REG - Surface Transforms - Trading and operations update

Surface TransformsAnnouncement

11/01/2023 07:00

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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 £5.1m (2021: £2.4m). 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 £14.9m (30 June 2022: £6.7m). Other
interest-bearing loans and asset finance totalled £1.2m (30 June 2022:
£1.8m). The previously notified £3.1m 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 £50m 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 £75m p.a. sales is also on plan, with over £3m 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                                            +44 151 356 2141

 David Bundred, Chairman

 Kevin Johnson, CEO

 Michael Cunningham, CFO

 Zeus (Nominated Advisor and Joint Broker)                         +44 203 829 5000

 David Foreman / Dan Bate / James Edis (Investment Banking)

 Dominic King (Corporate Broking)

 finnCap Ltd (Joint-Broker)                                        +44 20 7220 0500

 Ed Frisby / Abigail Kelly (Corporate Finance)

Andrew Burdis / Barney Hayward (ECM)

 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
(http://www.surfacetransforms.com)

 

 

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