Surface Transforms PLC Contract Award from OEM 8 and Trading Update (8215Y)
14 Settembre 2020 - 8:00AM
UK Regulatory
TIDMSCE
RNS Number : 8215Y
Surface Transforms PLC
14 September 2020
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14 September 2020
Surface Transforms plc
("Surface Transforms" or the "Company")
Contract Award from Global Vehicle Manufacturer
and 2020 Trading Update
Surface Transforms (AIM:SCE) is pleased to announce that it has
been notified of its selection as a tier one supplier of a carbon
ceramic brake disc on a vehicle by a global vehicle manufacturer -
henceforth to be described by the Company as OEM 8.
Pursuant to this selection, Surface Transforms has signed a
contract with OEM 8 specifying the agreed detailed pricing, volume,
payment terms and other generic supply terms for the contracted
model. The Company has also received an order for engineering
samples required by OEM 8 to complete their homologation activity
on this high performance car.
Specifically, the selection is for Surface Transforms to be the
standard fit, sole supplier of the carbon ceramic brake disc on
both axles of this car.
The lifetime revenue on this specific vehicle model contract ,
commencing in the summer of 2021, is estimated to be approximately
GBP27.5m. In line with normal automotive practice, there are no
minimum values in the contract. Forecast production volumes in the
contract show a ramp up to full series volume commencing in 2021
with annual revenue being approximately GBP8m p.a. for the
following three years. The contract currently covers series
production to 2024 but may potentially be extended. The contract is
priced in GBP.
Impact on capacity and cost base
Whilst the one-year period to start of production is shorter
than historically seen, the Company has the capacity within its
existing Small Volume Production Cell and OEM Production Cell One
to fulfil this large contract, albeit with some accelerated timing
of previously planned capital expenditure. The volumes set out in
the OEM 8 contract, together with the "steady state" volumes of
previously announced contracts with German OEM 5, British OEM 6,
Koenigsegg, and other customers will fill circa 60% of total
Surface Transforms installed capacity by December 2022.
In light of the above increase in contracted revenue, which more
than double the previously projected contracted turnover in 2022
and, in the expectation of further contract awards, the Company
will be increasing manufacturing support headcount adding
approximately GBP0.5m, GBP1.3m and GBP2.0m p.a. in 2020, 2021 and
2022 respectively. This additional headcount will provide the
necessary support infrastructure for all contracted sales and
further prospective - but as yet uncontracted - sales pipeline.
Trading Update for 2020
Additionally, and independently of this contract award, the
Company is pleased to announce that near OEM and retrofit sales
have continued to grow, despite Covid-19. The Board now anticipate
current FY20 revenues will be approximately GBP400k higher than
market expectations with Group revenue for the year expected to
increase to approximately GBP2.0m. This increased revenue will
mitigate the working capital impact of additional overhead in FY20
following the Board's decision to invest in the Company's
headcount.
Further contract announcements
The Company continues to expect to make further contract award
announcements over the next six months.
Kevin Johnson, CEO commented: "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.
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."
For enquiries, please contact
Surface Transforms plc +44 151 356 2141
Kevin Johnson, CEO
Michael Cunningham, CFO
David Bundred, Chairman
Zeus Capital Limited (Nominated Adviser and Joint Broker) +44 203 829 5000
David Foreman / Dan Bate/ Jordan Warburton (Corporate
Finance)
Dominic King (Corporate Broking)
finnCap Ltd (Joint Broker ) +44 20 7220 0500
Ed Frisby/Giles Rolls (Corporate Finance)
Richard Chambers (ECM)
For further Company details, visit www.surfacetransforms.com
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