Surface Transforms provides FY23 audit update

Surface Transforms plc (AIM:SCE), manufacturers of carbon fibre reinforced ceramic automotive brake discs, has announced that the audit of its statutory accounts for the year ended 31 December 2023 is ongoing and the Board of the Company currently anticipate its FY23 final results will be published in late June 2024.

There are two particular areas that have and are contributing to the extended audit timeline:

(1)         Impairments to the carrying value of certain intangible and tangible assets; and

(2)         Revenue recognition, namely relating to revenue generated from engineering, testing and tooling services provided to OEM customers during the development phase of the contract.

It is important to note that none of these matters impact cash, but taking each in turn:

1.            Impairments

Intangible assets:

The Company has applied a significantly higher discount rate in its assessment of its intangible assets and whether there is any indication of impairment.  This assessment was performed in order to address the combined challenges of cash flow forecasting risk and the potential gap between implied market value and carrying value and resulted in a recoverable amount lower than the carrying value. Whilst not yet agreed, the Board estimate that £6.2 million of non-cash impairments to intangible assets, specifically, capitalised R&D, software and right of use assets, will be recognised in FY23.

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