REG - Surface Transforms - Interim Results and Trading Update
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RNS Number : 3354A Surface Transforms PLC 23 September 2025
23 September 2025
Surface Transforms plc
("Surface Transforms" or the "Company")
Interim results for the six months ended 30 June 2025 and trading update
Surface Transforms (AIM: SCE) manufacturers of carbon fibre reinforced ceramic
automotive brake discs, announces its unaudited interim results for the six
months ended 30 June 2025 ("H1 2025") and trading update.
Financial highlights:
• Revenue increased 72% to £8.1m (six months ended
30 June 2024 ("H1 2024"): £4.7m)
• Gross margin at 64% (H1 2024: 56%) improved due to higher
pricing and increased yield particularly in Q2 together with reductions in
the unit cost of manufacture
• Operating loss £5.2m (H1 2024: £7.4m)
• Loss before tax £5.6m (H1 2024: £7.6m)
• Cash at 30 June 2025 was £1.2m (31 December 2024:
£0.5m)
Q3 highlights:
• Paul Marr joins the Board as a Non-Executive
Director and Steve Harrison as Chief Financial Officer
• Q3 revenue expected to be c.£5.5m, and full year 2025 now
anticipated to be c.£20m, c.10% ahead of previous expectations
• Yield in Q3 is anticipated to be c.70% and has been
temporarily impacted by the introduction of new equipment and processes
directed towards capacity growth and efficiency. With the completion of these
projects, yield returned to Q2 levels of greater than 75% and we remain
focused on achieving our target of above 80% in Q4
• Cash remains in line with expectations and continues to be
tightly managed. The Board re-iterates it continues to expect gross cash at 31
December 2025 will be c.£1.0m
• Customer support continues but with a much-reduced cash
prepayment requirement as improving EBITDA reduces dependency
• Key capacity expansion projects are in line with
plan and expected to meet the growth needs for 2026
CEO statement
2025 continues to be a year of transformation both in terms of scaling up
production and improving processes. The business is making substantial
progress towards sustainable and profitable operations.
Output and revenue have improved significantly with expectations for the full
year now at c.£20 million, broadly 10% ahead of previous management guidance.
Our customers continue to be highly supportive and collaborate closely with
us. They understand the challenges of building capacity and achieving higher
yields and are encouraged by what they are observing with the improving output
and capacity.
Cash at 30 June 2025 stood at £1.2 million. Operational and working capital
needs continue to dominate utilisation of cash as we step up to deliver
customer orders. The Company is developing means to release cash tied up in
working capital through ongoing discussions with key customers and suppliers
to optimise payment terms and to drive down inventory levels.
New capacity update
Specific capacity upgrade projects to take the existing £20m manufacturing
capacity up to £50m manufacturing revenue capacity continue to form the
backbone of our investment programme. This will provide the further benefit of
additional resilience, by resolving a key risk from any single points of
failure.
Installation of an additional furnace, which alleviates the most significant
capacity constraint has been progressing throughout 2025. We expect the
furnace will be commissioned and supporting 2026 revenues and production
output.
We continue to draw down from our £13.2m ERDF loan which wholly supports the
investment in the £50m manufacturing revenue capacity programme.
Operations update
Q3 has maintained the foundations laid in Q2 and the Company's focus on
continuous improvement has seen the resolution of a number of technical
problems, further enhancements to our manufacturing resilience and reductions
in the bill of materials. However, the integration of new equipment and
processes has meant that average yield for the third quarter is expected to be
c.70% (Q2 2025: 77%). This is a necessary and anticipated temporary reduction
which ultimately allows the required capacity expansion and process
enhancement to occur. Further improvements linked to equipment and automation
are due to take root in Q4, with a yield of 80% the target for Q4.
Financial review
Revenue increased by 72% to £8.1 million in the first half of 2025, primarily
driven by growth in OEM customer sales. Gross margin increased slightly to 64%
due to higher pricing, improved yield and reductions in the unit cost of
manufacture, particularly in Q2.
Operating loss reduced to £5.2 million, primarily reflecting the increase in
gross profit as the underlying operating expenses rose only moderately (3.5%
year on year).
Cash at 30 June 2025 stood at £1.2 million, with working capital requirements
having been met by continued customer support in the form of a further £11.3
million of prepayments during H1 2025.
We continue with R&D to optimise our manufacturing operations, improve
yield, and reduce cost per disc. We believe these initiatives will position us
for sustainable growth and profitability in the future.
Planned capital expenditure of £3.8 million occurred in the period, primarily
aimed at delivering capacity and efficiency. £9.2 million ERDF facility had
been drawn down at 30 June 2025 and a further £1.9m to support our capital
investment programme has been drawn down as at the end of August. It is
envisaged that the £13.2m facility will be fully drawn down by 31 December
2025.
Summary
The business has a clear roadmap to profitable growth, anchored in awarded
contracts. H1 2025 saw the business operating scale production with resultant
improved revenues, particularly in the second quarter.
The strategic objectives of building further capacity and improving yield
remain crucial, but cautious steps forward are taking the business into a more
robust state.
Demand for our product remains strong and our customers are supportive. Cash
management remains critical, but the advent of positive EBITDA enables
self-funding to become attainable.
Board and Management
We are pleased to announce two appointments to the Board. Paul Marr as
Non-Executive Director and Steve Harrison as Chief Financial Officer.
Paul brings a wealth of experience in automotive manufacturing and is
well-versed in the key US market. He has already played a key role in an
advisory capacity with the Company so we are confident that his experience and
knowledge will assist us further.
Steve has been with the Company in an interim role since March 2025 and has
brought a steady control and clarity to our financial position. In becoming a
permanent addition Steve is ideally positioned to drive the Company towards a
financially sustainable position.
Outlook statement from the Chair
The continued focus on operational improvement and cash management has
underpinned the recovery we have delivered in the first half of 2025. There is
still much to improve on; however we are confident that we will slightly
exceed previous 2025 expectations. We now anticipate full year revenue will be
c.£20m, EBITDA to be broadly neutral in H2 2025and we continue to expect
gross cash at 31 December 2025 will be c.£1.0m.
Capacity improvements from the extensive investment program occurring in H2
2025 should provide a suitable platform for further growth in 2026 and beyond.
The support of our customers and the patience of our investors is greatly
appreciated. We hope to reward them with further improvements and deliver on
the opportunity of scale and profitability we believe exists.
For enquiries, please contact:
Surface Transforms plc +44 151 356 2141
Kevin Johnson CEO
Steve Harrision, CFO
+44 203 829 5000
Zeus (Nominated Adviser and Sole Broker)
David Foreman / James Edis (Investment Banking)
Dominic King (Corporate Broking)
About Surface Transforms
Surface Transforms plc. (AIM:SCE) develops and produces 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 cars 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.
The Company holds the London Stock Exchange's Green Economy Mark.
For additional information please visit www.surfacetransforms.com
(http://www.surfacetransforms.com/)
Statement of Total Comprehensive Income Six months ended Six months ended Year to 31 December 2024
30-Jun-25 30-Jun-24
Unaudited Unaudited
Audited
£'000 £'000 £'000
8,121 4,653
Revenue 8,243
Cost of sales (2,961) (2,065) (4,137)
Gross profit 5,160 2,588 4,106
Margin % 64% 56% 50%
10 7
Other income 516
Gross profit after other income 5,170 2,595 4,622
Administrative expenses:
Before research and development costs (3,181) (2,792)
(6,050)
Research and development costs (7,157) (7,195) (15,440)
Impairment of fixed assets (6,488)
Total administrative expenses (10,338) (9,987) (27,978)
Operating loss (5,168) (7,392) (23,356)
Financial income 65 57 148
Financial expenses (518) (257) (678)
Loss before tax (5,621) (7,592) (23,886)
Taxation 517 539 1,537
Loss for the year after tax (5,104) (7,053) (22,349)
Total comprehensive loss for the year attributable to members (5,104) (7,053)
(22,349)
Loss per ordinary share
Basic and diluted (0.39)p (1.28)p (2.31)p
As at Restated * As at As at
Statement of Financial Position 30-Jun-25 30-Jun-24 31-Dec-24
Unaudited Unaudited Audited
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 17,094 19,449 13,772
Intangibles 41 22 34
Contract fulfilment assets 365 323 422
Total non-current assets 17,500 19,794 14,228
Current assets
Inventories 6,911 5,356 5,376
Trade receivables 3,743 2,939 1,543
Other receivables 2,902 1,530 1,998
Contract assets 977 - 278
Tax receivable 1,848 1,735 1,331
Contract fulfilment assets 466 1,387 235
Cash and cash equivalents 1,248 4,983 462
Total current assets 18,095 17.930 11,223
Total assets 35,595 37,724 25,451
Current liabilities
Other interest-bearing borrowings (9,106) (3,676) (5,214)
Lease liabilities (374) (381) (390)
Trade and other payables** (19,103) (5,671) (7,524)
Total current liabilities (28,583) (9,728) (13,128)
Non-current liabilities
Government grants (154) (168) (161)
Lease liabilities (1,405) (1,799) (1,648)
Other interest-bearing borrowings (84) (298) (193)
Total non-current liabilities (1,643) (2,265) (2,002)
Total liabilities (30,226) (11,993) (15,130)
Net assets 5,369 25,731 10,321
Equity
Share capital 13,021 13,021 13,021
Share premium 66,793 66,811 66,799
Capital reserve 464 464 464
Retained loss (74,909) (54,565) (69,963)
Total equity attributable to equity shareholders of the company 5,369 25,731 10,321
*restatement according to IFRS15, as detailed in note 1.
** Trade and other payables is inclusive of customer advances of £12.9m (H1
2024: £nil)
Statement of Cash Flows Six months ended Restated * Six months ended Year to 31 December
30-Jun-25 30-Jun-24 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flow from operating activities
Loss after tax for the year (5,104) (7,054) (22,349)
Adjusted for:
Depreciation and amortisation charge 561 708 2,091
Impairment of assets - - 6,488
Non-government grant amortisation (7) (7) (13)
Equity settled share-based payment expenses 158 117 14
Foreign exchange (gains)/losses (13) 6 22
Financial expense 518 257 678
Financial income (65) (57) (148)
Taxation (517) (539) (1,537)
(4,469) (6,569) (14,754)
Changes in working capital
Increase in inventories (1,535) (887) (907)
Increase in trade and other receivables (3,104) (1,607) (678)
Increase in contract assets (699) - (278)
Increase in contract fulfillment assets (174) (366) 492
Increase/(decrease) in trade and other payables 10,733 (38) 691
752 (9,467) (15,434)
Taxation received - - 1,402
Net cash used in operating activities 752 (9,467) (14,032)
Cash flows from investing activities
Acquisition of tangible assets (2,989) (3,432) (4,253)
Acquisition of intangible assets (45) (24) (59)
Proceeds from disposal of property, plant and equipment 10
Interest received 65 57 148
Net cash used in investing activities (2,969) (3,399) (4,154)
Cash flows from financing activities
Proceeds from issue of share capital - 9,500 9,500
Costs for issue of share capital (6) (560) (571)
Payment of finance lease liabilities (269) (251) (438)
Proceeds from borrowings 3,798 3,393 4,950
Payments of interest bearing borrowings (105) (91) (316)
Interest paid (428) (200) (519)
Net cash generated from financing activities 2,990 11,791 12,606
Net increase/(decrease) in cash and cash equivalents 773 (1,075) (5,580)
Foreign exchange losses 13 (6) (22)
Cash and cash equivalents at the beginning of the period 462 6,064 6,064
Cash and cash equivalents at the end of the period 1,248 4,983 462
*restatement according to IFRS15, as detailed in note 1.
Statement of Changes in Equity for the six months ended 30 June 2025 Share capital Share premium account Capital reserve Retained Loss Total
£'000 £'000 £'000 £'000 £'000
Balance as at 31 December 2024 13,021 66,799 464 (69,963) 10,321
Loss for the period - - - (5,104) (5,104)
Total comprehensive income for the year - - - (5,104) (5,104)
Cost of issue to share premium (6) (6)
Equity settled share based payment transactions 158 158
Balance as at 31 December 2025 13,021 66,793 464 (74,909) 5,369
Notes
1. Accounting policies
The interim financial statements are the responsibility of the Directors and
were authorised and approved by the Board of Directors for issuance on 23(rd)
September 2025.
Basis of preparation
The Company is a public limited liability Group incorporated and domiciled
in England & Wales. The financial information is presented in Pounds
Sterling (£) which is also the functional currency. The Company's accounting
reference date is 31 December.
These interim results for the period ended 30 June 2025, which are not
audited; do not comprise statutory accounts within the meaning of section 435
of the Companies Act 2006. They have not been prepared in accordance with IAS
34, Interim Financial Reporting that is not mandatory for UK AIM listed
companies, in the preparation of this half-yearly financial report. While the
financial information included has been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS), as adopted by the UK adopted international accounting
standards, these interim results do not contain sufficient information to
comply with IFRS.
Full audited accounts of the Company in respect of the year ended 31 December
2024, which received an unqualified audit opinion and did not contain a
statement under section 498(2) or (3) (accounting record or returns
inadequate, accounts not agreeing with records and returns or failure to
obtain necessary information and explanations) of the Companies Act 2006 have
been delivered to the Registrar of Companies.
The accounting policies used in the preparation of the financial information
for the six months ended 30 June 2025 are in accordance with the recognition
and measurement criteria of IFRS as adopted by the UK adopted international
accounting standards and are consistent with those which will be adopted in
the annual statutory financial statements for the year ending 31 December
2025.
Prior Period Restatement as at 30 June 2024 - Revenue Recognition for System
Integration Services (IFRS 15):
In the 2024 audited accounts the Company refined its assessment and
presentation of contract fulfilment assets associated with certain contracted
system integration services, including engineering, testing, and tooling.
These services are now considered to form part of a single performance
obligation together with the manufacture and sale of brake discs. This
assessment reflects the fact that the integration services are highly
interrelated and interdependent with the manufacturing process. They serve as
essential inputs in delivering the bespoke product that the customer expects
and, therefore, are not separately identifiable under IFRS 15.
The impact of this change on revenue recognised in prior periods is
immaterial.
As a result of the change, the contract fulfilment asset is amortised over the
expected period in which the related brake disks will be delivered rather than
within one year which has impacted the presentation of the contract fulfilment
asset in the statement of financial position as at 30 June 2024 with £323k of
the contract fulfilment asset now being presented as a non-current asset
whereas in the prior year half year announcement the total balance of £1,708k
was presented as part of current assets. The prior year restatement has had no
impact on profit after tax and equity.
Deferred tax
Management estimation is required to determine the amount of deferred tax
assets recognised. This requires considering the likelihood and timing of
future taxable profits, along with potential tax planning strategies.
Currently, management has not recognised deferred tax assets exceeding the
recognised deferred tax liability.
Key judgements assessed by management are as follows:
Research and development expenditure
The Board considers the definitions of research and development costs as
outlined in IAS 38: Intangible Assets when determining the correct treatment
of costs incurred. Where such expenditure is technically and commercially
feasible, the Company intends and has the technical ability and sufficient
resources to complete development, future economic benefits are probable and
if the Company can measure reliably the expenditure attributable to the
intangible asset it is treated as development expenditure and capitalised on
the statement of financial position.
The Company has determined that it will continue to not capitalise intangible
assets at the half-year end and this decision is based on an ongoing
assessment of the criteria. A comprehensive review will be conducted to
determine whether the criteria for capitalisation have been met by the
year-end. The decision at the half-year end does not affect the Company's
overall financial position or operations.
Revenue Recognition for the provision of brake discs
For core manufacturing activities, where the primary activity is the sale of
manufactured carbon ceramic brake discs, revenue is typically recognised at a
point in time when control of the goods has passed to the customer, which
usually occurs upon dispatch of the goods. These contracts typically contain
only one performance obligation, which is the delivery of the goods. The
majority of revenue is currently recognised at a point in time, when the
control of the goods has passed to the buyer (usually on dispatch of the
goods). These contracts contain only one performance obligation being the
provision of the specified goods.
Revenue Recognition for System Integration Services (IFRS 15)
Contracted system integration services, such as engineering, testing, and
tooling are considered part of a single performance obligation together with
the manufacture of brake discs. The total transaction price, including any
consideration for integration services, is allocated to the expected number of
discs to be delivered under the contract. Revenue is recognized
proportionately as the control of the related brake discs is transferred to
customers.
Inventories
Inventories are stated at the lower of cost and net realisable value. In
determining the cost of raw materials and consumables the purchase price is
used. For work in progress and finished goods, cost is taken as production
cost.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Where parts of an item of property, plant
and equipment have different useful lives, they are accounted for as separate
items of property, plant and equipment.
Depreciation is charged to the statement of total comprehensive income on a
straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are as follows:
• Plant and
machinery 15 - 5 years
• Fixtures and
fittings 3 years
• Leasehold improvements
Over life of lease
• Buildings(right of
use) Over life of lease
• Land
n/a
Depreciation methods and useful lives are reviewed at each balance sheet date.
No depreciation is charged on assets classified as capital in progress.
Depreciation is charged once an asset is brought into use by the business.
Land is held at cost, subject to impairment charges.
2. Taxation
Analysis of credit in period
Six months Six months Twelve Months
ended ended ended
30-Jun 30-Jun 31-Dec
2025 2024 2024
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
UK Corporation tax
Adjustment in respect of prior years R&D tax allowance - (206) (206)
R&D tax allowance for current period (518) (333) (1,331)
(518) (539) (1,537)
The effective rate of tax for the period/year is lower than the standard rate
of corporation tax in the UK of 25%, principally due to losses incurred by the
Company.
The potential deferred tax asset relating to losses has not been recognised in
the financial statements because it is not possible to assess whether there
will be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted.
3. Loss per share
6months ended 30th June 6months ended 30th June 12months ended 31st Dec
Basic 2025 2024 2024
Loss after tax (£) (5,104,000) (7,053,000) (22,349,000)
Weighted average number of shares 1,302,072,638 551,357,372 968,516,673
Loss per share (pence) (0.39p) (1.28p) (2.31p)
Loss per ordinary share is based on the Company's loss for the financial
period of £5,104k (30 June 2024: £7,053k loss; 31 December 2024: £22,349k
loss). The weighted average number of shares used in the basic calculation is
1,302,072,638 (30 June 2023: 551,357,372; 31 December 2024: 968,516,673).
The calculation of diluted loss per ordinary share is identical to that used
for the basic loss per ordinary share. This is because the exercise of share
options would have the effect of reducing the loss per ordinary share and is
therefore not dilutive under the terms of International Accounting Standard 33
"Earnings per share".
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