Directa Plus (LSE:DCTA) — Half Year Results

0:01 Good afternoon, and welcome to the DIRECTA PLUS PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can view your questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Giulio Cesario. Good afternoon to you. Thank you, and good afternoon to everybody. My name is Giulio Cesaro. I'm the founder and the CEO of the company.

0:47 I have forty year of experience in the graphite and graphene arena starting with twenty years in Union Carpet and twenty with DIRECTA PLUS. In front of me, there is our CFO. Giorgio, please introduce yourself. Good afternoon, everybody. My name is Giorgio Bonfarte. I'm the group CFO of DIRECTA PLUS, and I joined the company more than four years ago after some many experience. Nowadays, we will try to give you a concise view of what are the opportunities for DIRECTA PLUS in the future. And I would like to start by telling that if you go on the website, you will see a general consensus on an explosive expected growth of the graphene sector.

1:42 All the different are talking of compound annual growth rate between 2040% for the next ten years with a significant focus on three verticals, battery, defense, and environment. We consider DIRECTA to be a a leading company in this area. We have a process that has been during this year redesigned and reengineered with the objective to generate new products, not just graphene, but also nanographite. And I will go deep on analysis of the process and of the product in the next few slides. Time to market is still very aggressive in the range of three months, and we are signing significant partnership.

2:28 One of these, unfortunately, we will not have chance to disclose to much what is very, very important for the future of the company and is in the defense arena. If we move to the process, I think that this is the slide covering the old process, but I will give you much more detail in a slide that has been prepared to show the difference between the old and the new. Only one comment. For your information, we have 116 granted patent and 39 pending. And 100 or seven of these patents have my name as inventor or co inventor.

3:15 G plus graphene. So our material is an enabling material. So it transfers a number of different properties across different verticals and applications. So, for example, from thermal conductivity to antimicrobial properties, high electrical conductivity, improved mechanical properties. I have absorption short capacity, flame retardant, anticorrosion. So we have a number of different products across different verticals covered by a strong IP portfolio. We have a a portfolio of 22 patent families, four of which are covering the production process, and 18 are covering products and applications. Let let's jump in the first part of the presentation, which will give you a few highlights on the main the main events of the first half of twenty twenty five, starting from operational performance.

4:15 This is key for us. This is a game changer, so we'll go more in deeper in the next slide. But we are making some significant improvements on our production system that will allow us to have a drastic reduction in operational direct costs, and we'll have the access to new kind of products. So we'll cover more in detail in the upcoming part of the presentation. On the two main verticals, environmental remediation and textile, just a couple of quick comments. On environmental, we we keep working on the restructuring of SECTA after we acquired the full ownership, almost full ownership one year ago. And this has translated into solid results in the first half, and we signed also new important contracts using GraphAserver as the main material for for deploying the conference, media information that can't be withdrawn. And on textiles, we keep working on work with defense, and a very important news, as you just said, is the fact that we secured the first sole source contract by a primary governmental defense department.

5:26 In terms of financials, in the first half of the year, we had revenue increased by 15%. This was thanks to the new strategic focus. But most most importantly, we were able to reduce our EBITDA loss by 38%. This was the result of a continuous progress in terms of keep reducing their production costs, but also a rigorous cost control and optimization. Cash as of June 2025 was approximately 3,000,000, so in line with management expectations. We and we keep working on carefully managing, balancing investment and growth with business sustainability.

6:14 In the next part, we'll go more in detail on the main strategic actions we have put in place. Yes. We've put in place five strategic action really to generate and capture the the right momentum and the opportunity we see in the market. Let's start with the three levers underpinning the strategy. The first and most important nowadays is production. We did the massive action on the production line, reengineering and redesigning it. We have now full automation. We will have the chance to use new precursors with which from argon to nitrogen in the super expansion to reduce cost. But I will go with more detail in next slide covering production.

7:11 It's important to stress to your attention that we will be able with this system to reduce drastically production costs and to assess to new market. With regard to sales, are accelerating the market adoption in the existing verticals, still a main focus on environmental and textile. But especially with the new material in our hands, we will be able to satisfy not the quality because the quality demand from certain application was already performing properly, but the price expectation of customer and also on this, tried to do to give you additional info in the next slide.

7:59 R and D is working very well in a very close collaboration with production and sales, and we will focus on real opportunities, real market, and customer requests. So we are not checking all all the graphene opportunities without a real connection with the market. Now if we move to the slide covering production. As I told you, this is the most important move we made. And let me try to explain. On the upper side of this slide, there is the old system. On the bottom, the new one.

8:45 What are the reason to change from a system to the other? The reason are very simple inability to produce nano nanographite. And second, and more important, we start to realize that some of our key competitors were capturing our market offering nanographite materials. So we decide to move from a old design that has fixed parameters so that was utilizing a kind of algorithm maximizing the input of energy to obtain a significant amount of crystalline nanoplatement. So high input, low productivity, and a fixed number of morphology, moving to a new design where we prioritize what we can define the adaptive control logic. So we are able now to adapt the process during the production phase and to adapt the process also to different precursors.

9:48 This is key to get important very important cost reduction to get productivity increase. We have the full automation before there was a minor automation in each department. We have a fast, very fast setup change so we can move from one precursor to the other. And we have also a new cleaning process that is able with very high pressure water to clean the entire production line and also to keep the material that normally was eliminated as a raw material for a next production.

10:33 And we as I mentioned, we can work on different proportion. The last comment I want to make is that if you look at the third box in the bottom part of the slide, we are moving from the old exfoliation to what we call additional exfoliation and interblocking. What does it mean? We are able now to put together different materials. So we are able to cover a specific material with our graphene, adding binder and other product, and this satisfy mainly most significant needs in the battery arena. So the plant has been reconfigured as an integrated platform fully automated.

11:21 And doing doing this activity, we decided to certify all the drawings, which is a very important step because nowadays, we can license the technology anywhere in the world. And opportunities to to license the technology are rising right now. So as as Julio said, these upgrading our production plans are a game changer for us because we will have maybe two benefits. The first one is the fact that we reduce our direct production cost, as we said. This will allow us also to rebalance in certain cases our prices and to get easier access to to the markets depending on the vertical and applications.

12:13 The second point is the fact that we will be able to produce new kind of products. So we'll have two different categories. The g class traditional products with graphene and a platelets in it for higher performances, higher price, but also some niche of the specific application with high potential. But at the same time, we will also access the number five and blended materials markets with high volumes for industrial applications. So we'll have a double offering. And in this this slide, we try to summarize very briefly the main differences between the two categories. Yes. You know, let me tell you that the boundary between graphene and nanographite is, in many cases, is very thin. And if you look at the upper part of this slide, below 10 layer, we have nano feed over we have nano. Right? So for us, the different number of step within Oh, you can advise one a system that is designed to produce high productivity at the proper level. We are able really to drastically reduce the number of steps and create a material that is top quality but but

13:45 low cost. The key markets are all always the same energy, advanced composite, textile, the market we are in. But for example, in battery cathodes, we we are able to produce a very interesting specific material for our USA partner. And now we will move into the battery anode arena with the nanogafide. Positioning on one side is tailor made, on the other is volume based. And the compound annual growth for nanoplatelets of graphene is between 3540% and vice versa between ten and fifteen with nanogrify.

14:36 Okay. In the next slide, we try to recap the most important opportunities in terms of sales and contrast in our pipeline on the two main verticals. The first one is the on environmental remediation, we have a couple of important opportunities. The first one is with ONVITETOM, which is a long standing contract. We have been using roughly solder for a number of contracts with them. Now they are decommissioning the exhaustive wells they own in the Romanian ground. It's a twenty years project. They have to decommission 30,000 wells, and we are we have an open discussion. We still need to define total value for SECTA, but this will be a very important contract for for us. The second one is with Tenaris Romania. We for a total waste management contract, we submitted an offer of approx of a 2,000,000 per year, so we are waiting for the outcome of the tender.

15:39 This will will start from January 2026. On textiles, as we said, we keep working in the warfare and defense applications because those are application where we believe that our properties and technology can be appreciated the most. What is key here is the fact that, as we said, that we won our first sole source contract with a leading governmental defense agency. Julian, I'm not sure if you want to add. Yes. And we we are very proud because it's a very large agency. It's not an Italian agency, very prestigious. We're not allowed to disclose any information because we committed ourselves personally to avoid any any flow, not proper of information outside, but the leverage is on significant properties of our material recognized by this agency to the point that they decide without intermediary to adopt the DIRECTA and start to work with us.

16:57 Okay. The next slide is on SET. Correct? Yes. SEC restructuring progress plan has two objective. The first one is short term as and is almost completed. We have a new board, a new governance with a board, a new general manager. We define head of sales, and we are looking for a couple of new executive to reinforce the organization. We are continuously optimizing the workforce with the objective to introduce new talents. Since June 24, we moved from 164 four sixty five people down to June 25 to 144, and the objective by the end of this year is to be in the range of 130 or below.

17:57 We are working on contract portfolio, removing the low margin contracts with a lot of focus on specific activities that are not anymore in the area of DIRECTA technology. But the medium term objective is to explore this opportunity, keeping in the portfolio customers and materials that either maximize DIRECTA technological expertise or generate significant profit. Let me make an example. SETTA is a technology to decontaminate transformer with PCB oil that is working very well in generating the proper profit. We can move to a graphene technology, but the process is working well.

18:55 The equipment is almost unique, so we don't want to lose this business opportunity. With regards to looking ahead, as I mentioned, restructuring is still in progress. Timing, unfortunately, often exposed to external factor. One example, you know, we got a media order of 1,500,000 in this have been structured on the fact that SEC has the ability to decontaminate a drilling platform from hydrocarbons during all the activity, but the drilling platform was supposed to move from the Middle East to the Black Sea. And now instead of passing via a Suez Channel, nobody wants to insure them, so they will have to make a longer trip, and this could generate a delay.

19:55 The only other pending significant contract for this year is the fourth contract that is an old customer of Safeguard. With regards to r and d, as I mentioned, we are focusing on real opportunities, existing market. We have six projects ongoing. One is covering the lenses with a global company. We work to reinforce polyamide composite in order to reduce infrared transmission, and we discovered that the lens adopted with GPS graphene is significantly improving the impact resistance.

20:44 So now we're targeting polycarbonate lenses that are a very significant market for defense and safety. The other important area where we are moving quite fast is PFAS. You probably know that PFAS, the so called forever chemicals, are very dangerous, and they've been utilizing different industries to leverage their properties to resist with water and oil. We are developing, and we finally define a filter to remove PFAS from water, and we are already working in different area. We are working in pharma area, testing and checking the removal of contaminants in the pharma water, agricultural port, and semiconductors.

21:41 And we have also developed with the support of the external partner, a a pilot decontamination unit that can be scaled up and offered to different industry and different customers. We are moving also back to the tire arena and starting with go cap tires, but we are also testing and working with very large tire manufacturer, and the test are still moving on. We have a big electronic conglomerate working with our G plus on polycarbonate enhanced for gaming devices. We are integrating our new materials into batteries working with our NAND g battery company and partner.

22:41 In fact, I'm flying to USA next week to drill down on some very close business opportunity with them. And last, we develop an HVAC system that will capture at the entrance of a normal air conditioning system, not just the particles, but will act as a a significant microbic filter system. Just a couple of final slides on on the market and and outlook starting from the market. We would like to represent this this chart on the left of this slide, which clearly shows that the graphene market is expected to explode in terms of tons of graphene on the market.

23:38 What is what is key here to highlight is the fact that we believe that we are well positioned to benefit from the market growth because we have already products on the market. We have a strong IP portfolio, and we have a strong know how thanks to our work with the R and D over the last years. So we are expert in producing the theme. We need to rely on the on our partners in order to leverage on their industry knowledge, the technical capabilities, and the commercial network network to accelerate the commercialization of the technology on the market. Okay. Just some closing comments. The first one back to the upgraded production line. This is by far the most important move we made with the objective to really consolidate direct acquisition on a long term basis.

24:35 Future growth, environmental and textile as core sector, but with an eye on batteries where, as I mentioned, we we are ready with some very interesting products and on defense opportunity. We consider the momentum very good. As I mentioned at the beginning, the index all the different index are showing an incredible attention to graphite and graphene, And some countries are also starting project to reopen graphite mines and to design a new graphene industry. And, of course, we we are we are open to offer our technology in license.

25:22 And the the board really is is convinced and confident that we will deliver the year on year EBITDA improvement that the market is waiting for us. So let me tell that, you know, without any doubt, the future is no longer a distant horizon, but is it is unfolding now, and we are ready to shape it. I think that at this point, we can stop and wait for the questions. That's great. Julia, Georgia, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and unpublished Q and A can be accessed via your investor dashboard. And, Julie, Georgia, as you can see, we have received a number of questions throughout today's presentation.

26:18 And, Georgia, if I may now come hand back to you to share the q and a, and I'll pick up from you at the end. Thank you. Okay. So I will I will read some questions starting from the first one. How much of your h one revenue is recurring? What visibility do you have for 2025 and beyond? We can say that approximately 6,000,000 of our revenues on yearly basis are recurring so far. Recurring meaning long standing contracts and clients that you've been working for more than two years in the world. So So we we believe that we have a solid base of recurring customers. Of course, this give us some comfort also for next year in terms of revenue growth.

27:07 As we said, we expect to keep growing with at least a double digit growth as we did as we are doing in 2025 compared to 2024 also next year. Then I see that there are there are a couple of questions about EBITDA. So there is one I would say is, what is the road map to achieving breakeven EBITDA and what cost levels do you still need to pull? And another couple of questions with similar similar questions. So I will I will answer that. We we call it with presentation that we are we are in three maybe two different levers three different levers. The first one, of course, is keep growing the business, the market, the the contracts.

27:55 And as we said, we we believe that we have a good pipeline for the coming months and year. In parallel to that, we are keep increasing our gross margin and risk reducing our direct production cost. So the intervention and upgrades to the to the line are are fundamental, and we we are achieving good results on that, but also a a cost of media optimization with positive results. So we believe that we are we are near to reaching EBITDA breakeven in the short term. And let me add that some of this new opportunity, especially the defense one, could really explode the turnover if we will continue with this growing phase that is not just testing, but we are moving very close to significant number.

28:58 Of course, we we don't know exactly what is going to happen and when. But in any in any case, we see differently from the past that between starting an opportunity because we have the product, because we have the material, because we have the quality. And now we will have, in most of the cases, the price. The time is much, much closer on one side because the ECTRA probably is doing the right things. On on the other, because the entire global companies digested the concept and the logic behind the nano nanomaterials and graphene.

29:48 Okay. Another question is how scalable is graphisorber technology across different countries? As we disclosed a few times to the market, we have acquired Seccard to create a a business case for the deployment of graphics over on the market. So what we are doing with graphics over this and provide the full service to the market. And it is to take a successful business case, and after that, we can scale in other countries through two ways. Works with probably more probable one and is through licensing. So we have put in place, thanks to our key portfolio, we have put in place some we are working on potential licensing in the future on Graphisol. Yes.

30:41 Okay. Now the question is how strong is your IP portfolio, and are you continuing to file new patents? Yes. The the IP portfolio is really strong. Are filing some ideas. But now, especially now, with this defense opportunity, we are investing a lot in OALP. So instead of filing that at a certain point, we'll disclose some key information, we are keeping everything confidential. We created the defense business unit with a limited number of people and with a very, very protected area covering the important information.

31:32 Other places like PFAS or like some of the new material, we will continue to file as we did in the past. Okay. The question is, what is your expected timeline for generating revenues from the Nanonar five product line? We expect to move almost almost immediately because as I I presented in one of the slide, the border between the two material is so thin that it's just a question to go back to some of the customer. They tested our graphene material, offering them nanogrified at interesting new price, and and we expect they will place they will place the orders. So we have already planned very clear on this.

32:32 Okay. I believe we answered all the questions. That's great, Giorgio. Giulio, if I may just jump back in there. Thank you for addressing all those questions for investors today. And, of course, the company can review your questions submitted, and we'll publish those responses on the investment company platform. But, Giulio, before I redirect investors to provide you with their feedback, which in this particular important to the company, could I please just ask you for a few closing remarks to to wrap up? Yes. Let let let me mention a statement quite old that the the way up and the way down are one they are the same. What were once obstacle are now the very step of our ascent. You know? This was mentioned by Heraclitus five hundred years before Christ, and I think it's really valid for a company like DIRECTA. And I would like to add, you know, a very short and very simple comment from my side.

33:28 Come and rise with us. That's great, Julia and Georgiou. Thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of DIRECTA PLUS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.