REG - Surface Transforms - Q1 2024 sales and operations update

Surface TransformsAnnouncement

09/04/2024 07:00

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RNS Number : 7626J  Surface Transforms PLC  09 April 2024

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domain.

 

9 April 2024

 

Surface Transforms plc

("Surface Transforms" or "the Company")

 

Q1 2024 sales and operations update

 

Surface Transforms (AIM:SCE) manufacturer of carbon fibre reinforced ceramic
disc brake materials provides the following sales update for the three months
to 31 March 2024 and reconfirms unchanged sales guidance of £23m for the 2024
financial year.

 

Sales in the first quarter were £3.0m. The sales trend for the last five
quarters have therefore been 2023 Q1 £1.4m, Q2 £1.9m, Q3 £2.0m and Q4
£3.0m followed by Q1 £3.0m in 2024. Accepting that £3m maintains our run
rate rather than increases it in Q1 2024 and was lower than our internal
target, sales in March 2024 were £1.5m. Furthermore, significant improvements
in the underlying operational performance led by Stephen Easton, Chief
Operations Officer, have also been achieved. The single point of failure
capacity constraints have now, almost all, been resolved, the revised
maintenance procedures and continuing operator training have significantly
improved plant availability, and performance.

 

The prime remaining operational challenge relates to continuing high levels of
scrap from processes that are not yet fully capable. Again we regard these
issues as a learning curve and note, that considerable success has been
achieved in recent weeks in reducing scrap. We expect to continue these
improvements over the coming months unlocking further capacity.

 

The Company has now agreed revised 2024 delivery schedules with all customers
that progressively pull back arrears. We are broadly keeping to these
schedules and the customer situation is stable.

 

Progress on installing new capacity

 

The programme is proceeding to plan. We expect all but one of the furnaces for
our £50m sales p.a to be on site by mid-year. The issue with the last furnace
relates to our site expansion rather than the machine itself. The protracted
negotiations regarding the site expansion have now been concluded enabling the
last furnace to progress.

 

Our customers have taken great comfort that the financing for our capital
expenditure programmes in 2024 and 2025 has been secured and ring fenced by
the terms of our local authority loan.

 

Capacity increases can also be achieved by internal work on already installed
furnaces which over time can be substantial. The Company has a number of these
projects underway; they are progressing well and form part of 2024 capacity
contingency plans.

 

Forthcoming results announcement and further updates

 

Our 2023 audit is ongoing, and we expect to announce our preliminary results
in late May, at which point a further update on trading will be provided.

 

Outlook

 

We are maintaining sales guidance of £23m for the year ending 31 December
2024. However the scrap problems in particular have absorbed a sizeable amount
of working capital and cash. The Board are assessing options to address this
short term issue.

 

Board changes

 

David Bundred, Chairman has confirmed that after 12 years on the Board, he
intends to retire from this role in 2024. A search process has now started led
by Julia Woodhouse who has taken over Chair of the Remuneration and
Nominations Committee. Further updates will be provided in due course.

 

Kevin Johnson, CEO said: "Our priority in Q1 was a combination of fixing the
underlying fundamentals and continuing to improve customer relationships.
 Our customers have been kept fully informed of progress and remain
committed.  The team has also made significant progress on the key challenges
of building capacity and reducing scrap which is critical to continuing our
ramp up and driving revenue growth during 2024 and 2025. Our commitment to
building up production capacity, this year and beyond remains absolute."

 

 

For enquiries, please contact:

 

 Surface Transforms plc                                           +44 151 356 2141
 David Bundred, Chairman
 Kevin Johnson CEO

 Isabelle Maddock CFO

 Zeus (Nominated Adviser and Joint Broker)                        +44 203 829 5000
 David Foreman / Dan Bate / James Edis (Investment Banking)
 Dominic King (Corporate Broking)

 Cavendish Capital Markets Ltd (Joint Broker)                     +44 20 7220 0500
 Ed Frisby / Abigail Kelly (Corporate Finance)
 Andrew Burdis / Harriet Ward (ECM)

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)

 

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