City round-up: Surface Transforms; Immotion Group

High performance brakes manufacturer, Surface Transforms, announced a £45m contract win, today.

The Knowsley-based business, which supplies the automotive and aerospace sectors, said it has been selected as a tier one supplier of a carbon ceramic brake disc on the forthcoming launches of three cars of its existing customer, previously described as OEM (original equipment manufacturer) 6.

The carbon ceramic disc will be fitted as standard to both axles on all three cars.

The lifetime value of these contract wins is more than £45m – bringing the overall company order book to in excess of £115m.

These contract wins are in addition to the previously notified vehicle selection with this customer.

The first car is a limited-edition special model with start of production (SOP) in late 2023 with a short series production period.

The second two models – the base car and a derivative – have an SOP of mid 2024 and will be in production for at least six years.

In total, these three new selections by OEM 6 are expected to generate approximately £0.5m of sales in 2023, increasing to approximately £4m in 2024 and to approximately £7m in 2025 and thereafter.

The company said these wins were anticipated in its recent capacity and cash flow planning scenarios and were included within the “prospective carry-over” projections described during the February 2021 fund raising.

However, consistent with its policy that it only forecast contract wins, they were not included in any previous market guidance or analyst forecasts and can, therefore, now be added to these projections. “Carry-over” in the automotive industry is the use of existing product approvals with existing OEM customers on their future models.

Kevin Johnson, Surface Transforms CEO, said: “We are delighted to be deepening our relationship with OEM 6 including moving from tier two to tier one.

“We also note that this is now the third example of demonstrating our ability to win carry-over contracts after having won the first award. We expect to win further contracts in the new financial year across our range of existing and new customers in parallel to moving into profit and operational cash generation in 2022.”

On Tuesday this week shares in Surface Transforms dipped by more than 10% after it warned revenues will be “significantly short of market expectations.”

It said despite considerable growth against prior year, sales will be below £3m.

This is mainly 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.

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Immotion Group’s VR technology

Salford-based immersive entertainment business, Immotion Group, said it expects second half revenues to be “very significantly ahead” of that reported in the first half, in a trading update this morning.

The group expects revenue of circa £6.5m for the second half of 2021, compared with unaudited revenue of £2.8m in the first half.

Furthermore, on the back of a profitable fourth quarter to date, the company expects adjusted EBITDA for the full year 2021 to be significantly ahead of the £0.6m, reported on September 28, 2021, for the first nine months of trading.

As anticipated, operating cashflow generation has been strong. The group’s current cash balance is in excess of £1.2m compared with the £0.9m as at the last update on September 28, 2021.

The LBE (location based entertainment) business saw revenues surge in excess of 70% compared with H1 as almost all locations were reopened following the enforced closures earlier in the year as a result of the pandemic and, in particular, were able to benefit from the key summer trading period in the USA and UK.

Quarter four 2021 is expected to deliver a very satisfactory contribution, despite it being the quieter seasonal period with strong trade during the Thanksgiving Holiday period in USA and the October half term holidays in the UK.

Current trading is in line with expectations and to date Immotion Group has not seen any material impact as a result of further UK COVID-19 restrictions. It should also be noted the vast majority of revenue in the LBE business is generated in the USA – two thirds of total LBE revenue in H2 was generated in the USA.

Following the launch of the new zoo-targeted VR experience, ‘Gorilla Trek’ at the IAAPA trade show, in Florida, USA, in November 2021, the company has seen considerable interest in this exciting new offering and is already in discussions with a number of blue-chip USA zoos for installations in the first half of 2022. Overall levels of enquiries and discussions for both the aquaria and zoo offerings are very encouraging for 2022.

Immotion said it expects the HBE (home based entertainment) division to generate revenue in excess of £2m for the second half period, almost four times the revenue achieved in 2020.

Revenue in Q4 2021 is expected to be in excess of £1.5m versus £0.7m in the same period in 2020, generating a good profit contribution, despite the tough logistical challenges.

The growth in Amazon sales, both in the UK and USA has been considerable, with this channel now making up a significant and growing percentage of sales.

The group sold in excess of 25,000 Let’s Explore Oceans Mega Packs between July and November 2021 – and in excess 28,000 in aggregate for the full year to-date.

Given unprecedented challenges in global shipping and logistics, sales and margin have been considerably impacted by additional costs, including the massive challenge of getting stock in the right place at the right time. Logistic problems aside, the group feels the demand for ‘in-home’ VR entertainment is very encouraging and gives it confidence to further develop the product range.

To this end, the company’s new ‘in-home’ offering, ‘Vodiac’, a product specifically designed and priced to appeal to a mass market audience, with less seasonal demand, will be ‘soft’ launched in the coming weeks to its database of circa 40,000 ‘Let’s Explore Oceans’ customers who will be able to access it using their existing Let’s Explore headset.

The Vodiac product will include a smartphone-compatible VR headset, seven free VR videos, 20 premium VR videos, and the ability to purchase further premium content from an extensive catalogue of VR videos across seven VR channels. Vodiac will be available to purchase via selected retailers, Amazon and direct from the company in early February 2022.

Immotion said it expects Uvisan, its UV-C disinfection business, to generate revenue of circa £400,000 for the second half, an increase in excess of 400% versus the first half. This includes a second container load of cabinets expected to be on route to its Australian distributor before year-end.

It also reports that its order book for quarter one 2022 has started strongly, with visibility on orders of circa $350,000, including its largest single order ever from a new USA distributor.

With group revenues expected to exceed £9m, compared with £2.8m for 2020, a three-fold increase, and a strongly profitable second half Immotion said it firmly believes that this has been a year of significant progress for the company and it looks forward with confidence.

Martin Higginson, group CEO, said: “With full year revenues expected to exceed £9m we are pleased to be ending the year with a profitable business and cash in the bank.

“The surge in H2 revenues, expected to exceed £6.5m, a circa 230% increase on H1, is testament to the team, their drive and enthusiasm for our offerings.”

“This strong trading, combined with a successful IAAPA trade show for the LBE division, gives us renewed confidence for the year ahead.”