Interim Results for the six months ended 30 June 2009

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 2009.

Highlights

• Revenue and other income £427,000 (H1 2008: £179,000);
• Loss on operations £0.54 million (H1 2008: loss £1.80 million);
• Loss attributable to equity shareholders £0.81 million (H1 2008: loss £2.00 million)

Chairman’s Statement

The first six months of this year have seen your Board continue the work of the restructuring begun last year. I am pleased to report that we have made further savings in terms of the overall organisation and our cost base is now very low.

On the commercial front our leading UK licensee, 2K Manufacturing Limited, has acquired its factory site at Luton and has already installed its first machinery there. Your Board believes that the success of 2K will demonstrate the immense potential of our PIM Process technology.

The increasing recycling agenda has led to a considerable number of enquiries and negotiations in respect of the application of the PIM Process in various sectors.

The one major difficulty that remains is the ongoing litigation with the Group's former CEO in Kyrgyzstan. Mr Daley won his original case against the company and unfortunately the Company lost its Appeal, as announced on 23 June 2009. The Company is currently pursuing a separate set of proceedings against Mr Daley and will update shareholders with material developments. Your Board would still prefer an overall settlement through a mediation process and will continue to pursue this route.

I believe your Board is working extremely well with limited resources to achieve the best possible result for shareholders. I am very grateful to my fellow directors for all they do and believe our overall team effort is now producing the results for which shareholders have waited so long.

I am pleased to present to you our unaudited interim results for the six months ended 30 June 2009.

Ken Brooks
Chairman

Managing Director’s review

Despite uncertain global economic conditions, there has been significant activity in the waste management and environmental sectors as Governments throughout the world develop strategies to reduce the challenges of the carbon agenda.

We believe this vindicates the Board's decision to rebrand the enterprise and concentrate our efforts in sectors where the unique abilities of the PIM process to utilise high percentages of co-mingled and contaminated plastic waste materials are paramount.

In consequence, the Board is pleased to report that there is significant progress in the commercialisation of the PIM technology and provides the following updates:

• 2K commenced limited production of its "ecosheet" boards in July at its 62,000 sq ft facility in Luton and is, we understand, nearing completion of their proving period.
  
  There has been significant media interest in 2K's progress, not least from a recent edition of The Economist which has greatly enhanced global awareness of the technology and the ecosheet product.
• The Replas project funded by TSB and managed by PERA in cooperation with its industry partners and Brunel University has been extended to enable further development and detailed performance measurement using full scale ecosheet produced by 2K Manufacturing using specific raw material formulations. It is expected that this work will be invaluable in helping to achieve accreditation for ecosheet to meet construction industry standards.
• As we reported in the 2008 Annual Report, the Board considered a collaboration with Persico Srl. to be a significant development in the commercialisation of PIM. Persico are a leading manufacturer of rotational moulding equipment and moulds. Like PIM, rotational moulding relies on the introduction of polymer in powder format and so in many ways PIM is a natural development for Persico who see the technology as a USP to enhance their offering to the market, and particularly to promote the use of mixed plastic waste streams.
  
  We are pleased to confirm that Persico are promoting PIM into projects such as ultra lightweight panels for commercial vehicles, drink dispenser panels, and are working with our licensee Highseas Technologies to develop surf board production using PIM.
• In the USA we have a non exclusive license agreement with LBOC. Through their subsidiary GTI, an agreement has been reached with Greentech Inc to build a plant which is to include PIM manufacturing in Georgia . We understand that GTI have started to receive purchase orders and that the supply is to be on a turnkey basis. Of course under our out-licensed business model ERT have no input into the specification, or construction of the PIM plant.
• Although we have previously stated that we will only announce licenses when they have been signed, the Board is pleased to report that it is currently in negotiation with a prospective licensee who has formally made an offer for a license to produce a specific product using PIM in NAFTA and we hope this deal will be concluded in the near future.

The Board believe that the conditions are now ideal to achieve rapid adoption of PIM. The tangible progress at 2K manufacturing and the acclaim which they have quite rightly received in the media, together with the positive developments from the collaboration with Persico and the demand for innovative technologies to satisfy environmental challenges should combine to enable ERT and its loyal shareholders to enjoy the success we believe is deserved.

Roger Baynham
Managing Director

Financial review for the six months ended 30 June 2009

Results

Revenue for the six months ended 30 June 2009 was £321,000 (H1, 2008 £1,000). Other income from grants was £106,000 (H1, 2008 £178,000). The loss on operations was £0.54 million (H1, 2008 loss £1.80 million). Losses attributable to equity shareholders were £0.81 million (H1, 2008 loss £2.00 million).

Dividends and loss per share

No dividend payment is proposed. The basic and diluted loss per share was 0.28 pence compared to 0.78 pence in 2008.

Trading

Turnover included revenue for licences, minimum royalties and pre production units. Other income was made up of grants from the Technology Strategy Board (TSB).

Administrative expenses for the period were £0.97 million (H1, 2008 £1.98 million). No exceptional costs were incurred in the six months (H1, 2008 £0.49 million). The other administrative expenses include third party costs attributable to the TSB project of £0.11 million (H1, 2008 £0.13 million). Excluding the TSB project costs, depreciation and amortisation, the normal overheads incurred in running the company were £0.35 million (H1, 2008 £1.31 million), a significant reduction.

Financing

Total borrowings amounted to £3.11 million compared to £3.13 million at 31 December 2008.

During the period, YA Global Investments Limited ("Yorkville") converted a further £0.18 million into equity reducing the loans outstanding to £1.47 million. In total Yorkville has converted loans and accrued interest totalling £5.37 million at an average price of 4.78p per share.

The Standby Equity Distribution Agreement (SEDA) with Yorkville to the value of £5 million was extended in 2008 and expires in September 2010. Funding facilities, underwritten by the Yorkville facility, have been organised to cover the company's normal overheads for the rest of the year. The company has had commercial discussions with lenders to ensure that existing facilities remain available or will be settled in shares rather than cash. There are currently no reasons to believe that arrangements cannot be made on acceptable terms.

As set out in the Chairman's Statement above, the Company remains in litigation with the Group's former CEO in Kyrgyzstan. The Company has historically provided for legal and settlement costs associated with this litigation, further details of which can be seen in note 6 below. Shareholders should be aware however that the level of compensation being sought under Mr Daley's claim exceeds the present immediate cash resources of the Company.

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 2009 which comprises the Group Income Statement, Group Balance Sheet, Group Statement of Changes in Shareholders' Equity, Group Cash Flow Statement and the 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 2009 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 Stoy Hayward LLP
Chartered Accountants and Registered Auditors
Birmingham
11 September 2009

Interim Accounts for the Six Months ended 30 June 2009 (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 11 September 2009 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 2009.

Group Statement of Comprehensive Income (unaudited)

Group Statement of Financial Position (unaudited)

Group Statement of Changes in Shareholders’ Equity (unaudited)

Group Statement of Cash Flows (unaudited)
Six months ended 30 June 2009

Notes

Notes to the Financial Statements are available in the printable PDF version.

Page last updated: 14 September 2009