Final Results

Surface Transforms PLC 04 August 2004 4 August 2004 Preliminary results for the year ended 31 May 2004 Surface Transforms plc, manufacturers of carbon fibre reinforced ceramic (CFRC) materials, announces its preliminary results for the year ended 31 May 2004. Financial and business highlights: â€¢ Prestigious contract wins from Dunlop Aerospace and the United States Airforce Research Laboratory, and more recently with the German automotive brake systems supplier METEK and a development contract with the UK Ministry of Defence â€¢ Turnover increased by 79% to Â£428,608 (2003: Â£239,755) â€¢ Operating losses on ordinary activities reduced by 77% to Â£256,972 (2003: loss Â£1,129,909) â€¢ Raised Â£2.7 million after expenses, significantly strengthening the Company's balance sheet â€¢ Expanded team by hiring new managerial and technical staff Kevin D'Silva, Chairman of Surface Transforms, said: 'This has been a year of strong progress. We have key contracts in place in our target aerospace and automotive markets and, following the Â£2.7 million fundraising in April, have the financial strength to deliver our business objectives. 'We're happy with the way the Company is now structured and financed, leaving us free to focus on meeting the development milestones on our contracts, as well as having the resources in place to explore additional commercial opportunities for our carbon fibre ceramic materials.' For enquiries please contact: Julio Faria Neil Boom/Sophie Betts Managing Director Gresham PR Ltd. Surface Transforms plc 020 7404 9000 01928 735 498 Johnny Townsend/Simon Clements John East & Partners Limited 020 7628 2200 Chairman's Statement We have continued to make progress towards our goal, which is the profitable commercial exploitation of our carbon fibre reinforced ceramic (CFRC) materials. The most important events during the past year were the signing of key agreements with Dunlop Aerospace, the United States Air Force Research Laboratory (USAF), the UK Ministry of Defence (UK MoD) and, more recently, with the European automotive brake systems supplier METEK. A particularly interesting development was the MoD contract announced in May 2004, in which the MoD is investigating the potential of our CFRC materials for use in body armour. This could be a new income stream for Surface Transforms' technology which until now has been predominantly from sales relating to friction applications. Our new business model adopted around a year ago has delivered successful entries into all our target aerospace, automotive and anti-ballistic materials markets. As revenues are now increasing and costs have been reduced, our operational and financial position has steadily improved. The Company's working capital and balance sheet have also been strengthened by the fundraising in April, which raised Â£2.7 million after expenses and introduced new financial institutions to our shareholder base. Financial Review The Company's financial results for the year ended 31 May 2004 show a significant improvement on the comparable period last year. Turnover increased by 79% to Â£428,608 (2003: Â£239,755), while operating losses on ordinary activities were lower at Â£256,972 (2003: loss Â£1,129,909) and the Company's cash and working capital position has improved markedly. In addition, the reduction in operating losses is a result of improved financial cost control. Losses after tax were also lower at Â£129,524 (2003: loss Â£964,382), reflecting Research and Development tax credits of Â£119,685 (2003: Â£158,850). On 30 April 2004, the Company announced the Placing of 4,142,859 new Ordinary shares at 70 pence per share. The net proceeds of the Placing were Â£2.7 million of which Â£2.4 million was received in late May 2004. The remaining Â£332,500 was received in late July and is included in debtors at 31 May. The Placing has provided the resources to expand our management and technical teams and working capital to accelerate the expansion of the business. At 31 May 2004 the Company held cash and deposits of Â£2,707,839 (2003:Â£178,175). Surface Transforms continues to have no bank borrowings. OPERATING ACTIVITIES AIRCRAFT BRAKES In November 2003, Surface Transforms signed a major licensing contract with aircraft braking systems supplier Dunlop Aerospace to develop systems for a designated large commercial airliner. This contract is the first application of the Company's CFRCs in the commercial global aircraft industry. The recent sale of Dunlop Aerospace in July 2004 to Meggitt Plc, the British aerospace and defence company, does not alter the terms of the agreement with Surface Transforms. The work, to complete a material development programme and to design, install and commission a CFRC brake disc production plant at Dunlop's plant in Coventry, is advancing well. The first certification flight is scheduled for 2006. If the CFRC brake receives its certification from the Civil Aviation Authority for the specified airliner, Dunlop will initiate the supply of CFRC brakes manufactured under a previously announced licence agreement with Surface Transforms. This would secure long-term payments for the Company. AUTOMOTIVE Surface Transforms continues to develop applications within the automotive industry. In June 2004, the Company signed a two-year Cooperative Agreement initially worth Euro 60,000 with leading German automotive brake parts supplier METEK Metallverarbeitung GmbH of Meckenheim. The contract is for the design, development and supply of carbon ceramic brake discs and pads to METEK for use on high-performance and luxury European road cars. Entry into the road car market has long been one of the Company's stated objectives. Therefore, the METEK contract represents an important commercial landmark. We estimate that if carbon ceramic brake technology is adopted by major car manufacturers who now use steel or cast iron brake pads and discs, it is likely that we can achieve penetration of between one and three per cent of a total market valued at Euro 3.5 billion. Initial road car testing of Surface Transforms' materials at METEK has shown that CFRCs offer significant advantages over traditional cast iron brake discs with organic pads. METEK's booth at the European Motor Show in Essen, Germany in November 2004 will be the first occasion at which our new disc and brake systems will be on display, and will allow comparison of the performance of our systems with iron and other carbon ceramic brakes. We have begun a targeted marketing programme addressing the European automobile industry. The marketing programme is to raise awareness of the benefits of our ceramic brake disc technology, which we believe is inherently superior to the ceramic rotor and pad systems currently used on some high performance European road cars. AEROSPACE COMPONENTS Since January this year, work on the Roxel (Rocket Motors) programme has accelerated at Roxel's UK and French locations. In the past six months further CFRC components have been despatched to Roxel UK for rocket nozzle applications. It is the first time Roxel France (formerly Celerg, a division of the French Company SNPE) has used CFRC parts for a fuel valve assembly. Currently Roxel and Surface Transforms are investigating the details of a closer collaboration, not only for the supply of additional components but also for the generation of specific design data to characterise the performance of our material in the hostile environment of the rocket motor. In September 2003, Surface Transforms signed its first development contract with the United States Air Force Research Laboratory (USAF) for the supply of prototype CFRC materials. Since signing the agreement, the project has progressed well. It is currently on schedule and on budget. This contract was for 12 months. Extension of this contract is dependent on budget constraints at USAF but we have received very encouraging feedback from the extensive testing that has occurred during the first part of the contract. NEW APPLICATIONS FOR CFRC TECHNOLOGY BALLISTICS In May this year the Company was awarded a contract worth around Â£40,000, by the UK Ministry of Defence for the development and testing of anti-ballistic materials for use in infantry body armour and possibly as an anti-ballistic 'skin' for armoured personnel carriers and weapon platforms. Preliminary investigations show that our CFRCs offer protection against repeat hit high-power rifle shot, as well as weight saving advantages compared with standard alumina ceramic armour plates. Work is expected to be completed by around March 2005, subject to satisfactory product performance. The directors anticipate that if the performance is acceptable it should lead initially to commercial orders for body armour. TECHNOLOGY Non-executive director Professor David Clark continues to provide guidance to the technology team and he has recently completed an in-house review of the Company's technology and its comparative positioning within the world market. We have also recently commissioned two detailed market and technical research projects in the fields of aircraft brake systems and European automotive brakes and clutches. In terms of other new developments, two new patent applications for additional products and processes in the area of CFRCs are being prepared in readiness for expected submission by the end of this calendar year. MANAGEMENT Following the successful fundraising we have strengthened our technical and management teams, and will continue to do so. Dr. Kevin Johnson, PhD, MBA (aged 32), an industrial chemist with substantial experience, has joined as Operations Director. His appointment will be followed by the recruitment of three more technical executives in the areas of materials science and application engineering. The first of these appointments has already been made with Geoff Whitfield, a composites and aeronautical engineer, joining later this month. We expect to fill the remaining positions by the end of the year. The sales team will be strengthened by the appointment of a senior sales executive to assist Julio Faria and Dr. Geoff Gould in developing and growing the business. This appointment will be made after the completion of the market research projects on the aircraft and road car brake markets described above. Kate Hickman, formerly Operations Manager, has reduced her full-time involvement and is now employed as a consultant for one week per month. Kate has been with Surface Transforms for six years and her contribution to the development of our CFRC technology has been outstanding. We are delighted that she continues to apply her great enthusiasm and talents to the business. OUTLOOK This has been a year of strong progress. We now have key contracts in place in our target aerospace and automotive markets and, following the Â£2.7 million fundraising in April, have the financial strength to deliver our business objectives. We are happy with the way the Company is structured and financed, leaving us free to focus on completing work on our key contracts, as well as having the resources in place to explore additional commercial opportunities for our materials. The agreements that Surface Transforms has currently signed have the potential to bring in significant repeat revenues and it is our priority to ensure the development milestones are met on time and to standard. The success of the fundraising will allow the Company to achieve these aims. It also provides the capital to accelerate the development of our CFRC technology and invest in management and technical infrastructure which in turn will ensure that the higher levels of business activity are supported. We are now moving towards the goal set out in our business model to develop Surface Transforms into a company with first class technical, product development and business development capabilities. There is a high level of confidence within the Company, shared by employees and directors alike. Our recent new contract wins reflect the dedication and integrity of all employees. I would like to thank my board colleagues and talented staff for their hard work and commitment during a year of strong progress. Kevin D'Silva Chairman 3 August 2004 Details of the Company's business and financial performance, its share price history and the latest published commercial news can be found on the ArmShare icon which can be reached via www.surface-transforms.com. Analyst reviews of the Company are available on 'Company Review' and 'Other Commentaries' on the ArmShare website. SURFACE TRANSFORMS PLC PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 MAY 2004 Note 2004 2003 Â£ Â£ Turnover 428,608 239,755 Cost of sales (including exceptional items Â£nil (2003: Â£293,048)) 4 (117,461) (398,862) Gross profit/(loss) 311,147 (159,107) Distribution costs (1,261) (2,552) Administrative expenses: Before development costs (473,479) (617,644) Development costs (123,349) (350,606) Total administrative expenses (596,828) (968,250) Other operating income 29,970 - Operating loss (256,972) (1,129,909) Interest receivable and similar income 7,763 6,677 Loss on ordinary activities before taxation (249,209) (1,123,232) Tax on loss on ordinary activities 119,685 158,850 Loss on ordinary activities after taxation and retained for the financial year (129,524) (964,382) Loss per ordinary share Basic and diluted 3 (1.36p) (10.86p) All amounts relate to continuing activities. The company has no gains or losses in either the current or preceding year other than those reported above. SURFACE TRANSFORMS PLC BALANCE SHEET AS AT 31 MAY 2004 2004 2003 Â£ Â£ Â£ Â£ Fixed assets Intangible assets 8,540 10,758 Tangible assets 56,037 97,893 64,577 108,651 Current assets Stocks 88,683 70,068 Debtors 506,011 294,387 Cash at bank and in hand 2,707,839 178,175 3,302,533 542,630 Creditors: amounts falling due within one year (97,075) (77,608) Net current assets 3,205,458 465,022 Net assets 3,270,035 573,673 Capital and reserves Called up share capital 132,158 93,799 Share capital to be issued 4,750 - Share premium account 4,750,552 1,967,775 Other reserves 520,399 520,399 Profit and loss account (2,137,824) (2,008,300) Equity shareholders' funds 3,270,035 573,673 SURFACE TRANSFORMS PLC CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MAY 2004 2004 2003 Â£ Â£ Reconciliation of operating loss to net cash flow from operating activities Operating loss (256,972) (1,129,909) Depreciation charge 42,674 41,628 Amortisation charge 2,218 2,218 Profit on sale of fixed assets - (100) (Increase)/decrease in stocks (18,615) 268,103 Increase in debtors (37,974) (58,703) Increase/(decrease) in creditors 19,467 (40,834) Net cash outflow from operating activities (249,202) (917,597) 2004 2003 Â£ Â£ Cash flow statement Cash flow from operating activities (249,202) (917,597) Return on investments and servicing of finance 7,763 6,677 Taxation 278,535 - Capital expenditure (818) (9,045) Cash inflow/(outflow) before financing and management of liquid resources 36,278 (919,965) Management of liquid resources (2,635,000) - Financing 2,493,386 958,545 (Decrease)/increase in cash in the year (105,336) 38,580 2004 2003 Â£ Â£ Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash in the year (105,336) 38,580 Increase in liquid resources 2,635,000 - Movement in net funds in the year 2,529,664 38,580 Net funds at the start of the year 178,175 139,595 Net funds at the end of the year 2,707,839 178,175 SURFACE TRANSFORMS PLC Reconciliation of movements in shareholders' funds FOR THE YEAR ENDED 31 MAY 2004 2004 2003 Â£ Â£ Loss for the financial year (129,524) (964,382) New share capital subscribed (net of issue costs) 2,825,886 958,545 Net addition to/(reduction in) shareholders' funds 2,696,362 (5,837) Opening shareholders' funds 573,673 579,510 Closing shareholders' funds 3,270,035 573,673 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 2004 or 2003. The financial information for 2003 is derived from the statutory accounts for 2003 which have been delivered to the registrar of companies. The auditors have reported on the 2003 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 2004 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 convention. 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 2004 2003 Â£ Â£ Loss after tax (129,524) (964,382) Weighted average number of shares 9,506,297 8,882,861 Loss per share 1.36p 10.86p 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 warrants and options would have the effect of reducing the loss per ordinary share and is therefore not dilutative under the terms of FRS14. 4. Exceptional items Following Formula 1 regulatory changes introduced during the previous year which restricted the supply of products to that market, the directors decided to terminate all ongoing Formula 1 development. This resulted in a Formula 1 stock write down of Â£293,048 in the prior year. 5. Report and Accounts Copies of the Report and Accounts will be posted to shareholders shortly and will be available from the Company's registered office at April House, Tarvin Road, Frodsham, Cheshire WA6 6XN This information is provided by RNS The company news service from the London Stock Exchange

Companies

Surface Transforms (SCE)

Full Archive

UK 100

Latest directors dealings

All directors dealings today