Surface Transforms PLC: Pre-Close Trading and Operational Update

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

19 July 2024

Surface Transforms plc

("Surface Transforms" or "the Company")

Pre-Close trading and operational update

Surface Transforms (AIM:SCE), manufacturers of carbon fibre reinforced ceramic automotive brake discs, provides the following pre-close trading and operations update for the six months to 30 June 2024 ("H1 24").

Sales

Sales guidance for 2024 remains in line with market estimates - £17.5m - as current output levels are delivering to our revised customer needs.

We are pleased to report that production of discs has doubled in the four weeks ended 12 July 2024 from the average levels achieved over the previous 5 months, and importantly, on a consistent daily basis.

Total sales for H1 24 were £4.6m, including the impact of no pre-production engineering revenues due to the revision to the Company's revenue recognition policy.  We anticipate recognising £1.7m in engineering sales during H2 24.

We will continue to grow, and our planned rate of growth is not without risk, but the Board believes that we also remain on track to deliver market estimates for 2025 including £28.0m sales, positive EBITDA and operational cash generation.

Production

Over the last four weeks, we have consistently been achieving record daily and weekly production levels that enable us to meet our requisite run rates on output to meet full year estimates.

As previously announced, Q2 was impacted by the following production challenges:

 Supply chain difficulties in April and May caused by working capital constraints. These problems were progressively resolved in full during June following the recent fund raising.

 Yields have been lower than expected but have held steady at 75%. We have a clear pathway to further improvements and expect to achieve the previously guided 86% yield in Q4 2024.

Because of these challenges, both tooling and R&D costs were approximately £2m higher in H1 24 than forecast.  Whilst tooling costs are now reducing, the cost of improving yields will continue to be higher than previously forecast for the full year.

Cash Position

Cash as at 30 June 2024 was £5.0m. While we expect this to reduce towards the year end, no further funding is required.

Further Updates

Management will present a more detailed update following the AGM on Tuesday 23 July. We expect to publish the interim half year accounts in September 2024.

Kevin Johnson (CEO) said "The recent significant increase in daily output levels, over several weeks, is most encouraging both in terms of its consistency and recent output levels. Capacity constraint is diminishing as a production impediment, thanks to the reduction of the single points of failure problem. We acknowledge that production yields, whilst improving, are still below plan. However the issues are understood, we expect to overcome them, and we are now building these further improvements from this higher baseline

We look forward to meeting shareholders at next week's AGM to provide a fuller update"

For enquiries, please contact:

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

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.