REG - Surface Transforms - Year end results and Notice of AGM
10/06/2025 07:00
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RNS Number : 0962M Surface Transforms PLC 10 June 2025
Surface Transforms plc
("Surface Transforms" or the "Company")
Full year results for year ended 31 December 2024 and Notice of AGM
Surface Transforms (AIM:SCE), manufacturers of carbon fibre reinforced ceramic
automotive brake discs, is pleased to announce its audited results for the
twelve months ended 31 December 2024.
Financial highlights
· Revenue increased by 13% to £8.2m (2023 : £7.3m), due to a 21%
increase in disc sales
· Gross margin of 50% (2023 : 57%), reduction due to movement in
product mix towards customers with higher future volumes
· Net research costs pre-capitalisation of £15.4m (2023 : £12.9m)
due to extensive programme of initiatives to improve manufacturing efficiency
and yields
· Impairment of fixed assets of £6.5m (2023 : £9.2m)
· Loss after taxation was £22.3m (2023 : £19.6m)
· Loss per share of 2.31p (2023 : 7.92p)
· Cash used in operating activities of £14.0m (2023 : £10.3m)
· Cash as at 31 December 2024 of £0.5m (2023 : £6.1m)
· £9.5m equity placing and open offer to support ongoing working
capital needs in the year
· £5.1m ERDF loan advanced to fund capital investment
Customer highlights
· Six multi-year OEM contracts in series production
· Customers have been highly supportive through direct funding of
working capital and operational expertise, which has continued into 2025
· Confidence in our business and desire for our product remains
high
Operational highlights
· Extensive programme of technical, personnel and process changes
in the year to reduce equipment down time and scrap rates
· Capital investments of £6.2m (2023 : £9.1m) in the year
· Capacity constraints progressively reduced with built volumes 29%
higher than prior year, which has continued in 2025 year to date
· Focused on improving yield and process capability of all
operations
Board changes
· David Bundred retired as Chairman on 16 Sept 2024
· Ian Cleminson appointed as Interim Chairman on 6 November 2024
and Chairman on 20 May 2025
· Post year-end, Isabelle Maddock announced her intention to retire
as CFO and Steve Harrison joined as interim CFO (non-board director) on 17
March 2025
Posting of Annual Report and Notice of Annual General Meeting
The Company's Annual Report and Accounts for the year ended 31 December 2024,
together with a notice convening the Company's Annual General Meeting ("AGM")
will be posted to shareholders today and will be available on the Company's
website www.surfacetransforms.com (http://www.surfacetransforms.com) .
The AGM will be held at 98 King Street, Manchester M2 4WU on 22 July 2025 at
11.00 a.m.
For further information, please contact:
Surface Transforms plc +44 151 356 2141
Ian Cleminson, Chairman
Kevin Johnson, CEO
Zeus (Nominated Adviser and Broker) +44 203 829 5000
David Foreman / James Edis / Ed Beddows (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
Chairman's Statement
2024 proved to be another difficult year which was dominated by the challenge
of delivering consistent volume production with yields that would result in a
viable and profitable operating model. Progress was frustratingly slow and
resulted in a funding requirement leading the Company to raise fresh equity in
May 2024 and seek financial and operational support from key customers post
November 2024.
Against this backdrop the customer base has been hugely supportive, and the
business has shown incredible resolve. Fundamentally however, the performance
has just not been good enough and shareholders are right to be disappointed.
Sales Progress
The Company grew modestly; 13% year on year revenue growth. Similar to prior
periods, the business experienced demand levels beyond its available supply.
Progress on Operations
The inability to deliver higher production volumes stems from three broad
categories:
· an inability to achieve the target yield from current capacity;
· failure to deliver a consistent and repeatable process; and
· delays in installing capacity.
As the Company scaled production, mechanical and material science issues
emerged with upgraded or new equipment that were not apparent during the
development phase resulting in excessive down time and low yields. Since the
year end, operational efficiency and consistency has seen a continued
improvement, driven by equipment upgrades, improved processes, and the impact
of operational support from customers.
The Company is executing a capital investment program totalling £13.2
million, funded through ERDF support, aimed at enhancing the manufacturing
process. This investment is pivotal to achieving a sustainable and profitable
operating model. It underpins the Company's ability to meet projected demand,
drive down operating costs, improve production yields, and realise sustainable
cash flows.
As at 31 December 2024, £5.1 million of the programme had been deployed. The
remaining £8.2 million is expected to be spent over the course of 2025,
weighted towards H1 with full spend anticipated by year-end. This programme
will address future capacity limitations, positioning the Company to meet its
commercial and operational objectives with greater efficiency and resilience.
Personnel
The transition to full-scale production has continued to place significant
demands on our team. As with any period of sustained operational change, the
resulting pressure has led to notable staff churn, which, while disruptive at
times, has also created opportunities to strengthen the organisation.
Attracting and integrating skilled professionals across key technical
disciplines, including mechanical, electrical, and heat treatment engineering,
as well as maintenance is key to building depth and resilience. In parallel,
we have expanded our quality and operations teams and invested in the
development of senior management to support the evolving demands of the
business. Again, customer operational support post November 2024 has been
pivotal to the improvement we are now realising. A key focus for the Board
this year has been investing in our people, with a particular emphasis on
leadership development through external support.
Progress with customers
During the year we ensured that all customers were kept fully informed of our
operational difficulties and ability to deliver products at volume. The major
customers have been hugely supportive, offering both financial and operational
assistance. Beyond these major customers, we are maintaining our customer base
of small niche vehicle builders ("Near OEMs") as they offer a degree of
flexibility in our operational planning and have only a marginal impact on
capacity in a market segment that is growing and larger than we previously
believed.
Strategic discussions on commercial agreements specifying multi- year volumes
and prices as well as customer manufacturing support, received through
prepayments (£11.9m at 31 May 2025) are well advanced.
Current trading and outlook
The Board expects 2025 financial performance to reflect continued growth, as
production capacity and yield rise as a result of improvements made throughout
the organisation. The issues (previously reported) of inconsistent yield in
Q1-25 continues to be addressed with resultant improvements in Q2-25.
Management intend to report on the output for H1-25 on or before the Annual
General Meeting on 22 July 2025, where this can be discussed directly with
shareholders.
Summary
There is no doubt 2024 has been a year of disappointment and frustration.
Despite this the support of customers has been incredibly strong and reflects
the high value placed on our product and technology. The financial and
operational assistance that has been forwarded to the Company has been both
welcomed and key to any progress made.
Since November 2024 the Board has been focused solely on operational
improvement and cash management. We are starting to see sustainable
improvements in output, yield and quality that gives us a degree of confidence
that 2025 will be a much better year. While there remains a lot still to do we
are encouraged that a pivotal change has occurred.
Finally I want to thank all the employees for their dedication to the Company
in what has been a highly stressful period and shareholders for their patience
and support.
Financial Review
Revenue
Revenue increased 13% to £8.2m in 2024, driven by a 21% increase in discs
sold in the period.
Movement toward meeting the higher volume, but lower price, OEM's rather than
small dealer sales meant the unit price fell slightly.
Gross margin
Gross profit margin decreased to 50% due to the above shift in product mix and
costs incurred in efforts to improve capacity and yield.
Other Income
During the year, we recognised £0.5 million in other income relating to the
resolution of a historical equipment supply matter. While specific details
remain confidential under the terms of the agreement, this represents a
partial recovery in respect of the matter reported in the prior year.
Overheads
Administrative expenses rose 11% to £6.0 million in 2024, up from £5.4
million in 2023. The increase was primarily driven by a combination of
factors, including increases in audit-related fees and additional spend on
external expertise to support technical accounting and disclosure
requirements. Further increases arose from higher legal fees across a variety
of matters and elevated repairs and maintenance costs.
Our continued commitment to research and development (R&D) remains a key
driver of innovation and future growth. During the year, pre-capitalisation
R&D expenditure increased by £2.5 million to £15.4 million (2023: £12.9
million). Investment was primarily directed towards process and equipment
development, the resolution of technical challenges, and the establishment of
repeatable processes for higher-volume production. As these development
hurdles are progressively overcome, it is expected that the level of spend
will reduce.
During the year, we recognised an accelerated depreciation charge of £0.6
million following a review of the useful economic lives of certain assets.
This reflects the Group's transition to newer technologies and the associated
replacement of older generation equipment. The adjustment aligns with our
capital investment strategy and ensures our asset base continues to reflect
its operational utility and future economic benefits.
In accordance with IAS 38 Intangible Assets, no R&D costs were capitalised
during the year in relation to the development of our layered products because
it was not possible to demonstrate how the development costs will generate
future economic benefits using the principles of IAS 36 Impairment of Assets.
See Note 4 for details of the impairment assessment for the related CGU
performed at 31 December 2024.
Impairment
As part of our annual financial review, the Company conducted an impairment
assessment in accordance with IAS 36. Based on a value-in- use analysis
reflecting management's current expectations of future performance, an
impairment charge of £6.5 million has been recognised in the year (2023 :
£9.2 million), allocated on a pro-rata basis across all non-current asset
categories, including fixed assets, intangible assets, and contract fulfilment
assets.
The assessment reflects updated forecasts and a risk-adjusted view of
operational delivery and performance timing. While the impairment reduces the
carrying value of certain assets, management continues to view the asset base
as integral to the Company's ability to fulfil customer contracts and support
future revenue generation.
Further details, including key assumptions and sensitivity analysis, are
provided in Note 4 to the financial statements.
Net loss
Net loss in the year (after taxation) £22.3m (2023 £19.6m).
Cash Flow
Gross cash at the year-end was £0.5m (2023: £6.1m), supported by a £9.5m
fundraising to facilitate working capital growth. In addition, £1.6m of cash
advances were received from a key customer during the final quarter of the
year to further support working capital. Customer support has continued into
2025 including further working capital funding, increased pricing and funded
manufacturing expertise. At the time of writing, positive discussions with key
customers regarding further support remain ongoing.
Balance Sheet
Inventories increased by £0.9m and trade and other receivables rose by
£0.7m, reflecting higher activity levels. Contract fulfilment assets
decreased by £0.7m as costs held on the balance sheet were released in line
with the transfer of related goods and services to the customer (see Note 15
for further details). Trade and other payables increased by £1.9m, which
included a cash advance received from a key customer.
Equity
During the year, the Company successfully raised £9.5 million in equity
funding to support working capital requirements. Despite this, after the net
loss of £22.3m, net assets decreased by £13.4m
Loans
In December 2023, the Company secured a £13.2 million loan facility from the
LCR UDF Limited partnership. This loan originates from Liverpool city region's
Urban Development Fund, which is part-funded by the European Regional
Development Fund (ERDF). The loan is used to invest in new manufacturing
facilities, thereby increasing our production capacity. It is solely for
capital purposes and can be drawn down for eligible capital projects up until
31 December 2025. Similar to a revolving credit facility, the loan liability
is only recognised once funds are drawn down. As at 31 December 2024, £5.1m
(2023: £ nil) had been drawn down. The loan covenant position is further
described in the going concern section of this report. As a result of a
covenant breach as at December 2024, the loan is presented as a current
liability. Further details, including the post-year-end waiver, are provided
in Note 16 - Interest-bearing Borrowings and Lease Liabilities
Going Concern and Material Uncertainty Statement
The continued operation of the Company as a going concern is dependent on its
ability to successfully navigate the current scale-up phase, where the
efficiency of the production process will determine the sales volume
achievement, since demand is running well ahead of capacity. The Directors
have identified two key areas of material uncertainty that may cast
significant doubt over the Company's ability to continue as a going concern:
cost and yield challenges and flexibility in commercial arrangements and level
of committed funding.
1) Cost and Yield Challenges
· Cost of Manufacture: Inflationary pressures continue to pose a
risk to raw material and labour costs. In response, the Company has
renegotiated current pricing across all major OEM contracts and is pursuing
ongoing investments in scalable technology and process efficiencies. These
initiatives are expected to reduce manufacturing costs and support margin
sustainability, but the accuracy of that expectation remains to be
demonstrated consistently.
· Yield: Achieving consistent improvements in manufacturing yield
remains critical to meeting customer demand and achieving long-term cost
efficiencies. The production process is inherently complex, requiring specific
operating metrics, particularly around yield, to be consistently met. Lower
than expected yields not only reduce the number of saleable units, thereby
limiting revenue, but also increase production costs due to higher rates of
disc scrappage. This adversely impacts profit margins and cash flows.
Management has taken proactive steps to address these challenges. Several
successful upgrades to the manufacturing process were implemented during the
year, with further improvements and the involvement of external technical
expertise continuing into 2025. These initiatives are expected to materially
reduce scrappage rates and enhance overall efficiency.
However, while initial improvements have been encouraging, the underlying
processes are still maturing, and several months of sustained high yields will
be required before this uncertainty can be fully mitigated.
Until such consistency is demonstrated, Management believes there remains
material uncertainty. Any unforeseen setbacks in yield performance could
hinder the Company's ability to fulfil contractual obligations, potentially
leading to delays, renegotiations with customers, or the need for additional
funding.
Furthermore, as an exporter primarily to the US, the Company is mindful of the
varying trade and tariff environment. Having established Incoterms
transferring title for goods at UK dispatch with the majority of its
customers, the Company believes the impacts will be more macro in terms of
overall price pressures rather than directly within the supply chain. The
Company has advanced mid and long term price negotiations with customers to
limit tariff and currency pressures to the highest extent possible.
2) Flexibility in Commercial Arrangements and Level of Committed Funding
The Company's future cash position is heavily dependent on two further
factors: the successful finalisation of new commercial contract terms with OEM
partners and ongoing support from the Liverpool Combined Authority ("LCA")
through waivers for breach of covenant on the ERDF loan.
· Commercial contracts: The timing of finalising full commercial
agreements specifying multi- year volumes and prices as well as possible loan
conversion for customer manufacturing support, received through prepayments
(£11.9m at 31 May 2025) remains uncertain. Any unforeseen delays in securing
these agreements or accelerated demand for recovery of the prepayment could
lead to funding gaps or breaches of loan covenants, which would further
restrict access to future funding and thereby put additional pressure on cash
reserves.
· ERDF loan: During 2024, the Company made further drawdowns on the
ERDF loan utilising £5.1m of the £13.2m facility. In December 2024 the ERDF
covenants were again breached and this position remained unrectified in March
2025. However, the LCA have been willing to waive the December breach in
recognition of its temporary nature ahead of a much-improved long term outlook
and it is anticipated that further waivers will be given in 2025 until revised
covenants are agreed. Further permitted drawdowns have occurred during 2025
and it is anticipated that the £13.2m facility will be fully drawn by the end
of the year. Whist Management are confident that the unwavering support from
the LCA will continue, should covenants be breached and a further waiver not
granted then the Company would be required to raise funds from other sources.
Therefore, the requirement for covenant waivers contributes to material
uncertainty.
The Directors have modelled a range of scenarios incorporating the year ending
December 2025 and half year to 2026 with base case and downside cases
exploring the impact on liquidity from reductions in the key areas of revenue,
cost and yield. They have also noted that, since the balance sheet date, the
Company has made significant progress in the above areas on price and volumes
and tangible unit cost reductions when compared to 2024.
Further information on the scenario modelling and key judgments underpinning
the going concern assessment is disclosed in the notes to the accounts.
The full-year 2025 outlook remains aligned with Management's base case
expectations of revenue and EBIT as well as the achievement of cash positive
monthly flows by the second half of the year. However, the Board acknowledge
that uncertainty remains regarding yield performance, cost control, and the
timing of commercial agreements.
As such, there exists a material uncertainty that may cast significant doubt
over the Company's ability to continue as a going concern. Should these
challenges persist or worsen in the short term, they may adversely impact
operational performance, including sales and EBITDA generation, which are
essential for transitioning from a loss-making to a cash- generative business.
Notwithstanding the material uncertainty outlined above, after due
consideration the Directors have a reasonable expectation that the Company has
sufficient resources to continue in operational existence for the period of 12
months from the date of approval of these financial statements. Accordingly,
the financial statements continue to be prepared on the going concern basis
and do not contain the adjustments that would arise if the Company were unable
to continue as a going concern.
Statement of Total Comprehensive Income
Year to Year to
31 December 31 December
2024 2023
Note £'000
£'000
Revenue 3 8,243 7,312
Cost of Sales (4,137) (3,137)
Gross Profit 4,106 4,175
50% 57%
Other Income 516 16
Gross profit after other income 4,622 4,191
Administrative Expenses:
Before research and development costs (6,050) (5,439)
Research and development costs (15,440) (9,676)
Impairment of fixed assets (6,488) (9,238)
Total administrative expenses (27,978) (24,353)
Operating loss before exceptional items 4 (23,356) (20,162)
Exceptional items 5 - (389)
Operating loss after exceptional items (23,356) (20,551)
Financial Income 9 148 5
Financial Expenses 8 (678) (176)
Loss before tax (23,886) (20,722)
Taxation 10 1,537 1,163
Loss for the year after tax (22,349) (19,559)
Total comprehensive loss for the year attributable to members (22,349) (19,559)
Loss per ordinary share
(2.31)p (7.92)p
Basic and diluted 27
Statement of Financial Position
At 31 December 2024
As at As at
31 December 31 December
Note 2024 2023
£'000 £'000
(Restated)
Non-current Assets
Property, plant and equipment 11 13,772 16,017
Intangibles 12 34 -
Contract fulfilment asset 15 422 723
Total non-current assets 14,228 16,740
Current assets
Inventories 13 5,376 4,469
Trade receivables 14 1,543 1,702
Other receivables 14 1,998 1,161
Contract assets 14 278 -
Tax receivable 14 1,331 1,196
Contract fulfilment asset 15 235 619
Cash and cash equivalents 462 6,064
Total current assets 11,223 15,211
Total assets 25,451 31,951
Current liabilities
Other interest-bearing borrowings 16 (5,214) (211)
Lease liabilities 16 (390) (357)
Trade and other payables 17 (7,524) (5,649)
Total current Liabilities (13,128) (6,217)
Non-current liabilities
Government grants 27 (161) (174)
Lease liabilities 16 (1,648) (1,429)
Other interest-bearing borrowings 16 (193) (404)
Total non-current liabilities (2,002) (2,007)
Total liabilities (15,130) (8,224)
Net assets 10,321 23,727
Equity
Share capital 29 13,021 3,521
Share premium 66,799 67,370
Capital reserve 464 464
Retained loss (69,963) (47,628)
Total equity attributable to equity shareholders of the company 10,321 23,727
Statement of Changes in Equity
For the year ended 31 December 2024
Share Share Capital Retained Total
Capital premium Reserve Loss £'000
£'000 £'000 £'000 £'000
Balance as at 31 December 2023 3,521 67,370 464 (47,628) 23,727
Comprehensive income for the year
Loss for the period - - - (22,349) (22,349)
Total comprehensive income for the year - - - (22,349) (22,349)
Transactions with owners, recorded directly to equity
Shares issued in the period 9,500 - - - 9,500
Share options exercised - - - - -
Cost of issue to share premium - (571) - - (571)
Equity settled share based payment transactions - - - 14 14
Total contributions by and distributions to the owners 9,500 (571) - 14 8,943
3Balance as at 31 December 2024 13,021 66,799 464 (69,963) 10,321
For the year ended 31 December 2023
Share Share Capital Retained Total
Capital premium Reserve Loss £'000
£'000 £'000 £'000 £'000
Balance as at 31 December 2022 2,406 58,215 464 (28,270) 32,815
Comprehensive income for the year
Loss for the period - - - (19,559) (19,559)
Total comprehensive income for the year - - - (19,559) (19,559)
Transactions with owners, recorded directly to equity
Shares issued in the period 1,104 9,921 - - 11,025
Share options exercised 11 159 - - 170
Cost of issue to share premium - (925) - - (925)
Equity settled share based payment transactions - - - 201 201
Total contributions by and distributions to the owners 1,115 9,155 - 201 10,471
Balance as at 31 December 2023 3,521 67,370 464 (47,628) 23,727
Statement of Cash Flows
For the year ended 31 December 2024
Year ended Year ended
31 December
31 December
2024
2023
£'000
£'000
Cash flow from operating activities
Loss after tax for the year (22,349) (19,559)
Adjusted for:
Depreciation and amortisation charge 2,091 1,262
Disposal of fixed assets - 6
Impairment of assets 6,488 9,238
Non-government grant amortisation (13) (13)
Equity settled share-based payment expenses 14 201
Foreign exchange (gains)/losses 22 54
Financial expense 678 176
Financial income (148) (5)
Taxation (1,537) (1,163)
(14,754) (9,803)
Changes in working capital
Increase in inventories (907) (1,093)
Increase in trade and other receivables (678) (537)
Increase in contract assets (278) -
Decrease in contract fulfilment asset 492 (649)
Increase in trade and other payables 691 649
(15,434) (11,433)
Taxation received 1,402 1,172
Net cash used in operating activities (14,032) (10,261)
Cash flows from investing activities
Acquisition of tangible assets (4,253) (4,769)
Acquisition of intangible assets (59) (3,279)
Proceeds from disposal of property, plant and equipment 10 -
Interest received 148 5
Net cash used in investing activities (4,154) (8,043)
Cash flows from financing activities
Proceeds from issue of share capital 9,500 11,195
Costs for issue of share capital (571) (925)
Proceeds from long term loans 4,950 -
Payment of finance lease liabilities (438) (356)
Payments of interest bearing borrowings (316) (240)
Interest paid (519) (176)
Net cash generated from financing activities 12,606 9,498
Net (decrease)/increase in cash and cash equivalents (5,580) (8,806)
Foreign exchange losses (22) (54)
Cash and cash equivalents at the beginning of the period 6,064 14,924
Cash and cash equivalents at the end of the period 462 6,064
Notes to the Financial Statements
1. Basis of preparation
The results have been extracted from the audited financial statements of the
Company for the year ended 31 December 2024. The results do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Whilst the financial information included in this announcement has been
computed in accordance with the principles of UK-adopted international
accounting standards ('IFRS'), IFRIC interpretations and the Companies Act
2006 that applies to companies reporting under IFRS, this announcement does
not of itself contain sufficient information to comply with IFRS.
The Company will publish full financial statements that comply with IFRS. The
auditor has reported on those accounts. Their report for the accounts of the
year ended 31 December 2024 was unqualified and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006. The auditor's report
includes reference to the material uncertainty relating to going concern. See
below for more details of the going concern assessment performed by the Board
of Directors. The statutory accounts for the year ended 31 December 2023 have
been delivered to the Registrar of Companies and received an unqualified
auditor's report which included reference to the material uncertainty relating
to going concern and did not contain statements under s498 (2) or (3) of the
Companies Act 2006.
The financial information has been prepared using the historical cost
convention and under the assumption that the Company operates on a going
concern basis. The principal accounting policies adopted in the preparation of
the financial statements are set out in the statutory accounts of Surface
Transforms Plc for the year ended 31 December 2023. They have been
consistently applied to the periods presented, unless otherwise stated.
Accounting Policies
Prior Year Restatement
During the year, 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 with £723k of the contract fulfilment asset
now being presented as a non-current asset whereas in the prior year the total
balance of £1,342k was presented as part of current assets.
The prior year restatement has had no impact on profit after tax and equity.
Going concern - Judgements
This note should be read in conjunction with the Going Concern and Material
Uncertainty statement included in the Financial Review, which provides further
context on the assumptions and judgments made.
Scenario modelling:
The Company's operating model reflects the binary nature of contract wins from
a relatively small number of customers with substantial volumes attached.
Revenue growth in 2025 is high due to the impact of one major OEM, whilst
succeeding years are modelled only modestly, effectively growing the existing
base.
The downside case scenario modelled
The downside case scenario anticipates annualised revenue growth, exceeding
76% in the eighteen month period to 30 June 2026. This growth is attributed to
production output for our principle contracted OEM and an agreed partial
deferral of delivery on other OEM contracts. This scenario anticipates lower
revenue than the base case due to a 45% volume reduction from base case
demand. Yields are projected at 55% in 2025 and 2026.
In this case the current level of funding through customer manufacturing
support would need to remain in place and furthermore, as the cash headroom
would fall below zero in February 2026, additional funding in the form of
further prepayment would also then need to be sought. This is modelled a
c.£4.9m over the period until 30 June 2026.
Negotiations on continued customer manufacturing support are not currently
concluded and should there be a requirement to repay the support earlier than
anticipated, the cash headroom could then be eroded further. Similarly, if
volumes were to reduce further than modelled in the downside case scenario,
due to a further reduction in yield levels, then cash headroom would erode
earlier.
The base case scenario modelled
The base case scenario anticipates significant revenue growth in 2025 and
moderate growth in 2026. This growth is attributed to successful production
output and indicative volumes from existing OEM's. This scenario targets an
average yield of 77% in 2025 and 86% in 2026.
Equipment capacity is expected to be achieved in line with Project Management
Office (PMO) plans and customer manufacturing support funding is expected to
reduce by £3.5m in the latter half of 2025 prior to any conversion.
While base case cash headroom is above £0.5m, it will diminish if performance
weakens.
The Directors acknowledge that uncertainty remains regarding yield
performance, cost control, and the timing of commercial agreements. As such,
there exists a material uncertainty that may cast significant doubt over the
Company's ability to continue as a going concern. Should these challenges
persist or worsen, they may adversely impact operational performance,
including sales and EBITDA generation, which are essential for transitioning
from a loss-making to a cash generative business.
Notwithstanding the material uncertainty, after due consideration the
Directors have a reasonable expectation that the Company has sufficient
resources to continue in operational existence for the period of 12 months
from the date of approval of these financial statements. Accordingly, the
financial statements continue to be prepared on the going concern basis and do
not contain the adjustments that would arise if the Company were unable to
continue as a going concern.
Revenue recognition
The Company accounts for customer contracts in accordance with IFRS 15
Revenue from Contracts with Customers. Revenue from the sale of carbon ceramic
brake discs is typically recognised at a point in time, when control of the
goods transfers to the customer, usually upon despatch.
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 recognised proportionally
as the control of the related brake discs is transferred to customers.
2. Segment Reporting
The Company operates in a single segment being the manufacture and sale of
carbon fibre materials and associated technologies. This segment includes all
manufacturing, development, and sales activities related to carbon fibre
materials, regardless of the specific market or product application. All
carbon fibre materials are manufactured using comparable processes, further
supporting a single segment view. The Company recognises its product
technology as carbon fibre-reinforced ceramic material, which can be
customised into various shapes for diverse end-user applications. The Company
currently operates one manufacturing facility, eliminating the need to
allocate resources or discriminate between markets or product lines. The Chief
Executive Officer, who acts as the chief operating decision maker, reviews
performance information for the entire company and does not allocate resources
based on individual markets or products
3. Revenue by geographical destination
2024 2023
£'000 £'000
United Kingdom 1,729 845
Germany 813 492
Sweden 366 168
Netherlands 219 583
Rest of Europe 155 117
United States of America 4,395 5,006
Rest of World 566 102
8,243 7,312
During the year ended 31 December 2024, revenue of £0.44 million was
recognised in relation to system integration services (2023: £nil). The
remaining £7.9 million of revenue recognised in the current year (2023: £7.3
million) pertains solely to the sale of goods.
System Integration Services - remaining performance obligations disclosure
(IFRS 15.120)
The table below presents the updated transaction price allocated to the
remaining performance obligations related to system integration services, in
accordance with IFRS 15.120. The expected timing of revenue recognition has
changed from prior year estimates due to an updated assessment of performance
obligations under IFRS 15. Pre-production services, known in the industry as
System Integration Services along with finished goods are considered a single
performance obligation, with revenue recognised upon transfer of control of
the finished goods in line with the delivery of discs to satisfy the
contractual obligation to the customer. This updated interpretation has
impacted the allocation and timing of expected revenue recognition across
future periods. As the prior year disclosure represented a forward-looking
estimate at 31 Dec 2023, no restatement has been made to the comparative
figures.
2025 2026 2027 Total
As at 31 December 2024: £'000 £'000 Onwards £'000
£'000
Total transaction price allocated to the remaining performance obligations
647 419 1,686 2,752
2024 2025 2026 Total
As at 31 December 2023: £'000 £'000 Onwards £'000
£'000
Total transaction price allocated to the remaining performance obligations
2,437 486 - 2,923
During the reporting period, the Company derived approximately 36.8% of its
revenue (£3.0 million) from a single customer (2023: 11.8%, £0.86 million).
In accordance with IFRS 8, the identity of the customer has not been disclosed
due to commercial sensitivity.
4. Operating loss and auditor's remuneration
12 months to 12 months to
31 December 31 December
2024 2023
£'000 £'000
Operating loss is stated after charging
Loss on disposal of property plant and equipment - 6
Depreciation of property plant and equipment (4.1) 2,082 1,189
Impairments (4.2) 6,488 9,238
Amortisation of Intangible assets (note 12) 10 73
Research costs expensed as incurred (4.1) 15,440 9,676
Exchange losses/(gains) 22 54
Staff costs excluding Research costs expensed 2,508 2,267
after crediting
Government grants 13 13
Auditors remuneration
Amounts receivable by auditors and their associates in respect of:
12 months to 12 months to
31 December 31 December
2024 2023
£'000 £'000
Fees payable to the Company auditor for the audit of the financial statements 236 170
Total 236 170
Fees payable to the Company auditor for other services 80
-
Financial due diligence for debt financing arrangement
- 80
4.1 Research and Development and Depreciation
The Company's continued investment in research and development (R&D)
remains central to our strategy for innovation and long-term growth. Total
R&D expenditure increased by £2.5 million during the year to
£15.4 million (2023: £12.9 million on a pre-capitalisation basis; £9.7
million post-capitalisation, as presented above). This increase primarily
reflects investment in process and equipment development, resolution of
technical challenges, and the establishment of robust, repeatable processes
for higher-volume production.
In accordance with IAS 38 Intangible Assets, no R&D costs were capitalised
during the year in relation to the development of our layered products due to
the fact that it was not possible to demonstrate how the
development costs will generate future economic benefits using the principles
of IAS 36 Impairment of Assets, the impairment assessments are described in
4.2 below.
Depreciation expense increased during the year, including an accelerated
charge of £0.6 million recognised following a reassessment of the useful
economic lives of certain assets. This adjustment reflects the Group's
transition to newer technologies and the replacement of legacy equipment in
line with our capital investment strategy. The revised estimates ensure the
asset base continues to reflect current and future operational requirements.
4.2 Impairment assessments
In accordance with IAS 36 Impairment of Assets, the Company assesses the
recoverable amount of its assets whenever there is an indication of
impairment. For the purposes of impairment testing, the Company is considered
a single cash-generating unit (CGU), reflecting the integrated nature of its
operations and the fact that cash inflows are generated collectively.
An impairment assessment was carried out using a value-in-use model based on
the Board-approved five-year business plan. The forecast cash flows reflect
management's best estimates and are based on assumptions that are reasonable
and supportable, considering past experience and future expectations. A
terminal growth rate of 2.0% (2023: 2.0%) was applied beyond the forecast
period.
A post-tax discount rate of 16.5% (pre-tax: 20%) was applied, reflecting risks
specific to the CGU. In the prior year, a post-tax discount rate of 21%
(pre-tax: 22%) was used. As a result of this assessment, an impairment charge
of £6.5 million (2023: £9.2 million) has been recognised in the year.
Key Assumptions
The value-in-use model was prepared using management's current post-tax
forecasts, which incorporate expectations regarding future revenue growth,
EBITDA margins, and operating performance. Revenue is projected to grow 232%
over the first two years of the forecast period, reflecting the ramp-up of
production capacity, yield improvements, and delivery against contracted and
forecast volumes. In the following years, growth is expected to moderate. Over
the full five-year forecast period, revenue is projected to increase by
approximately 355%, supported by planned operational improvements and
sustained customer demand. The discount rate applied reflects the Company's
estimated weighted average cost of capital, adjusted for risks specific to the
CGU and the uncertainty associated with delivering planned performance
enhancements.
Capital expenditure included in the impairment model reflects the Company's
existing commitments in respect of in-progress development projects, as well
as ongoing maintenance expenditure over the forecast period.
Management believes the assumptions used are reasonable and supportable in
light of current market conditions.
Sensitivity analysis
The recoverable amount is sensitive to changes in key assumptions. A 1.0%
decrease in the discount rate would increase the recoverable amount by
approximately £2.6 million, whereas a 1.0% increase would decrease it by
£2.2 million.
The recoverable amount is particularly sensitive to the achievement of
forecast revenue in the early years of the model, reflecting the Company's
current position in its operational scale-up phase.
A revised downside sensitivity scenario has been considered to reflect
reasonably possible short-term risks associated with operational execution.
This scenario assumes revenue reductions of 30%, 10%, 5%, 3%, and 1% across
Years 1 to 5 respectively. These assumptions reflect the potential impact of
delays or challenges in achieving planned improvements in operations,
equipment ramp-up, process optimisation, and workforce effectiveness. Such
risks are expected to diminish over time as initiatives are embedded and the
business stabilises, with residual revenue risk normalising to around 1% by
Year 5. Under this downside scenario, an additional impairment of
approximately £5.9 million could arise.
An upside sensitivity has also been assessed, applying revenue uplifts of 30%,
10%, 5%, 3%, and 1% across Years 1 to 5 respectively. This scenario reflects
the Company remaining ahead of plan in executing operational improvements and
cost reduction programmes. If this positive trajectory continues, sales are
expected to exceed base forecasts, supported by strong market demand ensuring
full utilisation of available production capacity. As with the downside case,
operational risks are assumed to normalise by Year 5, with ongoing
improvements already embedded. Under this upside scenario, the recognised
impairment charge would reduce by approximately £5.9 million.
These revenue sensitivities translate into corresponding variations in
underlying EBITDA projections, with downside scenarios potentially reducing
cumulative EBITDA by around 25-30% relative to base forecasts, while upside
scenarios may increase EBITDA by a similar magnitude. This range highlights
the material impact of operational execution on the Company's profitability
and impairment outcomes. Market risk is considered immaterial, as demand for
the Company's product remains strong and is supported by contracted or
expected offtake for all forecast production volumes.
Allocation of impairment charge
The total impairment charge of £6.5 million (2023: £9.2 million) has been
allocated on a pro-rata basis across all non-current asset categories within
the cash-generating unit (CGU), in accordance with IAS 36.104. These asset
categories comprise Fixed Assets (including capital work in progress),
Intangible Assets, and Contract Fulfilment Assets.
The impairment assessment was conducted using a value-in-use model based on
management's best estimate of future cash flows. Management considered that a
fair value less costs of disposal approach would not result in a higher
recoverable amount, given the nature of the Company's integrated asset base
and the significant cost and complexity that would be involved in replacing
operationally embedded assets.
While the impairment assessment has resulted in a reduction in carrying value,
management believes that the underlying assets remain integral to fulfilling
customer contracts and generating future revenue. The impairment charge for
the year has been allocated across both tangible and intangible asset
categories. Full details of the allocation of the current and prior year
impairment charges are presented within the relevant asset notes:
· Tangible Fixed Assets - see Note 11
(Land and Buildings, Leasehold Improvements, Plant and Machinery, Fixtures and
Fittings)
· Intangible Fixed Assets - see Note 12
(Software, Capitalised Research & Development)
· Contract fulfilment Assets - see Note 15
5. Exceptional items
The Company recognised £nil ( 2024: £389,000) of other non- recurring
exceptional costs in the year.
6. Remuneration of directors
The aggregate amount of emoluments paid to Directors in respect of qualifying
services during the period was
£759,892 (2023 restated: £669,270).
The amounts set out above include remuneration in respect of the highest paid
director of £362,847
(2023: restated £335,597). Pension contributions of £34,848 (2023: £29,063)
were made to a money purchase scheme on behalf of executive directors.
The share transactions and key compensations of management designated as Key
Management Personnel are disclosed in note 21 Related Party Disclosures.
7. Staff numbers and costs
The average number of persons employed by the Company (including Directors)
during the year, analysed by category, was as follows:
Year to 31 December
2024 2023
Staff numbers and costs
Directors 6 6
Management and Admin 66 52
Production 98 89
170 147
The aggregate payroll costs of these persons were as follows:
Year to 31 December
2024 2023
£'000 £'000
Wages and salaries 7,793 5,684
Social security costs 853 687
Other pension costs 277 262
8,923 6,633
Share based compensation 14 201
8,937 6,834
8. Financial Expenses
Year to 31 December
2024 2023
£'000 £'000
Interest expense in relation to lease liabilities 175 129
Other interest charges 503 47
Total interest expense on financial liabilities measured at amortised cost 678 176
9. Financial Income
Year to 31 December
2024 2023
£'000 £'000
Total Interest Income (148) (5)
10. Taxation
2024 2023
£'000 £'000
Analysis of credit in year
UK corporation tax
Adjustment in respect of prior years - R&D tax allowances (206) 33
R&D tax allowance for current year (1,331) (1,196)
Total income tax credit (1,537) (1,163)
The tax assessed for the year is lower than (2023: lower than) the rate of
corporation tax in the UK of 25%. The differences are explained below:
Year to 31 December
2024 2023
£'000 £'000
Reconciliation of effective tax rate
Loss for year (22,349) (19,559)
Total income tax credit (1,537) (1,163)
Loss excluding income tax (23,886) (20,722)
Current tax at average rate of 25%/23.5% (5,971) (4,870)
Effects of:
Non-deductible expenses 1 1
Change in unrecognised timing differences
Current year losses for which no deferred tax recognised 5,970 4,869
R&D tax allowance for current year (1,331) (1,196)
Adjustment in respect of prior years - R&D tax allowances (206) 33
Income tax credit (1,537) (1,163)
For the financial year ended 31 December 2024, the tax rate remained 25%
across the whole period (2023:average weighted 23.5%). Deferred taxes as at
the reporting date have been measured using these tax rates.
11. Property, plant and equipment
Land and Buildings Leasehold improvements Plant and machinery Fixtures and Capital in progress Total
£'000 £'000 £'000 fittings £'000 £'000
£'000
Cost
At 31 December 2022 1,934 411 8,074 588 7,902 18,909
Transfers from Capital in
Progress - - 1,408 - (1,408) -
Additions - 6 1,634 96 4,101 5,837
Disposals - - (51) (6) - (57)
At 31 December 2023 (restated) 1,934 417 11,065 678 10,595 24,689
Transfers from Capital in
Progress - - 1,075 - (1,075) -
Additions 672 - 567 97 4,791 6,127
Disposals - - (96) - - (96)
At 31 December 2024 2,606 417 12,611 775 14,311 30,720
Depreciation
At 31 December 2022 694 165 2,369 493 - 3,721
Charge 142 34 953 60 - 1,189
Disposals - - (27) (6) - (32)
Impairment 735 - - - 3,060 3,795
At 31 December 2023 (restated) 1,571 199 3,295 547 3,060 8,672
Charge 124 34 1,838 86 - 2,082
Disposals - (86) (86)
Impairment 285 58 2,369 44 3,524 6,280
At 31 December 2024 1,980 291 7,417 677 6,584 16,949
Net book value
At 31 December 2022 1,240 246 5,705 95 7,902 15,188
At 31 December 2023 362 218 7,770 131 7,535 16,017
At 31 December 2024 626 126 5,194 98 7,728 13,772
An impairment loss of £6.3 million had been recognised in 2024 (2023: £3.8
million). Please see note 4 for further detail. The cost and depreciation
comparative figures for Land and Buildings have been restated as the 2023
impairment charge was incorrectly allocated to cost rather than depreciation.
This restatement does not impact the net book value of Land and Buildings.
12. Intangibles
Software Capitalised Total
£'000 R&D £'000
£'000
Cost
At 31 December 2022 2,075 466 2,541
Transfers from Capital in Progress - - -
Additions 3,158 121 3,279
Impairment (5,233) (587) (5,820)
At 31 December 2023 - - -
Transfers from Capital in Progress - - -
Additions - 59 59
At 31 December 2024 - 59 59
Amortisation
At 31 December 2022 9 296 305
Charge for period 2 71 73
Impairment (11) (367) (378)
At 31 December 2023 - - -
Charge for the period - 10 10
Impairment - 15 15
At 31 December 2024 - 25 25
Net book value
At 31 December 2022 2,066 171 2,237
At 31 December 2023 - - -
At 31 December 2024 - 34 34
All intangible assets were impaired in 2023 following a value in use
assessment. Please see note 4 for further detail.
13. Inventories
Year to 31 December
2024 2023
£'000 £'000
Raw materials and consumables 1,880 2,286
Work in progress 1,864 1,187
Finished goods 1,632 997
5,376 4,469
Raw materials, consumables and changes in finished goods and work in progress
recognised as cost of sales in the year amounted to £4,137k (2023: £3,317k).
There is no significant difference between the replacement cost of work in
progress and finished goods and their carrying amounts.
14. Trade and other receivables
Year to 31 December
2024 2023
£'000 £'000
Trade receivables 1,567 1,757
Provision for impairment on trade receivables (24) (55)
Net trade receivables 1,543 1,702
Other receivables 1,459 222
Prepayments and accrued income 539 939
Total other receivables 1,998 1,161
Contract asset 278 -
Tax receivable 1,331 1,196
Trade and other receivables 5,150 4,058
All receivables fall due within one year.
The Company uses the expected credit loss (ECL) model under IFRS 9 to assess
credit risk for all receivables. This model considers historical payment
performance, and forward looking factors such as economic forecasts, and
individual customer creditworthiness.
Bad debts amounting to £16k were written off in the year (Dec 2023; £Nil).
Exposure to credit risk arises from the potential of a customer defaulting on
their invoiced sales. The Company closely monitors the credit risk of
customers and offers credit only to those with healthy scores, on- going
credit risk is managed through regular review of ageing analysis. Based on the
current assessment and the Company's strong contractual relationships with
major customers, the estimated ECL for unbilled receivables is currently low.
All trade receivables (billed and unbilled) have been reviewed for expected
credit loss impairment and the expected credit loss (ECL) is estimated to be
£24k (Dec 2023; £55k) and is accounted for under " Provision impairment on
trade receivables".
15. Contract fulfilment asset
12 months to
31 December
2024 2023
£'000 £'000
Non-Current Assets - Contract Fulfilment Asset pre-impairment 615 723
Impairment (193) -
Non-Current Assets -Contract Fulfilment Asset 422 723
Current Assets - Contract Fulfilment Asset 235 619
Total Contract Fulfilment Asset 657 1,342
The Company recognises certain engineering and related services as contract
fulfilment assets in accordance with IFRS 15, where such costs meet the
criteria set out in paragraph 95 of the standard. Costs associated with system
integration services, including engineering, tooling, and testing services
required to fulfil the Company's contractual obligations to customers, are
recognised as contract fulfilment assets. These costs are recognised when they
are directly attributable to a specific customer contract, are not intended
for general or future use, are expected to be recovered through contract
payments or sufficient contract margins, and are reliably measurable based on
detailed project documentation and analysis.
Classification of Assets between current and non-current.
Following a change in the determination of the performance obligation-now
defined as the delivery of complete discs-contract fulfilment assets are
assessed based on their expected recoverability. As a result, assets
previously considered recoverable within one year are now expected to be
recovered over the forecasted contract volume, consistent with the pattern of
revenue recognition. Accordingly, contract fulfilment assets are classified as
either current or non-current, depending on the timing of expected recovery.
This accounting interpretation is applied retrospectively.
Recognition and Release
Both current and non-current contract fulfilment assets are recognised on the
statement of financial position and are systematically released to the income
statement in line with the transfer of the related goods to
the customer. An impairment charge of £0.2 million (2023: £ nil) has been
allocated to the Non-current contract fulfilment asset, see note 4 for further
details.
16. Interest-bearing borrowings and lease liabilities
This note provides information about the contractual terms of the Company's
interest-bearing borrowings and liabilities which are measured at amortised
cost. At 31 December 2024, the Company was in breach of a financial covenant
associated with its Liverpool City Region Urban Development Fund facility. In
accordance with applicable accounting standards, the outstanding balance of
£5,214k has been classified as a current liability. Subsequent to year-end,
the Company obtained a formal waiver of this covenant breach from the lender,
confirming that no immediate repayment is required.
Year to 31 December
2024 2023
£'000 £'000
Current liabilities
Lease Liabilities 390 357
Interest bearing borrowings 5,214 211
5,604 568
Non-current liabilities
Lease Liabilities 1,648 1,429
Interest bearing borrowings 193 404
1,841 1,833
Finance lease liabilities are payable as follows:
Finance lease liabilities are payable
Future minimum Present value of minimum Future minimum Present value of minimum
lease payments lease payments lease payments lease payments
2024 Interest 2024 2023 Interest 2023
£'000 2024 £'000 £'000 2023 £'000
£'000 £'000
Less than one year 538 (148) 390 475 (119) 357
More than one year 2,140 (492) 1,648 1,742 (313) 1,429
2,678 (640) 2038 2,217 (432) 1,786
The total contractual cash flows of Non-derivatives are as follows:
Due in 1 year Due in 2-5 years Due in 6-10 years Total Contractual cash flows Carrying amount
£'000 £'000 £'000 £'000 £'000
As at 31 December 2024
Interest bearing borrowings 6,024 200 - 6,224 5,407
Lease liabilities 538 1,386 755 2,679 2,038
Trade and other payables 7,524 - - 7,524 7,524
Total Non-Derivatives 14,086 1,586 755 16,427 14,970
Due in 1 year Due in 2-5 years Due in 6-10 years Total Contractual cash flows Carrying amount
£'000 £'000 £'000 £'000 £'000
As at 31 December 2023
Interest bearing borrowings 248 433 - 681 615
Lease liabilities 475 1,145 597 2,217 1,787
Trade and other payables 5,649 - - 5,649 5,649
Total Non-Derivatives 6,372 1,578 597 8,547 8,051
For more information about the Company's exposure to interest rate and foreign
currency risk see note 22. Other interest bearing borrowings:
MSIF Loans
In March 2021, the Company secured a £1 million loan from River Capital
Management Limited (formerly Alliance Fund Managers Limited) from the
Merseyside Investment Fund (MSIF) supported by the Liverpool City Region
Combined Authority's Flexible Growth Fund programme. As of the 31 December
2024 the Company has a remaining loan balance of £404,000.
LCR UDF Loan Funding (also referred to as the ERDF loan)
In December 2023, the Company secured a £13.2 million loan facility from the
LCR UDF Limited Partnership, supported by the Liverpool City Region Urban
Development Fund and part-funded by the European Regional Development Fund
(ERDF). The facility is restricted to qualifying capital investment projects.
As at 31 December 2024, £5.1 million had been drawn, with a remaining undrawn
commitment of £8.1 million available until 31 December 2025.
The facility operates on a drawdown basis, and there is no enforceable right
to receive cash until a formal utilisation request is made, supported by
documentation evidencing eligible expenditure. Accordingly, a loan liability
is recognised only when funds are drawn.
In December 2024, the Company breached certain ERDF financial covenants
associated with the facility. A waiver was granted by the LCR UDF in
recognition of the temporary nature of the breach and the Company's improving
long-term financial outlook. Since the year end, as of March 2025, a further
waiver is expected to be required and is anticipated to be granted. The
Company is working closely with the LCR UDF Partnership to review its
long-term plans and establish revised covenants that align with the business's
transition to sustainable operations while continuing to serve regional
development goals.
Drawdowns have continued into 2025, and the Company expects the full £13.2
million facility to be fully utilised by the end of the year.
Drawdowns are subject to interest at the ECB reference rate for the period,
which as at 1 April 2025 is 5.35%, with a commercial margin is 6.50% the
aggregate interest rate 11.85%.
Due in 1 year Due in 2-5 years Total
As at 31 December 2024 £'000 £'000 £'000
Other Borrowings (MSIF Loan) 211 193 404
Other Borrowings (ERDF Loan) 5,003 - 5,003
Total Other Borrowings 5,214 193 5,407
Due in 1 year Due in 2-5 years Total
As at 31 December 2023 £'000 £'000 £'000
Other Borrowings (MSIF Loans) 211 404 614
17. Trade and other payables
12 months to 31 December
2024 2023
£'000 £'000
Trade payables 3,584 3,859
Taxation and social security 831 357
Accruals and deferred income 851 841
Contract Liabilities 2,258 593
7,524 5,650
18. Deferred tax
Difference between accumulated depreciation and amortisation and capital
allowances
572 4,280
Tax losses (10,252) (8,934)
Un-recognised deferred tax asset (9,680) (4,654)
The Company has an un-recognised deferred tax asset at 31 December 2024 of
£9,680k (2023: £4,654k) relating principally to tax losses which the Company
can offset against future taxable profits. The Company has recognised a
deferred tax liability of £572k (2023: £4,280k) as these are recognised as
soon as they arise. The Company anticipates that an equal value of its
deferred tax asset could be utilised against this liability and this has been
deferred against the deferred tax liability.
19. Called up share capital
Allotted called up and fully paid of £0.01 each Number £'000
At 31 December 2022 240,613,233 2,406
Issue of shares 111,459,405 1,115
At 31 December 2023 352,072,638 3,521
Issue of shares 950,000,000 9,500
At 31 December 2024 1,302,072,638 13,021
During the year, the Company issued 950,000,000 ordinary shares through a
placing, subscription, and open offer. As a result, the total issued share
capital increased to 1,302,072,638 ordinary shares, raising net proceeds of
£8.9 million after fees.
The Company operates a share incentive scheme for the benefit of the Directors
and certain employees. Options under the scheme are granted at the discretion
of the Board and entitle the holders to purchase ordinary shares of £0.01
each.
Details of options granted to Directors, including the date of grant and
exercise price, are disclosed in the Report on Directors' Remuneration in the
Annual Report. In addition to the Directors' share options, certain employees
and former employees have also been granted options, with further details
provided in Note 28.
No share options were exercised by either Directors or employees during the
period (2023: 1,120,000 shares were issued through the exercise of options).
20. Pension scheme
The Company contributes to specific employees' personal pension schemes. The
pension charge for the year represents contributions payable by the Company to
the schemes and amounted to £335k (2023; £320k). During the year one
director (prior year two directors) and several senior managers opted to enter
salary exchange arrangements whereby they sacrificed salary for increased
pension contributions. These arrangements accounted for £58k of the pension
contributions (2023; £75k).
21. Related party disclosures
Transactions with key management personnel
Individuals are designated as Key Management Personnel (KMP) due to their
involvement in planning, directing, controlling, and making crucial decisions
for the company. Share transactions and Compensation paid to key management
personnel are reported below.
During the year 6 directors acquired 20,350,000 shares in the Company by
participating in the placing and subscription of shares as detailed below:
Existing shareholding Share placing and subscription Total shares acquired in Shareholding
before subscription year at 31 Dec
2024
David Bundred Non-executive Chair* 2,052,626 2,500,000 2,500,000 4,552,626
Kevin Johnson CEO 1,141,308 2,500,000 2,500,000 3,641,308
Isabelle Maddock CFO 113,763 350,000 350,000 463,763
Matthew Taylor Independent NED 1,240,203 10,000,000 10,000,000 11,240,203
Ian Cleminson Independent NED & Chair 319,654 2,500,000 2,500,000 2,819,654
Julia Woodhouse Independent NED 535,203 2,500,000 2,500,000 3,035,203
5,402,757 20,350,000 20,350,000 25,752,757
* David Bundred retired 16 Sept 2024
** Number of £0.01 ordinary shares
Compensation paid to key management personnel in the year is as follows:
Year to 31 December
2024 2023
£'000 £'000
(Restated)
Short term employee benefits 1,034 815
Post-employment benefits 47 43
Other long-term benefits - -
Termination benefits - 30
Share Based Payments 73 202
1,154 1,090
The 2023 short term benefits have been restated to exclude the bonus paid in
2023 in respect of the 2022 financial year of £86k and to include the bonus
paid in 2024 in respect of the 2023 financial year of £46k in line with
Companies Act requirements.
22. Net debt
Current liabilities 16 Interest-bearing borrowings and lease liabilities 5,604 568
Non-current liabilities 16 Interest-bearing borrowings and lease liabilities 1,841 1,833
Total debt 7,445 2,401
Cash (462) (6,064)
Net debt (cash) 6,983 (3,663)
As at Cash Other non-cash movements 31 December
1 January Flow £'000 2024
2024 £'000 £'000
£'000
Lease Liabilities (1,786) 613 (865) (2,038)
Interest bearing borrowings (614) (4,320) (473) (5,407)
Liabilities arising from financing activities (2,400) (3,707) (1,338) (7,445)
Cash 6,064 (5,580) (22) 462
Total net debt 3,664 (9,287) (1,360) (6,983)
As at Cash Other non-cash movements 31 December
1 January Flow £'000 2023
2023 £'000 £'000
£'000
Lease Liabilities (1,489) 534 (831) (1,786)
Interest bearing borrowings (1,239) 258 367 (614)
Liabilities arising from financing activities (2,728) 792 (464) (2,400)
Cash 14,925 (8,807) (54) 6,064
Total net debt 12,197 (8,015) (518) 3,664
23. Financial instruments
The Company's policies with regard to financial instruments are set out below.
The risks arising from the Company's financial assets and liabilities are set
out below along with the policies for their respective management.
Currency risk
The Company is exposed to foreign currency risk arising from transactions and
balances denominated in currencies other than sterling, primarily relating to
bank deposits, trade receivables, and trade payables. These exposures can
result in exchange differences that affect reported profits. At the year end,
the most significant exposures were to the US dollar and the euro.
Euro-denominated balances translated into sterling at the balance sheet date
comprised cash at bank of
£128k, trade receivables of £185k and trade payables of £701k resulting in
a net exposure of £388k.
US dollar-denominated balances translated into sterling at the balance sheet
date comprised trade receivables of £296k and trade payables of £272k, with
no cash at bank, resulting in a net exposure of £22k.
The Company's net exposure to foreign currency risk, based on the carrying
amounts of monetary financial instruments, was as follows:
Sensitivity analysis
A ten per cent strengthening of the pound against the US Dollar and the Euro
at 31 December 2024 would have increased losses by the amounts shown below.
This analysis assumes that all other variables, most notably, interest rates,
remain constant. The analysis is performed on the same basis for December
2023.
US Dollar Euro
£'000 £'000
31 December 2023 (35) 44
31 December 2024 (2) 35
A ten percent weakening of the pound against the US Dollar and the Euro at 31
December 2024 would have reduced loses by the amounts shown below; on the
basis all other variables remain constant.
US Dollar Euro
£'000 £'000
31 December 2023 43 (54)
31 December 2024 3 (43)
Price risk
The Company manages price risk associated with large contracts with major
Original Equipment Manufacturers (OEMs). These contracts generally fix the
price per part for the entire manufacturing period, helping to mitigate the
risk of price reductions due to volume fluctuations. However, the Company
recognises that inflationary pressures on raw materials and labour costs can
still increase overall manufacturing costs. To address this, the Company is
renegotiating pricing on all major OEM contracts. Looking ahead, and in line
with its ongoing capital investment programme, the Company expects that
investments in scalable technology, along with a focus on operational
efficiencies and improved processes, will help to reduce manufacturing costs
over time.
Credit risk
The Company uses the expected credit loss (ECL) model under IFRS 9 to assess
credit risk for all receivables, including unbilled receivables. This model
considers historical payment performance, and forward looking factors such as
economic conditions and forecasts, and individual customer creditworthiness.
The Company operates a closely monitored collection policy. The Company
closely monitors the credit risk of customers and offers credit only to those
with healthy scores.
All sales to retrofit and smaller OEM customers are on a payment before
shipping basis and only OEM's qualify for significant levels of credit. Where
appropriate the Company has in the past and would again secure trade credit
insurance for significant debt. The total credit risk is therefore £1,543k
(2023; £1,702k).
31 December 31 December
2024 2023
Opening balance 55 43
Decreased during the period 31 -
Utilised during the period - 12
Provision at year end 24 55
There was an amount of £24k (December 2023; £55k) in the allowance for
impairment in respect of trade receivables and unbilled receivables. The
average debtor days are 42 days (2023; 94 days), the average creditor days are
79 days (2023; 54 days).
Liquidity risk
The Company's objective is to maintain a balance between continuity and
flexibility of funding through the use of short- term deposits. The
contractual maturity of all cash, trade and other receivables at the current
and preceding balance sheet date is within one year. The contractual maturity
of trade and other payables at the current and preceding balance sheet date is
within 3 months.
Interest rate risk
At the balance sheet date, the interest rate profile of the Company's
interest-bearing financial instruments was:
2024 2023
£'000 £'000
Fixed rate instruments:
Lease liabilities
Less than one year 390 358
More than one year 1,648 1,429
Total 2,038 1,787
Other Loans and Borrowings
Less than one year 5,214 211
More than one year 193 404
Total 5.407 615
Sensitivity analysis
A 10% increase in the BOE base rate would result in an increase in interest on
the interest bearing loan of £1,050k.
£'000
2024 interest at current rate of 4.5% 472
2024 interest at sensitivity rate of 14.5% 1,523
Notional increase in interest payments in 2024 @ 10% upward sensitivity 1,050
Capital management
The Company manages it's capital to ensure that it will be able to continue as
a going concern and satisfy its debt as it falls due whilst also maximising
opportunities to progress the development of the business. The Capital
structure of the Company consists of cash and equity attributable to
shareholders comprising issued capital. A key indicator of capital management
performance used by management is the level of cash available to the Company.
Financial assets are comprised of £4,281k (2023; £8,927k) which consists of
cash and trade receivables.
Financial liabilities are comprised of £11,880k (2023; £7,101k) which
consists of trade payables, lease liabilities and current and long-term
interest-bearing loans.
24. Right of use assets
Amounts recognised in the income statement
L&B Other Total
£'000 £'000 £'000
Net Carrying value at 1 January 2024 362 118 479
Additions 672 - 672
Depreciation charge for the period (124) (50) (174)
Impairment (75) - (75)
Net Carrying value at 31 December 2024 835 68 902
Net Carrying value at 1 January 2023 1,240 55 1,294
Additions - 135 135
Depreciation charge for the period (142) (47) (189)
Disposals net book value - (25) (25)
Impairment (736) - (736)
Net Carrying value at 31 December 2023 362 118 479
Amounts Recognised in the Income Statement
December December
2024 2023
£'000 £'000
Interest on Lease liabilities 175 129
Lease Liabilities
December December
2024 2023
£'000 £'000
Current 390 357
Non-Current 1,648 1,429
Total Lease Liabilities 2,038 1,786
December December
2024 2023
£'000 £'000
Total Cash outflow for leases 613 454
December December
2024 2023
£'000 £'000
Within 1 year 538 475
Greater than one year but less than five years 1,386 1,145
Greater than five years but less than ten years 755 597
Greater than ten years but less than fifteen years - -
Total Lease Liabilities 2,679 2,217
25. Capital Commitments
Contracts placed for future capital expenditure as at 31 December 2024 were
£1,457k (2023; £1,406k)
26. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party due to
no individual party owning a majority share in the Company.
27. Loss per ordinary share
The calculation of basic loss per ordinary share is based on the loss for the
financial year divided by the weighted average number of shares in issue
during the year.
Losses and number of shares used in the calculation of loss per ordinary share
are set out below.
Basic 2024 2023
Loss after tax (£) (22,348,538) (19,558,869)
Weighted average number of shares (No. of shares) 968,516,673 247,044,609
Loss per share (pence) (2.31p) (7.92p)
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 options
would have the effect of reducing the loss per ordinary share from continuing
operations and is therefore anti-dilutive under the terms of IAS 33.
28. Share options
There is a total of 2,758,825 unexpired options held by employees,700,000
unexpired options held by former officers and a total of 3,500,000 unexpired
options held by directors. The number of options outstanding under the
Company's share option scheme is as follows:
At 31 December Cancelled Exercise price
Note 2023 Granted Leaver Exercised Lapsed At 31 December 2024 Date from which exercisable Expiry date
E2 40,753 - - - - - 40,753 £0.1050 05/07/2018 04/07/2028
E2 745,000 - - - - - 745,000 £0.1450 30/09/2018 04/07/2028
E2 990,000 - - - - - 990,000 £0.1588 01/10/2018 04/07/2028
U1.0 250,000 - - - - - 250,000 £0.1550 02/10/2018 02/10/2025
E1 321,667 - - - - - 321,667 £0.1525 04/01/2018 04/01/2028
U1.1 450,000 - - - - - 450,000 £0.1525 04/01/2018 04/01/2028
E1 245,000 - - - - - 245,000 £0.1300 05/12/2019 05/12/2029
U1.0 1,910,000 - - - - - 1,910,000 £0.1300 05/12/2019 05/12/2029
E1 360,000 - (20,000) - - - 340,000 £0.2350 04/12/2021 04/12/2029
E4 210,000 - - - - - 210,000 £0.2600 28/01/2020 28/01/2030
E3 120,000 - - - - - 120,000 £0.4600 20/10/2020 20/10/2030
E5 210,000 - (210,000) - - - 0 £0.5000 23/02/2021 23/02/2031
E6 40,000 - - - - - 40,000 £0.5000 23/02/2021 23/02/2031
E7 646,405 - (60,000) - - - 586,405 £0.5700 10/11/2021 10/11/2031
E5 500,000 - (290,000) - - - 210,000 £0.5700 10/11/2021 10/11/2031
E8 830,000 - (330,000) - - - 500,000 £0.5050 12/07/2022 12/07/2032
Total 7,868,825 - (910,000) - - - 6,958,825
EMI approved scheme
All the options below have been granted under the EMI approved scheme. The
options under E2, E3, E5, E6 and Evest on the achievement of specific
performance criteria relating to contract awards, cost targets and revenue
levels.
E1) There have been no variations to the terms and
conditions, or performance criteria attached to these share options during the
financial year. There are no performance conditions attached to the options
issued other than continued employment by the Company.
E2) These options have been granted under the approved
scheme. These options have been granted under the EMI approved scheme. There
have been no variations to the terms and conditions, or performance criteria
attached to these share options during the financial year. For these options
there are performance criteria relating cost and production targets.
E3) There have been no variations to the terms and
conditions, or performance criteria attached to these share options during the
financial year. For these options there are three performance criteria:
Production cell OEM1 meeting certain production criteria, the company
achieving a certain target cost for the manufacture of a carbon ceramic disc
and the delivery of £5m of revenue in a financial year.
E4) There are no performance conditions attached to the
options issued other than continuous employment by the Company for a period of
2 years and continuing employment.
E5) There have been no variations to the terms and
conditions, or performance criteria attached to these share options during the
financial year. For these options there are three performance criteria:
Achievement of staffing requirements for start of OEM production, ongoing
staff turnover levels below industry average in a 3 year period and the
delivery of £5m of revenue in a financial year.
E6) There have been no variations to the terms and
conditions, or performance criteria attached to these share options during the
financial year. For these options there are three performance criteria:
Achieving a minimum of £20m of sales in a rolling twelve-month period,
achieving a minimum of £5m profit before tax in a rolling twelve-month period
and installing capacity capable of achieving annual sales of at least £60m.
E7) There have been no variations to the terms and
conditions, or performance criteria attached to these share options during the
financial year. For these options there are three performance criteria:
Achieving a minimum of £20m of sales in a rolling twelve-month period,
achieving a minimum of £5m profit before tax in a rolling twelve-month period
and installing capacity capable of achieving annual sales of at least £80m.
Unapproved scheme
All the options below have been granted under the unapproved scheme. The
options under U1.1 below vest on the achievement of specific performance
criteria relating to contract awards and revenue levels.
U1.0) There have been no variations to the terms and conditions, or
performance criteria attached to these share options during the financial
year. There are no performance conditions attached to the options issued other
than continued employment by the Company.
U1.1) There have been no variations to the terms and conditions, or
performance criteria attached to these share options during the financial
year. For these options there are three performance criteria: The nomination
of a track car, a nomination by a mainstream OEM for a production vehicle
and/or the delivery of £5m of revenue in a financial year.
A total share-based payment credit of £113,372 was recognised in the income
statement during the year in relation to the Company's historic EMI scheme.
This credit primarily arose due to the forfeiture of options by employees who
left the business during the period.
LTIP schemes
Under the Company's Long Term Incentive Plan (LTIP), executive directors and
senior management have been granted options over ordinary shares, subject to
service and performance conditions. The LTIP is equity- settled and accounted
for in accordance with IFRS 2 Share-based Payment.
At 31 December 2024, 35,022,823 options (2023: nil) remained potentially
capable of vesting by August 2027.
Options at 31 Dec 2023 Options granted in the period Options exercised Options not expected to vest Options Lapsed in the period Options potential to vest at 31 Dec 2024
in the period
Nil 58,081,655 nil (19,652,962) (3,405,870) 35,022,823
There were no exercises of share options during the period (2023: nil), and no
gains were realised (2023: £nil). Further details on directors' participation
in the scheme are provided in the Directors Remuneration Report in the Annual
Report.
Valuation of Awards
For LTIP awards with market-based performance conditions (i.e. requiring the
Company's share price to reach at least 5 pence by the end of the vesting
period), the fair value was determined at the grant date using a Monte Carlo
simulation model, in line with IFRS 2. The model incorporated 100,000
iterations simulating potential share price paths and exit values to determine
the expected pay-out, discounted to present value.
The following key assumptions were applied in the model:
Grant date 15-Jan-24 14-Aug-24
Share price at date of grant £0.108 £0.016
Exercise Price £0.110 £0.017
Vesting period 3 Years 3 Years
Volatility 36.5% 36.5%
Dividend Yield 0% 0%
Valuation methodology Monte Carlo simulation (100,000 iterations)
Awards with non-market performance conditions, such as operational or
financial targets, are valued at the share price on the grant date, and the
charge is adjusted each period based on management's estimate of the number of
options expected to vest.
The total share-based payment charge recognised in the income statement during
the year in relation to the LTIP was £94,233 (2023: £nil).
The fair value per option for all LTIP awards with market-based performance
conditions is £0.001. For the remaining LTIP awards, the fair value is
aligned with the share price at the date of grant, as shown in the table.
Participation in the SIP was fixed at the start of the accumulation period (1
April 2024), with 73 employees enrolling. No new participants could join
mid-cycle, although employees were permitted to withdraw from the scheme
during the period. In such cases, employee contributions were refunded, and no
Matching Shares were issued. As at 31 December 2024, employee contributions
totalling approximately £29,220 had been made under the scheme. Based on a
fair value of £0.0885 per share at the SIP grant date and an expected
Matching Share issuance of 1,948,000 shares, the total IFRS 2 share-based
payment charge for the 48-month vesting period was calculated at £172,398.
The fair value of Matching Shares granted under the SIP equals the market
value at the SIP grant date. As there are no market-based or performance
vesting conditions, no additional valuation modelling (e.g., Monte Carlo) was
required.
A charge of £32,325 has been recognised in the income statement for the 2024
financial year, representing 9 months of the total charge.
This is the Company's only SIP scheme in place as at 31 December 2024. Future
annual SIP cycles are anticipated.
The total share-based payment charge/(credit) recognised in the income
statement during the year was as follows:
Scheme Charge/(Credit) Description
Long-Term Incentive Plan (LTIP) £94k Fair value measured using Monte Carlo simulation; see details below.
Share Incentive Plan (SIP) £32k Based on matching shares awarded over a 12-month accumulation period.
EMI Scheme (Historic) (£112k) Credit arising from forfeited options due to employee departures.
Total (£14K)
29. Government grants
Government grants on the statement of financial position at the year end
relate to grants received for capital equipment for use in production. These
grants are to be amortised over the life of the equipment to which they
relate. During the year to December 2024 the Company recognised £13k of
income against the furnaces which have entered production.
30. Post reporting date events
Strategic Commercial Realignment
Subsequent to the balance sheet date, the Company has taken steps to
strengthen its liquidity and operational effectiveness through strategic
commercial arrangements. This includes securing over £10 million in cash
advances under revised commercial terms from a key customer, aimed at
supporting working capital and reinforcing operational continuity.
The Company is actively engaged in the realignment of pricing structures and
broader commercial terms with this key customer. In parallel, negotiations are
underway with other OEMs to implement enhanced pricing agreements across
remaining production capacity, reflecting a strategic shift toward a more
value-driven commercial model.
To support operational efficiency and scale, the Group has also enhanced its
manufacturing capabilities. This includes the deployment of specialist
expertise-both internally sourced and introduced through commercial
arrangements-resulting in measurable improvements in production yield and
output.
These initiatives form part of a broader commercial repositioning to align the
business model with long-term growth objectives. Discussions regarding
longer-term frameworks remain ongoing, and the Company will provide further
updates as appropriate.
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