Surface Transforms plc (LON:SCE), manufacturer of carbon fibre reinforced ceramic materials has provided the following trading update for the six months to the 30th June 2022.
Revenue in H1 2022 grew 240% to £2.9m (H1 2021: £1.2m), reflecting deliveries on the Aston Martin Valkyrie project as well as catch up on the OEM arrears reported at the end of 2021.
Gross cash at 30 June 2022 was £6.7m, which includes £3m in the form of an irrevocable letter of credit for furnaces and excludes an R&D tax credit of £0.7m expected in September 2022.
Progress on OEM 8 contract
On 24th March 2022, the Company announced a new £100m (lifetime value) contract with OEM 8 replacing its previous contract for £27m reflecting both increased customer demand for its cars and an extension of contract life. Since that announcement, OEM 8 has been in discussions with all participants in its supply chain to match their demand with the detail of suppliers’ capacity constraints. Although these discussions caused a small delay to Start of Production (“SOP”) we are pleased to report that deliveries will commence in July and production schedules and run rates will now continue in line with management expectations.
Progress on other OEM contracts
Surface Transforms’ prospective contract pipeline has led to a series of new contract announcements bringing its lifetime contract value to over £180m. Furthermore, the Company continues to work with new and existing OEM customers and anticipates further contract awards in the second half of the year.
Progress on operations and capacity
The production issues reported at the year-end have been resolved and the Company has spent the subsequent period increasing output on all the machines and furnaces. The Board is satisfied with the current status; all arrears have been cleared and we can meet the immediate demand requirements of all customers. The second phase of the plant expansion which significantly increases capacity and builds resilience into our manufacturing processes is progressing well with completion still expected in H1 2023. As previously announced in September 2021, the Company has implemented a revised manufacturing strategy that increases installed capacity from the phase 1 £20m sales capacity to £50m sales capacity without the need for extra capital expenditure.
Outlook
The commencement of OEM 8 full monthly volumes will bring Surface Transforms into profitability for the financial year ending 31 December 2022. The small delay in OEM 8 SOP is offset by higher than forecast development revenues with other customers and the Board is therefore pleased to restate the guidance provided in the Chairman’s report in the 2021 preliminary results; “The Company continues its journey to profitability in 2022 and remains confident that this goal will be achieved, whilst maintaining our commitment to environmental and social goals.”
