18 June 2024
Surface Transforms
plc
("Surface Transforms" or the
"Company")
FY23 audit
update
Surface Transforms (AIM:SCE),
manufacturers of carbon fibre reinforced
ceramic automotive brake discs, announces that the audit of its
statutory accounts for the year ended 31 December 2023 ("FY23") is
ongoing and the Board of the Company currently anticipate its FY23
final results will be published in late June 2024.
There are two particular areas that
have and are contributing to the extended audit
timeline:
(1)
Impairments to the carrying value of certain intangible and
tangible assets; and
(2) Revenue
recognition, namely relating to revenue generated from engineering,
testing and tooling services provided to OEM customers during the
development phase of the contract.
It is important to note that none of
these matters impact cash, but taking each in turn:
1.
Impairments
Intangible assets:
The Company has applied a
significantly higher discount rate in its assessment of its
intangible assets and whether there is any indication of
impairment. This assessment was performed in order to address
the combined challenges of cash flow forecasting risk and the
potential gap between implied market value and carrying value and
resulted in a recoverable amount lower than the carrying
value. Whilst not yet agreed, the Board
estimate that £6.2 million of non-cash impairments to intangible
assets, specifically, capitalised R&D, software and right of
use assets, will be recognised in FY23.
The Board note however that these
assets continue to generate revenue, underpin its £390m order book
and the accounting decision has no impact on daily operational
performance.
Tangible assets:
The Company's impairment assessment
of its tangible assets has identified that a particular furnace was
not performing to contracted specification. Furthermore, despite
considerable engineering review with the supplier, the Board does
not now believe a cost-effective solution to improve the
performance of this one particular furnace, can be made.
Consequently, and whilst not yet agreed,
the Board estimate that £3.0 million of non-cash impairment to
tangible assets will be recognised in FY23.
The poor performance of this furnace
is not impacting current output due to better than planned output
from a complementary furnace together with some
outsourcing.
2.
Revenue recognition
Following discussions with the
Company's auditors, the Board has re-assessed its revenue recognition policy relating to
revenue generated from engineering, testing and tooling services
performed, together "development revenues". This will now result in
development revenues being recognised upon completion of system
integration by the OEM or when control is passed over for the
contracted services as opposed to in line with work performed and
percentage completed under the current policy. This change will not
impact cash, and whilst not yet agreed is expected to
transfer approximately £2.0m in total from FY23 and prior periods
into future years.
Further updates will be made
as appropriate.
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For
further information, please contact:
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Surface Transforms plc
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+44 151 356
2141
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David Bundred,
Chairman
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Kevin Johnson, CEO
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Isabelle
Maddock, CFO
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Zeus (Nominated Adviser and Joint
Broker)
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+44 203 829
5000
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David Foreman / James Edis / Ed
Beddows (Investment Banking)
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Dominic King (Corporate
Broking)
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Cavendish Capital Markets Ltd (Joint
Broker)
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+44 20 7220
0500
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Ed Frisby / Abigail Kelly (Corporate
Finance)
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Andrew Burdis / Harriet
Ward (ECM)
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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.
The Company holds the London Stock exchange's Green Economy
Mark
For additional information please visit www.surfacetransforms.com