Strip Tinning Holdings plc ($STG)

Good morning, and welcome to the Strip Tinning Holdings Plc 2025 Annual Results Investor Presentation. [Operator Instructions]. Before we begin, I would like to submit the following poll. I would now like to hand you over to CEO, Mark Perrins. Good morning.

Good morning. Thank you, and welcome, everybody, to the 2025 annual results presentation for Strip Tinning. I'm Mark Perrins, CEO, and I'm joined here with Kevin Edwards, our CFO. Right, I will take you through the slides, give you an update on where we're at. So just some highlights to start. In terms of revenue, you'll see we came in at GBP 8.6 million, which is 5% down on last year. That was anticipated as we switched the portfolio from the old traditional lower-margin products into the higher tech areas that we're now focused and with this year being the year where our volume really starts to ramp up to GBP 13.2 million. You'll see with the next bubble there, the adjusted EBITDA improved 75% on 2024, GBP 0.5 million and that's a reflection of the good work we've been doing on efficiency improvements throughout last year. Again, affected in the gross margin being 22% better than the previous year 40%, and you can see in the graph on the bottom left, the steady progress that we've made since 2022 year improving year-on-year gross margin. We were able to finish the year with slightly more cash than we did in 2024 at GBP 0.6 million, and we generated GBP 1.6 million in cash. We did that really through catching back on some of our R&D tax credit claims, reduce inventory, focusing on debtor days, that's really helped us in the year with cash through those items. We've also been working with our customers on the contract terms in relation to items like tariffs. So previously, the tariff incoterm for us was -- we were responsible. That has now changed going forward. So the customer is responsible for the tariffs is really good for us and also consignment stock, which is going to tie up a lot of working capital is now not required which means that the sort of payment terms are ticking from when we're shipping from the U.K. to the U.S. So that's really helped us. So we're positive on those items. And that leads me into where we are with the 3 new projects that we're really focused on this year. The first being the Zoox project. So you may have seen in the media that Zoox has partnered with Uber, that's good news for them being on that platform really helps CEO of Uber recently quoted that autonomous vehicles give us 30% better utilization rate when operating on their platform versus stand-alone platforms. Zoox have really started ramping up now. They're operating their test fleet in 10 distinct markets. The photo you see on the bottom right is an example of their command centers that support the vehicles. They've opened a third one in Arizona recently. They've now done over 300,000 rides in Las Vegas and San Francisco. So this year is really about when they start to build the vehicle at volume but the feedback is very positive on the fleet that's out there operating at the moment. In terms of our status internally, we are -- we finished the D-Phase. We're building the PPAP phase parts at the moment. That will all be shipped in April, and then we start building the serial production in May. So it really starts to ramp up between now and the summer in terms of those serial volumes. So we're really excited by this. We're excited by the fact that Zoox is putting all the investment in with command centers, depots, where they service the vehicles. It's already for -- go, go, go this year. In terms of our other 2 major projects. So the first one is a PDLC roof-glass connector project. We've been supplying the BMW iX for a number of years. That switched in terms of the Glazer, BMW switched that to a new glazing company, which we won the business with. So we've been supplying those parts several thousand connectors a week since June last year. We're now introducing the variance for the Audi Q7 and Audi Q9 through that same cell. So the Audi is live this month and the Q9 is coming along in Q2, late Q2. So we see good work through to 2031 for us and we're talking with the Tier 1 about some further projects for other OEM vehicles. 1/3 of the projects is for the Mercedes CLA vehicle. Image is an example of a PDLC roof-glass. So it's quite a nice feature in the vehicle, you can have different segments at the front passengers or the rear passengers can have the glass clear or opaque. You can see the little Mercedes symbols also in there. The demand for this vehicle is really positive. Recent Mercedes-Benz sales Board members said that if you order a CLA now, you're going to be waiting 6 months for it. And we've seen that in the strong volumes that we're getting asked to supply on this. So it sort of ramps up over the next few months to kind of 5-digit monthly volumes. So a really good project for us. So all 3 projects are going well. We see strong volume on them all. We've done the industrialization and we're working on the ramp-up phases of the vehicles, which put Strip Tinning in really at an inflection point for volume uptick. I'll hand you over to Kevin now who will take you through this revenue bridge.

This is the revenue bridge from '24 to '25 as we were on -- we achieved our market expectations for 2025. So most of this is as expected. But as you can see, the new programs are starting to grow in revenue terms. Unfortunately, some of the older connector business has tailed off through 2025, but that was as expected really. So achieving just above our market expectations of GBP 8.5 million. Margins are holding up well. Margins on the BT were very strong in the year, predominantly because of the C samples and D samples, as Mark mentioned, achieving 67% in the year. However, these will fall that as we reach serial and would start to steady out at just on 40% gross margin or just above 40%. As the new glazing projects come on and the older ones fall off, we should see glazing margins moved from 32% up towards the 40% mark as those new programs start to deliver higher volumes. In terms of our P&L for the year, below the gross margin level, we've very worked hard in the year to control our costs, so reducing our staff costs by some GBP 0.75 million. And our overhead costs, we look at very -- all of our overheads have made sure that we kept them as low as possible, achieving a year-on-year saving of GBP 166,000 which is really good to see. As we ramp up in the business, we'll see those costs increasing, but revenue is on target for 2026 at GBP 13.2 million. So we are moving towards EBITDA profitability in 2026. In terms of funding for the 25-year, we worked really hard to improve our debt funding in the year. We've improved our debt funding on our CID facility and also with regards to asset-based financing, we've achieved quite a lot in terms of asset-based financing in the year. We're still working on other opportunities to -- for debt financing as we move to profitability over the next 6 months in order to fund -- in order to give us both for contingency as well as giving us some funds to take on new opportunities as they become available.

Okay. So in terms of our outlook, the business, the square at the top is just to show where our focus is. So Q1 has been all about preparing for the launches. There are 6 pipeline projects we're also working on, which I'll talk to you about shortly. But Q1, all about preparing, Q2 about delivering the launches, Q3 will be about the efficiency improvements often required post launch and driving down scrap, et cetera, and we'll start to turn our attention to new business development in Q3 and Q4, a real full focus on the new business pipeline in -- as the 3 projects that are executed and underway. In terms of that pipeline, there's 6 projects that we've been working on, one of which we're part of the grant consortium which is more for future revenue and quite R&D-based project, but we have a number of others which can be busbar, FPC only or laminated busbar is a range of projects that we're working on with future potential. We actually have many, many more projects that come to us that we often fortunately have to turn down because of the limited resources we have. So we're very focused on executing the 3 projects this year, but we're keen to kick on with others and when we're in a stronger position to do that. And the house on the left is really just to reflect that the wall is as good as the foundation, the roofs are strong as the walls, we did a business turn around in '22 to '24. That gave us the foundations to go and win the 3 major projects, which we did in '24. Our first pillar this year is all about delivering it and showing we can make real volume in this factory tech area. We're scaling the business up, which was recently expanded with further industrial unit on our site. And then we will capitalize on the sales opportunities that these strong pillars give us towards Q4 of this year. So basically, that is the slides I have for you today. But in terms of summing up, 2025 was a good year for us. It's a difficult year with many headwinds that businesses have faced, particularly in the automotive space. We were able to focus strongly on our costs and control those and improve them. We were able to give good customer service and demonstrate execution on our projects and a number of our customers have visited and happy to see where we are with that. This year, we're really at the point where we'll start producing volume on these projects, and that will come through in our numbers and hopefully in our share price as well. So thank you for today.

[Operator Instructions].

Great. Thank you. Okay. Just looking at the first question from Richard there. Could you talk about your competitor environment in BT and smart glass. Is there a Chinese threat? Good question. Of course, unfortunately, there's always a Chinese threat. I think you see in some of our numbers, how we've been pivoting that sort of portfolio away from the more traditional OEMs are certainly coming under attack from companies like BYD in terms of market share. We are less exposed to automotive than we were. So some of our projects are on e-bikes and off-highway vehicles away from automotive. So that concerns us less. If I take that Mercedes CLA for example, that's on a platform. So there's also hybrid petrol full BEV. So irrespective of consumer choices on that, the PDLC glazing connector still on that vehicle. So that gives us confidence. In terms of the Chinese threat, I would say, some -- for some of the traditional connectors, they have gone to China, but they were lower margin. We get a lot of inquiries because customers don't always want to go direct to China. They want an engineered service or interaction. They want to be able to come and visit. And we're turning down work all of the time with some of the customers coming back to us. And that's really because of the engineered service that we offer. And I think the fact that the Chinese are adding a lot of content to their vehicles, encourages mainstream Western OEMs to compete with that. So as you see from the product PDLC group content going into match Chinese cars. So it also provides an opportunity. Thank you for that question. Second question from Gary with battery tech revenue more than double, how much of this is contracted versus pipeline? Kevin, would you want to answer that?

Most of our work for 2026 is already contracted. So already delivered and more than 80% of our work for '27 is already contracted within our current volumes. We still have a small amount of work that we -- on to the 6 projects we're working on to deliver '27. But I believe the pipeline is sustainable.

Thanks, Kevin. Obviously, with the Zoox project being a big project for us that already guarantees a good proportion of the revenue and the other work we have is contracted. So only a small amount of pipeline in there, but an opportunity for a much bigger pipeline going forward. A third question here, with the gross margin improvement to 40%, do you see this as sustainable as volume scale in the new projects ramp up? In terms of gross margin, preproduction phases, there's always multiples of things and that covers some of the R&D and the development that goes into that and supply chains where multiples are often common. It will more normalize with serial production, but we're confident that the product offering being of a higher tech means that there is a lot of value add in the products. And that's really why we've pivoted the portfolio away from more of the commoditized products to a higher tech product.

And the other thing a thing to say about that is as we scale and the volumes become greater, there's a greater opportunity for us to look into our supply chain and optimize some of those and keep the costs down on this area of production. So therefore, helping the margins to remain above the 40% margin. So do you think it is sustainable.

That's great, Mark. Kevin, if I may, just jump back in there and thank you for addressing those questions from investors today. And Mark, before I redirect investors to provide you with their feedback which is particularly important to yourself and the company. Can I please just ask you for a few closing comments?

Yes. Thank you very much. Thank you, everyone, for your time today and particularly to those who submitted questions, very useful. The business is really pleased with the progress we've made -- we're with some very big successful companies that have great futures. We're in a tech space that's moving all the time. There's loads of opportunity for us going forward. We're very keen to launch these projects and demonstrate our serial capability on such volume tech. And with that, we'll bring us many, many opportunities, and we look forward to talking to you about those in the next time.

Fantastic. Thank you once again for updating investors today. Can I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations? On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you.