Q2 2026 CT Automotive Group PLC Earnings Call

September 16, 2026

Speaker #1: Registry submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Please just simply type in your questions and press send.

Speaker #1: Before we begin, I'd like to submit the following poll. And I'd like to hand you over to the management team.

Speaker #2: Good afternoon, everyone. I'm thank you for joining us. I'm Ray Bench, Chairman of CT Automotive, and I'm joined by our Chief Executive, Simon Phillips.

Speaker #2: Simon will present the results and the business. Over the next half hour, you will hear three things: what actually happened in the first half, and why.

Speaker #2: A detailed account of the situation with our major customer, and why the business underneath these numbers is robust. This has been a year of deliberate compressed transition, with some associated costs.

Speaker #2: As of the 4th of August, trading update: the board were fully expecting to meet market expectations for the full year. Recent contract negotiations have given rise to us considering this position, and the board met Tuesday evening to review progress and make a decision regarding the likely timeline to conclusion and the potential impact on full-year forecast.

Speaker #2: The outcome will be explained in detail in this presentation. Over to you, Simon.

Speaker #3: For 3 years running, we delivered profit growth from gross margin improvement on a slightly declining revenue line. That discipline hasn't changed. The year has.

Speaker #3: FY26 is a transition year. We are rebuilding 40% of group revenue into our Mexico facility, in 16 months. Revenue is on target. The demand is there, and the programs have landed.

Speaker #3: And the issue is contained. Turkey and China are delivering to plan, tooling, and head office costs are on plan. Everything outside Mexico is running to expectation.

Speaker #3: Ramping Mexico at this pace was deliberately ambitious, and parts of it have proved harder than planned. What we are building this year is the trajectory for FY27 and beyond.

Speaker #3: These costs are the price of executing that once, not a change in the quality of the business. Let me give you the scale of what has been built.

Speaker #3: Monthly, Mexico revenue goes from 0.9 million dollars in June last year to around 4.9 million in October, five times. Injection molding machines, from 29 to 63.

Simon Phillips: In 16 months, revenue is on target, the demand is there, and the programs have landed, and the issue is contained. Turkey and China are delivering to plan. Tooling and head office costs are on plan. Everything outside Mexico is running to expectation. Ramping Mexico at this pace was deliberately ambitious, and parts of it have proved harder than planned. What we are building this year is the trajectory for FY27 and beyond. These costs are the price of executing that once, not a change in the quality of the business. Let me give you the scale of what has been built. Monthly Mexico revenue goes from $9 million in June last year to around $4.9 million in October, five times. Injection molding machines from 29 to 63. Production lines from 9 to 35, with around 13 new programs launched. 207 injection tools constructed.

Speaker #1: 16 months. Revenue is on target. The demand is there, and the program is have landed. And the issue is contained. Turkey and China were delivering to plan, tooling, and head office costs are on plan.

Speaker #3: Production lines, from 9 to 35, with around 13 new programs launched. 207 injection tools constructed. A spray paint facility installed and commissioned. Headcount from 214 to 890.

Speaker #1: Everything outside Mexico is running to expectation. Ramping Mexico at this pace was deliberately ambitious, and parts of it have proved harder than planned. What we are building this year is the trajectory for FY27 and beyond.

Speaker #3: Hired and trained. By October, Mexico is roughly 40% of group revenue. All of that in 16 months, while the rest of the group ran to plan.

Speaker #1: These costs are the price of executing that once, not a change in the quality of the business. Let me give you the scale of what has been built: monthly Mexico revenue goes from 0.9 million dollars in June last year to around 4.9 million in October, five times.

Speaker #3: Not many businesses of our size have executed a ramp-up of that scale at that pace. Why so compressed? Because the work came to us at pace for reasons outside our control, and we accepted the challenge.

Speaker #1: Injection molding machines increased from 29 to 63, production lines from 9 to 35, with around 13 new programs launched, and 207 injection tools constructed. A spray paint facility was installed and commissioned.

Speaker #3: Major OEMs have been urgently resourcing programs out of disrupted supply chains. Tariffs have pushed rapid localization into Mexico. Compressing sourcing decisions that would normally take years.

Simon Phillips: A spray paint facility installed and commissioned. Headcount from 214 to 890, hired and trained. By October, Mexico is roughly 40% of group revenue, all of that in 16 months while the rest of the group ran to plan. Not many businesses of our size have executed a ramp-up of that scale at that pace. Why so compressed? Because the work came to us at pace for reasons outside our control, and we accepted the challenge. Major OEMs have been urgently resourcing programs out of disrupted supply chains. Tariffs have pushed rapid localization into Mexico, compressing sourcing decisions that would normally take years. Product development that typically takes well over 2 years, we have averaged in around 6 months across the last 13 launches. The overruns in this year's numbers are the cost of accepting work a quarter of the normal development window.

Speaker #3: Product development that typically takes well over 2 years. We have averaged in around 6 months across the last 13 launches. The overruns in this year's numbers are the cost of accepting work at a quarter of the normal development window.

Speaker #1: Headcount from 214 to 890, hired and trained. By October, Mexico is roughly 40% of group revenue. All of that in 16 months, while the rest of the group ran to plan.

Speaker #3: The revenue from those launches builds through this year, and underwrites the years ahead. So, to the first half: revenue of 61.7 million dollars, up 14 cents, on plan.

Speaker #1: Not many businesses of our size have executed a ramp-up of that scale at that pace. Why so compressed? Because the work came to us at pace for reasons outside our control, and we accepted the challenge.

Speaker #3: This is not a demand problem. Gross profit of 16.4 million. Adjusted EBITDA of 4.4 million. And adjusted profit before tax delivered of 1.6 million.

Speaker #1: Major OEMs have been urgently resourcing programs out of disrupted supply chains. Tariffs have pushed rapid localization into Mexico, compressing sourcing decisions that would normally take years.

Speaker #3: Two things hit the half. First, 0.4 million proven adjustment to reflect negotiations with one of our key customers explained on the next slide, the 62.1 million of revenue we reported in the August trading update is prudently reduced to 61.7 million.

Speaker #1: Product development that typically takes well over 2 years. We have averaged in around 6 months across the last 13 launches. The overruns in this year's numbers are the cost of accepting work at a quarter of the normal development window.

Speaker #3: Second, 2.4 million of ramp-up costs and inefficiencies caused by tightening working capital. The customer position is covered on the next page, and the cost on the page after.

Speaker #1: The revenue from those launches builds through this year, and underwrites the years ahead. So, to the first half: revenue of $61.7 million, up 14% on plan.

Simon Phillips: The revenue from those launches builds through this year and underwrites the years ahead. So to the H1, revenue of $61.7 million, up 14% on plan. This is not a demand problem. Gross profit of $16.4 million, adjusted EBITDA $4.4 million, and adjusted profit before tax delivered of $1.6 million. Two things hit the half. First, $0.4 million prudent adjustment to reflect negotiations with one of our key customers explained on the next slide. The $62.1 million of revenue we reported in the August trading update is prudently reduced to $61.7 million. Second, $2.4 million of ramp-up costs and inefficiencies caused by tightening working capital. The customer position is covered on the next page, and the cost on the page after. Now the customer situation, and I want to be precise here because the two elements of it stand on different footings.

Speaker #3: Now, the customer situation and I want to be precise here, because the two elements of it stand on different footings. The FX element is contractual.

Speaker #1: This is not a demand problem. Gross profit of 16.4 million. Adjusted EBITDA of 4.4 million. And adjusted profit before tax delivered of 1.6 million.

Speaker #3: The exchange rate basis. And the right to realign it are written on the business awards we signed. The inflation element is a standard cost escalation, as it is across our sector.

Speaker #1: Two things hit the half. First, 0.4 million proven adjustment to reflect negotiations with one of our key customers explained on the next slide, the 62.1 million of revenue we reported in the August trading update is prudently reduced to 61.7 million.

Speaker #3: And every other customer worldwide has agreed these adjustments, and is paying them. During the first half, we submitted both. Around 2.9 million dollars for full year 26.

Speaker #1: Second, £2.4 million of ramp-up costs and inefficiencies caused by tightening working capital. The customer position is covered on the next page, and the cost on the page after.

Speaker #3: To our largest tier 1 customer, which is in chapter 11. The quantum remains under negotiation. The company has assumed a prudent level of recovery.

Speaker #1: Now, the customer situation and I want to be precise here, because the two elements of it stand on different footings. The FX element is contractual.

Speaker #3: 0.76 million recognized in the first half, which is why the 62.1 million reported revenue in August becomes 61.7 in these results. We are pursuing it in full.

Simon Phillips: The FX element is contractual, the exchange rate basis, and the right to realign it are written on the business awards we signed. The inflation element is a standard cost escalation as it is across our sector, and every other customer worldwide has agreed these adjustments and is paying them. During the H1, we submitted both, around $2.9 million for FY26 to our largest Tier 1 customer, which is in Chapter 11. The quantum remains under negotiation. The company has assumed a prudent level of recovery, $0.76 million recognized in the H1, which is why the $62.1 million reported revenue in August becomes $61.7 in these results. We are pursuing it in full. And to be clear about the level we have assumed, the increase remains under negotiation.

Speaker #1: The exchange rate basis. And the right to realign it are written on the business awards we signed. The inflation element is a standard cost escalation, as it is across our sector.

Speaker #3: And to be clear about the level we have assumed, the increase remains under negotiation, but our commercial team believes the assumed value should be agreeable, because it lines up with the FX terms written on the awards.

Speaker #1: And every other customer worldwide has agreed to these adjustments and is paying them. During the first half, we submitted both—around $2.9 million for fiscal year '26—to our largest Tier 1 customer, which is in Chapter 11.

Speaker #3: And with inflation adjustments of the kind every other customer worldwide has already agreed and is paying. Separately, on the chapter 11 filing, our lender withdrew around 4.5 million of invoice finance at short notice.

Speaker #1: The quantum remains under negotiation. The company has assumed a prudent level of recovery. 0.76 million recognized in the first half, which is why the 62.1 million reported revenue in August becomes 61.7 in these results.

Speaker #3: We navigated that through cost management. Our lender relationship and new low-cost facilities. Here is the first half in detail. 2.8 million of impact. And hold one thing, as you look at this page, every bar on it is Mexico.

Speaker #1: We are pursuing it in full. And to be clear about the level we have assumed, the increase remains under negotiation, but our commercial team believes the assumed value should be agreeable.

Speaker #3: Turkey, China, tooling, and head office all ran to plan. The amber bar is to 0.4 million of the customer claim, following the company's prudent approach to this.

Simon Phillips: Our commercial team believes the assumed value should be agreeable because it lines up with the FX terms written on the awards and with inflation adjustments of the kind every other customer worldwide has already agreed and is paying. Separately, on the Chapter 11 filing, our lender withdrew around 4.5 million of invoice finance at short notice. We navigated that through cost management, our lender relationship, and new low-cost facilities. Here is the H1 in detail, 2.8 million of impact. Hold one thing as you look at this page, every bar on it is Mexico. Turkey, China, tooling, and head office all ran as planned. The amber bar is the 0.4 million of the customer claim.

Speaker #1: Because it lines up with the FX terms written on the awards. And with inflation adjustments of the kind every other customer worldwide has already agreed and is paying.

Speaker #3: That is the step from the 62.1 reported revenue in August to the 61.7 in these results, and it is pursued in full. Then 2.4 million of cost, split by course.

Speaker #1: Separately, on the Chapter 11 filing, our lender withdrew around 4.5 million of invoice finance at short notice. We navigated that through cost management. Our lender relationship and new low-cost facilities.

Speaker #3: The majority, 1.4 million, 58%, was driven by tight working capital. And let me make each line concrete. Storage. Containers that could not be released in time.

Speaker #1: Here is the first half in detail. 2.8 million of impact. And hold one thing, as you look at this page, every bar on it is Mexico.

Speaker #3: Sitting at port, accruing charges. Expedited freight, where payments to suppliers ran late, shipments were held, and we then paid premium freight to recover the time.

Speaker #1: Turkey, China, tooling, and head office all ran to plan. The amber bar is to £0.4 million of the customer claim, following the company's prudent approach to this.

Speaker #3: And labor, overtime kicked in as material arrived late, crews waiting on material, then working extended hours to catch the schedule up. Every one of those traces, back to constrained material flow, the continued reduction of invoice finance as the customer remained in chapter 11 and 6.2 million of VAT held in Mexico.

Simon Phillips: Following the company's prudent approach to this, that is the step from the 62.1 reported revenue in August to the 61.7 in these results, and it is pursued in full. Then 2.4 million of costs split by cause. The majority, 1.4 million, 58%, was driven by tight working capital. Let me make each line concrete. Storage, containers that could not be released in time, sitting at port accruing charges. Expedited freight where payments to suppliers ran late, shipments were held, and we then paid premium freight to recover the time. Labor overtime kicked in as material arrived late, crews waiting on material, then working extended hours to catch the schedule up. Every one of those traces back to constrained material flow, the continued reduction of invoice finance as the customer remained in Chapter 11, and 6.2 million of VAT held in Mexico. It unwinds as the cash lands.

Speaker #1: That is the step from the 62.1 reported revenue in August to the 61.7 in these results, and it is pursued in full. Then 2.4 million of cost, split by course.

Speaker #1: The majority, 1.4 million, 58%, was driven by tight working capital. And let me make each line concrete. Storage. Containers that could not be released in time.

Speaker #3: It unwinds as the cash lands. Genuine operational issues were 0.8 million. The learning curve cost of the ramp itself, being engineered out through Meta CI.

Speaker #1: Sitting at port, accruing charges. Expedited freight, where payments to suppliers ran late, shipments were held, and we then paid premium freight to recover the time.

Speaker #3: And 0.2 million was geopolitics, late container shipments, resulting from the disruption in the Strait of Hormuz, entirely external, and industry-wide. The message is simple: the majority of the first half cost is the cash shortage, not operational failure.

Speaker #1: And labor, overtime kicked in as material arrived late, crews waiting on material, then working extended hours to catch the schedule up. Every one of those traces back to constrained material flow.

Speaker #3: Solve the cash, and this business operates to plan. So next, let me show you how we solve the cash. Now, the cash coming back.

Speaker #1: The continued reduction of invoice finance has the customer remained in Chapter 11 and 6.2 million of VAT held in Mexico. It unwinds as the cash lands.

Speaker #3: Two pools. And note these are the positions at the 30th of June, the half-year balance sheet dates. 6.2 million of Mexican VAT receivable, built through the first half as to plan scaled.

Speaker #1: Genuine operational issues were 0.8 million. The learning curve cost of out through Meta CI. And 0.2 million was geopolitics, late container shipments, resulting from the disruption in the Strait of Hormuz, entirely external, and majority of the first half cost is the cash shortage, not operational failure.

Simon Phillips: Genuine operational issues were 0.8 million. The learning curve cost of the ramp itself being engineered out through Metis AI. 0.2 million was geopolitics, late container shipments resulting from the disruption in the Strait of Hormuz, entirely external and industry-wide. The message is simple. The majority of the H1 cost is the cash shortage, not operational failure. Solve the cash, and this business operates to plan. Next, let me show you how we solve the cash. Now the cash coming back. Two pools, and note these are the positions at 30 June, the half-year balance sheet date. 6.2 million of Mexican VAT receivable built through the H1 as the plant scaled. Refunds due on our near 100% export position.

Speaker #3: Refunds due on our near 100% export position. And the 4.5 million of invoice finance our lender withdrew on the chapter 11 filing. Back in September last year.

Speaker #3: On that second pool, let me be honest with you. While the customer continues to trade in chapter 11. That funding is simply not available.

Speaker #3: No invoice finance lender will fund invoices to a company in that process. We carry those receivables on our own facilities until the customer emerges.

Speaker #1: Solve the cash, and this business operates to plan. So next, let me show you how we solve the cash. Now, the cash coming back.

Speaker #3: The pool we can actively recover is the VAT. And I want to be honest about why it built up in the first place. Mexico has substantially tightened the refund regime for exporters, alongside far stricter electronic invoice enforcement.

Speaker #1: Two pools. And note these are the positions at the 30th of June, the half-year balance sheet date. 6.2 million of Mexican VAT receivable, built through the first half as to plan scaled.

Speaker #1: Refunds due on our near 100% export position. And the 4.5 million of invoice finance our lender withdrew on the Chapter 11 filing. Back in September last year.

Speaker #3: Every exporter in the country is on that learning curve. We absorbed it in the middle of the ramp. The evidential standard is completeness. Every line across hundreds of thousands of records, and a single mismatch restarts the clock.

Simon Phillips: The 4.5 million of invoice finance our lender withdrew on the Chapter 11 filing back in September last year. On that second pool, let me be honest with you. While the customer continues to trade in Chapter 11, that funding is simply not available. No invoice finance lender will fund invoices to a company in that process. We carry those receivables on our own facilities until the customer emerges. The pool we can actively recover is the VAT, and I want to be honest about why it built up in the first place. Mexico has substantially tightened the refund regime for exporters, alongside fast strict to electronic invoice enforcement. Every exporter in the country is on that learning curve. We absorbed it in the middle of the ramp. The evidential standard is completeness.

Speaker #1: On that second pool, let me be honest with you. While the customer continues to trade in Chapter 11, that funding is simply not available.

Speaker #3: That is why we took extreme measures rather than incremental ones. Every claim now passes a 100% line-level AI review before submission, not a sample.

Speaker #1: No invoice finance lender will fund invoices to a company in that process. We carry those receivables on our own facilities until the customer emerges.

Speaker #3: We recruited a former director of the Mexican tax office to oversee and final review every claim. And the process now runs up to 6 claims in parallel, rather than one at a time.

Speaker #1: The pool we can actively recover is the VAT. And I want to be honest about why it built up in the first place. Mexico has substantially tightened the refund regime for exporters, alongside far stricter electronic invoice enforcement.

Speaker #3: The first claim generated under the new system has been submitted. With initial indications that it will be approved. This is a significant cash inflow ahead of us, and it is the same cash whose absence drove the first half cost you have just seen.

Speaker #1: Every exporter in the country is on that learning curve. We absorbed it in the middle of the ramp. The evidential standard is completeness. Every line across hundreds of thousands of records and a single mismatch restarts the clock.

Simon Phillips: Every line across hundreds of thousands of records, and a single mismatch restarts the clock. That is why we took extreme measures rather than incremental ones. Every claim now passes a 100% line level AI review before submission, not a sample. We recruited a former director of the Mexican tax office to oversee and final review every claim, and the process now runs up to six claims in parallel rather than one at a time. The first claim generated under the new system has been submitted with initial indications that it will be approved. This is a significant cash inflow ahead of us, and it is the same cash whose absence drove the H1 cost you have just seen, 1.4 million of cost in the half, 58% of the total was driven directly by tight working capital. Without it, that cost simply would not have occurred.

Speaker #3: 1.4 million of cost in the half. 58% of the total. Was driven directly by a tight working capital. Without it, that cost simply would not have occurred.

Speaker #1: That is why we took extreme measures rather than incremental ones. Every claim now passes a 100% line-level AI review before submission, not a sample.

Speaker #3: Briefly through the income statement. Revenue up 14% to 61.7 million. Production up 13%. Tooling up 31%. Driven by the Mexico launches. Gross profit at 16.4 million, at a 26.6% margin.

Speaker #1: We recruited a former director of the Mexican tax office to oversee and final review every claim. And the process now runs up to 6 claims in parallel, rather than one at a time.

Speaker #1: The first claim generated under the new system has been submitted. With initial indications that it will be approved. This is a significant cash inflow ahead of us, and it is the same cash whose absence drove the first half cost you have just seen.

Speaker #3: Down on last year on freight, material cost, and startup inefficiency. Partly offset by operating leverage from the higher volumes. Administrative expenses rose 1.8 million to 12.5 million.

Speaker #1: $1.4 million of cost in the half, 58% of the total, was driven directly by tight working capital. Without it, that cost simply would not have occurred.

Speaker #3: That includes one non-recurring item, and the balance is the larger Mexico cost base that supports the revenue growth. Underlying EBITDA of 4.7 million. Operating profit of 2.5 million.

Speaker #1: Briefly, through the income statement. Revenue is up 14% to £61.7 million. Production is up 13%. Tooling is up 31%, driven by the Mexico launches. Gross profit is £16.4 million, at a 26.6% margin.

Simon Phillips: Briefly through the income statement, revenue up 14% to $61.7 million, production up 13%, tooling up 31% driven by the Mexico launches. Gross profit of $16.4 million at a 26.6% margin, down on last year on freight, material costs, and start-up inefficiency, partly offset by operating leverage from the higher volumes. Administrative expenses rose $1.8 million to $12.1 million. That includes one non-recurring item and the balance is the larger Mexico cost base that supports the revenue growth. Underlying EBIT are $4.7 million, operating profit of $2.5 million, profit before tax of $1.6 million. One more way to read this statement, had the ramp and cash shortage cost not landed, this half would have delivered around $4 million of profit, roughly 18% ahead of last year, in the middle of the heaviest ramp in this company's history. On the balance sheet, total assets are up to $93.7 million.

Speaker #3: Profit before tax of 1.6 million. One more way to read this statement. Had the ramp and cash shortage cost not landed, this half would have delivered around $4 million of profit.

Speaker #3: Roughly 18% ahead of last year. In the middle of the heaviest ramp in this company's history. On the balance sheet, total assets are up to $93.7 million.

Speaker #1: Down on last year on freight, material cost, and start-up inefficiency. Partly offset by operating leverage from the higher volumes. Administrative expenses rose $1.8 million to $12.5 million.

Speaker #3: Two working capital items drive that. Receivables of $35.9 million, on the higher Mexican VAT, and inventories of $27.1 million. Reflecting the scale-up and deliberate buffer stock on critical Mexico contracts.

Speaker #1: That includes one non-recurring item, and the balance is the larger Mexico cost base that supports the revenue growth. Underlying EBITDA of 4.7 million. Operating profit of 2.5 million.

Speaker #3: Net debt rose to $12.2 million. Government-backed facilities became available during the period that attracted rates. And we used them to bring our debt facilities to a normal level for a business of our size.

Speaker #1: Profit before tax of $1.6 million. One more way to read this statement: Had the ramp and cash shortage cost not landed, this half would have delivered around $4 million of profit.

Speaker #3: But those facilities let us absorb the VAT, build the stock holding, and the first half profit reduction without touching capital expenditure. We expect these elements to begin to unwind in the second half.

Speaker #1: Roughly 18% ahead of last year. In the middle of the heaviest ramp in this company's history. On the balance sheet. Total assets are up to 93.7 million.

Speaker #3: Net assets increased to 31.8 million. Here is the movement in net debt. 7.7 million at December to 12.2 million at June. Three deliberate uses of cash.

Simon Phillips: Two working capital items drive that: receivables of $35.9 million on higher Mexican VAT, and inventories of $27.1 million, reflecting the scale-up and deliberate buffer stock on critical Mexico contracts. Net debt rose to $12.2 million. Government-backed facilities became available during the period at attractive rates, and we used them to bring our debt facilities to a normal level for a business of our size. Those facilities let us absorb the VAT, build the stockholding, and the H1 profit reduction without touching capital expenditure. We expect these elements to begin to unwind in the H2. Net assets increased to $31.8 million. Here is the movement in net debt. $7.7 million at December to $12.2 million at June.

Speaker #1: Two working capital items drive that. Receivables of 35.9 million. On the higher Mexican VAT and inventories of 27.1 million. Reflecting the scale-up and deliberate buffer stock on critical Mexico contracts.

Speaker #3: 2.4 million of net VAT outflow in Mexico. Timing. And it comes back. 3.2 million of Mexico capital expenditure, the program investment. And 2.4 million of lease repayments and interest.

Speaker #1: Net debt rose to 12.2 million. Government-backed facilities became available during the period that attracted rates. And we used them to bring our debt facilities to a normal level for a business of our size.

Speaker #3: Operating cash flow absorbed the pressures I have described. The point I would leave you with. Net debt today is below where it stood a year ago, at $30 million, with a far larger business underneath it.

Speaker #1: But those facilities let us absorb the VAT, build the stock holding, and the first half profit reduction without touching capital expenditure. We expect these elements to begin to unwind in the second half.

Speaker #3: The composition is on the page. 6.4 million of cash, held against the FGI facility, and the China loans. We expect an increase in net debt levels until the Mexican VAT position unwinds.

Speaker #1: Net assets increased to £31.8 million. Here is the movement in net debt: £7.7 million at December to £12.2 million at June. Three deliberate uses of cash.

Simon Phillips: Three deliberate uses of cash, $2.4 million of net VAT outflow in Mexico, timing, and it comes back $3.2 million of Mexico capital expenditure, the program investment, and $2.4 million of lease repayments and interest. Operating cash flow absorbed the pressures I have described. The point I would leave you with, net debt today is below where it stood a year ago at $30 million, with a far larger business underneath it. The composition is on the page, $6.4 million of cash held against the FGI facility and the China loans. We expect an increase in net debt levels until the Mexican VAT position unwinds. The directors have considered going concern and are satisfied that the group has adequate resources in place for at least 12 months from the date of the approval of the H126 interim statement. That takes us to guidance.

Speaker #3: The directors have considered going concern. And our satisfied that the group has adequate resources in place for at least 12 months from the date of the approval of the H-126 interim statements.

Speaker #1: 2.4 million of net VAT outflow in Mexico. Timing. And it comes back. 3.2 million of Mexico capital expenditure at the program investment. And 2.4 million of lease repayments and interest.

Speaker #3: That takes us to guidance. The board met Tuesday evening to review and consider the FY26 market expectations in light of progress with customer negotiations.

Speaker #1: Operating cash flow absorbed the pressures I have described. The point I would leave you with: net debt today is below where it stood a year ago, at £30 million, with a far larger business underneath it.

Speaker #3: Market expectation for the full year was 10.2 million dollars of adjusted profit before tax. The board considered it prudent to revise guidance to a range of 4.9 million to 9.4 million.

Speaker #1: The composition is on the page. 6.4 million of cash, held against the FGI facility, and the China loans. We expect an increase in net debt levels until the Mexican VAT position unwinds.

Speaker #3: A range which we will seek to narrow, based on the progress and conclusion of these discussions. The board do not think it likely that no price increase would be agreed.

Speaker #1: The directors have considered going concern and are satisfied that the group has adequate resources in place for at least 12 months from the date of approval of the H-126 interim statements.

Speaker #3: However, it is mindful of the importance of the relationship with our key customer, and the added complexity that chapter 11 involves. Four things to hold onto.

Speaker #3: First, the rest of the group is on plan. This is a Mexico ramp issue, not a group issue. Second, nothing structural. Every driver is recoverable.

Speaker #1: That takes us to guidance. The Board met Tuesday evening to review and consider the FY26 market expectations in light of progress with customer negotiations.

Simon Phillips: The board met Tuesday evening to review and consider the FY 2026 market expectations in light of progress with customer negotiations. Market expectation for the full year was $10.2 million of adjusted profit before tax. The board considered it prudent to revise guidance to a range of $4.9 million to $9.4 million, a range which we will seek to narrow based on the progress and conclusion of these discussions. The board do not think it likely that no price increase will be agreed. However, it is mindful of the importance of the relationship with our key customer and the added complexity that Chapter 11 involves. Four things to hold on to. First, the rest of the group is on plan. This is a Mexico ramp issue, not a group issue. Second, nothing structural. Every driver is recoverable, non-recurring, or a ramp cost against revenue that arrives from here.

Speaker #3: Non-recurring. Or a ramp cost against revenue that arrives from here. Third, let me be precise about what comes back and what does not. The claim balance and the VAT are recoverable.

Speaker #1: Market expectation for the full year was 10.2 million dollars of adjusted profit before tax. The board considered it prudent to revise guidance to a range of 4.9 million to 9.4 million.

Speaker #3: The costs are cash shortage created. The storage, the premium freight, the overtime are spent. And they are not coming back. What they are is one-off, tied to this ramp and this cash position, not to how the business runs.

Speaker #1: A range which we will seek to narrow, based on the progress and conclusion of these discussions. The board do not think it likely that no price increase will be agreed.

Speaker #1: However, it is mindful of the importance of the relationship with our key customer and the added complexity that Chapter 11 involves. Four things to hold onto:

Speaker #3: Strip both out, and the genuine operational miss is 0.8 million. Fourth, the second half anticipates the cash shortage continuing. The bridge from 9.4 to 4.9 is on the next page.

Speaker #1: First, the rest of the group is on plan. This is a Mexico ramp issue, not a group issue. Second, nothing structural—every driver is recoverable.

Speaker #3: I will hand over to Ray to run through that.

Speaker #1: Non-recurring, or ramp cost against revenue that arrives from here. Third, let me be precise about what comes back and what does not. The claim balance and the VAT are recoverable.

Speaker #1: Thank you, Simon. Following H-1, H-10, we expected PBT to meet market expectations of 10.2 million dollars. Having reviewed performance through July and August, the board is now expecting PBT of roughly 9.4 million for the full year, assuming the price increases flow as they have with every other customer, and mitigating the impact of the associated cash shortages in the second half.

Simon Phillips: Third, let me be precise about what comes back and what does not. The claim balance and the VAT are recoverable. The costs the cash shortage created, the storage, the premium freight, the overtime are spent, and they are not coming back. What they are is one-off, tied to this ramp and this cash position, not to how the business runs. Strip both out and the genuine operational miss is $0.8 million. Fourth, the second half anticipates the cash shortage continuing. The bridge from $9.4 million to $4.9 million is on the next page. I will hand over to Ray to run through that.

Speaker #1: The costs are cash shortage created. The storage, the premium freight, the overtime are spent and they are not coming back. What they are is one-off, tied to this ramp and this cash position, not to how the business runs.

Speaker #1: Unfortunately, negotiations with our major customer remained inconclusive. So in our H-1 reporting, we have assumed a prudent level of recovery on the claim rather than the full amount.

Speaker #1: Strip both out, and the genuine operational miss is 0.8 million. Fourth, the second half anticipates the cash shortage continuing. The bridge from 9.4 to 4.9 is on the next page.

Speaker #1: However, we are pursuing the claim in full with our key customer, a total of 2.9 million dollars for full year '26, showing in the amber block.

Speaker #1: I will hand over to Ray to run through that.

Speaker #2: Thank you, Simon. Following H-1, we expected PBT to meet market expectations of 10.2 million dollars. Having reviewed performance through July and August, the board is now expecting PBT of roughly 9.4 million for the full year.

Ray Bench: Thank you, Simon. Following H1 outlook, we expected PBT to meet market expectations of $10.2 million. Having reviewed performance through July and August, the board is now expecting PBT of roughly $9.4 million for the full year, assuming the price increases flow as they have with every other customer and mitigating the impact of the associated cash shortages in the second half. Unfortunately, negotiations with our major customer remained inconclusive.

Speaker #1: We have assumed 1.6 million of additional cost for the cash shortage continuing through the second half. That takes 9.4 to 4.9. A word on that 1.6 million, because I want you to see what sits inside it.

Speaker #2: Assuming the price increase is slow as they have with every other customer, and mitigating the impact of the associated cash shortages in the second half.

Speaker #1: We have assumed the cash shortage persists through the second half, causing inefficiencies due to labor productivity gains arriving late, continued demurrage costs, and material consumption deficiencies landing late.

Speaker #2: Unfortunately, negotiations with our major customer remained inconclusive. So, in our H1 reporting, we have assumed a prudent level of recovery on the claim rather than the full amount.

Ray Bench: In our H1 reporting, we have assumed a prudent level of recovery on the claim rather than the full amount. However, we are pursuing the claim in full with our key customer, a total of $2.9 million for full year 2026, showing in the amber block. We have assumed $1.6 million of additional cost for the cash shortage continuing through the second half. That takes $9.4 million to $4.9 million. A word on that $1.6 million, because I want you to see what sits inside it. We have assumed the cash shortage persists through the second half, causing inefficiencies due to labor productivity gains arriving late, continued demurrage costs, and material consumption efficiencies landing late. These are inside the $4.9 million, not further deductions to come. If the customer claim concludes earlier than we have assumed, those costs reduce, creating upside to the $4.9 million. Simon, back to you.

Speaker #1: These are inside the 4.9, not further deductions to come. If the customer claim concludes earlier than we have assumed, those costs reduce. Creating upside to the 4.9.

Speaker #2: However, we are pursuing the claim in full with our key customer, a total of 2.9 million dollars for full year 26, showing in the amber block.

Speaker #1: Simon, back to you.

Speaker #2: One more thing the ramp built. Ramping a pass of this skull in 16 months forced us to build something bigger than a ramp tool.

Speaker #2: We have assumed 1.6 million of additional cost for the cash shortage continuing through the second half. That takes 9.4 to 4.9. A word on that 1.6 million, because I want you to see what sits inside it.

Speaker #2: MetSCI, a genetic AI control of the whole factory. These are agents that work 24 hours a day, 7 days a week. Monitoring every critical aspect of the business as it runs.

Speaker #2: We have assumed the cash shortage persists through the second half, causing inefficiencies due to labour productivity gains arriving late, continued demurrage costs, and material consumption deficiencies landing late.

Speaker #2: Communicating directly with the workforce. And escalating to management where something needs a human decision. They do not sleep. They do not miss a shift.

Speaker #2: These are inside the 4.9, not further deductions to come. If the customer claim concludes earlier than we have assumed, those costs reduce. Creating upside to the 4.9.

Speaker #2: And they never stop watching the numbers. And I will be honest about what building it has taught us. The more of it we have built, the more we have realized just how impossible it is to run an efficient factory without it.

Speaker #2: Simon, back to you.

Speaker #2: Customer schedules land straight into the platform and drive everything downstream. Agents run the full material cycle, with the controls that engineered out this year's freight errors.

Speaker #1: One more thing the ramp built. Ramping a pass of this skull in 16 months forced us to build something bigger than a ramp tool.

Simon Phillips: One more thing the ramp built. Ramping a plant of this scale in 16 months forced us to build something bigger than a ramp tool. Metis AI, agentic AI control of the whole factory. These are agents that work 24 hours a day, seven days a week, monitoring every critical aspect of the business as it runs, communicating directly with the workforce, and escalating to management where something needs a human decision. They do not sleep, they do not miss a shift, and they never stop watching the numbers. I will be honest about what building it has taught us. The more of it we have built, the more we have realized just how impossible it is to run an efficient factory without it. Customer schedules land straight into the platform and drive everything downstream.

Speaker #1: MetSCI, a genetic AI control of the whole factory. These are agents that work 24 hours a day, 7 days a week. Monitoring every critical aspect of the business as it runs.

Speaker #2: Production plans are raised against live demand. The full workforce cycle runs through it. Onboarding, attendance, hours verified end-to-end before anyone is paid. Live efficiency of every line of machine as it runs.

Speaker #1: Communicating directly with the workforce. And escalating to management where something needs a human decision. They do not sleep. They do not miss a shift.

Speaker #2: Quality run inside the operating system, with issues caught on the line, not in the audit. We are not aware of any manufacturer running this end-to-end on a live plant.

Speaker #1: And they never stop watching the numbers. And I will be honest about what building it has taught us: the more of it we have built, the more we have realized just how impossible it is to run an efficient factory without it.

Speaker #2: Live in Mexico by November. Then rolled out across the group. So full messages to leave you with. Recoverable. Both the cost recoveries we are pursuing, contractual on FX, industry standard on inflation, and the VAT held in Mexico are expected to come back.

Speaker #1: Customer schedules land straight into the platform and drive everything downstream. Agents run the full material cycle, with the controls that engineered out this year's freight errors.

Simon Phillips: Agents run the full material cycle with the controls that engineered out this year's freight errors. Production plans are raised against live demand. The full workforce cycle runs through it. Onboarding, attendance, hours verified end to end before anyone is paid. Live efficiency of every line and machine as it runs. Quality run inside the operating system, with issues caught on the line, not in the audit. We are not aware of any manufacturer running this end to end on a live plant. Live in Mexico by November, then rolled out across the group. Four messages to leave you with. Recoverable. Both the cost recoveries we are pursuing, contractual on FX, industry standard on inflation, and the VAT held in Mexico are expected to come back. Non-recurring. The ramp costs are launch specific. The launch is finished in October.

Speaker #1: Production plans are raised against live demand. The full workforce cycle runs through it. Onboarding, attendance, hours verified end-to-end before anyone is paid. Live efficiency of every line of machine as it runs.

Speaker #2: Non-recurring. The ramp costs are launch-specific. The launch is finished in October. The ordering issues behind the freight costs are engineered out. Already delivered. The capacity is built and paid for.

Speaker #1: Quality run inside the operating system, with issues caught on the line, not in the audit. We are not aware of any manufacturer running this end-to-end on a live plant.

Speaker #2: 63 machines. 35 lines. The paint plant. A workforce of 890. And MetSCI. And the revenue it serves, arrives in FY27 and beyond. And capability.

Speaker #1: Live in Mexico by November. Then rolled out across the group. So full messages to leave you with. Recoverable. Both the cost recoveries we are pursuing, contractual on FX, industry standard on inflation, and the VAT held in Mexico are expected to come back.

Speaker #2: MetSCI. Operational in Mexico. Rolling out across the group in the first half of next year. A transition year with lights at the end of the tunnel.

Speaker #2: That is everything from us this afternoon. Thank you for listening. Ray and I are very happy to take your questions.

Speaker #1: Non-recurring. The ramp costs are launch-specific. The launch is finished in October. The ordering issues behind the freight cost are engineered out. Already delivered. The capacity is built and paid for.

Speaker #3: That's great. Thank you for updating investors today. Can I please remind investors to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen?

Simon Phillips: The ordering issues behind the freight costs are engineered out, already delivered. The capacity is built and paid for, 63 machines, 35 lines, the paint plant, a workforce of 890, and Metis AI, and the revenue it serves arrives in FY27 and beyond. Capability. Metis AI, operational in Mexico, rolling out across the group in the H1 of next year. A transition year with lights at the end of the tunnel. That is everything from us this afternoon. Thank you for listening. Ray and I are very happy to take your questions.

Speaker #3: If your reference a recording of today's presentation, we're available in the Investor Meet Company platform shortly after the meeting has ended. Guys, as you can see, we have received a number of questions during today's presentation.

Speaker #1: 63 machines. 35 lines. The paint plant. A workforce of 890. And MetSCI. And the revenue it serves, arrives in FY27 and beyond. And capability.

Speaker #3: So Simon, if I could just hand back to you at this point to read out the questions to give responses where appropriate to do so, and I'll pick up from you at the end.

Speaker #1: MetSCI. Operational in Mexico. Rolling out across the group in the first half of next year. A transition year with lights at the end of the tunnel.

Speaker #4: Okay. So I'll actually take the questions and propose most of them to you, Simon, if that's okay. Before we get into the questions that have been submitted through INC, we've actually had a couple that came through our own investor relations portal as well.

Speaker #1: That is everything from us this afternoon. Thank you for listening. Ray and I are very happy to take your questions.

Speaker #4: So I'll start with those. I think there's probably going to be quite a bit of overlap between them anyway, so. First question is, when did you become aware that Morelli was disputing your price increases and why didn't you update the market?

[Company Representative] (Investor Meet Company): That is great. Thank you for updating investors today. Could I please remind investors to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen. A recording of today's presentation will be available in the Investor Meet Company platform shortly after the meeting has ended. Guys, as you can see, we have received a number of questions during today's presentation. Simon, if I could just hand back to you at this point to read out the questions and give response where appropriate to do so, and I will pick up from you at the end.

Charlie Barker: That is great. Thank you for updating investors today. Could I please remind investors to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen. A recording of today's presentation will be available in the Investor Meet Company platform shortly after the meeting has ended. Guys, as you can see, we have received a number of questions during today's presentation. Simon, if I could just hand back to you at this point to read out the questions and give response where appropriate to do so, and I will pick up from you at the end.

Speaker #3: That's great. Thank you for updating investors today. Could I please remind investors to submit your questions by using the Q&A tab situated in the right-hand corner of your screen?

Speaker #3: If you require a recording of today's presentation, it will be available on the Investor Meet Company platform shortly after the meeting has ended. As you can see, we have received a number of questions during today's presentation.

Speaker #2: Okay. So I'll take that question then, Ray. I mean, first of all, I think what's really important for everybody to understand is that price negotiations go on all the time within the auto industry.

Speaker #3: So, Simon, if I could just hand back to you at this point to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Speaker #2: In our area, the areas that particularly sort of affect us is Turkey and Mexico. Because they're more sort of based around FX and inflation.

Speaker #4: Okay. So I'll actually take the questions and propose most of them to you, Simon, if that's okay. Before we get into the questions that have been submitted through IMC, we've actually had a couple that came through our own investor relations portal as well.

Ray Bench: Okay. I will actually take the questions and pose most of them to you, Simon, if that is okay.

Simon Phillips: Yeah, sure.

Speaker #2: So our commercial team has been working with Morelli since April, negotiating these commercial agreements. Morelli is in obviously a very difficult position because their chapter 11 position.

Ray Bench: Before we get into the questions that have been submitted through IMC, we have actually had a couple that came through our own Investor Relations portal as well. I will perhaps start with those. I think there is probably going to be quite a bit of overlap between them anyway. First question is, when did you become aware that Marelli was disputing your price increases, and why didn't you update the market?

Speaker #4: So, I'll start with those. I think there's probably going to be quite a bit of overlap between them anyway, so... First question is, when did you become aware that Morelli was disputing your price increases, and why didn't you update the market?

Speaker #2: But the price negotiations were going on very well. But then in, I'd say, roughly about mid-August, the commercial team said that Morelli were disputing a few of the issues on the claims.

Speaker #1: Okay, so I'll take that question then, Ray. I mean, first of all, I think what's really important for everybody to understand is that price negotiations go on all the time with the new auto industry.

Simon Phillips: Okay. I will take that question then, Ray. First of all, I think what is really important for everybody to understand is that price negotiations go on all the time in the auto industry. In our area, the areas that particularly affect us is Turkey and Mexico, because they are more based around FX and inflation. Our commercial team has been working with Marelli since April negotiating these commercial agreements. Marelli is in, obviously, a very difficult position because of their Chapter 11 position. The price negotiations were going on very well. Then in, I would say, roughly about mid-August, the commercial team said that Marelli were disputing a few of the issues on the claims. But as far as ourselves and the board are aware that this would all be concluded quite quickly.

Speaker #2: But as far as ourselves and the board are aware that this would all be concluded quite quickly. But then during the board meeting, yesterday having spoken to the commercial team, and with the disputes still ongoing, the board really decided to take a bit of a prudent view.

Speaker #1: In our area, the regions that particularly affect us are Turkey and Mexico, because they're more based around FX and inflation.

Speaker #1: So, our commercial team has been working with Morelli since April, negotiating these commercial agreements. Morelli is obviously in a very difficult position because of their Chapter 11 position.

Speaker #2: And reduce some of that claim just to potentially offset some of the risk. But as far as we're concerned, and as far as the commercial team is concerned, the claim that we have put forward is partly contractual and the other section of it is pretty much in line with industry norm.

Speaker #1: But the price negotiations were going on very well. But then in, I'd say, roughly about mid-August, the commercial team said that Morelli were disputing a few of the issues on the claims.

Speaker #1: But as far as ourselves and the board are aware that this would all be concluded quite quickly. But then during the board meeting, yesterday having spoken to the commercial team, and with the disputes still ongoing, the board really decided to take a bit of a prudent view.

Speaker #2: Now, the thing to take away is that we're negotiating with multiple customers across this year in those two regions of the world. And every single one of those customers have agreed claims in line with the expectation of the industry.

Simon Phillips: But then during the board meeting yesterday, having spoken to the commercial team and with the dispute still ongoing, the board really decided to take a bit of a prudent view and reduce some of that claim just to potentially offset some of the risk. As far as we are concerned, and as far as the commercial team is concerned, the claim that we have put forward is partly contractual and the other section of it is pretty much in line with industry norm. The thing to take away is that we are negotiating with multiple customers across this year in those two regions of the world, and every single one of those customers have agreed claims in line with the expectation of the industry. So from the commercial team's perspective, they are going to be pushing hard to close that claim.

Speaker #2: So from the commercial team's perspective, we're going to be pushing hard to close that claim. But the view on the board from the board meeting yesterday was that we should be a bit prudent and reduce that down.

Speaker #1: And reduce some of that claim just to potentially offset some of the risk. But as far as we're concerned, and as far as the commercial team is concerned, the claim that we have put forward is partly contractual, and the other section of it is pretty much in line with industry norm.

Speaker #2: I don't know if there's anything else you want to add to that, Ray.

Speaker #4: No, I've understood. I think the board obviously looks at the financial performance of the business on a monthly basis. We understand where the numbers sit and our forward forecasting of that.

Speaker #1: Now, the thing to take away is that we're negotiating with multiple customers across this year in those two regions of the world. And every single one of those customers have agreed claims in line with the expectation of the industry.

Speaker #4: We compare actuals to that forecast and up until this issue became very real in terms of it as it had been seen as a dispute.

Speaker #4: We had some good visibility towards the end of the year and didn't believe we had to come to market. Now, what we have done, as Simon has alluded to there, is taken a prudent approach.

Speaker #1: So from the commercial team's perspective, we're going to be pushing hard to close that claim. But the view on the board from the board meeting yesterday was that we should be a bit prudent and reduce that down.

Speaker #4: We've obviously reduced down the levels in that slide that you've just seen there to show what the worst case would be. If the full 2.9 million VAT standing claim wasn't recovered.

Simon Phillips: But the view on the board from the board meeting yesterday was that we should be a bit prudent and reduce that down. I do not know if there is anything else you want to add to that, Ray.

Speaker #1: I don't know if there's anything else you want to add to that, Ray.

Speaker #4: But also taken the worst case understanding of with that cash not flowing back into the business, some level of inefficiency continuing throughout the rest of the year, which is that additional 1.5, 1.6 million.

Ray Bench: Other than to say, I think, the board obviously looks at the financial performance of the business on a monthly basis. We understand where the numbers sit and our forward forecasting of that. We compare actual to that forecast, and up until this issue became very real in terms of it as being seen as a dispute, we had some good visibility towards the end of the year and did not believe we had to come to market. What we have done, as Simon has alluded to there, is taken a prudent approach. We have obviously reduced down the other levels in that slide that you have just seen there to show what the worst case would be if the full 2.9 million of the outstanding claim was not recovered.

Speaker #4: Which obviously also impacts the top line. Now, if that money does land, whether that's accelerating the Mexican VAT returns or it's the concluding the Morelli negotiations sooner than we think, some of that flows back in.

Speaker #4: We compare actuals to that forecast, and up until this issue became very real—in terms of it, as it had been seen as a dispute.

Speaker #4: That's why it's quite a broad range in terms of the forecast that's been given. We understand where the bottom boundary is. We understand where the top boundary is.

Speaker #4: We've obviously reduced down the levels in that slide that you've just seen there to show what the worst case would be, if the full £2.9 million VAT standing claim wasn't recovered.

Speaker #4: And the likelihood is, it's going to be somewhere in between, but it's too early to say exactly where at this point. Clearly, as we get some more granularity around that, we will come back to the market and guide it accordingly.

Ray Bench: But also taken the worst case understanding of, with that cash not flowing back into the business, some level of inefficiency continuing throughout the rest of the year, which is that additional 1.5, 1.6 million, which obviously also impacts the top line there. If that money does land, whether that is accelerating the Mexican VAT returns or it is concluding the Marelli negotiations sooner than we think, some of that flows back in. But that is why it is quite a broad range in terms of the forecast that has been given. We understand where the bottom boundary is, we understand where the top boundary is, and the likelihood is, it is going to be somewhere in between, but it is too early to say exactly where at this point. Clearly, as we get some more granularity around that, we will come back to the market and guide it accordingly.

Speaker #4: Okay. So moving on. Can you go into more detail regarding the claim? Is it contractual? If it's contractual, how can they dispute it?

Speaker #4: Which obviously also impacts the top line. Now, if that money does land, whether that's accelerating the next kind of VAT returns or it's the concluding the Morelli negotiations sooner than we think, some of that flows back in.

Speaker #2: Okay. So the claim itself is pretty much the same as every one of our customers. I mean, it's generally sort of split into two baskets.

Speaker #2: I mean, one area is currency. The other area is localized inflation. So to give a, I guess, a bit more detail relating to the Mexico side, those baskets are split roughly like this.

Speaker #4: That's why it's quite a broad range in terms of the forecast that's been given. We understand where the bottom boundary is. We understand where the top boundary is.

Speaker #2: 55% is raw materials, 45% is operational-based, which is related to the payslips. Now, as we know, the peso has strengthened against the US dollar quite significantly across the, you could say, the last eight months.

Speaker #1: Yeah. Agreed.

Simon Phillips: Yeah, that's great.

Speaker #4: Okay, so moving on—can you go into more detail regarding the claim? Is it contractual? If it’s contractual, how can they dispute it?

Ray Bench: Okay, so moving on. Can you go into more detail regarding the claim? Is it contractual? If it's contractual, how can they dispute it?

Speaker #2: It's been shifting from what was our business nomination awards of somewhere in the region of like 19 to 20 pesos to the dollar. Down to roughly about 17 pesos to the dollar at the moment.

Speaker #1: Okay. So the claim itself is pretty much the same as every one of our customers. I mean, it's generally sort of split into two baskets.

Simon Phillips: Okay. The claim itself is pretty much the same as every one of our customers. It's generally split into two baskets. One area is currency, the other area is localized inflation. To give, I guess, a bit more detail relating to the Mexico side, those baskets are split roughly like this: 55% is raw materials, 45% is operational waste, which is related to the peso. As we know, the peso has strengthened against the USD quite significantly across the, you could say, the last eight months. It's been shifting from what was our business nomination awards of somewhere in the region of like 19 to 20 pesos to the dollar, down to roughly about 17 pesos to the dollar at the moment. That currency has obviously quite a large impact on our bottom line.

Speaker #1: I mean, one area is currency. The other area is localized inflation. So, to give a bit more detail relating to the Mexico side, those baskets are split roughly like this.

Speaker #2: So that sort of currency has obviously quite a large impact on our bottom line. So in terms of the business from a P&L perspective, you can sort of view it as 55% we have a natural hedge.

Speaker #1: 55% is raw materials, 45% is operational-based, which is related to the pacing. Now, as we know, the peso has strengthened against the US dollar quite significantly across the, you could say, last eight months.

Speaker #2: Because 55% is a raw materials and/or US dollar-related costs within the business. 45% is based around the pesos. So in terms of the contractual agreements, we have specified our exchange rates on our business nomination awards.

Speaker #1: It's been shifting from what was our business nomination awards of somewhere in the region of like 19 to 20 pesos to the dollar. Down to roughly about 17 pesos to the dollar at the moment.

Speaker #2: And that obviously has that direct impact with regards to the FX movement. That part is contractual. And really, there should be no question or argument about that.

Speaker #1: So, that sort of currency obviously has quite a large impact on our bottom line. In terms of the business from a P&L perspective, you can view it as 55%—we have a natural hedge.

Simon Phillips: In terms of the business from a P&L perspective, you can view it as 55%, we have a natural hedge because 55% is the raw materials, and all USD related costs within the business, 45% is based around the pesos. In terms of the contractual agreement, we have specified our exchange rates on our business nomination awards, and that obviously has that direct impact with regards to the FX movement. That part is contractual, and really there should be no question or argument about that. The second part is the inflation. The inflation in Mexico has been quite significant over the last few years, particularly with what is quite a socialist government driving up labor costs.

Speaker #2: The second part is the inflation. And the inflation in Mexico has been quite significant over the last sort of few years. Particularly with what is quite a socialist government driving up labour costs.

Speaker #1: Because 55% is a raw materials, or US dollar-related costs within the business. 45% is based around the pesos. So in terms of the contractual agreements, we have specified our exchange rates on our business nomination awards.

Speaker #2: So the real negotiation is going on around labour costs. And just to sort of say again, I mean, the vast majority of our customers have accepted all of our labour costs.

Speaker #2: And when I say vast majority, I mean everyone. But the problem is, I guess, particularly with Morelli, is they're trying to emerge from chapter 11.

Speaker #1: And that obviously has a direct impact with regard to the FX movement. That part is contractual, and really, there should be no question or argument about that.

Speaker #2: They're controlling profits extremely tightly. And obviously, this is an impact to their profits, to accept it from us. So that's where the tougher part in the negotiation is going on at the moment.

Speaker #1: The second part is the inflation. And the inflation in Mexico has been quite significant over the last sort of few years. Particularly with what is quite a socialist government driving up labour costs.

Speaker #2: Since we've been made aware at the board level, with regards to these disputes, I mean, I personally have been involved in this. And we do have meetings sort of set up.

Speaker #1: So the real negotiation is going on around labour costs. And just to sort of say again, I mean, the vast majority of our customers have accepted all of our labour costs.

Simon Phillips: The real negotiation is going on around labor costs and just to say again, the vast majority of our customers have accepted all of our labor costs. When I say vast majority, I mean everyone. The problem is, I guess particularly with Marelli, they are trying to emerge from Chapter 11. They are controlling profits extremely tightly, and obviously this is an impact to their profits to accept this from us. That is where the tougher part in the negotiation is going on at the moment. Since we have been made aware at the board level with regards to these disputes, I personally have been involved in this. We do have meetings set up. There is meant to be one on Friday and one on Monday, and we hope to reach a decent conclusion on it.

Speaker #1: And when I say vast majority, I mean everyone. But the problem is, I guess, particularly with Morelli, is they're trying to emerge from chapter 11.

Speaker #2: There's meant to be one on Friday and one on Monday. And we hope to reach a decent conclusion on it. I mean, the only thing I would say is that it's sensitive.

Speaker #2: I mean, particularly given the fact that Morelli is 40% of our revenue and our largest customer. We have to do what's right for the business and protect the business.

Speaker #1: They're controlling profits extremely tightly. And, obviously, this is an impact to their profits, to accept it from us. So that's where the tougher part in the negotiation is going on at the moment.

Speaker #2: But we're also mindful of the relationship with particularly with them trying to emerge from chapter 11.

Speaker #1: Since we've been made aware at the board level with regards to these disputes, I mean, I personally have been involved in this. And we do have meetings sort of set up.

Speaker #4: Okay. A lot of detail there, Simon. So I think, again, we need to be mindful of those negotiations still ongoing. So question about Morelli again.

Speaker #4: So how much are you dependent on Morelli and how much are you dependent on Morelli coming out of chapter 11?

Speaker #1: There's meant to be one on Friday and one on Monday. And we hope to reach a decent conclusion on it. I mean, the only thing I would say is that it's sensitive.

Speaker #2: So, I mean, like I said earlier, I mean, 40% of the revenue is dependent on Morelli. I mean, we are of course, we want them to come out of chapter 11 as soon as possible.

Simon Phillips: The only thing I would say is that it is sensitive, particularly given the fact that Marelli is 40% of our revenue and our largest customer. We have to do what is right for the business and protect the business, but we are also mindful of the relationship, particularly with them trying to emerge from Chapter 11.

Speaker #1: I mean, particularly given the fact that Morelli is 40% of our revenue and our largest customer. We have to do what's right for the business and protect the business.

Speaker #2: Because it has hit our working capital. I mean, the AR funding for Morelli is roughly about 4.5 million dollars. And when Morelli went into chapter 11, FGI, our bank, understandably no longer wanted to fund that.

Speaker #1: But we're also mindful of the relationship, particularly with them trying to emerge from Chapter 11.

Speaker #4: Okay, a lot of detail there, Simon. So, I think, again, we need to be mindful of those negotiations still ongoing. So, question about Morelli again.

Ray Bench: Okay. A lot of detail there, Simon. I think, again, we need to be mindful of those negotiations still ongoing. A question about Marelli, again, so how much are you dependent on Marelli, and how much are you dependent on Marelli coming out of Chapter 11?

Speaker #2: Because they could no longer ensure the debt. So that's been managed within the business itself. But I would say that we're 100% confident about them coming out of chapter 11 or emerging in some form.

Speaker #4: So how much are you dependent on Morelli and how much are you dependent on Morelli coming out of chapter 11?

Speaker #1: So, I mean, like I said earlier, 40% of the revenue is dependent on Morelli. I mean, of course, we want them to come out of Chapter 11 as soon as possible.

Simon Phillips: As I said earlier, 40% of the group revenue is dependent on Marelli. Of course, we want them to come out of Chapter 11 as soon as possible because it has hit our working capital. The IR funding from Marelli is roughly about $4.5 million. When Marelli went into Chapter 11, FGI, our bank, understandably, no longer wanted to fund that because they could no longer insure the debt. That is being managed within the business itself. I would say that we are 100% confident about them coming out of Chapter 11 or emerging in some form because Marelli is an enormous Tier 1 with revenue somewhere in the region of 11 billion, and that is obviously crossing multiple OEMs, both in Europe and America.

Speaker #2: Because Morelli is an enormous tier one. With revenue somewhere in the region of 11 billion. And that's obviously crossing multiple OEMs, both in Europe and America.

Speaker #1: Because it has hit our working capital. I mean, the AR funding for Morelli is roughly about 4.5 million dollars. And when Morelli went into chapter 11, FGI, our bank, understandably no longer wanted to fund that.

Speaker #2: So just for the investors to understand, I mean, if Morelli for some reason completely went down, they'd take down the majority of the auto industry, both in Europe and America.

Speaker #2: And clearly, that's not going to happen. And that's why they continue to get funded. But we hope they'll emerge soon. And then that will have a significant impact and improvement to our working capital.

Speaker #1: Because they could no longer ensure the debt. So that's been managed within the business itself. But I would say that we're 100% confident about them coming out of Chapter 11 or emerging in some form.

Speaker #4: Okay. You've indicated your cash constraints. You have enough cash to continue as a going concern?

Speaker #1: Because Morelli is an enormous tier one with revenue somewhere in the region of 11 multiple OEMs both in Europe and America. So just for the investors to understand, I mean, if Morelli for some reason completely went down, they'd take down the majority of the auto industry, both in Europe and America.

Speaker #2: Yeah. I mean, we've done this we've been through this in detail with the board. And we're quite comfortable that we are. I mean, just to sort of talk about that sort of cash constraint and liquidity.

Simon Phillips: So just for the investors to be able to understand, if Marelli, for some reason, completely went down, they would take down the majority of the auto industry, both in Europe and America. Clearly that is not going to happen, and that is why they continue to get funded. We hope they will emerge soon, and then that will have a significant impact and improvement to our working capital.

Speaker #2: I mean, it has been a very it's been a very tricky year. I mean, it started obviously at the back end of last year when Morelli went into chapter 11.

Speaker #2: And that 4.5 million impact. I think there's some questions later and I'll get more into the detail about the Mexican VAT at 6.2 million.

Speaker #1: And clearly, that's not going to happen, and that's why they continue to get funded. But we hope they'll emerge soon, and that will have a significant impact and improvement to our working capital.

Speaker #2: But I think it's been explained quite clearly in the presentation itself. But that Mexican VAT receivable, that's 6.2 million dollars of cash that should be in our bank at the moment.

Speaker #4: Okay. You've indicated your cash constraints. You have enough cash to continue as a going concern?

Ray Bench: Okay. You indicated your cash constraints. Do you have enough cash to continue as a going concern?

Speaker #1: Yeah. I mean, we've done this, we've been through this in detail with the board, and we're quite comfortable that we are. I mean, just to sort of talk about that sort of cash constraint and liquidity.

Simon Phillips: Yeah. We have done this. We have been through this in detail with the board, and we are quite comfortable that we are. Just to talk about that cash constraint and liquidity, it has been a very tricky year. It started obviously at the back end of last year and Marelli went into Chapter 11 and that $4.5 million impact. I think there are some questions later, and I will get more into the detail about the Mexican VAT at $6.2 million, but I think it has been explained quite clearly in the presentation itself. That Mexican VAT receivable, that $6.2 million of cash that should be in our bank at the moment, as is should be the Marelli $4.5 million.

Speaker #2: As is, should be the Morelli 4.5 million dollars. So that has squeezed cash, which is sadly impacted the operational of our business. Mainly through us having to trade a little bit from our suppliers, which then causes material shortages or shifting containers out of ports.

Speaker #1: I mean, it has been a very it's been a very tricky year. I mean, it started obviously at the back end of last year when Morelli went into chapter 11.

Speaker #1: And that 4.5 million impact. I think there's some questions later and I'll get more into the detail about the Mexican VAT at 6.2 million.

Speaker #2: But we have got adequate mitigation plans. I mean, one thing is, is on that 6.2 million of Mexican VAT, we have completely built this integrated AI system to do all of our VAT returns.

Speaker #1: But I think it's been explained quite clearly in the presentation itself. But that Mexican VAT receivable, that's $6.2 million of cash that should be in our bank at the moment.

Speaker #2: And we've hired an ex-director of the Mexican VAT office to oversee it. Now, the positive thing on that side is that having sort of built the entire system is that we can perhaps six claims in at any period in time.

Speaker #1: As is, should be the Morelli 4.5 million dollars. So that has squeezed cash, which is sadly impacted the operational of our business. Mainly through us having to trade a little bit from our suppliers, which then causes material shortages or shifting containers out of ports.

Simon Phillips: That has squeezed cash, which has sadly impacted the operations of our business, mainly through us having to trade a little bit from our suppliers, which then causes material shortages or shifting containers out of ports. We have got adequate mitigation plans. One thing is on that $6.2 million of Mexican VAT, we have completely built this integrated AI system to do all of our VAT returns, and we have hired an ex-director of the Mexican SAT office to oversee it. Now, the positive thing on that side is that having built the entire system is that we can put up six claims in at any period in time. At this point in time, this week, those six claims have been maximized.

Speaker #2: So at this point in time this week, those six claims have been maximised. So what that means is that we're going to start going through a recovery cycle on that, which is going to it's going to flow in very quickly.

Speaker #1: But we have got adequate mitigation plans. I mean, one thing is, on that $6.2 million of Mexican VAT, we have completely built this integrated AI system to do all of our VAT returns.

Speaker #2: And in the meantime, what we've been doing on the 4.5 million for Morelli is that we have been taking on some facilities in China.

Speaker #2: To offset that AR. So as far as soon as this cash starts sort of flowing in really quickly, then I think that will completely resolve our liquidity problems.

Speaker #1: And we've hired an ex-director of the Mexican VAT office to oversee it. Now, the positive thing on that side is that having sort of built the entire system, we can perhaps have six claims in at any period in time.

Speaker #2: And then hopefully, as a result of that, underlying business will perform as normal.

Speaker #1: So at this point in time this week, those six claims have been maximized. So what that means is that we're going to start going through a recovery cycle on that, which is going to flow in very quickly.

Speaker #4: I think you've covered one of the other questions that come through there about Mexican VAT in some detail. I know the slides covered it as well.

Speaker #4: So one of the other questions related to working capital and cash is, are you at risk of breaching covenants?

Simon Phillips: What that means is that we are going to start going through a recovery cycle on that, which is going to flow in very quickly. In the meantime, what we have been doing on the $4.5 million from Marelli is that we have been taking on some facilities in China to offset that IR. As soon as this cash starts flowing in really quickly, then I think that that will completely resolve our liquidity problems, and then hopefully, as a result of that, underlying business will perform as normal.

Speaker #2: Well, we're looking at it from two directions. With FGI, both from the profitability side, which is fine. But then there's also the liquidity side.

Speaker #1: And in the meantime, what we've been doing on the $4.5 million for Morelli is that we have been taking on some facilities in China.

Speaker #1: To offset that AR. So as soon as this cash starts sort of flowing in really quickly, then I think that will completely resolve our liquidity problems.

Speaker #2: And there's a liquidity measure of ensuring that we have 3 million dollars liquidity at any point in time. During this period of time, as we've been going through this, there are periods of times where we go slightly below that.

Speaker #1: And then hopefully, as a result of that, underlying business will perform as normal.

Speaker #2: But we have made FGI completely aware of that. So they're quite comfortable with the situation. I think they, like us, are just wanting to see this VAT start flowing through pretty quickly.

Ray Bench: Mm-hmm. I think you have covered most of the questions that come through there about Mexican VAT in some detail. I know the slides covered it as well. One of the other questions related to working capital and cash is, are you at risk of breaching covenants?

Speaker #4: I think you've covered one of the other questions that come through there about Mexican VAT in some detail. I know the slides covered it as well.

Speaker #4: So one of the other questions related to working capital and cash is, are you at risk of breaching covenants?

Speaker #2: Because that obviously resolves all of our issues.

Simon Phillips: Well, we are looking at it from two directions with FGI, both from the profitability side, which is fine, but then there is also the liquidity side, and there is a liquidity measure for ensuring that you have $3 million liquidity at any point in time. During this period of time, as we have been going through this, there are periods of times where we go slightly below that, but we have made FGI completely aware of that, so they are quite comfortable with the situation. I think they, like us, are just wanting to see this VAT start flowing through pretty quickly because that obviously resolves all of our issues.

Speaker #1: Well, we're looking at it from two directions. With FGI, both from the profitability side—which is fine—but then there's also the liquidity side.

Speaker #4: Okay. Next question. So a question here about we're concerned about your finance function given the significant prior period adjustments. Last year, annual change in your announced revenue number.

Speaker #1: And there's a liquidity measure of ensuring that we have 3 million dollars liquidity at any point in time. During this period of time, as we've been going through this, there are periods of times where we go slightly below that.

Speaker #4: What are you doing about it?

Speaker #2: I mean, yeah. We have sort of discussed this before. But we've obviously beefed up the finance team in India now to 14 people, covering every aspect of finance right way through the business.

Speaker #1: But we have made FGI completely aware of that, so they're quite comfortable with the situation. I think they, like us, are just wanting to see this VAT start flowing through pretty quickly.

Speaker #2: And that is actually functioning really well. I mean, we've been over the history about the interims last year. So I think everyone's pretty much aware of that.

Speaker #1: Because that obviously resolves all of our issues.

Speaker #2: Going into this year, and the situation of where we are at the moment, there is nothing really that the finance function could have done that sorry, any better than what they have actually done.

Speaker #4: Okay, next question. So, a question here about: we're concerned about your finance function, given the significant prior period adjustments last year and the annual change in your announced revenue number.

Ray Bench: Okay, next question. A question here about, we are concerned about your finance functions given the significant prior period adjustments last year and your change in your announced revenue number. What are you doing about it?

Speaker #4: What are you doing about it?

Speaker #2: I mean, the reporting the numbers on time. We know what the situation is in the business from a management perspective. And operational understanding. The recent board events that happened yesterday I think is just taking a prudent view on the Morelli recovery.

Speaker #1: I mean, yeah. We have sort of discussed this before. But we've obviously beefed up the finance team in India now to 14 people, covering every aspect of finance right the way through the business.

Simon Phillips: We have sort of discussed this before, but we've obviously beefed up the finance team in India now to 14 people, covering every aspect of finance right the way through the business. That is actually functioning really well. We've been over the history about the interims last year, so I think everyone's pretty much aware of that. Going into this year and the situation of where we are at the moment, there is nothing really that the finance function could have done any better than what they have actually done. They're reporting the numbers on time. We know what the situation is facing the business from a management perspective and operational understanding.

Speaker #1: And that is actually functioning really well. I mean, we've been over the history about the interims last year. So I think everyone's pretty much aware of into this year, and the situation of where we are at the moment, there is nothing really that the finance function could have done that any better than what they have actually done.

Speaker #2: And then looking forwards and thinking to ourselves, well, if the cash from Morelli isn't really going to come in at the speed that we expected to be coming in at, what could potentially be the knock-on effects that we've been seeing in the first half of the year?

Speaker #2: And I think putting that sort of 1.6 million aside for that is prudent. I mean, we're not saying that that is going to be used.

Speaker #1: I mean, they're reporting the numbers on time. We know what the situation is in the business from a management perspective. And operational understanding. The recent board events that happened yesterday I think is just taking a prudent view on the Morelli recovery.

Speaker #2: We're going to hope that we're not going to use it. But depending on the situation with the SAT office and trying to recover some money, recover this money from Morelli, these could be realistic results from the cash squeezed that we're in.

Simon Phillips: The recent board events that happened yesterday, I think it's just taking a prudent view on the Marelli recovery and then looking forwards and thinking to ourselves, "Well, if the cash from Marelli isn't really going to come in at the speed that we expect it to be coming in at, what could potentially be the knock-on effects that we've been seeing in the first half of the year?" I think putting that $1.6 million aside for that is prudent. We're not saying that that is going to be used. We're going to hope that we're not going to use it. But depending on the situation with the SAT office and trying to recover this money from Marelli, these could be realistic results from the cash squeeze that we're in.

Speaker #1: And then looking forwards and thinking to ourselves, well, if the cash from Morelli isn't really going to come in at the speed that we expected to be coming in at, what could potentially be the knock-on effects that we've been seeing in the first half of the year?

Speaker #4: Okay. So did your auditors review these interim financial statements?

Speaker #2: No. Because as the name listed company, that's not necessary.

Speaker #4: Although I would say that some of the finance accounting papers obviously would create do go to the auditors to review to make sure that we're aligned and correctly for the end of year audits.

Speaker #1: And I think putting that sort of $1.6 million aside for that is prudent. I mean, we're not saying that that is going to be used.

Speaker #2: Yeah.

Speaker #1: We're going to hope that we're not going to use it, but depending on the situation with the SAT office and trying to recover some money—recover this money from Morelli—these could be realistic results from the cash squeeze that we're in.

Speaker #4: Question regarding shares. So are your board and CEO buying further shares? I mean, I can certainly speak for myself in terms of the net that obviously I've invested my own money out of the nets as well.

Speaker #4: From the executive side, Simon, I think you well, I won't put words in your mouth, but you've sort of extended to me your desire to want to buy shares.

Speaker #4: Okay. So did your auditors review these interim financial statements?

Ray Bench: Okay. So did your auditors review these interim financial statements?

Speaker #4: But obviously, there are limitations in place at the moment regarding the takeover panel. So you cannot do that since you're as a concert party.

Speaker #1: No. Because as the name listed company, that's not necessary.

Simon Phillips: No, because as a main listed company, that's not necessary.

Ray Bench: Although I would say that some of the finance accounting papers we create do go to the auditors to review to make sure that we are lined up correctly for the end of year audits.

Speaker #4: I mean, actually, there is a note to that, to the effect in the annual report from 25 as well. So I mean.

Speaker #2: Just to add to that, Ray, that you're quite right. And as you know, in the conversations I've had with a few in the board, if I had the opportunity, I'd be buying 100%.

Speaker #1: Yeah.

Simon Phillips: Yeah.

Ray Bench: Question regarding shares. Are your board and CEO buying further shares? I can certainly speak for myself in terms of a NED that I have invested my own money, as have the other NEDs as well. From the executive side, Simon, I think, well, I will not put words in your mouth, but you have extended to me your desire to want to buy shares, but there are limitations in place at the moment regarding The Takeover Panel, so you cannot do that since you are the concert party. Actually, there is a note to that to the effect in the annual report from 1925 as well.

Speaker #2: But it requires a whitewash. And it requires and due to the regulations over the 30% concert party, it appears not possible. But frankly, if I could, I would.

Speaker #4: From the executive side, Simon, I think you well, I won't put words in your mouth, but you've sort of extended to me your desire to want to buy shares.

Speaker #2: Because you only have to look at the business at the moment. And you look at the underlying performance of the business. If you take out what we've been sadly impacted on with this with the Mexican SAT office and Morelli.

Speaker #4: But obviously, there are limitations in place at the moment regarding the takeover panel. So you cannot do that since you're as a concert party.

Speaker #4: I mean, actually, there is a note to that to the effect in the annual report from 25 as well. So I mean.

Speaker #2: And it's sound. It's as sound as it ever has been. And I think when you look at the execution from the management team, to be able to build effectively shift 40% of revenue to a new factory to launch all these new programmes, to build a fully sort of integrated agentic AI system within the business within 16 months.

Simon Phillips: Just to add to that, Ray, you are quite right. As you know, in the conversations I have had with a few on the board, if I had the opportunity, I would be buying 100%. But it requires a whitewash, and due to the regulations over the 30% concert party, it appears not possible, but frankly, if I could, I would, because you only have to look at the business at the moment, and you look at the underlying performance of the business if you take out what we have been sadly impacted on with the Mexican SAT office and Marelli, and it is sound. It is as sound as it ever has been.

Speaker #1: Just to add to that, Ray, that you're quite right. And as you know, in the conversations I've had with a few in the board, if I had the opportunity, I'd be buying 100%.

Speaker #1: But it requires a whitewash. And it requires and due to the regulations over the 30% concert party, it appears not possible. But frankly, if I could, I would.

Speaker #1: Because you only have to look at the business at the moment. And you look at the underlying performance of the business if you take out what we've been sadly impacted on with this with the Mexican SAT office and Morelli.

Speaker #2: I mean, there is nothing wrong with that. The business is performing exceptionally well. It's just sadly, it's the implications about having on a cash squeeze where this 4.5 million and this 6.2 million of that is hitting us.

Speaker #1: And it's sound. It's as sound as it ever has been. And I think when you look at the execution from the management team—to be able to effectively shift 40% of revenue to a new factory, to launch all these new programmes, to build a fully sort of integrated agentic AI system within the business within 16 months.

Speaker #4: Okay. We've been on. So fingers estimate that approximately 70 to 80% of the FY26 PBT must be earned in H2. What precise operational and financial assumptions give the board confidence that this can be achieved?

Simon Phillips: I think, when you look at the execution from the management team, to be able to build, effectively shift 40% of revenue to a new factory to launch all these new programs, to build a fully integrated agentic AI system within the business within 16 months, there is nothing wrong with that. The business is performing exceptionally well. It is just, sadly, it is the implications we are having on the cash squeeze where this 4.5 million and this 6.2 million of VAT is hitting us.

Speaker #2: Okay. Really, you've got to step it back a little bit. And say that the reason why 70 to 80% has become greater is because of our profitability at this point in time.

Speaker #1: I mean, there is nothing wrong with that. The business is performing exceptionally well. It's just sadly, it's the implications about having a cash squeeze where this 4.5 million and this 6.2 million of that is hitting us.

Speaker #2: But if you actually take out the cash flow impacts, then it would have been more like on a 60/40 split. If we had assumed that we'd achieved 4.0.

Speaker #4: Historically, isn't it?

Speaker #4: Okay, we've been on. So, fingers estimate that approximately 70 to 80% of the FY26 BBT must be earned in H2. What precise operational and financial assumptions give the board confidence that this can be achieved?

Ray Bench: Okay. Moving on. Singer estimates that approximately 70% to 80% of the FY26 PBT has been earned in H2. What precise operational and financial assumptions give the board confidence that this can be achieved?

Speaker #2: Yeah. Which is a lot more normal historically. So this was always the case. Of what the management had set out in the year, we expected a stronger second half performance.

Speaker #2: And that's largely down to the fact that a lot of the operational launch costs are out of the way. So I mean, if you can imagine it, I mean, you're gearing a plant up from something like 27 injection mold machines to 60.

Speaker #1: Okay. Really, you've got to step it back a little bit and say that the reason why 70 to 80% has become greater is because of our profitability at this point in time.

Simon Phillips: Well, you have to step it back a little bit and say that the reason why 70% to 80% have come greater is because of our profitability at this point in time. But if you actually take out the cash flow impacts, then it would have been more like on a 60/40 split if we had assumed that we had achieved full results.

Speaker #2: You're building a paint plant. You're introducing 35 new production lines. That is a monumental task, to do in that. And that sort of level of speed.

Speaker #1: But if you actually take out the cash flow impacts, then it would have been more like on a 60/40 split. If we had assumed that we'd achieved 4 million dollars.

Speaker #2: And there's a lot of costs associated with it. We're flying engineers around from China, from India, from different locations that are staying in hotels.

Ray Bench: More normal historically, isn't it?

Speaker #4: Historically, isn't it?

Simon Phillips: Yeah, which is a lot more normal historically. This was always the case of what the management had set out in the year. We expected a stronger second half performance, and that is largely down to the fact that a lot of the operational launch costs are out the way. If you can imagine it, you are gearing a plant up from something like 27 injection molding machines to 60. You are building a paint plant. You are introducing 35 new production lines. That is a momentous task to do in that sort of level of speed. There is a lot of costs associated with it. We are flying engineers around from China, from India, from different locations. They are staying in hotels, they are on the lines because the customers are there on the lines launching these new products. It takes a lot of engineering resource to push that through.

Speaker #1: Yeah, which is a lot more normal historically. So this was always the case. Of what the management had set out in the year, we expected a stronger second half performance.

Speaker #2: They're on the lines. Because the customers are there on the lines launching these new products. And so it takes a lot of engineering resources to push that through.

Speaker #1: And that's largely down to the fact that a lot of the operational launch costs are out of the way. So, I mean, if you can imagine it, you're gearing a plant up from something like 27 injection-mold machines to 60.

Speaker #2: Those costs were baked into the first half of the year. So they unwind into the second half of the year. But then the second half of the year, like I mean, just like as an example, I'm here in Mexico at the moment.

Speaker #2: And I'm seeing all firsthand. We've got at least 10 new production lines that are just launching new Ford programmes, which all start to push through in October.

Speaker #1: You're building a paint plant. You're introducing 35 new production lines. That is a monumental task. To do in that. And that sort of level of speed.

Speaker #2: And so from a management accounting perspective, we expect higher revenue in the second half. That improves gross profit, fixed costs reduce basically down to the operational costs of the startup starting to fall away.

Speaker #1: And there are a lot of costs associated with it. We're flying engineers around from China, from India, from different locations, and they're staying in hotels.

Speaker #1: They're on the lines. Because the customers are there on the lines launching these new products. And so it takes a lot of engineering resources to push that through.

Speaker #2: So it was always the case of that was our expectation.

Speaker #4: Okay. Next couple of questions are actually linked. I think we've covered some of it already. But let's just go back over it. So how much of the half one cost over and is contractually recoverable from customers?

Speaker #1: Those costs were baked into the first half of the year. So they unwind into the second half of the year. But then the second half of the year, like I mean, just like as an example, I'm here in Mexico at the moment.

Simon Phillips: Those costs were baked into the H1 of the year, so they unwind into the H2 of the year. But in the H2 of the year, just as an example, I am here in Mexico at the moment and I am seeing it all firsthand. We have at least 10 new production lines that are just launching new Ford programs, which will start to push through in October. So from a management accounting perspective, we expect higher revenue in the H2. That improves gross profit. Fixed cost was reduced basically down to the operational costs, the startup starting to fall away. So it was always the case of that was our expectation.

Speaker #4: How much has already been agreed? And when will the cash actually be received?

Speaker #1: And I'm seeing it all firsthand. We've got at least 10 new production lines that are just launching new Ford programmes, which all start to push through in October.

Speaker #2: Yeah. So I mean, the main cost overrun is the price negotiation with Morelli. And we have meetings set up later this week, next week.

Speaker #1: And so from a management accounting perspective, we expect high revenue in the second half. That improves gross profit, fixed costs reduce basically down to the operational costs of the startup starting to fall away.

Speaker #2: And then we can try and understand when we can receive that cash back into the business. So I can't be precise about that at this point in time.

Speaker #2: When that cash will come through. The things that is non-recoverable is things like what we saw in terms of exercise freight. A certain amount of the labor costs, which is due to the inefficiencies of the cash squeeze that we've been going through.

Speaker #1: So it was always the case of that was our expectation.

Speaker #4: Okay, the next couple of questions are actually linked. I think we've covered some of this already, but let's just go back over it. So, how much of the half one cost overrun is contractually recoverable from customers?

Ray Bench: Okay. Next couple of questions are actually linked. I think we have covered some of it already, but let us just go back over it. So how much of the H1 cost overrun is contractually recoverable from customers? How much has already been agreed, and when will the cash actually be received?

Speaker #4: How much has already been agreed? And when will the cash actually be received?

Speaker #2: And the storage costs where you have containers stuck in ports waiting to be cleared out. It's sad to say that those are those are the direct impacts of the of what's happened with regards to Morelli's Chapter 11.

Speaker #1: Yeah. So I mean, the main cost over on is the price negotiation with Morelli. And we have meetings set up later this week, next week.

Simon Phillips: Yeah. The main cost overrun is the price negotiation with Marelli. We have meetings set up later this week, next week, and then we can try and understand when we can receive that cash back into the business. So I cannot be precise about that at this point in time when that cash will come through.

Speaker #1: And then we can try and understand when we can receive that cash back into the business. So I can't be precise about that at this point in time.

Speaker #2: And what's been going on for the Mexican VAT office.

Speaker #1: And that cash will come through. But the things that are non-recoverable are things like what we saw in terms of excess freight, and a certain amount of the labor costs, which is due to the inefficiencies of the cash squeeze that we've been going through.

Speaker #4: Okay. So I think you've answered the second part of that question there. We're talking about freight. So next question is the August broker report says that the Mexico inefficiencies have been identified and fixed.

Ray Bench: Sure.

Simon Phillips: The things that is non-recoverable is things like what we saw in terms of exercise, freight, a certain amount of labor cost, which is due to the inefficiencies of the cash squeeze that we have been going through, and the storage costs where you have containers stuck in ports waiting to be cleared out. It is sad to say that these are the direct impacts of what has happened with regards to Marelli's Chapter 11 and what has been going on with the Mexican SAT office.

Speaker #4: What measurable evidence supports that statement? And when did Mexico begin operating at the required efficiency level? I think actually, this perhaps leads into the meticious ious discussion as well in terms of how you can measure parts of the business.

Speaker #1: And the storage costs where you have containers stuck in ports waiting to be cleared out. It's sad to say that those are those are the direct impacts of the of what's happened with regards to Morelli's chapter 11.

Speaker #2: Yeah. I mean, to be clear, we had some inefficiencies at the beginning past year. When you're down supply chain management errors and supply chain management errors in terms of all the materials that kind of thing leads into material shortages, which then leads into labor cost efficiency issues relating to overtime and stuff like that in Mexico.

Speaker #1: And what's been going on with the Mexican SAT office?

Speaker #4: Okay. So I think you've answered the second part of that question there with talking about freight. So next question is the August broker report says that the Mexico inefficiencies have been identified and fixed.

Ray Bench: Okay. I think you've answered the second part of that question there with talking about freight. Next question is the August broker report says that the Mexico inefficiencies have been identified and fixed. What measurable evidence supports that statement? When did Mexico begin operating at the required efficiency level? I think actually this perhaps leads into the Metis discussion as well in terms of how you can measure parts of the business.

Speaker #2: But with Metis, what we have done is we have taken out the human element right away through production planning, supply chain. At the moment, within the business itself, operationally as it stands at the moment, there's roughly about 22 agentic AI agents operating in the business.

Speaker #4: What measurable evidence supports that statement? And when did Mexico begin operating at the required efficiency level? I think actually, this perhaps leads into the meticious discussion as well in terms of how you can measure parts of the business.

Speaker #1: Yeah. I mean, to be clear, we had some inefficiencies at the beginning past year. Mainly down to supply chain management errors and supply chain management errors in terms of all the materials that kind of thing leads into material shortages, which then leads into labor cost efficiency issues relating to overtime and stuff like that in Mexico.

Simon Phillips: Yeah. To be clear, we had some inefficiencies at the beginning part of the year, mainly down to supply chain management errors and supply chain management errors in terms of ordering materials. That kind of thing leads into material shortages, which then leads into labor cost efficiency issues relating to overtime and stuff like that in Mexico. With Metis, what we have done is we have taken out the human element right the way through production planning, supply chain. At the moment, within the business itself, operationally as it stands at the moment, there's roughly about 22 agentic AI agents operating in the business, making sure that humans can no longer make errors. It's just not possible anymore.

Speaker #2: Making sure that humans can no longer make errors. It's just not possible anymore. I mean, these agents are working 24/7, checking with suppliers, checking that materials coming on time, checking where ships are in the water ready to be delivered at ports, doing all the production planning, making sure that works all as a creative and efficient way that production is planned in an efficient way through the factory itself.

Speaker #1: But with Meticious, what we have done is we have taken out the human element right away through production planning and supply chain. At the moment, within the business itself, operationally as it stands at the moment, there are roughly about 22 agentic AI agents operating in the business.

Speaker #2: And this is all great stuff. And actually, it goes to improve gross profit margin, not just now, but into the future. But I think the question is slightly wrong in some ways, really.

Speaker #2: Because Mexican plant is not inefficient right now. It's capable of achieving our expected gross profit margins. The only thing that has stopped us from doing that is the cash squeeze.

Speaker #1: Making sure that humans can no longer make errors—it's just not possible anymore. I mean, these agents are working 24/7, checking with suppliers, checking that materials are coming on time, checking where ships are in the water, ready to be delivered at ports.

Simon Phillips: These agents are working 24/7, checking with suppliers, checking that material is coming on time, checking where ships are in the water ready to be delivered at ports, doing all the production planning, making sure that works orders are created in an efficient way, that production is planned in an efficient way through the factory itself. This is all great stuff and actually it goes to improve gross profit margin, not just now, but into the future. I think the question is slightly wrong in some ways for you, because the Mexican plant is not inefficient right now. It's capable of achieving our expected gross profit margins. The only thing that has stopped us from doing that is the cash squeeze. What Metis is doing is going to improve it further into the future.

Speaker #2: What Metis is doing is going to improve it further into the future.

Speaker #4: So I guess just to reiterate that, the next question is probably asking the same question. So after including the launch costs and inefficiencies incurred to date, are the new Mexican programmes still expected to deliver the originally targeted lifetime margins and returns on capital?

Speaker #1: Doing all the production planning, making sure that works all as a creative and efficient way that production is planned in an efficient way through the factory itself.

Speaker #1: And but this is all great stuff. And actually, it goes to improve gross profit margin, not just now, but into the future. But I think the question is slightly wrong in some ways, really, inefficient right now.

Speaker #2: I think this one can be just simply calculated in the numbers themselves. Because I think if you just take the first half numbers and you remove the one-off impacts due to what we've been seeing in cash shortage, the answer is apparent.

Speaker #1: It's capable of achieving our expected gross profit margins. The only thing that has stopped us from doing that is the cash squeeze. What Meticious is doing is going to improve it further into the future.

Speaker #2: The gross profit margins in line with expectations.

Speaker #4: Okay. Moving on. So a single continues to forecast the gross margin of approximately 30% for FY26 and 27. Is that still a realistic structural margin after the half one issues?

Speaker #4: So I guess just to reiterate that the next question is probably asking the same question. So after including the launch cost and inefficiencies incurred to date, are the new Mexican programmes still expected to deliver the originally targeted lifetime margins and returns on capital?

Ray Bench: I guess just to reiterate that, the next question is probably asking the same question. After including the launch costs and inefficiencies incurred to date, are the new Mexican programs still expected to deliver their originally targeted lifetime margins and returns on capital?

Speaker #4: And what gross margin is required in half two to achieve the FY26 PBT forecast?

Speaker #2: So first of all, when you look at the gross profit margin flowing into FY27, our basic assumptions on that is that the speed of recovery that we're putting in place on the SAT office means that the cash unwinds and that we should not be seeing the sort of cash concerns we've had to be forced into seeing this year.

Speaker #1: I think this one can be just simply calculated in the numbers themselves. Because I think if you just take the first half numbers and you remove the one-off impacts due to what we've been seeing in cash shortage, the answer is apparent.

Simon Phillips: I think this one can be just simply calculated in the numbers themselves, because I think if you just take the H1 numbers and you remove the one-off impacts due to what we've been seeing in cash shortage, the answer is apparent. The gross profit margin is in line with expectations.

Speaker #1: The gross profit margins in line with expectations.

Ray Bench: Okay. Moving on. Singer continues to forecast a gross margin of approximately 30% for FY 26 and 27. Is that still a realistic structural margin after the H1 issues? What gross margin is required in H2 to achieve the FY 26 PBT forecast?

Speaker #4: Okay. Moving on. So a single continues to forecast the gross margin of approximately 30% for FY26 and 27. Is that still a realistic structural margin after the half one issues?

Speaker #2: If that's the case and that's in place, then the gross profit margins will flow. But that's apparent both this year and in our business modeling looks out towards next year.

Speaker #4: And what gross margin is required in H2 to achieve the FY26 PBT forecast?

Speaker #2: When it comes to the gross profit margin, the exact numbers for the H2 to be able to hit the target, I mean, to be honest with you, I would have to look at the maths on the P&L.

Speaker #1: So first of all, when you look at the gross profit margin flowing into FY27, our basic assumptions on that is that the speed of recovery that we're putting in place on the SAT office means that the cash unwinds and that we should not be seeing the sort of cash concerns we've had to be forced into seeing this year.

Simon Phillips: Well, first of all, when you look at the gross profit margin flowing into FY 27, our basic assumptions on that is that the speed of recovery that we're putting in place on the SAT office means that the cash unwinds, and that we should not be seeing sort of cash concerns we've had to be forced into seeing this year. If that's the case and that's in place, then the gross profit margins will flow. That's apparent both from this year and in our business modeling looks out towards next year. When it comes to the gross profit margin, the exact numbers for H2 to be able to hit the target, to be honest with you, I would have to look at the maths on the P&L. It's not something that I know exactly to mind at the moment.

Speaker #2: It's not something that I know exactly to mind at the moment.

Speaker #4: Okay. Some other questions that are coming through as well. So can you explain why your largest customer being in Chapter 11 is not a concern for future customer demand?

Speaker #1: If that's the case and that's in place, then the gross profit margins will flow. But that's apparent both this year and in our business modeling looks out towards next year.

Speaker #2: Is it because Morelli, with regards to future customer demand, because Morelli doesn't dictate customer demand. Customer demand is dictated through the OEMs to Morelli and then Morelli to us.

Speaker #1: But when it comes to the gross profit margin, the exact numbers for the H2 to be able to hit the target, I mean, to be honest with you, I would have to look at the maths on the P&L.

Speaker #2: So whilst Morelli are in Chapter 11, the one thing that Morelli can't do is dictate customer demand. They can't. There's no customer. None of our OEMs that are going to start slowing down production when they can sell cars because Morelli, for example, might have some financial issues, which is stopping them from producing goods.

Speaker #1: It's not something that I know exactly off the top of my head at the moment.

Speaker #4: Okay. Some other questions that are coming through as well. So can you explain why your largest customer being in chapter 11 is not a concern for future customer demand?

Ray Bench: Okay. Some other questions that are coming through as well. Can you explain why your largest customer being in Chapter 11 is not a concern for future customer demand?

Speaker #2: They'll just support.

Speaker #4: Okay. What was the value of the temporary Mexican inventory build at the 30th of June? And how much was subsequently unwind? And when will stock return to normal levels?

Simon Phillips: Because with regards to future customer demand, Marelli doesn't dictate customer demand. Customer demand is dictated through the OEMs to Marelli and then Marelli to us. While Marelli are in Chapter 11, the one thing that Marelli can't do is dictate customer demand. There's no customer, none of our OEMs that are going to start slowing down production when they can sell cars because Marelli, for example, might have some financial issues which is stopping them from producing goods. They'll just stop.

Speaker #1: Is it because Morelli, with regards to future customer demand—because Morelli doesn't dictate customer demand. Customer demand is dictated through the OEMs to Morelli, and then Morelli to us.

Speaker #2: Good question. I mean, and this is what compiles things slightly harder on the cash flow front. So we increased our stock holding in Mexico by about 1.4 million US dollars.

Speaker #1: So whilst Morelli are in chapter 11, the one thing that Morelli can't do is dictate customer demand. They can't. There's no customer. None of our OEMs that are going to start slowing down production when they can sell cars because Morelli, for example, might have some financial issues, which is stopping them from producing goods.

Speaker #2: But the main reason why we started to do that, and it can be seen it's evident from the bar charts that we saw in the first half of the year, is that the sort of geopolitical issues that occurred with the Straits Hall moves, which then started delaying containers coming into ports, within the auto industry, you simply can never, ever be late on delivering a part.

Speaker #1: They'll just support.

Speaker #4: Okay. What was the value of the temporary Mexican inventory build at the 30th of June? And how much was subsequently unwound? And when was stock returned to normal levels?

Ray Bench: Okay. What was the value of the temporary Mexican inventory build at 30 June? How much was subsequently unwound? When will stock return to normal levels?

Speaker #2: You cannot be the company that starts stopping a production line in an OEM. So if you have a ship en route and let's say the freight forwarders are telling you that it's going to dock on time and everything else, and then as a result of the geopolitical issues, they then turn around and they say that it's two weeks off.

Speaker #1: Good question. I mean, and this year is what compiles things slightly harder on the cash flow front. So we increased our stock holding in Mexico by about main reason why we started to do that, and it can be seen it's evident from the bar charts that we saw in the first half of the year, is that the sort of geopolitical issues that occurred with the Straits Hall moves, which then started delaying containers coming into ports, within the auto industry, you simply can never, ever be late on delivering a part.

Simon Phillips: Good question. This year is what compiles things slightly harder on the cash flow front. We increased our stockholding in Mexico by about $1.4 million. The main reason why we started to do that, and it can be seen, it's evident from the bar charts that we saw in the H1 of the year, is that the geopolitical issues that occurred with the Straits of Hormuz, which then started delaying containers coming into ports. Within the auto industry, you simply can never, ever be late on delivering a part. You cannot be the company that starts stopping a production line in an OEM.

Speaker #2: There is only one choice in a situation like that, which is to get parts on planes from China or Japan, wherever the supply chains are, and get that product into the factory.

Speaker #2: So the way that we could truly sort of mitigate those severe risks was to increase our stock, which is what we've done. Now, what I would say is this, is that the vast majority of that 1.4 million dollars' worth of stock, it was actually quite large painted components that are coming in from subsuppliers in China.

Speaker #1: You cannot be the company that starts stopping a production line in an OEM. So if you have a ship en route and let's say the freight forwarders are telling you that it's going to dock on time and everything else, and then as a result of the geopolitical issues, they then turn around and they say that it's two weeks off.

Simon Phillips: If you have a ship on route, and let's say the freight forwarders are telling you that it's going to dock on time and everything else, and then as a result of the geopolitical issues, they then turn around and they say that it's two weeks off. There is only one choice in a situation like that, which is to get parts on planes from China or Japan, wherever the supply chains are, and get that product into the factory. The way that we could truly mitigate those severe risks was to increase our stock, which is what we've done. Now, what I would say is this, the vast majority of that $1.4 million worth of stock, it was actually quite large painted components that are coming in from sub-suppliers in China.

Speaker #2: That was one of the specific reasons why the paint plant was built in Mexico, to eliminate that supply chain risk. And obviously, to increase the margins within the business as a result of no longer having to pay the container costs to ship these goods.

Speaker #1: There is only one choice in a situation like that, which is to get parts on planes from China or Japan, wherever the supply chains are, and get that product into the factory.

Speaker #1: So, the way that we could truly sort of mitigate those severe risks was to increase our stock, which is what we've done. Now, what I would say is this: the vast majority of that $1.4 million worth of stock was actually quite large, painted components that are coming in from sub-suppliers in China.

Speaker #2: And also to achieve the margins that the painting suppliers in China are currently doing. So with regards to the unwinding of it, I know that Graham, our COO, has been doing a lot of work on this alongside Angel.

Speaker #2: And I would imagine most of that would be unwound by the end of this year. So that's another cash advantage for us going forward.

Speaker #1: That was one of the specific reasons why the paint plant was built in Mexico, to eliminate that supply chain risk. And obviously, to increase the margins within the business as a result of no longer having to pay the container costs to ship these goods.

Simon Phillips: That was one of the specific reasons why the paint plant was built in Mexico, to eliminate that supply chain risk, and obviously to increase the margins within the business as a result of no longer having to pay the container costs to ship these goods, and also to achieve the margins that the painting suppliers in China are currently doing. With regards to the unwinding of it, I know that Graham, our COO, has been doing a lot of work on this alongside Anshul, and I would imagine most of that would be unwound by the end of this year. That is another cash advantage for us going forward.

Speaker #4: So it's a slightly complicated question. Not complicated. It's kind of loaded that perhaps. Does management still expect the FY26 equity-free cash flow of approximately 2.2 million and year-end net debt, excluding leases of 6.3 million, and if so, what working capital releases required in H2?

Speaker #1: And also to achieve the margins that the painting suppliers in China are currently doing. So with regards to the unwinding of it, I know that Graham, our COO, has been doing a lot of work on this alongside Angel.

Speaker #2: Yeah. I mean, I think maybe this question's come in post the post our presentation. So I think our presentation explains it quite well. I mean, really, I would love it to be like that, but the reality is, is that we're expecting net debt to be at about 15 million by the end of the year.

Speaker #1: And I would imagine most of that would be unwound by the end of this year. So that's another cash advantage for us going forward.

Speaker #2: And quite honestly, where does the 15 million sit? It sits purely in the Mexican SAT. I mean, the Mexican SAT by the end of the year could be as high as 8.5 million.

Speaker #4: So there's a slightly complicated question, not complicated, convoluted that perhaps. Does management still expect the FY26 equity-free cash flow of approximately 2.2 million and year-end net debt, excluding leases of 6.3 million, and if so, what working capital releases required in H2?

Ray Bench: There is a slightly complicated question, not complicated, convoluted perhaps. Does management still expect the FY26 equity free cash flow of approximately USD 2.2 million and year-end net debt excluding leases of USD 6.3 million? If so, what working capital release is required in H2?

Speaker #2: Take it off 15 million, we're bang where we need to be. So that's the worst-case scenario, I'd say. But obviously, we're trying to be pushing in these six applications at a time so that we pull that money in a lot faster.

Speaker #1: Yeah. I mean, I think maybe this question's come in post the post our presentation. So I think our presentation explains it quite well. I mean, really, I would love it is, is that we're expecting net debt to be at about 15 million by the end of the year.

Simon Phillips: Yeah. I think maybe this question has come in post our presentation, because I think our presentation explains it quite well. I would love it to be like that, but the reality is that we are expecting net debt to be at about USD 15 million by the end of the year. Quite honestly, where does the USD 15 million sit? It sits purely in the Mexican SAT. The Mexican SAT by the end of the year could be as high as USD 8.5 million. Take it off USD 15 million, we are bang where we need to be. That is the worst-case scenario, I would say. But obviously, we are trying to be pushing in these six applications at a time so that we pull that money in a lot faster.

Speaker #2: Now, within our cash flows, we've made the assumption that the SAT runs to the maximum period of time, which is about 100 days. And that's hence why Angel is sort of reducing the expectation in the cash flow.

Speaker #1: And quite honestly, where does the $15 million sit? It sits purely in the Mexican SAT. I mean, the Mexican SAT by the end of the year could be as high as $8.5 million.

Speaker #2: But on our side, we are trying to we've been having regular meetings with the SAT office now. We've been explaining the implications of what has gone on and how that's impacting us as a business.

Speaker #1: Take it off 15 million, we're bang where we need to be. So that's the worst-case scenario, I'd say. But obviously, we're trying to be pushing in these six applications at a time so that we pull that money in a lot faster.

Speaker #2: And so therefore, we've been asking them to try to ensure that we see a turnaround of like 60 days, in which case there'll be an improvement sooner.

Speaker #4: Okay. Question actually about the Mexican paint facility. So it's really asking about what annual cost savings working capital reductions and margin benefit with the Mexican paint facility produce, and when will it reach normal utilization?

Speaker #1: Now, within our cash flows, we've made the assumption that the SAT runs to the maximum period of time, which is about 100 days. And that's hence why Angel is sort of reducing the expectation in the cash flow.

Simon Phillips: Now, within our cash flows, we have made the assumption that the SAT runs for the maximum period of time, which is about 100 days, and that is hence why Andrew is sort of reducing the expectation in the cash flow. But on our side, we are trying our best. We have been having regular meetings with the SAT office now. We have been explaining the implications of what has gone on and how that is impacting us as a business. Therefore, we have been asking them to try to ensure that we see a turnaround of 60 days, in which case there will be an improvement to that.

Speaker #1: But on our side, we are trying to we've been having regular meetings with the SAT office now. We've been explaining the implications of what has gone on and how that's impacting us as a business.

Speaker #2: Okay. So normal utilization actually almost complete utilization will occur within October. And if you think when we first started looking at the Mexican paint facility, to be fair, we thought it was going to cost about 2.4 million, and there was an overrun on the development because customers wanted additional technologies put into it, which took up to about an extra 600,000.

Speaker #1: And so therefore, we've been asking them to try to ensure that we see a turnaround of like 60 days, in which case there'll be an improvement sooner.

Ray Bench: Okay. Question actually about the Mexican paint facility. It is really asking about what annual cost savings, working capital reductions, and margin benefits would the Mexican paint facility produce, and when will it reach normal utilization?

Speaker #2: But excuse me. When we did the initial 2.4 million investment plan, the ROI on it was 18 months. So that gives you a bit of an idea.

Speaker #1: Okay. So normal utilization actually almost complete utilization will occur in October. And if you think when we first started looking at the Mexican paint facility, to be fair, we thought it was going to cost about 2.4 million, and there was an overrun on the development because customers wanted additional technologies put into it, which took up to about an extra 600,000.

Simon Phillips: Okay. Normal utilization, actually almost complete utilization, will occur in October. When we first started looking at the Mexican paint facility, to be fair, we thought it was going to cost about USD 2.4 million, and there was an overrun on the development because customers wanted additional technologies put into it, which took it up to about an extra USD 600,000. But excuse me. When we did the initial USD 2.4 million investment plan, the ROI on it was 18 months. So that gives you a bit of an idea. That is how much, once it is flowing, how much it is going to improve gross profit margin from the business. So we expect it to impact and improve gross profit margin to the tune of about USD 1.8 million a year. That is the expectation.

Speaker #2: That's how much once it's flowing. How much it's going to improve sort of gross profit margin within the business. So we expect it sort of impact and improve gross profit margins as soon as about 1.8 a year.

Speaker #2: 1.8 million. That's the expectation.

Speaker #4: Okay. Next question, which is probably the easiest for me to answer actually, is please provide a year-by-year bridge showing how the 47 million of annualized program wins secured in FY25 converts into revenue during FY26, FY27, and FY28.

Speaker #1: But excuse me, when we did the initial 2.4 million investment plan, the ROI on it was 18 months. So that gives you a bit of an idea.

Speaker #4: Now, clearly, if we were to provide that, then that would be given a very clear steer in terms of future year revenue forecast, which is not actually for us to do.

Speaker #1: That's how much once it's flowing. How much it's going to improve sort of gross profit margin from the business. So we expect it sort of like impact and improve gross profit margin to tune about 1.8 a year, 1.8 million.

Speaker #4: That's something that the analyst notes would normally do having looked at the business plan of the company. What I would say, though, is that the majority of those contracts are due to land in 27 and 28.

Speaker #4: So again, those revenues that are detailed within the analyst notes will reflect those contract wins in the same way that they also reflect the wastage of old programs coming out of productions.

Speaker #1: That's the expectation.

Speaker #4: Okay, next question, which is probably the easiest for me to answer actually, is: Please provide a year-by-year breakdown showing how the £47 million of annualized program wins secured in FY25 converts into revenue during FY26, FY27, and FY28.

Ray Bench: Okay. Next question, which is probably the easiest of which to answer actually is, please provide a year-by-year bridge showing how the USD 47 million of annualized program wins secured in FY25 converts into revenue during FY 26, FY 27, and FY 28. Clearly, if we were to provide that, then that would be giving a very clear steer in terms of future year revenue forecast, which is not actually for us to do. That is something that the analyst notes would normally do, having looked at the business plan of the company. What I would say, though, is that the majority of those contracts are due to land in 2027 and 2028. So again, those revenues that are detailed within the analyst notes will reflect those contract wins in the same way as they also reflect the wastage of old programs coming out of production.

Speaker #4: So some of the contract wins sort of luck supplement the contracts that are expiring, and some of it is genuine revenue growth. And that comes through into the forecasts that get published by the singers.

Speaker #4: Now, clearly, if we were to provide that, then that would give a very clear steer in terms of future-year revenue forecasts, which is not actually for us to do.

Speaker #4: That's something that the analyst notes would normally do, having looked at the business plan of the company. What I would say, though, is that the majority of those contracts are due to land in '27 and '28.

Speaker #4: Next question is if customer recoveries are delayed or Mexico improvement is slower than expected, what is the realistic downside range for FY26 adjusted PPT cash flow and net debt?

Speaker #4: And so again, those revenues that are detailed within the analyst notes will reflect those contract wins in the same way that they also reflect the wastage of old program coming out of productions.

Speaker #4: So I think we covered this actually in the slide earlier in the deck, basically saying that the prudence of review that we've taken as a board is to take pretty much that worst-case scenario.

Speaker #4: That bottom boundary is no recoveries, which obviously gives an issue in terms of cash as well, which knocks onto the efficiency of the business as it runs.

Ray Bench: Some of the contract wins sort of supplant the contracts that are expiring, and some of it is genuine revenue growth, and that comes through into the forecasts that get published by the year by Singer. Next question is, if customer recoveries are delayed or Mexico improvement is slower than expected, what is the realistic downside range for FY 26 adjusted PBT cash flow and net debt? I think we covered this actually in the slide earlier in the deck, basically saying that the prudent view that we have taken as a board is to take pretty much that worst-case scenario. The bottom boundary is no recoveries, which obviously gives an issue in terms of cash as well, which knocks on to the efficiency of the business as it runs. Clearly, that is also modeled out as a worst case in terms of the cash flow and the net debt.

Speaker #4: Clearly, that's also modeled out as a worst-case in terms of the cash flow and the net debt. It's not our view that that will come to pass, but that's what causes the lower boundary in that forecast.

Speaker #4: Next question is if customer recoveries are delayed or Mexico improvement is slower than expected, what is the realistic downside range for FY26 adjusted PPT cash flow and net debt?

Speaker #4: Moving to the other questions that we've got. Interesting one that we've perhaps should address this. So there's a question that's come through actually on a couple of people.

Speaker #4: So, I think we covered this actually in the slide earlier in the deck, basically saying that the prudent sort of view that we've taken as a board is to take pretty much that worst-case scenario.

Speaker #4: I think it's is there a plan to announce a permanent CFO? So I think, again, I'd reiterate the comments that you made earlier, Simon, about the existing sort of finance team and the building the depth of that.

Speaker #4: That bottom boundary is no recoveries, which obviously gives an issue in terms of cash as well, which knocks onto the efficiency of the business as it runs.

Speaker #4: I think at the last IMC meet strategy that we had, we said that as a board, we're open-minded in terms of acquiring more talent.

Ray Bench: It's not our view that will come to pass, but that's what causes the lower boundary in that forecast. Moving through the other questions that we've got. Interesting one that we perhaps should address. There's a question that's come through, actually, on a couple of people, I think it is there a plan to announce a permanent CFO? I think, again, I'd reiterate the comments that you made earlier, Simon, about the existing finance team and building the depth of that. I think at the last high-end lead strategy that we had, we said that as a board, we are open-minded in terms of acquiring more talent, but also pointed out that finding experienced CFOs that were conversant within the automotive sector and understood businesses of this complexity are not easy to find. There's not a huge manufacturing base left in the UK to pull from.

Speaker #4: But also pointed out that finding experienced CFOs that were fully conversant within the automotive sector and understood businesses of this complexity. And not easy to find.

Speaker #4: Moving through the other questions that we've got, here's an interesting one that we should perhaps address. There's a question that's actually come through from a couple of people.

Speaker #4: So there's not a huge manufacturing sort of base left in the UK to pull from. Not that it's limited to the UK. We keep an open mind.

Speaker #4: I think it's, is there a plan to announce a permanent CFO? So I think, again, I'd reiterate the comments that you made earlier, Simon, about the existing sort of finance team and building the depth of that.

Speaker #4: If talent is available, we'd clearly consider it. Looking also at the growth strategy of the business and how that could support it. So again, genuinely, the board keeps an open mind to this.

Speaker #4: I think at the last finance meet strategy that we had, we said that as a board, we're open-minded in terms of acquiring more talent.

Speaker #4: And if we find a perfect fit candidate, we'd certainly look at it in detail. Moving on to others. That's flowing through here. So comment here about I can't see any updated note from your broker singers.

Speaker #4: But also pointed out that finding experienced CFOs that we fully converted within the automotive sector and who understood businesses of this complexity is not easy to find.

Speaker #4: So there's not a huge manufacturing sort of base left in the UK to pull from. It's not that it's limited to the UK. Keep an open mind.

Speaker #4: Is there any reason why, or can I say that there is an updated note that came out from singers? First thing this morning. If that can't be found through the normal sort of route, it should be available through research tree.

Ray Bench: Not that it's limited to the UK. We keep an open mind. If talent is available, we'd clearly consider it, looking also at the growth strategy of the business and how that could support it. Again, genuinely, the board keeps an open mind to this, and if we find the perfect candidate, we'd certainly look at it in detail. Moving on to others that are flowing through here. A comment here about, I can't see any updated note from your broker, Singer. Is there any reason why? All I can say is that there is an updated note that came out from Singer first thing this morning. That can't be found through the normal route. It should be available through Research Tree. I think there's normally a couple of days lag, but it will certainly be available. Have you seen net debt evolving, particularly post-year end?

Speaker #4: If talent is available, we'd clearly consider it. Looking also at the growth strategy of the business and how that could support it. So again, genuinely the board keeps an open mind to this.

Speaker #4: I think there's normally a couple of days lag, but it will certainly be available. How do you see net debt evolving particularly post-year end?

Speaker #4: And if we find a perfect fit candidate, we'd certainly look at it in detail. Moving on to others. They're flowing through here. So a comment here about I can't see any updated note from your broker singers.

Speaker #4: So I think, again, we sort of covered that to the end of this year. I think, Simon, if you've got any views of the trajectory of net debt through 27.

Speaker #2: I think we certainly discussed it at the board meeting. And obviously, we unwind the Mexican VAT, which brings us back to the position where we expected to be.

Speaker #4: Is there any reason why? Or can I say that there is an updated note that came out from singers first thing this morning? If that can't be found through the normal sort of route, it should be available through research tree.

Speaker #2: Then post that situation, where we're into a situation where the business is generating the sort of level of cash that we expected to be.

Speaker #4: I think there's normally a couple of days lag, but it will certainly be available. How do you see net debt evolving particularly post-year end?

Speaker #2: And there's one of the models we were looking at was having sort of very limited net debt by the end of the year, somewhere in the region of like $4 million.

Speaker #4: So I think again, we sort of covered that to the end of this year. I think Simon, if you've got any views of the trajectory of net debt through 27.

Ray Bench: I think, again, we sort of covered that to the end of this year. I think, Simon, if you've got any views of the trajectory of net debt through 2027?

Speaker #2: But as we discussed really where I think at the board meeting is that having net debt at that low levels would give them the sort of profitability side and the scale of the business, I think the real sort of question is, is just ensuring that liquidity is good?

Simon Phillips: I think we certainly discussed it at the board meeting, and obviously we unwind the Mexican VAT, which brings us back to the position where we expect it to be. Then post that situation where we're into a situation where the business is generating the sort of level of cash that we expect it to be. And one of the models we were looking at was on having sort of a limited net debt by the end of the year, somewhere in the region of $4 million. But as we discussed, really, where I think at the board meeting is that having net debt at that low levels, given the sort of profitability side and the scale of the business, I think the real question is just ensuring that liquidity is good because we've seen firsthand, right, this year what liquidity does to a business.

Speaker #1: I think we certainly discussed it at the board meeting. And obviously, we unwind the Mexican VAT, which brings us back to the position where we expected to be.

Speaker #2: Because we've seen firsthand, right, this year what liquidity does to a business. And on that basis, I'm more of the view of sort of maintaining a bit more debt to ensure that liquidity is good.

Speaker #1: Then post that situation, where we're into a situation where the business is generating the sort of level of cash that we expected to be.

Speaker #1: And there's one of the models we were looking at was having sort of a limited net debt by the end of the year, somewhere in the region of like $4 million.

Speaker #2: Because as we've seen when liquidity gets tight, it has profound impacts on the P&L.

Speaker #1: But as we discussed earlier, I think at the board meeting is that having net debt at that low levels would give them the sort of profitability side and the scale of the business.

Speaker #4: So next question again, referring back to Morelli. It's been one of our largest customers, our CTA working to diversify as far as possible away from that level of Morelli exposure.

Speaker #1: I think the real question is just ensuring that liquidity is good, because we've seen firsthand this year what liquidity does to a business.

Speaker #2: Yeah. And that is something that we're working on. In fact, Morelli's percentage has dropped quite a lot this year compared to previous years. And as people have seen in terms of our new business, or we spoke about with regards to our new business strategy and what we're working on, we are diversifying into many more OEMs.

Ray Bench: Yeah.

Speaker #1: And on that basis, I'm more of the view of sort of maintaining a bit more debt to ensure that liquidity is good. Because as we've seen, when liquidity gets tight, it has profound impacts on the P&L.

Simon Phillips: On that basis, I am more of the view of maintaining a bit more debt to ensure that liquidity is good because as we have seen, when liquidity gets tight, it has profound impacts on the P&L.

Speaker #2: And our expectation is to grow that down to something more like about 20 to 25 percent in the coming years.

Speaker #4: So, next question—again referring back to Morelli. It's been one of our largest customers. Are CTA working to diversify as far as possible away from that level of Morelli exposure?

Ray Bench: Next question, again, referring back to Marelli as it has been one of our largest customers. Are CT Automotive working to diversify as far as possible away from that level of Marelli exposure?

Speaker #4: I've got a question then about contracts coming to an end, which I sort of think are covered by saying that, yeah, we've got natural wastage of programs that come to an end after they're five, six, seven years, but then they get replaced by new business just to maintain the revenue level.

Speaker #1: Yeah. I mean, and that is something that we're working on. In fact, Morelli's 70-ish ish has dropped quite a lot this year compared to previous years.

Simon Phillips: Yeah, that is something that we are working on. In fact, Marelli's percentage has dropped quite a lot this year compared to previous years. As people have seen in terms of our new business, or we spoke about with regards to our new business strategy and what we are working on, we are diversifying into many more OEMs. Our expectation is to grow that down to something more like about 20% to 25% in the coming years.

Speaker #1: And as people have seen in terms of our new business, or we spoke about with regards to our new business strategy and what we're working on, we are diversifying into many more OEMs.

Speaker #4: And then obviously, the new business that comes on top of that grows it. So I think that's answered. So a quick look through to make sure we've covered everything else that's come through that we can answer today.

Speaker #1: And our expectation is to grow that down to something more like about 20 to 25 percent in the coming years.

Speaker #4: I think we probably have. So I guess at that point, Charlie, I think you've perhaps would ask us to make a final few words.

Ray Bench: There is a question then about contracts coming to an end, which I sort of think are covered by saying that, yeah, we have got natural wastage of programs that come to an end after their five, six, seven years, but then they get replaced by new business, just to maintain the revenue level and then obviously the new business that goes on top of that grows it. So I think that is answered. Just doing a quick look through to make sure we have covered everything else that has come through that we can answer today. I think we probably have. So I guess at that point, Charlie, I think you perhaps would ask us to make a final few words.

Speaker #4: I have a question then about contracts coming to an end, which I sort of think are covered by saying that, yeah, we've got natural wastage of programs that come to an end after they're five, six, seven years, but then they get replaced by new business.

Speaker #3: Yes. Thank you for updating investors today. But like you said, can we please just ask you, Simon, for some closing comments?

Speaker #2: Yeah. I mean, thinking about the closing comments, I would say it's the business has performed. I know it sounds difficult looking at the numbers, but the business has performed exceptionally.

Speaker #4: Just to maintain the revenue level, and then obviously the new business that goes on top of that grows it. So I think that's answered.

Speaker #4: So, a quick look through to make sure we've covered everything else that's come through that we can answer today. I think we probably have.

Speaker #2: I mean, we have launched multiple new programs at paces that people thought were impossible. Six months within what's normally two and a half years has been six months.

Speaker #2: We've grown that business to like 40% of the company's revenue. I've been here myself personally near enough the whole year in Mexico. I look at how those lines are operating, how efficiently and everything else they can deliver the gross profit margin.

Speaker #4: So I guess at that point, Charlie, I think you've perhaps would ask us to make a final few words.

Speaker #2: Yes, thank you for the update versus today. But, like you said, can we please just ask you, Simon, for some closing comments?

[Company Representative] (Investor Meet Company): Yes. Thank you for updating investors today. Can we just ask you, Simon, for some closing comments?

Charlie Barker: Yes. Thank you for updating investors today. Can we just ask you, Simon, for some closing comments?

Speaker #2: The difficulty is this whole year can be pointed to some simple single factors. I mean, obviously, it was the Morelli chapter 11 and the impacts from the 4.5 million.

Speaker #1: Yeah. I mean, thinking about the closing comments, I would say it's the business has performed. I know it sounds difficult looking at the numbers, but the business has performed exceptionally.

Simon Phillips: Yeah. Thinking about the closing comments, I would say the business has performed. I know it sounds difficult looking at the numbers, but the business has performed exceptionally. We have launched multiple new programs at paces that people thought were impossible. Six months within what's normally 2 and a half years, it's been 6 months. We've grown that business to 40% of the company's revenue. I've been here myself personally near enough the whole year in Mexico. I look at how those lines are operating, how efficiently and everything else they can deliver the gross profit margin. The difficulty is this whole year can be pointed to some simple, single factors. Obviously, it was the Marelli Chapter 11 and the impacts from the 4.5 million and the SAT office, particularly their new rules this year, which has impacted not just us, has impacted most exporters within Mexico.

Speaker #2: And the SAT office particularly, their new rules this year, which is impacted not just us, has impacted most exporters within Mexico. That, unfortunately, has created a bit of a cash squeeze.

Speaker #1: I mean, we have launched multiple new programs at paces that people thought were impossible. Six months within what's normally two and a half years has been six months.

Speaker #2: And sadly, what I tend to see is that a lot of the management spending a lot of time prioritizing what materials to bring in to keep lines running.

Speaker #1: We've grown that business to like 40% of the company's revenue. I've been here myself personally near enough the whole year in Mexico. I look at how those lines are operating, how efficiently and everything else they can deliver the gross profit margin.

Speaker #2: And when those materials don't come in, those lines then have to run at weekends on overtime, and that incurs cost. And that's exactly what we've been seeing.

Speaker #1: The difficulty is this whole year can be pointed to some simple single factors. I mean, obviously, it was the Morelli Chapter 11 and the impacts on the 4.5 million, and the SAT office particularly their new rules this year, which is impacted not just us.

Speaker #2: Premium phrasing costs. With the new AI systems that we've built with regards to the VAT, that will unwind that situation incredibly fast. I think on top of everything else, what the company's done in terms of expanding that Mexico plan, launching these programs at speed, what has been built with what the team now of 10 with Metis EI that are joined to KI system, I believe we'll be one of the, if not the most advanced systems-based business in the world by November.

Speaker #1: It's impacted most exporters within Mexico. That, unfortunately, has created a bit of a cash squeeze. And sadly, what I tend to see is a lot of the management spending a lot of time prioritizing what materials to bring in to keep lines running.

Simon Phillips: That unfortunately has created a bit of a cash squeeze. Sadly, what I tend to see is a lot of the management spending a lot of time prioritizing what materials to bring in to keep lines running. When those materials don't come in, those lines then have to run at weekends on overtime, and that incurs costs, and that's exactly what we've been seeing, premium freight costs. With the new AI systems that we've built with regards to the VAT, that will unwind that situation incredibly fast. I think on top of everything else, what the company's done in terms of expanding that Mexico plant, launching these programs at speed, what has been built with the team now of 10 with Metis AI, the agentic AI system, I believe we'll be one of the, if not the most advanced systems-based business in the world by November.

Speaker #1: And when those materials don't come in, those lines then have to run on weekends on overtime, and that incurs costs. And that's exactly what we've been seeing.

Speaker #2: And these are huge achievements from the management team that the problem is, and it disappoints me to have to tell you this to the shareholders, is that it's just unfortunate about those two factors.

Speaker #1: Premium phrasing costs. With the new AI systems that we've built with regards to the VAT, that will unwind that situation incredibly fast. I think on top of everything else, what the company's done in terms of expanding that Mexico plan, launching these programs at speed, what has been built with what the team now of 10 with Metis EI that are joined to KI system, I believe we'll be one of the, if not the most advanced systems-based business in the world by November.

Speaker #2: That have impacted our cash. But we are mitigating them. We're working through them. And we've got clear plans to recover that situation. And then I think it's business as usual.

Speaker #2: And it is business as usual because when you look at the P&L, you see that. It's just those two things that are impacting us.

Speaker #2: So just to say, thank you to all you guys for coming on to listen to us. Thanks to the management team for what's been the incredible year of change.

Speaker #1: And these are huge achievements from the management team that the problem is, and it disappoints me to have to tell you this to the shareholders, is that it's just unfortunate about those two factors.

Simon Phillips: These are huge achievements from the management team. The problem is, and it disappoints me to have to tell you this to the shareholders, is that it's just unfortunate about these two factors that have impacted our cash. We are mitigating them. We're working through them, and we've got clear plans to recover that situation. Then I think it's business as usual, and it is business as usual because when you look at the P&L, you see that. It's just those two things that are impacting us. Just to say thank you to all you guys for coming on to listen to us. Thanks to the management team for what's been an incredible year of change. That's it. That's me wrapped up.

Speaker #2: And that's it. That's me wrapped up.

Speaker #3: Perfect. Thank you, Simon and Ray for updating all those investors today. Can I please ask investors not to close the session as you now be automatically redirected to provide your feedback?

Speaker #1: That has impacted our cash, but we are mitigating these issues. We're working through them, and we've got clear plans to recover that situation. And then I think it's business as usual.

Speaker #1: And it is business as usual because when you look at the P&L, you see that. It's just those two things that are impacting us.

Speaker #1: So just to say, thank you to all you guys for coming on to listen to us. Thanks to the management team for what's been the incredible year of change.

Speaker #1: And that's it. That's me wrapped up.

[Company Representative] (Investor Meet Company): Perfect. Thank you, Simon and Ray, for updating all those investors today. Could I please ask investors not to close the session as you will now be automatically redirected to provide your feedback. On behalf of the management team of CT Automotive Group PLC, we would like to thank you for attending today's presentation, and good afternoon.

Charlie Barker: Perfect. Thank you, Simon and Ray, for updating all those investors today. Could I please ask investors not to close the session as you will now be automatically redirected to provide your feedback. On behalf of the management team of CT Automotive Group PLC, we would like to thank you for attending today's presentation, and good afternoon.

Speaker #2: Perfect. Thank you, Simon and Ray for updating all those investors today. Can I please ask investors not to close the session as you're now being automatically redirected to provide your feedback?

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Q2 2026 CT Automotive Group PLC Earnings Call

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