Surface Transforms Regulatory News (SCE)

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (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 via the Regulatory Information Service, this inside information is now considered to be in the public domain.

14 December 2021

Surface Transforms plc

("Surface Transforms" or the "Company")

Trading and operations update

Surface Transforms (AIM:SCE), manufacturers of carbon fibre reinforced brake discs, announces the below trading and operations update and progress with OEM 8.

Trading and operations update

The Board of Surface Transforms is disappointed to advise that despite considerable growth against prior year, revenue for the year ending 31 December 2021 will be below £3m, significantly short of market expectations. The shortfall has mainly been as a result of delays in the final commissioning of the upscaled production capacity at Knowsley (in relation to OEM Production Cell One) and the associated start of the anticipated upscaling of commercial revenues expected from December.

Whilst this capacity programme progressed considerably during the year, a series of minor startup challenges has caused output delay, resulted in Q4 output missing target. By December, these issues have been narrowed down to an issue with one particularly complex furnace, which the Board believe will be fully resolved imminently. Given December is a short month, the Company is unlikely now to recover the sales gap in this financial year.

It is important to note that these sales have not been lost, the key OEM customers have not seen any impact and the revenue gap, whilst proportionately large in 2021, is small in relation to overall 2022 volumes and is expected to be recovered progressively through Q1 and Q2 2022.

The Board recognise that the short-term effect of this is disappointing, but as noted above, believe these operational issues will all be satisfactorily resolved in short order. Accordingly, the Board intend to provide a further operations update in January 2022 and also to provide quarterly updates for a period of time to reassure the market in respect of revenue performance alignment with future market expectations.

Progress on OEM 8

As previously notified, the Company won a lifetime £27.5m sales contract with an expected maturity level of £8m sales per year, commencing, (later than planned) in 2022, with a customer described as OEM 8. Again, as previously announced, the order intake for this car has greatly exceeded the customers original volume expectations and they have been in discussions with all the supply chain to explore the capacity availability for significant volume increases. These discussions are being finalised with all suppliers, with updated contract volumes expected early in the new year.

Production of parts on this contract has commenced at Knowsley in line with current OEM 8 contractual requirements and we make no change to guidance in 2022. Our 2022 capacity investment plan can support the customer's future increased volume requirements, although delays from the wider supply chain remain a risk.

Further contact awards

The Company is pleased to report continuing progress being made on further contract awards and expects to make a further announcement in the near future.  

David Bundred, Chairman, said:

"This announcement summarises the broad position of Surface Transforms over the last three months of 2021. Excellent progress continues to be made on the strategic plan but with work still to do on getting the new Knowsley manufacturing plant to the required daily volume all day, every day. It has been a tough period for all the team, but they have progressively dealt with every issue with their usually tenacity and commitment. We are confident that we are almost through this transformational period and, underpinned by the encouraging news from OEM 8, and other expected contract awards, are looking forward to 2022 with real confidence."

For enquiries, please contact:

Surface Transforms plc +44 151 356 2141

David Bundred, Chairman

Kevin Johnson, CEO

Michael Cunningham CFO

Zeus Capital Limited (Nominated Advisor and Joint Broker) +44 203 829 5000

David Foreman / Dan Bate / Jordan Warburton (Corporate Finance)

Dominic King (Corporate Broking)

finnCap Ltd (Joint Broker) +44 20 7220 0500

Ed Frisby / Abigail Kelly (Corporate Finance)Richard Chambers / Barney Hayward (ECM)

About Surface Transforms

Surface Transforms plc. (AIM:SCE) develop and produce 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