Surface Transforms Plc · LSE:SCE
Surface Transforms — H1 2023 Earnings Presentation
21 slides from Surface Transforms's earnings presentation, September 2023
Slide 1: HY 2023 Presentation
Kevin Johnson, CEO and Isabelle Maddock, CFO September 2023
Slide 2: Chief Executive Officer and Chief Financial Officer
Chief Executive Officer Dr Kevin Johnson Kevin has a doctorate in Chemistry from the University of Liverpool and an MBA from Manchester Business School. He has spent six years in product development for the chemical industry and has a broad experience with OEM multinationals in the area of new techn
Slide 3: Agenda
Agenda 04 About Surface Transforms 10 Business Development KPI’s 05 Market Development 11 Manufacturing Capacity 06 H1 2023 Highlights 12 ESG 07 HY 2023 Financial Performance 13 Outlook 08 -09 Half Year Results 2023 14 Appendices
Slide 4: About Surface Transforms
About Surface Transforms Manufactures carbon-ceramic brake discs for automotive Automotive brake discs • Brake components installed on all four wheels of the car • Key safety and performance feature of the vehicle • Integrated complex system • Braking achieved by the caliper pressing the brake pads
Slide 5: Market Development
Market Development Effectively navigating challenges, global issues and local scale up risks Growing revenues In house technical delivering profitability expertise World class product and Scale up and process technology execution risks Alternative supply routes ST segment prioritised Capacity buildi
Slide 6: H1 2023 Highlights
H1 2023 Highlights • Revenue growth of 15% to £3.3m in H1 2023 (H1-2022: £2.9m) Continued • Lower than plan due to H1 technical challenges Revenue Growth • Now meeting customer requirements • Gross margin maintained at 60% Gross Margin • Substantial outlay to overcome technical challenges • Signific
Slide 7: HY 2023 Financial Performance
HY 2023 Financial Performance Revenue up, loss greater due to ramp up issues which have been overcome Revenue Gross Profit R&D £3.3m £2m £4.1m Loss After Tax Gross Cash EPS £4.8m £4.5m (2.01p) 07
Slide 8: Half Year Results 2023 - Financial Highlights
Half Year Results 2023 Financial Highlights Ramp-up issues cost £2.5m and include Financial Highlights • Equipment failures and scrapped production due to product defects H1 2023 H1 2022 Change • Costly tooling repairs, machine wear and tear and high £m £m £m utilisation of machine consumables Reven
Slide 9: Half Year Results 2023 - Cash Highlights
Half Year Results 2023 Cash Highlights Our cash balance has dropped to £4.5m H1 2023 H1 2022 Change compared to £6.7 million in the same period last year, (31 Dec 2022: £14.9m). £m £m £m Cash Flow from Operations (5.3) (3.3) (2.1) The large outlays in H1 2023 are not expected to re-occur Capital E
Slide 10: Business Development KPI's
Business Development KPI’s Sustainable growth with strong order bank and prospective contract pipeline (PCP) • Model contracts in series production driving revenue growth • Contracted models & contract life providing sustainable, high growth over coming years • Broader customer base & carry over con
Slide 11: Capital Investment in Manufacturing Capacity
Capital Investment in Manufacturing Capacity Capacity in Place – Supports Current Contracts £20m/yr • Installed and in production • Progressive ramp up in Q3 and will continue through Q4 • Fully utilised during Q4 2023 Capacity Expansion - Phase 2 £50m/yr • Provides capacity to support 2024 demand &
Slide 12: ESG
ESG Environment: • Product is renowned for reducing brake dust, light weighting and durability • Energy strategy targets carbon reductions through new furnace technology • Potential to recycle/reuse carbon gases in manufacturing process • Green Economy Mark company Social: • We have taken on 3 addit
Slide 13: Positive Outlook continues
Positive Outlook continues Meeting customer requirements Growth in production rate increasing every quarter, with further improvements expected in Q4 Profitability in Q4 2023 with breakeven for H2 2023 Strengthening of leadership team Increasing demand from established customers with new c
Slide 14: Appendices
Appendices • Revenue Analysis • Automotive Market drivers • Proprietary Process • Lead Time with an OEM • Board of Directors
Slide 15: Revenue Analysis
Revenue Analysis Revenue up , OEM weighting up By Customer Type By Category Half Year 2023 Half Year 2023 Retrofit 13% Development 29% 12% Near OEM 71% Disc 75% OEM H1 2023 2022 2021 H1 2023 2022 2021 OEM 75% 52% 44% Development 29% 29% 15% Near OEM 12% 22% 17% Discs (Incl Freight) 71% 71% 85% Retro
Slide 16: Automotive Market Drivers
Automotive Market Drivers This is based on the directors’ expectations and their understanding of the relevant OEM’s production plan and estimated demand for discs. This is based on the directors’ experience and understanding of the market. Market leading proprietary products & process² Limitations
Slide 17: Proprietary Process
Proprietary Process Ox-Pan Preform Carbonisation Chemical Vapour Infiltration Heat Treatment Carbon- Carbon Machining Melt Infiltration Ceramic Machining Ceramic Friction Layer 17
Slide 18: Lead Time with an OEM
Lead Time with an OEM PRE- DEVELOPMENT PHASE DEVELOPMENT PHASE IN SERIES 1 Year 2 -3 Years 5 - 7 Years Contract Awarded In Series 7 years in full production with ST supplying the OEM for the lifetime of that model. 18
Slide 19: Board of Directors
Board of Directors David Bundred, Non Executive Chair David has industrial experience at senior management levels in the UK, Germany and the US and is now an active investor with “a hands on" focus in a small number of high growth companies. He previously had a 24 year long career until 1999 at Luca
Slide 20: Board of Directors (continued)
Julia Woodhouse, Independent Non Executive Director Julia spent her executive career with Ford Motor Company where her roles included Director, Global Power Train Purchasing, based in USA and Director, Global Chassis Purchasing, based in Germany. She retired from Ford in 2018 and until recently was
Slide 21: Disclaimer
Disclamer The information contained in these slides and any accompanying verbal presentation, any question and answer session and any document or material distributed at or in connection with the verbal presentation (together, the “Presentation”) have not been approved by an authorised person within