Surface Transforms Settles Existing Contract, Awarded Two More

(Alliance News) - Shares rose in Surface Transforms PLC on Friday as it said that it has been awarded a contract to supply ceramic brake discs to an existing UK original equipment manufacturer, whom it didn't name.

In addition, Surface Transforms has concluded a commercial settlement on an existing contract with the same company, referred to by Surface Transforms as OEM 6, concerning a delay to the start of production of the original car covered by that contract.

Shares in the brake disc manufacturer rose 23% to 16.65 pence early Friday in London.

The new contract award by 'OEM 6' is for a new car that will be produced over three years with the start of production scheduled towards the end of 2021. Surface Transforms expects the contract to generate revenue of GBP6 million over its lifetime.

Also, considering production delays on the original car in the first contract, OEM 6 will pay Surface Transforms GBP300,000 in cash relating to the direct costs of discs.

Although this will add GBP300,000 to Surface Transforms's near-term cash, it will not affect the gross margin expected in the financial year ending May 2020. This existing contract is still expected to generate revenue of GBP2 million over two years starting from calendar 2020.

Surface Transforms's second new contract is with Swedish car manufacturer Koenigsegg Automotive AB, for its new 300 miles per hour supercar Jesko. The Jesko will replace the Regara model with an expected start of production in the autumn of 2020.

Surface Transforms will be the tier one supplier for carbon ceramic brake disc with an annual revenue of up to GBP300,000.

"This GBP6 million lifetime sales contract award from OEM 6, is very good news and represents another crucial step in achieving Surface Transforms' profitability objectives. Arguably of equal importance however, is the strategic implications of these two contract awards; confirming that once we have a position with a customer, we can (in the case of OEM 6) grow from that base or (in the case of Koenigsegg) maintain that position as they change models," said Chief Executive Officer Kevin Johnson.

"This capability, reflecting both the customer's experience of the product and our supply chain performance, will be crucial in becoming a significant automotive supplier as we further develop production relationships with the mainstream OEMs," Johnson added.