|I have met the team several times-there is no delusion or blue sky stuff with them.They raised the cash earlier this year-I took part in the placing.It takes a while to move premises and order and instal the kit-long lead in times.I see no real slippage.The challenge is in the scale up as they move from tiny to mass manufacture.
I have also seen the product being made the 'old' way in the current premises.It is obvious why they need new premises and kit.
I expect the deals to flow when the kit and premises are up and running.One way ticket for me|
|Thanks Swiss Paul, I do agree with your sentiments and it'd be great to see more concrete timelines with clear milestones and punctual deliveries. I do not have an engineering background myself but I'm sure many of us have experienced complex projects and it is easy to see how timelines slip, particularly when there is a dependency on third parties!
Put simply - SCE needs the factory up and running and VDA certification completed in Q1 '17 or there will be rightful concerns. Brembo/SGL cannot be allowed to overtake recent years' progress.
If these milestones can be achieved then the optimism displayed here will be very justified!|
|Ok - so lets get rid of the ebullience and down to clear and concise facts.
Shanks thanks - but it seems a reiteration of previous years powerpoint. If you don't trust me - go back and look at the story 12 months ago. In fact look in th e header at the 2014 report
1, "New Factory" Where are we on the location / relocation as this if anything is a major risk to the organisation. Have you ever dealt with gas / elec suppliers for new connections - they sting you - in fact they take you to the cleaners as much as they can. As a reminder to all "The agreement covers a site of 2.1 acres with total building footprint of 55,000 ft sq, which the Company will occupy in two phases, 30,000 ft sq from September 2016 and the remaining 25,000 ft sq from September 2019". The current site in Ellesmere Port of 12,000 ft sq will be vacated when the lease expires in early 2017.
2, Positive vibes and pathways all sound good - but lets be honest they are not going to go through their risk register and tell you the potential downsides. Take this for instance
"Surface Transforms (AIM: SCE), manufacturers of carbon fibre reinforced ceramic brake discs, is pleased to announce that it has signed a pre-production technology development agreement ("Agreement") with a leading German performance car manufacturer which, if successfully concluded, is expected to lead to series supply of the Company's carbon ceramic brake discs in the financial year 2018-19. Can I emphasise the word expected - has this been put into something more substantive?
3, "Aircraft sales are now pending/imminent". This song is becoming my earworm and I am hearing it a lot over the last couple of years.
Can I suggest that you update the header with each annual report and then we can honestly say what has / has not been achieved.
As you will have seen from this and previous I am a bear - but a friendly one who does not believe everything that comes out as PR or an RNS. And yes I do hold
PS don't forget the board (incl NEDS) read these and if they think they are on an easy ride - well I will leave it to your imagination - hint - your feeding them|
|longshanks, GrahamITY and rivaldo, thanks for your feedback from the AGM. The story still sounds good. I had planned to be at the AGM myself but had to call off the trip last minute so your reports are much appreciated.|
|Thx to longshanks in particular and GrahamITY for their excellent AGM write-ups. I was there too (had to leave quickly at the end unfortunately) and can't really add much of substance to what's already been written.
The main takeaway for me was the absolute certainty from David and Kevin and the positive vibes regarding the pathway to SCE becoming a much bigger entity than it is today, with the main OEM spending substantial sums of their own money in development and investment.
This may go exactly to timetable or take slightly longer - but in the long run it makes no difference.
It was also important to hear that when the initial US military airframe contract revenues start coming in in early 2018 then SCE will become cash-generative. Very reassuring.
SCE's m/cap is still only £21.6m. Once SCE announce confirmation of airframe revenues, OEM contract news flow etc then this will look like peanuts.|
|Please may I add my thanks to both attendees - it is immensely reassuring to hear that things are largely as they should be (apart from Aston Martin freeze and a two month factory delay).
So the main concern is that Porsche continue to be bullish and we don't have a mega global recession!!
I suspect we won't see much upward share price movement until q3 2017.
|Longshanks, thank you for your AGM report and write up, much appreciated|
|Longshanks, many many thanks, excellent write up. Each time I see SCE they have delivered, are open and honest. The risks get smaller as time goes by, frustrating though some of the delays are.
I agree with you, the OEMs are dead keen for this to happen. My worry ( and the content of all my questions for the next 18 months) will be on execution risk. Can SCE deliver what they have promised, on time and on budget ! I spoke at length to the whole "implementation team" at the back afterwards ( and I applaud SCE and Kevin for making them all available) and they are absolutely focused on getting the new plant working to the same quality as soon as possible. David has not given them any leeway on overspend and they know exactly what they have to do. As an aside, the share option profile of SCE has now changed and most options are "in the money", and some of these guys are now getting equity exposure that could really make a difference to them.
So, wait and see. I hope the trading statement contains no surprises in a couple of weeks ( that would really annoy me).|
|Above are my AGM notes.
There is a mixture of content from the meeting itself and private one-to-one chats after.
Nothing too much in there that isn't already in the public domain.
The new factory has had a small hiccup that will delay completion of the move to Feb 2017, but other than that I am satisfied that everything is going more or less to plan.
The big news item we are all waiting on is that of an automotive OEM contract. It is clear that this will only come once the factory is up and running and that they have satisfied the VDA 6.3 standard.
OEM 3 is leading the charge and both production and pre-production revenues will be significant. The fact that they have invested over £1m internally in development work with ST is a testament to how determined this one company is to having an alternative supplier to Brembo/SGL. It is also worth noting that BMW are a significant shareholder in SGL - as good a reason as any for the interest being paid by OEM 3.
On the VDA 6.3 - I think this is a good thing to have - as it means that all elements of the supply chain are detailed and consequently all weaknesses addressed. Short term this may impact start of supply but this would be relatively brief and the benefit is a well defined professional engineering operation.
Aircraft sales are now pending/imminent. It is difficult to say when they will start - but currently it is final qualification paperwork with the US Military that is all that is outstanding. First year revenues of £1.3m would follow - so this is something to be cheered on arrival.
I think the company (and us shareholders) are in for a period of consolidation as the final stages in the metamorphosis from pupae to butterfly complete. Some shareholders will get bored now and leave, but a different class of shareholder will start to emerge as the news broadens on this Northern Powerhouse success story.
One thing that is missing though is the next stage plan - how to move the company on once they are in large scale OEM supply and making their £15m p.a. revenues.
Nothing was mentioned about electric vehicles and their developing significance. I hope this is something not being overlooked: the thought of Elon Musk championing the use of carbon ceramic brakes makes me break out in rapture.|
|Thanks for the write up Longshanks. Very informative and detailed. It certainly appears the pieces are all falling nicely into place.|
|Surface Transforms AGM 2016
27 Attendees: 4 directors, 4 key managers included
Started promptly at 11:00 - ordinary business ran for 8 minutes, led by David Bundred.
Nothing extraordinary in the vote: approx 13m votes on each item; 2.8m voted against items 3,4 & 5. All resolutions approved.
Presentation given by Kevin Johnson.
1. Introduction highlighting two key markets: luxury & performance cars; military & light aircraft
a) Cars - key factors are: braking performance, weight reduction, extended life, production streamlining (commmon component across range of vehicles) and aesthetics
b) Aircraft - key factors: braking performance, weight reduction and extended life.
Versus main competitor: Brembo SGL, ST is seen as having key benefits.
a) has significant extended life
b) is stronger and allows smaller size disks
c) is more applicable for production streamlining
a) partnering with brake supplier that is 90% market leader in aircraft braking
b) "airframe 1": a key military aircraft
i) needs ceramic rather than carbon/carbon as there is a "cold use" issue for the aircraft in question
ii) currently use a ceramic coating which frequently fails
iii) SOP (Start of Production): Q1 2018
iv) Finalising qualification and paperwork
v) No further development (meaning also no development revenues)
vi) FY17/18 revenues anticipated at £1.3m
c) light aircraft & other military
i) definite market requirement - esp. for weight saving and extended life
ii) on hold as resources being focused on "airframe 1" until that is completed
a) Estimated £2bn potential market
b) Brembo/SGL currently sell 200k disks p.a. - £150m income
c) Working with OEM's for an addressable market of £50m
i) Focus on just UK and German premium marques
d) OEM 1: British
i) Priorities: weight reduction, performance
ii) SOP: 2018.
iii) Production "freeze" but ST treating it as a 6 month delay
iv) £1.8m first year revenue leading to £3m on mature volumes
e) OEM 2: British
i) Priorities: heat management, weight reduction
ii) Now looking at more than just one model
iii) Sister company to (and following lead of) OEM 3
iv) SOP: 2019
v) Revenues of approx £1.8m p.a.
f) OEM 3: German
i) Priorities: weight reduction, performance and an alternative supplier
ii) Requiring adherence to German quality standard VDA 6.3
iii) New "wet" test to be made to mark ST product above Brembo's - not a dealbreaker though
iv) SOP: 2019
v) £9m first year revenue
vi) Likely to be applied to flagship model and across the product range
vii) £2m development revenue likely
viii) OEM 3 has already invested internally > £1m in development with ST already
g) OEM 4: German
i) Sister to OEM 3 - following same drivers
ii) More diverse range
iii) £1.8m first year revenue leading to £4m on mature volumes
h) OEM 5: German
i) Somewhat behind the development curve to OEM 3 and sisters
ii) Keen to make up ground - pushing for security of supply
i) Aiming for 2018/19 revenues of £15m with rapid growth towards £50m
a) Not needed for aircraft sales to commence
b) Required to complete automotive OEM contracts
c) Relocation already very much underway
d) Production currently in place with finishing being done on old premises
e) Recent problem with gas supply means full transfer of production is being delayed to Feb 2017
f) Space for five automotive, 1 aircraft and 1 SVP (small volume production) production cells
g) Starting with 1 automotive, 1 aircraft and 1 SVP cell - second automotive cell in planning
h) Current investment plan takes production to 20k disks p.a.
i) Future capacity of facility is 100k disks p.a.
j) Existing furnace is easy to relocate - was taken apart last year as part of resolving the issues
k) New furnace much larger - some technical risk - but manageable
l) Many large items were purchased in Euro - company hedged currency risk by converting some cash shortly after the placing
a) Reiterated strong price inflection point at £750/disk
b) New factory completes price reduction plan: allows sale price at £500/disk
c) New quality standard (VDA 6.3) to be completed Q2 2017
d) Fulfilling OEM requirement for dual sourcing (security of supply) - Q1 2017
e) OEM 3 wanting product refinement on salt water testing
a) All development going to plan - enough capital to see ST through to OEM revenue
b) Some R&D is likely to be capitalised in future
c) Loans/grants to be included in balance sheet rather than as income
d) No aircraft development revenue in FY2016/17
e) Race preforms - stopping supply to Brembo (a decision by ST not Brembo)
f) Near OEM and retrofit sales to grow
g) overall FY16/17 income to look flat
a) Details on the salt water test were fleshed out
In conversation with David afterwards - this is a "nice to have" rather than "must have" requirement
b) BoD was asked how much money was being spent on winning OEM work
David pointed out that it is not significant
OEM 3 is leading the charge on development and has invested internally > £1m
Very real commitment being shown by OEMs on getting alternative supply
c) A question was asked how the new factory is affecting production timelines
Currently production of a disk takes 16 weeks from start to finish
With new factory that comes down to 8 weeks
(Note: work out working capital requirement based on 20k disks p.a. at £375 cost)
d) The question was asked how Brembo are likely to react
ST not likely to significantly dent Brembo's market in short term - the market is expanding rapidly
Brembo will need to change its production methods to mirror those of ST in time
e) Why do OEM's want a different supplier
Currently Brembo demand that Brembo disks come with Brembo callipers
Inflexibility on product development
OEM 3 want to use Japanese callipers/brake pads|
|It can't have been a bad AGM then longshanks ?|
|Another 15k for me....|
|I think you and I were asking most of the questions...
I will do my customary write up too.
I imagine that the AGM presentation will be available online too in due course. They changed the format slightly and whilst the bulk of the content will be familiar to most on here there were some interesting details that clarified the current state of affairs and reassured me that the processes being followed in this final stage of commercialisation are necessary and will result in OEM contracts.|
|Good AGM, will try to write up later.
The OEMs remain dead keen. All SCE have got to do is not overspend on the new site, produce top quality product, and then sell it at the right price. Other than that....easy.
We shall see !|
|I think the "which" is easy to discern from the info given to date.The "when" question is more pertinent IMO|
|I doubt there will be any announcement Timbo but am grateful you are attending. Look carefully at the board's eyes for sign of nerves.
Ask a difficult question and keep looking straight at them - fix your eyes and see if they avert.
"We have Aston Martin, Bentley and their related companies Porsche and Audi and lastly Mercedes-Benz as SCE customers. Which one is likely to be the first to commit to production offtake and when!?
|It is always a little disheartening to see the share price drift down and wallow in a dearth of news.Look at the three year trend though and it appears very much a normal pattern on what is overall an upward trajectory.I am very relaxed with my holdings and have been topping up as and when funds allow.I would take some comfort from the absence of news. No news means no deals have been signed yet, but it also means the new manufacturing site is progressing more or less to schedule.The AGM will, I am sure be well attended and I shall endeavour to provide my customary update report.|
|Doubt it most drift on little news - pretty unknown co too st the moment|
|This is drifting down a bit without much selling. The chart has pulled back a number of times, so hope this is nothing ominous. Hopefully the AGM next week will give us the next leg up ?|
|SCE is one of Unicorn AIM VCT's newest investments (via the placing), and in their results this morning they have this to say:
"Surface Transforms (+74%) is an established AIM-listed company focused on the development and manufacture of next-generation, carbon ceramic brake discs for the automotive and aircraft industries.
In April 2016, Surface Transforms completed a £6million placing and open offer. Unicorn committed £1.5 million to this VCT qualifying fundraising. As a result of this funding round, the balance sheet has been considerably strengthened and the business now has the capital it requires to invest in essential factory expansion.
This investment in new plant and equipment is required because of the significant recent progress Surface Transforms has made with its key automotive customers, which includes the signing of a pre-production contract with a major German automotive manufacturer. Although the business remains loss-making, it now has the foundations in place to enable it to grow its revenues substantially over the next two years."|
|Here's WP Pro's own version of the above news FYI:
"WP Pro Ceramic line
WP Pro is pleased to introduce our new Ceramic line up of high performance brake systems, in collaboration with Surface Transform in the UK. With a life span that is expected to surpass any OE Ceramic rotor (PCCB II) by up to 10 times, these systems can be considered to be some of the best ceramic set-ups that money can buy.
|Thanks for that rivaldo, well spotted.
This is yet another step in the right direction that should be beneficial to both ST and us very patient share holders. I expect the share price to be significantly different in six to twelve months and higher again over a longer period of time. We just need those much talked about game changers and hopefully we won't have to much longer to wait.|