Surface Transforms Regulatory News (SCE)

10 June 2015

Surface Transforms plc

("Surface Transforms", the "Company" or "Group")

Pre Close Trading Update

Surface Transforms (AIM: SCE) announces that revenue in the year ended 31 May 2015 was below expectations at £1.1 million (2014: £1.3 million), primarily due to a temporary breakdown of the CVI furnace in May. Importantly however, road car sales increased 52% to £418k (2014: £276k) and total annual revenues when normalised to take account of non-recurring 2014 items were actually 10% higher than prior year, despite the aforementioned operational issue.

David Bundred, Chairman said "The temporary breakdown of the CVI furnace in May has been investigated and understood and is currently being rectified. The furnace is again operational although not yet operating at full capacity. We are confident the majority of the revenue shortfall will be recovered in the first quarter of the new financial year."

The Group cash position as at 31 May 2015 was £776k (2014: £151k) and the Board also anticipate receiving a R&D Tax Credit in excess of £200k (2014: £217k) in the next 4 months.

The reduction in revenue will adversely affect the Group's expected loss before tax for the year. However, because the shortfall is one principally of timing, the impact on the Group's working capital requirement over the next year is minimal; albeit management now intend to add new features to the CVI furnace in the new financial year to permanently rectify the recent problems at a cost of approximately £150k.

The Company is pleased to report continuing progress on the game changing contracts, in particular:

· the Company has now successfully completed all testing by a major tier one international brake manufacturer and is in the process of jointly sharing the results with a British vehicle OEM. The results confirm the technical superiority of Surface Transforms' products compared with the competition and included passing the "wet endurance test" as previously described (see RNS announcement dated 18 November 2014)

· the Company is shortly to receive a delegation from a renowned premium German car manufacturer to review the Group's internal processes - a crucial part of their new product introduction system for new suppliers

· the detailed engineering discussions with the furnace manufacturers have led us to jointly conclude that the Company can now build a pilot plant for 17,000 discs, (against the 10,000 disc capacity previously described) for the same £4 million investment

The Board of Directors continue to believe that it will be able to make a significant announcement in the near future.

The Company is also pleased to announce strengthening of the management team with the following appointments:

Des Farrell, Operations and Supply Chain Manager

Des was previously Head of UK Operations at Air Liquide where he was responsible for 13 plants across the UK; he has particular experience of developing new sites.

Peter Studer, Non-Continental Automotive & Worldwide Aerospace Sales

Peter was previously Business Manager of Vehicle Dynamics at Lotus Engineering and prior to that, Sales and Marketing Director of Dynamic Suspensions.

Michael Sinai, Continental Europe Automotive Sales

Michael Sinai is based out of Dusseldorf and was previously business development manager for Flextronics.

The Company expects to announce its preliminary results in August.

For enquiries, please contact:

For further Company details, visit www.surfacetransforms.com.