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The numbers will be interesting. Most of our cash has gone on the expansion. Now we have the loan ringfenced for capx the proceeds of the fund raise should last until cash flow positive. Sounds like the operational efficiencies are improving so maybe there’s a nice surprise and that comes earlier than expected.
IMO you’ve got to see it as a new investment, forget what you put in before. If you’d rather invest elsewhere do that.
I keep reading comments from SCE and brokers along the lines of Zeus' note; "The production team has now removed almost all the single points of failure and scrapping rates have reduced significantly in the past two months."
But how do we know? How can we have any faith that the manufacturing process has been/ is being fully resolved when we have been fed a whole bunch of bulls**t since last September (and possibly longer)? Unless manufacturing is sorted they will just burn through this cash as well. It's a pure leap of faith.
I'd appreciate other's views here because as a long term holder I've been wiped out. I either do nothing and need a 40-bagger to break even, or average down and "only" need a 10 or 20-bagger! It's an appalling Hobson's Choice.
Thanks for the post, the debt covenants issue will likely be that there are potential debt serviceability covenants that ST was in risk of breaching due to the delays, and those needed to be renegotiated to avoid triggering a default. Remember that these furnaces are apparently unique to ST and their process, therefore from a lender's perspective they've very little value as collateral, if these were HGV's or other ubiquitous assets with readily ascertainable market value, a simple Asset Based Lending facility could probably be achieved on a light to no covenant basis.
Thanks Dogg.
I had already assumed from the RNS that they hadn’t drawn down on the loan yet. It certainly reads like that.
This seems to confirm it.
Below is from Zeus. Note the part about the development loan - debt covenants being renegotiated - does this mean we havent drawn down on the loan yet? Will have plenty of cash headroom.
Surface continues to target increasing factory capacity to £75m of annualised sales over the next few years, with a medium-term target of £150m. As recent trading statements have shown, improving manufacturing resilience is at least as important as the capacity build out, and this is being addressed diligently by management. The production team has now removed almost all the single points of failure and scrapping rates have reduced significantly in the past two months.
Surface has a secured and prospective risk weighted customer pipeline for c. £700m of sales; it can sell as many discs as it can manufacture. Over £390m of the c. £700m is expected orders, with an average revenue of c. £79m each year. Customers, who are global and significant OEMs, remain supportive.
We assume base case 2024e revenue of £17.5m, against £8.3m of sales in 2023a, and recent guidance from Surface for a range of sales of £17.5m to £22m. We assume a gross profit margin of c. 55% for 2024e, rising to 57% in 2025e helped by planned unit cost reductions. This remains conservative against our expectation of a normalised run-rate of c. 60% over the medium term. The gross margin will vary with revenue levels and mix, particularly relating to the volumes of sales made to global OEMs versus other customers. In this note we provide quarterly estimates for 2024e to show the movements in capacity, revenue, and cash for the near term.
We expect operating cash generation to turn positive later in 2024e. Working capital intensity should start to reduce as volume production normalises. With a successful fundraising, cash balances will start to look much stronger, and improve rapidly with further positive cash generation in 2025e.
Debt financing is in place for capex funding with the Liverpool City Region’s Urban Development Fund (which is part funded by the ERDF). In this way, equity investors are somewhat shielded from the significant cash outflows associated with further large equipment purchases. Surface Transforms and Liverpool City Region’s Urban Development Fund have agreed revised financial covenants for the loan facility, with banking documentation currently being prepared.
The market opportunity remains significant, measured in the billions of dollars over the medium term. We believe the adoption of this durable and light weight technology will expand significantly as the unit price falls for the end-customer.
The supplier market structure is attractive with an effective global duopoly comprising one major competitor. Barriers to entry, particularly driven by the complexities of volume production, are high.
With the proceeds from this fundraising combined with the capex loan, Surface Transforms should now be funded through to the next phase of g
e****eker, your lack of understanding of this business and the sector it operates within is astonishing. suggest you go and do some homework.
Manufacturing wasn't scaled up until the orders were received. Doesn't make sense to do it the other way around. Now targeting £75m+ annual revenue and we know we can sell anything we can produce.
Why does it take 30+ years for a company like surface transforms to start scaling up manufacturing. Look at Brembo - a world leader but growth has been stagnant.
What Surface Transforms can do Brembo can do, so why waste money on ST? What's so special about ST, I can't understand. Investors keep pouring money into a black hole, yet management fail to deliver.
Well, he bought high and sold (very) low.
Those of us who took his shares off his hands are aiming to buy low and sell high.
(Of course he might have hedged his position with a countervailing short as someone else said).
Thanks
@Goldwater - the 15% holding was before the trade, it went to Zero afterwards.
Richard own 15% of the company . Did he held any before?.
I expect the fact that our largest shareholder didnt want to participate in the fund raise was one of the key reasons it was at such a discount. He subscribed in previous placings but we were told the last one was the last one. Must have had a huge falling out with management over this shambles. Luckily for them the company has the product and order book to back it up. Shareholders have bailed them out of their poor management. Its cheap now for new buyers like me but I can understand why longer term holders would just want to be shot of it.
@Razza - from my experience you're told before you're provided with information that would make you inside, and can inform the BOD that you don't want to be brought inside, allowing you to trade without having said information. If the investor just wanted to dump, then he'd have refused the info (and take the risk that it would have been great news that would cause the stock to rocket) and then dumped between 3p and 1p.
LOL he couldnt sell prior to the raise because that would be insider trading. and the raise was yesterday. he waited until the churn stopped then bailed. FOR A REASON
If he did he wouldn't have waited until yesterday to sell and then at the lowest price. Seems like he knows no more than us.
Maybe he knows something we dont
I assume it was his £336k sell at 0.9p. Absolutely crazy considering he wont qualify for the open offer at 1p now! maybe he was expecting a heads up on the discount and didnt get one.
Wow.... talk about disgusted with the performance of the BOD , ..I mean 185% dilution is enough to p*ss off even the keenest of supporters
Hope he had a Derivative hedge bet against the SP drop....
PLOP
Did I read that right, in that he had 15.3% of the stock (53m shares) and has dumped the LOT?
Well that is one big seller that doesn't have any more left. Seems like if you were going to sell you would have already.
Of course it is. they always butter their bread in favour of themselves. while milking PI to keep the company actually in business.
The ex entitlement date for the open offer is 7 May so anyone buying now will get an option for more shares at 1p. It looks like some of the new placing shares, including the director shares will begin trading on 7th May, does this mean they will be able to take part in the open offer as well as the discounted placing? If so thats a bit cheeky IMO.