Surface Transforms PLC Trading & Operational Update (2966J)
December 04 2018 - 1:00AM
UK Regulatory
TIDMSCE
RNS Number : 2966J
Surface Transforms PLC
04 December 2018
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Surface Transforms plc.
("Surface Transforms" or the "Company")
Trading & Operational Update
Surface Transforms (AIM: SCE) provides the following trading
update for the six months to 30 November 2018.
Revenues for the period were GBP509k (2017: GBP524k). The cash
balance at 30 November was GBP744k (2017: GBP3.3m) to which can be
added an expected R&D tax credit in excess of GBP500k, expected
to be received in December 2018.
The Company expects to report its interim results for the six
months ended 30 November in February 2019.
Progress with Potential OEM Customers
The Company continues to test products with customers as
described in recent announcements and is making particularly good
progress with German OEM5. Having reviewed the Company's quality
processes, logistics capability, financial strength and capacity
plan, German OEM 5 has approved Surface Transforms as a potential
supplier to them. The Company has been informed, "... it is now
officially possible for (OEM 5) to place orders under the condition
that the development department is happy with the required
performance of ST discs". In respect to engineering approval, test
track testing is underway and on schedule. To save later car
development time, OEM5 has indicated to Surface Transforms that it
intends to approve, at this stage, a pad/disc combination with a
new environmentally friendly pad; this new pad requirement is
lengthening the test programme and therefore engineering sign off
is now expected in early 2019, still within the nomination time
frame on the target vehicle.
The work on passing the OEM 3 rig test is also continuing with
good progress having been made on understanding the reason for
process variability. This work is expected to complete in the first
quarter of calendar 2019, consistent with the next round of
nomination dates.
Progress with New Capital Equipment
The Company has been awarded the environmental standard ISO
14001 ahead of schedule.
The final furnace for OEM production cell one has successfully
completed a number of production runs at the supplier's premises
and will now be dismantled and shipped to Knowsley during the next
8 weeks.
These extensive production trials, in combination with a
supplier change on a key component, have had the effect of building
significant work-in-progress inventory (approx. GBP200k increase in
the period). This excess will unwind over the next 18 months but,
obviously, the recent increase and projected decrease in inventory,
impacts both current cash and cash projections.
The other furnaces are either in production or finalising
software installation. The Company expects OEM cell one to be
operational in in summer 2019.
Outlook
The start of production ("SOP") of British OEM6 had been
forecast for the final quarter of the Company's FY 2018/19. The
Board is increasingly concerned of a possible, but not yet certain,
three to six months delay to the SOP. The delay, if it happens,
would likely reduce FY 2018/19 sales by GBP500k. As a precaution,
the Company has modelled the working capital impact of this as well
as a "stress test" of FY 2018/19 sales simply repeating last year's
sales. In both instances the Company has adequate cash headroom. It
is additionally worth noting that a delay in SOP does not of course
change the medium-term cash projections as this is a limited
edition contract for a specific number of cars which have been pre
sold, and which, for regulatory reasons need to be produced before
December 2020.
Nonetheless, in the light of this, and as a matter of prudence,
the Company has revised its FY19 projections based on a delayed
scenario of the British OEM 6 limited edition track car, such
revenues being deferred to subsequent periods.
For enquiries, please contact:
Surface Transforms plc. +44 151 356 2141
David Bundred, Chairman
Kevin Johnson, CEO
Michael Cunningham CFO
Cantor Fitzgerald Europe (Nomad & Joint-Broker) +44 20 7894 7000
David Foreman, Richard Salmond, Michael Boot (Corporate
Finance)
Caspar Shand-Kydd, Gregor Paterson (Sales)
finnCap Ltd (Joint-Broker) +44 20 7220 0500
Ed Frisby / Giles Rolls (Corporate Finance)
Richard Chambers (Corporate Broking)
For further Company details, visit www.surfacetransforms.com
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END
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