REG - Surface Transforms - Trading Update

Surface TransformsAnnouncement

03/11/2023 07:15

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RNS Number : 2658S  Surface Transforms PLC  03 November 2023

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3 November 2023

  Surface Transforms plc

("Surface Transforms" or the "Company")

 

Trading update

 

Surface Transforms (AIM:SCE), manufacturer of carbon fibre reinforced ceramic
brake disc materials provides the following trading update for the ten months
to 31 October 2023 and revised outlook for the 2023 financial year.

Sales in the four months to 31 October 2023 were £3.0m bringing year-to-date
sales for the period to 31 October 2023 to £6.3m. Whilst October sales of
£1.0m was the best month of sales in 2023, it was lower than management had
previously budgeted.

The previously reported technical problems have now been overcome. However, we
continue to face some challenges in our production line, including single
points of failure and a learning curve on the maintenance of our new
equipment. These challenges, which are being resolved, are hindering us from
creating sufficient capacity resilience and are constraining our production
ramp up.

Consequently, the Company is prioritising new capacity on these single failure
points whilst building up work-in-progress buffer stocks to mitigate the
learning curves on key pieces of equipment unique to us. In parallel to these
actions, revised operating processes and training has been accelerated to deal
with improving maintenance of key pieces of equipment. The Company has also
made significant changes to Operations Management, including but not limited
to, the appointment of a new Chief Operating Officer, Stephen Easton.

Outlook

Output continues to increase, and as noted above October was the best sales
month in 2023 but not yet at the desired rate. In the light of these
challenges, the Company is now planning its cash needs and customer
commitments based on a shallower ramp and now expects to reach the required
rate of production in Q1 2024, later than previously forecast. As a result,
the Company is reducing its sales guidance for the year to December 2023 to
£8.6m. Overall, the outlook for 2024 to 2027 continues to remain very
positive reflecting contracts in series production and recent new business
announcements, with capacity being installed to fulfil these awards.

Progress on installing new capacity

The Company is continuing to install the capacity (capital expenditure of
approximately £8m in 2023 and £9m in 2024) required to both meet increasing
customer demand and providing the necessary resilience to overcome single
points of failure. The Company remains on course to have capacity equivalent
to £50m sales per year run rate in 2024 and for £75m sales run rate in 2025.
Additionally the Company is well advanced with its plans for the next phase
aimed at progressively providing £150m of sales capacity by 2027.

Potential loan finance

To finance its capital expenditure plans, the Company is in advanced
discussions on a £13m capital expenditure loan that would be released as new
capacity is expended in 2024 and 2025 but cannot be used for working capital
purposes. The outcome of these discussions is not certain but is expected to
conclude before the end of 2023. Success in securing the loan will enable the
Company to finish installing the current capacity build to £75m as well as
commencing the next stage of the capacity build towards £150m sales capacity;
however there remains the need to finance the working capital of the
significant sales increase over the next few years.

Kevin Johnson (Chief Executive Officer) said: "These ongoing production issues
are frustrating for all of us, particularly as the issues are not, in
themselves, insurmountable. The revision to our plan for 2023 both reflects
recent performance and provides certainty for our customers over the next six
months. Our customers continue to understand the issues we are facing with the
pace of the sales increase, as evidenced by the recent announcement of our
biggest ever nomination."

 

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/Barney Hayward (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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