Surface Transforms (AIM: SCE) have given DirectorsTalk the following trading update for the six months to 30 November 2016.
Revenue for the period was £327k (2015: £782k) and whilst less than the corresponding period last year, is in line with management expectations and guidance provided in the Outlook section of the Company’s 2015-16 financial statements.
The overall sales comparison masks significant changes in underlying mix. Sales to near OEM customers increased by £67k to £163k (2015: £96k), whereas sales to retrofit customers fell by £46k to £164k (2015: £210k) partially reflecting a one off sales catch up last year in H1 2015 following a previous furnace break down. However the biggest change was the absence of any sales into the race car customer in the six months to November 2016 (2015: £337k). There were also no aerospace development revenues in this half-year (2015: £111k), as the Company’s military aircraft development activity has now concluded, in anticipation of series production from early 2018.
Whilst the Company expects full year sales and gross margin percentages will be broadly similar to prior year, increased overheads reflecting additional costs of the new larger site, and R & D costs are expected to mean that losses will be higher than the prior year, but within the range of broker expectations.
Cash at 30 November 2016 was £2,660k (2015: £523k) but this did not include the £338k R&D tax credit, receipt of which is expected in the next few weeks.
The Company expects to report its interim results for the six months ended 30 November in February 2017.
Knowsley Facility
The Company’s move to its new Knowsley factory remains on track for completion by February 2017. Orders have been placed and deposits paid for substantially all new capital equipment for the factory expansion, with delivery expected in 2017.
Progress with Potential OEM Customers
The Company continues to make progress with potential OEM customers in line with management expectations and anticipate meeting German OEM 3’s environmental and testing requirements in the first six months of 2017. In addition, the Company expects to be VDA 6.3 – the German automotive industry standard which focuses on manufacturing processes – compliant over the same period
