H1 2024 Trading Update

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered in the public domain.

16 July 2024

Strip Tinning Holdings plc

("Strip Tinning" or the "Company")

H1 2024 Trading Update

Significant wins in H1 set to drive future growth, despite current market headwinds

Strip Tinning Holdings plc (AIM: STG), a leading supplier of specialist connection systems to the automotive sector, announces a Trading Update for the six months ended 30 June 2024 ("H1 2024").

As previously announced, the Company is pleased that it has secured three significant nominations¹ across both divisions in H1 2024. Given the lead time of these particular projects and later than expected starts of production, the financial benefits of these wins will start to be realised from late 2025 onwards, therefore having limited impact on FY24 financial performance beyond the necessary upfront investments to launch each production programme. These investments include purchase orders for tooling to the value of £0.9 million, which have already been received. 

These wins comprised the Battery Technologies ("BT") division securing a £43.0 million nomination in June, with production set to commence in Q4 2025, thereby reinforcing confidence in Strip Tinning's leading position in the growing Mid-Market segment. Two significant "smart" glass PDLC glazing nominations, together worth £18.6 million, were also secured in H1 2024.  Scheduled for production in Q3 2025 and 2026 respectively, these nominations demonstrate the Company's first mover advantage within this growing Glazing products market.

However, as previously guided, in the first half there has been some moderation of market demand from OEMs as they align inventory levels in response to lower market demand, in particular on EV platforms. Given the Company's strategic focus on wining higher value new business within the growing EV market, this temporary slowdown is having a more pronounced impact. Although aggregate H1 2024 sales in Glazing have been broadly as expected, the weaker production market, as well as the planned reduction in sales from H2 2023 based on agreed programme exits, is beginning to impact Glazing sales. In the BT division, sales have also slowed due to delays in new vehicle development programmes.  These trends are expected to continue through H2 2024 and into 2025.

The Company has also seen adverse cost pressures.  As previously noted, overhead costs have needed to increase as the build-up of the engineering team has accelerated. This is essential to ensure successful launches of material new business wins, which are expected to double the sales of the business by 2026 and grow capacity to secure further wins. This will continue to affect profit margins until production begins for these projects. Gross margin has also been adversely affected by rising costs in materials (in particular copper) and labour as past inflation has fed through into the Living Wage.  Lastly, gross margins have also suffered from the under-absorption of semi-fixed costs as sales have weakened and adverse mix changes within the Glazing division, resulting from programme specific fluctuations in demand compared to internal forecasts for different products.

Gross margin has nonetheless continued to improve with each half year's results since H2 2022, primarily driven by the elimination of loss making products and increased productivity. Production headcount has been further right sized and is now down to 67, 20% down on the start of the year. The Company continues to target improvements in gross margins.

Key H1 Financials:

With all the above expected to materially impact revenue and profitability in the current financial year, the Company expects FY24 and FY25 financial performance to be behind market expectations². The Board now expects that for FY 2024, revenues will be approximately £9.1 million and adjusted EBITDA loss will be £1.9 million.

The reduced Operating EBITDA has proportionately affected cash usage in the business and so cash in hand as at 30 June 2024, was £2.1 million.

Despite the softening of EV sales growth, the transition towards EV is enduring, and Strip Tinning is well-placed to benefit from its leading position in the Mid-Market for Battery Technologies and the rapidly growing PDLC connector market for Glazing. The Company remains confident in its medium-term prospects, as illustrated by the progress made in sales developments during H1 2024, which will drive material future revenue growth.   

Following the completion of the BT Mid-Market strategy study, completed under a grant from the Advanced Propulsion Centre, which confirmed the growth potential in Strip Tinning's markets, the Company is now preparing to submit a c.£3 million grant application to the Automotive Transformation Fund.

Adam Robson, Executive Chair, commented:

"The two Glazing and one major Battery Technologies nominations in the first half of the year have secured our medium-term growth plans through to 2026, by which time we expect to have doubled the sales of the Company. In the short-term, the sector-wide headwinds we are currently facing are clearly frustrating. That said, our nominations, extensive industry experience, ever improving productivity and strong customer relationships  give us confidence in improved margins and further growth as customer confidence returns and as further new nominations are secured."

¹ A nomination can be defined as a formal contract to supply components for particular vehicle models or projects over a certain period.

²Strip Tinning understands that as at the date of this announcement, market expectations for the years ended 31 December 2024 and 2025 are for revenues of £10.9m and £15.0m and for Adjusted EBITDA of (£0.4m) and £0.7m. (Source: FactSet)

The person responsible for arranging the release of this information on behalf of the Company is Adam Robson, Executive Chair.

Enquiries:

Strip Tinning Holdings plc                                                                                                                   Via Alma

Adam Robson, Executive Chair

Mark Perrins, Chief Executive Officer

Singer Capital Markets (Nominated Adviser and Sole Broker)               +44 (0) 20 7496 3000

Rick Thompson

James Fischer

Alma (Financial PR)                                                                                                                   striptinning@almastrategic.com

Josh Royston                                                                                                                        +44 (0) 20 3405 0205       

Joe Pederzolli