New OEM 8 Contract for Additional Sales
The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
24 March 2022
Surface Transforms plc
("Surface Transforms" or the "Company")
New OEM 8 contract for additional sales
Surface Transforms plc (AIM:SCE) is pleased to announce that it has signed a new contract with its existing customer, OEM 8 with a contract value of approximately £100m. This contract replaces the previously announced contract from September 2020 which was valued at approximately £27.5m. This increased contract value of over £70m is driven by both significantly increased demand for this particular model of OEM 8 and the contract being extended to 2027.
The contract remains priced in pounds sterling and increases the Company's sales forecast by £4m in 2023, £11m in both 2024 and 2025 and by £20m in both 2026 and 2027, taking the Company's overall lifetime order book to over £180m.
By way of background, in September 2020 the Company announced its selection by OEM 8 to be the standard fit, sole supplier of the carbon ceramic brake disc on both axles of a new model variant. At that time, the start of production ("SOP") was scheduled for the summer of 2021 and the contract was for 3 years with an estimated lifetime value of £27.5m. Whilst OEM 8 delayed the SOP (now scheduled for spring 2022), the market response to the car has exceeded their order expectations; the customer has therefore been in discussions with all impacted suppliers to increase capacity and output.
This new contract clearly has capacity and overhead implications. In several separate announcements, the Company has said that by mid 2023 we will have installed capacity for £50m sales p.a. which is enough to accommodate the extra volumes from this new contract. However, our staffing and infrastructure overheads are currently in line with the previous forecast of approximately £17m sales for 2023. Accordingly, the Company now needs to accelerate the recruitment and infrastructure actions required to support these much higher sales, which the Board currently estimates will result in current year overheads (mostly people related) increasing by £2.5m.
Kevin Johnson (CEO) said: "This important announcement maintains the recent momentum of significant commercial success for our brake discs. This success is of course being accompanied by our parallel focus on installing and commissioning the new plant to produce this huge increase in sales, a project that is continuing apace. We look forward to showing shareholders the progress on both contracts and production at our Capital Markets Day in April 2022."
For enquiries, please contact:
Surface Transforms plc +44 151 356 2141
David Bundred, Chairman
Kevin Johnson, CEO
Michael Cunningham CFO
Zeus (Nominated Advisor and Joint Broker) +44 203 829 5000
David Foreman / Dan Bate / Jordan Warburton (Investment Banking)
Dominic King (Corporate Broking)
finnCap Ltd (Joint Broker) +44 20 7220 0500
Ed Frisby/Abigail Kelly (Corporate Finance)
Richard Chambers/Barney Hayward (ECM)
About Surface Transforms
Surface Transforms plc. (AIM:SCE) develop and produce carbon ‐ ceramic material automotive brake discs. The Company is the UK's only manufacturer of carbon ‐ ceramic brake discs, and only one of two mainstream carbon ceramic brake disc companies in the world, serving customers that include major OEMs in the global automotive markets.
The Company utilises its proprietary next generation Carbon Ceramic Technology to create lightweight brake discs for high ‐ performance road and track applications for both internal combustion engine and electric vehicles. While competitor carbon ‐ ceramic brake discs use discontinuous chopped carbon fibre, Surface Transforms interweaves continuous carbon fibre to form a 3D matrix, producing a stronger and more durable product with improved heat conductivity compared to competitor products; this reduces the brake system operating temperature, resulting in lighter and longer life components with superior brake performance. These benefits are in addition to the benefits of all carbon ‐ ceramic brake discs vs. iron brake discs: weight savings of up to 70%, longer product life, consistent performance, reduced brake pad dust and corrosion free.
For additional information please visit www.surfacetransforms.com
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