Half Yearly Report

Biofutures International plc

("Biofutures" or the "Group")

Half Yearly Results for the six months ended 30 June 2012

The Board of Biofutures announces the unaudited interim results of the Company for the period from 1 January 2012 to 30 June 2012. A copy of these financial statements will also be available on the Company's website www.biofuturesplc.com.

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CHAIRMAN'S STATEMENT

I am pleased to present our unaudited interim results for the six months ended 30 June 2012.

Financial Review:

Revenue for the 6 month period ended 30 June 2012 was £300,000 compared to £38,000 for the same period in 2011, reflecting the increased level of operations. However, revenues were down compared to the second half (H2) of 2012 (£632,000) as the company suffered from high crude palm oil prices in Malaysia, along with the rest of the Malaysian palm oil industry. Gross margins remained in negative territory, continuing the performance experienced in H2 2011. Operating costs were up year on year to £562,000 (H1 2011: £307,000) but down on H2 2011 (£818,000) as the Company took steps to control its cost base. In previous years, the interest charge had been capitalised whilst the plant was being constructed. With the plant now in full operation, these interim results include financing charges of £274,000 in respect of the loan with Bank Kerjasama Rakyat Malaysia Bhd. The result is that the loss for the 6 month period ended 30 June 2012 was £839,000 compared to £245,000 for the same period in 2011.

A revolving credit facility of RM7.5 million was obtained from Bank Rakyat on 8 June 2012 for the purposes of working capital for the purchase of crude palm oil. To date, this facility has not been utilised.

In February 2012, the Group received the results of the arbitration entered into by Zurex Corporation Sdn Bhd ("Zurex") and JJ Lurgi Engineering Sdn Bhd ("Lurgi"), in relation to a contract dated 26 January 2007 for the supply by Lurgi of components for the construction of a biodiesel plant (the "Contract"). The arbitrator concluded that the contract between Zurex and Lurgi was not terminated and, as a consequence, dismissed the claims by both parties with each side paying its own costs. The directors of Biofutures were disappointed by the outcome, particularly as the Group had received legal advice that its case would be successful. However, because the value of the assets under the Contract has been impaired in prior years, there is no further liability arising as a consequence of the arbitrator's conclusion, and so the decision did not have any material effects on the Group's results.

The dispute with Lurgi was finalised in July, when Zurex agreed to pay Lurgi RM0.8m (£0.161m) [£GBP 1 = RM4.97], and in return received a high-pressure boiler and 4 pumps, with the payment being spread over 12 months.

In March 2012, our Executive Chairman Mr David Yeoh resigned for personal reasons, and Dr Patrick Howes was appointed as Non-Executive Chairman.

Outlook

According to a report dated 4 September 2012 by one of the leading players in the market (http://www.iffcofatsandoils.com/market_trends.asp?market_id=3) the current refining margin for crude palm oil to refined olein is ca. USD -13 (£-8.18) per metric tonne (pmt) in Malaysia, and approximately USD +42 (£26.43) pmt in Indonesia, a difference of approximately USD 55 pmt (£34.61 ) [US$ 1.5890 = £GBP1 www.fx-rate.net].

With the crude palm oil prices in Malaysia being significantly higher than those in neighbouring Indonesia, the palm-oil refining industry in Malaysia has experienced what is probably the toughest period in its history. Whilst Plantation backed refinery groups have been able to maintain much of their market share, with the plantations absorbing losses at the refinery, and multi-national groups have maintained both their market share and profitability by exporting from their Indonesian refineries; Malaysian refiners that are not plantation backed, such as Biofutures, have experienced a loss of market share in the global market.

It is expected that the relatively high crude palm oil price will remain at least until the forthcoming Malaysian General Election, which is now expected to be held in November 2012, and must be held by April 2013 at the latest. Thereafter, government action is expected to restore the profitability of the Malaysian refining industry.

We believe that with a fully functional refinery and the recently completed pipelines between the Zurex refinery and the jetty at POIC Lahad Datu, the Group is well placed to take advantage of export opportunities and generate profits as soon as the current relatively high price of crude palm oil within Malaysia is corrected.

The impact on the carrying value of the property plant and equipment and related intangible assets is being closely monitored, but the directors are of the opinion that no impairment further to that made in the 31 December 2011 accounts is required at this stage.

We continue to search for a suitable partner to assist in the provision of mutual and consistent profitability.

Dr Patrick Howes Non-Executive Chairman

27th September 2012

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2012

 1 Basis of preparation

These unaudited interim condensed consolidated financial statements (the "interim financial statements") are for the six months ended 30 June 2012. They have been prepared using the recognition and measurement principles of IFRS (as adopted by the EU). IFRS include interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011.

The interim financial statements have been prepared under the historical cost convention.. These interim financial statements have been prepared in accordance with the accounting policies as set out on pages 17 to 20 in the Group's consolidated financial statements for the year ended 31 December 2011. The accounting policies have been applied consistently throughout the Group for the purpose of preparation of the interim financial statements.

The financial information contained in these interim financial statements comprises the Group statement of financial position as at 30 June 2012, 30 June 2011 and 31 December 2011 and the Group statement of comprehensive income, the Group statement of cash flows and the Group statement of changes in equity for the half-years ended 30 June 2012 and 30 June 2011 and the year ended 31 December 2011.

The financial information set out on pages 3 to 6 is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The comparative numbers for the year ended 31 December 2011 have been extracted from the audited accounts which have been filed at Companies House and which carried an unqualified audit report with no statement under section 498 (2), (3) or (4) of the Companies Act 2006.

 2 Segmental Information

Management has determined the operating segments based on the reports reviewed by The Board that are used to make strategic decisions.

Management has determined that the Group has one operating segment, which is the palm oil refining activity. The financial information contained in these financial statements therefore relates solely to this segment. The Group has produced revenue and does not have any customers representing more than 10% of the revenue. The Group's non-current assets consist of property, plant and equipment, goodwill and intangible assets, and are located entirely in Malaysia.

3 Income tax

There is no tax charge due to the losses arising in the period.

4 Net exchange differences on translating foreign operations

Income and expenditure for overseas subsidiaries are included based upon monthly average exchange rates to give a fair approximation to the transaction rate. Balance sheet items are included at the exchange rate at the balance sheet date. All other differences are included within the translation reserve, including related goodwill and intangible assets, which are translated at the rate ruling at the balance sheet date (30 June 2012 £1 = RM 4.97, at 30 June 2011 £1= RM 4.88 and at 31 December 2011 £1 = RM 4.90).

5 Loss per share

The impact of options and warrants on the loss per share is anti-dilutive and therefore no diluted loss per share figures have been included.

6 Cash generated from/(used in) operations

7 Dividend

The directors do not recommend the payment of a dividend.

8 Contingencies

In the matter of dispute between Zurex, a subsidiary of Biofutures International plc and JJ-Lurgi, in connection with the contract between them dated 26 January 2007 for the supply of components for the construction of a palm oil biodiesel plant, the decision of the Arbitrator was received in February 2012.

The Arbitrator dismissed both Zurex's and JJ-Lurgi's claims. Since then, the parties have settled their dispute agreeing that Zurex will acquire components from JJ-Lurgi for RM800,000, payable by 12 equal monthly installments. With this final agreement not being reached by 30 June 2012, no provision has been made in these interim financial statements.

9 Restatement of comparative figures

The 30 June 2011 comparatives in the interim financial statements have been restated following a reclassification of fixed deposits pledged as security from cash equivalents to non-cash equivalents in order to be consistent with the approach adopted in the consolidated financial statements of the Group for the year ended 31 December 2011. 

The effect of foreign exchange rate changes arising as a result of the reclassification has been reflected accordingly.

The following comparative figures in the interim financial statements have been reclassified:

10 Availability of half yearly report

The Company's half yearly report will be available in soft copy from the investors' section of the Company's website (www.biofuturesplc.com).