Trading Statement

14 Dec 2005 07:00

To be embargoed until 7.00am on 14 December, 2005 Surface Transforms Plc ('Surface Transforms' or 'the Company') Trading Update, Directorate Change & Director's Interests Surface Transforms first six months trading for the 2005/6 financial yearclosed on 30 November, 2005.Unaudited turnover for the six months was ‚£68,302 (2004: ‚£208,442) and Cash on deposit was ‚£ 2.1 million ( May 2005: ‚£2.73million)Despite the reduction in turnover from the comparative period in 2004 whichincluded sales from a development contract with Dunlop Aerospace, turnover hasincreased compared to the previous six months ended 31 May 2005 of ‚£49,914.Turnover in the first half comprised principally revenues from a developmentcontract with a US aircraft brake manufacturer, sales of rocket motorcomponents and a small amount of sales of high performance automotive brakedisc systems. The Company's order book is currently ‚£44,500. The interimresults will be released during February 2006.Automotivea) GeneralThe most recent on road tests were on 16 November and 12 December at theAnglesey racetrack, where ceramic brakes on a number of cars were evaluated byboth test drivers and engineering teams. There were encouraging successes andup to date news, including endorsements from certain car manufacturers whichcan be accessed on www.systemst.com and www. surface-transforms.com. The grantaward announced last month assists and underscores the Company's drive todeliver a highly cost effective brake, which can be used for both Track andRoad car requirements.b) AftermarketSales from the automotive after market had been expected to be higher by thisstage. However, the first sales channel established has not yet provedsuccessful. In order to provide greater control over the entry to this market,the Company has taken two steps. The first has been development of the abilityto tune the whole braking system (ie brake disc, brake pad, wheel bell andbobbin) for a targeted vehicle model so as to ensure satisfactory brakingperformance in terms of both stopping distance performance and noise, vibrationand harshness. The second is to enter the UK aftermarket by targetingparticularly suitable models of Porsche and Ferrari initially, and then selectbrake fitting companies specialising in those models to assemble and fit thecompany's system - three such companies in the UK have already been contractedwith. Once this business model is established, the company intends to roll itout by vehicle model and by country.c) Vehicle ManufacturersA number of EU car manufacturers of high performance cars (both high and lowvolume) continue to evaluate System ST brake systems. Further to the Angleseytrack day referred to above, it is expected that low volume manufacturers ofspecialist sports cars will be the first category of manufacturers to adopt thesystem.The BoardPeter Holland has indicated that due to his other executive businesscommitments he wishes to resign as a non-executive director with immediateeffect. Peter is a successful businessman in the industrial chemical market andsince his appointment as a non-executive director in 2003, he has beeninstrumental in guiding the reshaping of the Company. During 2005, he assumedan interim executive role to ensure a smooth management transition, which ledto the appointment of Dr. Kevin Johnson as Managing Director. His wise counselwill be missed but he will continue to be available to the Company for adviceon specific issues. The Company has started the process of looking for anotherindustry relevant non-executive director.Peter Holland owns 170,515 shares in Surface Transforms and as part of hisdeparture has agreed to sell 31,000 shares to Julio Faria, resulting in thelatter's holding increasing to 2,357,845 shares in the Company, representing16.8 per cent. of the issued share capital of the Company.OutlookWhilst introducing a new, high technology product is never straightforward,particularly in terms of predicting timing of take up, the board continues toview the future with confidence based on the steps which it is taking toprovide the Company with greater control over its entry into the automotiveaftermarket and also the greater control and understanding which the Companynow has over every stage of its production process, leading to lowermanufacturing costs and a stronger platform from which to conduct licensingnegotiations with OEMs.For enquiries, please contact:Surface Transforms plc John East & Partners Limited (NOMAD)Dr. Kevin Johnson 0151 373130 Johnny Townsend, Simon ClementsMr. Kevin D'Silva 07802 306956 0207 628 2200Teather & Greenwood (Broker)Mark Dickenson, Sindre Ottesen0207 426 9000Details of the Company's business and financial performance and its share pricecan be found onwww.armshare.comwhich is accessed from the Armshare icon onwww.surface-transforms.comA webcast of the 2005 results is also available on www.surface-transforms.com/Investor and Media relations .ENDSURFACE TRANSFORMS PLC