- Surface Transforms said 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.

Chairman David Bundred 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 also reports 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.

At 9:16am: [LON:SCE] Surface Transforms PLC share price was -0.25p at 12p

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