Surface Transforms PLC Trading, Premises and Operating Update (1923B)
June 15 2016 - 1:00AM
UK Regulatory
TIDMSCE
RNS Number : 1923B
Surface Transforms PLC
15 June 2016
15 June 2016
Surface Transforms plc
("Surface Transforms", the "Company" or the "Group")
Trading, Premises and Operating Update
Surface Transforms (AIM: SCE) ), manufacturers of carbon fibre
reinforced ceramic brake discs, announces that revenue in the year
ended 31 May 2016 was in line with expectations of GBP1.4 million
(2015: GBP1.1 million). Margins and costs are also expected to be
in line with expectations but income from R&D and investment
grants and credits was about GBP100k below plan.
The increase in sales was primarily driven by an increase of 25%
in sales to retrofit customers in 2016 of GBP384k (2015: GBP306k),
a 55% increase in sales to near OEM customers of GBP174k (2015:
GBP112k) and a one-off increase of approximately GBP142k in
aerospace development revenues. All other customer sales were
approximately in line with the previous year.
The cash position as at 31 May 2016 was GBP4.8m (2015: GBP0.8m),
while the Board anticipates receiving an R&D tax credit in
excess of GBP250k (2015: GBP306k) in the next four months in
addition to previously announced GBP500k in grants and interest
free loans from local authorities in support of our capital
investment.
Premises update
The Company has now formally signed the lease on its new
Knowsley premises and ordered equipment (including the payment of
deposits) for the new factory with a total investment cost of
GBP3.1m. The actual order value of the equipment is in line with
budget. The Company will begin disassembling the equipment in the
existing Ellesmere Port factory in August for reassembly in
Knowsley, with full vacation of the existing site planned for
February 2017 in line with management expectations.
Operating update
In respect of the five main automotive manufacturers the Group
is working on or in discussions with:
OEM 1 (British) Start of production ("SOP") on this limited
edition car is expected in mid-2018, with first financial year
("FY") sales of GBP1.0m and a further GBP1.2m in the following
financial year. If the further named vehicles in the currently
agreed introduction schedule come on stream potential annual
revenues would be expected to exceed GBP5m. For reasons unconnected
with Surface Transforms this performance car customer has extended
the vehicle freeze date of the first model by three months (at
which point they are expected to formally contract) but is stating
that this will not impact the SOP of the car. The Company's disc is
the only unit being tested on the car, no new issues have arisen
and engineering discussions have started on follow on models.
OEM 2 (British) SOP is currently scheduled for late 2019 with
first FY sales of GBP0.6m and future mature production sales of
GBP1.1m. This luxury car company continues to test, however it is a
sister company of OEM 3 and is therefore waiting for the OEM 3
tests to finish before contractually committing to Surface
Transforms. Nonetheless the size and weight of this vehicle is such
that the superior heat dissipation characteristics of the Surface
Transforms product is particularly relevant to this vehicle.
OEM 3 (German) SOP is currently scheduled for mid-2019 with
pre-production revenues starting mid-2018. Revenues during
production approval in calendar year 2018 are expected to be
approximately GBP3m with expected future mature production sales
after SOP of approximately GBP10m-GBP12m. These revised projections
are potentially earlier than previously forecast and higher mature
volumes as it is now understood that the discs will first be
available on a higher volume production model however the details
of these numbers are still in discussion.
OEM 4 (German) SOP is currently scheduled for late 2019 with
expected first FY revenues of GBP2.4m and future mature production
sales of GBP4.3m. As previously announced, this is a sister company
to OEM 3 and whilst delivery milestones are later, the current
testing required by OEM 3 should not need to be duplicated.
OEM 5 (German) SOP is currently scheduled for mid-2019 with
expected first FY revenues of GBP2.7m and future mature production
sales of GBP4.3m. There has been an acceleration of activity with
this customer who is both aware of their competitors' activities
with Surface Transforms and seeking to ensure they get equality of
resource allocation. No new issues have arisen from recent
testing.
In respect of the Group's aerospace activities with its main US
customer, SOP is currently scheduled for January 2018 with expected
first FY revenues of GBP0.5m and future mature production sales of
GBP1.3m. This project is proceeding to timetable and the customer
is now completing the process/product change approvals required
from the aircraft customer in line with normal aerospace practices.
There has been little progress on the light aircraft opportunity,
solely driven by resource constraints within our customer.
The Company expects to announce its preliminary results in
September.
David Bundred (Chairman) said "Good progress is being made on
all the "game changing contracts" - albeit the Board shares
investors' frustrations that we have not yet been able to announce
the names of the automotive and aerospace companies. Their
continuing desire for anonymity is driven by their marketing and
product planning motivations and not by the engineering and
purchasing personnel we work with.
Since the successful fundraising there has been a significant
acceleration in the pace of implementation action on both the
testing activity on the "game changing contracts" and the
supporting operational activity to deliver the capacity required.
The programmes are all on target and the Company continues to look
forward with confidence."
For enquiries, please contact:
+44 151 356
Surface Transforms plc 2141
Kevin Johnson, CEO
David Bundred, Chairman
Cantor Fitzgerald Europe (Nomad +44 20 7894
& Joint Broker) 7000
David Foreman, Michael Reynolds
(Corporate Finance)
David Banks (Sales)
finnCap Ltd (Joint Broker)
Stephen Norcross / Nikita Jain
(Corporate Broking)
Ed Frisby / Giles Rolls (Corporate +44 20 7220
Finance) 0500
For further Company details, visit
www.surfacetransforms.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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