Following the recent announcement of a placing and public offer by Surface Transforms, the management team of David Bundred, chairman, Kevin Johnson, CEO, and Isabelle Maddock, CFO, appeared on Hardman Talks to explain the need for further funding. This will support the expansion in manufacturing capacity, itself driven by strong customer demand.
In this update to investors SCE provides detail on the roll-out of its recent production starts on five models and the steps taken on increasing output. SCE currently has financial resources – a debt line is in the last stages of approval – to fund expansion to £150m annual sales capacity by 2027 with the benefit of modelled cash generation to 2027, and then beyond.
The most pressing issue for investors is the delay in achieving the fourfold production rise for which the production line has been expanded. Output in October ran at £1m, which is a rise of two-and-a-half times compared with the average rate last year. De-bottlenecking is the key, as there are seven ‘single points of failure ‘ in the ca. 30-step production process. SCE has already paid for and is installing production equipment to raise capacity further, to £50m p.a. sales. The de-bottlenecking of processes on the existing enlarged line has driven turnover expectations and estimates for 2024E and the progressive roll-out of the £50m capacity impacts in stages through the year, leaving SCE with scope for elimination of the bottlenecks in this next year.
With only one competitor in a large and rapidly growing auto component market with at least three major environmental advantages – weight, particulates and end-of-life – the delivery on the £390m order book is the constraint to sales. Demand most certainly is not. The order book is to 12 models, stretching ca. seven years, with five currently live. SCE updated on its strong relationship with its customers, which remains cooperative and good. The next update is anticipated in January 2024.