Based in Knowsley, Surface Transforms makes carbon ceramic brake discs for high performance cars and has raised £18m in a share placing to expand its production facilities. Tony McDonough reports
A Merseyside maker of carbon ceramic brake discs for high performance cars has raised £18m in a new share placing to fund an expansion of its production facilities.
Surface Transforms (ST) is based in Knowsley and is listed on the London Stock Exchange’s Alternative Investment Market. In 2020 the business secured two major contracts that it says will be “transformational” for future revenues.
They included a “game-changing” £27.5m deal with an unnamed global vehicle maker. Revenue for the the year to December 31, 2020, came in at £2m, a small increase on the £1.9m generated in 2019. However, the new deals could see that figure soar to £20m in 2021 eventually rising to £75m a year in the next few years.
It is confident of securing further deals with vehicle manufacturers to supply its brake discs for future models. ST works using ‘production cells’ and needs to build a second production cell (Production Cell Two) in order to meet current and future demand.
This week the company raised gross proceeds of £18m through the successful placing of 35,750,000 Placing Shares and 250,000 Subscription Shares at the Issue Price of 50 pence per Ordinary Share. The Placing Shares and Subscription Shares represent approximately 23.2 per cent. of the Company’s Existing Ordinary Shares.
Net proceeds of the placing will be around £17m. ST will use £9.2m to build Production Cell Two. A further £700,000 is to be allocated for machinery improvements to Production Cell One. The balance will be used for future general working capital requirements.
ST’s customers are known as Original Equipment Manufacturers (OEMs). These are companies that will put their own branding on ST’s products. ST refers to the OEMs by number rather than name.
OEM 8 and OEM 9 operate differently to ST’ other existing OEM customers, including requiring a more compressed 12-15 month (not 24-month) period between contract award and start of production. Given the compressed start of production timelines required by OEM 8 and OEM 9, the board consider it sensible to build capacity ahead of any such contract awards.
David Bundred, chairman of Surface Transforms, said: “We are delighted with the success of this Placing which now enables us to proceed with building OEM Production Cell Two and thus removing this impediment in winning target business with OEM 8 and OEM 9.
“In addition, it is most encouraging to welcome a number of new institutional investors, as well as receiving significant ongoing support from our existing institutional shareholders.”