AERTE GROUP PLC ("Aerte" or "the Company")

Unaudited Results for the Six Months Ended 31 December 2011

Aerte Group PLC, a leading environmental technology group, today reports its unaudited results for the six months ended 31 December 2011.

Overview

·      As expected, launch of new product range interrupted sales in H1, resulting in revenues of £47,000 (2010: £202,000)

·      Since the end of H1, received a first order for 3,200 units from our proposed Chinese distributor, to be delivered shortly

·      Further interest from and samples issued to potential distributors in the Middle East, India, Central America and Europe

·      Primary focus on markets in China and India

·      Placing in November 2011, raised £1.7m net of expenses providing the capital to support the Company's commercial plans

·      As of today's date, the Company had net cash of £1.0 million

·      Appointed a new Chief Marketing Officer, John Morton

·      Worldwide demand for air disinfection products remains strong

Javier Segura, Managing Director of Aerte, said,

"The response from customers to the new devices has been good. Management is focused on securing further orders from our Chinese and other distribution partners. The expected launch of the new devices interrupted sales in H1 but we expect revenues to recover in the Q4. The Company still has to deliver on increasing sales volumes but, based on the level of interest being shown in the new devices and the ongoing need for air disinfection, I believe we are well positioned to do so."

For further information:

Aerte Group PLC                                   Tel: +44 (0) 20 7603 1515

Andrew Tonks, Finance Director

Panmure Gordon (UK) Limited                 Tel: +44 (0) 20 7459 3600

Andrew Godber / Adam Pollock

Cardew Group                                        Tel: +44 (0) 20 7930 0777

Tim Robertson / Georgina Hall

Chairman and Managing Director's Report

Introduction

Aerte specialises in air disinfection technology and products. The Company's products disinfect the air and surfaces of bacteria and viruses, eliminating airborne infections in enclosed spaces using hydroxyl radicals.

During the period under review, the Company was focused on, and invested in, developing its flagship air disinfection product, "the AD", through bringing to market the next generation of devices. As previously reported, the introduction of the new versions of the AD meant there was a hiatus in terms of sales during the period as distributors waited for the new products and as a result revenues for the period were lower. This together with increased investment meant the Company recorded a loss of £1.7 million for the period. Since the period end, orders for the new ADs have commenced with an order for 3,200 devices. This is a positive start given that 1,760 units were sold throughout the previous financial year.

In November 2011, the Company raised £1.7 million (net of expenses) through a Placing and the new capital has supported the sales and marketing of the new devices and further product development. 

Strategy

While we had hoped that the AD 2.0 and Klean would have moved into production more quickly than they did, we are very pleased with the end result. We are confident that their introduction will translate into higher sales volumes. The design, cost and capabilities of these products have improved substantially.

The Company's two most immediate markets for future sales are China and India. In China, the Company is making good progress with its distribution partner, who also participated in the Group's recent fund raising, and is presently responsible for the majority of new sales for AD 2.0 and Klean. India also remains a primary territory and is expected to be a key market for the Company in 2012.

The strategic focus for the business is also on marketing the new devices to other distributors but only those with sufficient scale and networks to support orders in larger quantities than previously. Aerte's marketing team under the newly appointed Chief Marketing Officer, John Morton, is focused on securing new orders and re-focusing the distributor network.

An agreement has also been signed with a company specialising in e-commerce sales and this venture is scheduled to launch in the UK, France and Spain in May.

New Product Range

Whilst technically superior to alternative solutions in the marketplace, the original 'AD' had the scope to be improved and to meet further customer requirements. After an extensive period of research and development, two new models were introduced replacing the original 'AD'. The first is the "AD 2.0", specifically designed for commercial and professional use; and second, named "Klean", is designed for small commercial and domestic use.

The new models of the AD are based on the same science and technology, and have already attracted significant attention from customers as they achieve the same effective results as the existing AD, but are now substantially cheaper and smaller than this. In addition, they have been wholly redesigned with both significant practical and aesthetic improvements and offer the choice of two consumable cartridges, with diluted H₂O₂ offered as an alternative to d-limonene to produce the key hydroxyl radicals.

In the final phase of manufacturing the new products there have been delays in completing the first batch of 5,000 devices and associated consumable cartridges. This has been due to several technical problems, which have contributed to the manufacturer missing their scheduled delivery dates. The problems experienced are not unusual when launching new products that are highly technical and complex like AD 2.0 and Klean. The remaining issues are being resolved and the first production order is expected to be completed shortly.

Development of the miniaturised AD solely for the retail market has slowed while the Group's focus has been on AD 2.0 and Klean. Now that these products have been launched, the research and development team will again focus on the development of the mini AD which represents a significant opportunity given the size of the potential marketplace.  The Company will defer any decision on forming a joint venture to commercialise the mini AD as the management believe the terms of any partnership will be disadvantageous to Aerte until the mini AD has been further developed.

Financial Results for the Period

These interim condensed consolidated statements are prepared under International Financial Reporting Standards (IFRS).

In the six months ended 31 December 2011, the continuing activities achieved revenues of £0.05 million (2010: £0.2 million) and the loss for the period was from continuing operations was £1.7 million (2010: loss of £1.2 million).  The loss reflects the increased investment in sales and marketing resources and research and development made by the Company as part of its strategy to enter more markets and territories. The loss also includes £0.2 million for reorganisation costs, a bad debt provision and a write down of old 'AD' stock which can no longer be used following the introduction of the new range.

The basic and diluted loss per share was 0.59 pence (2010: loss of 0.47 pence).

Net cash inflow for the six months ended 31 December 2011 was £0.4 million (2010: £1.4 million outflow). Net cash used in operating activities was £1.3 million (2010: £1.4 million).

At 31 December 2011, the Group had net cash balances of £1.7 million (2010: £2.4 million).

The Directors do not recommend payment of a dividend for the half year ended 31 December 2011 (2010: £nil).

People

John Morton has joined as Aerte Limited CMO, with significant experience of FMCG through numerous sales and marketing roles with the Sara Lee, SC Johnson and Colgate Palmolive groups. John spent over 15 years at Sara Lee working in the household and body care division, which included being the international marketing lead for Ambipur.

Current trading and prospects

The immediate focus for the business is on securing further sales for the new devices. The relationship with the Chinese distributor is progressing well with the first order having been placed. The 3,200 devices are manufactured and once the consumables are completed, the products will be delivered shortly. We expect further orders in due course and to finalise a full distribution agreement later in the year.

The next phase is to focus on further discussions with all of the Company's distribution contacts and securing orders for the new devices. Given the product improvements, the lower price of the AD 2.0 and Klean and initial reactions of prospective customers we are hopeful of achieving positive take up.

The Board remains confident in the future prospects of the business whilst recognising the need to drive sales of the new devices to ensure financial stability of the business.

John Bateson, Chairman

Javier Segura, Managing Director

30 March, 2012

Condensed consolidated interim statement of comprehensive income

Condensed consolidated interim statement of financial position

Condensed consolidated interim statement of changes in equity

Condensed consolidated interim statement of cash flows