REG - Surface Transforms - FY23 Audit Update

Surface TransformsAnnouncement

18/06/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240618:nRSR7831Sa&default-theme=true

RNS Number : 7831S  Surface Transforms PLC  18 June 2024

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.

 

 

 For further information, please contact:

 Surface Transforms plc                                             +44 151 356 2141

 David Bundred, Chairman
 Kevin Johnson, CEO
 Isabelle Maddock, CFO

 Zeus (Nominated Adviser and Joint Broker)                          +44 203 829 5000

 David Foreman / James Edis / Ed Beddows (Investment Banking)
 Dominic King (Corporate Broking)

 Cavendish Capital Markets Ltd (Joint Broker)                       +44 20 7220 0500

 Ed Frisby / Abigail Kelly (Corporate Finance)
 Andrew Burdis / Harriet Ward (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.

The Company holds the London Stock exchange's Green Economy Mark

For additional information please visit www.surfacetransforms.com

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCFDLLFZQLFBBK