Adverse cost pressures, particularly in copper material price rises, which have hit the £10m capitalised Strip Tinning Holdings (LON: STG),will now materially impact revenue and profitability in the current financial year, with the company expecting FY24 and FY25 financial performance to be behind market expectations.
This morning the group has guided that it now expects that for FY 2024, revenues will be approximately £9.1m and that the adjusted EBITDA loss will be £1.9m.
The Business
Supplied in high volumes, Strip Tinning products are used by most major vehicle OEMs, with a bias towards the premium end of the market and EVs, as these vehicle types typically have more sophisticated electronic features.
Typical applications are sports and luxury cars, trucks, off-highway vehicles, new vehicle types such as autonomous shuttles, motorcycles, and even Electric Vertical Take Off and Landing (eVTOL) aircraft.
Strip Tinning has four major product groups, all serving the automotive electrical connector market – its Glazing segment is made up of Busbar and Connectors, whilst the Battery Technologies segment contains Flexible Printed Circuits (FPC) and Cell Contacting Systems (CCS).
Busbar – ultra fine gauge plated metals such as tinned copper strip to provide a circuit for electrical connections in a vehicle and Tungsten wire used for heating elements.
Connector types include cable connectors, flat foil connectors, and, increasingly, FPC connectors. These connectors provide a broad range of functionality from heated windscreens to antenna GPS / FM / TV digital signal reception and internet access, emergency response, camera and Radar / Lidar systems and “smart glass” applications for tinting, solar power generating glass, and embedded LED lighting.
FPC are circuits printed onto a flexible substrate, allowing the circuit to tolerate flexing during use as well as being thinner, lighter and simpler to install. The use of this technology is well established across all forms of electrical equipment, including in the automotive sector.
CCS, large, sophisticated electrical connectors for batteries. The CCS electrically connects the cells and provide monitoring of the cells for charge (efficiency) and temperature (safety).
The CCS can be used with battery packs for a great range of applications, including truck, off-highway, and static power applications
Currently, 90% of Strip Tinning product is exported (with the majority of the balance destined for export) to over 30 countries, including China, South Korea, Japan, Mexico, and Morocco.
Management Comments
In the April issued Report & Accounts, CEO Richard Barton had previously stated that:
“We believe that 2024 will be a formative year for the business with a strong focus on preparing for profitable delivery of the nominations already received as they ramp up in in 2025 and maintaining the investment needed to maximise our success in converting the strong Battery Technologies and Glazing sales pipeline we have before us to secure the nominations that will return us to significant growth from 2025.”
This morning Executive Chairman Adam Robson stated that:
“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.”
Analyst View
Caroline de La Soujeole at Singer Capital Markets still rates the group’s shares as a Buy, but with a lower Price Objective of 65p (75p) a share.
The analyst considers that:
“For the patient investor, willing to look through short-term volatility in performance, there is a strong rationale for owning the shares given expectations of a much-improved trading performance from FY26 onwards with delivery of the Glazing & Battery Technologies order book supporting significant potential shareholder value creation.”
This morning the group’s shares have responded to the adverse news, by easing 25% to 38.50p.