Surface Transforms shares slump on further bad news of operational constraints

Surface Transforms

Shares in Knowsley-based specialist brakes manufacturer, Surface Transforms, slumped by more than 30% this afternoon following its latest stock market note, revealing that operational problems have worsened.

Last September the group revised down its full year forecasts, blaming a failure to hit growth targets.

In November it announced the immediate departure of non-executive chairman, Andrew Kitchingman, having been in the role for barely three months.

When CEO Kevin Johnson revised down forecasts in September, he said: “While we are delivering new highs in terms of output and revenues in 2024, the pace of growth is significantly behind plan.

“Revenues in Q3 are expected to be significantly down on plan and we have revised our output and revenue plans for Q4 materially downwards. As a result, revenues for the full year are now expected to be circa £11m which is significantly lower than current market expectations of £17.5m.”

Today, Surface Transforms published a financing, trading and operations update for the year to December 31, 2024, which was badly received by investors.

It said that key customers remain highly supportive and engaged in improving the company’s manufacturing yield, output and financial stability.

Backing from customers has included increased pricing, funded manufacturing expertise and cash advances of more than £4m in 2025 to support the company’s working capital requirements, it revealed.

It said discussions with key customers continue.

The trading update revealed that, subject to audit, revenue for financial year 2024 was £8.2m, compared with £7.3min 2023.

Gross cash at the end of 2024 was £0.5m, with working capital becoming increasingly constrained.

These working capital constraints significantly impacted both revenue as well as yield in Q4 and trading results will remain challenged until current constraints are resolved, it announced.

The group added, despite this, capital expenditure of approximately £5.5m continued during FY24.

The company has a £13.2m loan agreement solely for use against capital expenditure of which £4.9m had been drawn down at the year end, with further drawdowns having been made in 2025, for the majority of the difference.

The company said its priorities remain on operational improvements and tight management of cash.

Cash constraints and supplier restrictions during Q4 impacted the efficiency of operations, resulting in yield being more inconsistent than of recent prior periods, with a weekly range of 52% to 78%, against the average yield target of 86% for Q4.

Kevin Johnson

Kevin Johnson said: “There remain numerous challenges to grow output and revenue at the pace required.

“The company, alongside customer support, is working through each of these difficulties, not least those posed by the cash constraints which has limited our ability to operate.

“Frustratingly our efforts have not yielded the results we expect of ourselves or at the levels of demand our customers require.”

He added: “As the company navigates these difficult times the support of our customers remains steadfast and their desire to see the company succeed is highly encouraging and welcome.

“These Q4 results are not typical and do not reflect the progress achieved during 2024 as a whole.

“We remain optimistic that we can firstly, find a solution to current working capital constraints and thereafter, achieve the necessary operational volumes and targets.”

Click here to sign up to receive our new South West business news...
Close