Solid State Plc · LSE:SOLI
Solid State — Merger or Acquisition (July 2022)
62 slides from Solid State's merger presentation, July 2022
Slide 1: Project Wheel
Solid State PLC Investor Project Wheel June/July 2022 Project Wheel
Slide 2: Project Wheel presenters
SOLID STATE PLC PRESENTS: PRESENTED BY: Gary Marsh Project Wheel Peter James Matthew Richards
Slide 3: Disclaimer
Disclaimer The content of this presentation has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 (“FSMA”). Reliance on the information contained in this presentation for the purposes of engaging in any investment activity may expose the inve
Slide 4: Executive Team
EXECUTIVE TEAM Solid State PLC Investor Project Wheel GARY PETER MATTHEW JOHN MARSH JAMES RICHARDS MACMICHAEL Managing Director Managing Director Chief Executive Officer Chief Financial Officer Systems Division Components Division 4
Slide 5: Introduction to Solid State PLC
5 Solid State PLC Investor Project Wheel Solid State PLC Introduction to
Slide 6: Solid State PLC – who are we?
6 Solid State PLC Investor Project Wheel Solid State PLC – who are we?
Slide 7: Our facility locations
Our facility locations Solid State PLC Investor Project Wheel International operations across 12 locations 300+ employees 7
Slide 8: A profitable and resilient business model
Solid State PLC a profitable and resilient business model Solid State PLC – supplying specialist engineered systems and value added components. Solid State PLC Investor Project Wheel 8
Slide 9: Group history and strategic acquisitions completed
Group history and strategic acquisitions completed Solid State PLC Investor Project Wheel 9 * Level of consideration paid. ** Maximum estimate incl’ earnout
Slide 10: An attractive investment proposition
Solid State PLC an attractive investment proposition Solid State PLC – ambition for the next 5 years is to replicate or beat historic performance ➢ Solid State PLC – strong growth delivering record financial performance ➢ The 5 year strategy delivered growth through: ➢ investment in organic growth S
Slide 11: Consistent earnings growth & a record orderbook
Consistent earnings growth & a record orderbook Significant opportunities - FY23 and beyond ➢ Cash generation secures progressive dividend. ➢ FY22 consensus 19.5p (2021: 16p). ➢ Market cap ~£80m - £100m - top half of AIM Pence companies. Solid State PLC Investor Project Wheel ➢ Delivering shareholde
Slide 12: Introduction to the transaction
12 Solid State PLC Investor Project Wheel transaction Introduction to the
Slide 13: Project Wheel - transaction overview
Project Wheel - transaction overview Acquisition of Custom Power, a US battery pack manufacturer ➢ Acquisition of Custom Power, for an initial $30 million on a debt free cash free basis ➢ Custom Power: ➢ a strategically significant US based Power specialist ➢ operating at scale in target growth mark
Slide 14: Consideration: $30m on completion, $10m deferred and $5m earnout
Consideration: $30m on completion, $10m deferred and $5m earnout Deal structure ➢ Acquisition of 100% of the Custom Power LLC membership interests for up to $45m on a debt free cash free basis ➢ Initial consideration $30m (of which $1m has been paid in the form of a non refundable deposit) ➢ Deferre
Slide 15: Enlarged group financing - cash & borrowings impacts post completion
Enlarged group financing - cash & borrowings impacts post completion Existing Lloyds Bank facilities £’000 Interims Year end Mgmt accounts 30 Sept 2021 31 Mar 2022 31-May-2022 ➢ £7.5m RCF committed until Nov 2023 Cash 5,323 2,925 1,962 RCF drawn (2,000) (1,500) (4,000) ➢ £3.0m multi-currency (MC) ov
Slide 16: Custom Power strategic investment case
Custom Power strategic Solid State PLC Investor Project Wheel investment case 16
Slide 17: Key to accelerating our growth strategy for a sustainable future
Key to accelerating our growth strategy for a sustainable future Project Wheel – Transformational acquisition - executing on our strategy ➢ Adds engineering talent: ➢ Tailorable suite of ➢ Electrical technologies: ➢ BMS software Investment & Broaden ➢ BMS (Battery development complementary Managemen
Slide 18: Project Wheel differentiates our Power BU with transatlantic presence
Project Wheel differentiates our Power BU with transatlantic presence Establishes a platform for growth ➢ Battery market - a high growth sector with strong CAGRs in the markets we are targeting ➢ Power BU has high growth potential – rapid increase in demand and ability to scale production ➢ Project
Slide 19: Business strategy, operations and values are aligned
Business strategy, operations and values are aligned* Experienced team to manage and mitigate integration risk Custom Power – California USA Solid State Plc – Crewkerne UK Solid State PLC Investor Project Wheel * Statement of Directors’ belief 19
Slide 20: Group structure - Custom Power will be included in the Power BU
Group structure - Custom Power will be included in the Power BU Solid State PLC Investor Project Wheel 20
Slide 21: Technology solutions partner for our customers
Technology solutions partner for our customers Solid State PLC Investor Project Wheel 21
Slide 22: CP scales our Power BU to c. $40m - $50m
CP scales our Power BU to c. $40m - $50m with growth opportunities Solid State PLC Investor Project Wheel 22 *Wheel provides a step function in the Power BU.
Slide 23: Key synergies from Project Wheel
23 Solid State PLC Investor Project Wheel 5 key synergies from Project Wheel
Slide 24: Custom Power LLC: What are we acquiring?
Custom Power LLC What are we acquiring? Solid State PLC Investor Project Wheel 24
Slide 25: Profitable, cash generative Battery Pack manufacturer
Profitable, cash generative Battery Pack manufacturer ➢ Introduction to Custom Power (“CP”) ➢ CP is an established battery pack manufacturer in California, USA ➢ Ultimately controlled by Private Equity firm Elan Growth Partners ➢ Business was established 30+ years ago ➢ Strong historical performance
Slide 26: CP established in complementary high growth markets
CP established in complementary high growth markets Custom Power provides step change in scale of the Group’s Power capabilities Commercialised profitable products & solutions: ➢ Established in strategic growth markets with high barriers to entry: ➢ Defence; ➢ Medical; and Solid State PLC Investor P
Slide 27: Market positioning of the enlarged power business unit
Market positioning of the enlarged power Solid State PLC Investor Project Wheel business unit 27
Slide 28: Macroeconomic trends driving growth in key battery market sectors
Macroeconomic trends driving growth in key battery market sectors Climate Change Ageing Population Digitalisation Global / national security Solid State PLC Investor Project Wheel Consumer Surveillance / defence e-Mobility Industrial / Medical Electronics and energy • Market measured $100’s Bn • Mar
Slide 29: Where is the value in the battery pack supply chain?
Where is the value in the battery pack supply chain? Solid State PLC Investor Project Wheel Source: UKRI Faraday Battery Challenge 29
Slide 30: Common well-defined criteria for new opportunities in our target markets
Common well-defined criteria for new opportunities in our target markets New Project Opportunities Target Criteria Avoided Criteria ✓ Medium volume, complex custom assemblies Low-Volume, Single Cell Custom Assemblies ✓ Annual production runs of 1,000 to 100,000 units Annual production runs of <1
Slide 31: Financial appraisal of Custom Power
31 Solid State PLC Investor Project Wheel Custom Power Financial appraisal of
Slide 32: CP proforma margins are accretive to the Group
CP proforma margins are accretive to the Group FY21 Reported to Proforma P&L L4L $'000 Reported Adjust' Proforma CP underlying performance to 31 Dec’ 21 reflects a record year Revenue 29,758 - 29,758 CoS (19,257) - (19,257) ➢ The Custom Power proforma column presented opposite adjusts the Gross marg
Slide 33: CP proforma trading performance shows consistent growth
CP proforma trading performance shows consistent growth Delivery on the strategy in three years of Elan’s ownership CP Proforma Proforma Proforma Proforma P&L L4L $'000 FY19 FY20 FY21 Reported revenue 30,185 29,256 29,758 ➢ Strong growth in target markets – engineering reputation Proforma adj (7,971
Slide 34: CP expected to deliver ~$3.2m of earnings enhancement in a full year
CP expected to deliver ~ $3.2m of earnings enhancement in a full year Basis of preparation of actual financial information Earn out Earn out target 1st target 1st 18 FY21 18 mths mths ➢ The $5m earn out hurdle is based on a Last Twelve Month (LTM) Proforma P&L L4L $'000 $'000 £'000 revenue exceeding
Slide 35: Investment summary
35 Solid State PLC Investor Project Wheel summary Investment
Slide 36: Project Wheel investment case
Project Wheel investment case CP acquisition is expected to be earnings enhancing in FY23 ➢ Transformational: CP is an established profitable, cash generative battery business in USA ➢ Attractive deal terms: ~1.2x revenue and ~14x PE multiples lower than other deals in the sector ➢ Record Orderbooks
Slide 37: Appendices
Appendices 1) Strategic benefits of the 4) Other sector deals and public Solid State PLC Investor Project Wheel acquisition company peers 2) Wheel financial history 5) Existing shareholder base and detailed timetable 3) Solid State PLC existing Group financial history 6) Battery Systems Market Revie
Slide 38: Appendix 1: Strategic benefits of the acquisition
APPENDIX 1 Strategic benefits Solid State PLC Investor Project Wheel of the acquisition 38
Slide 39: CP's established strength is in high growth sectors in the US market
CP’s established strength is in high growth sectors in the US market Solid State PLC Investor Project Wheel 39
Slide 40: CP adds strength in semiconductor / software engineering expertise
CP adds strength in semiconductor / software engineering expertise Solid State PLC Investor Project Wheel 40
Slide 41: CP has excellent synergistic engineering test equipment and tools
CP has excellent synergistic engineering test equipment and tools Solid State PLC Investor Project Wheel 41
Slide 42: CP has established quality manufacturing capabilities
CP has established quality manufacturing capabilities Solid State PLC Investor Project Wheel 42
Slide 43: Transatlantic capabilities to service international customer base
Transatlantic capabilities to service international customer base Solid State PLC Investor Project Wheel 43
Slide 44: Appendix 2: Wheel financial history
44 Solid State PLC Investor Project Wheel Wheel APPENDIX 2 financial history
Slide 45: Underlying trading performance FY19, FY20, FY21 reflects good growth
Underlying trading performance FY19, FY20, FY21 reflects good growth FY19 Reported to Proforma P&L L4L $'000 Reported Adjust' Proforma FY20 Reported to Proforma P&L L4L $'000 Reported Adjust' Proforma Revenue 30,185 (7,971) 22,214 Revenue 29,256 (3,135) 26,121 CoS (20,128) 4,983 (15,145) CoS (19,783
Slide 46: Historic balance sheet for Custom Power reflects investment in W/C
Historic balance sheet for Custom Power reflects investment in W/C CP Proforma Proforma Proforma Custom Power historic balance sheet information Proforma Balance sheet $'000 FY19 FY20 FY21 Intangibles and goodwill 13,880 12,123 9,136 ➢ Intangibles reflect Elan’s acquisition goodwill Fixed Assets 282
Slide 47: Appendix 3: Solid State Plc existing group financial history
APPENDIX 3 Solid State Plc Solid State PLC Investor Project Wheel existing group financial history 47
Slide 48: Record trading performance delivered on year plan - doubling EPS
Record trading performance delivered on 5 year plan - doubling EPS ➢ Two revenue and profit upgrades during FY22 totalling ~8% and ~25% respectively ➢ Consensus Revenue £85m up 28% Solid State PLC Investor Project Wheel ➢ Consensus Adj PBT £7.2m up 33% ➢ Consensus expectations reflect 30% growth in
Slide 49: Cash generation facilitated investment and growth, delivering value
Cash generation facilitated investment and growth, delivering value ➢ Cash generation basis for increase in consensus dividend to 19.5p up 22% ➢ Strong H1 cash generation, H2 working capital outflow increases net debt Solid State PLC Investor Project Wheel ➢ Record orderbook £85.5m up 106% 49
Slide 50: Appendix 4: Other sector deals and public company peers
APPENDIX 4 Other sector deals Solid State PLC Investor Project Wheel and public company peers 50
Slide 51: Deals in the sector being completed at higher valuation metrics
Deals in the sector being completed at higher valuation metrics Yanmar acquires majority ownership in battery technology company ELEO Osaka, Japan, and Helmond, the Netherlands – April 4th, 2022 ➢ Yanmar Holdings Co., Ltd., a privately held multi-billion dollar multinational company headquartered in
Slide 52: Public company Power sector peer group comparators
Public company Power sector peer group comparators 27/04/2022 27/04/2022 Ticker Company Name Next Price Price Mkt Cap EV EV Revenue (£m) EV/Revenue Year End FX (Local) (£) (£m) (£m) (Local) Hist FY1 FY2 Hist FY1 FY2 AIM:AMTE AMTE Power plc Jun 2022 GBP 0.86 0.86 30.3 25 25 1.97 2.30 6.50 77.2x 10.9x
Slide 53: Appendix 5: Existing shareholder base and detailed timeframe
APPENDIX 5 Existing shareholder Solid State PLC Investor Project Wheel base and detailed timeframe 53
Slide 54: Shareholder information
Shareholder information Major Shareholders Holding Directors Holding • Schroders 9.84% • Gary Marsh, Chief Executive 3.29% • Mr & Mrs G Comben 8.54%* • John Macmichael, M.D. - Components 1.43% • Seguro Nominees Limited 6.97% • Peter Haining, Non-Executive Director 0.64% • Mrs B Marsh 6.44% • Matthew
Slide 55: Anticipated timetable
Anticipated timetable Progressing to successful completion ➢ Marketing: 24/27 June to 5 July 2022 ➢ Finalise book: 6 July 2022 ➢ Sign MIPA 6 July 2022 after hours Solid State PLC Investor Project Wheel ➢ ABB announcement 7 July 2022 ➢ Posting of circular 7/8 July 2022 ➢ Open offer open 8 July 2022 –
Slide 56: Appendix 6: Battery systems market review
APPENDIX 6 Battery systems Solid State PLC Investor Project Wheel market review Ryan Maughan FIMechE, CEng, MSc, BEng, MCMI, CMgr 56
Slide 57: Macroeconomic trends driving battery systems market
Macroeconomic trends driving battery systems market Solid State PLC Investor Project Wheel ➢ The most compelling macroeconomic trends of our time are driving strong growth in all key battery system markets ➢ High levels of investment in battery cell technology and capacity creating lower cost higher
Slide 58: Consensus view of global battery system market > $150Bn by 2030
Consensus view of global battery system market > $150Bn by 2030 $182.53B Copyright Grand View Research Copyright Markets and Markets Research Ltd Copyright Technavio Solid State PLC Investor Project Wheel Copyright Wallenius Wilhelmsen ASA Copyright Yole Research Copyright Eurobat 58
Slide 59: Steatite Power focus markets
Steatite Power focus markets ➢ Focus on high growth industrial and specialist e-mobility Mobile Robotics Unmanned Aerial Vehicles (UAV/UAS) markets ➢ Safety and mission critical battery systems with high reliability, validation and certification requirements Professional Tools & Low Volume ➢ Histori
Slide 60: High growth Industrial and Specialist e-Mobility markets
High growth Industrial and Specialist e-Mobility markets Mobile Robotics Medical Equipment Copyright Solid State PLC Investor Project Wheel Copyright P&S Precedence Intelligence Research Unmanned Aerial Vehicles (UAV/UAS) Professional Tools & Off-Highway Equipment Copyright Technavio Research Copyri
Slide 61: Additional market data
Additional market data Solid State PLC Investor Project Wheel Copyright Grand View Research Copyright Yuanli Ding et al 61
Slide 62: References
References 1. Based on Frost and Sullivan Global Industrial Battery Market, Forecast to 2023 MD4A-27 2. Combined figure for industrial and mobility market growth 3. Based on Yole research split by pack component 2025 • www.yole.fr/iso_album/illus_li-ionbatterypacks_marketvalue_yole_march2020.jpg • w