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Gateshead’s Sevcon Unveils $400m Contract Pipeline

WORLD-LEADING electrification specialist Sevcon has recorded a 38% increase in first quarter sales – after earlier unveiling a $400m (£320m) contract pipeline.

The Gateshead company saw revenues increase to $12.5m (£10m) in the first quarter of fiscal 2017, up from $9.1m (£7.3m) in the first quarter of 2016.

Sales for the period October to December 2016 were supported with a $5.2m (£4.2m) boost from the acquisition of Italian battery charging company Bassi.

The record figures come days after the company announced a sixth major deal for its contract pipeline. The latest one is for the development of an electric drivetrain for a Chinese/European car maker worth up to $200m (£160m).

The Team Valley company, which makes controllers for low carbon vehicles, adds this to its existing pipeline totalling a further $200m.

Sevcon says it has developed the drivetrain for Chinese/European customer throughout 2016, and will now develop an inverter based on its existing Gen5 technology. Start of production is expected to be late 2018.

Over the initial three-year production period, revenues are likely to total in the range of $150m (£120m) to $200m, say the company.

The latest deal is the sixth major project in Sevcon’s development pipeline.

Two of the projects, worth over $70m (£56m), are with a British supercar company and were announced last year, while a second is with a South East Asian tier one supplier, which could be worth up to $50m (£40m).

Sevcon is unable to reveal further specifics on the remaining contracts.

Sevcon President and Chief Executive Officer Matt Boyle said Sevcon’s world-leading electric drivetrain expertise has put it in a strong position to capture a large share of the growing global, on-road electrification market.

Electrifying on-road vehicle drivetrains requires highly-specialised staff and skills. Contracts for this work tend to operate on timescales of at least five years, with each passing a series of milestones from proof of concept to performance testing, tooling and then manufacture.

Mr Boyle said: “We are excited by the confidence that an increasing number of on-road OEMs are placing in our solutions, and we look forward to meeting the many milestones we have before us in 2017.  As we look even further out, our project pipeline and the market demand for electrification solutions provides us with significant opportunity for growth.”

Speaking on the first quarter results Mr Boyle continued: “We remain very bullish about our prospects this year. While we expect challenging conditions in the industrial markets in the near-term, we expect to see further improvement in our on-road business as a result of our strong project pipeline.

“First-quarter revenues increased 38% year over year, reflecting the $5m (£4m) contribution from our Bassi acquisition, partially offset by lower sales from the industrial side of the business due to a continuation of the challenging macroeconomic headwinds our customers are facing.

“Bassi has performed above our expectations, having reported 33% revenue growth post acquisition compared with the same three-month period in the prior year, and we expect that momentum to continue in the second quarter.”

The company reported a loss of $2.4m (£1.9m) for the first quarter, compared with a profit of $180,000 (£144,000) in the first quarter last year.

Mr Boyle added: “The operating loss reflects our significant investment in both engineering and sales and marketing personnel to capitalise on our strong and expanding on-road project pipeline. Production revenues from these programs are expected to start in 2017-2018.”

Sevcon currently employs over 80 skilled engineers in its Team Valley HQ and is recruiting a further 20 engineers in the Thames Valley.

The Gateshead-based company posted record sales in 2016, of $49.8m (£40m) up from $41.1m (£33m) in 2015.