ACE.L Regulatory News (ACE)

AUHUA CLEAN ENERGY PLC

(the "Company", "Auhua" or the "Group")

INTERIM RESULTS

30 September 2015: Auhua Clean Energy plc (AIM: ACE), the AIM quoted environmental technology group based in the Shandong Province of Eastern China today announces its unaudited results for the six months ended 30 June 2015.

Highlights

· Revenue remained stable at RMB 112.8 million: GBP 12.1 million (30 June 2014: RMB 116.2 million: GBP 11.1 million).

· Strong focus on selling to property developers resulted in a 2.3% increase in number of units sold to 37,356 (30 June 2014: 36,500).

· Order book increased by 67% to RMB 133.5 million as at 30 June 2015: GBP 13.9 million (30 June 2014: RMB 80.0 million: GBP 7.6 million).

· Gross profit remained stable at RMB 49.1 million: GBP 5.3 million (30 June 2014: RMB 50.9 million: GBP 4.8 million) as did gross margins at 44% (30 June 2014: 44%).

· Net profit before tax remained stable at RMB 24.8 million: GBP 2.6 million (30 June 2014: RMB 25.6 million: GBP 2.4 million).

· Net assets increased by 21% to RMB 286.3 million: GBP 29.7 million (30 June 2014: RMB 236.8 million: GBP 22.6 million).

· Cash balances dipped to RMB 36.9 million at 30 June 2014: GBP 3.8 million (30 June 2014: RMB 45.5 million: GBP 4.3 million).

· Earnings per share at the half year of RMB 0.18: GBP 0.02 (30 June 2014: RMB 0.21: GBP 0.02).

· Successful fund raise with gross proceeds of GBP 1.72 million in June 2015.

· Post-period event:

- Investment of USD 700,000 secured for Taiwan Ziolar, resulting in the cessation of Taiwan Ziolar as a wholly-owned subsidiary of the Group.

Outlook

· China property decline appears to be bottoming out but outlook remains challenging.

· Strong order book and a steady balance sheet, supported by proven technical capabilities and an established brand reputation will enable the Group to continue to maintain good revenues and profits.

David Sumner, non-executive Chairman of Auhua, said, "I am pleased to report a solid set of results for the six months ended 30 June 2015. In spite of a bearish property sector in China, we have continued to maintain strong revenues and excellent margins.

The Shandong province, where Auhua operates, is the leader in China's solar thermal initiatives and Auhua's products are currently the only five star rated split-unit solar water heaters. This gives us a competitive advantage and our strategic focus remains to continue investing in research and development to ensure we remain on the cutting-edge of solar thermal technological innovation."

 * All RMB amounts translated using an exchange rate:

RMB 1 : GBP 0.10376 (as at 30 June 2015)

RMB 1 : GBP 0.09527 (as at 30 June 2014)

Further information

Notes to Editors:

About Auhua Clean Energy

Auhua Clean Energy is an environmental technology group based in the Shandong Province of Eastern China specialising in the development and application of green energy and energy efficient solar water heating solutions. In particular, the Group is focused on the manufacture and sale of split-unit solar water heating systems.

Auhua Clean Energy operates through its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd and Weihua Auhua New Energy Co., Ltd., of which Auhua Holdings Pte Ltd is the intermediate holding company.

Chairman's Statement

Business Review

On behalf of the Board of Directors, I am pleased to present the unaudited accounts for the Group for the six month period ended 30 June 2015.

The Group has maintained a strong level of sales over the previous 6 months despite the economic downturn in China, with revenue remaining stable at RMB 112.8 million: GBP 12.1 million (30 June 2014: RMB 116.2 million: GBP 11.1 million).

Gross profits also remained stable at RMB 49.1 million: GBP 5.2 million (30 June 2014: RMB 50.9 million: GBP 4.8 million) as did gross margins of 44% (30 June 2014: 44%), despite the Group targeting larger property developers in China who are often more price sensitive. Net profit after tax was RMB 17.0 million: GBP 1.8 million (30 June 2014: RMB 17.4 million: GBP 1.7 million).

Financial Performance

Gross profit remained stable at RMB 49.1 million: GBP 5.2 million (30 June 2014: RMB 50.9 million: GBP 4.8 million) as did gross margins of 44% (30 June 2014: 44%) despite the Group offering discounted prices to secure projects with larger property developers who were also rolling out large scale low cost housing.

Administrative expenses fell during the period by RMB 0.8 million (GBP 0.1 million) to RMB 12.2 million (GBP 1.3 million), whilst profit before tax remained steady at RMB 24.8 million: GBP 2.6 million (30 June 2014: RMB 25.6 million: GBP 2.4 million)

The Group's trade receivables increased to RMB 120.8 million: GBP 12.5 million (H1 2014: RMB 84.5 million: GBP 8.1 million) due to the tight domestic debt markets affecting our customers. In shifting our focus to the larger property developers, we have provided some of our larger clients with longer credit terms. Some of our customers have also slowed down their property roll-out plans and have requested longer installation periods and commissioning phases, thereby affecting the collection period. As a result, our debtor days increased from 129 days for FY 2014 to 191 days for H1 2015 (131 days for H1 2014) with 35% of debtors being less than 180 days. Overall, trade receivables represent 107% of our H1 2015 turnover (H1 2014: 72%).

Inventory levels increased to RMB 11.1 million: GBP 1.1 million (FY 2014: RMB 7.0 million: GBP 0.7 million) and due to these relatively low levels we do not hedge against raw material price fluctuations. Inventory was kept low despite the increase in activity due to the increase in trade receivables and the Group's prudent cash management policy.

As such, the Group maintained a strong financial position with a balance sheet debt ratio of 22.1%. Cash and cash equivalents held at 30 June 2015 were RMB 36.9 million: GBP 3.8 million compared to RMB 45.5 million: GBP 4.3 million at 30 June 2014.

Currently, the Group has a combined capacity of an estimated 90,000 units per annum but has the potential to increase production capacity by a further 60,000 units in the factory in Weihai city.

China Property Market

The Chinese property market appears to be bottoming out. Prices of new homes in 288 cities rose by an average of 0.07 per cent in August 2015 from a year earlier, the first year-on-year rise since November 2014 (according to a recent poll by the property services firm, China Real Estate Information Corporation (CRIC). Many cities in China have started to loosen the property restrictions imposed over the last year.

The relaxing of property restrictions is still expected to have a muted response due to China's GDP slowing down and its PMI dropping to 47, its lowest since 2009. As such, the Company has seen many of its contracts delayed and its order book increase by over 50%.

Taiwan Ziolar

In September 2015, Taiwan Ziolar secured further investment from an independent investor. The Company's ownership has been significantly diluted as a result of the investment and Taiwan Ziolar is now an affiliate of the Company. The Group has negotiated an arrangement with Taiwan Ziolar and its new majority shareholders such that the Group will benefit from the use of the intellectual property if Taiwan Ziolar is successful in the development of its technologies in the future. The Group has not made any provisions for its Taiwan Ziolar investment for 1H 2015 but will review its investment value for the full financial year ending 31 December 2015.

Outlook

Despite the challenges of the Chinese property market, the Company continues to maintain its sales. Attempts to enter into the UAE solar water heating market have progressed well but securing firm orders has taken longer than anticipated. In time, the Group expects the Chinese market to improve and for its investment in the UAE to be realised, however this is not expected to take place during 2015.

Nevertheless, the Directors remain confident of the Group's prospects as it continues to have good revenues, a strong order book and a sound balance sheet, supported by proven technical capabilities and an established brand reputation in China.

David Sumner

Non-executive Chairman

Auhua Clean Energy Plc

Unaudited Consolidated Statement of Comprehensive Income

For the six month period ended 30 June 2015

Unaudited Consolidated Statement of Changes in Equity

For the six month period ended 30 June 2015

Consolidated Statement of Financial Position

As at 30 June 2015

Consolidated Statement of Cash Flows

For the six month period ended 30 June 2015

Basis of Presentation and Summary of Significant Accounting Policies

1. General information and principal activities

The financial information for the six months ended 30 June 2015 and 30 June 2014 set out in this interim financial information is unaudited and does not constitute statutory financial statements. The financial information for the year ended 31 December 2014 set out in this interim financial information does not comprise the Group's statutory financial statements but has been extracted from those financial statements.

The directors approved the interim financial information for the six months ended 30 June 2015 on 29 September 2015.

Copies of this interim financial information will be available on the Company's website:

www.auhuacleanenergy.com.

The interim financial information has been prepared in accordance with the principles of IFRS as adopted by the European Union. The standards have been applied consistently (except as otherwise stated).

The statutory financial statements for the year ended 31 December 2014, which have been filed at Jersey Registrar of Companies, were prepared under IFRS and IFRIC interpretations as adopted by the European Union.

The accounting policies adopted by the Group in this interim financial information is consistent with those set out in the Annual Report for the year ended 31 December 2014, have been consistently applied to all periods presented and are consistent with those accounting policies the Group expects to be using in the Annual Report for the year ended 31 December 2015.

2. Operating segments

For the purpose of IFRS 8, the chief operating decision-maker ("CODM"), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. Auhua is an environmental technology group specialising in the development and application of green energy and energy efficient solar water heating solutions. The Group's revenue and profit before taxation were all derived from its principal activity. Revenues from all periods were derived from external customers based in China. The operations are based in China and its assets and liabilities related to this single business segment. The CODM therefore considers that the business of the Group comprises a single activity and that therefore only one reportable segment exists.

3. Taxation

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rates is as follows:-

No deferred tax assets or liabilities are recognised, principally as result of the taxable profit for the Group equating to accounting profit.

4. Property, plant and equipment

5. Other intangible assets

The goodwill is primarily attributable to expected synergies arising from the acquisition, which is not separately recognised.

Goodwill

The recoverable amount of goodwill of RMB 6.1 million at 30 June 2015 is determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five year period. Cash flow projections beyond the five year timeframe are extrapolated by applying a flat growth rate in perpetuity. The pre-tax discount rate applied to the cash flow projections is 11%. As a result of the analysis, management did not identify any impairment to the goodwill.

Event after the period end

In September 2015, Taiwan Ziolar secured further investment of USD 700,000 from an independent investor. The Company's ownership has been significantly diluted as a result of the investment and Taiwan Ziolar is now an affiliate of the Company.

6. Stated capital

7. Reserves

7.1 Capital reserve

According to the relevant PRC regulations and the Articles of Association, a company is required to transfer 10% of its profit after income tax to the statutory surplus reserve until the reserve balance reaches 50% of its registered capital. The transfer to this reserve must be made before the distribution of dividends to equity owners. Statutory surplus reserve can be used to make good previous years' losses, if any, and may be converted into paid-in capital in proportion to the existing interests of equity owners, provided that the balance after such conversion is not less than 25% of the registered capital.

7.2 Share based payment reserve

During 2012 the Company granted Northland Capital Partners Limited an option to subscribe for 635,650 ordinary shares at 40 pence at any time during the period of three years following admission. These were granted in respect of the services they provided during the listing of the Company on the Alternative Investment Market. These options have been valued at the fair value of the services received. At the period ending 30 June 2015, these options remain unexercised.

Movement in the year:

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options during the year:

8. Related party transactions

a) Related parties are entities with common direct or indirect shareholders and/or previous and/or current directors. Parties are considered to be related if one party has the ability to control the other party in making financial and operating decisions.

Certain of Group's transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in the financial statements. The balances are unsecured, interest-free and repayable on demand unless otherwise stated.

b) Key management personnel compensation is analysed as follows:

Key management personnel are the Directors.

c) Payment to Augrains Capital Pte Ltd

Augrains Capital Pte Ltd is controlled by Tham Wai Mun Raphael, a director of the Group as at the balance sheet date.

9. Earnings per share

The calculation of earnings per share is based on the following earnings and number of shares.

-Ends-