Surface Transforms to miss revenue targets

Based in Merseyside, Surface Transforms makes ceramic brake discs for high performance cars including Porsche and Aston Martin and says it will miss its 2021 revenue targets. Tony McDonough reports

Aston Martin Valkyrie
Surface Transform is making brake discs for the Aston Martin Valkyrie

 

A Merseyside manufacturer of carbon fibre reinforced ceramic brake discs for high performance cars will miss its 2021 revenue targets – sending its shares falling more than 7%.

This year has seen a steady stream of good new announcements for Knowsley-based Surface Transforms (ST) with a series of new contract announcements. In September it revealed that its order book stood at £70m.

However, delays in upscaling it production capacity at Knowsley now means revenue for the 12 months to December 31, 2021, will now be below £3m, below market expectations and described as “disappointing” by the board.

However, this is a temporary setback for the businesses. ST says the missed revenues aren’t lost revenues and they will flow into the company once it has made up the lost ground on the production upgrade. 

ST, which is listed on the Alternative Investment Market, has established a niche as a specialist manufacturer of brake discs for high performance cars. Its customers have included Porsche, Ferrari and Nissan. It September it revealed that it had now started production with Aston Martin to deliver brake discs for the limited edition Valkyrie model.

In Tuesday’s update, it said: “The board of Surface Transforms is disappointed to advise that despite considerable growth against prior year, revenue for the year ending December 31, 2021, will be below £3m, significantly short of market expectations.

“The shortfall has mainly been as a result of delays in the final commissioning of the upscaled production capacity at Knowsley and the associated start of the anticipated upscaling of commercial revenues expected from December.

“Whilst this capacity programme progressed considerably during the year, a series of minor startup challenges has caused output delay, resulted in Q4 output missing target. By December, these issues have been narrowed down to an issue with one particularly complex furnace, which the board believes will be fully resolved imminently.

“Given December is a short month, the company is unlikely now to recover the sales gap in this financial year. It is important to note that these sales have not been lost, the key customers have not seen any impact.

“And the revenue gap, whilst proportionately large in 2021, is small in relation to overall 2022 volumes and is expected to be recovered progressively through Q1 and Q2 2022.”

It also added some good news with the possibility of extra orders from an existing customer. The statement said: “As previously notified, the company won a lifetime £27.5m sales contract with an expected maturity level of £8m sales per year, commencing, (later than planned) in 2022.

“Again, as previously announced, the order intake for this car has greatly exceeded the customers original volume expectations and they have been in discussions with all the supply chain to explore the capacity availability for significant volume increases.

“These discussions are being finalised with all suppliers, with updated contract volumes expected early in the New Year.”

Chairman David Bundred added: “Excellent progress continues to be made on the strategic plan but with work still to do on getting the new Knowsley manufacturing plant to the required daily volume all day, every day.

“It has been a tough period for all the team, but they have progressively dealt with every issue with their usually tenacity and commitment. We are confident that we are almost through this transformational period.”

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