Specialist brake firm confident on profit targets

Knowsley-based ceramic brake manufacturer Surface Transforms has reported lower revenues and a larger loss for the year to May 31.

But chairman David Bundred said he expects the firm to move into profit, and achieve a pre-tax profit in 2022.

Revenues of £1m compared with £1.3m the previous year, while the pre-tax loss of £2.98m compared with £2.3m last year. Cash at May 31 was £1.92m, up from £923,000.

It raised £3.3m, net of expenses, of equity finance in two successful equity placings during the year.

In July the firm, which makes brakes for high performance cars and aircraft, won an €11.8m contract over seven years from a major German automotive firm.

Post year end it was also awarded a £6m contract over three years to be fitted onto British specialist automotive company cars for an original equipment manufactuer (OEM) with start of production at the end of calendar year 2021.

And the firm said it is on target to achieve a 50% reduction in direct production costs.

He said: “The past 15 months, and more particularly the three-month period of contract awards since 31 May 2019, have been transformational in the development of Surface Transforms.

“The company now has multi-year, multi million revenue contracts that we expect to support break even EBITDA (including tax credit) during 2020, positive EBITDA (including tax credit) in 2021 and profit before tax in 2022.”

He added: “The company is now confident of its competitiveness, evidenced by the recent contract awards.

“However, like all disruptive technologies there is a price elasticity curve for carbon ceramic discs, indeed we believe that price elasticity for carbon ceramic discs is currently high.

“The current high-performance car market for the company’s products is potentially £2bn, however if the company (and indeed its competitor) wishes to further increase the size of the market, beyond high performance cars, continuing cost reduction is essential.

“Therefore, having achieved our initial cost reduction goal, planning has now commenced on the second phase of the ongoing reduction in direct production costs.”

He said: “In summary, the company has made satisfactory progress in its automotive projects and is progressing well with its expansion plans.”