Pre-close trading update and operations update

31 July 2023

  Surface Transforms plc

("Surface Transforms" or the "Company")

Pre-Close Trading Statement and Operations Update

Surface Transforms (AIM:SCE), manufacturer of carbon fibre reinforced ceramic brake disc materials is pleased to provide the following trading update for the six months to 30 June 2023.

As reported at the Company's recent AGM, sales for the six months to 30 June 2023 grew to £3.3m (H1 2022: £2.9m) representing an overall increase of 14%. Within this total, the volume of manufactured discs during the period increased by more than 80%, reflecting the improvements made in production during 2023; the remainder of the sales in both periods was pre-production development income.

Gross cash on 30 June 2023 was £4.5m (31 December 2022: £14.9m). Capital expenditure in the six months to 30 June 2023 was £5.4m with the balance of cash movement arising from the the previously announced production issues resulting in delayed sales and non recurring operational costs.

Progress on operations and capacity

The improvement in June output rates, reported in the AGM statement, has continued into July. Customer arrears have been reduced over the past six weeks. Accordingly, the Board maintains its 2023 revenue expectations.

Installation of extra capacity is still on track with a further £3.4m of capital expenditure expected in the second half of this year. This extra capacity will provide resilience during the continuing ramp up in the second half of 2023 and also underpins the projected further near doubling of sales in 2024.

Outlook

The revenue expectations for 2023 and 2024 are unchanged. The production problems of the last six months have inevitably had cost and cash implications. However, cash has been managed by prudent cash management, the use of some contingencies in the original plan and the phasing of capital expenditure for the next phase of capacity expansion. Reflecting the Board's expectation of continuing operational performance, gross cash at 31 December 2023 is now expected to be no worse than £1m lower than previous estimates.

The Board still expects the Company to be profitable in the second half of 2023.

The Company is continuing its work with customers on converting its prospective contact pipeline into firm orders with further announcements expected in the current financial year.

Further Announcements

The Company will announce its 2023 interim results on 27 September 2023.

For enquiries, please contact:

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 cars 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