Chairman of Merseyside supercar brake disc maker Surface Transforms acknowledges ‘anger and frustration’ of shareholders as it taps them for another £8.5m for working capital and production scale-up. Tony McDonough reports
Supercar brake disc maker Surface Transforms (ST) is tapping shareholders for a further £8.5m as it looks to raise working capital and cash for production scale-up.
This comes just months after investors were asked for £11m. On Thursday chairman David Bundred acknowledged their “frustration and anger” at being asked to cough up again.
Knowsley-based ST, which is listed on the Alternative Investment Market, said on Thursday morning that it had conditionally raised gross proceeds of £6.5m through a successful share placing.
This saw the placing of 58,727,744 firm placing shares, 569,422,256 conditional placing shares and 21,850,000 subscription shares at the issue price of 1 pence per ordinary share.
In addition, ST intends to provide all qualifying shareholders with the opportunity to subscribe for an aggregate of up to 200,000,000 open offer shares at the issue price, to raise up to approximately £2m (before expenses).
ST manufactures carbon fibre reinforced ceramic automotive brake discs for high performance cars. Customers of the business include, or have included Porsche, Ferrari, Jaguar Land Rover and Aston Martin.
It currently has a forward order book of £390m and says its prospective customer pipeline is worth around £700m.
However, in 2022 the business experienced what it described as “growing pains”. A drive to increase capacity led to “highly specific, but cumulatively significant” production issues with furnaces. This in turn led to scrapped production.
In April this year it said sales in the first quarter of 2024 had been “constrained” due to high levels of scrap from processes that are not yet fully capable. This issue has “absorbed a sizable amount of working capital and cash”.
As a result ST trimmed its full-year sales forecast for the year to between £17.5m and £22m. Originally the top end figure had been £24m. Either way it will still be a significant uplift on the £8.3m of sales reported for 2023.
It was only in November 2023 the business raised £11m from its shareholders, as well as a £13m loan from Liverpool City Region Combined Authority.
David Bundred said on Thursday: “The board obviously regrets the circumstances that have led to this distressed fund raising and completely understands the frustration and anger of shareholders.
“The board is, however, now confident the combination of this £6.5m Placing, the £2m open offer and the £13m local authority loan is sufficient for working capital and capital expenditure needs over the next few years.
“I would like to thank those institutional shareholders, new and old, who have participated in this placing for their support. We trust that the open offer offers smaller shareholders the opportunity to participate and ameliorate dilution through the open offer.”
In its statement to the stock exchange, ST added: “Over the next three years (and potentially beyond), Surface Transforms expect to be able to sell as many discs as it can manufacture.”