Surface Transforms

Growth rate and visibility enhanced even further

25 Apr 2022 / Corporate research

On 24 March, Surface Transforms (SCE) announced a further major multi-year contract from OEM 8. This contract is its largest to date, and brings an additional ca.£70m lifetime sales value. The company’s strong outlook is entrenched, as aptly summarised by the Chairman some time ago with the FY’22 interim results, which were announced on 13 September 2021: “The Company now expects to enter a period of high growth, partially, but not solely based on a lifetime value OEM order book of ca.£70m". The £70m order book of seven months ago has expanded to over £180m, via existing and new clients. Capacity expansion is in place and documented.

  • Order book growth: The order book has grown two-and-a-half-fold in the past seven months. Up to then, it had trebled in the previous couple of years. The book steadily lengthens, giving strong visibility. The overwhelming majority of end-sales of cars have order books themselves, which adds visibility too.
  • How we got here: The first bespoke pieces were supplied in 2002. The proof-of-performance has come from a combination of OEM trials, and on-road retrofit and track cars. Complex manufacturing processes and a supply chain honed over many years provide excellent hurdles to new competition.
  • Where we are going: There is only one – larger – competitor, BremboSGL. SCE itself has been proactive and clear on its expansion of capacity, which has been crucial in winning orders. Equipment to accommodate further growth from £20m capacity to £50m p.a. is under way, for completion in mid-2023.
  • Risks: This is a rapidly growing market, and SCE is flexible with clients and potential clients to accommodate the rapid evolution. A major sales increase leads to a (definable) increase in working capital needs. The successful commissioning of new capacity is now being achieved, but is always a risk.
  • Investment case: This market is ca.96%-supplied by one, profitable competitor. Single supply was a most anomalous position for an auto OEM market; now SCE also supplies. Thus, the two combined OEM 8 orders, while true “game changers”, simply fitted into the broader SCE place in the market expansion. This is being delivered on a broad customer base of global OEMs.
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