29th August 2008

Stanelco Plc ("Stanelco" or "the Group")

Interim Results for the six months ended 30th June 2008

Highlights

• Sales up 92% to £7.4m (2007: £3.9m)
• Loss from operations reduced to £1.6m (2007: £3.7m)
• Strong progress achieved in developing sales leads in BioPlastics division 
• Biotec joint venture experienced volume growth of 87%
• Closing Group cash position at 30th June 2008 £6.2m

Paul Mines, Chief Executive said:

"We are very pleased to see the results of the efforts made over the past six months to focus the business into two distinct divisions to improve product commercialisation. This has been achieved through strengthening our sales teams and increasing the number of customer trials we have been conducting.  

"By broadening our customer base, we are able to drive product innovation and develop concepts to match our markets. We are pleased to report growth in the first six months of this year and are confident in the outlook for the full year."

John Standen, Non-executive Chairman said:

"We are continuing to look for compatible and sensible investment opportunities to gain greater momentum for our strategy and provide shareholders with a better return on the value within the Group. 

"We believe the second half of the year will underline the progress we have made in the first half of the year. "

Ends

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Chairman's Statement

Sales during the first half of 2008 gained momentum and, by period end, had almost doubled reaching 92% of the sales level for the full year of 2007. Group revenues increased from £3.9m to £7.4m in the period ended 30 June 2008 (an increase of 92%) compared with the six months ended 30 June 2007. 

The increase was achieved by driving sales of biodegradable resin through Stanelco directly (a fourfold increase) and further growth at the Group's Biotec subsidiary, where volumes in the first half of 2008 have doubled to exceed the total for the full year 2007. 

The re-organisation of the business during the last year into the two distinct divisions of BioPlastics and Radio Frequency Applications (RF) has provided the Group with commercial opportunities for the Group's intellectual property (IP) and technology. Within the BioPlastics division, targeted commercialisation moved forward, rapidly gaining sales traction in various end-uses throughout the European market. 

The Group's net loss reduced to £1.0m from £3.7m in the same period last year whilst the Group made a loss from operations of £1.6m compared with a loss of £3.7m for the six months to 30 June  2007 and £1.9m for the six months to 31 December 2007 (the same period last year included £2.0m of exceptional items). 

The Group's closing cash position at 30 June 2008 was £6.2m.

Stanelco BioPlastics 

The BioPlastics division has made considerable progress in the period with revenues increasing to £7.0m in the period ended 30 June 2008 compared with £3.3m in the six months ended 30 June 2007 and £3.6m in the six months ended 31 December 2007. 

The first signs of factors changing the nature of and driving the growth of the bioplastics market are emerging. Initial participants were brand-owner/converters, characterised as innovators/early adopters who saw a business opportunity and began experimentation early. Now, more mature players are participating in the supply chain as the potential for sustained growth is appreciated. 

The social ethos driving the market is shifting from 'bio-degradability' and end-of-life concerns to the 'sustainability' of biomass sourced plastics in the world of higher oil prices. Coupled with a broadening of the customer base, this is driving product innovation with regard to raw material sourcing as well as the functional characteristics of bioplastics materials. 

Stanelco's BioPlastics division is now recognised as a capable bioplastics innovator, with a strong focus on customer service and support. In the first half of 2008, the BioPlastics team undertook 27 sets of customer trials (each containing between one and four individual trials) of which 21 have led to production orders of Bioplast materials. Success is being achieved in applying our IP and technology to a broadening set of end uses, including sheet products for thermoforming, injection moulded articles and extrusion coating amongst others. 

We continue to invest in the pilot facilities in Southampton. The development costs incurred in the first half of £154,000 were in line with the Board's expectations and we have already begun to see the benefits of this through new concepts being developed. 

This will be essential to business growth, and, as we continue to gain traction with this division, we anticipate strengthening the team and increasing its new product output over the coming months. 

During the period, the Group announced the licensing of the design and manufacture of FROGMAT biodegradable packaging to MonoSol LLC (MonoSol). Subsequently, the first development/production machine for FROGMAT, developed in the UK, has also been sold to MonoSol. 

The Biotec subsidiary in Germany is a joint venture with SPhere SA. Biotec saw substantive volume growth in the period driven by the sales growth experienced by both partners. Further strengthening of the local team is being considered to address the increased production levels of the first half. 

Biotec's product range, manufacturing capability and underlying science continues to provide a robust platform for Stanelco's further growth. 

Stanelco RF Applications 

The radio frequency applications division traded in line with the Board's expectations, with sales of £0.4m.  We continue to consolidate the division's position as the pre-eminent supplier of RF furnaces to the optical fibre market. The new product pipeline remains robust, and the business was reinforced in May by the recruitment of Neil Martin as General Manager. Neil has over 20 years of experience within the high technology sector, and in particular has extensive experience of the Asian market. 

Demand for RF furnaces continues to be firm, with enquiries continuing to increase largely driven by fibre demand in Asia. Since the period end, Stanelco shipped a furnace to a Chinese customer incorporating the first of a new generation of RF generators, designed and built in-house. This brings the number of substantive new product launches in 2008 to three. 

Assets and Cash 

At the start of the period the Group had cash balances of £8.1m. During the period the Group invested £102,000 in development equipment and utilized £1.2m of working capital to fund growth. At period end, the cash balance had reduced in line with Board expectations to £6.2m. Shareholders' funds have reduced by £0.2m to £21.1m during the six month period. 

Outlook 

We are pursuing our strategy of delivering sustainable and profitable growth; the first six months of this year have demonstrated good progress in achieving this goal. The substantial increase in sales of our products in the BioPlastics division is particularly notable. We believe that much of this is repeatable business and that this momentum should be sustainable in the second half of the year. Our challenge remains to increase margins in this part of the business but this should be possible over time. 

We are continuing to look for compatible and sensible investment opportunities to gain greater momentum for our strategy and provide shareholders with a better return on the value within the Group. 

We believe the second half of the year will underline the progress we have made in the first half of the year. 

John Standen 

Chairman 

29 August 2008 

  Condensed unaudited consolidated income statement

For the period ended 30 June 2008 

The calculation of earnings per share is based on the loss after tax for the six months of £984,154 (2007: £5,049,467) and a weighted average of 3,021,403,333 (2007: 2,996,577,096) ordinary shares in issue. 

  Condensed unaudited consolidated balance sheet

As at 30 June 2008 

The interim statements were approved by the Board on 29 August 2008 

Signed on behalf of the Board of Directors 

Paul R Mines (Chief Executive) 

Clive H Warner (Financial Director) 

29 August 2008 

                    Condensed unaudited consolidated statement of changes in equity

                  As at 30 June 2008

   Condensed unaudited consolidated cash flow statement 

For the period ended 30 June 2008