Merseyside supercar brake disc maker Surface Transforms sees half-year losses more than double to £5.5m amid ‘technical challenges’ but profitability is now within reach. Tony McDonough reports
Carbon fibre brake disc maker Surface Transforms (ST) is reporting a pre-tax loss of £5.5m for the half year to June 30 – more than double the £2.5m loss in the same period in 2022.
Knowsley-based ST hit problems in late 2022 when it attempted to ramp up capacity at its factory to deliver on its £290m order book for multiple automotive manufacturers.
Listed on the Alternative Investment Market, the firm produces carbon fibre brake discs for high performance cars. Customers have included Porsche, Ferrari and Nissan. It is currently supplying brake discs for the Aston Martin Valkyrie which retails at £3m apiece.
Its drive to increase capacity led to “highly specific, but cumulatively significant” production issues with furnaces. This in turn led to scrapped production. Issues were resolved in the first quarter of 2023 but the financial effects lasted for longer.
However the company’s management now believes those problems are now behind it and is now aiming to achieve profitability in the final quarter of 2023.
Chairman David Bundred said: “The steady growth in production seen throughout 2023 is expected to continue. Whilst H1-2023 has been operationally challenging the company has delivered considerable strategic progress.
“We have engineered solutions to our technical problems and brought in additional furnace capacity designed to our know-how.
“Productivity efficiencies and capacity improvements are expected to continue through 2023, a target break-even in the second half of the year, with profitability in Q4.”
Revenue for the half-year period was up 15% on last year to £3.3m. This figure is expected to rise significantly in the coming months and years as it scales up production. ST now has a prospective contract pipeline of £420m.
Planned capital expenditure of £4.8m occurred in the half-year period, primarily aimed at delivering 2024 capacity. Full year capex is now expected to be in the region of £8m.
ST has also beefed up its management team. Isabelle Maddock has joined as chief financial officer and board director, and Stephen Easton has joined the team as (non-board) chief operating officer.
Since the start of the year the firm has taken on three apprentices and have also secured nine graduates primarily in IT, engineering, manufacturing technology, human resources, finance and sales roles.
David Bundred added: “We have continued to invest to reach, initially £50m sales capacity in 2024 and £75m sales capacity in the following year.
“Of greatest importance our customers have understood our issues, including immersing themselves in our capacity plans, and remain committed to awarding the company further business. We are appreciative of shareholders support through this learning curve.”