STS calls for rescue package

Shareholders in Surface Technology Systems are to vote next month on proposals for a £5m cash lifeline from the company’s Japanese parent.

The announcement this week follows a request by the Newport microchip equipment manufacturer for a ‘significant’ injection of capital in order for it to continue operations.

After several difficult years serving the telecoms and microelectromechanical systems industries, the company said earlier this month that deliveries of anumber of machines for the first half of 2004 were not fulfilled ‘for a variety of reasons’.

Consequently revenue levels are likely to be below forecast, adding more weight to the company’s financial problems.

Last week, STS said it still had the support of its banks, but that it was now in discussions withSumitomo Precision Products, its largest shareholder, ‘with a view to obtaining a significant capital injection into the business to support its continuing operations’.

Tuesday’s proposal would see Sumitomo take five million preference shares in STS at £1 each. These could be converted intoordinary shares in the event of the company’s insolvency or takeover bid by a third party.

Founded in 1984, STS now focuses on the manufacture of plasma etch and depositionsystems for the MEMs, optoelectronic, compound semiconductor, wafer level packaging and thin film head industries.

The company expected to do well during the dotcom revolution with growth in the emerging semiconductor market being fuelled by demand for fibre-optic networks, internet infrastructure, high-speed wireless technology for mobile phones and laptop computers.

It also developed novel technologies for the silicon etching and in particular the manufacturing of micro electromechanical systems.

However, a fall in customer confidence and capital investment has taken its toll. The annual results have missed analysts’ forecasts for the last two years and the company has been forced to make staff and other cost cuts since 2001.

However the extra cash from Sumitomo Precision Products could grant the company the breathing space it needs. Although sales will fall short, losses are set to be lower than last year. STS is also confident that the longer-term market opportunities remain, and its new ‘Pro’ range of waferprocessing machines for the volume production of micro electromechanical systems have started to win customers.