Based in Knowsley, Surface Transforms makes carbon ceramic brake discs for high performance cars, including the Aston Martin Valkyrie. Tony McDonough reports
A Merseyside manufacturer of carbon ceramic brake discs for high performance cars says it expects to move into profit this year after securing £32.5m in new contracts.
Surface Transforms (ST) is based in Knowsley and also supplies its products to the aerospace sector as well the the automotive sector. In its latest results for the year to December 31, AIM-listed ST is reporting a pre-tax loss of almost £3m and revenues of just under £2m.
However, the business now has an order book totalling £43m thanks to two new contracts, worth £27.5m and £5m, secured over the past 12 months. However, as a result of the new contracts and the upgrading of its production facilities it is now in a position to start generating revenues of £20m a year – 10 times the current level.
And further planned upgrades to its production capacity will see this figure rise to £35m a year with the potential to rise to £75m a year. Consequently ST now expects to move into profit in the current financial year.
The company has also raised £19m in extra capital in the last few months, via a new share placing and a £1m loan from the Liverpool City Region Combined Authority.
Chairman David Bundred said: “The company is now poised to move into profit and cash generation, initially on a monthly basis as OEM (original equipment manufacturer) 8 and Aston Martin Valkyrie enter production in the second half of 2021, and then looking forward to reporting full year profits and cash generation in 2022.”
Mr Bundred also talk about new and existing customers. Announced in September 2020, the £27.5m contract is with a unnamed global vehicle manufacturer. In line with normal automotive practice, there are no minimum values in the contract.
Forecast production volumes in the contract show a ramp up to full series volume commencing in second half of 2021 with annual revenue being approximately £8m a year for the following three years. The contract currently covers series production to 2024 but may potentially be extended.
In June 2020 the ST announced that it has been selected as the tier one sole supplier of carbon ceramic brake discs on both axles of the Koenigsegg Gemera. The lifetime value of the contract is in excess of £5m with a start of production in mid-2022 completing in mid-2027.
Revenue is expected to be generated broadly evenly over the contract with approximately £1m per year being recognised in each of the four mid-programme years starting in 2023. And in 2019 the business secured a £9.8m order from a German mainstream manufacturer. He also referred to other existing customers.
He added: “It was a successful year for these customers and the resultant sales were the prime reason that the company was able to ride out the worst excesses of the COVID-19 pandemic. In simple terms, whilst our mainstream OEM customers essentially locked down in the year, our near OEM and retrofit customers did not and nor did we.
“These customers have been the mainstay of the early years of Surface Transforms, providing road mileage experience, end use customer testimonials and not insignificant cash over 10 years.”
During the year, ST strengthened its board with the appointment of two new non-executive directors with substantial experience in the global automotive industry. And, after 17 years on the board, Kevin D’Silva is retiring with effect from April 12.