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AgCert Intl PLC (AGC)

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Thursday 27 September, 2007

AgCert Intl PLC

Full Interim Results

AgCert International PLC
27 September 2007





Interim results for the six months ended 30 June 2007


DUBLIN, 27 September 2007 - AgCert International plc ('AgCert'), a leader in the
production of greenhouse gas emission reductions, is pleased to announce its
Half Year Results for the next six months ended 30 June 2007.


Highlights:

AgCert continued to make significant progress in the first half of 2007.  The
momentum around its new initiatives started building, and the delivery risk for
2008 and beyond has been substantially mitigated.

AgCert has entered into a heads of terms with a major European trading company
(the 'Trading Counterparty') under which the Trading Counterparty would assume
up to 4.2 million tonnes of AgCert's customer delivery obligations through 2008,
contingent upon, among other things, final documentation, Board and shareholder
approval and finalisation of negotiations with customers.

AgCert has entered into an agreement that has the effect of increasing by US$7
million, and rescheduling its outstanding indebtedness with Laurus Master Fund,
making the whole of the indebtedness convertible into equity at a premium to the
current share price, extending the due date from May 2008 to half in March and
half in May 2009, contingent upon shareholder approval, finalisation of the
transaction with the Trading counterparty among other things.

If the proposed transaction with the Trading Counterparty is completed, AgCert
will have the ability to satisfy its forward delivery obligations by
re-balancing its delivery commitments and would expect to be long through 2012
and beyond


      • 100% of original 2007  deliveries would be  covered
      • 86% of original 2008 deliveries would be covered with existing
        production and contracts, compared to 32% in May 2007
      • 80% of 2009 would be covered with existing production and contracts


A further announcement will be made and a circular will be sent to shareholders
as soon as documentation has been signed and negotiations finalised.


Existing Production

The company's own Animal Waste Management business is producing up to
expectations, at a level of approximately 1.4 million tonnes per year, which
represents an increase of 40% since January 2007.


New Strategic Initiatives

Future production from implementation of new strategic initiatives includes:


(i)  TurboGreen, AgCert's strategic account business focusing on large
     industrial projects:

       -  Built a strong pipeline of more than 100 potential offset-creating
          projects since May, representing a potential of several million annual 
          credits to AgCert
       -  Identified potential projects in cement, landfill, energy and fuel 
          switching industries
       -  Executed its first contract for hydro-electric plant in Colombia


(ii)  Agency, AgCert's carbon acquisition business

       -  Completed 3 agency contracts for 2.4m tonnes since May 2007 for delivery 
          through 2012

(iii) Forestry Products Business

       -  Signed a joint venture agreement with Forest Systems, an established 
          forest investment management firm and manager of a carbon forest 
          sequestration fund

The current portfolio of Offsets through 2012 expected from its biodigester,
strategic accounts and agency business breaks down as follows:


In negotiation                     28.0 million tones
Under 'Letter of Intent'           2.0
Contracted                         16.0


  • Developed new strategy requiring significantly lower capital

  • Headcount was reduced to 193 compared with 312 at Dec. 2006 and 270 at
    June 2006

  • Revenues grew to €2.4m during the first half of year 2007, compared with
    €25,000 for the period in 2006

  • Cash on hand at end of period of €27.7M vs. €26.5M at June 2006

  • Operating losses, before financial costs, fell to €22m, compared with a
    loss of €47m incurred during the first half of 2006

  • The normalised EBITDA loss for the period was €13.4m compared with a
    normalised EBITDA loss of €15.7m for the 2006 half year results

  • Received review date from US Patent Examiner of no later than Q1 2008
    regarding our patent application covering the creation of greenhouse gas
    offsets, and AgCert will be notifying potential infringers of intellectual
    property


Overall, AgCert continued to make significant progress in the first half of
2007. The momentum around its new initiatives started building, and the
delivery risk for 2008 and beyond has been substantially mitigated.


Analyst Meeting

AgCert is holding a conference call for analysts today at 16.00 BST.  Analysts
wishing to participate should contact Anthony Parker/Karlie Nichols at College
Hill on +44 20 7457 2020 for further details.


27 September 2007


ENQUIRIES:

AgCert International
Bill Haskell, CEO, AgCert International                      +353 (0) 1 245 7400
Paul D'Alton, Finance Director

College Hill
Anthony Parker                                              +44 (0) 207 457 2020
Mark Garraway


More information about AgCert's greenhouse gas reduction projects can be found
at www.agcert.com.


The shares of AgCert International plc (the 'Shares') have not been and will not
be registered under the U.S. Securities Act of 1933, as amended (the 'Securities
Act').  The Shares may not be offered or sold in the United States, or to, or
for the account or benefit of, U.S. persons as such term is defined in
Regulation S under the Securities Act except (1) in a transaction meeting the
requirements of Regulation S under the Securities Act, (2) pursuant to an
effective registration statement under the Securities Act, or (3) pursuant to an
available exemption from the registration requirements of the Securities Act, in
each case in accordance with all applicable securities laws, including
applicable state securities laws of the United States.


AgCert International plc

Chairman's Letter to condensed consolidated Interim Financial statements
Period From 1 January 2007 to 30 June 2007


Overview

During the first half of 2007, AgCert embarked on a revised and expanded
strategy to secure a supply of greenhouse emission reduction offsets to build
its business and to meet is contractual delivery obligations.  This entailed
raising fresh equity capital, reducing operating expenses and reorganising
business operations to significantly reduce capital intensity.  The results of
these actions are being seen only now, several months following the end of the
first half, and they are encouraging in their direction and long term magnitude
but, as a result of higher offset prices and longer than expected project
cycles, insufficient, alone, for the Company to meet its 2008 delivery
obligations of approximately 7.2 million CERs.  As a result the Company has
sought to supplement its operational activities with transactional ones.

The Company is in advanced negotiations with several counterparties to
re-balance the Company's contractual delivery obligations, and has entered into
a heads of terms agreement with a major European trading company to assume the
Company's CER deliveries of 4.2 million through the end of 2008, subject to
among other things, final documentation, Board and shareholder approval and
finalization of negotiations with customers.

In addition it has executed an agreement with its lender, to extend the maturity
of its loan note in March and May 2009, to make available an additional $7
million (subject to the satisfaction of certain tests) and to make the debt
convertible into equity at a premium to the pre-announcement market price.  The
agreement is subject to, among other things, shareholder approval and
finalization of the transaction with the Trading counterparty.  Its
equity-linked features (warrants and potential conversion) would be dilutive to
shareholders.


New strategy

At the time of the IPO the Company's business model was focused on the
construction of modified animal waste management systems using biodigesters to
capture and combust methane.  The Company incurred all of the capital
expenditures up front and assumed the regulatory risk, but was entitled to
receive the majority of the Offsets generated.

Since then, the Company has experienced a number of challenges in the
implementation of its original business model that have led to its operational
and financial performance being below expectations.

In May, the Company completed an equity transaction raising approximately €30
million from selling new shares and capitalizing approximately €14 million of
shareholder loans, to fund its revised and expanded strategy.  The new strategy
is designed to lower the Company's Offset costs and to accelerate the
accumulation of Offsets by leveraging the Company's extensive CDM regulatory
experience for use with others in situations where the Company does not invest
its own capital.  In addition, the Company is working to improve its core AWMS
operations.  In implementing the new strategy, the Company intends to create
Offsets from its AWMS business (animals) and to source Offsets from its new
business ( strategic accounts, agency/forward purchases and forestry).


Results

Revenues and operating costs for the first half 2007 are in line with our
expectations.  The Company completed its announced reduction in staffing and
operating costs after the close of the first half. Total headcount at 30 June
2007 was 193 as compared to 317 at year end 2006 and 272 at 30 June 2006.  After
an extensive site by site review of its biodigesters, the Company has taken an
impairment charge of €6.8 million for those sites which have chronically
underperformed and other sites determined uneconomic prior to completion.  The
total number of impaired locations represents 129 of 695 total biodigester
locations.  The Company reported a normalized EBITDA loss for the period of
€13.4 million (before impairment provision) compared with a normalized EBITDA
loss of €15.7 million for the same period in 2006.  The 2007 half-year results
do not capture the full impact of the headcount reductions as they were made
late in the first half.

Progress under the new strategy during the first half and until mid-September
has been steady but slower than anticipated.

  • The Company's existing production (AWMS business) is producing up to our
    expectations, at a level of approximately 1.4 million tones per year which
    represents an increase of 40% since January 2007.
  • In strategic accounts the Company has built a strong pipeline of more than
    100 potential Offset-creating projects and has signed its first one, a
    hydro-electric plant in Colombia.  The potential projects include the
    industry areas of, cement and other basic industries, landfill, energy, and
    fuel switching.  Although the Company has uncovered a large number of
    potential projects, the project approval cycle at the host company (prior to
    any regulatory activities) is proving to be longer than the Company had
    expected, giving us confidence in the ultimate size of the market, but
    leading us to lengthen the time in which we expect host companies to approve
    projects.
  • The Company has completed 3 agency transactions covering 2.4 million CERs
    through 2012 and finds there to be adequate volumes of CERs available in the
    market - albeit at rising prices since the May equity placing.  AgCert has
    sought to secure CERs which are earlier in the regulatory process than it
    had originally planned as CERs from these projects are less expensive, but
    carry more regulatory risk, and require a longer lead time to generate CERs.
  • Progress in the forestry area is ahead of the Company's expectations,
    including the completion of a joint venture with Forest Systems, an
    established forest investment management firm and manager of a forest carbon
    sequestration fund.  Forestry projects produce a different variety of
    Offsets which are not fungible with CERs, but once established, forestry
    activities can produce Offsets over the decades-long project life.  Forestry
    projects initiated now would be expected to first produce offsets in about
    2011.


As of this date, the current portfolio of Offsets through 2012 expected from its
biodigester, strategic accounts and agency business breaks down as follows:


In negotiation                     28.0 million tones
Under 'Letter of Intent'           2.0
Contracted                         16.0



Outlook

In parallel to its operational initiatives to secure Offsets, the Company has
been exploring transactional sources to supplement its internal Offsets.

The Company has made good progress toward satisfying its delivery obligations,
and assuming that the transaction with the Trading counterparty closes, believes
that its 2007 deliveries are covered with existing production and contracts,
while those for 2008 would be 86% covered with existing production  and
contracts as compared to 32% in May 2007.  Further in the future, the Company
believes that 80% of 2009 deliveries would be similarly covered.

The Company is negotiating transactions with several counterparties to rebalance
its customer deliveries in 2008 and beyond.  The goal of the transactions is to
put the Company on a positive pathway to building its run rate of Offsets and to
rebuilding shareholder value for the future.


Merrick G. Andlinger
Chairman



27 September 2007

Introduction

We have been engaged by the company to review accounting policies, consolidated
interim income statement, consolidated interim balance sheet, consolidated
interim statement of cashflows, interim statement of recognised income and
expense and the related notes 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.

This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the UK Financial Services Authority.  Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose.  To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we have reached.


Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors.  The directors are
responsible for preparing this interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual financial statements except where any changes, and the reasons
for them, are disclosed.


Review work performed

We conducted our review in accordance with guidance contained in APB Bulletin
1999/4 Review of interim financial information issued by the Auditing Practices
Board for use in Ireland and the United Kingdom.  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 is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing (UK and Ireland) ('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 June 2007.


KPMG
                                                               27 September 2007

Chartered Accountants
Registered Auditor




Income statement


                                                              Half Year             Year          Year
                                                              30-Jun-07        30-Jun-06     31-Dec-06
                                                   Note           €'000            €'000         €'000

                                    Revenue           2           2,470               25           220


Wages and salaries                                              (7,268)          (6,510)      (15,944)
General and administrative expenses                             (5,041)          (4,277)      (10,034)
Professional and legal expenses                                 (1,619)          (2,487)       (5,033)
Raw materials and consumables used                              (1,990)             (22)         (195)
Depreciation and amortisation                                   (1,143)            (344)       (1,505)
Employee share based payments                        11           (949)            (952)       (3,176)
Write off of inventory                                                           (2,406)       (2,658)
Impairment of assets                                  3         (7,673)                -             -
Contract management                                                   -         (30,000)      (50,000)
Loan Conversion feature                               8           1,245                -             -
Operating loss before financing costs                          (21,968)         (46,973)      (88,325)

Financial income                                      4             455              346           619
Financial expense                                     4         (6,952)            (501)       (5,678)

Net financing costs                                             (6,497)            (155)       (5,059)

Loss after financing costs                                     (28,465)         (47,128)      (93,384)

Loss before tax                                                (28,465)         (47,128)      (93,384)

Income tax expense                                    5            (41)            (164)         (375)
                                                             __________       __________        ______
                                                                          
Loss for the period                                            (28,506)         (47,292)      (93,759)

Attributable to:
Equity holders of the parent                                   (28,506)         (47,292)      (93,759)
Basic (loss) per share                      6                    (0.15)            (0.3)        (0.58)
Diluted (loss) per share                    6                    (0.15)            (0.3)        (0.58)



On behalf of the board

Merrick G Andlinger                                     Paul M D'Alton
Director                                                Director
27 September 2007                                       27 September 2007






                                           Note              Half        Half         
                                                             Year        year        Year 
                                                          30 June        June         Dec
                                                             2007        2006        2006
                                                            €'000       €'000       €'000
Foreign exchange translation differences
on net investment in foreign operations    10               1,806     (2,314)     (3,027)
Income and expense recognised
directly in equity                                          1,806     (2,314)     (3,027)

Loss for the period                                      (28,506)    (47,292)    (93,759)

Total recognised income
and expense for the period                               (26,700)    (49,606)    (96,786)

Attributable to:
Equity holders of the parent                             (26,700)    (49,606)    (96,786)



Merrick G Andlinger                                     Paul M D'Alton
Director                                                Director
27 September 2007                                       27 September 2007






Consolidated Balance Sheet
                                                                    Half Year              Year        Half Year
                                                                 30 June 2007       31 Dec 2006     30 June 2006
                                                     Note               €'000             €'000            €'000
Assets
Property, plant and equipment                           7              66,607            64,443           53,118
Goodwill and intangible assets                                          2,524             3,447            3,541
Total non-current assets                                               69,131            67,890           56,659

Inventories                                                             4,307             3,106            1,039
Trade and other receivables                                             2,054             2,896            1,761
Cash and cash equivalents                                              27,745            27,576           26,482
Total current assets                                                   34,106            33,578           29,282


Total assets                                                          103,237           101,468           85,941

Equity
Issued capital                                         10             170,609           128,284          128,352
Translation reserve                                    10               (864)           (2,670)          (2,315)
Warrant Reserve                                        10              11,923            11,923            2,054
Equity incentive reserve                               10               4,700             3,905            1,937
Retained earnings                                      10           (141,158)         (112,805)         (66,582)


Total equity attributable to equity                                    45,210            28,637           63,446
holders of the parent


Liabilities
Deferred Revenue                                       12              38,505            37,215           17,946
Loans due after 1 year                                                      -            13,982                -
Finance lease liabilities (non-current)                 9                 108               156              225


Total non-current liabilities                                          38,613            51,353           18,171

Trade and other payables                                                8,351             7,713            4,210
Loans due in less than 1 year                           8              10,905            13,641                -
Finance lease liabilities (current)                     9                 158               124              114


Total current liabilities                                              19,414            21,478            4,324

Total liabilities                                                      58,027            72,831           22,495

Total equity and liabilities                                          103,237           101,468           85,941





Cash Flow Statement

                                                                    Half Year     Half Year          Year
Cash flows from operating activities
Loss before taxation                                                 (28,465)      (47,292)      (93,384)
Adjustments for:
Interest income                                               4         (455)         (346)         (619)
Interest expense                                              4         7,344           371         5,678
Depreciation and amortisation                                           1,143           344         1,505
Employee share based payments                                11           949           952         3,176
Contract management payments                                                -        30,000        50,000
Fair valuation of inventory                                                 -         2,406         2,658
(Increase)/Decrease in inventories                                    (1,201)       (2,168)       (4,487)
(Increase)/Decrease in trade and other receivables                       396            447         (688)
Increase/(Decrease) in trade and other payables                         (567)       (3,984)         2,801
Income tax paid                                                         (154)             -         (375)
Deferred Revenue                                                            -             -        35,919
Impairment of Fixed Assets                                    3         7,673             -             -
Loan Conversion feature                                       8       (1,245)             -             -
Net cash outflow before contract management                          (14,582)      (19,270)         2,184

Contract management payments                                                -      (30,000)      (50,000)

Net cash outflow from operating activities                           (14,582)      (49,270)      (47,816)

Cash flows from investing activities
Interest income                                               4           455           346           619
Property, plant and equipment constructed                             (6,946)      (12,707)      (28,802)



Net cash from investing activities                                    (6,491)      (12,361)      (28,183)


Cash flows from financing activities
Proceeds from the issue of share capital                               30,245        40,435        40,466
Proceeds from the issue of debt                                             -             -        32,591
Payment of transaction costs                                          (2,665)          (23)         (134)
Interest expense                                              4         (794)         (371)          (22)
Finance Costs                                                               -             -       (1,321)
Deferred Revenue                                                            -             -         4,081
Prepaid inventory financing                                  12             -        20,000             -
Payment of finance lease liabilities                                     (42)          (13)         (171)
Loan repayment                                                        (5,502)             -             -


Net cash from financing activities                                     21,242        60,028        75,490





Condensed consolidated interim cash flow statement

For the six month period from 1 January 2007 to 30 June 2007


                                                           Half Year 30     Half Year 30  Year 31 December
                                                        June 2007 €'000  June 2006 €'000        2006 €'000

Net Increase/(decrease)
in cash and cash equivalents                                        169          (1,603)             (509)


Cash and cash equivalents at beginning of period                 27,576           28,085            28,085


Cash and cash equivalents
at end of period                                                 27,745           26,482            27,576



On behalf of the board

Merrick G Andlinger                                 Paul M D'Alton
Director                                            Director
27 September 2007                                   27 September 2007



Subsequent events

Since the balance sheet date, the Company has taken steps to rebalance its
delivery portfolio and to reschedule certain debt repayments.


a)  Debt rescheduling

The Company has agreed to repay a convertible loan note originally issued to
Laurus Master Fund Ltd, which was due to May 2008.  The Laurus note was replaced
with a new note to certain affiliates of Laurus due half in March and half in
May 2009.

In addition, the Company has also agreed to a further credit facility of US$7
million, draw down being subject to certain conditions.

The loans will be secured and are convertible into equity at a price of £0.255,
a premium to the average closing price of the Company's shares for the five
business days prior to this announcement trading levels.

In addition, there will be warrant covering 150% of the total investment amount,
being the principal of both the original and the new loans, two thirds of which
are exercisable at a price of £0.255 and one third at £0.40. The repayment is
subject to shareholder approval and finalisation of the transaction with the
Trading Counterparty mentioned below.


b)  Restructuring of delivery schedule

The company has entered into heads of terms with a major European trading
company (the 'Trading Counterparty') under which the Trading Counterparty would
assume 4.2 million tonnes of AgCert's customer delivery obligations through
2008, contingent upon, among other things, final documentation, board and
shareholder approval and finalisation of negotiations with customers.

Consideration payable by the Company to the counterparty for agreeing to enter
into the above novations will comprise one or other of the following options or
a combination thereof:

  (1)  Delivery of a maximum of 4 million CERs to the counterparty between
       2009 and 2012 or
  (2)  Issue to the counterparty of a maximum of €20 million convertible
       debt

If the convertible debt, rather than CER delivery is availed of, the debt will
be secured and rank pari passu with Laurus.

The counterparty will also have an option to purchase 2 million CERs in each of
2013 and 2014 at a price equal to 75% of market price.




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