Surface Transforms, the Knowsley-based specialist brakes manufacturer, announced today (July 19) that it has doubled its production levels. Over the past four weeks, leading up to July 12, the company consistently reached record daily and weekly production levels. This achievement aligns with its required output run rates for the full year estimates.
During the second quarter, the company faced supply chain issues in April and May due to working capital constraints. These problems were progressively resolved by June following a recent fundraising effort. Although yields were initially lower than expected, they have stabilised at 75%. Surface Transforms has a clear plan for further improvements and aims to reach an 86% yield by the fourth quarter of 2024.
The company faced additional challenges with higher-than-expected tooling and R&D costs, which were approximately £2 million above forecast for the first half of 2024. While tooling costs are now decreasing, the cost of improving yields will remain higher than previously forecast for the entire year.
Despite these challenges, the company’s sales guidance for 2024 remains in line with market estimates at £17.5 million, with current output levels meeting revised customer needs. Total sales for the first half of 2024 were £4.6 million, influenced by a change in the company’s revenue recognition policy that led to no pre-production engineering revenues. However, Surface Transforms expects to recognise £1.7 million in engineering sales during the second half of 2024.
Looking ahead, the company plans to continue growing, although it acknowledges that this growth is not without risks. The board remains confident in meeting market estimates for 2025, including £28 million in sales, positive EBITDA, and operational cash generation.
In May, the AIM-listed company raised over £9.5 million through an open offer for its shares. This was in addition to a £13.2 million local authority loan, ringfenced for capital expenditure, announced on December 11, 2023. As of June 30, 2024, the company had £5 million in cash. While this amount is expected to decrease towards the year’s end, no further funding is required.
CEO Kevin Johnson expressed optimism about the recent increase in daily output levels, noting the consistency and improvement in production yields. He acknowledged that while production yields are still below plan, the issues are understood and improvements are being made. Johnson looks forward to providing a fuller update to shareholders at the upcoming AGM.
Surface Transforms plc (LON:SCE) is a manufacturer of next-generation carbon-ceramic brake discs for automotive and aircraft applications and has been certified to IS9001-2000 since 2008 and was certified to TS16949 automotive quality accreditation and AS9100C aerospace quality accreditation in 2015.
