InnoConcepts’ net profit after tax for the first half year of 2006 rose to EUR 4.2 million, an increase of 19% in comparison with the first half year of 2005.
• I-Pac Technologies entered the food packaging market with a first partner.
• InnoConcepts increases its stake in I-Pac to 100% by purchasing the remaining 1.4%.
In the first six months of 2006 the net profit after tax of InnoConcepts increased by 19% when compared to the first six months of 2005 from EUR 3.5 million to EUR 4.2 million.
This growth was primarily the result of the increased (royalty) income from I-Pac’s technology portfolio. Following the existing licenses and partnerships in multimedia packaging (including cd & dvd boxes) and plastic transport containers (including crates, pallets and big boxes), I-Pac has established its first partnership in food packaging with respect to generic and unbranded food packaging products in Europe.
In addition to the announced acquisition of 18.9% in I-Pac from KBC Private Equity on 19 July 2006, InnoConcepts has entered into agreements with the remaining third party shareholders to acquire their 1.4% interest in I-Pac, bringing InnoConcepts’ stake in I-Pac to 100%. As indicated in the press release dated 19 July 2006, InnoConcepts has attracted new financing in order to pay the EUR 20 million cash component to KBC Private Equity. InnoConcepts is in the process of re-assessing its financial ratios and the related financial structure. On that basis, InnoConcepts expects to refinance part or whole of the indebtedness incurred by the acquisition of the remaining I-Pac stakes through an equity offering.

NOTES ON FINANCIAL RESULTS The financial statements for the six months ended 30 June 2006 are reported under IFRS, while the half year results of the previous year were reported under Dutch GAAP. The financial statements for the first six months ended 30 June 2005 are therefore hereby restated to IFRS for comparison purposes.

For the eighth consecutive year since obtaining its listing on the stock exchange in 1998, InnoConcepts has increased its first half year results over the comparable period in the preceding year. The net profit after tax increased by 19% from Euro 3.5 million to Euro 4.2 million. Earnings per share rose by 10% from EUR 0.217 to EUR 0.238. In July 2005, InnoConcepts sold InnoCleaning Concepts, its cleaning and coating activities, to Proventec. The proceeds were paid by means of a convertible loan note and Proventec shares, giving InnoConcepts an interest in Proventec (39% of ordinary shares as per 30 June 2006). The results of the cleaning and coating activities have been included in the consolidated profit and loss accounts up to and including the first half of 2005.

Profit and loss account
Net profit after tax increased by 19% to EUR 4.2 million. The composition of the result has changed considerably primarily as a result of the deconsolidation of InnoCleaning Concepts and a contractual change with respect to the media packaging activities in Asia. Per 1 July 2005, InnoCleaning Concepts was deconsolidated following its sale to Proventec. As from that date no sales trading activities or sales intellectual property rights (IPR) or related costs of InnoCleaning Concepts are recorded in the profit and loss account. In the first half of 2006, income from Proventec is recorded under share of profits of associates. In December 2005, the European media packaging sales activities were divested in line with the strategic decision to dispose of direct selling activities and to focus on revenues from intellectual property (such as royalties and license fees). As a result the sales trading activities for this activity are no longer included in the profit and loss account as from 1 January 2006. In 2005, a royalty fee was paid by I-Pac’s licensee for media packaging in Asia for the use of equipment and technology combined. This royalty fee was recorded as sales IPR. For the 2006 financial year the use of the equipment qualifies as a financial lease as a result of a change in the nature of the contract with this licensee. Therefore, the financial information for the six months ended 30 June 2006 no longer includes the sales IPR in respect of this part of the revenue nor is the depreciation of the relating assets included. This income is shown under interest financial leases, representing the net proceeds received from the use of the assets. Due to the above mentioned changes, total sales for the six months ended 30 June 2006 were down by 45%, from EUR 12.7 million for the six months ended 30 June 2005 to EUR 7.0 million, with sales IPR reducing by 27% and sales trading activities decreasing by 95%.
Primarily as a consequence of the decline in direct trading activities, operating expenses decreased by 22% from EUR 1.9 million for the six months ended 30 June 2005 to EUR 1.5 million for the six months ended 30 June 2006. Principally as a result of the change in the contract with the I-Pac licensee in Asia, depreciation decreased considerably from EUR 2.7 million for the six months ended 30 June 2005 to EUR 0.5 million for the six months ended 30 June 2006. Including share of profits of associates, the total profit before interest and tax rose by 14% from EUR 5.4 million for the six months ended 30 June 2005 to EUR 6.2 million for the six months ended 30 June 2006.


Cash Flow
The cash flow from operating activities decreased by 123% from EUR 7.5 million for the six months ended 30 June 2005 to a cash outflow of EUR 1.7 million for the six months ended 30 June 2006, mainly due to the strategic decision to focus on IPR (such as royalties and license fees). License receivables fluctuate more during the year, while furthermore having a longer payment term than trade receivables, which causes an on average higher receivable position. The decrease in cash flow from operating activities is mainly due to this growth in receivables. Furthermore, more taxes where paid in the six months ended 30 June 2006, which resulted in a lower cash flow from operating activities. The cash outflow from investing activities decreased by 91% from EUR 6.4 million for the six months ended 30 June 2005 to EUR 0.6 million for the six months ended 30 June 2006. This decrease was mainly due to the fact that the group has ceased to invest in further expansion of the Asian media packaging activities, concentrating on spreading IPR to other market segments. Furthermore, in March 2006 InnoConcepts sold the Proventec convertible loan note, received as part of the proceeds from the sale of the cleaning activities. The sale of the attached conversion rights shows as a positive cash flow from investing activities. The cash flow from financing activities increased by 61% from EUR 2.5 million for the six months ended 30 June 2005 to EUR 4.1 million for the six months ended 30 June 2006 primarily due to the sale of the convertible loan note.

OPERATIONS AND PROSPECTS The trend in revenues whereby the revenues principally comprise Sales IPR as shown in the consolidated financial statements for the six months ended 30 June 2006 is expected to continue for the full year 2006 based on the strategic decision to focus on revenues from intellectual property. InnoConcepts enters food packaging market I-Pac is considering strategic opportunities in various plastic packaging markets such as the food packaging industry, being arguably one of the biggest sectors where I-Pac’s technology can be applied. The food packaging market is dominated by large global food groups as end customers and is very competitive and fragmented as regards packaging suppliers. This offers the opportunity for I-Pac to consider several exclusive licenses based on either product-market-combinations and/or geographical areas. A first partnership has been established for generic unbranded food packaging (including take away meals and meat packaging) in the European market. I-Pac’s partner in this segment is an international food packaging wholesaler who for competitive reasons has requested to remain undisclosed.

FULL OWNERSHIP OF I-PAC On 19 July 2006, InnoConcepts acquired 18.9% of I-Pac's issued share capital from KBC Private Equity. In connection with this acquisition InnoConcepts (i) paid a cash consideration of EUR 20 million and (ii) agreed to issue and place 1,547,000 new ordinary shares in InnoConcepts with KBC Private Equity. On 26 September 2006 InnoConcepts reached agreement to acquire the remaining 1.4% of I-Pac’s shares from I-Pac’s initial shareholders for a total consideration of EUR 2.3 million in cash. InnoConcepts is in the process of re-assessing its financial ratios and the related financial structure following the acquisition of full ownership of I-Pac. On that basis, InnoConcepts expects to refinance part or whole of the indebtedness incurred by the acquisition through an equity offering.

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