Final Results

Embargoed for release at 7.00 am on 17 August 2006

                    Surface Transforms plc ("the Company")                     

              Preliminary results for the year ended 31 May 2006               

Surface Transforms plc, manufacturers of carbon fibre reinforced ceramic (CFRC)
materials, announces its preliminary results for the year ended 31 May 2006.

Highlights:

  * Turnover £155,177 (2005: £258,336) and loss after tax of £811,870 (2005: £
    616,623). Increase in losses largely due to the loss of development
    contract in year ended 31 May 2005
   
  * Turnover in the second half of the year is ahead of that achieved in the
    first six months
   
  * Cash at 31 May 2006 approximately £1.75 million, equivalent to 12.4 pence
    per share
   
  * Outstanding order bank at the year end of £147,400
   
  * Intellectual Property Portfolio enhanced through 3 new patent applications
   
  * Initial sales of ceramic brakes made under a 12 month contract with
    Koenigsegg Automotive
   
  * Additionally working with three, small UK based automotive OEMs who build
    high performance cars and Weber Sportcars in Switzerland. Considerable
    interest in the System ST brake system being shown
   
  * Management team strengthened during the year and further non-executives to
    be appointed to assist in targeting the range of activities undertaken by
    the Company
   
For enquiries, please contact:

Surface Transforms plc                             John East & Partners Limited
                                                                               
Kevin Johnson 0151 472 3733                        Simon Clements 0207 628 2200
                                                                               
Julio Faria 0151 472 3733                         Johnny Townsend 0207 628 2200
                                                                               
Kevin D'Silva 07802 306956                          Teather & Greenwood Limited
                                                                               
                                                   Mark Dickenson 0207 426 9000
                                                                               
                                                   Sindre Ottesen 0207 426 9000



Chairman's Statement

In the year under review, Dr Kevin Johnson, Managing Director, and his new
management team have progressed plans within the Company's operations and my
statement is designed to bring shareholders up to date with progress in the
year to 31 May 2006 and since the year end. The principal areas the Board has
and continues to focus on are:

  * strengthening the Intellectual Property portfolio;
   
  * the Company's next generation production process for carbon ceramic brake
    discs;
   
  * development of a carbon ceramic disc brake for commercial aircraft; and
   
  * commercialisation of the Company's SystemST carbon ceramic brake systems
    for high performance cars.
   
Financial Review

In the year to 31 May 2006, turnover was £155,177 (2005: £258,336). Despite the
fall in turnover for the full year compared with the prior year the sales
performance in the second half of the year was better than that achieved in the
first six months of the year. The outstanding order bank at the year end was £
147,400.

Revenues in this period include development fees from a US aircraft brake
system supplier, sales of ceramic rocket components to Roxel and initial sales
of ceramic brake discs to Koenigsegg Automotive, the Company's first
significant automotive client, and to prospective clients who are testing
automotive brake discs.

Losses after tax in the period were £811,870 (2005: £616,623). The increase in
losses relates almost entirely to the first half of the year, where the
corresponding period in 2004/05 included development income from a contract
which was terminated later that year. Furthermore, the losses also reflect the
Board's decision to strengthen the management team and invest in the Company's
proprietary technology.

Shareholders funds as at 31 May 2006 were £1,997,105 (2005: £2,808,975) which
included cash deposits of £1,743,389 (2005: £2,728,052). At the year end cash
represented 12.4 pence per share.

Capital expenditure in the year amounted to £129,690 (2005: £63,775).

Operating Activities

SCIENCE & TECHNOLOGY

During the period the Company made three new patent applications which, once
approved, are expected to supplement the existing patent portfolio.

The Company is making good progress with the new ST Tech 2 production system
which is designed to improve productivity and reduce the costs of manufacturing
automotive carbon ceramic brake discs.

Capital expenditure in the current year is expected to be mainly within the
CVIST and MIST sub-processes. The majority of the CVIST expenditure planned for
the current year falls within the criteria of the £200,000 grant awarded by the
Northwest Development Agency.

The Board have decided to temporarily delay expenditure on the MIST process
until the Company receives confirmation of a second automotive contract
alongside the Koenigsegg agreement. We have conducted preliminary work on the
MIST process and at present we are confident that the technology delivers the
productivity and cost savings targeted. The new production system is expected
to generate a 50 per cent. reduction in the unit cost of disc brakes compared
with those currently being produced.

AIRCRAFT BRAKE SYSTEMS

The Company is currently engaged in brake development programmes with three
global aircraft brake suppliers. These development programmes derive low levels
of revenue but they are expected to continue for at least the next twelve
months. It is difficult to forecast the timing of the eventual acceptance of
the first ceramic brake disc for aircraft use, although two of our clients are
very keen to continue to evaluate the suitability of our technology as a
replacement for the current carbon carbon brakes that are used on most
commercial aircraft.

The development contracts are profitable and the Board's view is that it should
maintain its position in this market and continue to target increased revenues
from aircraft brake development programmes.

AUTOMOTIVE BRAKING SYSTEMS

In March this year Koenigsegg Automotive of Sweden agreed a supply contract for
carbon ceramic brakes for 24 car systems with a value of up to £145,000 over
twelve months. The carbon ceramic brakes are being sold as a factory fitted
option on the new Koenigsegg CCX, a 860 bhp supercar that was launched this
year.

The Company continues to work with three, small UK based automotive OEMs who
build high performance cars and it is also working with Weber Sportcars in
Switzerland. It is never easy to predict customer uptake on the introduction of
a new, high technology product but there is little doubt that there is
considerable interest in the System ST brake system.

People

Our success depends on fostering a strong entrepreneurial culture within which
our young management team can develop professionally. We have been active in
incentivising our staff with share options to ensure their rewards are the same
as other shareholders and that the business is managed with an `owner's eye'.
Share options, although granted this year, have been priced at levels higher
than the current share prices and we have selected our share price as a key
performance indicator for remuneration. I would like to thank all my colleagues
for their hard work and dedication over the past year.

Outlook

We have two main challenges ahead of us in the coming year.

The first is that we have to gain at least one other significant automotive
brake contract and once this has been achieved it will provide clear evidence
of customer acceptance of the Company's brake disc technology for high
performance cars. In the aircraft brake market our technology is actively being
evaluated by several system suppliers but it will take time before our product
is accepted for use on a commercial aircraft.

The second challenge is the completion of our ST Tech 2 production process so
that it delivers products at greater efficiency and at lower cost than the
current process. The Company is relocating to new facilities approximately 10
miles from the current site and the move should be completed by the end of the
year.

The Board currently has two non-executive directors including Professor David
Clark who is a founder and has been a director since the Company's
incorporation. To support the current range of activities undertaken by the
Company and to assist it in targeting its automotive and aerospace markets more
effectively, it is the Board's intention to appoint additional non-executive
directors and we hope to make such announcements in the current year.

Kevin D'Silva
Chairman
17 August 2006



SURFACE TRANSFORMS PLC

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 MAY 2006

                                               Note           2006         2005
                                                                               
                                                                 £            £
                                                                               
Turnover                                                   155,177      258,336
                                                                               
Cost of sales                                            (101,706)     (93,846)
                                                                               
Gross profit                                                53,471      164,490
                                                                               
Distribution costs                                         (1,613)      (1,348)
                                                                               
Administrative expenses:                                                       
                                                                               
Before development costs                                 (511,186)    (500,574)
                                                                               
Development costs                                        (583,936)    (472,978)
                                                                               
Total administrative expenses                          (1,095,122)    (973,552)
                                                                               
Other operating income                                      27,155        4,980
                                                                               
Operating loss                                         (1,016,109)    (805,430)
                                                                               
Interest receivable                                         92,662      131,480
                                                                               
Interest payable                                                 -      (1,235)
                                                                               
Loss on ordinary activities before taxation              (923,447)    (675,185)
                                                                               
Tax on loss on ordinary activities                         111,577       58,562
                                                                               
Loss on ordinary activities after taxation               (811,870)    (616,623)
and retained                                                                   
                                                                               
for the financial year                                                         
                                                                               
Loss per ordinary share                                                        
                                                                               
Basic and diluted                               3          (5.79p)      (4.47p)
                                                                               

All amounts relate to continuing activities.



SURFACE TRANSFORMS PLC

BALANCE SHEET

AS AT 31 MAY 2006

                                            2006                  2005         
                                                                               
                                            £           £         £           £
                                                                               
Fixed assets                                                                   
                                                                               
Intangible assets                                   4,104                 6,322
                                                                               
Tangible assets                                   170,156                73,877
                                                                               
                                                  174,260                80,199
                                                                               
Current assets                                                                 
                                                                               
Stocks                                124,335                67,522            
                                                                               
Debtors                                84,135                80,991            
                                                                               
Cash at bank and in hand            1,743,389             2,728,052            
                                                                               
                                    1,951,859             2,876,565            
                                                                               
Creditors: amounts falling                                                     
                                                                               
due within one year                 (129,014)             (147,789)            
                                                                               
Net current assets                              1,822,845             2,728,776
                                                                               
Net assets                                      1,997,105             2,808,975
                                                                               
Capital and reserves                                                           
                                                                               
Called up share capital                           140,308               140,308
                                                                               
Share premium account                           4,902,715             4,902,715
                                                                               
Other reserves                                    463,885               463,885
                                                                               
Profit and loss account                       (3,509,803)           (2,697,933)
                                                                               
Shareholders' funds                             1,997,105             2,808,975
                                                                               


SURFACE TRANSFORMS PLC

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MAY 2006

                                                           2006            2005
                                                                               
                                                              £               £
                                                                               
Reconciliation of operating loss to                                            
net                                                                            
                                                                               
cash flow from operating activities                                            
                                                                               
Operating loss                                      (1,016,109)       (805,430)
                                                                               
Depreciation charge                                      33,411          45,935
                                                                               
Amortisation charge                                       2,218           2,218
                                                                               
(Increase)/decrease in stocks                          (56,813)          21,161
                                                                               
(Increase)/decrease in debtors                         (14,471)         103,847
                                                                               
(Decrease)/increase in creditors                       (18,775)          50,714
                                                                               
Net cash outflow from operating                     (1,070,539)       (581,555)
activities                                                                     
                                                                               

                                                           2006            2005
                                                                               
                                                              £               £
                                                                               
Cash flow statement                                                            
                                                                               
Cash flow from operating activities                 (1,070,539)       (581,555)
                                                                               
Return on investments and servicing of                  103,989         118,918
finance                                                                        
                                                                               
Taxation                                                111,577          58,562
                                                                               
Capital expenditure                                   (129,690)        (63,775)
                                                                               
Cash outflow before management of                     (984,663)       (467,850)
liquid resources and financing                                                 
                                                                               
Management of liquid resources                          987,500           3,000
                                                                               
Financing                                                     -         488,063
                                                                               
Increase in cash in the year                              2,837          23,213
                                                                               

                                                           2006            2005
                                                                               
                                                              £               £
                                                                               
Reconciliation of net cash flow to                                             
                                                                               
movement in net funds                                                          
                                                                               
Increase in cash in the year                              2,837          23,213
                                                                               
Cash outflow from liquid resources                    (987,500)         (3,000)
                                                                               
Movement in net funds in the year                     (984,663)          20,213
                                                                               
Net funds at the start of the year                    2,728,052       2,707,839
                                                                               
Net funds at the end of the year                      1,743,389       2,728,052
                                                                               


SURFACE TRANSFORMS PLC

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

FOR THE YEAR ENDED 31 MAY 2006

                                                               2006        2005
                                                                               
                                                                  £           £
                                                                               
Loss for the financial year                               (811,870)   (616,623)
                                                                               
Unrealised gain on the lapse of warrants                          -      56,514
                                                                               
Total recognised gains and losses relating to the         (811,870)   (560,109)
financial year                                                                 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

FOR THE YEAR ENDED 31 MAY 2006

                                                              2006         2005
                                                                               
                                                                 £            £
                                                                               
Loss for the financial year                              (811,870)    (616,623)
                                                                               
New share capital subscribed (net of issue costs)                -      155,563
                                                                               
Net reduction in shareholders' funds                     (811,870)    (461,060)
                                                                               
Opening shareholders' funds                              2,808,975    3,270,035
                                                                               
Closing shareholders' funds                              1,997,105    2,808,975
                                                                               

SURFACE TRANSFORMS PLC

NOTES

1. Nature of Financial Information

The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 May 2006 or 2005. The financial
information for 2005 is derived from the statutory accounts for 2005 which have
been delivered to the registrar of companies. The auditors have reported on the
2005 accounts: their report was unqualified and did not contain statements
under section 237(2) or (3) of the Companies Act 1985. The statutory accounts
for 2006 will be finalised on the basis of the financial information presented
by the directors in this preliminary announcement and will be delivered to the
registrar of companies following the Company's annual general meeting.

2. Basis of preparation

The accounting policies have been applied consistently in dealing with items
which are considered material in relation to the company's financial
statements. The financial statements have been prepared in accordance with
applicable accounting standards and in accordance with the historical cost
accounting rules.

3. Loss per share
   
The calculation of basic loss per ordinary share is based on the loss for the
financial year divided by the weighted average number of shares in issue during
the year.

Losses and number of shares used in the calculations of loss per ordinary share
are set out below:

Basic                                                         2006         2005
                                                                               
                                                                 £            £
                                                                               
Loss after tax                                           (811,870)    (616,623)
                                                                               
Weighted average number of shares                       14,030,748   13,805,406
                                                                               
Loss per share                                             (5.79p)      (4.47p)

The calculation of diluted loss per ordinary share is identical to that used
for the basic loss per ordinary share. This is because the exercise of options
would have the effect of reducing the loss per ordinary share and is therefore
not dilutive under the terms of Financial Reporting Standard 14.

4. Dividends

No dividends were paid or are proposed in respect of the year ended 31 May
2006.

5. Report and Financial Statements

Copies of the Report and Financial Statements will be posted to shareholders
shortly and will be available from the Company's registered office at Cheshire
Innovation Park, Unit 306, Pool Lane, Ince, Cheshire CH2 4NU.