Trading Update & Notice of Results
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
Strip Tinning Holdings plc
("Strip Tinning" the "Company" or "Group")
Trading Update & Notice of Results
Strip Tinning (AIM: STG), a leading supplier of specialist connectors to the automotive sector, provides an update on trading ahead of the announcement of its full year results for the year ended 31 December 2021 ("FY21") on 21 June 2022.
For FY21, Strip Tinning is pleased to confirm that Group revenues and underlying EBITDA are expected to be in line with the Board's expectations.
The Group now expects, subject to the finalisation of the accounts and the FY21 audit, revenues to be up 29% to £11.1m (FY20: £8.6m) with underlying EBITDA of £0.5m (FY20: £1.2m). As previously disclosed, disruption to production associated with the global COVID-19 pandemic, increasing material, shipping and labour costs all impacted margin in the period. In addition, the Company made significant investment in its product development and in the launch of EV products in 2021 and further strengthened its organisational structure to manage planned growth.
1 These will be the audited results for Strip Tinning Limited ("STL") the Group's wholly owned operating subsidiary. The Company was incorporated on 6 January 2022 as Strip Tinning Holdings Limited and on 7 February re-registered as public company changing its name to Strip Tinning Holdings plc, ahead of its admission to AIM. The Company is the holding company of the Group. Save for the Company and STL there are no other companies within the Group.
The Group consists of two business lines; Automotive Glazing and Electric Vehicle battery sub-systems ("EV"). Over 90 per cent. of the Group's historical sales have related to Glazing systems, however the proportion of revenue generated from the EV division will considerably increase as the Company exploits the significant new opportunities in the fast growing EV space.
The OEM EV business is performing ahead of our expectations for FY22, reflecting the increasing momentum in EV, with OEM plans to introduce more EV's against a growing backlog of consumer demand. Management are now confident that our German OEM customer for our first EV Cell Management System nomination will run at annual volumes approximately 33% higher than originally envisaged, but with an expected start of volume production for the Company now deferred from Q1 to Q2 FY23. Additionally, it is further anticipated that the unit price will rise in line with a number of more complex engineering specifications. Accordingly, this nomination could now have a potential value of EUR 3.2m per annum from 2023 onwards, with a potential lifetime value in excess of EUR 16m, an increase of 54%. The Company has also converted an EV Supercar opportunity, and is now the nominated battery sensing connector supplier with an order value of £150k. We remain in dialogue with a major Korean chemicals company and leader in the development of Lithium-ion batteries, and as their European supply chain evolves we anticipate opportunities will arise.
The pipeline of new opportunities also remains strong and in the last couple of months, the Company has received 4 new RFQs, including from another major German OEM and a multinational speciality chemicals and sustainable technologies company. Furthermore, the Company is now working toward development designs with a pioneering electric aviation customer and has early stage negotiations with a UK electric trucks business.
The Company is also pleased to have recently recruited a very experienced German business development consultant, to further develop opportunities in EV in particular with the German OEMs. He joins from Manz AG, a German multinational high-tech engineering company, specifically active in automation, laser welding and assembly projects within the EV battery sector.
The EV order book for parts (mainly prototype) to be delivered within the next 6 to 9 months remains healthy, above expectations at £1.3m.
The Board is pleased to report progress on a number of our operational improvement plans, such as the inclusion of ex works and materials price escalators in new customer contracts. The Company has recently signed a new 10 year ex works supply agreement with Sisecam Automotive, our third largest Tier One glazing customer that is forecast to deliver incremental sales of EUR3m over this period from 2023.
However, the reported deterioration in market conditions in the automotive sector due to a number of well publicised factors are impacting the Company's glazing sales and profits. The European car market, which accounted for 57% of Group sales in 2021, has seen a marked softening with passenger car registrations declining 20.5% in March 2022, compared to the same period in 2021. Ongoing supply chain disruptions, exacerbated by Russia's invasion of Ukraine, which has heightened the shortage of semiconductors and wiring harnesses, and recent COVID-19 related lockdowns in Shanghai have all negatively affected car production, with a number of OEM plants now halting production.
The Company's glazing customers are multi-national Tier One suppliers, through which its products reach the majority of global OEMs in multiple global locations. This includes some OEM production facilities in Russia. The Company estimates that such product shipments have historically accounted, on average, for c.10-12% of glazing revenues. Such shipments are now materially reduced, pending, in part, the future relocation of the relevant OEM production.
Whilst a slightly improving sales position is anticipated for the remainder of FY22 as a result of previously won new products entering full production, the Board now expects to deliver revenues for the FY22 consistent with last year, in line with the wider automotive market performance. This loss of sales combined with strong inflationary cost pressures in materials and energy in particular, and imbalances in our overhead costs, is impacting margins and profitability. Great care is being taken to ensure that overheads are reduced where appropriate in line with lower than budgeted sales, whilst retaining all the key resources necessary for protecting the growth activities in the business, on the EV side in particular.
In addition, the Company is currently putting through a number of price rises across its product range.
The Board believes that the Company retains its strong market share and is confident in the medium-term sales outlook for the business.
Richard Barton, Group Chief Executive Officer of Strip Tinning, commented:
"We are encouraged by the improving prospects for our EV business, particularly with the established OEMs, but it is deeply frustrating that recent factors outside of our control will impact on our Glazing performance this year. That said, we are performing resiliently during these very turbulent times and continue to have a strong degree of confidence in the medium-term prospects of the business, as illustrated by the progress made in sales developments which will contribute to future revenue growth".
The person responsible for arranging the release of this announcement on behalf of the Company is Adam Le Van, Group Chief Financial Officer.
Strip Tinning Holdings plc Via Alma PR
Richard Barton, Chief Executive Officer
Adam Le Van, Chief Financial Officer
Singer Capital Markets (Nominated Adviser and Sole Broker) +44 (0) 20 7496 3000
Alma PR (Financial PR) [email protected]
Josh Royston +44 (0) 20 3405 0205