Change in funding strategy

RNS Number:6606M
Antonov PLC
24 June 2003

For release at 07.00 British Summer Time on June 24, 2003

ANTONOV PLC

Change of funding and commercial strategy

Key points

* New funding and commercial strategy to focus on the exploitation of
the six-speed Antonov Automatic Drive in conjunction with an industrial partner
and without further recourse to stock market funding.

* Recent studies have suggested that the unit production price will be
lower than existing products although the previously announced target price for
a production AAD of 650 Euros has not yet been validated.

* Target weight for production unit of 55 kg considered achievable
compared with current prototype weight of 72 kg - both are competitive against
known alternatives.

* Latest design of unit achieves 250mm target.

* UTAC prototype tests for fuel-efficiency have not reached simulated
values. On-going work on mechanical efficiency and system calibration is
expected to lead to improvements in future tests.

* Fund conservation programme initiated resulting in suspension of
non-core research projects, halving of payroll costs and cutting of
non-essential bought-in business services.

* Roumen Antonov will continue on Board as non-executive Chairman.

* Company continues its dialogue with Getrag, Aisin, JATCO, BMW, General
Motors, Volkswagen and Honda, but currently is not in talks with ZF

Martin Schinzig, the Company's recently appointed Chief Executive said today:

"I have been very impressed by what I've found since I joined Antonov in March.
We have successfully completed the demonstration phase; with car makers giving a
positive assessment of what we've achieved. Now we want to work with a customer
to be sure that our next-generation six-speed transmission is designed and built
to meet the industry's specific needs. We are ready to place Antonov's ten-year
development know-how and excellent patent portfolio at the disposal of the right
industrial partner."

Roumen Antonov, the Company's Chairman also said today

I am fully supportive of the initiatives taken by Martin Schinzig. He has
refreshed our organisation in a way that gives me greater confidence than ever
that we will find the right partner to take our AAD forward. I look forward to
working with a suitable partner to transfer our technological know-how to the
commercial market. I have decided to step down from an executive capacity within
the Company whilst Martin pursues the new strategy which offers the Company its
best chance to meet its commercial goals."


For further enquiries, please contact:


AAT BV Rotterdam NL - Tel: [phone]



Change of funding and commercial strategy


Antonov plc ("Antonov", or the "Company"), the developer of the Antonov
Automatic Drive (the "AAD"), an advanced and efficient new automatic
transmission, announces a new funding and commercial strategy for the Company.

Rather than continuing to seek funding from the stock market, Antonov will seek
a major business partner to back the development of its next-generation
six-speed AAD.

In view of recent technical tests and assessments the Board consider that there
is still further work to do before any significant revenue can be made and so
have initiated measures to conserve the Company's funds.


Technical progress


Studies carried out to date show that the production price of the six-speed AAD
will be lower than the price of existing solutions. However, independent
production-cost estimates have not yet validated the Company's target price of
650 Euros. Antonov will be looking to benefit from its chosen future partner's
manufacturing expertise to help configure the Company's designs for price
minimisation.


Similarly, further work is needed to optimise the AAD's design for reduced
weight. The current AAD prototype at 72kg is still lighter than any other
six-speed automatic of which the Company is aware. Antonov estimates that with
volume-production techniques, such as stamping of key components, a weight of 55
kg should be achievable.


Antonov continues to make progress on the length of its unit. In a
transverse-engined car a transmission's length translates into width, which in
small cars is tightly constrained between frame rails. Accordingly, a design
becomes more attractive to car manufactures as its length becomes shorter.
Although the length of the current prototype is 310 mm, the design has now been
reconfigured to reduce the overall length of the six-speed unit to the original
250 mm announced.


Tests were recently carried out by independent testers UTAC on Antonov's 1.4
litre Opel Corsa fitted with the 6-speed AAD in comparison with a same model
with a standard automatic gearbox. The results showed fuel consumption slightly
higher than the comparison vehicle, although the last test showed an improvement
with a 4 per cent. improvement in fuel economy compared with the previous test.
Although the values obtained are promising for this kind of prototype, there was
not the significant improvement anticipated by the Company's simulations. This
program is still ongoing and further work is being carried out to improve the
prototype performance.


Antonov is tackling the required improvements with an ongoing programme of
mechanical efficiency testing and studies to improve the electronic interaction
between engine and transmission. The latter interaction is vital to the
successful performance of modern power trains and as Antonov is not a specialist
in engine-management systems there is much scope for the chosen future
development partner to improve performance in this area through the application
of its own expertise.


All of these findings support the Board's view that a strategy of close
co-operation with an industrial partner will rapidly advance acceptance of the
company's technology.


Funds conservation


In the light of these new findings the Company has initiated a programme of
funds conservation. The technical staff have been reorganised to improve
efficiency. Work force cost has been reduced by slightly more than 51 per cent..
Work has been stopped on all non-core projects, such as the electrical actuation
system and the 3-speed AAD, that do not contribute to the Company's immediate
customer needs. A plan has been put in place to halve the Company's payroll and
those business service provider contracts that are not absolutely essential to
the continuation of the Company's core activity have recently been terminated.


In view of the refocusing of the Company's activities on the commercial
development of the six-speed AAD, Roumen Antonov has decided to step down from
an executive capacity within the Company and will continue on the board as
non-executive chairman.


Commercial progress


Since his appointment as Chief Executive in March, some of the Company's
commercial contacts have been reviewed. The Company remains in active
discussions with Getrag and JATCO, but currently is not talking with ZF. The
Company is responding to issues raised by Aisin. Amongst the car companies, the
Company is in contact with BMW, General Motors and Volkswagon Group and
continues to work with licensee Honda.


ENDS






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