Surface Transforms flags solid 2020 despite pandemic

Carbon fibre brake disc manufacturer Surface Transforms updated the market on its trading for the year ended 31 December on Tuesday, reporting that revenue for the year rose to £2m from £1.9m.

The AIM-traded firm said cash at the end of the year stood at £1.1m, up from £0.8m, and to that cash sum could be added an estimated £0.6m tax credit, expected to be received in July 2021.

Other interest-bearing loans and asset finance totalled £0.5m, down from £0.6m in the prior year.

The company said it had maintained operations throughout the Covid-19 pandemic, and while all of its original equipment manufacturer (OEM) customers had been impacted, it had continued to win new contracts in each of its OEM, near-OEM and retrofit segments.

Surface Transforms said it was continuing to work both with a number of potential new customers, and with existing customers making use of existing product approvals, for nomination on their future models - known in the automotive industry as ‘carry-over’.

All of the tests and carry-over discussions were proceeding to plan, with the board saying it was confident the company would be nominated for further vehicles in the near future.

The firm’s new machines in OEM Production Cell One were being commissioned in line with its installation plan, to be ready for series volume production in the second quarter of 2021, it said.

Recruitment was also continuing, and the company announced that it had appointed its first human resources executive, Rebecca Hooper, reporting to chief executive Kevin Johnson.

Hooper had worked at both large and small companies, including Raytheon and Unilever, and in both traditional engineering and newer digital companies.

The board said she was bringing “considerable experience” in what had previously been a gap in the management team.

Revenue capacity of OEM Production Cell One, as well as the existing small volume production cell, totalled about £20m.

The board said that capacity would be available in the second quarter.

Surface Transforms had contracts stretching into 2024 and 2025, and thus had an improved view of expected average selling prices (ASP).

Allowing for the ‘cost down’ and ‘volume break’ clauses in its contracts, the firm said the ASPs were higher than originally expected.

As a result, the board said that primarily due to the ASP, the total potential revenue of the five OEM cells in Knowsley was likely to be around £75m per annum, rather than the previously-stated £50m, with no change to the anticipated cost of building each cell.

“2020 has been transformational for the company with new vehicle nominations and a significant increase in contracted pipeline revenues,” said chairman David Bundred.

“Moreover, testing and negotiations with both existing and new OEM clients alike are progressing well and we remain confident of being nominated on further vehicles in the near future.

“We continue to expect to see the impact of this success in the 2021 results and beyond.”

Surface Transforms said it would report its preliminary results for the year ended 31 December in May.

At 1212 GMT, shares in Surface Transforms were up 3.92% at 53p.