Interim Results

Kenetics Group Limited 11 September 2007 Kenetics Group Limited Interim Results Kenetics Group Limited ('Kenetics' or 'the Company' or 'the Group'), the Radio Frequency Identification (RFID) company focused on security and RFID systems and products, announces its interim report for the 6 months ended 30 June 2007. Key Points • Consolidated turnover versus the comparable period increased by 36.7% to £283,000 (H1 2006: £207,000). • Consolidated loss on ordinary activities after tax and expenses was £177,000 (H1 2006: £103,000) • A range of newer generation products has been developed and is expected to be launched in the third quarter of the current year. • The Company is expanding its sales and distribution network in Europe to meet expected demand for its new generation products as well as to service the anticipated growing number of European customers. • As reported, the Company has secured the ODM project that had been delayed to the early part of 2007. This project is expected to complete by January 2008. Commenting on the results Ken Wong, President and CEO said: 'We continue to remain optimistic about the outlook for the Group as we have developed a range of new generation products that is expected to bring in a source of revenue in addition to the revenue generated from the ODM projects. With our expected expansion in the European market, we look forward to a progressive improvement in our business in the second half of the year.' For more information, please contact: Ken Wong Kenetics Group Limited Tel: +65 6749 0083 Website : www.kenetics-group.com Tim Thompson Buchanan Communications Tel: +44 20 7466 5000 Nandita Sahgal Nominated Adviser/Broker Insinger de Beaufort Tel: +44 20 7190 7000 CHAIRMAN'S STATEMENT It is my pleasure to report our interim results for the 6 months period ended 30 June 2007. Business Review The steps taken by the Company to get some of the delayed projects in 2006 back on track have borne fruition. The Company has secured a tender in a key project worth £250,000 that is contributing revenue on a monthly basis until January 2008. The Company is also expected to secure another project that will bring in additional revenue for the year. In addition, the Company has widened its list of potential major ODM customers and is expected to submit tenders due in the second half of the year. In line with the Company's change in emphasis from being a systems developer to a product developer, the Company entered into technical collaborations with major chip manufacturers to develop a generation of products to cater for their new GEN2 chips. A collaboration with Intel has resulted in the Company completing its first new generation UHF (Ultra High Frequency) products that complements its existing HF (High Frequency) product range. These UHF Readers are expected to open up a new segment of the market, both in Europe and especially in the US. This range of products, to be marketed in the third quarter of the year is expected to generate sales in 2008. The Company's new HF mobile reader was launched in the CEBIT 2007 show in Hanover, Germany. Initial orders have been received and volume production has begun for deliveries in September 2007. In Europe, the Company is evaluating various options to enlarge its sales and distribution network to grow its business. Possible avenues include expansion generically through the setting up of a sales office or through joint partnerships or acquisitions. With the marketing and sales of its new range of products in Europe and the US, the Company is expected to lessen the timing uncertainty of ODM projects and to provide a more stable and regular source of income for the future. The China business support office established in Beijing is now fully functional. Although the office will continue to explore ODM projects in China, it has also taken the additional function of being a purchasing and outsourcing arm of the Group. With this access to lower manufacturing costs, the Group's operational expenses are expected to decrease. Financial Summary The turnover for the period was £283,000 (H1 2006: £207,000). With the reorganisation efforts taken in the second half of 2006, the Company has effectively got its business back on track with turnover increasing by 160% over the previous six months (H2 2006: £109,000). As a result of its investments in new product development, the recruitment of a team of skilled engineers and various recurring professional and administrative expenses arising from its AIM listing, post-tax loss of for the period was £177,000 (H1 2006: £103,000). With the infrastructure in placed and the expected increase in turnover for the second half of 2007, the Company expects the post-tax loss to be further reduced for the year. Prospects The board believes that with the transition from being a systems developer to product developer and with greater ODM traction, the Company is well placed to achieve a better performance than the previous year. Ken Wong Kai En Chairman 11 September 2007 Kenetics Group Limited - Interim financial information Six months ended 30 June 2007 CONSOLIDATED INCOME STATEMENTS Proforma 6 months 6 months 12 months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Continuing operations Revenue 283 207 316 Other operating income - - - Changes in inventories of finished goods and work-in-progress (74) 31 29 Raw materials and consumables used (36) (80) (139) Employee benefits expenses (217) (167) (382) Depreciation of plant and equipment (24) (21) (49) Other operating expenses (109) (73) (226) Finance costs - - 2 Loss before tax (177) (103) (449) Income tax expense - - - Loss for the period (177) (103) (449) Attributable to: Equity holders of the Company (177) (103) (446) Minority interests - - (3) (177) (103) (449) Loss per share (pence) - Basic (0.67) (0.43) (1.93) and diluted Kenetics Group Limited - Interim financial information Six months ended 30 June 2007 CONSOLIDATED BALANCE SHEETS Proforma 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Non-current assets Plant and equipment 123 136 145 Available for sale financial asset 136 142 139 Total non-current assets 259 278 284 Current assets Contract work-in-progress - 35 5 Stocks and work-in-progress 234 134 155 Trade receivables 125 60 101 Other receivables 41 117 66 Cash and cash equivalents 187 206 376 Total current assets 587 552 703 Total assets 846 830 987 Equity Share capital 264 606 264 Share premium 280 3 280 Share option reserve 27 - 27 Merger reserve 370 - 370 Foreign currency translation reserve (24) - (18) (Accumulated losses)/Retained profits (383) 138 (206) Total equity 534 747 717 Non-current liabilities Amount owing to director 32 - 48 Obligations under finance leases 3 5 6 Total non-current liabilities 35 5 54 Current liabilities Excess of progress billings over contract work-in-progress 31 - 33 Trade payables 116 18 32 Other payables 109 36 136 Amount owing to directors 16 - 10 Obligations under finance leases 5 9 5 Provision for taxation - 15 - Total current liabilities 277 78 216 Total liabilities 312 83 270 Total equity and liabilities 846 830 987 Kenetics Group Limited - Interim financial information Six months ended 30 June 2007 CONSOLIDATED CASH FLOW STATEMENTS Proforma 6 months 6 months 12 months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Cash flows from operating activities Loss before taxation (177) (103) (449) Adjustments for: Depreciation 24 21 49 Interest received (1) - (3) Share options expenses 1 - - Unrealised translation loss 2 (2) - Operating loss before working capital changes (151) (84) (403) Decrease/(increase) in contract work-in- progress/ excess of contract work-in-progress over progress billings 4 (39) 25 Decrease in trade and other receivables (3) 93 99 (Increase) in inventories (83) (95) (118) Increase/(decrease) in trade and other payables 64 (115) 38 Cash used in operations (169) (240) (359) Income tax paid - (36) (53) Net cash flows used in operating activities (169) (276) (412) Cash flows from investing activities Purchase of unquoted shares - (139) (139) Purchase of plant and equipment (5) (24) (64) Capital contribution from minority interests - - 3 Interest received 1 1 3 Net cash flows used in investing activities (4) (162) (197) Cash flows from financing activities Repayment of loan from director (8) (52) (27) (Decrease) in share application - (2) - Proceed from issue of ordinary shares of holding company - - 827 Proceed from issue of ordinary shares of subsidiary - 450 450 Repayment of hire purchase loan (2) (2) (5) Payment of AIM listing expenses - - (493) Payment of dividend - - (1) Difference of fixed deposit balance due to accumulation of interest (2) (1) (1) Net cash flows (used in)/ generated from financing activities (12) 393 750 Net (decrease)/increase in cash in hand (185) (45) 141 and at bank Effect of exchange rate changes (4) (4) (17) Cash in hand and at bank at beginning of period 291 167 167 Cash in hand and at bank at end of period 102 118 291 Fixed deposit 85 88 85 Cash and cash equivalents per balance sheet 187 206 376 Kenetics Group Limited - Interim financial information Six months ended 30 June 2007 1. Business of Kenetics Group Limited The Company was incorporated in Jersey on 22 June 2006. The consolidated financial statements of the Company for the six months ended 30 June 2007 comprise the Company and its subsidiaries, namely Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co., Ltd. The Group is in the business of electronics design and manufacturing and producing of electrical and electronic goods. 2. Basis of preparation of interim financial statements The interim financial statements for the six months ended 30 June 2007 has been prepared in accordance with the accounting policies set out in the annual report and accounts for the year ended 31 December 2006. 3. Loss per share Basic loss per share has been calculated on the basis of the losses attributable to ordinary shareholders divided by 26,349,466 (30/06/06: 23,592,880, 31/12/06: 23,125,500), being the weighted average number of ordinary shares issued by the Company. In accordance with IAS 33 and as the Group has reported a loss for the period, the potential ordinary shares are not dilutive. 4. Exchange rates The reporting currency of the Company is deemed to be Sterling Pounds. The functional currencies of Kenetics Innovations Pte Ltd and Kenetics Innovations (Beijing) Co Ltd are in Singapore dollars and Chinese Renminbi respectively. The following exchange rates have been used in preparing this financial information: S$1 = £ RMB1 = £ 30 June 2007 0.3259 0.06563 Average rates 0.3313 0.06571 5. Income tax There was no income tax expense as the Group was making losses. 6. RECONCILIATION OF MOVEMENT IN COMBINED SHAREHOLDERS' EQUITY 6 months 6 months 12 months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Loss for the period (177) (103) (449) Movement arising from - - 448 restructuring exercise Reduction in share applications - (2) - New shares issued - 452 827 AIM listing expenses - - (519) Share options granted - - 27 Incorporation of a subsidiary - - 2 Opening shareholders funds 717 409 409 Currency translation differences (6) (9) (28) Closing shareholders funds 534 747 717 7. Nature of financial information The interim financial information set out above is neither audited nor reviewed and does not represent statutory financial statements for Kenetics Group Limited or for any of the entities comprising the Kenetics Group for the period ended 30 June 2007. The figures for the year ended 31 December 2006 were extracted from the consolidated financial statements which have been presented to the shareholders. The auditors' report on those financial statements was unqualified. The figures for the six months ended 30 June 2006 represents the results and financial position of one of the Company's subsidiary, Kenetics Innovations Pte Ltd that was acquired by way of an exchange of shares on 24 July 2006. The acquisition of Kenetics Innovations Pte Ltd reflects a group reconstruction and has been treated as a merger for accounting purpose. The Board approved the interim financial information for the period ended 30 June 2007 on 31 August 2007 These interim results are available on the Company's website www.kenetics-group.com. This information is provided by RNS The company news service from the London Stock Exchange

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