Flexible automotive connectors supplier Strip Tinning (LON: STG) had a poor first year on AIM, but there are signs that it is on course to recover. There are also opportunities to win contracts for cell contact systems for electric vehicles, which could eventually sharply increase revenues. There could be a contract announcement in the next few weeks.
The top 15 potential customers have possible total annualised sales value of £88m. There are already sample sales to potential customers.
Strip Tinning lost an electric vehicles contract soon after joining AIM in February 2022. This dispute appears to be near settlement, but it held back the progress of the business. There were also unprofitable contracts in the automotive glazing business.
In the six months to June 2023, revenues improved from £4.7m to £5.6m, while the underlying loss was reduced from £2.5m to £798,000. That was partly due to other income of £790,000, including a £741,000 government grant.
EV revenues were flat, and the growth came from the automotive glazing business thanks to price rises. Volumes are falling as loss-making business is shed and the second half should mark the bottom. Production efficiency has improved.
A new production line is being installed ahead of new contracts for the EV business. This has capacity for 180,000 units. The line can be used for glazing products while EV business builds up.
There is a new invoice discounting facility of £1.5m and that should help to finance growth. If multiple new contracts are won, then there could be a requirement for additional working capital.
Singer forecasts a dip in 2023 revenues from £10.2m to £9.4m, but the loss should reduce from £3.3m to £1.4m. Next year revenues are expected to recover to £11.3m and the loss could fall to £500,000. Net debt is expected to be £3.5m at the end of the year.
The loss is partly a reflection of investment ahead of potential contract wins. New EV contracts will not make much of a contribution in the short-term, but they could be highly significant when the vehicles are commercially launched.
The initial placing price was 185p. The share price fell 3.7% to 65p on the results. It could recover if a lucrative EV order is secured.