8th Feb 07 ARMSHARE update :Link Back to Page 6 Here


Information Archive Folder : http://www.esnips.com/web/SurfaceTransformsInfo/


Main Web Site : http://www.surface-transforms.com/

March 2008 Presentation : Presentation Link


Commerical Overview

Surface Transform plcs core activity is exploiting proprietary technologies to create innovative, lightweight, high energy dissipating braking system materials, which can be commercialised for high-performance applications.

Surface Transforms plc has worked on technology programmes in collaboration with major companies such as AlliedSignal Inc, BAE Systems/Roxel, Dunlop Aerospace and Faiveley

Today, Surface Transforms is commercialising its products for an increasing range of high-performance applications. These include automotive, motorsport and aircraft brakes, for which the company has developed Ceramic brakes with improved friction properties, enhanced lifetime and lower production costs. Other growth areas include aerospace components (principally rocket motors) and anti-ballistic armour.

Key milestones have included:

-A new aircraft brakes development contract (Jan 2004) with a leading US based aircraft brakes maker
-A licensing contract (September 2003) with Dunlop Aerospace to develop and supply CFRC brakes;
-A contract with the UK Ministry of Defence to supply innovative materials that will increase protection against high-power rifle and cannon fire;
-A contract with the United States Airforce Research Laboratory for the supply of prototype CFRC materials for military applications.
-First commercial sales of carbon-ceramic brake discs for installation on the KOENIGSEGG Swedish supercar
-First commercial sales of Carbon Ceramic road car discs to StopTech the California based brake system upgrade specialists.
-First commercial sales of Carbon Ceramic road car discs to MOVIT one of the leading brake after-market upgrade kit suppliers based in Germany.


Not expecting anything over night here but to me it is now at the stage of becoming a good play with potential rewards in 2010 onwards on success.

New armshare update : www.armshare.com


The interim results to November 2005 showed sales of 68,000 (2004: 208,000) and pre-tax loss of 479,000 (2004: 239,000) - the explanation for these results was given in the December 2005 announcement (see above). The company reported that it maintains brake development programmes with three global suppliers of aircraft brakes, two European and one US - there has been extensive development work with the latter, with Phase 1 (measurement of wear and friction) nearing completion and the expectation that development work will continue for the next year; regarding automotive, a Swedish supercar fitted with SystemST is on display at the 2006 Geneva Motor Show - sales via METEK into the German aftermarket have been disappointing, resulting in the arrangement being terminated and a replacement being sought - in the short to medium term the board expects the first commercial success to come from one of the smaller high performance car OEMs; cash at November 2005 was 2.1 million (representing c15p per share).

In March 2006, Swedish supercar manufacturer, Koenigsegg Automotive AB, placed a brake supply supply agreement for an initial term of 12 months with a 3 month notice clause, with an annual value of up to 131,000. Koenigsegg has just launched the CCX model (the Geneva Motor Show model referred to in the above para), selling for over 450,000 each and capable of 0-100 kph acceleration in 3.2 seconds - more details can be seen by clicking on Company Website above. The CCX can be fitted with SystemST ceramic brakes as an option but Koenigsegg are of the view that most of its buyers will choose the new ceramic brake system - they will also offer it as an upgrade option to all pre-CCX model owners of Koenigsegg cars.
Research Standing
The market invariably canes a company's share price where there is a setback such as occurred in Autumn 2004 on the aircraft brake project with Dunlop. This provides opportunities for the more dispassionate and longer term investor. ArmShare is an advocate of constructing portfolios comprising at least 80% invested in established businesses combining growth and value and up to 20% in a portfolio of earlier stage higher risk businesses considered to have the potential to develop into the former - Surface Transforms is an obvious candidate for the '20%' category of such a portfolio.

Whilst the financial results to November 2005 scarcely hit the radar screen, they mask the fact that the company has made very significant progress in strengthening its position for negotiating with channel partners, particularly in automotive. Until it started both to fully understand and also take control of the entire process for delivering merchantable brakes, it was very difficult to hold serious discussions with automotive OEMs because the company could not deliver a turnkey solution - automotive OEMs are different from aicraft brake OEMs because the latter already use the processes which accompany ST's core process - this negotiating position will be enhanced by the significant cost reduction which ST expects to derive from the new plant scheduled to be completed in the course of 2006.

The March 2006 supply agreement with specialist automotive OEM Koenigsegg is a seminal event because an answer can now be given to the all important question when negotiating with other OEMs "who else is using the system?".

With cash at bank at November 2005 equivalent to 15p per share, a share price of 16.5p at 16th March, a team which has strengthened considerably over the last two years and much greater knowledge/control re the delivery of merchantable solutions, ST has become an increasingly attractively valued concept stock.

From uk-analyst.com

"Surface Transforms shares rose 0.5p to 17p after it announced an interesting new deal with a supercar manufacturer. Surface Transforms manufactures carbon-fibre reinforced ceramic materials and will supply high performance, carbon ceramic automotive brake discs and components to Swiss group Koenigsegg, an established European manufacturer with a 10-year history of producing high performance supercars. This supply agreement is for an initial term of 12 months with a 3-month notice clause, and it has an annual value of up to 131,000 pounds."

Some front page Yahoo Finance coverage for the Koenigsegg CCX, the worlds fastest car (and one using SystemST braking :) )


http://biz.yahoo.com/weekend/fastest_1.html

Should mark the end of the small sells on SCE now, it was an obvious candidate for many to write off against profits for the year, and now we should start, slowely, the recovery of the price into more good news on deals as the months go by.

The next deal should mark a reversal in trend, so come on SCE, time to deliver the second commercial deal :)

A director buy, small, but a buy all the same :)

PapalPower, I hold these also; but am concerned that the sp graph is falling month-on-month.
The orders are quite small I guess and so the Q has to be: - will the business make money, or are we looking at a cash-call?
The Market is pricing-in something, eh?
I've averaged down a while ago but history is repeating itself and each time it gets lower - I'm sure this is a great technology - but IS the present Management up to the task, .......your thoughts.
PS Do you go to their agm's?
Thanks.

hangon, no have not been been to the AGM, although in contact with them all. Cash call ? Why............they have been clear on the fact they do not need it, and also clear that progress is being made, and the coming (now 4 years) looks fine. They are beginning to generate revenues, this is a process that will take time, and over the coming 18 to 24 months that process should slowley continue. On the car braking front they can break even easily, profit generation requires a major breakthrough (a major or similar to adopt the SCE technique). Aircraft braking is on schedule and things going to plan, but no major details I would say until 24 to 36 months.

All things can happen quicker, who knows, all that is happening with the SP is its being marked down on minimal volume as there is an overhang.......simple supply and demand. If anyone was to buy 100K of SCE today, the price would soon return to nearer the 20p mid price levels I think.

Its a long term and speculative buy, but come late 08 or 09 these could come good, so I am happy to keep holding and building up a larger holding.

Seems to have woken up today for some reason..........

And continues to make a bit of progress here and there :)

Presently on the car braking side, after getting the deal with Koenigsegg (which is going very well according to rumour) they are well underway with trials at 6 other smaller car makers, and news might come along of another deal or two in the second half.

This analyst has been reasonably accurate so far since this report came out in March 05 as to events that followed and also the figures.

Here's to hoping that the accuracy continues, especially with the financial forecasts as we go into 2010 :)

Link below - PDF file.

http://www.armshare.com/assets/contributordocs/Surface%20Transforms%20310305P8.pdf

Surface Transforms PLC - Notice of Results
7 August 2006

Surface Transforms plc

('Surface Transforms' or 'the Company')

Notice of results

Surface Transforms plc, manufacturer of high technology carbon ceramic
materials for braking systems, will announce its preliminary results for the
year ended 31 May 2006 on Thursday, 17 August 2006.

For enquiries:

Surface Transforms plc

Kevin Johnson 0151 373 7130

John East & Partners Limited

Simon Clements 020 7628 2200



END

As I expected, in fact, a little better than I was expecting given performance since the period of reporting end. Nice to see cautiously positive outlooks and goals :)

The next commercial deal on car braking is the key event then, lets hope its before year end, that would be good news.


http://www.investegate.co.uk/Article.aspx?id=20060817070000PB2B8

Latest update from http://www.armshare.com


..........The final results to May 2006 showed sales of 155,000 (2005: 258,000) and pre-tax loss of 923,000 (2005: (675,000)) - for the key explanations underlying these results, see December 2005 above - sales comprise H1 of 68,000 and H2 of 87,000. The company reported that the new production process being developed (see October and November 2005 above) is expected to reduce the unit cost of disc brakes by 50%; in Automotive Brakes, in addition to Koenigsegg (see March 2006), the company continues to work with 3 small UK based automotive OEMs which build high performance cars, and with Weber Sportcars in Switzerland; 3 patent applications were made to supplement the existing patent portfolio; the 2 key commercial targets for 2006/7 are to win another Automotive Brake customer and to complete the development of the new production process; it is intended to recruit further application relevant NEDs to facilitate market entry; year end cash was 1.75 million.


Research Standing

The market invariably canes a company's share price where there is a setback such as occurred in Autumn 2004 on the aircraft brake project with Dunlop. This provides opportunities for the more dispassionate and longer term investor. ArmShare is an advocate of constructing portfolios comprising at least 80% invested in established businesses combining growth and value and up to 20% in a portfolio of earlier stage higher risk businesses considered to have the potential to develop into the former - Surface Transforms is an obvious candidate for the '20%' category of such a portfolio.

Whilst the financial results to May 2006 scarcely hit the radar screen, they mask the fact that the company has made very significant progress in strengthening its position for negotiating with channel partners, particularly in automotive. Until it started both to fully understand and also take control of the entire process for delivering merchantable brakes, it was very difficult to hold serious discussions with automotive OEMs because the company could not deliver a turnkey solution - automotive OEMs are different from aicraft brake OEMs because the latter already use the processes which accompany ST's core process and therefore do not require a turnkey solution - this negotiating position will be enhanced by the significant cost reduction which ST expects to derive from the new plant scheduled to be completed in the course of 2006/7.

The March 2006 supply agreement with specialist automotive OEM Koenigsegg is a seminal event because an answer can now be given to the all important question when negotiating with other OEMs "who else is using the system?".

With cash at bank at May 2006 equivalent to 12.4p per share, a share price of 12.5p at 17th August, a team which has strengthened considerably over the last two years and much greater knowledge/control re the delivery of merchantable solutions, ST is an attractively valued concept stock.

Thanks - I like to hear I'm considered an attractive concept! ST


PS - "The March 2006 supply agreement with specialist automotive OEM Koenigsegg is a seminal event because an answer can now be given to the all important question when negotiating with other OEMs "who else is using the system?"

This may well be correct. Jeremy Clarkson raved over the Koenigsegg CCX when he tested it earlier this year for the Sunday Times. And he pointed out that in view of its terrifyingly quick performance it needed decent brakes. If SCE has succeeded in providing these, there must be something to the product.

ST, yes, all of the CCX so far have been supplied with System ST from SCE.

Thats a good advert, a very good one.

To get the Koenigsegg CCX in proper context: it is one of the fastest, lightest, most powerful (at least in terms of power-to-weight ratio) production cars ever to be made. (I am quoting from memory from Clarkson's article - Sunday Times Online subsribers may be able to locate it and confirm or post the relevant juicy bits).

The Koenigsegg CCX was designed and built by an utter performance car obsessive who, not finding the high-performance car of his dreams on the market, decided to make his own. That means that all the parts, Surface Transforms brakes included, have been hand-sourced by a designer who really wanted the best.

Jeremy Clarkson was terrified by the amount of power available, and the on-the-edge, raw driving experience, and this is a man who has test-driven everything, including F-15 jets! His words: "Get it wrong in a Porsche Carrera, and you can correct it; get it wrong in this (the Koenigsegg CCX) and it'll kill you."

What one thing stands between the driver and the consequences of his driving? The brakes.

There can be no doubt that the Surface Transforms braking system is up to the job - the issue is how many units will sell.

This is where the next step is key, they really want another small OEM on the books by year end, and then things should naturally progress.

I would take a guess that by the time they have 3 small OEM's under contract they will be approaching break even, and thats just the car braking side of the business, there are other things too, but those are a couple of years away (rocket propulsion systems application presently under trial, as well as the airplane braking systems presently under trial).

PapalPower is esp. keen on this stock; but where's the evidence that these scientists can make a commercial product? Sure they have "interest" and some aero-deals (although I believe they missed-out on the new euro-jumbo- forget its name but doing well against Boing,).
Sure they have some deals with performance cars - but somehow stopping isn't quite as exciting as getting faster, is it?

A new device that improves mpg and gets 20% more power from your engine would sell like Hot Cakes...but here is a product that enables you to get closer to "the edge" and still walk away.
I have invested in this business since just after it went round the mini-investment exhibitions - well, those times are over and the sp is no-longer being fed by hype or greed (IMHO_). So it depends on retail sales - there's the difficulty - you can't just go out and fit this gear to your Ford - it's possible (I understand) with some exotic cars - but Costly and might require some changes to suspension (since these bits are lighter).
Yes it's a great technology and has many advantages in Aero - cold-braking in particular......but I have some doubts that they can grow the sales enough...with all the regulation inherent in such devices.
I understood there were some sales in the rocket-market (high-temp discharge bits)...but there again these sales will be fairly small.
I suspect that concentrating on performance issues means that the Management expect the Market to come to them - whereas in truth, SCE has to find a market and exploit it - brakes/clutches is such a diverse market I can't see them surviving on Exotic cars alone....maybe they need to look elsewhere, even develop another product using their research expertise - The Unbreakable Vase (who knows?)...


Has anyone talked to management about getting some regular bread and butter lines runniing? Regular Turnover is certainly nice to see on the balance-sheet......and sadly the Market doesn't like promises exotic car sales, only facts.
So, I'm a disapointed investor, =peaked too soon, huh?

Hangon, I think that those are very valuable points and I see this disadvantage as being inherent in many niche companies.

I'm not in this, so can afford to play devil's advocate, but at the end of the day it is top-line sales that are going to determine bottom-line profits, and without the sales the shares will go nowhere.

Some of these companies have the problem that they are run by engineers who are so fascinated with developing the products that they neglect to develop the business. Whether SCE is one I'll leave to others to decide. Sometimes I just enjoy contributing info to a thread without necessarily implying that it should be the Next Big Thing for my portfolio, and I'm probably not the only one.

As far as investing in new technology tiddlers goes, my money's better off in QTI, where I believe I can see where the upside will come from!

Hangon, fair points, but you have to understand they are going to the market, not waiting for the market to come to them.

Presently there are ongoing trials with 6 companies, these trials are 6 months in.

The deal they have already for the CCX came after 7 months of trials. So they are now at the stage where in the coming months there may be more commercial deals coming through. The CCX decision at 7 months is not a timescale either, some may want to trial 12 months, but the fact is that trials are happening.

They are acutely aware of the need for revenue, and working hard on acheiving increase in it. The next interims will show an increase in revenue over H1 2005, and lets hope that builds up more.

The key will be the next deals they make and when news of those comes.

Certainly is a risky one, but its valuation is not hyped up, like Stanleco or the many other companies with great plans but no revenue to back up their massive market cap when compared to cash levels.