Surface Transforms PLC Trading and operations update (3164M)
11 January 2023 - 6:00PM
UK Regulatory
TIDMSCE
RNS Number : 3164M
Surface Transforms PLC
11 January 2023
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018.
Upon the publication of this announcement via the Regulatory
Information Service, this inside information is now considered to
be in the public domain.
11 January 2023
Surface Transforms plc
("Surface Transforms" or the "Company")
Pre close trading and operations update
Surface Transforms (AIM:SCE) manufacturers of carbon fibre
reinforced ceramic automotive brake discs, provides the following
pre close trading and operations update for the year to 31 December
2022 ("FY22").
Trading update
Revenue for FY22 grew 113% to GBP5.1m (2021: GBP2.4m). This is
less than previously guided, reflecting some highly specific, but
cumulatively significant, production issues at the Company in late
November and December as volumes were ramped up. The problem
furnaces are now operational but management wish to see several
weeks of consistent output before being comfortable to confirm that
the issue has been permanently resolved. In parallel, and as back
up, the Company is accelerating additional capacity for these
furnaces with the capacity on this process expected to double in
the next three months. The Company is also implementing a number of
increased resources, operational changes and developments to
facilitate the Company's expansion plans, including the recent
appointment of a Chief Operations Officer.
Whilst the Company was profitable in November, these production
issues resulted in the Company not being profitable in
December.
Gross cash as at 31 December 2022 was GBP14.9m (30 June 2022:
GBP6.7m). Other interest-bearing loans and asset finance totalled
GBP1.2m (30 June 2022: GBP1.8m). The previously notified GBP3.1m
letter of credit to a furnace manufacturer, has now been satisfied
and is no longer a liability.
The Company's final results for FY22 will be reported in April
2023 together with its Q1 2023 revenue. Q2 2023 revenue will be
announced in early July.
New capital equipment update
The Company repeats the statement made on 24 November that it
expects the planned Phase 2 doubling in capacity to GBP50m sales
p.a. to be operational in Q2 2023. The increase in capacity is
progressive and we expect some critical bottlenecks to be relieved
earlier than this. The implementation of Phase 3.1 capacity
increase to GBP75m p.a. sales is also on plan, with over GBP3m of
equipment orders (with deposits) placed since the fund raising and
the remainder of the project at advanced stages of commercial
discussions.
Outlook for 2023
Whilst acknowledging the significant impact these production
issues had in December, management are encouraged by production
levels in recent weeks and consequently, the Company is not
changing its guidance for 2023 and will be profitable. Management
has repeatedly emphasised its need for and focus on having
production resilience. In the first half of 2023 the Company will
be capacity constrained, not demand constrained. Furthermore,
Surface Transforms' customers are fully engaged in the actions we
have taken both to resolve the recent production issues and our
planned capacity increases and remain supportive.
Kevin Johnson (CEO) said : It is most frustrating to again be
reporting a production problem impacting our previous guidance. The
core issue is not the technical problems themselves, but the lack
of capacity to provide headroom when they occur. Technical problems
are part of the learning curve arising from a tenfold increase in
production rates, the key is to ensure that we have spare capacity
to recover the lost production after the problem has been solved.
The installation of Phase 2 capacity by Q2 will enable the Company
to get ahead of the continuingly strong customer demand and then,
with completion of Phases 3.1 and 3.2 capacity increases in the
following two years, to stay there."
For enquiries, please contact:
Surface Transforms plc
David Bundred, Chairman
Kevin Johnson, CEO
Michael Cunningham, CFO +44 151 356 2141
Zeus (Nominated Advisor and Joint Broker)
David Foreman / Dan Bate / James Edis (Investment
Banking)
Dominic King (Corporate Broking) +44 203 829 5000
finnCap Ltd (Joint-Broker)
Ed Frisby / Abigail Kelly (Corporate Finance)
Andrew Burdis / Barney Hayward (ECM) +44 20 7220 0500
About Surface Transforms
Surface Transforms plc. (AIM:SCE) develop and produce
carbon--ceramic material automotive brake discs. The Company is the
UK's only manufacturer of carbon--ceramic brake discs, and only one
of two mainstream carbon ceramic brake disc companies in the world,
serving customers that include major OEMs in the global automotive
markets.
The Company utilises its proprietary next generation Carbon
Ceramic Technology to create lightweight brake discs for
high--performance road and track applications for both internal
combustion engine and electric vehicles. While competitor
carbon--ceramic brake discs use discontinuous chopped carbon fibre,
Surface Transforms interweaves continuous carbon fibre to form a 3D
matrix, producing a stronger and more durable product with improved
heat conductivity compared to competitor products; this reduces the
brake system operating temperature, resulting in lighter and longer
life components with superior brake performance. These benefits are
in addition to the benefits of all carbon--ceramic brake discs vs.
iron brake discs: weight savings of up to 70%, longer product life,
consistent performance, reduced brake pad dust and corrosion
free.
For additional information please visit
www.surfacetransforms.com
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