ENVIRONMENTAL CLEAN TECHNOLOGIES LIMITED. — Interim / Quarterly Report 2004

Feb 12, 2004

Appendix 4D

Half yearly report

Name of entity

ENVIRONMENTAL SOLUTIONS INTERNATIONAL LTD

ABN or equivalent company reference	Half year ended ('current period')
28 009 120 405	31 December 2003
For announcement to the market Extracts from this report for announcement to the market.				SA'000
Revenues from ordinary activities	Uр	127%	- to	17,701
Profit (loss) from ordinary activities after tax attributable to members	Up	$54\%$ to		(1,806)
Net profit (loss) for the period attributable to members	down	$54\%$ to		(1,806)
Dividends		Amount per security		Franked amount per security
Interim dividend		NIL		NIL
Previous corresponding period		NIL		NIL
+ Record date for determining entitlements to the dividend Brief explanation of any of the figures reported above and short details of any other item(s) of importance not	N/A
previously released to the market: Refer accompanying report.

NTA backing	Current period	Previous corresponding period
Net tangible asset backing per $+$ ordinary security	\$0.079	\$0.123

Control gained over entities having material effect

Name of entity (or group of entities)

Consolidated profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) since the date in the current period on which control was $\dot{\tau}$ acquired

Date from which such profit has been calculated

Profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) for the whole of the previous corresponding period

Loss of control of entities having material effect

Name of entity (or group of entities)

Consolidated profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) for the current period to the date of loss of control

Date to which the profit (loss) in item 14.2 has been calculated

Consolidated profit (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) while controlled during the whole of the previous corresponding period Contribution to consolidated profit (loss) from ordinary activities and extraordinary items from sale of interest leading to loss of control

Dividends (in the case of a trust, distributions)

Date the dividend (distribution) is payable

$+$ Record date to determine entitlements to the dividend (distribution) (ie, on the basis of proper instruments of transfer received by 5.00 pm if $+$ securities are not $+$ CHESS approved, or security holding balances established by 5.00 pm or such later time permitted by SCH Business Rules if $+$ securities are $+$ CHESS approved)

Amount per security

		Amount per security	Franked amount per security at $%$ tax	Amount per security of foreign source dividend
Interim dividend: Current year	Previous year

Interim dividend (distribution) on all securities

	Current period \$A'000	Previous corresponding period - \$A'000
$+$ Ordinary securities (each class separately)	NIL	NIL
Preference + securities (each class separately)
Other equity instruments (each class separately)
Total	NIL	NIL

The $\dot{\tau}$ dividend or distribution plans shown below are in operation.

The last date(s) for receipt of election notices for the ⁺dividend or distribution plans

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Any other disclosures in relation to dividends (distributions). (For half yearly reports, provide details in accordance with paragraph 7.5(d) of AASB 1029 Interim Financial Reporting)

Details of aggregate share of profits (losses) of associates and joint venture entities

Group's share of associates' and joint venture entities':	Current period \$A'000	Previous corresponding period - \$A'000
Profit (loss) from ordinary activities before tax
Income tax on ordinary activities
Profit (loss) from ordinary activities after tax
Extraordinary items net of tax
Net profit (loss)
Adjustments
Share of net profit (loss) of associates and joint venture entities

Material interests in entities which are not controlled entities

The economic entity has an interest (that is material to it) in the following entities. (If the interest was acquired or disposed of during either the current or previous corresponding period, indicate date of acquisition ('from dd/mm/yy') or disposal ('to dd/mm/yy').)

Name of entity	Percentage of ownership interest held at end of period or date of disposal		Contribution to net profit (loss)
Equity accounted associates and joint venture entities	Current period	Previous corresponding period	Current period SA'000	Previous corresponding period- \$A'000
Total
Other material interests
Total

Foreign Entities

For foreign entities, which set of accounting standards is used in compiling the report (e.g. International Accounting Standards)

Audit Dispute or Qualification

For all entities, if the ⁺accounts are subject to audit dispute or qualification, a description of the dispute or qualification should follow:

• See chapter 19 for defined terms.

HALF YEAR ENDED 31 DECEMBER 2003 REVIEW OF OPERATIONS

Environmental Solutions International Limited (ESI) recorded a disappointing loss of \$1.8M in the half year ended 31 December 2003.

The company has experienced significant recent growth which has meant several major wastewater and potable water treatment contracts were commenced almost simultaneously across Australia. This growth has come at the same time as a significant tightening in the market for engineers and other technical people particularly with water and wastewater treatment skills. The inability to recruit sufficiently experienced personnel placed major strains on our existing staff, resulting in difficulties in some areas of project delivery and consequent cost overruns.

A thorough review of all major contracts has been undertaken at the half-year and all known and anticipated cost overruns have been brought to account in the above result.

The company has recruited and continues to recruit new staff and believes that the current and projected workload can now be delivered satisfactorily and profitably.

On the upside the half-yearly result does not include a number of variation claims which are currently being pursued with clients. The second half is projected to recover some of the losses but at this stage we do not believe the recovery will be sufficient for the year as a whole to be profitable.

Importantly, the company is finalising the delivery of two potable treatment plants which, although they presented their own set of technical and project delivery difficulties are now essentially delivered to the satisfaction of the clients concerned and are operating to contractual specifications. The company believes that there are significant opportunities for it to develop in the potable water business.

ENERSLUDGE^TM

As previously advised, the Board is pursuing the option of finding a Strategic Partner to participate in the final steps of the commercialisation of the technology. ESI and its UK-based consultants have identified several companies who meet the criteria set by ESI.

Preliminary discussions have commenced and negotiations will be advanced during meetings in Europe in the next 3 months.

OUTLOOK

Whilst Directors are very disappointed with the first half results they believe that the above mentioned issues have been addressed. They are encouraged by the company's still strong order book which currently stands at approximately \$60M with an additional \$18.5M being at "preferred tenderer" stage. The company remains debt free and continues to win new work.