With a rapidly-growing order book close to £300m Merseyside brake disc maker Surface Transforms is having to be patient on profits despite ‘exceptional’ 2022. Tony McDonough reports
Carbon fibre brake disc maker Surface Transforms (ST) enjoyed “exceptional commercial success” in 2022 as its order book swelled to almost £300m.
However, profits continue to elude the Knowsley automotive supplier with production issues in late 2002 and early 2023 contributing to a full-year £4.8m pre-tax loss. This compares to a £4m pre-tax loss for 2021.
During the 12 months to December 31, 2022, ST did see a 116% rise in revenues to £5.1m. And its order book grew by £175m to £290m, offering a real prospect that profits will not be too far away.
Chairman David Bundred said 2020 had been a “transitional year that leaves us ideally placed for the future”.
However, frustrations remain in the present. Stock market-listed ST manufactures carbon ceramic brake discs for a number of 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.
In early April, the company issued a trading update in which it warned that disruption to production at the end of 2022 and into 2023 is likely to impact on its full-year profit forecasts.
In January ST reported “highly specific, but cumulatively significant” production issues with furnaces at the factory in late November and December as volumes were ramped up. In the April update it said the problems had now been resolved but added the first quarter 0f 2023 would now be loss-making.
Over the last 18 months the company has been installing capacity to support contracted sales from £2m a year in 2020, to more than £30m a year. in 2024.
Installation of this capacity increase is on track, with installed revenue capacity of £50m per year to be in place by September 2023.
Mr Bundred added on Monday: “The 12 months to December 2022 was one of exceptional commercial success, catapulting the company from being regarded as a start-up to becoming a serious participant in the plans of mainstream automotive companies.
“The company won £175m (lifetime value) of new orders in the year taking the total order book to £290m (lifetime value).
“These wins demonstrated both the company’s ability to deepen relationships with existing customers (carry over contracts) as well as developing new long-term relationships as we added a £100m lifetime value contract award to our relationship with OEM 10 (an existing customer).”
However, he added: “Our operational performance did not match this commercial progress, albeit resolved post balance sheet in Q1 2023.”
Mr Bundred went on to say: “During the strains of our technical problems we were pleased that our customers understood the issues the company was facing, noted the progress and, throughout the period continued discussions on future programmes.
“With our technical problems now resolved and new capacity in place, we can now also return to the task of widening our customer base.
“… Shareholders can be comforted both that the pipeline contracts discussions are still very active and that this next phase of seeking additional customers is underway, thereby maintaining our explosive sales growth.”