TIDMSCE
RNS Number : 2198A
Surface Transforms PLC
28 September 2020
28 September 2020
Surface Transforms plc.
("Surface Transforms" or "the Company")
Half-year financial results for the six months ended 30 June
2020
Surface Transforms (AIM:SCE) manufacturers of carbon fibre
reinforced ceramic materials, is pleased to announce its half-year
financial results for the six months ended 30 June 2020.
Financial highlights:
- Revenue increased by 55% to GBP902k (H1-2019: GBP583k)
- Gross profit increased by 72% to GBP590k (H1-2019: GBP343k)
- Loss before tax decreased to GBP1,451k (H1-2019: GBP1,525k)
- Loss after tax increased to GBP1,175k (H1-2019: GBP837k) partially
reflecting inclusion of two R&D tax credits in the comparable prior
period ended June 2019
- Cash at 30 June 2020 was GBP2,019k (31 December 2019: GBP770k),
to which can be added GBP334k of R&D tax credit received in September
2020.
- Capital expenditure on property, plant and equipment of GBP277k
(H1-2019: GBP32k) mainly relating to the installation of OEM Production
Cell One
- Successful equity placing and oversubscribed open offer raising
GBP2,206k (net of expenses)
Sales and Operational Highlights:
- Post balance sheet date, awarded a contract with a global automotive
vehicle manufacturer (described as OEM 8) with estimated lifetime
value of approximately GBP27.5 million
- GBP5m lifetime value contract awarded from Koenigsegg on the recently
launched Gemera car
- Continuing delays on start of production (SOP) on the Aston Martin
Valkyrie car
- Continuing progress on testing with OEM 3, OEM 1 and a number
of other potential customers, some of whom have not tested Surface
Transforms products before
- Increasing dialogue with OEM's for prospective electric vehicle
(EV) projects
- Maintained production and sales throughout the Covid 19 lockdown
period
- All furnaces and machine tools in the new OEM Production Cell
One have successfully operated. Task in H2 is to balance the overall
system and demonstrate repeatable volume production
Outlook
Despite the Covid 19 lockdown, trading has been better than
expected. As a result, the Company reiterates that it now
anticipates current FY 20 revenues will be approximately
GBP2.0m.
The OEM 8 contract win increases sales expectations by over
GBP3m in 2021 and GBP8m in 2022 (and the following two years). As
recently announced, given this contract as well as the expectation
of further, as yet unspecified, contract awards, the Company is
investing in manufacturing support headcount and other costs over
the next three years, which will progressively add approximately
GBP2m to annual overheads in 2022 and thereafter.
Consequently, the Company reiterates that it is now forecasting
positive profits after tax (including receipt of the R&D tax
credit), a year earlier than previously announced, in 2021 and
positive operating profit, before interest and tax, in 2022.
The Company continues to expect to announce further contract
awards over the next six months.
Summary
During the period the Company accelerated its progress to
becoming a profitable mainstream automotive supplier of carbon
ceramic brake discs. This continued progress was achieved against
the most difficult economic and operational conditions in recent
memory.
Finally, I would like to conclude by recording the Board's
appreciation of the outstanding contribution by all members of the
team, particularly in the context of the Covid 19 pandemic. Thank
You!
David Bundred
Chairman
For enquiries, please contact:
Surface Transforms plc.
Kevin Johnson, CEO
Michael Cunningham, CFO
David Bundred, Chairman +44 151 356 2141
Zeus Capital Limited (Nominated Adviser and Joint Broker) +44 203 829 5000
David Foreman / Dan Bate/ Jordan Warburton (Corporate
Finance)
Dominic King (Corporate Broking)
finnCap Ltd (Joint-Broker) +44 20 7220 0500
Ed Frisby / Giles Rolls (Corporate Finance)
Richard Chambers (Corporate Broking)
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 period increased to GBP902k despite the Covid 19
pandemic occurring within the period. The growth was fuelled
primarily by increased retrofit sales, which held up strongly
during the pandemic. OEM sales were also higher in the period and
near OEM sales broadly flat compared with the six months to June
2019.
Gross profit increased to GBP590k (H1-2019: GBP343k) and gross
margin was 65.4% (H1-2019: 58.8%). The increase in margin was due
to both better labour productivity and purchasing of raw materials,
and is sustainable. Whilst future selling prices will fall, as
volumes increase, this will be offset by further production
efficiencies being generated as OEM Production Cell One becomes
fully operational.
Administrative expenses rose by GBP173k to GBP928k (H1-2019:
GBP755k) due in large part to some increased salary costs.
Research expenses increased by GBP149k to GBP1,212k (H1-2019:
GBP1,063k) reflecting an increase in the number of customer
projects.
The R&D tax credit reduced by GBP412k to GBP276k (H1-2019:
GBP688k) following a change in accounting policy in 2019.
Previously, the tax credit was recognised when received, but is now
accrued in the year to which the tax credit relates. This
transition led to the inclusion of two tax credits in the prior
period. It had no impact on the quantum or timing of the cash
receipt. As Surface Transforms advances into profitability, it is
worth noting that the Group has substantial tax losses carried
forward.
Within the statement of financial position, property, plant and
equipment increased by a net GBP70k to GBP5,588k (December 2019:
GBP5,518k) being capital expenditure of GBP277k in OEM Production
Cell One offset by increased depreciation of GBP207k. Receivables
fell by GBP368k to GBP950k partially reflecting the reversal of
late customer payments noted in our financial results for the seven
month period ended 31 December 2019. Within this June 2020 total,
trade debtors were GBP185k and the provision for R&D tax credit
was GBP596k, of which GBP334k was received in September 2020.
Inventories fell by GBP85k to GBP921k (December 2019: GBP1,006k).
Notwithstanding this welcome reduction, the Company still suffers
from minimum order quantities on key input materials,
disproportionate to historic sales levels; thus as sales increase,
inventories should not rise at the same rate and the ratio of
inventory to sales is therefore expected to improve.
The Company had also taken advantage of HMRC support on PAYE
time to pay to improve cash flow during the coronavirus outbreak.
At the balance sheet date, Surface Transforms had authorised excess
PAYE payments of GBP246k due. These were settled in full in
July.
In the period, the Company raised GBP2,206k after fees in an
over-subscribed equity placing and open offer.
Progress with potential OEM customers
Surface Transforms is undertaking testing on a number of
projects for OEMs, including for both existing customers and others
who have not tested our products before. The Company believes that
it is not commercially appropriate to provide further details of
these projects in advance of contract award, but does note that
whilst the Covid 19 lockdown has impacted almost all project
timings and start of production (SOP), the implications of which
have previously been disclosed, the tests are validating the
superior performance of Surface Transforms' discs across a range of
key measures.
Consequently, the Company continues to expect that it will be
able to announce further contract awards over the next six
months.
- Electric Vehicles : It is also worth noting that approximately
half of the current projects pipeline relate to electric vehicles
(EVs). Whilst the generic advantages of carbon ceramic brakes
are relevant to all our customers, irrespective of vehicle powertrain,
the weight saving of carbon ceramic discs are particularly attractive
to EV manufacturers given the weight of batteries and need for
extended range. Additionally, EV manufacturers are concerned by
the, admittedly small, but nonetheless high impact risk, of pads
sticking to grey iron discs on EVs that make little use of the
hydraulic brake - known as galvanic corrosion. Galvanic corrosion
does not happen on carbon ceramic discs.
- Aston Martin Valkyrie : This project was forecast to launch in
the period but for the customer's own reasons the SOP has been
postponed. Despite this, the Company continues to expect this
project to be a major element of Surface Transforms activity during
2021.
- OEM 8: Post balance sheet date, the Company announced that it
had been selected to be the standard fit, sole supplier of the
carbon ceramic brake disc on both axles of a new car to be manufactured
by a global automotive manufacturer (hereinafter described as
OEM 8). The contract is estimated to be worth GBP27.5m over the
lifetime of the contract from 2021 to 2024. There is also the
possibility that the contract will be extended beyond 2024.
- Koenigsegg Gemera : The Company was selected as the tier one
sole supplier of carbon ceramic discs on the Koenigsegg Gemera
supercar during the period. The contract is valued in excess of
GBP5m with SOP in mid 2022 and completing in mid 2027.
- OEM 3: This customer has a unique environmental test that the
Company has been endeavoring to pass for some time now. It is
encouraging to report that considerable progress has been made
over the last year with discussions on target models continuing.
As previously stated, the Company's generic policy is not to comment
further, prior to contract award for any of its existing OEM development
programmes. However, an exception has been made for OEM 3 given
the uniqueness of their required environmental test.
- Retrofit and Near OEM : Sales into this segment continue to form
the bedrock of current trading. In the period, progress in overseas
retrofit markets - notably EU and the US - has been most encouraging.
Additionally, the Company continues to seek out (and sometimes
is sought out by) the small niche automotive vehicle manufacturers
that we describe as "Near OEMs", frequently hardly known and often
only building a handful of cars per year. Whilst, not transformational,
our growing success in this small segment is important in providing
both road mileage experience on our products (important to the
mainstream OEMs) and, of course, short term cash generation.
Progress on Operations
Over the past three years the Company has invested over GBP6m to
increase capacity from circa GBP4m sales, in what we describe as
the small volume production cell (SVP) to an overall site capacity
of circa GBP20m sales by building what we describe as OEM
Production Cell One. The site has a footprint that will facilitate
duplications of OEM Production Cell One, with the overall
potential, in Knowsley and with further investment, of
approximately 100,000 discs. The operational task has therefore
been, and continues to be, to improve productivity and
repeatability in SVP - the initial learning curve - whilst
installing and bringing OEM Production Cell One into full operation
thus providing the capacity required for the already awarded OEM
contracts that commence in early 2021.
- Covid 19 Pandemic: The operational team has had to achieve the
dual tasks above against the background of the Covid 19 lockdown;
for example furnace supplier engineers could not visit the site
to assist in installation debugging and trouble-shooting. The priority
has, of course, been the health and well being of our staff. With
their excellent co-operation, the Knowsley plant remained operational
throughout the period, maintaining production whilst also progressing
the installation of OEM Cell Production One, even with a high number
of staff working from home. Against this background, the results,
in both the SVP and OEM Production Cell One, were outstanding and
bode well for the next stage of bringing OEM Production Cell One
into balanced repeatable production.
- Capacity and Progress with OEM Production Cell One: The recent
contract awards noted above, together with existing contracts will
utilise approximately 60% of SVP and OEM Production Cell One capacity
by early 2022. All furnaces and machine tools in the new OEM Production
Cell One have operated successfully; indeed, for cost and superior
technology reasons, some of the furnaces are currently contributing
to SVP production needs. Clearly there have been some Covid 19
related delays but not to the overall detriment of the project.
The task is now to balance overall system performance and demonstrate
repeatable volume production. The timetable on completing this
task has been tightened since the OEM 8 contract award, which has
a shorter period between nomination and SOP than Surface Transforms
has historically seen. The resultant accelerated plan includes
bringing forward some capital expenditure as well as increasing
headcount (assuming the SVP and OEM Production Cell One are operating
at capacity). As previously announced, this increased headcount
and certain other indirect overheads will progressively increase
Group costs up to a steady-state level of approximately GBP2m p.a.
in 2022 and thereafter.
Nonetheless the Board and team are confident that the tasks can
be accelerated with a repeatable optimised and balanced production
capacity available when needed in 2021 and 2022.
-------------------------------------------------------------------------
- Cost reductions: The Company continues to see continuous cost
reduction in manufacturing as a key ingredient for future success
in the automotive industry. Not least because carbon ceramic brakes
are currently an expensive item and further market size expansion
(beyond cars over GBP50k retail price ) require lower costs. Prior
to securing the Knowsley plant, the Company set itself the task
of halving the then production price. This task is achieved with
OEM Production Cell One production. However, the Company will not
rest on that laurel with the next stage already in full planning,
indeed in some areas already underway.
-------------------------------------------------------------------------
- Environment : The team at Surface Transforms is proud that its
products make a material contribution to a better planet; a longer
life product that reduces carbon emissions through weight saving
and being considerably less polluting by reducing the amount of
brake dust during braking. Our task is to ensure that our production
processes complement this product achievement. To this end we are
determined to be a good neighbour, protecting the local environment,
through constant control and measurement of emissions and have
set objectives to continuously reduce our environmental footprint.
-------------------------------------------------------------------------
Statement of Total Comprehensive Income
For the six months ended 30 June 2020
Six Months Six Months Seven Months Year
Ended Ended Ended Ended
30-Jun-20 30-Jun-19 31-Dec-19 31-Dec-19
GBP'000 GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited Unaudited
----------------------------------- ----------- ----------- ------------- ----------
Revenue 902 583 1,451 1,938
Cost of sales (312) (240) (583) (783)
----------------------------------- ----------- ----------- ------------- ----------
Gross profit 590 343 868 1,155
Other income:
Government grants* 154 - - -
Administrative expenses:
Before research and development
costs (928) (755) (1,063) (1,752)
Research and development costs (1,212) (1,063) (1,502) (2,281)
----------------------------------- -------------
Total administrative expenses (2,140) (1,818) (2,566) (4,033)
----------------------------------- ----------- ----------- ------------- ----------
Operating loss (1,396) (1,475) (1,698) (2,878)
Financial income - - 1 2
Financial expenses (55) (50) (63) (109)
----------------------------------- ----------- ----------- ------------- ----------
Loss before tax (1,451) (1,525) (1,760) (2,985)
Taxation 276 688 443 1,131
----------------------------------- ----------- ----------- ------------- ----------
Loss for the year after tax (1,175) (837) (1,317) (1,854)
Total comprehensive loss for
the year attributable to members (1,175) (837) (1,317) (1,854)
----------------------------------- ----------- ----------- ------------- ----------
Loss per ordinary share
Basic and diluted (0.82)p (0.64)p (0.97)p (1.46)p
----------------------------------- ----------- ----------- ------------- ----------
* Government grants received relate to amounts received under
the Coronavirus Job Retention Scheme
Statement of Financial Position
As at 30 June 2020
30-Jun-20 30-Jun-19 31-Dec-19
GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited
------------------------------------- ---------- ---------- ----------
Non-current assets
Property, plant and equipment 5,588 5,125 5,518
Intangibles 162 198 175
------------------------------------- ---------- ---------- ----------
5,750 5,323 5,693
Current assets
Inventories 921 1,161 1,006
Trade and other receivables 950 889 1,318
Cash and cash equivalents 2,019 1,554 770
-------------------------------------
3,89 0 3,604 3,094
------------------------------------- ---------- ---------- ----------
Total assets 9,64 0 8,927 8,787
Current liabilities
Other interest bearing loans
and borrowings (83) (13) (118)
Loans associated with right of
use assets (140) (137) (138)
Trade and other payables (798) (465) (1,028)
------------------------------------- ---------- ---------- ----------
(1,021) (615) (1,284)
Non-current liabilities
Government grants (200) (200) (200)
Loans associated with right of
use assets (1,198) (1,240) (1,207)
Other interest bearing loans
and borrowings (471) (344) (476)
-------------------------------------
(1,869) (1,784) (1,883)
------------------------------------- ---------- ---------- ----------
Total liabilities (2,890) (2,399) (3,167)
------------------------------------- ---------- ---------- ----------
Net assets 6,750 6,528 5,620
------------------------------------- ---------- ---------- ----------
Equity
Share capital 1,546 1,360 1,361
Share premium 22,733 20,704 20,712
Capital reserve 464 464 464
Retained loss (17,993) (16,000) (16,917)
-------------------------------------
Total equity attributable to
equity shareholders of the company 6,750 6,528 5,620
------------------------------------- ---------- ---------- ----------
Statement of Cash Flow
For the six months to 30 June 2020
Seven
Six Months Six Months Months Year
Ended Ended Ended Ended
30-Jun-20 30-Jun-19 31-Dec-19 31-Dec-19
GBP'000 GBP'000 GBP'000 GBP'000
Unaudited Unaudited Audited Unaudited
---------------------------------------- ------------ ------------ ---------- -----------
Cash flow from operating activities
Loss after tax for the year (1,175) (837) (1,317) (1,854)
Adjusted for:
Depreciation and amortisation charge 222 238 289 491
Equity settled share-based payment
expenses 96 67 106 161
Financial expense 55 50 63 109
Financial income - - (1) (2)
Taxation (276) (688) (442) (1,131)
---------------------------------------- ------------ ------------ ---------- -----------
(1,078) (1,170) (1,302) (2,226)
Changes in working capital
Decrease/(increase) in inventories 85 (52) 157 103
Decrease/(increase) in trade and
other receivables 368 13 (501) (415)
Increase/(decrease) in trade and
other payables (229) 77 443 640
---------------------------------------- ------------ ------------ ---------- -----------
(854) (1,132) (1,203) (1,898)
Taxation received 276 688 523 1,131
---------------------------------------- ------------ ------------ ---------- -----------
Net cash used in operating activities (578) (444) (680) (767)
---------------------------------------- ------------ ------------ ---------- -----------
Cash flows from investing activities
Acquisition of tangible and intangible
assets (277) (32) (344) (653)
Net cash used in investing activities (277) (32) (344) (653)
---------------------------------------- ------------ ------------ ---------- -----------
Cash flows from financing activities
Proceeds from issue of share capital,
net of expenses 2,206 1,793 9 1,802
Payment of finance lease liabilities (7) (29) (53) (58)
Repayment/ proceeds from long term
loans (40) (3) (25) 234
Interest received - - 1 2
Interest paid (55) (50) (63) (109)
---------------------------------------- ------------ ------------ ---------- -----------
Net cash generated from financing
activities 2,104 1,711 (131) 1,871
---------------------------------------- ------------ ------------ ---------- -----------
Net increase/ (decrease) in cash
and cash equivalents 1,249 1,235 (1,155) 451
Cash and cash equivalents at the
beginning of the period 770 319 1,925 319
---------------------------------------- ------------ ------------ ---------- -----------
Cash and cash equivalents at the
end of the period 2,019 1,554 770 770
---------------------------------------- ------------ ------------ ---------- -----------
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
period (1,175) (1,175)
--------------- ---------------------- ---------------------- ---------------------- ---------
Total
comprehensive
income
for the
period - - - (1,175) (1,175)
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Transactions
with owners,
recorded
directly to
equity
Shares issued
in the period 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 as at
30 June 2020 1,546 22,733 464 (17,993) 6,750
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Statement of
changes in
equity
For the six
months ended
30 June 2019
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 1,237 19,034 464 (15,227) 5,508
Comprehensive
income for
the year
Loss for the
year (837) (837)
--------------- ---------------------- ---------------------- ---------------------- ---------
Total
comprehensive
income
for the year - - - (837) (837)
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Transactions
with owners,
recorded
directly to
equity
Shares issued
in the year 123 1,784 1,907
Cost of issue
to share
premium (114) (114)
Equity settled share based payment
transactions 64 64
--------------------------------------- ---------------------- ---------------------- ---------
Total
contributions
by and
distributions
to the owners 123 1,670 - 64 1,857
--------------- ---------------------- ---------------------- ---------------------- ---------
Balance at 30
June 2019 1,360 20,704 464 (16,000) 6,528
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Statement of
changes in
equity
For the s even
month period
ended 31 Dece
mber 2019
Share
Share premium Capital Retained
capital account reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Balance as at
31 May 2019 1,360 20,704 464 (15,706) 6,822
Comprehensive
income for
the year
Loss for the
period (1,317) (1,317)
--------------- ---------------------- ---------------------- ---------------------- ---------
Total
comprehensive
income
for the year 1,360 20,704 464 (17,023) 5,505
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Transactions
with owners,
recorded
directly to
equity
Share options
exercised 1 8 9
Cost of issue
off to share
premium -
Equity settled share based payment
transactions 106 106
--------------------------------------- ---------------------- ---------------------- ---------
Total
contributions
by and
distributions
to the owners 1 8 - 106 115
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
Balance as at
31 December
2019 1,361 20,712 464 (16,917) 5,620
--------------- ---------------------- ---------------------- ---------------------- --------- ----------------------
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 28 February 2020.
Basis of preparation
Surface Transforms plc is a public limited liability company
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 2020 and have been prepared in accordance with
IAS 34, 'Interim Financial Reporting' as adopted by the EU. They do
not include all the information required for a complete set of IFRS
financial statements. However, selected explanatory notes are
included to explain events and transactions that are significant to
an understanding of the changes in the Group's financial position
and performance since the last consolidated financial statements as
at and for the seven month period ended 31 December 2019.
These interim results for the period ended 30 June 2020, 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 period
ended 31 December 2019, 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 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 2020 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 2020.
Revenue recognition
Revenue from the sale of goods is recognised when the
significant risks and rewards of ownership of the goods have passed
to the buyer (usually on dispatch of the goods), the amount of
revenue can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to the Company
and the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Government grants
Capital grants are initially recognised as deferred income and
credited to the statement of total comprehensive income over the
life of the asset to which it relates.
Grants received under the Governments Corona virus job retention
scheme are recognised in the statement of total comprehensive
income on a systematic basis over the period in which the Company
recognises the related costs for which the grants are intended to
compensate.
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 of 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; and any dilapidation or
restoration 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
IFRS 8 "Operating Segments" requires that the segments should be
reported on the same basis as the internal reporting information
that is provided to, and regularly reviewed by, the chief operating
decision-maker, whom the Group has identified as the CEO.
The Board has reviewed the requirements of IFRS 8, including
consideration of what results and information the CEO reviews
regularly to assess performance and allocate resources, and
concluded that all revenue falls under a single business
segment.
The Directors consider that the Group does not have separate
divisional segments as defined under IFRS 8. The CEO assesses the
commercial performance of the business based upon consolidated
revenues; margins and operating costs and assets are reviewed at a
consolidated level.
Estimates
The preparation of half-yearly financial statements requires
management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates. In preparing these condensed
consolidated half-yearly financial statements, the significant
judgments made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty are expected
to be the same as those that will be adopted in the annual
statutory financial statements for the year ending 31 December
2020.
Going concern
These interim financial statements have been prepared on a going
concern basis|. Whilst the Group incurred a net loss of GBP1,175k
during the period, the Group's forecasts and projections, taking
into account reasonable possible changes in trading performance,
show that the Group has sufficient financial resources, to meet the
Group's liabilities as and when they fall due for a period of
twelve months from the date of this statement.
2. Taxation
Analysis of credit in the period
Six months Six months S even Months
ended ended ended
30-Jun 30-Jun 31-Dec
2020 2019 2019
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
UK Corporation tax
Adjustment in respect
of prior years R&D tax
allowance - 521 1 23
R&D tax allowance for
current period 276 167 3 20
276 688 4 43
------------- ------------- --------------
The effective rate of tax for the period is lower than the
standard rate of corporation tax in the UK of 20 per cent,
principally due to losses incurred by the Group.
The significant reduction in tax in the six months to 30 June
2020 is due to the fact that in the six months to 30 June 2019 the
Company changed its accounting policy to move from a cash basis for
tax to an accruals basis. The GBP688k in the six months to 30 June
2019 therefore includes both the cash receipt relating to the year
ended 30 May 2018 as well as the accrued tax credit for the six
month period.
3. Loss per share
Six months Six months Seven Months
ended ended ended
30-Jun 30-Jun 31-Dec
2020 2019 2019
(unaudited) (unaudited) (audited)
Pence Pence Pence
Loss per share:
Basic and diluted (0 .84 ) (0.64) (0.97)
------------- ------------- -------------
Loss per ordinary share is based on the Company's loss for the
financial period of GBP1,175k (30 June 2019: GBP837k loss; 31
December 2019: GBP1,317k loss). The weighted average number of
shares used in the basic calculation is 140,650,681 (31 December
2019: 136,036,376; 30 June 2019: 130,711,912).
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
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:
Six Months Six Months Seven Months
Ended Ended Ended
30 J une 31 December
2020 30 June 2019 2019
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
United Kingdom 79 172 963
Rest of Europe 410 334 165
United States of America 372 66 251
Rest of World 41 11 72
--------------------------
902 583 1,451
-------------------------- ------------- ------------- -------------
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END
IR PPUUPBUPUGBM
(END) Dow Jones Newswires
September 28, 2020 02:00 ET (06:00 GMT)
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