Last checked at 16 Sep 2008 07:00
Embargoed Release: 07:00hrs Tuesday 16th September 2008
Surface Transforms plc ("Surface Transforms" or "the Company") Preliminary Results for the year ended 31 May 2008 Surface Transforms is the UK's leading manufacturer of`next-generation' carbon fibre reinforced ceramic composite materials (CRFCs).The Company's high-performance products are being commercialised with majorindustry partners, for an expanding range of innovative global applications,using cutting-edge technology developed by the Company.
Highlights
* Revenue increased by 90 per cent. to ‚£508,111 (2007: ‚£266,789)
* Losses after taxation improved by eight per cent. to ‚£594,065 (2007: ‚£646,422)
* Cash position as at 31 May 2008 of ‚£1,112,719 (2007: ‚£878,971) * Order Book of ‚£302,124 (as at 31 May 2008)
* Receipt of a four year, ‚£300,000 to ‚£400,000 per annum initial contract
with a leading, global, brake systems group for the supply of carbon fibre
brake discs.
* Award of a ‚£150,000, three year development contract with MBDA, a world
leading missile manufacturer jointly owned by BAE Systems, EADS and
Finmeccanica.
* Unit costs of ceramic brake discs are now 20 per cent. lower than levels in
May 2007.
* The commencement of a development contract with a new US based aircraft
brake system supplier which currently supplies both commercial and defence
aircraft. * Fundraising amounting to ‚£897,000 net of expenses by the issue of new ordinary shares at 20 pence per share as announced in July 2007.
Commenting, Kevin D'Silva, Chairman of Surface Transforms, said:
"We envisage further progress during the coming year and the board believes that Surface Transforms has established itself as an industry operator with world class technology. The commercial and development contracts which have been signed in the past year underline this reputation.
"In spite of the widely reported slowdown in world consumer and industrial markets, the Company continues to improve its order book. The board anticipates that the revenue growth experienced in 2008/09 will continue."
Enquiries:Surface Transforms plc websites: www.surface-transforms.com and www.systemsST.com Dr Kevin Johnson, Dr Geoff Gould Tel: 0151 356 2141 Kevin D'Silva Tel: 07802 306956 John East & Partners Limited (Nomad and Broker) Simon Clements Tel: 020 7628 2200 Hansard Group (PR) Tel: 020 7245 1100 John Bick/Chris Roberts Redmayne Bentley (Private Client Broker) Lucy Clapham/Simon Flather Tel: 01943 886600 Chairman's statement
In the 12 months to 31 May, 2008 the Company has achieved its financial targets for the year and has also met a number of the strategic and operating milestones that the management had set themselves.
The Company started the 2008/09 financial year with a record order book; four automotive brake systems clients that are ordering brake discs on a regular basis and improved prospects for further growth in the business. The key achievements for the period under review were:
* Receipt of a four year, ‚£300,000 to ‚£400,000 per annum initial contract
with a leading, global, brake systems group for the supply of carbon fibre
brake discs.
* Award of a ‚£150,000, three year development contract with MBDA, a world
leading missile manufacturer jointly owned by BAE Systems, EADS and
Finmeccanica.
* Unit costs of ceramic brake discs are now 20 per cent. lower than levels in
May 2007.
* The commencement of a development contract with a new US based aircraft
brake system supplier which currently supplies both commercial and defence
aircraft. * Fundraising amounting to ‚£897,000 net of expenses by the issue of new ordinary shares at 20 pence per share as announced in July 2007.
FINANCIAL REVIEW
In the 12 months to 31 May 2008, revenue was ‚£508,111 (2007: ‚£266,789). Thisrepresents a 90 per cent. increase on the same period in 2007. Increasedautomotive brake disc revenues account for most of the percentage rise and nowrepresents over 80 per cent. of the Company's revenue.At 31 May 2008, the outstanding order book was ‚£302,124 (2007: ‚£126,097)
Losses after taxation for the 12 month period were ‚£594,065 (2007: ‚£646,422).
Loss per share was 3.33 pence (2007: 4.61pence loss per share).
During the year the Company raised ‚£897,000 by way of an issue of ordinaryshares at 20 pence per share. Shareholder funds at 31 May 2008 were ‚£1,722,839(2007: ‚£1,413,058) and this included cash deposits of ‚£1,112,719 (2007: ‚£878,971).
Capital expenditure during the year amounted to ‚£142,599 (2007: ‚£193,382).
The Company has no borrowings.
DEVELOPMENTS
At present, the Company is currently in advanced discussions regarding a supplycontract with a leading European supplier of braking systems to theafter-market industry. A further announcement regarding this will be made indue course.
In addition, in April 2008, the Company signed a four year supply agreement to supply carbon fibre brake discs to a global automotive brake system supplier.
The directors believe, based on forecasts prepared by the brakes systemsupplier, that this contract could generate additional revenues ofapproximately ‚£300,000 to ‚£400,000 per annum over the life of the agreement andthat the Company has sufficient manufacturing capacity to meet this demand.This agreement demonstrates that Surface Transforms has the expertise inadvanced carbon fibres and industrial fabrics which can provide a competitiveedge in composite brake technology and takes the Company's leading-edgeproducts into the forefront of the international automotive performance brakemarket.PEOPLE
The board would like to thank management and staff who have all contributed tothe progress the Company has made during the year. We continue to incentiviseexecutives with share options as we wish to align their rewards with those
ofshareholders.OUTLOOK
We envisage further progress during the coming year.
The board believes that Surface Transforms has established itself as an industry operator with world class technology. The commercial and development contracts which have been signed in the past year underline this reputation.
In spite of the widely reported slowdown in world consumer and industrial markets, the Company continues to improve its order book. The board anticipates that the revenue growth experienced in 2008/09 will continue.
Kevin D'SilvaChairman16 September 2008Income Statement
for the year ended 31 May 2008
Note 2008 2007 ‚£ ‚£ Revenue 3 508,111 266,789 Cost of sales (252,874) (138,955) Gross profit 255,237 127,834 Administrative expenses: Before research costs (678,078) (586,643) Research costs (615,617) (560,005) Total administrative expenses (1,293,695) (1,146,648) Other operating income 220,652 176,530 Operating loss (817,806) (842,284) Financial income 67,347 59,845 Loss before tax (750,459) (782,439) Taxation 4 156,394 136,017 Loss for the year (594,065) (646,422) Loss per ordinary share Basic and diluted 6 (3.33p) (4.61p)
All amounts relate to continuing activities.
Statement of Changes in Equity
as at 31 May 20082007 Share Share Capital Profit and Total Capital premium reserve loss account account ‚£ ‚£ ‚£ ‚£ ‚£ Credit in relation to - - - 62,375 62,375share based payments Net income recognised - - - 62,375 62,375directly to equity Loss for the year - - - (646,422) (646,422) Total recognised income - - - (584,047) (584,047)and expense Opening shareholders funds 140,308 4,902,715 463,885 (3,509,803) 1,997,105at 1 June 2006 Closing shareholders funds 140,308 4,902,715 463,885 (4,093,850) 1,413,058at 31 May 2007 2008 Share Share Capital Profit and Total Capital premium reserve loss account account ‚£ ‚£ ‚£ ‚£ ‚£ Credit in relation to - - - 56,609 56,609share based payments Net income recognised - - - 56,609 56,609directly to equity Loss for the year - - - (594,065) (594,065) Issue of new shares 50,000 847,237 - - 897,237 Total recognised income 50,000 847,237 - (537,456) 359,781and expense Opening shareholders funds 140,308 4,902,715 463,885 (4,093,850) 1,413,058at 1 June 2007 Closing shareholders funds 190,308 5,749,952 463,885 (4,631,306) 1,772,839at 31 May 2008 Balance sheetat 31 May 2008 Note 2008 2007 ‚£ ‚£ ‚£ ‚£ Non-current assets Intangible assets 5 - 1,886
Property, plant and equipment 382,975
289,455 382,975 291,341 Current assets Inventories 258,874 212,181
Trade and other receivables 292,923 289,576 Cash and cash equivalents 1,112,719
878,971 Total Assets 1,664,516 1,380,728 2,047,491 1,672,069 Current Liabilities Trade and other payables (274,652)
(259,011) Total Liabilities (274,652)
(259,011) Net assets 1,772,839 1,413,058 Equity Share capital 190,308 140,308 Share premium 5,749,952 4,902,715
Capital reserve 463,885 463,885 Retained earnings (4,631,306) (4,093,850) Total equity attributable to 1,772,839
1,413,058equity shareholders of the Company Cash flow statement
for the year ended 31 May 2008
2008 2007 ‚£ ‚£
Cash flows from operating activities
Loss for the year (594,065) (646,422) Adjusted for: Depreciation charge 49,079 74,083 Amortisation charge 1,886 2,218
Equity settled share-based payment 56,609
62,375expenses Financial income (67,347) (59,845) Taxation (156,394) (136,017) (710,232) (703,608) Changes in working capital Increase in inventories (46,693) (87,846) Increase in trade and other receivables (3,347)
(205,441)
Increase in trade and other payables 15,641
129,997 (744,631) (866,898) Finance income received 67,347 59,845 Taxation received 156,394 136,017 Net cash used in operating activities (520,890) (671,036)
Cash flows from investing activities Acquisition of property, plant and (142,599) (193,382)equipment Net cash used in investing activities (142,599) (193,382)
Cash flows from financing activities Proceeds from issue of share capital 897,237
-
Net cash from financing activities 897,237
- Net increase/(decrease) in cash and cash 233,748 (864,418)equivalents Cash and cash equivalents at the beginning 878,971 1,743,389of the period
Cash and cash equivalents at the end of 1,112,719
878,971the period Notes
1. Nature of Financial Information
The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 May 2008 or 2007. The financialinformation for 2007 is derived from the statutory accounts for 2007 which havebeen delivered to the registrar of companies. The auditors have reported on the2007 accounts: their report was unqualified and did not contain statementsunder section 237(2) or (3) of the Companies Act 1985. The statutory accountsfor 2008 will be finalised on the basis of the financial information presentedby the directors in this preliminary announcement and will be delivered to theregistrar of companies following the Company's annual general meeting.
2. Basis of preparation
The financial statements have been prepared in accordance with applicableaccounting standards and under the historical cost accounting rules, modifiedto include revaluation to fair value of certain financial instruments describedbelow.The accounting policies set out in the 2008 report and accounts have, unlessotherwise stated, been applied consistently to all periods presented in thefinancial statements and in preparing an opening IFRS balance sheet at 1 June2006 for the purposes of the transition to Adopted IFRSs.
Going concern
The financial statements have been prepared on a going concern basis which thedirectors believe to be appropriate. The Company incurred a net loss of ‚£594,065 during the year however the directors are satisfied, based on detailedcash flow projections, that sufficient cash is available to meet the Company'sneeds as they fall due for at least 12 months from the date of signing theaccounts. In addition revenues are expected to continue to increase in thecoming years resulting in the Company becoming profitable in due course.
3. Analysis of turnover and loss on ordinary activities before taxation
Revenue and loss on ordinary activities before taxation is wholly attributable to the principal activity of the Company
Primary reporting format - business segments
Revenue by business segment is analysed as follows:
2008 2007 ‚£ ‚£ Automotive 424,413 216,065 Aerospace 83,698 50,724 508,111 266,789
All business segments are serviced by a single production facility. As such, net assets, liabilities, additions to property, plant and equipment, loss before tax and depreciation cannot be attributed to specific business segments.
Secondary reporting format - Geographical segments
Revenue by destination is analysed as follows:
2008 2007 ‚£ ‚£ By geographical market: United Kingdom 138,074 93,270 Rest of Europe 353,964 129,522 United States of America 16,073 42,897 Rest of World - 1,100 508,111 266,789 Revenue by origin, net assets and profit before interest and tax all relate tothe UK.4. TaxationAnalysis of credit in year 2008 2007 ‚£ ‚£ UK corporation tax Research and development tax repayment (156,394) (136,017) Income tax credit (156,394) (136,017)
Details of the unrecognised deferred tax asset are included in note 13.
Factors affecting the tax credit for the current period
The current tax credit for the year is lower (2007: lower) than the standard rate of corporation tax in the UK of 28 per cent. (2007: 30 per cent.). The differences are explained below:
2008
2007
Reconciliation of effective tax rate ‚£
‚£ Loss for the year (594,065) (646,422) Total income tax credit (156,394) (136,017) Loss excluding income tax (750,459) (782,439) Current tax at average rate of 29.67 per cent. (222,661) (234,732)(2007: 30 per cent.) Effects of: Non-deductible expenses 632 3,118 Reduction in tax rate 38,861 - Change in unrecognised timing differences 4,976
(41,302)
Current year losses for which no deferred tax 178,192 272,916recognised Tax incentives (156,394) (136,017) Income tax credit (see above) (156,394) (136,017)
The corporation tax rate applicable to the company has changed from 30 per cent. to 28 per cent. with effect from 1 April 2008.
Factors that may affect future tax charges
The effective tax rate in future years is expected to be below the standard rate of corporation tax in the UK due principally to historical losses which have been carried forward.
5. Loss on ordinary sharesThe calculation of basic loss per ordinary share is based on the loss for thefinancial year divided by the weighted average number of shares in issue duringthe year.Losses and number of shares used in the calculations of loss per ordinary shareare set out below:Basic 2008 2007 ‚£ ‚£ Loss after tax (594,065) (646,422) Weighted average number of shares 17,828,562 14,030,748 Loss per share (3.33p) (4.61p) The calculation of diluted loss per ordinary share is identical to that usedfor the basic loss per ordinary share. This is because the exercise of optionswould have the effect of reducing the loss per ordinary share from continuingoperations and is therefore not dilutive under the terms of IAS33.
6. Dividends
No dividends were paid or are proposed in respect of the year ended 31 May 2008.
7. IFRS Restatement Information
The Company's financial statements for the year ended 31 May 2008 are the Company's first annual statements in compliance with adopted IFRSs.
There are no material differences between the figures previously presented under UK GAAP and their restatement to adopted IFRSs.
8. Report and Financial Statements
Copies of the Report and Financial Statements will be posted to shareholders next week.
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