Half-yearly Report
31 January 2008
Surface Transforms Plc
("Surface Transforms" or "the Company")
Half-yearly financial results for the six months ended 30 November 2007
Surface Transforms (AIM: SCE.L) is the UK's leading manufacturer of
`next-generation' carbon fibre reinforced ceramic composite materials (CRFCs).
The Company's products are being commercialised with major industry partners
for a range of applications in the automotive and aerospace sectors.
Summary
* Turnover of £205,997 (2006: £116,439)
* Losses after taxation £213,956 (2006: £292,098)
* Cash position of £1,592,785
* Order book of £201,593 (as of 30 November 2007)
* Automotive Braking Systems - the SystemST ceramic brakes system is now
represented on over 25 car platforms and was recently launched on the new
AVOCET performance car at the 2008 Autosport international show in
Birmingham.
* Aircraft Brake Systems - revenues from the aircraft brake systems sector
continue to come from paid development contracts and ST's technology in
this area is being evaluated by two major aircraft braking system OEMs.
Commenting on the outlook for the Company, Chairman, Kevin D'Silva, said;
"The Board believes that further progress will be made in the near future in
particular, within the automotive and rocket component businesses.
"In spite of the widely reported rapid slowdown in world consumer and
industrial markets, the Company continues to build its order book and expects
turnover for the year ending May 2008 will be higher than the previous year."
For further Company details visit www.surface-transforms.com
Enquiries:
Surface Transforms plc Tel: +44(0)1513 562
141
Dr Kevin Johnson
Geoff Hall
John East & Partners Limited (Nomad and Joint Tel: +44(0)20 7628
Broker) 2200
Simon Clements
David Worlidge
Redmayne Bentley (Private client broker) Tel: +44(0)1943 886
600
Lucy Clapham
Simon Flather
Hansard Group Tel: +44(0)20 7245
1100
John Bick
Chris Roberts
For further Company details visit www.surface-transforms.com, click on
Armshare.
Chairman's Statement
In the six months ended 30 November 2007 the Company has achieved its financial
targets for the first half of the financial year and it has made satisfactory
progress towards achieving its main strategic targets for its business as
follows:
* To gain additional, significant automotive brake contracts to operate
alongside the Koenigsegg Automotive supply contract for ceramic brake
discs.
* To improve efficiency and reduce the cost of manufacturing ceramic brake
discs.
FINANCIAL REVIEW
In the six months ended 30 November 2007, the Company generated turnover of £
205,997 (2006: £116,439) which represents an increase of 77 per cent over the
same period last year. The largest proportion, approximately 74 per cent, of
this increase relates to revenue derived from sales of automotive discs.
As at 30 November 2007, the outstanding order book was £201,593.
Losses after taxation for the six month period were reduced to £213,956 (2006:
loss £292,098). It was decided that the next annual financial statements of the
company for the year ending 31 May 2008, will be prepared in accordance with
International Financial Reporting Standards (IFRS's) as adopted by the EU
("adopted IFRS's). The results to 30 November 2007 and the comparative periods
are prepared under adopted IFRS's. An IFRS restatement note (note 6) is
included within this report, however, there were no material differences
between the statements presented under adopted IFRS and statements presented
under UK GAAP.
Total equity as at 30 November 2007 was £2,129,137 (31 May 2007: £1,413,058)
and this included cash deposits of £1,592,785 equivalent to 8.4 pence per
share. (31 May 2007 £878,971: equivalent to 6.3 pence per share).
Automotive Braking Systems
SystemST is now represented on over 25 car platforms. The most recent success
came in January 2008 when Martin Miles Industries launched its new AVOCET
performance car equipped with SystemST ceramic brakes. The AVOCET was launched
at 2008 Autosport international show in Birmingham and approx 50 cars are
expected to be built in the first year of operations.
Other car platforms which have adopted the SystemST product include:
Koenigsegg Automotive (www.koenigsegg.sw) - SystemST brakes are currently
fitted to over 30 supercars and current production exceeds 25 cars per annum.
StopTech Inc (www.stoptech.com) - a company that supplies the US after market
with upgraded brake systems. Sales in recent months have been slower than
expected principally due to the weakness of the US dollar.
Mov'it GmbH (www.movit.de) - revenues generated from this customer have
exceeded management's expectations and in the six month period under review 36
SystemST car disc sets have been purchased and a further 50 car sets are
expected to be delivered in the second half of this financial year.
Ascari Cars (www.ascari.co.uk) - the Ascari A10 is fitted with SystemST brakes
and approximately 10 car sets are expected to be delivered in 2008.
Weber Sports Cars (www.weber-sportcars.com) - Weber are close to starting
production of their new car and are planning to build eight of these supercars
in 2008.
Tramontana (www.tramontana.sp) - the Spanish supercar manufacturer equips its
latest model with SystemST ceramic brake discs and approximately ten cars are
expected to be sold in this financial year.
The Company hopes to be able to update investors with news of further
automotive contracts in the short to medium term.
Aircraft Brake Systems
Revenues from the aircraft brake systems sector are principally from paid
development contracts.
One of our customers, Dunlop Aircraft Braking Systems ("Dunlop"), a subsidiary
of Meggitt plc, has now merged with a US competitor. Both of these companies
are independently evaluating ST's technology.
Dunlop is a member of the £1.34 million three year collaborative R&D project
awarded by the DTI and managed by the Company.
People
We welcome Julio Faria to the board in his new capacity of non-executive
director. We continue to ensure we incentivise management and staff with share
options to ensure their potential rewards align with those of shareholders.
During the next 12 months the Company intends to grant further options to
senior management and key members of the operational team.
Outlook
The Board believes that further progress will be made in the near future in
particular, within the automotive and rocket component businesses.
In spite of the widely reported rapid slowdown in world consumer and industrial
markets, the Company continues to build its order book and expects turnover for
the year ending May 2008 will be higher than the previous year.
Kevin D'Silva
Chairman
31 January 2008
INCOME STATEMENT
for THE six months ended 30 November 2007
Note (Unaudited) (Unaudited) (Unaudited)
Six months Six months Year ended
ended ended 31 May
30 November 30 November 2007
2007 2006
£ £ £
Revenue 205,997 116,439 266,789
Cost of sales (103,663) (58,233) (138,955)
Gross profit 102,334 58,206 127,834
Other operating income - revenue 125,682 52,869 176,530
grants
Distribution expenses - (490) -
Administrative expenses:
Before development costs (318,677) (281,141) (586,643)
Development costs (312,314) (290,862) (560,005)
Total administrative expenses (630,991) (572,003) (1,146,648)
Operating loss (402,975) (461,418) (842,284)
Financial income 32,625 33,303 59,845
Financial income 32,625 33,303 59,845
Loss before taxation (370,350) (428,115) (782,439)
Taxation 2 156,394 136,017 136,017
Loss for the period attributable (213,956) (292,098) (646,422)
to equity holders of the Company
Loss per ordinary share
Basic and diluted 3 (1.28p) (2.08p) (4.61p)
BALANCE SHEET
AS AT 30 NOVEMBER 2007
(Unaudited) (Unaudited) (Unaudited)
As at As at As at
30 November 30 November 31 May
2007 2006 2007
£ £ £
Non current assets
Property Plant and Equipment 334,828 164,812 289,455
Intangible assets 777 2,995 1,886
Total non current assets 335,605 167,807 291,341
Current assets
Inventories 221,988 120,638 212,181
Trade and Other Receivables 257,039 104,390 289,576
Cash and cash equivalents 1,592,785 1,473,062 878,971
Total current assets 2,071,812 1,698,090 1,380,728
Total assets 2,407,417 1,865,897 1,672,069
Current liabilities
Trade and other payables (278,280) (137,402) (259,011)
Total liabilities (278,280) (137,402) (259,011)
Net assets 2,129,137 1,728,495 1,413,058
Equity
Share capital 190,308 140,308 140,308
Share premium account 5,751,198 4,902,715 4,902,715
Other reserves 463,885 463,885 463,885
Retained Earnings (4,276,254) (3,778,413) (4,093,850)
Total equity attributable to equity 2,129,137 1,728,495 1,413,058
shareholders of the Company
cash flow statement
FOR THE SIX MONTHS ENDED 30 NOVEMBER 2007
(Unaudited) (Unaudited) (Unaudited)
Six months Six months Year ended
ended ended
31 May
30 November 30 November
2007
2007 2006
£ £ £
Cash generated from operating activities
Loss for the period (213,956) (292,098) (646,422)
Adjustments for:
Depreciation 19,984 15,000 76,301
Financial Income (32,625) (33,303) (59,845)
Equity settled share based payment 31,552 23,488 62,375
expenses
Taxation (156,394) (136,017) (136,017)
Operating loss before changes in working (351,439) (422,930) (703,608)
capital and provisions
(Increase)/decrease in trade and other 32,537 (20,255) (205,441)
receivables
(Increase)/decrease in inventories (9,807) 3,697 (87,846)
Increase in trade and other payables 19,269 8,388 129,997
(309,440) (431,100) (866,898)
Tax Received 156,394 136,017 136,017
Net cash outflow from operating activities (153,046) (295,083) (730,881)
Cash flow from investing activities
Interest Received 32,625 33,303 59,845
Acquisition of property, plant and (64,248) (8,547) (193,382)
equipment
Net cash (outflow)/inflow from investing (31,623) 24,756 (133,537)
activities
Cash flows from financing activities
Gross proceed from the issue of share 1,000,000 - -
capital
Share issue costs (101,517) - -
Net cash inflow from financing activities 898,483 - -
Net increase/(decrease) in cash and cash 713,814 (270,327) (864,418)
equivalents
Opening cash and cash equivalents 878,971 1,743,389 1,743,389
Closing cash and cash equivalents 1,592,785 1,473,062 878,971
statement of changes in shareholders equity
Unaudited six months
to 30 November 2006
Share Share Other Retained Total
capital premium reserves earnings
£ £ £ £ £
Balance at 1 June 2007 140,308 4,902,715 463,885 (4,093,850) 1,413,058
Total income and - - - - -
expense recognised
directly in equity
Loss for the period - - - (213,956) (213,956)
Total recognised - - - (213,956) (213,956)
income and expenses
Share based payments - - - 31,552 31,552
Issue of new shares 50,000 848,483 - - 898,483
Balance at 30 November 190,308 5,751,198 463,885 (4,276,254) 2,129,137
2007
Unaudited six months
to 30 November 2007
Share Share Other Retained Total
capital premium reserves earnings
£ £ £ £ £
Balance at 1 June 2006 140,308 4,902,715 463,885 (3,509,802) 1,997,106
Total income and - - - - -
expense recognised
directly in equity
Loss for the period - - - (292,098) (292,098)
Total recognised - - - (292,098) (292,098)
income and expenses
Share based payments - - - 23,487 23,487
Balance at 30 November 140,308 4,902,715 463,885 (3,778,413) 1,728,495
2006
Unaudited year ended
to 31 May 2007
Share Share Other Retained Total
capital premium reserves earnings
£ £ £ £ £
Balance at 1 June 2006 140,308 4,902,715 463,885 (3,509,802) 1,997,106
Total income and - - - - -
expense recognised
directly in equity
Loss for the period - - - (646,422) (646,422)
Total recognised - - - (646,422) (646,422)
income and expenses
Share based payments - - - 62,374 62,374
Balance at 31 May 2007 140,308 4,902,715 463,885 (4,093,850) 1,413,058
NOTES
1. Basis of preparation
The half-yearly financial statements of the Company for the period ended 30
November 2007 are unaudited and do not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985.
The directors of the company have decided that, as permitted under the
Companies Act 1985, the next annual financial statements of the company, for
the year ending 31 May 2008, will be prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the EU ("adopted IFRSs").
Reconciliations and descriptions of the effect of the transition from UK GAAP
to adopted IFRS on the Company's statements are provided in this half-yearly
report.
This half yearly financial information has been prepared on the basis of the
recognition and measurement requirements of adopted IFRS as at 30 November 2007
that are effective (or available for early adoption) at 31 May 2008, the
Company's first annual reporting date at which it has decided to apply adopted
IFRS. Based on these adopted IFRS, the directors have applied the accounting
policies set out in note 6, which they expect to apply when the first annual
financial statements are prepared in accordance with adopted IFRS for the year
ending 31 May 2008.
However, the adopted IFRSs that will be effective (or available for early
adoption) in the annual financial statements for the year ending 31 May 2008
are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the year ending 31 May 2008.
The comparative figures for the financial year ended 31 May 2007 are not the
Company's statutory accounts for that financial year. Those accounts, which
were prepared under UK GAAP, have been reported on by the Company's auditors
and delivered to the Registrar of Companies. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.
2. Taxation
Analysis of credit in the period/year
(Unaudited) (Unaudited) (Unaudited)
Six months Six months Year ended
ended ended
31 May
30 November 30 November
2007
2007 2006
£ £ £
UK Corporation tax
Current tax on income for the period - - -
Research and development tax 156,394 136,017 136,017
repayment
156,394 136,017 136,017
The effective rate of tax for the period/year is lower than the standard rate
of corporation tax in the UK of 30 per cent. principally due to losses incurred
by the Company.
The deferred tax asset relating to losses has not been recognised in the
financial statements because it is not possible to assess whether there will be
suitable taxable profits from which the future reversal of the underlying
timing differences can be deducted.
3. Loss per share
(Unaudited) (Unaudited) (Unaudited)
Six months Six months Year ended
ended ended
31 May
30 November 30 November
2007
2007 2006
Pence Pence Pence
Loss per ordinary share:
Basic and diluted (1.28) (2.08) (4.61)
Loss per ordinary share is based on the Company's loss for the financial period
of £213,956 (30 November 2006: £292,098; 31 May 2007: £646,422). The weighted
average number of shares used in the basic calculation is 16,708,199
(30 November 2006: 14,030,748; 31 May 2007:14,030,748).
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 share
options would have the effect of reducing the loss per ordinary share and is
therefore not dilutive under the terms of International Accounting Standard 33
"Earnings per share".
4. Dividends
The directors are not proposing the payment of a dividend in respect of the six
months ended 30 November 2007.
5. Copies of results
Copies of half-yearly financial results will be sent to shareholders shortly
and will also be available at the Company's registered office, Unit 4, Olympic
Park, Poole Hall Road, Ellesmere Port, Cheshire, CH66 1ST and on the Company's
website www.surface-transforms.com.
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