Preliminary Results for the year ended 31 December 2007

Environmental Recycling Technologies plc ("ERT" or "the Company") (AIM: ENRT), which has developed and is exploiting the patented rights to the Powder Impression Moulding ("PIM") process capable of converting mixed waste plastics into commercially viable products, announces its preliminary results for the year ended 31 December 2007.

Highlights

• The Company is now operating under an out-licensing business model - Consequent significant reduction in overhead and costs
• The Company continues to sign additional licensing -    Expected revenues of at least £1.0m from license fees
• Increasing interest in applications for the technology - Major interest in Eco Sheet
• Turnover £243,000 (2006: £ 319,000)
• Operating loss £4.74 million (2006: loss £2.62 million)
• Loss attributable to equity shareholders £5.69 million (2006: loss £8.49 million)

Chairman's Statement

The Group had a difficult year in 2007 with projects underway at the beginning of the year failing to gain traction as quickly as expected and with certain development projects turning out to be more expensive than anticipated. Furthermore, although we have disposed of the Bedwas facility, thereby greatly reducing our overheads, we were still maintaining a costly in-house project management and development team for most of the financial year. It was expected that projects that were underway would mature and come to fruition over the course of the year. The result is a considerable loss for 2007.

The Group has also faced various claims arising from the previous restructuring including an historic claim arising from the closure of the Group’s old operations in the Kyrgyzstan Republic. Our former Chief Executive Officer in the area has successfully maintained a compensation claim which we are contesting but have provided for in the Accounts. The Group no longer has any interests in Kyrgyzstan.

As a result of these high costs and provisions, the Group is reporting a loss from continuing operations before taxation of £5.7m (2006: loss £3.7m).

We have now reduced our overhead cost base to the minimum possible level by subsourcing activities wherever practical and we no longer manage projects in-house or undertake expensive product development work. Instead, under our revised business framework, we enter into licence agreements for the development, manufacture and use of our proprietary technology.

In effect we now operate as an intellectual property bank and we have been able to sign several new licences since 1 March 2008 which are expected to generate minimum revenue for the Group in the current financial year of £1.0m. This, combined with the Group’s new approach of operating at minimal overhead and outsourcing where possible has placed the Group in a more stable position for the future. We are particularly pleased by the rapid progress being made by 2K Manufacturing Limited which has secured its own funding and is progressing apace on its site acquisition and development programme.

Last summer the Group raised £2,800,000 via an equity issue to both new and existing shareholders. The funds raised were used to repay outstanding debt to Cornell Capital Partners and Montgomery Equity Partners and for working capital commitments. Both Cornell Capital Partners and Montgomery Equity Partners went through their own restructuring during 2007 and as a consequence the Group is now indebted to their successor YA Global Investments Limited. Following the repayment of debt and the conversion of £1.24 million of debt into equity the Group had total loans outstanding of £1.6 million as at 31 December 2007. This has been reduced further by £0.43 million since the year end. The board believes that following the reduction of debt we have finally turned the corner in relation to the Group’s indebtness. The loan facilities with YA Global Investments Limited expire in September 2010. More information on these facilities are set out in our previous announcement of 11 June 2008 and indeed in the Financial review that follows. Following the reduction in the creditor position of the Group and with our overheads falling significantly we believe that the out licensing business model can be made profitable.

I am pleased to welcome Roger Baynham into his executive role as Managing Director and Henry Bellingham MP as a non-executive. With David Shepley-Cuthbert our Finance Director and myself resuming the Executive Chairman role, as announced on 27 February 2008, I believe we have the right team to run this Group on a simplified out-licensing basis. It has taken far longer than anticipated, but the Group has seen its first royalty revenue in 2008. Additionally, the Board believes it will see significant royalty revenue arising in 2009. In the meantime we continue to market licences and, as mentioned above, our marketing strategy now is proving successful.

I would like to thank shareholders for their support in 2007, I believe strongly in the technology the Group possesses and in the future of this company.

Ken Brooks Chairman

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Managing Director’s review

As you will know I have been a non executive Director of ERT for the past 2 years and I was delighted to have been offered the position of Managing Director earlier this year. Ken Brooks and I have worked together for over 15 years, since our first business turnaround, Philip Tyler Polymers Limited, a plastic recycling company. This company has since delivered significant shareholder returns.

We believe that the successful business model which we devised for Philip Tyler Polymers should be used as a blueprint and adapted for ERT. As a result we have been tailoring the business such that its overhead costs are now significantly reduced and that commercial opportunities are exploited in conjunction with licencees.

The rebranding of ERT is intended to reflect the refocusing on commercialisation of the plastic Powder Impression Moulding (PIM) system in the UK and European environmental sector. The development of PIM products incorporating plastic waste in particular for the construction sector, has arisen due to increasing demand for sustainable products. The numerous industry awards for “Eco Sheet” are a testimony to this and we look forward to full scale production by 2K Manufacturing in 2009. Bovis has also helped provide a focus on Eco Sheet in the project which includes utilisation of waste streams from Tesco.

However, it is the step change in the plastic recycling sector which I believe will provide the catalyst for wider adoption of PIM. As Chairman of the WRAP (Waste Recourses Action Programme) Plastics Forum and Vice Chairman of the British Plastics Federation Recycling Council, I am fortunate to see both technical and commercial evidence of this step change. With plans for approximately 200,000 tonnes of post consumer bottle recycling capacity due to be delivered in the UK over the next 12 months, WRAP are now focusing on mixed waste recycling. An integrated approach will require a market for those significant out flows which cannot viably be separated. PIM provides that opportunity.

We are delighted by the recent progress of the Replas project. This was a DTI award, managed by PERA, with support from its commercial partners and its academic partner, Brunel University. As 2K Manufacturing move into their product development phase we envisage close cooperation with Brunel University which will accelerate the project and develop technical specifications and material formulations.

In addition significant progress has been made by our licencee, EPT with regards to the agreements with Contour and Mediwall. The PIM shower deck products were centre stage on the Contour stand at a recent exhibition and are currently in production at the Bedwas facility. The product development project for Mediwall is reaching a conclusion with positive results from the fire testing currently in progress.

Whilst our main focus is in UK it is our plan to offer territorial and sector franchising in order to accelerate licensing wherever possible either securing an upfront payment (possibly in instalments) or a transfer of overhead and liability effectively creating cost-savings for the Group.

Following this strategy, we have signed a number of licenses over the past 3 months: Most (but not all) involve up front licence fees and minimum royalties. Within the constraints of commercial confidentiality, we will separately announce the major details of the Licences but the brief headlines are:

These above new licence agreements are expected to generate minimum revenues of £1.0m in the year to 31 December 2008.

There is no doubt in my mind that we have made significant progress over the past few weeks and months, and whilst there is still a considerable amount of work to be done, I am confident that, as a result of adoption of our new business model, the commercialisation of PIM is now much closer to reality.

Roger Baynham Managing Director

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Financial Review

Results

Revenue for the year ended 31 December 2007 was £243,000 (2006: £319,000). The loss on operations was £4.74 million compared to losses of £2.62 million in 2006. Losses attributable to equity shareholders were £5.69 million (2006 loss £8.49 million).

Dividends and loss per share

No dividend payment is proposed. There remained 21.1 million warrants and 3.8 million shares under option at the year end which had no dilutive effect on the earnings per share. The loss per share was (4.01) pence compared to (10.91) pence in 2006.

Trading

Turnover included revenue for pre-production work and the release of licence income from deferred income.

Administrative expenses for continuing operations for the period were £3.72 million compared to £2.07 million in the same period in 2006. In addition to normal running expenses, they include corporate finance costs associated with the August 2007 placing and provision for increased depreciation for the US plant and machinery.

Exceptional expenses of £1.18 million compared to £1.01 million in 2006 cover provisions for contractual costs for product development for Mediwall and other contracts as well as provisions for legal and settlement costs associated with a former employee in Kyrgyzstan.

The reduction in general overheads continues as the company pursues its goal of becoming a virtual operation run on the minimal overheads associated with being an AIM listed company.

Disposal of non-core interests

In accordance with the previously stated policy of disposing of non-core interests to concentrate resources on PIM Process development, the company sold its investments in Medical Waste Solutions Limited and Value Plastic Technologies LLC. The Board considered that management time was better spent on the UK and European based activities of the Group. Medical Waste Solutions was subsequently refinanced by a consortium of venture capitalists. The operations of Value Plastic Technologies have been taken over by Global Tech International Inc. and the company is now effectively dormant. Overall the company’s stated policy has been followed in that these interests have been disposed of with resources in time and money being concentrated on UK and European operations of PIM Process.

Finance costs

During the IFRS conversion project, a number of warrants attaching to loans were identified which had not been previously accounted for. This has resulted in additional finance costs of £0.84 million (31 December 2006 £0.57 million) being charged to the income statement. Financing

As announced on 11 June 2008 the placing that was authorised at the EGM on 23 August 2007 has raised £2.8 million and has been used to pay down other third party loans and interest due as well as for product development and long standing creditors. The balance has been used to fund general working capital.

During the period, YA Global Investments Limited (“Yorkville”), successor to Cornell Capital Partners L.P. and Montgomery Equity Partners (collectively “Cornell”) converted a further £1.24 million into equity reducing the loans outstanding to £1.61 million. Since 31 December 2007, Yorkville have converted a further £0.43 million including £0.25 million applicable to accrued interest outstanding. In total, Yorkville/Cornell/Montgomery have converted £5.06 million at an average price of 5.12p per share.

The Standby Equity Distribution Agreement (SEDA) with Cornell to the value of £5 million was due to expire in September 2008. An extended SEDA for £5 million, on the same terms as Cornell, has been signed with Yorkville which expires in September 2010. No draw down has been made against this facility.

David Shepley-Cuthbert Finance Director

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Group Income Statement

The notes on pages 20 to 46 form part of these financial statements.

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Group Balance Sheet

The financial statements on pages 13 to 46 were approved and authorised for issue by the Board on 30 June 2008 and were signed on its behalf by:

K W Brooks Chairman

The notes on pages 20 to 46 form part of these financial statements.

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Company Balance Sheet

At 31 December 2007

The financial statements on pages 13 to 46 were approved and authorised for issue by the Board on 30 June 2008 and were signed on its behalf by:

K W Brooks Chairman

The notes on pages 20 to 46 form part of these financial statements.

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Group Statement of Changes in Shareholders’ Equity

Year ended 31 December 2006

Year ended 31 December 2007

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Company Statement of Changes in Shareholders’ Equity

Year ended 31 December 2006

Year ended 31 December 2007

The notes on pages 20 to 46 form part of these financial statements.

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Group cash flow statement