By Steve Moore | Tuesday 14 February 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Surface Transforms (SCE) has announced results for the six months ended 30th November 2016, claiming “a tough, albeit exciting and successful six months”. The shares have responded… approaching 7% lower, towards 20p. Hmmm.
The results show a pre-tax loss increased over the corresponding 2015 period by £0.55 million to £0.98 million on revenue 58% lower at £0.33 million. Successful six months?
The company particularly noted “the absence of any sales into the race car customer (H1-2015: £337k)”, though argued its key metric “continues to be the advancement of the game changing contracts”.
However, there is some timetable slippage amongst these and a “key outstanding technical requirement” with the major focus of the company's R&D activity. It though notes that a “new ‘evolved’ design is under test” and that it “remains confident of achieving its potential and is optimistic over the outcome”.
However, after particularly £0.62 million of capex over depreciation and a net £0.51 million working capital outflow in addition to the noted loss, there was a more than £2 million decline in cash to £2.70 million.
It is added that “a tax credit of £356k was received in January 2017” and that the capex “mainly related to the new Knowsley facility”. However, also “development spend will, at least, be maintained at the current higher levels, and indeed the current high cost of off site dynamometer testing and contractors to complete the VDA 6.3 work is putting that budget under strain”.
It is stated that “the directors are satisfied that sufficient cash is available to meet the company's liabilities as and when they fall due for at least 12 months from the date of signing the half yearly report”, though “if we were to win both OEM Three and Five we would not have enough capacity and would need to raise funds for this extra capacity”. Hmmm. The announcement does little to assuage my previously stated cash concerns and I continue to avoid.
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