future forecast for electric vehicles is still ticking up. So that's something that's not going away.

It's worth recognizing actually now if you look at -- despite the Prime Minister's shifting of one of the goalposts from 2030 to 2035. Actually, it was almost irrelevant because the zero-emission vehicles mandate still ensure the same trajectory of electric vehicle deployment as you get out to 2030 and beyond. But we now have completely aligned targets effectively at the endpoint in 2035 across the U.K. and the EU 27. So that makes life a bit easier for the automakers.

Understood. That makes sense. And I guess one thing we're going to need if we're going to do all this as raw materials and lots of them, I think it was touched on one of the presentations earlier, but could you get the sense maybe in that the raw material supply chain is sort of mature enough outside China to get where it needs to get to?

I'd say not yet. I think the reality is that Chinese refiners and manufacturers of material are still globally dominant. This isn't a challenge just for this country, it is a global situation. But I would say that the big chemical companies, in particular as well as some innovative technology developers are aware of the opportunity. It's clear that this is a growing market. And that there are new materials that needs to be developed and supplied as part of the new technologies that are being rolled out. And we're seeing international players step into those often supported by some of the legislation changes that we were discussing earlier on in the morning.

China is a real risk in that if you look at lithium, for example, around 90% of the world's battery-grade lithium carbonate equivalent is processed one way or another in China. And many of the Chinese entities are highly vertically integrated from mine right the way through to refined battery input material, in some cases, into batteries themselves. That's a very difficult place to come from because you've got no mark-to-market. At any point, you've always got the opportunity to arbitrage with your own vertically integrated supply chain. The West is fighting back in different ways. If you look at the U.S., as it was raised by one of the questions earlier on through the U.S. Inflation Reduction Act, you can only access many of those incentives as in that producer or at retail level, if you don't have materials that come from China from key inputs. That's one way of doing it, but it's expensive and it's risky because you risk having differential pricing, which we're already starting to see for battery materials that are U.S. IRA-compliant and materials that are not. Europe and the U.K. have got a slight different approach, and we're really focusing on building out those supply chains. So we've had a very strong focus through our programs in developing our materials that we can source from our own shores, like lithium, where we've got significant reserves in the U.K. actually. Down in the Southwest, we've funded a number of projects from companies like Cornish Lithium and Imerys British Lithium and a bit further north of the companies that are focusing on refining of imported concentrates, specifically with a focus on building supply chain resilience and tilting away a little bit from a single country counterparty risk. And that is also the approach that's being taken by the European Union and they've got things like the critical raw materials coming into play as well that's driving that. And there is money behind the clock as well to do that. U.K. has got a very strong focus on supply chain resilience. And actually Minister Ghani, who's recently moved from DBT into FCDO, has a very strong personal interest in critical minerals. And building supply chain resilience and sponsored a task force, which I was a member to look at how we build those integrated and more resilient supply chains, and she's taken that portfolio with her into a new role. So I think we are doing the right things, but there is some intermediate risk where we are dependent on China. And I don't think you get there by playing can you -- stopping it. You've actually got to try and build your own little supply chains that can help you tilt away and that means looking right the way through to supply chain partnerships with other territories that do have the raw materials and then allowing the U.K. to focus on the midstream processing, which is where we can really add a lot of value and where we have a lot of capability in our chemicals processing sector. Places like the Northeast and Northwest are really good at chemicals processing. And that's an opportunity that we're going to try and exploit.

And is that sort of raw material availability something that comes across your door, I guess, is it something that people focus on that early stage of development?

Yes. It's -- I'd say what we've seen, I think so Faraday, I mean we've been investing in sort of early stage or mid-stage research 2017. And I'd say there's a massive change. And if you go back to that point, I think people are worried about trying to make good materials, and that's what we really focus is on smaller source small business starting up or even large businesses, starting out in that looking at batteries. Now everybody is going. Now I'm doing this because of critical mineral supplies, this reason, this reason, energy efficiency and all the things that you would really hope. Hopefully, companies are focusing on, that's everyone's focus now, and it's something that we actively assess for when we sort of look to support companies. But I think there's a few other things to pick up, I think in the short term, yes, there is definitely there's partnerships and is pulling through critical minerals and the need for that. But it's also interesting because what you're generally seeing in the industry is a lot of pick and place. Pick-and-place technology, it's -- this works in China will bring it through and set us up because that's trusted processes. And to a certain extent, that's what you need to do because they are related to deadlines, you need to get factories and processes that you know work and you need to get them set up so they're IRA-compliant and all the rest of it support the U.S. and similar things for the EU as well. But in the same way that Giga Factory as you might have heard because it probably is like Tesla revolutionizing how you put together a battery cell, but that's the same for pretty much all processes when you put together a battery. So if you look at cathode materials, so normally a black-ish power, very shaded black, everything is black in battery. It's the way that's made in China and globally is -- they got to come out pretty simple. It takes some things, mix them in a big reactor, filter it through a big filter and then bake it and grind it a bit as well if you really want to. I mean that's literally it. Very controlled but those processes, first off is batch processing. It's very inefficient. So some of the things we're starting to see come through and a lot of focus, I think, especially if people looking -- maybe not in the first phase or the second phase is actually saying, well, we can't compete with Chinese manufacturing costs. But actually, the way the market is going is we need to drive better efficiency of processing. And there's loads of efficiency gains for making continuous flow processes, just having same as there's in every industry, if you automate, if you make it continuous, you get the cost down. And through that, that's things that we're starting to see a really big push of people looking to that process manufacturing costs. How do you make these things smarter, not just putting cells and batteries together, but also in the material side and this will -- cost-squeezing. There's so much room for cost-squeezing throughout all of it, and that's really important. And then the second point, I think it's worth saying that we export -- I think it's about 80% of the cars we make. We also import a similar amount. Most of the raw materials that are going up in the U.K. are going to be in the shape of cars, not immediately, but future. And that's the same for what I'd say, most of Europe. And what that means is there's a really, really big focus on how we're going to utilize that. I think some of the future sort of amount in terms of our critical minerals that could be supplied by recycling are actually really, really high when you look at maybe 10, 15 years. And like that's long term, but in terms of thinking -- in terms of long-term strategic supply, as soon as those things come online, become economically viable, then we got huge supply of minerals coming through. And I think it's -- that's one of the reasons why I think groups like Julian's and others are starting to really focus on what happens to electric light vehicles now because at the moment, you take in my vehicles, you shred them. And then all that's something called black mass, and it's all of the sort of the shredded bits of the battery, as all of the materials in there that really high value gets packaged up and shifted off to China where they refine it and then put it back into the batteries and then you buy them back in again. And that's what we definitely need to stop because that's probably in terms of the U.K., we've got great lithium reserves. We've actually got some potential other really critical mineral reserves in, I think, probably in Scotland but there's going to be a massive amount coming out of recycled vehicles. And that's something we'll keep an eye on as well.

That's a really good point actually, and different car producing nations around the world, we're in a very different position. So in the U.K., as Thomas just said, we've got a positive mass balance of battery materials coming in through finished vehicles. So we will have a surplus of recyclate availability over time. If you look at Japan, for example, they're in almost diametrically opposite position because they make a lot of vehicles and export them but they import virtually no vehicles. So they have very few raw materials themselves. They're importing all their raw materials and they're exporting on their finished products. So they've got a huge negative mass volumes. So these partnerships, and we do have the critical minerals partnership with Japan and a number of other nations are going to be really important looking at secondary materials as well as primary materials and it also helps improve the sort of the life cycle impact of battery electric vehicles.

Really interesting. And I think, obviously, the solid-state batteries is what I'm focusing on today. I won't start with Graeme because, I guess, I know your view on this one. But in terms of sort of solid-state batteries, what are the benefits maybe and do you think they can sort of drive adoption of EV?

I remember without giving too many trade secrets away, I remember a very difficult discussion back in my former employer about a new vehicle architecture and how on earth we were going to package a battery big enough to power the vehicle within the constraints of the vehicle. Making the floor too high or squashing people's head into the roof. And that was largely because we're trying to package something that got cylindrical cells that were all stacked together in a pack. Each of those cylindrical cells was in a module, a small brick-like or shoebox-like module, sometimes a bit bigger. You distribute those in the pack, which has got other containment around it as well. And you're basically trying to fit big boxes into small spaces and they don't work. You've got some interesting things to do with lithium-ion batteries if you are talking about wet cells, conventional cells. [ Domicile ] pontificate about this for a long time if we let him. But basically, lithium-ion cells start to expand when you use them and when they start to expand, then they degrade and they fail, right? So to stop them doing that, you have to contain them, you have to squash them. So cylinders do that nicely. They keep everything held together. But when you try and package them together, you've got lots of gaps in between. So it's not very space-efficient. You don't get much surface area for all the volume that you occupy, and then you've got to stick them all together and hold them in a big frame because they're not structuring themselves. So what's called the cell-to-pack efficiency is quite poor. So the -- so that's the volume occupied by the pack compared to the volume of the cells themselves. And you add cost as well and weight. When you start to go to a big format prismatic cells or big pouch cells, you've got the opportunity to stack them all together, so you get better package efficiency, but you still got to squash them all to stop them expanding. And things like those pouch cells, they need a lot of physical containment to stop them degrading. So you need strength. The advantage with solid-state cells is that you don't need to contain them in the same way because they don't exhibit the same characteristics. So the opportunity afforded by solid-state cells is disruptive on the way that you architect a vehicle platform because you don't need to package so much stuff around the battery. You don't need to worry too much about crash protection from side impact, for example, because the batteries are inherently more safe. They've got no flammable electrolyte sat in the middle of it. You don't have to worry about putting a 6-inch nail through it, which is one of the common tests for batteries, right? You do that with conventional lithium-ion cell and it's quite entertaining. It's called a thermal event. But with solid state sales, you don't have that issue. So you get much better sell to pack efficiency with solid state cells, and that's where the opportunity comes in terms of volumetric efficiency and energy density and power density.

And I mean do you think it's going to help drive adoption, Thomas?

Yes, I'll help with that. So yes, I think we touched on this a little bit with talking about the different sort of classifications in terms of the automotive sector. It's -- I think where there's sort of 2 types of horizons on this. So one of which is that when you look at automakers designing, I'd say very much in the large segment and we're talking very large cars, very expensive cars, where customers have a certain performance requirement, which is, I want to go through to drive very, very long ranges performance to be really, really high. And I'm not accepting less. And the automakers are very, very aware of that. You can't take a Range Rover and say, yes, you can drive that by only 13 miles at a time. And actually, we're going to step of the acceleration of the new Ferrari, electric Ferrari because actually, we're trying to protect the battery bit, so we're going to back off the performance. No, that doesn't sell. So when you're looking at those costs -- those are, I think, Graeme has mentioned, they are sort of the segments that are looking really at the sort of next generation of batteries that have really high-performance batteries because they will sell cars. They can't afford not to. But what they have to do is either go incredibly, incredibly intensive on that pack engineering that Julian was talking about, trying to squeeze every last little bit of available space, last a little bit of a max out. Because the batteries, the actual sells that can buy are probably the same as everybody else's. They're not massively different. They really are all shapes and sizes of the same sort of performance. It's all on how they're assembling and packing those in. So obviously the batteries will enable them to do though is, as you say, strip-loaded that out and allow them to offer that performance that is expected of the customers of the premium price tag. It's one of the reasons why you have to sort of -- next introduction piece makes sense both from a volume perspective but also from a meets customer demand perspective. So very much on those. I would say hard to electrify. And the reason I say hard to electrify, they will be, but it's hard to electrify and keep the performance that's expected by the customers. And I think that's the real bit where it's going to drive it. As you then walk out in time, and I think Julian has touched on solid-state batteries and the reason that people have been so excited about them for so long is because, yes, you've got the inherent safety so you can squeeze things out of the performance, which is great because I think I always personally say no car that is sold with a battery and it is sold, not safe. They're all designed to be safe. What the extra safety inherent safety allows you to do is design out all of more controls so you get -- you don't need to control the heat as much. You can sort of push it a little bit more or the software limits that at the moment, when you charge your car to 100%, it's not charged up to 100%. It's limited. When you put your fall down, you're not getting all of the performance out. It's all limited. All of those things can be rolled back so you can get more performance. But it also comes back to that manufacturing piece, which is really, really important. And I think we're, especially in the U.K. and in Europe, et cetera, we're used to making technology efficient and making things really well. And I think that's a really good point. Once you get away from the conventional battery manufacturing process, which no matter what way you're going to make a solid-state battery is always going to be slightly different. It might be a little bit different depending on the route you go, might be able to cut out certain parts of that process, maybe reduce certain times or if you're going to really out there so if solid-state battery technology. You could throw the whole process in the bid and start again. But what that does is it gets you off the sort of the current track and get you on to things where you can start having these things in smaller footprints. You can how much less capital -- CapEx expenditure in your factories. And that's where when you look at the cost point of solid-state batteries, that's why they're always coming out the future, really, really low, and that's the point at which then they can appeal to that market is sort of that longer-term duration.

There's another factor actually that's often overlooked. If you look at the technology that is the internal combustion engine, it's pretty much ubiquitous. It will work in very low temperatures, very high temperatures, high duty cycles, low duty cycles. Conventional lithium-ion batteries have got a bit of a problem and they don't like being very cold and they don't like being very hot. And one of the advantages of solid-state batteries is they've got a much wider temperature capability. You think about signing off cars that are going to work in Siberia, maybe not at the moment. But they've got to work in mine or even Canada, they've got to work in minus 40. Batteries don't work at minus 40, to keep them warm, so you got to keep them plugged in. If you take us to the Middle East, they've got to work in at least plus 40, some cases, the sign-off is plus 45 or plus 50. That high temperature, you haven't got much leeway before you start to get to thermal runaway position for conventional lithium-ion batteries. So it's not so easy to ubiquitously deploy conventional lithium-ion technology in all operating environments. And this is where solid state technology can extend the operating capability of vehicles that electric vehicles in some of those more extreme markets. So I think -- and people will pay for that. So it's a great premium opportunity.

Graeme, just I guess, earlier on, it was mentioned few of the competitors are well-funded OEMs. And I think we've seen Nissan mentioned solid-state batteries more recently. So in the conversations you're having with the OEMs, you're seeing them is sentiment improving, I suppose, that they can realize a lot of these benefits as solid-state has been around for long as a potential technology. So are you sensing that we're much cost?

Yes. Absolutely. I think every global OEM and Tier 1 in this industry has got solid state on their road map and whether they have an in-house program in order to deliver that or more often, they're looking for collaboration opportunities. Everybody realizes that actually this is the direction of travel and they have to have a plan in place in order to make it happen. And I think perhaps the other point that builds on what Thomas and Julian was saying earlier about recycling of batteries being really important. Solid-state batteries lend themselves to be recycled in a much more straightforward manner. And in fact, as part of our current Faraday battery challenge program, there is a study, an LCA study being done by HSSMI, one of the collaborators working through that whole recycling argument. And it's very clear that if you've got a simpler or solid battery, it's easier in order to extract all of those minerals. It's critical minerals, you want to put back into the supply chain. If you've got a solid state construction relative to one that's got a polymer separator in a toxic potentially flammable liquid electrolyte. You don't have those worries in solid state.

Started to get conscious of time. I think we've got a little while left. So last one, I guess, just thinking about, we've had some high profile and lower profile battery companies that haven't worked in the U.K. recently. So maybe from the sort of the early stage point of view, what are the unique challenges in terms of making a successful battery company.

So yes, I mean we -- just to put context. So we, as a challenge, we sought about 150 organizations today, GBP 118 million worth of grants. Those companies are able to raise about GBP 780 million so far. We're actually doing quite well growing companies. I'd say, an early stage in the U.K. We've a study, I think we did last year. Pretty much so we've got what sort of the fourth highest enterprise value in Europe. We're really good at growing company. I'd say what -- and also other is that the scale-up stage, it's really pushing through right. It's getting that technology for a great idea through and staying on that track up to then be able to get to mass market. And that is not a battery problem. It's a hard tech problem. It's -- I don't just make a software problem. And it's because -- I don't necessarily -- because it requires quite a lot of patient capital to sit and work through and create prototypes and get out there. And that's the same for battery, it's same for any sort of hard tech physical products that are made. I think were the unique -- I'd say, I'll start with the challenges and then get on to some positives actually. But I think the challenges of batteries is the rate of change. So it's the rate of the speed and the fact that everything is standing up really quickly. And what we're hearing from companies across the board, and it's great to hear that in the door talking to OEMs around solid-state battery technology, is that the barrier to entry to get into an OEM or into a Giga Factory's R&D department, which is where everyone starts. You don't start with the purposing department when you're scaling up new battery technology, you start in the R&D people. The batteries, when it used to be, I've got some technology, can you test it for me? That's going back maybe 7, 8 years ago. Now, so you can get to that point at the front door, it's you need -- if you have a material, sourcing cell, you need to be able to provide the material you also need to provide the data sheet of what that looks like in a representative battery. You also need to know what that battery means at the module impact level in terms of your value proposition and also what it means a vehicle level as a value proposition. And you have to have that ready to give to the R&D departments because they've got everybody after them. They've got -- they really need to know that they can invest their time in talking to your company. So once you're in the door and you've got the position, that's really good. And then the problem is the -- well, it's a nice problem to have, but it's ramped up. Once you're through the door and you're starting to click through, you've got examples of the company is going in the U.K. that they've gone from, "Oh, yes, can I have a few hundred grams of material, please?" The next month, it's going to have 10 kilos, please? And then in 6 months' time, it's right, "can I please have 500 kilos?" For a company that's making 100 grams to be asked in 6 months, can you supply half a tonne of material. That's quite a significant ramp up. And that's why in the U.K., that's why we built things like the U.K. BIC, I know collaborating with battery destabilization center because you can go and when you can't wait for a whole battery line to come up there to prove your stuff at that sort of scale, so you can go and use the open access facilities. We're also doing a similar thing up in the Northeast with material scale up facility they're investing, building it now and building all that sort of capability. And that's why it's really critical we got quite a good growing ecosystem in the U.K. of that open access facilities is because of that ramp up scale that you need to hit to sort of keep on track. The positive and [indiscernible] time, the positive is, though, is unlike quite a lot of hard tech, there is such a legislated deadline and there's such pressures on the OEMs to get the best technology through that if you can hit all that, and you've got a really good technology, as technology allow you to get that next step then you're off. We do need to get through the door.

Is that similar, I guess, when you're moving into industrialization to those challenges?

Yes, it is. I mean, the big challenge is the scale of the capital cost to industrialize and you have to make sure that what you're industrializing is contemporary and it's competitive. And frankly, the margins on conventional lithium-ion batteries, particularly LFP cells that largely produced in China today is wafer thin. So it's about volume and it's about getting capital cost efficiency. And even at that level, you're still looking at investing at least GBP 100 million per gigawatt hour for industrialization. That's just for cell assembly, right? When you start to get it smaller scale and more steric technologies, then actually you start to spend a lot more than GBP 100 million per gigawatt hour. And that's why you see most Giga Factories being built in the Western world are many billions somewhere between GBP 2 billion and GBP 4 billion or GBP 5 billion or dollars to industrialize at a reasonable scale. The bigger challenge is the link with the vehicle development time line because. Frankly, the vehicles that you'll be driving in 2030, you buy in 2029 are already on the concept drawing board today. It takes about 5 years to go through a full new architecture development. You start with target cascade, getting down to component level specification, then you got to go through a full validation session as much as we try and do more and more of that using virtual techniques in the simulated domain you still need some physical testing, particularly with these nascent technologies. And that means you've got to provide physical samples that are production representative at a relatively early stage. So the challenge for battery companies, and this is why we're trying to bridge the gap in that funding. And this is not unique to the U.K., the EU doing it as well with their [indiscernible] schemes and the U.S. is doing it too, is to make sure that you can support the production of production-like samples at an early stage. And then you have to sit there and wait for them to go through the combined vehicle development testing regimes before you can then get to the point where you get -- where you're commercially sourced and you have a strike price. So you have to be patient. And if you try and rush it, if you try and grow too fast, without getting all of those samples out at the right time, then you run the risk of running out of cash. So you've got to make sure that you've got deep pockets when you start this, but if you bold and you hold your nerve and the fundamental technology is basically good, there is a ready market at the premium end because it's that leading edge where the margins exist not in the mass market.

And then, Graeme, I guess, point. which sort of challenges are you facing most of the moment.

Well, I think the key to Ilika's success were perhaps other battery companies may not have covered themselves in glory is to have a risk-managed approach to the challenges that Thomas and Julian have just outlined in that we say that we will develop our batteries and get them to A sample. So this is the language of vocabulary of the automotive industry where an A sample is a cell that has the function that you need to power your application. A B sample is then a battery that has the same specification but is actually made on a piece of equipment, which is industrially relevant, so you could transfer that piece of equipment into a larger scale facility. And then a C sample is actually where you start to make volume production of cells on that of equipment. So the idea in Ilika is that we get to A sample and that's enough so that we can engage in an RFQ process, a request for quotation from an OEM. They can tell us what they like about what we've made and what we need to improve. And actually, we can get qualified for the rest of the commercial procurement process at that point. But then we partner for B samples and C samples and work with the U.K. battery industrialization center and also Tier 1 manufacturers themselves in order to avoid the requirement on Ilika to actually deploy those hundreds of millions of capital that's required because actually, we believe that through partnership, we can get a more efficient socialization journey both like as a developer and also for the Tier 1 and OEM as manufacturers.

And that's exactly why U.K. BIC was paid for by government.

There you go.

Thanks. I think we are up against time, but thank you Julian and Graeme, really interesting discussion. And we'll hand over to Jason.

Thank you all. So if I hopefully finish out the CMD with a little bit on finance actually picking up topic of conversation to start with on the financial aspects, really around grant funding, which is a theme through the finances for the last few years and into this year. So just picking out one of the grants that has been mentioned before by Louise. So this is the system grant that we've received. So this is a 13th month grant program, GBP 2.7 million in total, although funds direct to Ilika of GBP 400,000. So that GBP 2.7 million is spread across the 3 partners within that processor, that's ourselves, U.K. BIC and Mpac, and Mpac are an automation specialist. And really the benefit and the reason for highlighting this is it's not just about the funding that comes to Ilika for this, this is also through utilizing an innovative way of the grant funding. We can ensure that through the partnership with Mpac, they can develop an assembly line that we will then bring in to deliver that 1.5 megawatt hour production facility that Louise talked about earlier, to help us on that journey to proving out that A sample. So it's not just about that funds that directly to Ilika, it's also being able to use the support of the U.K. grant funding landscape to make sure that we can manage that journey and have proper allocation of capital to extend the run of business as long as possible. So that process runs through towards the end of this year. So we expect to take delivery of that Mpac assembly ring, you can see on the bottom left there on the screen or representation of ours will be slightly different to that. Towards the end of this year, we'll take physical delivery, and then we'll qualify that and get that setup. through the early part of 2025, so that, that is ready to move on to A sample production timing. Just along the same timing that you would see with the history project, which is along the technological development. So once again, supported by U.K. government grant to really bring along the technology of the cells themselves to the point of our D8 data point. So that really is bringing together both that physical ability to produce sales and also the technology to get to the right point where we really see that convergence coming together for the A sample production. And as you just heard, that's the point when you really start to get to engagement with the automotive sector and going to start to put those cells into that pack and start that next journey. So just to give you a different aspect that you would have seen earlier within the presentation in terms of time line. So this very much talks back to that time line graph that you saw with Louise. So remember, the S-curve in terms of our technological development, followed then by the blocks for the automotive A, B and C sample just in terms of the manufacturing scale up activity. So through 2018 to '24. We've had the pre-pilot line. So that's very much the research element so hand manufacturing these elements to get to the point that we're at now that P1 sample, all hand made in our existing facilities. Then as we move forward, as I said, that system grants supporting the introduction of the automated pipeline and moving into the ability to start to introduce some of those manufacturing like processes within our existing facilities. And that's really important as we look to engage with the OEMs, they want to be able to see that, as Thomas was saying, it's being able to demonstrate that this thing that you've developed in a lab is capable of being produced on a production line at scale. So that's highly important. And that very much is the journey that we've already been on with the Stereax product line. But doing that now with Goliath starts to bring that to fruition where we get to that automated production so that we can demonstrate that with those OEM partners with 17 interactions that we've got, so they can start to see that, that's easily transferable into the supply chain. And then as we go forward then, as we've talked about with our business model right at the start when Graeme was talking earlier, we are not looking to build a Giga Factory. We recognize that Ilika's specialism is in the research and development. There are a number of unfortunate U.K. battery companies that have tried to be master of everything, both develop technology and build the factory. And unfortunately, over the last year or so, they've fallen by the wayside. It's very difficult ask, having come from a manufacturing background. It's a very specialist requirement, again, as Thomas was saying, to be able to look for those incremental gains and eat those out of your manufacturing base. So through our business model of engaging at that A sample point and then doing a tech transfer a license agreement with the automotive partners that allows us to leverage their expertise in manufacturing to make sure that we get the best of both. We will continue to be that technological development, but we don't have that cost piece of trying to scale up to that Giga Factory scale as we heard just a minute ago. Some of those numbers are quite eye-watering and difficult to deploy. So that really underpins the financial pieces that we look to from an Ilika's perspective. Just touching then on the financials. If I start with a little bit of history for those that maybe are less okay with Ilika and our back story. So if we look at the recent past FY '20, so financial year ending April 2022 through '23. So that's the table you can see on the bottom left of the screen. We have been very strong in receiving grant funding through that R&D and technological development. Now I should say, for the business as a whole, that grant funding has very much been geared towards the automotive sector. So the steric side of the business has been developed without that grant funding support. Predominantly because the main market for that really is outside of the U.K. So it's not really particularly applicable to U.K. PLC, although, obviously, over time, the therapies that are developed in the U.S. trickle down across the globe. So ultimately, the markets will still be there. But that early adoption, as John talked to earlier, is all sat within the U.S. market. So limited grant funding. But we have done very well as a business in receiving grant funding to date. So good in the early years, although a little bit of drop-off in FY '22 just because of the timing of the grant and our own development, then stepping back up in '23. And then as we've talked about with the history and the system project as we go into this financial year, that's really good financial support that we've received non-dilutive funding for the business to support that Goliath roadmap and development. Cost wise, from a business perspective, as we were more R&D in the early years, obviously, limited costs as we were at an EBITDA loss position. But really, as you saw in FY '22 and FY '23, that cost base increase. Now that was very much to do with the industrialization of the Stereax product. So once again, with our business model, we had to demonstrate that in production intent equipment and building out that fab facility within the U.K. is not a cheap exercise but in demonstrating that it was capable of producing those batteries at that micro fab scale. That allowed us to then engage with Stereax, as we heard earlier through John's presentation and with Brad into that licensing model and for them to adopt. I'm very much in them doing that and transferring that technology across. That's allowed us to then take that cost back out of the business to focus then our cost distribution towards the Goliath as we go on that same journey of scaling up into that small-scale fabrication to demonstrate the product, then as we go into engaging on a licensing aspect. So that really leads us into then our half year results that we had at the end of October, and I'll just follow that through with the announcement this morning on an update on a couple of those aspects. So at the half year, total income was GBP 1.3 million. So going back to last year at GBP 0.7 million of direct grant revenue and total income of GBP 0.8 million for the full year. At the half year, we were showing a really strong performance. Now that very much has to do with both that history and that system grant income coming through. Although as you saw from the awards that those represent over the time line, those are fixed awards, and they're a little bit front-end loaded. So we have seen that slowing down as we've gone into the second half of the year. And we have just announced this morning that we expect income to be around the GBP 2 million mark as we get to the full year in only a couple of weeks' time. In the loss at the half year was at GBP 1.9 million. So as you can see from the previous half year, a significant reduction on that. And as we talked, for those that follow the business at the half year announcement, that was very much on the back of that reduction of the Stereax cost side of the business as we moved the very expensive operation for an inefficient small scale demonstration facility to the U.S., taking advantage of the IRA and the lower energy prices that we have. So thank you for the Q&A earlier. It makes my job easier to relate it back. So that allows us to move that out and take advantage and Cirtec is a best place to be able to do that small-scale manufacturing as they go through that regulatory period because they can deploy their manpower across their other activities where we were in the U.K. only with one single product line and doing one activity. We couldn't redeploy that manpower or that energy elsewhere if we actually producing something. So there's a lot of synergies in that early adoption with Cirtec. And that really allowed us to pull cost out of the business for this year, certainly at the half year, and that's followed through into the second half. Cash balance at the half year, we're at GBP 13.2 million. And as announced morning, we're expecting to be around GBP 11 million at the full year position in a couple of weeks. Very much that's underpinned by that cost reduction that I just talked about on the Stereax side of the business, great performance in terms of additional revenue from grants and also the timing of our capital spend. So with the system piece and that was one of the reasons to talk about that. It's avoiding capital spend but without delaying the technical progress, one of the reasons why we've been able to maintain that technological processes by having those partnerships and also having the U.K. grant funding, they hold us honest in terms of making sure that we continue to progress as we've done. So quarterly, half yearly reviews, where they make us stand up and ensure that we are delivering to the milestones for each of those projects that underpin both the technological development on the history side and also the manufacturing scale piece on the system piece. So that really gets us to the expected cash position. And then going into sort of the last bit I want to touch on while we're not in a position to give specific forward guidance in terms of the revenues, values, certainly to make sure that we stay on the right side of the regulations. For those that followed the half year, what we do want to do is start to give some education in how we expect to see revenue building as we look forward with both the Stereax which we talked about at the half year, and I'll go through now and also now as we start to get close to that A sample piece on the Goliath side. So on the Stereax position, there are a number of different revenue streams that we'll build through for that business. So help people understand how that comes through and how we expect those layers to develop. So right at the very bottom for those that can see it, Graeme talked earlier about the transference of the technology, the equipment sent through to Cirtec. I did say that we are retaining the LCO deposition piece. That really is the secret source, if you want the most IP-protected part of the Stereax battery and was the most difficult piece to get right when doing that fab setup. So we're going to retain that in the short term within the Cirtec relationship. And we will operate that on a subcontract basis. So within the contract, we will be paid for manufacturing, and that will drive revenue the earliest point as we start to produce those wafers that then go back into the Cirtec's supply chain for them to follow through the other activities. So that really starts the income flowing as Graeme said, get into '25 and those volumes are -- to go from the Cirtec business, that will drive income coming through. On top of that, and John picked up on it earlier, we have nonrecurring engineering. And this very much has been led by conversations with Cirtec. This is very much that med tech model where they have a product and either the customer, the OEM is looking for someone to certify that, that Stereax battery will work for their application, and they will pay fees for doing that. So that's the existing M300 to be certified in their application or actually, we like our M300, but we'd like it longer, thinner thicker, slightly more power, slightly different shape to fit our particular application. And once again, they'll provide funding through to Ilika's to change these form and format of the Stereax battery to fit their particular application. So we've already had a number of conversations with potential customers and also with Cirtec on how that develops and really relying on the Cirtec experience within that med tech sector to guide us on how that builds and the expected levels. Building then on top of that, the gray sector that you could see there is the revenue that's built into the contract. So Graeme talked about the Cirtec contract. And the way that is defined is a profit share in the early days on low value. And then as we get to a break point when it really starts to get through, as we expect the certification of products through the FDA process to start happening, it then trips over because of the volume trigger. And then we switch to a normal royalty rate. So that's where you would see that real ramp-up as we expect to then get to the point. But in the short term, Stereax, and therefore, Ilika get the lion's share of the profit coming from those very low volume as they're used through that certification process. And then the last point, those yellow spikes that you see on top of there. Graeme talked about this earlier. The contract is exclusive within the med tech sector, but with a couple of carve-outs. So we know that, as Graeme talked about, there is the opportunity that potentially one of the fans that we may have in our customer base comes along and says, "We want your application, but we need it much higher volumes than we need it to be within our application." So we preserve the right for a license to be issued on that. And therefore, we'd expect a license income to come from that or for outside of med tech, while we would want to push as much volume as we possibly can through the Cirtec manufacturing capability to bring cost points down as quickly as possible. We also recognize that there is a secondary market with industrial Internet of Things, IoT. And once we get that cost point starting to come down, some of those applications, once again, will potentially need larger volumes, and we have the right preserved in contract to issue a license outside of the field of med tech. So that really gives us an opportunity to build the various layers and hopefully gives investors both institutional and retail way to help understanding how over time the revenues were build. But ultimately, as we progress through that FDA approval process and the product gets into applications, the predominant revenue will ultimately come from that traditional royalty model. Moving on to then the Goliath side, very similar in terms of layering in terms of how we expect to build that up. So once again, I can't give specific guidance, but to help people understand how over time that builds through. So in the short term, rather than the manufacturing piece, we have grant income. So we've touched already on the income that we have at the minute and the activity we're doing to try and look forward and engage in the next stage, it would be a great piece for U.K. plc to be able to be grant funded all the way through from the Faraday R&D at one end all the way through to the APC and the next project at the end to see our batteries in pack and rule and driving rounded track somewhere. So we're looking to engage in that piece and that would be the next journey from a grant point of view. But we expect that to slowly decline down as we diminish the amount of R&D and move to more commercialization although there will always be an element of the R&D as we look to change the factories for other applications. So we would expect grant funding to continue to support that with new applications as we look to innovate and that really is at the core of Ilika. So on top of that, once again, very similar to the Stereax side of things, so nonrecurring engineering, so NRE. We've designed the Goliath battery to be a generic cell that could be used across the board and will be recognized by many automotive customers. But at the same time, they will have their own requirements within their own pack, their own system design. So we expect once again in conversation with some of these OEMs about their particular requirements that funds would flow to us to change the generic design that we have for our Goliath cell into something specific for their own architecture. So that's an easy plug into that automotive, once again, it's about easy adoption. The funds are there to help so that change over and we've started a number of those conversations already to understand what that would look like. So that's being guided by those conversations with those 17 OEMs that we talked about in the early conversations. Built on top of that, within the licensing model, we'd expect a license issuance fee. So from a Goliath point of view, we are planning and modeling on a number of different regional manufacturing licenses. So we're not trying to assume that we will have global domination, as we've said in a number of conversation. There will be many different battery chemistries out there for many different applications. So we've taken a very prudent view in how we've modeled this to expect to see that coming through. But as we move in, as Louise talked about again, from that A sample period through to B sample, we would expect to be engaging in that licensing opportunity. So that would be funds flowing through with the nature of those licenses being quite lumpy and when they come through, that's why you would expect to see that being spiky before then get into battery production coming through as the batteries are manufactured. And then the last part on there once again, would be the royalties flowing from batteries. So very small volumes in the early days as they are proved out in the automotive platform. But then once again, as they go into mass manufacturing within the supply chain ahead of being on the forecast, you would expect that to ramp up. So for both of Goliath and Stereax, very similar and very underpinned by the Ilika business model, but hopefully, that gives people a better understanding for how to expect the Ilika business model to transpose into funds flow in the future and to underpin the growth of the business as we go forward. And then I shall touch on ESG to finish out. So ESG is very important to us as a company. Obviously, the U.K. is very hot on making sure that everything is compliant and regulation. But for Ilika, although we are an A-listed company and have maybe not the full regulations applied to some of the FTSE companies. It's highly important to us. because we're interacting with those OEMs who are sat in that space. So as we already interact with them on this day, as we start to talk to the 17 customers, we're already getting questions about, can you prove your modern slavery statement. Can you talk about conflict mineral in your supply chain? The business model that we have within Ilika is that we want to ease adoption, so very much making it easy to hand across the source of materials to those OEMs so that we haven't sourced unique esoteric minerals that you can't get from somewhere. We want to make it as easy as possible for using the biggest players we possibly can to hand that into the OEMs to make adoption from their perspective as easy as possible. So once again, going back to Thomas and Julian talking about those barriers to entry, we're trying to break that down by taking a look ahead and saying, actually, it's not just about having the Ilika technology. It's also about thinking about the impact on the supply chain as a whole and how we can ease that through. So as well as ensuring that we have a great culture within the company and great governance, making sure that we follow those through. That's it for me. I shall hand back to Graeme.

You've been very patient. I hope it's been an interesting morning for you all. Just to recap on some of the key messages perhaps. First of all, you've heard about Stereax about how we're building scale through that manufacturing partnership with Cirtec, a very compelling piece of video footage, I think, from Brad to give you comfort in that regard. We're maturing the Goliath technology through partnerships and some very well-defined technical milestones, Louise's team delivering on those milestones in spades. And we're going to continue pursuing grant support from the government agencies and also commercial revenue through partnering with some of those Tier 1s and OEMs. So many thanks for that. We're now going to have an audience Q&A just to wrap up any questions that we may not have answered in the course of the morning and then we'll be able to launch ourselves into that smorgasbord that we've been promised from Berenberg. So I think Julian and Thomas have agreed also to field any questions relevant to them. So if we have any general questions on the market, we may pull on that resource. So if the Ilika guys could sit on the front, you as well, Denis, don't be shy. And we can open the floor. Sam, you've got the microphone.

Yes. Sam Wahab, Liberum. It's actually more on a financial basis. Just looking at some of those revenue slides that Jason presented, does Ilika have sufficient existing cash runway to get through to cash flow breakeven? And then secondly on that, is there any specific additional U.K. grants that you're looking to access over the coming year or two?

Very good. Jason, I think that's in your [ bailiwick ].

Yes, that's for me. We certainly have the cash availability and runway as we look forward for the midterm future. But we recognize that as we look across the U.K. battery industry, we refer back to [ Anti ], perhaps they left it a little bit too to secure their future and have suffered as a result of that. So given the market that we have in the mix, given the geopolitical question marks that are out there. We would want to make sure that we're securing funds in the right time where we need to, to ensure that we've got that runway to make sure that we've done profile, as Thomas alluded to, there are many companies who try and get to that commercialization and fail because they haven't planned ahead. So although we have funds through for the future, that good cash position, that we talked about at the current point that we expect for the year-end. We want to make sure that we have secured ourselves and don't leave it too late and therefore, run into any unintended consequences that the market might throw at us. So that was it from a cash point of view. And then from a grant funding point of view, I think we touched on it there in both Louise's slides and when I taught. So we have done a great journey in though the Faraday Battery Challenge through to the APC. And the next part of that really is seeing our batteries move into a mule and actually getting miles on the clock. So really that would be looking to access grant funding and very much that's within the APC's gift to be able to support that. A number of programs coming up that would support that in partnership with an OEM to actually demonstrate the Goliath batteries in action really is that next step to commercialization. So that moves us from that 1.5 megawatt hour facility allows us to build those batteries to be able to produce enough batteries to then do that scale and that would be grant-funded as well if we're successful in that application.

Thomas?

Yes. Just to add to that as well. So well, 10 of the last year as well, just to give a bit more color to that grant availability runway. So the announcements around advanced manufacturing plan by government last year, about GBP 4 billion sort of pounds worth of support page for battery manufacturing, about GBP 2 billion of that for battery support. That is being put into auto 2030. So sporting from 2025 up until 2030, covering, I think, it was scale -- scale development and also industrialization. So that's likely to be element of the [ 30 ] has covered around sort of the ATF capital side of things, but also very much around the later-stage R&D and the scale of R&D. So expecting one is government level support quite a large government level support over the next 5 years. Obviously, belittle be sort of within reach of that. And then also that's underpinned by U.K.'s national battery strategy that was published in November, which specifically calls out solid-state batteries as a great opportunity for U.K. as well.

So it's probably also just worth scaling -- some of the tons of competitions that we sponsor. So as well as the [indiscernible] already been successful over the years. Sorry, I thought this one was still low.

Our collaborative R&D programs, the one that Louise referred to, that they're planning to pitch into we invite applications for projects that range between GBP 10 million and GBP 40 million. So we would typically fund about 50% of that. So there is plenty of scope for collaborative programs, including route to market and other partners to cover some of the expenditures going forward with suitable projects. But the caveat is there are always competitions and there is quite a step competition, but Ilika have proven pretty successful at being able to navigate that process in the past. We do have some specific competitions focused on product demonstrators like our advanced route to market demonstrated, it's a competition that's open right now, and we're pruning another one again next year. And that can help with some specific things that help in the validation processes when you're dealing with making samples at sufficient scale to satisfy the requirements of automakers.

It's [ Alex Branco ]. I'm going to pick up as well actually on Jason, your slides about revenue, but maybe it's not actually a question for you. The those -- clearly, you've made -- you've got pretty good visibility on the Stereax outcome because you've got products in the field and you've got a manufacturing partner and you've got OEM. What does it look -- what does the marketing process look like that allows those lands on a page to become firm contracts. What will I be able to see as an outside party that will give me confidence that those things are happening?

John, do you want to handle that one?

I guess I'm saying that the Stereax we've got some evidence, right, because we've got a manufacturing partner with Goliath, it's still a little bit more...

It's a spooky similar process, really. We -- to what is A sample. This really is the key point at which an OEM can engage because of that point, we've got the evidence of how it operates at the system level. So we've sort of covered that. At that point, we'll be asking for a license because when they move from A sample through a tech transfer to B and to C, they need to license our technology so that they can produce those B and C samples in their facility. They're doing that because they've decided they would like to put it onto a platform, car platform. I think as Julian described, it could be a 4- to 5-year journey to do that sort of process. But actually, they need quite a few cars. Initially, they need quite a few subcomponents to go through a serious amount of testing. But actually, towards the end of that, they need maybe 30 to 50 carloads of battery, but they're also going to be a lot of run-through whether they make a good battery or a bad battery, there's to be has the license for the privilege. So you add up to quite a surprisingly large amount of -- well, the license pass, I mean, you saw the [ cascader ], the license plus the early-stage sampling. It is still fairly significant amounts of battery going through. And ideally, in our view, more than one OEM, that's the journey of our OEM. We're talking to a number of OEMs. We'd like to be multiplying that process.

Okay. And then secondly, your scale up to A sample looks like it's about 30x scale up to that numbers, but you want to go again for the next scale up. How much more risky is that second scale up? What can you give people that says, okay, we know this is going to work.

Yes. I mean, obviously, the money side risk is with the OEM because [indiscernible] that are doing that transfer in the same way that Stereax carrying risk for the Cirtec side. But actually, one of the -- maybe we haven't focused on it enough on the system, we talked about the system project. There's 2 things we're building a machine using a company called impact, and then we talked to you about this logo called the BIC. Well, what the BIC are doing. They've got the near giga-scale roll-to-roll production line for making sort of cathodes and anodes. And we've got this sort of tiny 1.5 megawatt hour line at our facility, the big gap in the 2. We're already funded under the system program to run near giga-cell trials at the BIC now. You wouldn't necessarily want to do that using your [ only ]. It's one of the problems a few of the OEMs we're talking about here tried to do that using their own money because just turning that line on is about GBP 0.25 million in the run-through. So you're basically to get -- to tune the line on the roll-to roll process and simply to get to a point where you're making a few hundred meters of decent cathode, you can easily burn through about GBP 0.25 million and you want to do more than 1 trial. So that element of that system project was doing that. Now that I have to go back to these OEMs and say, yes, we've got this sort of fairly modest size 1.5 megawatts our capability in our facility. But here's the data from the near Giga trial, we ran the BIC on the same material to prove to you that your scale-up is derisked.

Just a question. Let's see, in the best of all possible worlds, your carve-out works or commercialization of Stereax and med tech really takes off. What happens if [ someday ] demand turns out to be millions of batteries. And would you continue to make the capital material to it? And I'm thinking here, what is the relationship with Cirtec would presumably have the capability if it's non-med tech or it's IoT?

Yes. So first of all, I think Cirtec would be delighted to make batteries for other market segments. I mean their stated focus is Cirtec actually strictly the company's called Cirtec Medical. So they are very much focused on that sector. But Brian Highley, their CEO, has told me in no uncertain terms that they are quite keen to sell into other sectors as well if it fits their business model. If we get demand in particular for consumer electronics applications where it simply outstrips the scale that Cirtec manufacture up and you're looking at a Foxconn as somebody like that to manufacture then we would probably transfer the cathode manufacturing at that point in order to have as efficient a manufacturing supply chain as possible. Because this is our first tech transfer with Stereax we were clearly a little bit conservative in terms of what we transferred. As we explained earlier, we kept as difficult a bit at a close control so that we didn't have any disappointment. But clearly, in the future, we should be in a more robust position to be able to transfer that. So we don't expect to be manufacturing cathodes forever. We expect it to be able to transfer that in due course.

Andrew has got a question.

At the start of this year, you talked about Stereax opportunity with Cirtec GBP 10 million to GBP 15 million. So it's a possible whatever color you can provide to connect the chart that you showed with what you said and also give a sense to the extent you want to on the gross margin of that income.

Yes. I mean, clearly, the chart that Jason showed is not incompatible with that previous discussion. So you can use your imagination perhaps to -- what the vertical axis may be. And Jason, do you want to speak about the gross margin?

Yes. So from a Stereax perspective, we -- when looking at that Cirtec contract, we benchmarked that against very accepted royalty rates to understand where we were coming out. So as we've previously given that information to the market, that's high single-digit royalty rate flowing back to Ilika, although we have built into volume breaks to make sure that there's more adoption and as it extends out into a wider area that we can make sure that we keep driving adoption through a lower price point but still increasing the revenue back to Goliath as a company.

Well, it looks like we're there, guys. Thank you very much for all of your engagement today. It's been a really lively morning, and many thanks to our host at Berenberg and for the support from Librum in order to make this such a success. Thanks for attending. Please join us for some lunch.