TIDMSCE
RNS Number : 4793L
Surface Transforms PLC
13 September 2021
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.
13 September 2021
Surface Transforms plc
("Surface Transforms" or "the Company")
Half-year financial results for the six months ended 30 June
2021
Surface Transforms (AIM: SCE) manufacturers of carbon fibre
reinforced ceramic brake discs, announces its half-year financial
results for the six months ended 30 June 2021.
Financial highlights:
-- Revenue increased by 34% to GBP1.2m (H1-2020: GBP0.9m)
-- Cash at 30 June 2021 was GBP17.2m (H1-2020: GBP2.0m)
-- Gross profit increased by 27% at GBP0.7m (H1-2020: GBP0.6m)
-- Total administrative expenses rose by 35% to GBP2.9m
(H1-2020: GBP2.1m) as a result of increased customer testing costs,
headcount and depreciation in anticipation of the commissioning of
Production Cell One
-- Loss before tax increased to GBP1.9m (H1-2020: GBP1.2m)
-- Capital expenditure on property, plant and equipment was
GBP0.8m (H1-2020: GBP0.3m) to which a further GBP3.7m of capital
equipment purchase orders were contracted in the period
-- Successfully raised GBP19m of new equity (after fees) in a heavily over-subscribed fund raise
Sales and Operational Highlights:
-- Series production commenced for the Aston Martin Valkyrie
-- Post balance sheet date, contract wins announced with a new
customer, now described as OEM 10, of GBP20m and a follow-on order
with an existing customer, OEM 5, of EUR5m
-- Bringing our overall lifetime value, OEM order book to circa GBP70m sales
-- Good progress on both commercial discussions and ongoing
successful product testing with several other new and existing
customers
-- Production Cell One will be ready for the ramp up in sales forecast in Q4-2021
-- Significant revision to the Company's manufacturing strategy
which, inter-alia, is expected to: save GBP10m in the subsequent
equipping of the Knowsley site; provide GBP50m of annual sales
capacity in early 2023, an increase of GBP15m from previous
capacity forecast (without new capital expenditure); and reduce our
projected carbon footprint
-- Strengthened the Board with the addition of two independent non-executive directors
Outlook
The Company now expects to enter a period of high growth,
partially, but not solely based on a lifetime value OEM order book
of circa GBP70m. Indeed, we repeat the statement made by the Chief
Executive in the manufacturing strategy announcement of 1 September
"at the time of the fundraising we said that we thought there could
be sufficient demand to fill the Knowsley factory by 2025 (GBP75m
sales), albeit these projections are still uncontracted...we have
now concluded that we may want this capacity by 2024."
However, the immediate 2021 outlook is driven by the background
combination of customer start of production dates ("SOP") and the
subsequent "ramp" of production from SOP to mature manufacturing
volumes. In neither case can we be totally certain of the
customers' projections. It is not uncommon for SOP dates to be
delayed and the ramp varies both by customer and is specific to
each individual customer circumstances.
These uncertainties are impacting our view of the outlook for
2021. Sales in the last quarter are dominated by the forecast SOP
for OEM 8. As described below the SOP of our model derivative has
slipped into Q1 2022, but as the customer's supply chain will
always require our parts before the customer's SOP, the impact on
Surface Transforms in the final months of this year is unclear.
Discussions are continuing; however, in the extreme position of
parts not being required until Q1 2022, this would shift
approximately GBP2m of budgeted 2021 sales to a future date.
In contrast to these short-term uncertainties, the forecast for
2022 has become more robust. There are no major forecast SOPs in
the year and the issue of the ramp for OEM 8 is offset by the
commercial success of the car, demonstrated by the customer's
higher than originally forecast order book. Nonetheless, using our
policy that we only provide guidance based on firm contract awards
we make no changes here and now to our 2022 revenue
expectations.
However, we reiterate our previous statements, that we expect to
be profitable in 2022.
Summary
The Company continues to announce contract wins with new and
existing customers and is working on a significant number of
unannounced projects. All these customer R&D projects are
either going to plan or exceeding expectations.
The hard, detailed work of commissioning Cell One has continued,
and the cell will be ready for production when needed to satisfy
the budgeted ramp up of sales. Additionally, as part of the process
for installing Cell Two, the Company has reviewed and subsequently
adopted a new manufacturing strategy which will lead to the change
from the Knowsley plant's modular plan to a single site, single
production line concept. The implementation of this plan will
provide GBP50m of annualised sales capacity in 2023 and if needed
and with further capital expenditure, GBP75m of annualised sales
capacity in 2024, shorter lead times with lower cash need and
reduced projected carbon footprint.
There are some short term 2021 outlook concerns over the precise
SOP date for the OEM 8 model and the shape of its subsequent
production ramp, but these concerns cover a short period in the
context of a sales opportunity that is increasing in size with the
customer.
The Company continues to ascribe the highest priority to
underpinning its strong Environmental, Social and Governance
credentials. In the period, actions included strengthening the
Board, incorporating a reduced carbon footprint as a key criterion
for furnace selection, installing emission measuring equipment that
exceeds regulatory requirements, increasing employment in a
deprived area of the country and continuing to build our
relationship with the local community.
The regulatory discussions and lobbying to include brake dust
regulations in the new Euro 7 regulations accelerated in the
period. There are no certainties to this process, but enhanced
brake dust regulations would be beneficial to all carbon ceramic
("CC") disc suppliers.
Finally, I would like to conclude by recording the Board's
appreciation of the outstanding contribution by all members of the
team. Thank You!
David Bundred
Chairman
For enquiries, please contact:
Surface Transforms plc. +44 151 356 2141
David Bundred, Chairman
Kevin Johnson, CEO
Michael Cunningham CFO
Zeus Capital Limited (Nominated Advisor and Joint Broker) +44 20
3829 5000
David Foreman / Dan Bate / Jordan Warburton (Corporate
Finance)
Dominic King (Corporate Broking)
finnCap Ltd (Joint-Broker) +44 20 7220 0500
Ed Frisby / Abigail Kelly (Corporate Finance)
Richard Chambers/Barney Hayward (ECM)
About Surface Transforms
Surface Transforms plc. (AIM:SCE) develop and produce
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 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.
For additional information please visit
www.surfacetransforms.com
Financial Review:
Revenue in the six months ended 30 June 2021 increased to
GBP1,207k (H1-2020: GBP902k) ahead of expectations, mainly
reflecting higher than forecast invoicing of prototype parts and
engineering services to OEM customers.
Gross profit increased to GBP747k (H1-2020: GBP590k) and gross
margin was 62% (H1-2020: 65%). Gross margin percentage reduced
slightly but is expected to recover in the second half of the year
as we see both the cost savings from the use of the new furnaces
and volume purchasing effects from series production.
Administrative expenses before R&D costs, rose GBP353k to
GBP1,281k (H1-2020: GBP928k) driven by both increased headcount and
staff costs (GBP263k) and an increase in depreciation of GBP90k.
Both increases are in anticipation of the commissioning of
Production Cell One and were forecast at the time of the
fundraising. Headcount rose by 22 staff in the six-month period and
the Company expects to recruit a further 12 staff in the second
half of the year.
Research expenses increased GBP395k to GBP1,607k (H1-2020:
GBP1,212k). This increase reflects the significant growth in
testing activity on new projects, including off-site test houses
and prototypes for testing, where there is no customer
contribution.
Cash at 30 June was GBP17,197k (December 2020: GBP1,058k), to
which can be added GBP576k of R&D tax credit received in July.
The 30 June 2021 balance reflects the February fundraise of GBP19m
after fees.
The Company has also been awarded a Future Growth Fund loan from
the local authority for GBP1m on favourable commercial terms
repayable over 5 years.
Loss per share was 1.03p (H1-2020: 0.82p).
Progress with potential OEM customers
Surface Transforms is undertaking testing with several OEMs,
including existing customers and those who have not tested our
products before. These OEMs wish to control the information flow on
both this activity and the subsequent technology and supplier
selection. Therefore, we only disclose names after our customers
have done so and assign project names or numbers to respect that
confidentiality.
In general, all the tests are either going to plan or exceeding
expectations.
Electric vehicles: The technical characteristics of our product
- notably light weight, significant reduction in brake dust, no
brake fade and elimination of galvanic corrosion - are particularly
relevant to electric vehicles ("EV") and thus whilst we are
delighted that we continue to win contracts on internal combustion
engine ("ICE") vehicles it is likely that by 2025 this EV segment
will dominate our sales because it is currently dominating our
project activity.
OEM 8: The Company won a GBP27.5m contract with this customer in
2020 and, at that time the customer's plan was standard fit on a
new derivative of an EV model in their range. The orders for the
car have greatly exceeded the customer's expectations, which in
turn is expected to lead to higher volumes for Surface Transforms.
The customer is now discussing with suppliers the introduction of
CC brakes through a "performance pack" version of the car. The
discussions include seeking significantly higher capacity
commitments. Whilst we cannot forecast the outcome of these
discussions as the whole supply chain will be constrained by
whichever single supplier has the greatest capacity constraint; it
is nevertheless an encouraging development.
These changes and subsequent capacity discussions have led to a
delay to SOP for our model derivative which is consuming the
contingency that we built into the programme launch. These delays
may impact current expectations of 2021 sales. If our timing
contingency were to be exhausted and there were no sales to OEM 8
in 2021 this would reduce sales by GBP2m in the current year. We
would expect 2022 sales to be higher than previously guided,
however until the whole supply chain capacity discussions have
concluded we are maintaining previous revenue guidance.
OEM 10: This new customer is a mainstream OEM and one of the
largest in the world. It was therefore encouraging to win a GBP20m
contract on an ICE car, forecast to launch in mid-2024. Fitment is
standard on both axles of the car.
OEM5: This is a mainstream German OEM. We won our first EUR11m
contract with them in 2019. The contract envisaged further awards
as the technology had then been approved for general use across
their wider vehicle range. The first potential award, in 2020, was
a victim of the Covid resource issue as the planned facelift was
cancelled. It is therefore encouraging that we won the first
"carry-over" order with this customer, post balance sheet, in
August 2021, worth EUR5m over 5 years starting in 2024. We now
regard ourselves as 'back on track' and expect future "carry-over"
awards from this customer in the future.
OEM 9: This potential new customer, announced during the fund
raise, has delayed the SOP for our target car by one year to
mid-2023. The dialogue with the customer is continuing and we
expect to make further announcements in 2022. In the meantime, and
in accordance with our general policy we have not included
potential sales from OEM 9 in our forecasts.
OEM 3: This customer is testing our product for all divisions
within their parent company and thus potentially extends to OEM 2
and 4 as well. The customer has a unique environmental test that
Surface Transforms has been endeavouring to pass for some time. The
Company has made good progress on this project in the period,
indeed arguably more progress has been made in the last six months
than in the last three years. The Company is currently in
discussions with the customer with regard to our recent test
results.
Aston Martin Valkyrie: It is most encouraging to report that
Aston Martin has now started production with Surface Transforms
delivering CC brake discs on this car. Production will continue
into mid-2022.
Retrofit and Near OEM: Retrofit sales are fitment of our discs
onto already registered cars replacing either the in-situ grey
iron, or frequently, our competitor's CC discs. Near OEM sales are
to a number of very low volume specialist manufacturers, some of
whom make less than ten cars per year. Sales into these segments
have been the bedrock of Surface Transforms over the past ten
years.
Whilst market size is modest against the above OEM customers it
is encouraging to report that we still see growth in the segment,
particularly retrofit where retail customers see the benefits of
using our technology against competing technologies; end-user
feedback that is not lost on the OEMs.
Progress on Operations
As previously reported the Company has current annualised sales
capacity for GBP4m sales from what we describe as the Small Volume
Production Cell ("SVP"). The construction of Production Cell One
has been underway for a few years which (together with SVP) will
raise the site capacity to GBP20m sales when it enters production
at the year end. In February 2021 the Company raised GBP19m, after
fees, to increase site sales capacity to GBP35m sales by building
Production Cell Two.
Production Cell One commissioning ; Work on this project has
dominated operational activity over the reporting period. There
have been several detailed issues to resolve but we can report that
every furnace has now produced parts and the overall cell will be
ready for production when needed in the next few months.
Production Cell Two design and revised manufacturing strategy:
As previously reported, the Company approached the design and
procurement of Production Cell Two as part of the wider plan to
provide site sales capacity of GBP75m in 2025. After internal
assessment and extensive discussions with furnace supplier partners
the Company has revised its manufacturing strategy which means that
the Company will no longer be building modular cells and instead
approach the project as a plant wide "single production line"
project.
The effects of the new manufacturing strategy are:
-- saving approximately GBP10m in equipping the complete Knowsley factory
-- increasing our 2023 sales capacity by GBP15m p.a. from GBP35m
p.a. to GBP50m p.a. with no new capital equipment cash needed
-- reducing implementation time for equipping the whole factory by approximately 18 months
-- significantly increasing capacity implementation flexibility
beyond 2022 as the business grows over the next 2 to 3 years
-- reducing our projected carbon footprint by using more
environmentally friendly furnace technology
The orders for the first furnaces consistent with this strategy
have been placed.
Cost reductions: Continuous reduction in manufacturing cost
remains a key objective for the Company and is arguably a key
requirement of all automotive suppliers. There have been cost
reductions in the period, as new furnaces have contributed to
current production, but the main effect will be seen in the next
few months as we see the cost savings from the use of the complete
Cell One production line, as well as the volume purchasing effects
from series production.
Progress on Environmental, Social and Governance ("ESG")
The Company continues to extend its ESG credentials. Our product
reduces carbon emissions on ICE vehicles through reduced vehicle
weight; a benefit that is needed even more on heavier EVs.
Additionally, CC discs significantly reduce brake dust particles
being released into the atmosphere and watercourse, an issue of
increasing interest to regulators. And finally, CC discs eliminates
galvanic corrosion, a safety concern for grey iron discs on
EVs.
The Board regularly reviews progress on this subject and intends
to issue an information memorandum for interested stakeholders in
2022. ESG activities of the Company in the period included:
-- Regular measurement of progress against several
sustainability criteria selected by the Board
-- carbon footprint reduction set as one of the key criteria in
the selection of the Company's furnace partner's technology
-- as part of our determination to be a good neighbour, the
Company is installing continuous emission measuring equipment that
exceeds regulatory requirements
-- providing increased employment opportunities in one of the
most deprived boroughs in the country continued to deepen the
Company's relationships with the local community
-- the Company increased both the independence and diversity of
the Board through the recruitment of two new non-executive
directors Matthew Taylor and Julia Woodhouse
Developments in braking regulations
We note increased lobbying by environmentalists to include brake
dust regulations in the forthcoming Euro 7 emission standards,
hitherto confined to engine emissions. Lobbying has included, for
example, questions in the European parliament, internal EU
discussion papers and request for comment by the OEMs. Of course,
this may not lead to stronger regulations, but an industry
specialist journalist has described the brake system suppliers as
currently being "Inside the eye of a dust storm". Regulations to
reduce brake dust would be advantageous to all the CC disc
suppliers.
Statement of Total Comprehensive Income
For the six months ended 30 June 2021
Six Months Six Months Year
Ended Ended Ended
30-Jun-21 30-Jun-20 31-Dec-20
Unaudited Unaudited Audited
--------------------------------------------------------------- ------------ ------------ ----------
Revenue 1,207 902 1,952
Cost of Sales (459) (312) (642)
--------------------------------------------------------------- ------------ ------------ ----------
Gross Profit 747 590 1,310
Other Income 11 154 240
Administrative Expenses:
Before research and development costs (1,281) (928) (1,888)
Research and development costs (1,607) (1,212) (2,468)
--------------------------------------------------------------- ----------
Total administrative expenses (2,888) (2,140) (4,356)
--------------------------------------------------------------- ------------ ------------ ----------
Operating loss before non recurring items (2,130) (1,396) (2,806)
Non-recurring items (6) - -
Financial Income - - -
Financial Expenses (56) (55) (111)
--------------------------------------------------------------- ------------ ------------ ----------
Loss before tax (2,192) (1,451) (2,917)
Taxation 277 276 614
--------------------------------------------------------------- ------------ ------------ ----------
Loss for the period after tax (1,915) (1,175) (2,303)
Total comprehensive loss for the year attributable to members (1,915) (1,175) (2,303)
--------------------------------------------------------------- ------------ ------------ ----------
Loss per ordinary share
Basic and diluted (1.03)p (0.82)p (1.54)p
--------------------------------------------------------------- ------------ ------------ ----------
Statement of Financial Position
As at 30 June 2021
Six Months Six Months Year
Ended Ended Ended
30-Jun-21 30-Jun-20 31-Dec-20
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
----------------------------------------------------------------- ----------- ----------- ----------
Non-current Assets
Property, plant and equipment 6,136 5,588 5,626
Intangibles 333 162 278
----------------------------------------------------------------- ----------- ----------- ----------
6,469 5,750 5,904
Current assets
Inventories 724 921 575
Trade and other receivables 1,388 950 1,078
Cash and cash equivalents 17,197 2,019 1,058
-----------------------------------------------------------------
19,309 3,890 2,711
----------------------------------------------------------------- ----------- ----------- ----------
Total assets 25,778 9,640 8,615
Current liabilities
Other interest bearing loans and borrowings 75 83 75
Loans associated with right of use assets 225 140 224
Trade and other payables 1,061 798 920
----------------------------------------------------------------- ----------- ----------- ----------
1,362 1,021 1,219
Non-current liabilities
Government Grants 200 200 200
Loans associated with right of use assets 1,077 1,198 1,147
Other interest bearing loans and borrowings 257 471 371
-----------------------------------------------------------------
Total liabilities 2,896 2,890 2,937
----------------------------------------------------------------- ----------- ----------- ----------
Net assets 22,882 6,750 5,678
----------------------------------------------------------------- ----------- ----------- ----------
Equity
Share capital 1,951 1,546 1,549
Share premium 41,436 22,733 22,779
Capital reserve 464 464 464
Retained loss (20,971) (17,993) (19,114)
-----------------------------------------------------------------
Total equity attributable to equity shareholders of the company 22,880 6,750 5,678
----------------------------------------------------------------- ----------- ----------- ----------
Statement of Cash Flow
For the six months to 30 June 2021
Six Months Six Months Year
Ended Ended Ended
30-Jun-21 31-Jun-20 31-Dec-20
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
---------------------------------------------------------- ------------ ------------ ----------
Cash flow from operating activities
Loss after tax for the period (1,915) (1,175) (2,303)
Adjusted for:
Depreciation and amortisation charge 312 222 494
Equity settled share-based payment expenses 60 96 106
Foreign exchange losses / (gains) 28 - 18
Financial expense 56 55 111
Loss on disposal of Fixed assets 6 - -
Taxation (277) (276) (614)
---------------------------------------------------------- ------------ ------------ ----------
(1,729) (1,078) (2,188)
Changes in working capital
Decrease/(increase) in inventories (149) 85 431
Decrease/(increase) in trade and other receivables (33) 368 520
Increase/(decrease) in trade and other payables 87 (229) (109)
---------------------------------------------------------- ------------ ------------ ----------
(1,825) (854) (1,346)
Taxation received - 276 334
---------------------------------------------------------- ------------ ------------ ----------
Net cash used in operating activities (1,825) (578) (1,012)
---------------------------------------------------------- ------------ ------------ ----------
Cash flows from investing activities
Acquisition of tangible and intangible assets (823) (277) (643)
Proceeds from disposal of property, plant and equipment 2 - -
Net cash used in investing activities (821) (277) (643)
---------------------------------------------------------- ------------ ------------ ----------
Cash flows from financing activities
Proceeds from issue of share capital, net of expenses 19,059 2,206 2,256
Payment of finance lease liabilities (45) (7) (56)
Proceeds from long term loans (1) (40) (128)
Interest paid (56) (55) (111)
---------------------------------------------------------- ------------ ------------ ----------
Net cash generated from financing activities 18,956 2,104 1,961
---------------------------------------------------------- ------------ ------------ ----------
Net (decrease)/increase in cash and cash equivalents 16,310 1,249 306
Foreign Exchange losses (28) - (18)
Cash and cash equivalents at the beginning of the period 1,058 770 770
---------------------------------------------------------- ------------ ------------ ----------
Cash and cash equivalents at the end of the period 17,340 2,019 1,058
---------------------------------------------------------- ------------ ------------ ----------
Statement of Changes in Equity
For the six months to 30 June 2021
Share
Share premium Capital Retained
capital account reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Balance as at 31
December
2020 1,549 22,779 464 (19,115) 5,678
Comprehensive income for
the year
Loss for the year (1,915) (1,915)
------------------------- ---------------------- ---------------------- ---------------------- ---------
Total comprehensive
income
for the year - - - (1,915) (1,915)
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Transactions with
owners,
recorded directly to
equity
Shares issued in the
year 400 19,600 20,000
Share options exercised 2 29 31
Cost of issue to share
premium (973) (973)
Equity settled share based payment
transactions 60 60
------------------------------------------------- ---------------------- ---------------------- ---------
Total contributions by
and distributions to
the
owners 402 18,656 - 60 19,119
------------------------- ---------------------- ---------------------- ---------------------- ---------
Balance at 30 June 2021 1,951 41,436 464 (20,969) 22,882
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Statement of changes
in equity
For the six months ended
30 June 2020
Share
Share premium Capital Retained
capital account reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Balance as at 31
December
2019 1,361 20,712 464 (16,917) 5,620
Comprehensive income
for the year
Loss for the year (1,175) (1,175)
------------------------- ---------------------- ---------------------- ---------------------- ---------
Total comprehensive
income for the year - - - (1,175) (1,175)
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Transactions with
owners,
recorded directly to
equity
Shares issued in the
year 185 2,220 2,405
Cost of issue to share
premium (199) (199)
Equity settled share based
payment transactions 99 99
------------------------------------------------- ---------------------- ---------------------- ---------
Total contributions
by and distributions
to the owners 185 2,021 - 99 2,305
------------------------- ---------------------- ---------------------- ---------------------- ---------
Balance at 30 June 2020 1,546 22,733 464 (17,993) 6,750
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Statement of changes
in equity
For the 12 months ended
31 December 2020
Share
Share premium Capital Retained
capital account reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Balance as at 31
December
2019 1,361 20,712 464 (16,917) 5,620
Comprehensive income
for the year
Loss for the year (2,303) (2,303)
------------------------- ---------------------- ---------------------- ---------------------- ---------
Total comprehensive
income for the year - - - (2,303) (2,303)
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
Transactions with
owners,
recorded directly to
equity
Shares issued in the
year 185 2,220 2,405
Share options exercised 3 24 27
Cost of issue to share
premium (177) (177)
Equity settled share based
payment transactions 106 106
------------------------------------------------- ---------------------- ---------------------- ---------
Total contributions
by and distributions
to the owners 188 2,067 - 106 2,361
------------------------- ---------------------- ---------------------- ---------------------- ---------
Balance at 30 June 2020 1,549 22,779 464 (19,114) 5,678
------------------------- ---------------------- ---------------------- ---------------------- --------- --------
SURFACE TRANSFORMS PLC
NOTES
1. Accounting policies
The interim financial statements are the responsibility of the
Directors and were authorised and approved by the Board of
Directors for issuance on 10 September 2021.
Basis of preparation
The Company is a public limited liability Group incorporated and
domiciled in England & Wales. The financial information is
presented in Pounds Sterling (GBP) which is also the functional
currency. The Company's accounting reference date is 31
December.
These interim condensed financial statements are for the six
months to 30 June 2021. They have not been prepared in accordance
with IAS 34, Interim Financial Reporting that is not mandatory for
UK AIM listed companies, in the preparation of this half-yearly
financial report. While the financial information included has been
prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRS), as
adopted by the European Union (EU), these interim results do not
contain sufficient information to comply with IFRS.
These interim results for the period ended 30 June 2021, which
are not audited; do not comprise statutory accounts within the
meaning of section 435 of the Companies Act 2006.
Full audited accounts of the Company in respect of the year
ended 31 December 2020, which received an unqualified audit opinion
and did not contain a statement under section 498(2) or (3)
(accounting record or returns inadequate, accounts not agreeing
with records and returns or failure to obtain necessary information
and explanations) of the Companies Act 2006 and have been delivered
to the Registrar of Companies.
The accounting policies used in the preparation of the financial
information for the six months ended 30 June 2021 are in accordance
with the recognition and measurement criteria of IFRS as adopted by
the EU and are consistent with those which will be adopted in the
annual statutory financial statements for the year ending 31
December 2021.
Going concern
The financial statements have been prepared on a going concern
basis which the Directors believe to be appropriate. The Company
incurred a net loss of GBP1915k during the period however the
Directors are satisfied, based on detailed cash flow projections
and after the consideration of reasonable sensitivities, that
sufficient cash is available to meet the Company's needs as they
fall due for the foreseeable future and at least 12 months from the
date of authorising the accounts. The detailed cash flow
assumptions are based on the company's annual budget, prepared and
approved by the Board, which reflects a number of key assumptions
including revenue growth, underpinned by current pipeline; customer
compliance with payment terms; other receipts of a value and timing
consistent with previous years. These forecasts also include the
impacts of the Covid situation, and the recent fund raise which has
increased cash balances.
The current COVID-19 situation is expected to continue to impact
operations throughout 2021. In addition, the company has taken cash
protection measures in order to preserve working capital until the
situation has been resolved. The fundraise has however delivered
the headroom required to give comfort over going concern.
The Directors believe that the Company is well placed to manage
its business risks successfully despite the current uncertain
economic outlook. After making enquiries, the Directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the interim report and accounts.
Leases and right of use assets
The company assesses whether a contract is or contains a lease
at inception of the contract. A lease conveys the right to direct
the use and obtain substantially all the economic benefits of an
identified asset for a period of time in exchange for
consideration.
A right of use asset and corresponding lease liability are
recognised at commencement of the lease. The lease liability is
measured at the present value of the lease payments, discounted at
the rate implicit in the lease, or if that cannot be readily
determined, at the lessee's incremental borrowing rate specific to
the term, country, currency and start date of the lease.
The lease liability is subsequently measured at amortised cost
using the effective interest rate method. The right of use asset is
initially measured at cost, comprising: the initial lease
liability; any lease payments already made less any lease
incentives received; initial direct costs. The right of use asset
is subsequently depreciated on a straight-line basis over the
shorter of the lease term or the useful life of the underlying
asset. The right of use asset is tested for impairment if there are
any indicators of impairment.
Leases of low value assets and short-term leases of 12 months or
less are expensed to the income statement, as are variable payments
dependent on performance or usage, 'out of contract' payments and
non-lease service components.
Segmental reporting
Due to the nature of the business the Company is currently
focused on building revenue streams from a variety of different
markets. As there is only one manufacturing facility, and as this
has capacity above and beyond the current levels of trade, there is
no requirement to allocate resources to or discriminate between
specific markets or products. As a result, the Company's chief
operating decision maker, the Chief Executive, reviews performance
information for the Company as a whole and does not allocate
resources based on products or markets. In addition, all products
manufactured by the Company are produced using similar processes.
Having considered this information in conjunction with the
requirements of IFRS 8, as at the reporting date the board of
Directors have concluded that the Company has only one reportable
segment that being the manufacture and sale of carbon fibre
materials and the development of technologies associated with
this.
The Company considers it offers product technology namely carbon
fibre re-enforced ceramic material, which is machined into
differing shapes depending on the intended purpose of the end
user.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with
adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. In
considering key judgements, management have considered revenue
recognised over time as judgement however this is not material in
current period. See revenue recognition accounting policy for
further details.
Key judgements assessed by management are as follows:
Research and development expenditure
The Board considers the definitions of research and development
costs as outlined in IAS 38: Intangible Assets when determining the
correct treatment of costs incurred. Where such expenditure is
technically and commercially feasible, the Company intends and has
the technical ability and sufficient resources to complete
development, future economic benefits are probable and if the
Company can measure reliably the expenditure attributable to the
intangible asset it is treated as development expenditure and
capitalised on the statement of financial position.
In considering whether an item of expenditure meets these
criteria, the Board applies judgement in determining when the items
are technically and commercially feasible.
Deferred tax
Judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and
level of future taxable profits together with an assessment of the
effect of future tax planning strategies. At present management
have not recognised deferred tax assets above the value of the
deferred tax liability recognised, on the basis that future taxable
profits are possible, not probable.
There has been a deferred tax asset recognised for GBP159k in
current year on the basis that the deferred tax liabilities of
GBP159k could be offset by deductible differences per IAS 12.28.
Further information regarding the level of unrecognised deferred
tax is included in note 16.
Management do not consider there to be any significant estimates
included in the accounts which have a significant risk of causing a
material adjustment to carrying amount of assets and liabilities
within the next financial year.
Revenue recognition
Revenue arises primarily from the provision of carbon ceramic
brake discs.
To determine whether to recognise revenue, the company follows a
5-step process:
1. Identify the existence of a contract with a customer
2. Identify the separable performance obligations
3. Determine an appropriate transaction price for the
contract
4. Allocate the transaction price to the performance
obligations
5. Recognise revenue either at a point in time, or over time,
dependent on how the obligation is satisfied.
The majority of revenue is currently recognised at a point in
time, when the control of the goods has passed to the buyer
(usually on dispatch of the goods). These contracts contain only
one performance obligation being the provision of the specified
goods.
The company is beginning to enter contracts (notably OEM 8),
which have a number of separable elements included as part of the
provision of pre-production services to the customer. For such
contracts where it has been determined that a good or service is
being transferred, the performance obligations which are capable of
being distinct must first be identified and then an assessment made
of whether the identified performance obligations are distinct in
the context of the contract. Judgement is exercised in making this
assessment and is driven by what the customers expectation of goods
and services to be received are.
When transferring a good or service to the customer the revenue
recognition point is determined based on whether the control of the
good or service is transferred over time or at a point in time.
Where the customer receives and consumes benefits simultaneously
over the period of the performance revenue is recognised over time
whereas when the service is transferring a good at a point in time
the revenue is recognised at that time. Where revenue is recognised
on an over time basis, the Company uses a percentage of completion
model to recognise the appropriate revenue in the year. This
percentage of completion is a judgement based on time booked to the
contract.
2. Taxation
Analysis of credit in the period
Six months Six months Twelve Months
ended ended ended
30-Jun 30-Jun 31-Dec
2021 2020 2020
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (unaudited)
UK Corporation
tax
Adjustment in
respect
of prior years
R&D
tax allowance (23) - 14
R&D tax
allowance
for current
period 300 276 600
277 276 614
------------------------------ ------------------------------- -------------------------------
The effective rate of tax for the period/year is lower than the
standard rate of corporation tax in the UK of 20 per cent,
principally due to losses incurred by the Company.
The potential deferred tax asset relating to losses has not been
recognised in the financial statements because it is not possible
to assess whether there will be suitable taxable profits from which
the future reversal of the underlying timing differences can be
deducted.
3. Loss per share
6m to 30th June 6m to 30th June 12m to 31st Dec
Basic 2021 2020 2020
---------------------------------------------------
Loss after tax (GBPk) (1,915) (1,175) (2,301)
--------------------------------------------------- ---------------- ---------------- ----------------
Weighted average number of shares (No. of shares) 185,204,922 142,650,681 149,013,664
--------------------------------------------------- ---------------- ---------------- ----------------
Loss per share (pence) (1.03p) (0.82p) (1.54p)
--------------------------------------------------- ---------------- ---------------- ----------------
Loss per ordinary share is based on the Company's loss for the
financial period of GBP1,298k (30 June 2020: GBP1,175k loss; 31
December 2020: GBP2,301k loss). The weighted average number of
shares used in the basic calculation is 185,204,922 (30 June 2020:
142,650,681; 31 December 2020: 149,013,664).
The calculation of diluted loss per ordinary share is identical
to that used for the basic loss per ordinary share. This is because
the exercise of share options would have the effect of reducing the
loss per ordinary share and is therefore not dilutive under the
terms of International Accounting Standard 33 "Earnings per
share".
4. Segment reporting
Due to the start-up nature of the business the Company is
currently focused on building revenue streams from a variety of
different markets. As there is only one manufacturing facility, and
as this has capacity above and beyond the current levels of trade,
there is no requirement to allocate resources to or discriminate
between specific markets or products. As a result, the Company's
chief operating decision maker, the Chief Executive, reviews
performance information for the Company as a whole and does not
allocate resources based on products or markets. In addition, all
products manufactured by the Company are produced using similar
processes. Having considered this information in conjunction with
the requirements of IFRS 8, as at the reporting date the Board of
Directors has concluded that the Company has only one reportable
segment that being the manufacture and sale of carbon fibre
materials and the development of technologies associated with
this.
The Company considers it offers product technology namely carbon
fibre re-enforced ceramic material which is machined into different
shapes depending on the intended purpose of the end user.
Revenue by geographical destination is analysed as follows:
6m to 30th June 6m to 30th June 12m to 31st December
2021 2020 2020
GBP'000 GBP'000 GBP'000
-------------------------- ---------------- ---------------- ---------------------
United Kingdom 479 79 487
Rest of Europe 253 410 569
United States of America 353 372 806
Rest of World 122 41 90
---------------------------
1,207 902 1,952
-------------------------- ---------------- ---------------- ---------------------
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END
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(END) Dow Jones Newswires
September 13, 2021 02:00 ET (06:00 GMT)
Grafico Azioni Surface Transforms (LSE:SCE)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Surface Transforms (LSE:SCE)
Storico
Da Apr 2023 a Apr 2024
