Brake specialist unveils ‘game changing’ deal worth £27m

Surface Transforms

AIM-listed ceramic brake manufacturer, Surface Transforms, announced a ‘game changing’ deal worth at least £27m this morning.

The Knowsley-based business said it has been selected as a tier one supplier of a carbon ceramic brake disc on a vehicle by a global vehicle manufacturer, which it refers to as OEM (original equipment manufacturer) 8.

The company has also received an order for engineering samples required by OEM 8 to complete their regulatory approval activity on this high performance car.

The deal involves Surface Transforms being the standard fit, sole supplier of the carbon ceramic brake disc on both axles of the car.

The lifetime revenue from the contract, set to start next Summer, £27.5m.

Forecast production volumes in the contract show a ramp up to full series volume commencing in 2021 with annual revenue being approximately £8m per annum for the following three years. The contract currently covers series production to 2024 but may potentially be extended.

The company is investing £500,000 this year in increasing its headcount as a result of the new contract, £1.3m in 2021, and £2m in 2022, to provide the necessary support infrastructure.

In a trading update for the year so far, Surface Transforms said that sales have continued to grow, despite the effects of COVID-19 and the board now anticipate that current 2020 revenues will be approximately £400,000 higher than market expectations, with group revenue for the year expected to increase to approximately £2.0m.

This increased revenue will mitigate the working capital impact of additional overhead following the decision to invest in the company’s headcount.

The company continues to expect to make further contract award announcements over the next six months, it said.

Chief executive, Kevin Johnson, said: “This, truly game changing, award builds upon the recent trend of significant contract wins with mainstream automotive manufacturers.

“The award, which on its own, doubles previous revenue projections for FY22 and accelerates Surface Transforms’ transition into profitability and operational cash generation.

“The board is delighted with this award and want to particularly thank both our employees and the customer for their considerable efforts in concluding the work needed for nomination against the background of the COVID-19 pandemic and lockdown.”

He added: “This is a very good day for Surface Transforms and we look forward to further extending our relationship with this major new customer and making further contract announcements with both OEM 8 and other, existing and new, customers.”

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