TIDMSCE
RNS Number : 4649K
Surface Transforms PLC
02 September 2021
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (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, this inside information is now
considered to be in the public domain.
2 September 2021
Surface Transforms plc
("Surface Transforms" or the "Company")
New manufacturing strategy
Surface Transforms (AIM:SCE), manufacturers of carbon fibre
reinforced ceramic brake discs, is pleased to announce that,
following internal analysis and extensive discussions with its
furnace supplier partners, it is updating its manufacturing
strategy which will have the effect of:
-- saving approximately GBP10 million in equipping the entire Knowsley factory
-- increasing 2023 sales capacity by GBP15 million p.a. from
GBP35 million p.a. to GBP50 million p.a. with no new capital
equipment cash requirement
-- reducing implementation time for equipping the entire factory by approximately 18 months
-- significantly increasing capacity implementation flexibility
beyond 2022 as the business grows over the next 2 to 3 years
-- reducing Surface Transforms' projected carbon footprint using
more environmentally friendly furnace technology
By way of background, the Company has until now, had the
strategy of equipping the Knowsley factory in a series of five
modular, relatively independent but identical production cells,
being built at one cell roughly every 18 months at a cost of
approximately GBP10 million per cell. Cell One is complete. The
Company raised GBP20 million in February 2021 to equip Cell Two and
to provide additional working capital enabling site capacity for
GBP35 million sales when complete in early 2023.
Following the fund raise, the Company and its furnace supplier
partners examined the options for building not just Cell Two but
also ensuring that the factory will have the required level of
equipment over the next few years. The Board subsequently concluded
that improvements could be made to the previous manufacturing
strategy, noting that:
-- The primary objective remains to ultimately provide a factory
with sales capacity of GBP75 million p.a.
-- However, the Company will no longer build separate production
cells but approach the project as a plant-wide "single production
line" project
-- This includes seeing the procurement of the furnaces (about
two thirds of the cost and all the lead time) as being very
different from that of the machine tools and other equipment
-- Following advice from the furnace suppliers and internal
evaluation the Company will now procure a smaller number of larger
furnaces to support the sales capacity target for the Knowsley
factory of GBP75 million p.a.
-- The immediate effect is to raise the 2023 capacity
availability from the fundraising projection of GBP35 million p.a.
sales to GBP50 million p.a. sales with no impact on the 2022 cash
requirement
-- The procurement of the other machine tools is now in
"buckets" of circa GBP5 million p.a. capacity (previously circa
GBP15 million p.a.) giving the Company shorter lead times and
greater flexibility to deal with shorter lead time customer
requests that we have seen more recently from some customers. It
should also be possible to asset finance a large proportion of the
machine tool purchases as the Company moves into profitability
-- The nearer term additional production capacity that this new
strategy provides means the Company can await contract awards
before needing to buy further furnaces to increase sales from GBP50
million to GBP75 million
-- During the fund raise the Company stated that it expected it
would cost approximately GBP50 million to provide sales capacity of
GBP75 million p.a. of which GBP10 million had been spent and the
fund raise included GBP10 million for Cell Two capital equipment.
This total requirement is now reduced to GBP40 million, a saving of
GBP10 million
-- Working capital cash needs remain unchanged. This
announcement only impacts capital expenditure
Upon completion of this project there will no longer be any
self-contained complete production cells in Knowsley. The
technologies will be grouped together, and work-in-progress will
flow from one technology to the next in a lean environment. The
machines in the current SVP Cell and production Cell One will be
moved to the appropriate new location in the new factory
layout.
Kevin Johnson, CEO, commented:
"At the time of the fund raising we said that we thought there
could be sufficient demand to fill the Knowsley factory by 2025,
albeit the sales were then, and are still now, only partially
contracted. Our continuing discussions with existing and potential
customers together with increasingly encouraging test results have
not only lifted our confidence in this view but led us to the
conclusion that we may require this capacity by 2024. This new
manufacturing strategy will achieve the primary capacity objective
with the added benefit of reducing overall capital expenditure.
There are numerous positive cash implications, and we continue to
work with our customers to convert the significant number of active
projects into firm agreements to fill this capacity."
For enquiries, please contact:
Surface Transforms plc. +44 151 356 2141
David Bundred, Chairman
Kevin Johnson, CEO
Michael Cunningham, CFO
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 Limited (Joint Broker) +44 207 220 0500
Ed Frisby / Abigail Kelly (Corporate Finance)
Richard Chambers / Barney Hayward (ECM)
About Surface Transforms
Surface Transforms plc. (AIM:SCE) develops and produces 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
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END
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