A supplier to the likes of Aston Martin and McLaren expects to report a profit this year after a decade-long wait.
Liverpool-based Surface Transforms, which manufactures carbon ceramic brake discs for the automotive and aircraft industries, said a deal with an original equipment manufacturer (OEM) means it will post a profit for the 12 months to December 31, 2022.
However, the listed company did confirm that its sales are set to be £1.5m lower than previously anticipated because of a delay in production.
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The update comes as Surface Transforms revealed its results for the six months to June 30, 2022, which show its revenue increased from £1.2m to £2.9m and its gross profits rose from £700,000 to £1.7m. However, its pre-tax losses widened from £2.2m to £2.5m.
Chairman David Bundred said: “2022 is the point at which the hard work of the past decade is being successfully converted to company profitability.
“The company is now in series production with three OEMs whilst at the same time both winning new contracts and significantly expanding the PCP.
“We continue to maintain profitability guidance for 2022 and are upgrading guidance for the following three years.
“Our £190m order book is complemented by a £400m PCP. The near-term issue is capacity, whilst maintaining sufficient resilience and the board is currently modelling options to address this. These are exciting times for Surface Transforms.
“Finally, I would like to conclude by recording the board’s appreciation of the outstanding contribution by all members of the team. Thank you.”
On its outlook, a company statement said: “The commencement of OEM 8 series monthly volumes, even if slightly later than originally planned, brings Surface Transforms into profitability for the financial year ending 31 December 2022.
“Assisted by higher development income, the company was also profitable in June and July.
“The financial impact of this small delay in OEM 8 start of production (‘SOP’) is offset by higher than forecast development revenues with other customers.
“As a result, guideline profitability remains unchanged for 2022 even though sales guidance is now expected to be approximately £1.5m below previous expectations.
“Moreover, looking forward to the three years 2023 to 2025, and having concluded volume discussions with OEM 8, the board is very pleased to increase sales guidance in these years by approximately 10% p.a., almost wholly attributable to OEM 8.
“There are some offsetting costs – approximately £0.8m p.a. reflecting additional production overheads to support sales growth; the overall effect is to upgrade forecast profitability for 2023 to 2025.
“The company will also benefit from the super deduction scheme that will allow £15m of accelerated tax allowances, which when combined with the company’s carry forward losses will ensure that even when profitable and based upon existing contracted values the company will not be paying corporation tax until after 2025.”
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