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Surface Transforms – half-year trading update, despite attempted glossing over cash burn concerns…

By Steve Moore | Thursday 8 December 2016

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.

Previously writing on developer and manufacturer of jam tomorrow (Oops sorry, of carbon ceramic products for the brakes market), Surface Transforms (SCE) I concluded with the shares sliding below 25p that delayed jam tomorrow in conjunction with the nearer-term trading challenges saw me continue to avoid. There is now a “Trading Update” announcement, on the back of which the shares are currently around 8.5% lower at sub 22p.

This is despite updated “progress with potential OEM customers in line with management expectations” and with it noted “cash at 30 November 2016 was £2,660k (2015: £523k)”, with also a £0.338 million R&D tax credit “expected in the next few weeks”.

However, the direct cash comparison with “£523k” conveniently ignores a subsequent net £5.14 million of new equity raised - and the cash being down from £4.78 million six months ago.

This is with revenue for the six months to 30th November more than halved from 2015 to £0.33 million (particularly reflecting “the absence of any sales into the race car customer in the six months to November 2016”, 2015: £0.337 million) and “increased overheads reflecting additional costs of the new larger site, and R & D costs” noted.

With the drop from £4.78 million already, this enhances cash concerns here and I’ll certainly currently continue to avoid. At present, a bargepole stock.

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