Surface Transforms Plc (LON:SCE) manufacturers of carbon fibre reinforced ceramic automotive brake discs, has announced its unaudited interim results for the six months ended 30 June 2025 and trading update.
Financial highlights:
• Revenue increased 72% to £8.1m (six months ended 30 June 2024 (“H1 2024”): £4.7m)
• Gross margin at 64% (H1 2024: 56%) improved due to higher pricing and increased yield particularly in Q2 together with reductions in the unit cost of manufacture
• Operating loss £5.2m (H1 2024: £7.4m)
• Loss before tax £5.6m (H1 2024: £7.6m)
• Cash at 30 June 2025 was £1.2m (31 December 2024: £0.5m)
Q3 highlights:
• Paul Marr joins the Board as a Non-Executive Director and Steve Harrison as Chief Financial Officer
• Q3 revenue expected to be c.£5.5m, and full year 2025 now anticipated to be c.£20m, c.10% ahead of previous expectations
• Yield in Q3 is anticipated to be c.70% and has been temporarily impacted by the introduction of new equipment and processes directed towards capacity growth and efficiency. With the completion of these projects, yield returned to Q2 levels of greater than 75% and we remain focused on achieving our target of above 80% in Q4
• Cash remains in line with expectations and continues to be tightly managed. The Board re-iterates it continues to expect gross cash at 31 December 2025 will be c.£1.0m
• Customer support continues but with a much-reduced cash prepayment requirement as improving EBITDA reduces dependency
• Key capacity expansion projects are in line with plan and expected to meet the growth needs for 2026
CEO statement
2025 continues to be a year of transformation both in terms of scaling up production and improving processes. The business is making substantial progress towards sustainable and profitable operations.
Output and revenue have improved significantly with expectations for the full year now at c.£20 million, broadly 10% ahead of previous management guidance.
Our customers continue to be highly supportive and collaborate closely with us. They understand the challenges of building capacity and achieving higher yields and are encouraged by what they are observing with the improving output and capacity.
Cash at 30 June 2025 stood at £1.2 million. Operational and working capital needs continue to dominate utilisation of cash as we step up to deliver customer orders. The Company is developing means to release cash tied up in working capital through ongoing discussions with key customers and suppliers to optimise payment terms and to drive down inventory levels.
New capacity update
Specific capacity upgrade projects to take the existing £20m manufacturing capacity up to £50m manufacturing revenue capacity continue to form the backbone of our investment programme. This will provide the further benefit of additional resilience, by resolving a key risk from any single points of failure.
Installation of an additional furnace, which alleviates the most significant capacity constraint has been progressing throughout 2025. We expect the furnace will be commissioned and supporting 2026 revenues and production output.
We continue to draw down from our £13.2m ERDF loan which wholly supports the investment in the £50m manufacturing revenue capacity programme.
Operations update
Q3 has maintained the foundations laid in Q2 and the Company’s focus on continuous improvement has seen the resolution of a number of technical problems, further enhancements to our manufacturing resilience and reductions in the bill of materials. However, the integration of new equipment and processes has meant that average yield for the third quarter is expected to be c.70% (Q2 2025: 77%). This is a necessary and anticipated temporary reduction which ultimately allows the required capacity expansion and process enhancement to occur. Further improvements linked to equipment and automation are due to take root in Q4, with a yield of 80% the target for Q4.
Financial review
Revenue increased by 72% to £8.1 million in the first half of 2025, primarily driven by growth in OEM customer sales. Gross margin increased slightly to 64% due to higher pricing, improved yield and reductions in the unit cost of manufacture, particularly in Q2.
Operating loss reduced to £5.2 million, primarily reflecting the increase in gross profit as the underlying operating expenses rose only moderately (3.5% year on year).
Cash at 30 June 2025 stood at £1.2 million, with working capital requirements having been met by continued customer support in the form of a further £11.3 million of prepayments during H1 2025.
We continue with R&D to optimise our manufacturing operations, improve yield, and reduce cost per disc. We believe these initiatives will position us for sustainable growth and profitability in the future.
Planned capital expenditure of £3.8 million occurred in the period, primarily aimed at delivering capacity and efficiency. £9.2 million ERDF facility had been drawn down at 30 June 2025 and a further £1.9m to support our capital investment programme has been drawn down as at the end of August. It is envisaged that the £13.2m facility will be fully drawn down by 31 December 2025.
Summary
The business has a clear roadmap to profitable growth, anchored in awarded contracts. H1 2025 saw the business operating scale production with resultant improved revenues, particularly in the second quarter.
The strategic objectives of building further capacity and improving yield remain crucial, but cautious steps forward are taking the business into a more robust state.
Demand for our product remains strong and our customers are supportive. Cash management remains critical, but the advent of positive EBITDA enables self-funding to become attainable.
Board and Management
We are pleased to announce two appointments to the Board. Paul Marr as Non-Executive Director and Steve Harrison as Chief Financial Officer.
Paul brings a wealth of experience in automotive manufacturing and is well-versed in the key US market. He has already played a key role in an advisory capacity with the Company so we are confident that his experience and knowledge will assist us further.
Steve has been with Surface Transforms in an interim role since March 2025 and has brought a steady control and clarity to our financial position. In becoming a permanent addition Steve is ideally positioned to drive the Company towards a financially sustainable position.
Outlook statement from the Chair
The continued focus on operational improvement and cash management has underpinned the recovery we have delivered in the first half of 2025. There is still much to improve on; however we are confident that we will slightly exceed previous 2025 expectations. We now anticipate full year revenue will be c.£20m, EBITDA to be broadly neutral in H2 2025and we continue to expect gross cash at 31 December 2025 will be c.£1.0m.
Capacity improvements from the extensive investment program occurring in H2 2025 should provide a suitable platform for further growth in 2026 and beyond.
The support of our customers and the patience of our investors is greatly appreciated. We hope to reward them with further improvements and deliver on the opportunity of scale and profitability we believe exists.
