Interim Results for the six months ended 30 June 2011
Environmental Recycling Technologies plc ("ERT", "the Company" or the "Group") (AIM: ENRT), which has developed and is exploiting the patented rights to the Powder Impression Moulding ("PIM") process capable of converting mixed waste plastics into commercially viable products, announces its unaudited interim results for the six months ended 30 June 2011
Chairman and Managing Director's Statement
We are pleased to report further significant progress in the past six months in the commercialisation of the PIM process.
The Company's major UK licensee, 2K Manufacturing Limited ("2K"), has installed pre-preparation equipment which is capable of delivering recycled plastic powder to the PIM line already installed at 2K's Luton factory. This has significantly increased their production capacity of Ecosheet over the past six months.
Further improvements have been made to the PIM line at Luton which is now running well and now requires only a single operative.
We are delighted with the success that 2K has achieved in the mechanisation of the PIM process to date and greater volumes in production from the Luton factory are anticipated in the coming months.
The Company continues to be very focused on increasing the number of PIM lines and factories.
Additionally, the Company is in the process of attempting to expand the range of applications for PIM beyond flat sheet and is currently in various negotiations to do so.
The Company is pleased to report that the working relationship with Arup is going well and the parties have identified a short list of possible new commercial opportunities for the development of products using the PIM process.
As previously stated, the Company is seeking commercial partners for the products successfully developed but not commercialised in the past. Negotiations with various parties continue to this end.
Our licensee Contour Showers continues to successfully make and sell its Eco-Dec shower trays manufactured using the PIM process and One Delta has widened its research and development program to cover a broader range of products.
During the period, the Company has continued to ensure that its intellectual property is adequately protected. Additional international patent grants and enforcement of any potential patent breaches remain an important focus for ERT.
In the next six months the Company intends to address more closely the international possibilities including a close review of operations in North America and Mexico.
The Company recognises the importance of recruitment and partnerships to provide the necessary resources, particularly technical and commercial, to facilitate a successful and sustainable international rollout and is taking the necessary steps in this respect.
We are pleased to confirm that we have launched our revamped website which is now available to view online.
| Ken Brooks | Roger Baynham |
| Chairman | Managing Director |
Financial review for the six months ended 30 June 2011
Results
Revenue for the six months ended 30 June 2011 was £94,000 (H1, 2010 £492,000). The loss on operations was £0.88 million (H1, 2010 loss £0.42 million). Losses attributable to equity shareholders were £1.68 million (H1, 2010 loss £0.86 million).
Dividends and loss per share
No dividend payment is proposed. The basic and diluted loss per share was 0.32 pence compared to a loss of 0.22 pence in 2010.
Trading
Turnover included revenue for licences and minimum royalties.
Administrative expenses for the period were £0.97 million (H1, 2010 £0.91million). Exceptional costs of £0.13 million (H1, 2010 £nil) were incurred relating to impairment of available-for-sale assets. Excluding the impairment for available-for-sale financial assets and amortisation, normal overheads incurred in running the company were £0.39 million (H1, 2010 £0.30 million). The increase in overheads related to securing patents and the associated legal costs.
Financing
Subscription for shares
On 31 January 2011, the Company entered into a subscription agreement with a new investor to raise £540,000 by issuing 13,500,000 ordinary shares of 2.5 pence each in the Company ("Ordinary Shares") at a price of 4 pence per Ordinary Share. As part of that subscription, the Company agreed to issue warrants over 6,000,000 new Ordinary Shares exercisable at any time until 28 April 2011. In addition, the new investor indicated in writing that they would be willing to subscribe for a further 13,500,000 Ordinary Shares at a price of 4 pence at any time up to 20 April 2011. This offer was accepted on 25 March 2011 which raised a further £540,000 for the Company.
On 20 April 2011, the 6,000,000 warrants were exercised at a price of 2.5p per share resulting in net proceeds received by the company of £150,000.
Repayment of Convertible Loan Agreement
Following the subscription in January 2011, the Board resolved to repay in full its Convertible Loan Agreement with YA Global Investments ("Yorkville") entered into on 28 December 2005.
In accordance with the Convertible Loan Agreement, and following receipt of conversion notices, the Company issued two tranches of Ordinary Shares to Yorkville (the "Conversion"). The first tranche was for 8,459,492 Ordinary Shares which were issued at a price of 3.76 pence, which represented a discount of 32.8 percent to the closing middle market price of the Company on 28 January 2011. The second tranche was for 214,136 Ordinary Shares which were issued at a price of 4.38 pence, which represented a discount of 21.7 percent to the closing middle market price of the Company on 28 January 2011. The Conversion satisfied £259,400 of loans owed to Yorkville.
The remaining outstanding amounts under the Convertible Loan Agreement of £540,000 were repaid using the cash proceeds from the subscription for Ordinary Shares set out above (the "Repayment").
Following the Conversion and Repayment, the Convertible Loan Agreement was terminated and a debenture secured against the assets of the Company is in the process of being removed.
Litigation settlement
On 2 February 2010, the company announced that it reached a settlement on a series of disputes and litigation with Mr Sean Daley ("Mr Daley"), the former director of Camco Corporation Limited and CEO of the group's Central Asian operations. As part of that settlement agreement the Board agreed to make certain payments to Mr Daley in both cash and shares over a period of three years.
In accordance with this settlement agreement, the Company issued Mr Daley with 992,063 Ordinary Shares at 5.04 pence, representing a discount of 10 percent to the closing middle market price of the Company on 31 January 2011.
Finance guarantee obligations
In April 2011, the full and final settlement terms of the finance guarantee obligation were agreed between all parties. The provision for the financial guarantee obligation has been settled during the period with a resulting increase in borrowings.
Debt conversion
On 29 June 2011, in accordance with the Company's policy of debt reduction, a further £1,024,487 of longer term debt, being the amount owed to third party lenders as at 31 December 2010, was converted into 23,551,425 Ordinary shares in the Company at a price of 4.35p per share.
Short term funding
Short term funding facilities have been organised to cover the Company's normal overheads for the rest of the year. The directors do not expect there to be a requirement to repay the loans in cash during the next 12 months.
Post balance sheet events
On 7 September 2011, a resolution to increase the authorised share capital from 600,000,000 ordinary shares of £0.025 each to 800,000,000 ordinary shares of £0.025 each was approved at the Annual General Meeting.
David Shepley-Cuthbert
Finance Director
Independent review report to Environmental Recycling Technologies plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Shareholders' Equity, Group Statement of Cash Flows and notes 1 to 6.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.
BDO LLP
Chartered Accountants and Registered Auditors, Birmingham. 9 September 2011
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127)
Interim Accounts for the Six Months ended 30 June 2011 (unaudited)
The financial information contained within these accounts has been prepared by the Directors who accept responsibility for the financial information presented below and confirm that it has been properly presented in accordance with applicable law. The interim financial statements were approved by the Board of Directors on 5 September 2011 and have been prepared on the basis of the accounting policies set out in note 1. The financial information covers the six months ended 30 June 2011.
Group Statement of Comprehensive Income (unaudited)
| Six months ended 30 June 2011 |
Six months ended 30 June 2010 |
Year ended 31 December 2010 |
||
| £'000 | £'000 | £'000 | ||
| Continuing operations | note | Unaudited | Unaudited | Audited |
| Revenue | 94 | 492 | 1,016 | |
| Administrative expenses | ||||
| Exceptional | 2 | (127) | - | (1,407) |
| Other | (845) | (913) | (2,410) | |
| Total administrative expenses | (972) | (913) | (3,817) | |
| Loss on operations | (878) | (421) | (2,801) | |
| Finance income | 3 | 35 | - | 629 |
| Finance costs | 3 | (830) | (349) | (1,230) |
| Loss before income tax | (1,673) | (770) | (3,402) | |
| Tax on loss on ordinary activities | - | - | - | |
| Loss for the period from continuing | ||||
| operations attributable to the equity shareholders of the company | (1,673) | (770) | (3,402) | |
| Other comprehensive income | ||||
| Available-for-sale financial assets | ||||
| -foreign currency and valuation movements | (4) | - | 4 | |
| -impairment | - | (89) | 80 | |
| Other comprehensive income | - | (89) | 84 | |
| Total comprehensive loss for the period attributable to equity shareholders of the company | (1,677) | (859) | (3,318) | |
| Loss per share (pence) | ||||
| Basic and diluted loss per share | 4 | (0.32p) | (0.22p) | (0.83p) |
Group Statement of Financial Position (unaudited)
| Six months ended 30 June 2011 |
Six months ended 30 June 2010 |
Year ended 31 December 2010 |
||
| £'000 | £'000 | £'000 | ||
| Assets | note | Unaudited | Unaudited | Audited |
| Non-Current Assets | ||||
| Intangible assets | 8,449 | 9,344 | 8,897 | |
| Plant & equipment | - | - | - | |
| Available-for-sale financial assets | 32 | 612 | 163 | |
| Total non current assets | 8,481 | 9,956 | 9,060 | |
| Current assets | ||||
| Trade and other receivables | 1,515 | 1,250 | 1,455 | |
| Cash and cash equivalents | 270 | 9 | 177 | |
| Total current assets | 1,785 | 1,259 | 1,632 | |
| Total assets | 10,266 | 11,215 | 10,692 | |
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | 1,263 | 1,747 | 1,873 | |
| Borrowings | 5 | 3,513 | 2,377 | 2,475 |
| Provisions | 6 | - | 1,795 | 2,202 |
| Total current liabilities | 4,776 | 5,919 | 6,550 | |
| Total liabilities | 4,776 | 5,919 | 6,550 | |
| Net assets | 5,490 | 5,296 | 4,142 | |
| Equity attributable to the shareholders of the parent | ||||
| Share capital | 14,026 | 10,797 | 12,247 | |
| Share premium reserve | 36,673 | 35,500 | 35,749 | |
| Warrant reserve | 428 | 329 | 564 | |
| Available-for-sale reserve | (74) | (243) | (70) | |
| Retained earnings | (45,527) | (41,087) | (44,348) | |
| Total equity | 5,490 | 5,296 | 4,142 |
Group Statement of Changes in Shareholders' Equity (unaudited)
| Six months ended 30 June 2011 | Share Capital |
Share Premium |
Warrant Reserves |
Available -for-sale reserve |
Retained Earnings |
Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Loss for the period | - | - | - | - | (1,673) | (1,673) |
| Foreign currency movement | - | - | - | (4) | - | (4) |
| Total comprehensive loss for the period | - | - | - | (4) | (1,673) | (1,677) |
| Issue of share capital | 1,779 | 1,091 | - | - | 155 | 3,025 |
| Warrants granted | - | (203) | 253 | - | (50) | - |
| Warrants exercised | - | - | (389) | - | 389 | - |
| Movement for the period | 1,779 | 888 | (136) | (4) | (1,179) | 1,348 |
| Balance at 1 January 2011 | 12,247 | 35,749 | 564 | (70) | (44,348) | 4,142 |
| Balance at 30 June 2011 | 14,026 | 36,637 | 428 | (74) | (45,527) | 5,490 |
| Six months ended 30 June 2010 | Share Capital |
Share Premium |
Warrant Reserves |
Available -for-sale reserve |
Retained Earnings |
Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Loss for the period | - | - | - | - | (770) | (770) |
| Available-for-sale reserve | - | - | - | (89) | - | (89) |
| Total comprehensive loss for the period | - | - | - | (89) | (770) | (859) |
| Issue of share capital | 2,385 | - | - | - | - | 2,385 |
| Warrants and options lapsed | - | - | (616) | - | 616 | - |
| Movement for the period | 2,385 | - | (616) | (89) | (154) | 1,526 |
| Balance at 1 January 2010 | 8,412 | 35,500 | 945 | (154) | (40,933) | 3,770 |
| Balance at 30 June 2010 | 10,797 | 35,500 | 329 | (243) | (41,087) | 5,296 |
| Year ended 31 December 2010 | Share Capital |
Share Premium |
Warrant Reserves |
Available -for-sale reserve |
Retained Earnings |
Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Loss for the year | - | - | - | - | (3,402) | (3,402) |
| Foreign currency movement | - | - | - | 4 | - | 4 |
| Impairment | - | - | - | 80 | - | 80 |
| Total comprehensive loss for the period | - | - | - | 84 | (3,402) | (3,318) |
| Issue of share capital | 3,835 | 249 | - | - | (629) | 3,455 |
| Warrants and options granted | - | - | 235 | - | - | 235 |
| Warrants granted | - | - | 112 | - | (112) | - |
| Warrants and options exercised | - | - | (104) | - | 104 | - |
| Warrants and options lapsed | - | - | (624) | - | 624 | - |
| Movement for the year | 3,835 | 249 | (381) | 84 | (3,415) | 372 |
| Balance at 1 January 2010 | 8,412 | 35,500 | 945 | (154) | (40,933) | 3,770 |
| Balance at 31 December 2010 | 12,247 | 35,749 | 564 | (70) | (44,348) | 4,142 |
Group Statement of Cash Flows (unaudited)
Six months ended 30 June 2011
| Six months ended 30 June 2011 |
Six months ended 30 June 2010 |
Year ended 31 December 2010 |
|
| £'000 | £'000 | £'000 | |
| Unaudited | Unaudited | Audited | |
| Continuing Activities | |||
| Loss before tax | (1,673) | (770) | (3,402) |
| Adjusted for: | |||
| Amortisation of intangible assets | 448 | 447 | 894 |
| Accrued interest cost | 180 | 192 | 380 |
| Share options granted | - | - | 172 |
| Warrants granted | - | - | 63 |
| Loss/(gains) on liabilities settled in shares | 155 | - | (629) |
| Impairment of available-for-sale assets | 127 | - | 622 |
| Amortisation of debt issue costs | 460 | 157 | 824 |
| Fees and legal claims settled in shares | - | 1,311 | - |
| Adjusted loss from operations | (303) | 1,337 | (1,076) |
| Increase in trade and other receivables | (60) | (446) | (651) |
| (Decrease)/increase in trade and other payables | (343) | (474) | 463 |
| (Decrease)/increase in provisions | - | (638) | 579 |
| Cash used by operations | (706) | (221) | (685) |
| Net cash outflow from operations | (706) | (221) | (685) |
| Cash flows from financing activities | |||
| Issue of equity share capital | 1,230 | - | 378 |
| Inception of loans | 300 | 50 | 280 |
| Repayment of loans | (731) | (24) | - |
| Net increase in cash from financing activities | 799 | 26 | 658 |
| Net increase/(decrease) in cash | 93 | (195) | (27) |
| Cash and cash equivalents at beginning of period | 177 | 204 | 204 |
| Cash and cash equivalents at end of period | 270 | 9 | 177 |
Notes
Notes to the Financial Statements are available in the printable PDF version.
Page last updated: 13 September 2011