LIVERPOOL, U.K. – Gross profit and revenues both increase during the first half of 2023 (2023H1) which ended June 30, 2023, for Surface Transforms (AIM: SCE).
The company, which manufactures carbon fiber reinforced ceramic automotive brake discs, recently announced H1 financials.
Financial highlights from the announcement:
– Revenue increased 15% to £3.3m (H1-2022: £2.9m)
– Gross profit increased 14% to £2.0m (H1-2022: £1.7m), with margin consistent at 60%
– Operating loss1 increased to £4.6m primarily due to £2.5m of non-repeatable outlays to overcome technical challenges. Investment in teams, R&D and depreciation also increased in line with plan
– Loss before tax increased to £5.5m (H1-2022: £2.5m)
– Cash at 30 June 2023 was £4.5m (31 Dec 2022: £14.9.m)
– Improving revenue post period end, with H2-2023 revenue expected to be significantly ahead of H1-2023
1Before non-recurring items
Strategic highlights from the announcement:
– Revenues lower than plan due to H1 technical challenges now overcome
– Additional furnace capacity in place and increase in proprietary know how
– Strengthened leadership team for next phase of growth, including new CFO and COO
– Meeting customer demands with further OEM contract awards expected in H2-2023
– Strategic investment programme for c.£75m capacity progressing well, with capital expenditure of £4.8m (H1-2022: £2.8m). Phase 2 target of £50m capacity will be available in 2024
– Strong order book unchanged with lifetime value of contracts at £290m across 11 contracted models
– New product development for customers continues in line with the contract roadmap
– Healthy prospective contract pipeline increased to £420m (31 Dec 2022: £393m)
– Commenced planning for site expansion to c.£150m capacity
David Bundred, Surface Transforms chairman, commented on the earnings report:
“The steady growth in production seen throughout 2023 is expected to continue. Whilst H1-2023 has been operationally challenging the Company has delivered considerable strategic progress. We have engineered solutions to our technical problems and brought in additional furnace capacity designed to our know-how. Productivity efficiencies and capacity improvements are expected to continue through 2023, a target break-even in the second half of the year, with profitability in Q4.
We have continued to invest to reach, initially £50m sales capacity in 2024 and £75m sales capacity in the following year. Of greatest importance our customers have understood our issues, including immersing themselves in our capacity plans, and remain committed to awarding the Company further business. We are appreciative of shareholders support through this learning curve.”
