Interim Results

Stanelco PLC 14 July 2006 14 July 2006 Stanelco PLC Interim Results for the six months ending 30 April 2006 Highlights â€¢ Turnover of Â£2,600,000 (2005: Â£629,000) â€¢ Loss before taxation of Â£2,100,000 (2005: Â£960,000) â€¢ Starpol 2000 selling successfully into US marketplace and Starpol 3000 awaiting food contact approvals â€¢ Selection by Wal Mart into their Sustainable Value Network â€¢ Continued progress towards commercialisation of GREENSEAL technology with successful trials completed with 3 major food packers â€¢ Board strengthened with appointment of Clive Warner as Finance Director â€¢ Successful Placing of Ordinary Shares raising a total of Â£3.7 million (net of expenses) successfully completed with UK institutions Phillip Lovegrove, Chairman of Stanelco, commented: 'Over the last six months we have continued to make good progress towards the commercialisation of Stanelco's vast array of products and applications. We have continued to make considerable strides across all our product lines. 'Our business operates in a fast moving and exciting space. The worldwide packaging industry is fast waking up to the need for new solutions and products that are environmentally friendly whist being cost effective and practical. We remain at the forefront of this revolution.' For further information contact: Stanelco Martin Wagner, Chief Executive Tel: 44 (0) 2380 867 100 Press: Financial Dynamics Jonathon Brill/Billy Clegg Tel: 44 (0) 20 7831 3113 Investors: IR focus Neville Harris Tel: 44 (0)20 7378 7033 UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC CHIEF EXECUTIVE'S STATEMENT The six months to 30 April 2006 have seen further progress and significant change at Stanelco as the business develops its portfolio of products and the range of applications for its IP. This has taken the business from its development and acquisition phases, where we have invested heavily in Research & Development, as well as the acquisition of Biotec, to the commercialisation phase of the considerable portfolio in our possession. Financial Review The Group has increased revenue from Â£0.6m to Â£2.6m for the period ended 30 April 2006 compared to the corresponding period last year. The increase is due to inclusion of six months sales by Biotec who had not been acquired by the Group until the second half of last year. This compares favourably with full year sales of Â£1.4m for the year to 31 October 2005. The Group has made a loss of Â£2.3m for the six month period compared with Â£1m for the corresponding period last year. Increased costs have been incurred on the various initiatives that have been vigorously pursued. The Group started the period with a cash balance of Â£4.4m and has made investments in research and development of Â£0.6m and increased its levels of stock from Â£2.6m at the year end to Â£3.1m. We have also invested Â£1.2m in capital expenditure in the period. Closing cash was Â£0.3m at 30 April 2006. Since the half year end, the Group has raised Â£3.7m (net of expenses) by way of an equity placing in June 2006 of which Â£1.6m has been used to meet a stage payment for the acquisition of Biotec and Â£2.1m is being utilised as working capital The Group is currently considering its funding requirements and funding options for the next phase of its development. Shareholders funds have reduced by Â£0.9m to Â£15.8m in the period. International Financial Reporting Standards (IFRS) These statements have been prepared under IFRS for the first time. Comparative figures have been restated to reflect the changes in accounting treatment required by IFRS. Full details of the adjustments and the effect on the financial statements of the Group are disclosed in Appendix 1. The major differences between our prior accounting practice and IFRS have been in respect of Share Based Payments (IFRS 2) and the fact that goodwill is no longer amortised (IAS 38). The charge for share based payments is Â£254k for the period (2005: Â£113k restated). Goodwill amortisation was Â£72k for the period to April 2005 and has now been re-instated. Board Changes The Board has been further restructured and strengthened. Clive Warner has been appointed as our Finance Director, bringing considerable commercial experience to the management team. Significant Developments Stanelco is working with some of the largest companies in the world. Their continued interest in our products is encouraging and we are working together to progress the opportunities. A close partnership has been established with Perseco U.S. to advance the commercialisation of Stanelco's sustainable technologies. Stanelco were one of the few companies selected by Wal Mart to be involved in their Sustainable Value Network (SVN). This provides an excellent platform from which to explore the future packaging requirements for retailers. We also achieved a number of other milestones over the period. These included: â€¢ Starpol 2000 (biodegradable material) has been accredited full food contact approval from European and US regulatory bodies and is selling in the US market. â€¢ Development of Starpol 3000 (100% sustainable and biodegradable) is complete. Similar food contact approvals are being sought. â€¢ Technical trials have been successfully completed on Multivac and Proseal packaging machines at three major food packers for the Greenseal project. Products & Businesses Biotec and Biodegradable materials We have made major strides in developing our full range of biodegradable materials, taking full use of our skills and expertise with Biotec. The following summarises the progress made through the year and the current status on these products. Starpol 2000 has achieved European and US regulatory approval for food contact and is being used for food trays and other products. This can be processed on most conventional machines and will not require major capital investment by convertors. Wrap 100, a biodegradable replacement for wax coated paper, will help to improve packaging quality in the food industry and provides benefits to the environment. This material's properties do not allow oil or moisture to pass through it, whilst permitting moisture vapour to permeate out. It can be used for fast foods like burgers as it stops condensation occurring which can adversely affect food quality. It competes on a cost neutral basis with the currently used products and is also significantly lighter. This presents potential cost savings on the product with reduced transport costs and landfill taxes. Starpol 3000, is a cost competitive,100% sustainable and biodegradable material which also provides a gas barrier for MAP ( Modified Atmosphere Packaging to extend shelf life) matching industry standards. To meet the potential demands for these products we are in discussion with operators in the food industries to establish resin manufacturing partnerships. Adept Polymers Adept continues to provide the expertise to promote the groups products and assist in the development of the Starpol ranges along with the marketing of its Depart PVOH and Starpol blends of pellet, films and materials . We have invested in equipment to enable us to develop the cigarette filter trials and, with our advisers, we are continuing to evaluate the market opportunities. We are currently in the process of manufacturing samples of filters. Adept and Aquasol, combining with Biotec, continue to work with Carclo Plc in developing and commercialising ingestible injection mouldable grades of material for hard shell capsules for vetinary and then pharmaceutical applications. Aquasol Aquasol has developed a range of patent protected packaging technologies and designs. Aquasol receive royalty streams from Reckitt Benckiser's Finish Quantum and Electrasol Gelcaps products. The FrogPack Products are now being manufactured and distributed under agreement with Merlin Packaging in the UK (who recently acquired Mondi Packaging). We have entered into an agreement with Berkshire Security Labels, the largest suppliers of security labelling products in Europe, to develop, manufacture and sell Pulsline. Outlook The Board is concentrating its efforts on converting opportunities into commercial contracts. It is confident that the strengthened management team will bring expertise, energy and commitment to meet these challenges. We have developed strong partnerships and key relationships with leading organisations. We are confident that our intellectual property portfolio will in time bring environmental benefits to both the packaging industry and the consumer and as a result enhance shareholder value Martin Wagner Chief Executive 13 July 2006 STANELCO TRADEMARKS Starpol is a registered trademark in the European Community, PulseLine is a registered trademark in the UK. Starpol 2000, Starpol 3000, GreenSeal, FrogPack, FrogMat and FrogWrap are all trademarks of the Stanelco Group. UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 Independent auditors' review report To the shareholders of Stanelco plc Introduction We have been instructed by the company to review the financial information set out on pages 7 to 19 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 April 2006. Jeffreys Henry LLP Chartered Accountants Registered Auditors Finsgate 5-7 Cranwood Street London EC1V 9EE 13 July 2006 UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2006 Unaudited Unaudited Six Six Audited months months Year ended ended ended 30 April 30 April 31 October 2006 2005 2005 Â£'000 Â£'000 Â£'000 REVENUE 2,620 629 1,454 Cost of sales (1,539) (407) (889) ------------------------------------------ Gross profit 1,081 222 565 Distribution costs (87) (24) (67) Administrative expenses (3,331) (1,231) (3,200) Exceptional item - - (690) ------------------------------------------ LOSS FROM OPERATIONS (2,337) (1,033) (3,392) Investment revenue net of finance costs 5 33 133 ------------------------------------------ LOSS BEFORE TAX (2,332) (1,000) (3,259) Tax - 23 37 ------------------------------------------ LOSS FOR THE PERIOD (2,332) (977) (3,222) ------------------------------------------ Attributable to: Equity holders of the parent (2,341) (973) (3,150) Minority interest 9 (4) (72) ------------------------------------------ RETAINED FOR THE PERIOD (2,332) (977) (3,222) ------------------------------------------ EARNINGS PER SHARE Basic and diluted loss per share - pence (0.249) (0.114) (0.363) ------------------------------------------ UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 APRIL 2006 Share Share Shares Share Hedging Retained ATTRIBUTABLE Minority TOTAL capital premium to be options and losses TO EQUITY interest EQUITY account issued reserve translation HOLDERS OF reserves THE PARENT Â£'000's Â£'000's Â£'000's Â£'000's Â£'000's Â£'000's Â£'000's Â£'000's Â£'000's Balance at 1 November 2004 832 5,209 2,500 71 - (2,451) 6,161 22 6,183 ----------------------------------------------------------------------------------------------------- New share capital subscribed 50 5,162 5,212 5,212 Share option charges in period 113 113 113 Exchange differences rising on translation of overseas operation 9 9 17 26 ----------------------------------------------------------------------------------------------------- Net income recognised directly in equity 50 5,162 - 113 - 9 5,336 17 5,351 ----------------------------------------------------------------------------------------------------- Loss for the period (973) (973) (4) (977) ----------------------------------------------------------------------------------------------------- Balance at 30 April 2005 882 10,371 2,500 184 - (3,415) 10,524 35 10,557 ----------------------------------------------------------------------------------------------------- Balance at 1 November 2005 929 19,899 1,050 393 19 (5,600) 16,690 2,498 19,188 ----------------------------------------------------------------------------------------------------- New share capital subscribed 15 1,407 1,422 1,422 Share option charges in period 254 254 254 Share options exercised in period (41) 41 - - Exchange differences arising on translation of overseas operation (196) (196) (196) ----------------------------------------------------------------------------------------------------- Net income recognised directly in equity 15 1,407 - 213 (196) 41 1,480 - 1,480 ----------------------------------------------------------------------------------------------------- Loss for the period (2,341) (2,341) 8 (2,333) ----------------------------------------------------------------------------------------------------- Balance at 30 April 2006 944 21,306 1,050 606 (177) (7,900) 15,829 2,506 18,335 ----------------------------------------------------------------------------------------------------- UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC CONDENSED CONSOLIDATED BALANCE SHEET AT 30 APRIL 2006 Note Unaudited Unaudited Audited Audited At 30 April At 30 April At 31 October At 31 October 2006 2006 2005 2005 Â£'000 Â£'000 Â£'000 Â£'000 NON-CURRENT ASSETS Goodwill 13,930 13,930 Other intangible assets 6,116 5,755 Property, plant and equipment 4,238 3,235 ------------ ------------ 24,284 22,920 CURRENT ASSETS Inventories 3,144 2,604 Trade and other receivables 1,276 1,155 Amounts due on part disposal of subsidiary 5 3,438 3,531 Corporation tax 3 60 Cash and cash equivalents 292 4,396 ------------ ------------ 8,153 11,746 ------------ ------------ TOTAL ASSETS 32,437 34,666 ------------ ------------ CURRENT LIABILITIES Trade and other payables 1,474 1,581 Amounts due to third party in respect of purchase of subsidiary 3,438 3,531 Promissory notes 5,317 5,168 Tax liabilities - 8 Obligations under finance lease 43 38 Bank overdrafts and loans 19 21 Short term provisions 209 1,453 ------------ ------------ 10,500 11,800 ------------ ------------ NON-CURRENT LIABILITIES Amounts due to third party in respect of purchase of subsidiary 3,438 3,531 Obligations under finance lease 65 36 Bank loans 99 111 ------------ ------------ 3,602 3,678 ------------ ------------ TOTAL LIABILITIES 14,102 15,478 ------------ ------------ ------------ ------------ NET ASSETS 18,335 19,188 ------------ ------------ UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC CONDENSED CONSOLIDATED BALANCE SHEET CONTINUED AT 30 APRIL 2006 Unaudited Audited At 30 At 31 April 2006 October 2005 Â£'000 Â£'000 EQUITY Share capital 944 929 Share premium account 21,306 19,899 Shares to be issued 1,050 1,050 Share options reserve 606 393 Hedging and translation reserves (177) 19 Retained losses (7,900) (5,600) ------------ ------------ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 15,829 16,690 Minority interest 2,506 2,498 ------------ ------------ TOTAL EQUITY 18,335 19,188 ------------ ------------ The Interim Accounts were approved by the Board of Directors and authorised for issue on 13 July 2006 They were signed on behalf of the Board of Directors by: Martin J Wagner (Chief Executive Officer) Clive H Warner (Finance Director) UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2006 Unaudited Unaudited Six Six Audited months months Year ended ended ended 30 April 30 April 31 October 2006 2005 2005 Note Â£'000 Â£'000 Â£'000 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 4 (3,551) (2,245) (4,138) ------------------------------------------ INVESTING ACTIVITIES Interest received 39 18 168 Proceeds on disposal of property, plant and equipment 7 10 25 Investment in intangible assets (582) (717) (3,436) Purchase of property, plant and equipment (1,262) (140) (807) Purchase of subsidiary - - (7,082) Part disposal of subsidiary - - 3,372 Cash at bank acquired with subsidiary - - 65 ------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES (1,798) (829) (7,695) ------------------------------------------ FINANCING ACTIVITIES Dividend paid - (1) (1) Repayment of loan capital (14) (14) (15) Repayment of obligations under finance lease (42) (9) (19) Proceeds of issue of ordinary share capital 1,422 5,212 14,287 Proceeds of issue of shares in subsidiary to minority interest - - 1,015 New finance lease 76 - 42 ------------------------------------------ NET CASH FROM FINANCING ACTIVITIES 1,442 5,188 15,309 ------------------------------------------ NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS (3,907) 2,114 3,476 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,396 920 920 Effect of foreign exchange rate changes (197) - - ------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 292 3,034 4,396 ------------------------------------------ UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM ACCOUNTS FOR THE SIX MONTHS ENDED 30 APRIL 2006 Notes 1. Earnings per share from continuing operations The basic loss per share is based on a loss after tax of Â£2,332,000 (2005 Â£977,000) and on the basic weighted average ordinary shares in issue during the period of 937,779,292 (2005:857,040,675). 2. Research and development expenditure Research and development expenditure of Â£582,000 (2005: Â£717,000) has been incurred in the period. Of this expenditure Â£582,000 (2005: Â£717,000) has been capitalised as an intangible asset to be amortised against future revenues. Expenditure of this type is only capitalised where the Board is of the opinion that future revenues will exceed the costs incurred over the expected product life in accordance with International Accounting Standard 38. 3. Post balance sheet Placing On 8th June Stanelco announced that it had placed 46,939,939 ordinary shares at a price of 8.1p per share to raise approximately Â£3.8m (approximately Â£3.7m after expenses). The proceeds of this placing were used to meet the next stage payment in respect of the acquisition of Biotec Â£1.6m and to provide working capital. 4. Notes to condensed consolidated cash flow statement Unaudited Unaudited Six Six Audited months months Year ended ended ended 30 April 30 April 31 October 2006 2005 2005 Â£'000 Â£'000 Â£'000 Loss from operations (2,337) (1,033) (3,393) Adjustment for:- Amortisation and impairment of intangible fixed assets 221 187 422 Depreciation of property, plant and equipment 246 71 216 Share based payments 254 113 325 Loss on disposal of property, plant and equipment 6 - 10 (Decrease)/increase in provisions (1,244) (397) 262 ------------------------------------------ Operating cash flows before movement in working capital (2,854) (1,059) (2,158) (Increase) in inventories (540) (825) (1,504) (Increase) in receivables (28) (37) (172) (Decrease) in payables (144) (310) (261) ------------------------------------------ Cash utilised by operations (3,566) (2,231) (4,095) Corporation tax received/(paid) 49 (11) (10) Interest paid (34) (3) (33) ------------------------------------------ Net cash (outflow) from operating activities (3,551) (2,245) (4,138) ------------------------------------------ Additions to property, plant and equipment during the period amounting to Â£76k were financed by new finance leases. 5. Current assets Unaudited Audited At 30 April At 31 October 2006 2005 Â£'000 Â£'000 Amounts due on part disposal of subsidiary 3,438 3,531 ----------- ------------ Amounts included above receivable after more than one year 1,719 1,766 ----------- ------------ 6. Changes in accounting policies The principal accounting policies of the Group have remained unchanged as in the Group's 2005 Annual Report and Financial Statements with the exception of those set out in the Appendix to reflect changes required as a result of adopting IFRS. 7. Condensed Consolidated Interim Accounts The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The results are unaudited but have been reviewed by the auditors. The financial information for the year to 31 October 2005 and the six months ended 30 April 2005 has been extracted from the group's IFRS transitional document (see appendix), which were based on the group's 2005 Annual Review and the 2005 interim report. The 2005 Annual Review has been filed with the Registrar of Companies. The audit report on the Annual Review 2005 was unqualified and did not contain a statement under Section 237 (2) or (3), of the Companies Act 1985. This interim statement is being sent to all shareholders and is also available upon request from the Company Secretary, Stanelco plc, Starpol Technology Centre, North Road, Marchwood, Southampton SO40 4BL or viewed at http:// www.stanelcoplc.com/investor_reports.html. The IFRS transitional document is an appendix to this report. UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC APPENDIX - Transition Statement Reconciliation from UK GAAP to IFRS As part of the European Commission's plan to develop a single European capital market, all publicly quoted European companies in the EU are required to prepare consolidated financial statement in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Commission in respect of accounting periods commencing on or after 1 January 2005. Up to and including the accounting period to 31 October 2005, Stanelco plc (the Group) prepared its consolidated financial statement in accordance with UK GAAP (Generally Accepted Accounting Principles). The balance sheets and income statements that follow reconcile IFRS to previous UK GAAP for the primary financial statements. Key Differences The key reconciling items between IFRS to previous UK GAAP for the primary financial statements arise from the adoption and first time application of the following IFRS standards: â€¢ International Financial Reporting Standard 2: Share Based Payments (IFRS 2). â€¢ International Accounting Standards 38: Intangible Assets (IAS38). The 2005 opening balance sheet and financial statements have now been adjusted to reflect adoption of IFRS. Full details of the adjustments and the effect of the adjustments on the financial statement of the Group are disclosed later in this Appendix. The major differences between our prior accounting practice and IFRS have been in respect of Share Based Payments (IFRS 2) and the fact that goodwill is no longer amortised (IAS 38) and previous amortisation charges have been reversed. REVISED PROVISIONAL GROUP ACCOUNTING POLICIES UNDER IFRS Goodwill All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries, joint ventures and associates. In respect of business acquisitions goodwill represents the difference between the cost of acquisition and the fair value of the net identifiable assets acquired. Goodwill is allocated to cash generating units and is now no longer amortised but is tested annually for impairment at a consistent time each year. Goodwill is now stated at cost or deemed cost less any accumulated impairment losses. Employee benefits Share-based payment transactions The share option programmes allows Group employees to acquire shares of the Company. The fair value of options granted under the programme is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes formula, taking into account the terms and conditions upon which the options were granted. In accordance with the exemption allowed on transition to IFRS, the fair value calculations in respect of share based payments under International Financial Reporting Standard 2: Share Based Payments (FRS 2), have only been applied in respect of share options granted after 7 November 2002 that have not vested by 1 January 2005. UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC Appendix 1 Consolidated balance sheet at 31 October 2005 RECONCILIATION FROM UK GAAP TO IFRS Previous Share UK GAAP based IFRS at at 31 Goodwill payments 31 October Amortisation IFRS 2 October 2005 IAS 38 Note1 Note 2 2005 Â£'000's Â£'000's Â£'000's Â£'000's ----------------------------------------------------------------- NON CURRENT ASSETS Goodwill 13,625 305 - 13,930 Other intangibles assets 5,755 5,755 Property, plant and Equipment 3,235 3,235 ----------------------------------------------------------------- 22,615 305 - 22,920 ----------------------------------------------------------------- CURRENT ASSETS Inventories 2,604 2,604 Trade and other receivables 1,155 1,155 Amounts due on part disposal of subsidiary 3,531 3,531 Corporation tax 60 60 Cash and cash equivalents 4,396 4,396 ----------------------------------------------------------------- 11,746 - - 11,746 ----------------------------------------------------------------- TOTAL ASSETS 34,361 305 - 34,666 ----------------------------------------------------------------- CURRENT LIABILITIES Trade and other payables 1,581 1,581 Amounts due to third party in respect of purchase of subsidiary 3,531 3,531 Promissory notes 5,168 5,168 Tax liabilities 8 8 Obligations under finance lease 38 38 Bank overdrafts and loans 21 21 Short term provisions 1,453 1,453 ----------------------------------------------------------------- 11,800 - - 11,800 ----------------------------------------------------------------- NON-CURRENT LIABILITIES Amounts due to third party in respect of purchase of subsidiary 3,531 3,531 Obligations under finance lease 36 36 Bank loans 111 111 ----------------------------------------------------------------- 3,678 - - 3,678 ----------------------------------------------------------------- TOTAL LIABILITIES 15,478 - - 15,478 ----------------------------------------------------------------- NET ASSETS 18,883 305 - 19,188 ----------------------------------------------------------------- UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC Consolidated balance sheet at 31 October 2005 RECONCILIATION FROM UK GAAP TO IFRS continued Previous Share based UK GAAP Goodwill Payments IFRS at at 31 Amortisation IFRS 2 31 October IAS 38 Note1 Note 2 October 2005 2005 UK GAAP at 31 October 2005 Â£'000's Â£'000's Â£'000's Â£'000's ---------------------------------------------------------------------- EQUITY Share capital 929 929 Share premium 19,899 account 19,899 Shares to be issued 1,050 1,050 Share options reserve - - 393 393 Hedging and translation reserves 19 19 Retained losses (5,512) 305 (393) (5,600) ---------------------------------------------------------------------- EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 16,385 305 - 16,690 Minority interest 2,498 2,498 ---------------------------------------------------------------------- TOTAL EQUITY 18,883 305 - 19,188 ---------------------------------------------------------------------- UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC Consolidated income statement for the year ended 31 October 2005 RECONCILIATION FROM UK GAAP TO IFRS Previous Goodwill UK GAAP Amortisation Share Year IAS 38 Note1 based IFRS year ended 31 payments ended 31 October IFRS 2 October 2005 Note 2 2005 Â£'000's Â£'000's Â£'000's Â£'000's Revenue 1,454 1,454 Cost of sales (889) (889) -------------------------------------------------------------- Gross profit 565 - - 565 Distribution costs (67) (67) Administrative expenses (3,810) 244 (325) (3,890) -------------------------------------------------------------- Loss from operations (3,312) 244 (325) (3,392) Investment revenue 168 168 Finance costs (35) (35) -------------------------------------------------------------- Loss before tax (3,179) 244 (325) (3,259) Taxation 37 37 -------------------------------------------------------------- Loss for the period (3,142) 244 (325) (3,222) -------------------------------------------------------------- Attributable to: Equity Holders of the (3,070) 244 (325) (3,150) parent Minority interest (72) (72) -------------------------------------------------------------- Retained for the period (3,142) 244 (325) (3,222) -------------------------------------------------------------- Weighted average ordinary shares 888,097,434 888,097,434 Basic and diluted loss per share (0.354)p (0.363)p -------------------------------------------------------------- UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC Consolidated balance sheet at 30 April 2005 RECONCILIATION FROM UK GAAP TO IFRS Previous Share UK GAAP based at 30 Goodwill payments IFRS at April Amortisation IFRS 2 30 April 2005 IAS 38 Note1 Note 2 2005 Â£'000's Â£'000's Â£'000's Â£'000's ------------------------------------------------------------ NON CURRENT ASSETS Goodwill 2,758 132 - 2,890 Other intangibles assets 3,273 3,273 Property, plant and equipment 992 992 ------------------------------------------------------------ 7,023 132 - 7,155 ------------------------------------------------------------ CURRENT ASSETS Inventories 1,435 1,435 Trade and other receivables 640 640 Corporation tax 36 36 Cash and cash equivalents 3,034 3,034 ------------------------------------------------------------ 5,145 - - 5,145 ------------------------------------------------------------ TOTAL ASSETS 12,168 132 - 12,300 ------------------------------------------------------------ CURRENT LIABILITIES Trade and other payables 872 872 Obligations under 14 14 finance lease Bank overdrafts and 22 22 loans Short term provisions 696 696 ------------------------------------------------------------ 1,604 - - 1,604 ------------------------------------------------------------ NON-CURRENT LIABILITIES Obligations under 28 28 finance lease Bank loans 111 111 ------------------------------------------------------------ 139 - - 139 ------------------------------------------------------------ ------------------------------------------------------------ TOTAL LIABILITIES 1,743 - - 1,743 ------------------------------------------------------------ ------------------------------------------------------------ NET ASSETS 10,425 132 - 10,577 ------------------------------------------------------------ EQUITY Share capital 882 882 Share premium 10,371 10,371 account Shares to be issued 2,500 2,500 Share options reserve - - 184 184 Retained losses (3,363) 132 (184) (3,415) ------------------------------------------------------------ EQUITY 10,390 132 - 10,522 ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Minority interest 35 35 ------------------------------------------------------------ TOTAL EQUITY 10,425 132 - 10,557 ------------------------------------------------------------ UNAUDITED INTERIM CONSOLIDATED ACCOUNTS 2006 STANELCO PLC Consolidated income statement for the period to 30 April 2005 RECONCILIATION FROM UK GAAP TO IFRS Previous Goodwill Share IFRS UK GAAP Amortisation based period period IAS 38 Note1 payments ended 30 ended 30 IFRS 2 April 2005 April 2005 Note 2 Â£'000's Â£'000's Â£'000's Â£'000's Revenue 629 629 Cost of sales (407) (407) ------------------------------------------------------------ Gross profit 222 - - 222 Distribution costs Administrative expenses (1,214) 72 (113) (1,255) ------------------------------------------------------------ Loss from operations (992) 72 (113) (1,033) Investment revenue 36 36 Finance costs (3) (3) ------------------------------------------------------------ Loss before tax (959) 72 (113) (1,000) Taxation 23 23 ------------------------------------------------------------ Loss for the period (936) 72 (113) (977) ------------------------------------------------------------ Attributable to: Equity Holders of the parent (932) 72 (113) (973) Minority interest (4) (4) ------------------------------------------------------------ Retained for the period (936) 72 (113) (977) ------------------------------------------------------------ Weighted average 857,040,675 857,040,675 ordinary shares Basic and diluted loss per share (0.109)p (0.114)p ------------------------------------------------------------ Notes to accompany the Consolidated Income Statement and Consolidated Balance Sheet six months ended 30 April and year ended 31 October. Reconciliation from UK GAAP to IFRS 1 Under International Accounting Standard 38: Intangible assets (IAS 38) goodwill is no longer amortised on a straight line basis, but instead is subject to annual impairment testing under International Accounting Standard 36 (IAS 36). Goodwill totalling Â£305,000 which had previously been amortised to the profit and loss account has been reinstated in the balance sheet. This has resulted in a reduction in administration expenses of Â£244,000 for year ended 31 October 2005 and Â£72,000 for the interim period to 30 April 2005. 2 Under International Financial Reporting Standard No. 2: Share Based Payments (IFRS 2) the fair value of share based payments are expensed in the income statement throughout their vesting period. In accordance with IFRS 2, the fair value calculations have only been applied in respect of share based payment transactions granted after 7 November 2002 that had not vested by 1 January 2005. Had IFRS 2 been in place during the financial year ended 31 October 2005 the pre-tax loss would have been increased by Â£113,000 for the six months ended 30 April 2005 and Â£325,000 for the year ended 31 October 2005. This information is provided by RNS The company news service from the London Stock Exchange GGMNRFGGVZM

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