Knowsley-based Surface Transforms manufactures brake discs for high performance cars and a ‘game-changing’ £27.5m deal will see profits return a year earlier than forecast. Tony McDonough reports
High performance brake disc make Surface Transforms says it expects to move into profit a year earlier than expected after signing a “game-changing” £27.5m deal.
Knowsley-based Surface Transforms announced the three-year deal, with an unnamed global vehicle maker, in mid-September. The agreement will see the business become the standard fit, sole supplier of the carbon ceramic brake disc on both axles on a specific model.
Forecast production volumes in the contract show a ramp up to full volume starting in 2021 with annual revenue being approximately £8m a year. The contract currently covers series production to 2024 but may potentially be extended. It will also see new jobs created at the firm.
On Monday, AIM-listed Surface Transforms published its half-year results, revealing a 55% rise in revenues to £902,000 for the six months to June 30. It also reported pre-tax losses of just over £1.45m. This was lower than the £1.525m loss for the same period in 2019.
Its cash position at June 30, 2020 was just over £2m, up from £770,000 on December 31, 2019, to which can be added £334,000 of R&D tax credits received by the company in September 2020.
Surface Transforms is now anticipates full-year revenues to be around £2m. The major contract mentioned, above, increases sales expectations by more than £3m in 2021 and £8m in 2022, and the following two years.
In its half-year report, the company said: “As recently announced, given this contract as well as the expectation of further, as yet unspecified, contract awards, the company is investing in manufacturing support headcount and other costs over the next three years.
“Consequently, the company reiterates that it is now forecasting positive profits after tax (including receipt of the R&D tax credit), a year earlier than previously announced, in 2021 and positive operating profit, before interest and tax, in 2022.
Surface Transforms says it expects to announce further contract awards over the next six months. The report added: “During the period the company accelerated its progress to becoming a profitable mainstream automotive supplier of carbon ceramic brake discs.
“This continued progress was achieved against the most difficult economic and operational conditions in recent memory.”