Surface Transforms plc (LON:SCE) Chairman David Bundred caught up with DirectorsTalk for an exclusive interview to discuss their significant brake test results, increased capacity and the new management positions
Q1: You released some news to the market a few days ago, can you tell our readers what that news was?
A1: We issued an RNS that had 3 parts to it; updating shareholders on the short term operational results, most importantly we took the opportunity to talk about the progress we’re making on the ‘game changers’ and lastly, we spoke about some management changes we’ve made in the business. On the operational side, we were a bit disappointed with the results for last year but it was a purely one-off, we had a breakdown on a crucial piece of kit and now in the process of being fixed.
Q2: So you said that your discs have been successfully tested by brake manufacturers, what’s the significance in completing those tests?
A2: I really cannot understate the significance and the importance of those set of tests. A major brake manufacturer, and we’re talking one of the three or four world famous leading brake manufacturers, confirmed objectively everything we’ve been saying about the brake discs for the last few years. They’ve really done extensive testing, the testing took 6 months, they tested every facet of it, they really did test it to destruction and confirmed everything particularly and most encouragingly they confirmed the superiority of our product, over the competitors, able to run at 200 degrees centigrade hotter than the competitors and indecently the best test was at about 25% better than the competitors.
Q3: In terms of your other customers, do you think they’ll just read across these results?
A3: I wish! That would be a nice world wouldn’t it? No, the other customers will all want to do their own tests. Don’t forget, brake disc is a safety critical item and frankly even if they wanted to, they’re not allowed to, they have to test it. They also have to test it as part of the integrated system but that’s not really the point. The point is that this is now the third set of data and they all tell exactly the same story. We tested it obviously, we’ve got our own test data and we show that to customers all the time. The aerospace manufacturer tested it and he’s got his set of data and that’s confirmed that and now we’ve got this mainstream brake manufacturer so we are now confident in the technology and we’re now confident in what we’re saying about the product but the end customers will all want to do their own testing. Not least, they’ll want to do their own testing within their own subsystem.
Q4: Now you’ve said you believe that you’ll be able to make a significant announcement in the near future. Based on the fact that you’re upping your capacity, which I’ll come to in a minute, I’m guessing this will be a contract announcement but are you really on plan to make an announcement in the near future?
A4: Given the comments we’ve made in the past, we’re running a bit late. I think we’re running 3 or 4 months late, in other words we had hoped to be able to be making an announcement about the summer was always our thinking, our expectation. The reason we’re late is simply because the brake testing, which we anticipated it taking 2 or 3 months, actually took 6 months which is indicative of the degree of detail, the degree of testing that took place. So yes, we’re a bit late but the fundamentals haven’t changed, we’ve still got five major programs with separate BM’s and we’re still advancing. Yes, we’re a bit late though arguably we’re advancing on a broader front so we are expecting to make an announcement, a bit later than we’d said but we’re still expecting to make it in the near future.
Q5: Going back to the increased capacity, you originally said you only had capacity for 10,000 discs. How are you able to say now that your proposed pilot plan will be able to hold 17,000 discs at the same cost?
A5: In simple terms, it’s a function of detailed engineering discussions between our engineers and the manufacturers of the plant and both were talking to two potential furnace manufacturers and they’re both saying broadly the same thing. It’s to do with when you get down to the discussions, you say things like ‘if the furnace was 2 foot longer and 3 foot higher, how much extra would that cost and what’s that worth to us in terms of outputs’, it’s those detailed stuff and the design internally and the guys have done a cracking job in virtually doubling the capacity for the same money, we’re very pleased with them.
Q6: Where are we in regards to agreeing a location for the new factory?
A6: The big issue there is we’re in discussions with 2 local authorities on grant income and that it taking a bit longer than I expected. This austerity world of agreeing deals with the public sector just takes longer and they are tough discussions at the moment, we are full on. In the 2 shortlisted local authorities, we’ve seen premises that we like and the long pole in the tent is getting the grant agreed and once we’ve got the grant agreed, we’ll be signing contracts with landlords very quickly after that.
Q7: What about the new furnaces, where are we with those?
A7: Basically, it’s the same thing. We can’t commit to the furnace, we know who we’re going to buy this from but what we can’t do is commit until we’ve got the grant. It’s a feature of winning grants which has been around forever but you can’t backdate the cheque, you have to agree the grant first then make the commitment. So getting the grant sorted is the impediment at the moment to get the location sorted and signing the contract on the furnaces. It is literally that, there is nothing else stopping us.
Q8: You also announced that you’ve been busy recruiting three new members of staff, all highly experienced in their fields. Can you tell us a bit about the roles they’ll be taking and how this fits in with your current strategy?
A8: Yes I can but before I do, I just want to say that to me the most important issue in those recruitments is the quality of the people we were able to recruit. These guys have got big jobs, they’re coming from big jobs to what, on paper, is little Surface Transforms. In fact we are as I’ve said before ‘don’t underestimate the scale of our ambition’ and those guys are coming because they don’t underestimate the scale of our ambition, they can see what we’re trying to do and we want to be part of it so I was particularly pleased that we had, in all cases, a very good shortlist. The operational role is very straight forward which it’s part of the maturity of the business. We’re about to spend a big capital expenditure program and I wanted someone in the business who had experience of building new factories, had experience of running large organisations so he’s responsible for all of that. On the other side, there’s a lot going on with customers at the moment and we wanted to split the sales role between Germany, which is where a lot of the effort is and I think it’s almost a full time job looking after Germany so we’ve now got a guy in Germany purely responsible for that, reporting directly to Kevin and Peter has joined us from Lotus, responsible for the aerospace and the rest of the world automotive business so those 2 guys are very busy people.
