Surface Transforms angers investors with distressed fundraise

Knowsley-based Surface Transforms has angered shareholders by raising a further £8.5m through a ‘distressed’ placing and open offer.

It comes just five months after the company raised £11m through investors, and achieved a £13.2m loan from Liverpool City Region Combined Authority.

The company successfully closed the offer in mid December, saying the cash would fund working capital requirements as it geared up for a phased increase in production levels.

The firm, which makes brakes for high performance cars and aircraft, announced the latest fundraising on the stock exchange at 5:30pm last night (May 1), after the exchange had closed.

It confirmed this morning that it had successfully secured £8.5m from shareholders, including £200,000 from directors and senior management, which will be used for short term working capital.

Last month the company revealed that it was “suffering from continuing high levels of scrap from processes that are not yet fully capable”.

At the same time chairman David Bundred announced he would be stepping down this year after 12 years in the role.

Surface Transforms admitted that it had incurred increased costs and certain timing differences which has resulted in it being ‘working capital constrained’.

It said it “has been and expects to continue to be working capital constrained in the absence of a cash injection”.

In its defence it said: “It is important to note that Surface Transforms already has a secured and prospective customer pipeline for approximately £700m of sales, of which approximately £390m is contracted.

“Over the next three years (and potentially beyond), Surface Transforms expect to be able to sell as many discs as it can manufacture.

“Related to which, the board continues to target increasing factory capacity to £75m sales per annum over the next few years with a medium term target of £150m per annum.”

Announcing the successful conclusion of the latest cash call, David Bundred said: “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.”

The company’s shares opened at 1.15p per share this morning and by mid-day were trading at 1.05p per share.

Over the past year its shares have traded at a high of 39.29p, and hit a low of 0.90p.