CNEL.L Regulatory News (CNEL)

30 September 2016

China New Energy Limited

("China New Energy" "CNE" or "the Group")

Half-yearly report for the six months to 30 June 2016

China New Energy Limited (AIM: CNEL), the engineering and technology solutions provider to the bioenergy sector, announces its unaudited half-yearly results for the six months ended 30 June 2016.

Financial Highlights

· Revenue of RMB 45.4m (H1 2015: RMB 26.7m), which represents a 70% increase over the same period last year

· Gross profit of RMB 16.2m (H1 2015: RMB 3.06m)

· Net Profit of RMB11.3m (H1 2015: loss of RMB5.54m)

· Earnings per share of RMB 0.029 (H1 2015 loss of RMB 0.014)

Operational Highlights

· Maintenance and construction contracts secured in China in 2015 are being implemented and generating revenue

· Canadian contract in process of implementation and will be finalised in Q2

Yu Weijun, Chairman, commented:

"I am very pleased to report that the Company has made a profit in the first half of the year based upon contracts in from China, Myanmar and Canada that were secured in 2015 for implementation in 2016.

The bioenergy industry still faces many headwinds due to the low-oil price. However, our revised strategy is beginning to gain traction in both China and international markets and we look forward to continued successes."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Enquiries:

Chairman's Statement

On behalf of the Board, I am very pleased to present the unaudited half-yearly results for the six month period ended 30 June 2016.

Financial Review

Revenue for the first six months of the year was up to RMB 45.4m (H1 2015:RMB 26.7m) an increase of approximately 70%. The Group's gross profit also increased in the period RMB 16.2m (H1 2015:RMB 3.06m) which resulted in the Group returning a net profit in the period of RMB 11.3m (H1 2015: loss of RMB 5.5m).

Selling and distribution expenses increased by 6.2% to RMB2.39m (H1 2015:RMB2.25m) while administrative expenses increased by 2.7% to RMB 4.76m (H1 2015: RMB 4.63m). The Group's other income were up to RMB 2.89m (H1 2015:RMB0.05m). The other expenses decreased by 56% to RMB 0.55m (H1 2015:RMB1.26m). Finance expense decreased to RMB0.14m (H1 2015:0.51m).

The turnaround from loss to profit is mostly attributed to a higher gross margin and to the continued implementation of contracts in China, Myanmar and Canada that were won in 2015.

Operational Review

The Group principally provides EPC (Equipment, Procurement and Construction) services and VAS (Value Added Service) to ethanol and biobutanol producers. The EPC team primarily designs and builds commercial-scale biorefineries that convert feedstock into ethanol for both the biofuel and edible alcohol markets, whilst the VAS team provide services and technology to optimise the ethanol production at existing biorefineries.

CNE is a market leader in China at designing and building 1st Generation biorefineries that convert agricultural feedstock such as corn, cassava and sugarcane into ethanol. We have completed more than 100 1st Generation projects in China and around the world.

During the period, we completed an anhydrous alcohol EPC contract for our existing customer Jilin Buoda alcohol group with recorded revenue from this contract of RMB 10.6 million. The Company also won its first contract in Canada with BioNeutra North America Inc. and, during the period, manufactured and exported all of the equipment needed for the isomaltooligosaccharide production line. The total contract value was RMB 14.4 million (Excluding VAT:12.3 million) and we recorded revenue of RMB 8.2 million during the period. We are very pleased to advise that post period end, the equipment has now been installed and is being tested and we have now received more than 80% of the contract value as per the agreement. The project will be completed in H2.

These two top contracts constitute 42% of our total revenue, and the remaining revenue came from approximately 30 smaller maintenance and construction contracts in China and Myanmar.

The Company continues to maintain our cooperation with South China University of Technology and SDIC Guangdong Bio-Energy Co., Ltd. We jointly undertake research and development projects including a project to advance 2nd generation pre-treatment technology that converts cellulosic (non-food) feedstock into bioethanol. This research project has been approved and funded by a grant from the Guangdong Provincial Department of Science and Technology. The company has received its full allocation of RMB 3.5 million which was recorded as other operating income.

Outlook

After a long downturn in the bioenergy market, mostly due the low oil price, we are beginning to see an increase demand for our products and services. This is attributed to the implementation of our strategy to diversify our product and service portfolio and to market to them to both domestic and international customers.

China remains an important participant in the global energy market and is very focussed on delivering renewable energy to both reduce emissions and increase energy security and reliance on importing fossil fuels. We note the country recently signed the Paris Climate Change Agreement, and we are optimistic that we will see an increased interest in biotechnology because it is widely considered to be one of the key alternatives to fossil fuel and a pathway to lower emissions. The company intends to continue its research and development activities in partnership with institutions including Guangzhou Institute of Energy Conversion ("GIEC"), part of the Chinese Academy of Sciences, to commercialise advanced alternative and renewable energy technologies for the bioenergy market.

Internationally, we continue to promote our products and services through our partners. We continue to see an increased interest in our existing 1st generation bioenergy technology in emerging markets such as Africa and South East Asia. We also see an increased interest in 2nd generation bioenergy technology in developed markets which is also being aided by changes in the regulatory environment to support biofuel production. The encouragement of 2nd generation biofuel and regulatory changes are very welcome events as these help break down the inverse relationship between investment in biofuels and oil prices. We shall continue to update the market on developments on previously announced and new projects as they occur.

The Board are very pleased with our current progress and return to profitability. The board is also optimistic about the increased interest in the bioenergy sector and our pipeline of sales opportunities. However, we continue to maintain a cautious business approach due to the macro-economic climate and continued low-oil prices.

Yu Weijun

Chairman

30 September 2016Consolidated Statement of Financial Position

Consolidated Statement of Comprehensive Income

Consolidated Statement of Cash flows

Consolidated Statement of Changes in Equity

Notes to the Interim Financial Information - Period ended 30 June 2016

1. Basis of preparation

The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 December 2016 and are unchanged from those disclosed in the Group's Report and Financial Statements for the year ended 31 December 2015, except for the following additional accounting policies:

Basis of consolidation

The Group includes the assets and liabilities of the Employee Benefit Trust ("EBT") within its Statement of Financial Position. In the event of the winding up of the Group, neither the shareholders nor the creditors would be entitled to the assets of the EBT.

Long-term incentive scheme charge

The fair value of the employee services received in exchange for the grant of shares or share options is recognised as an expense.

The total amount to be expensed over the performance period, from grant date to vesting date, is determined by reference to the fair value of the shares determined at the date the employee is deemed to be fully aware of their potential entitlement and all conditions of vesting.

Own shares

Company shares held by the EBT are deducted from the shareholders' funds and classified as Own Shares until such time as they vest unconditionally to participating employees and their families.

This interim financial information has not been reviewed or audited by the Group's auditors. The comparatives for the period ended 31 December 2015 are not the Group's full statutory accounts for that period but have been extracted from those financial statements. A copy of the statutory financial statements for that period, which were prepared under IFRS, has been delivered to the Companies Registry. The auditors' report on those accounts was unqualified.

Whilst the financial information included in this Interim Financial information has been prepared in accordance with the recognition and measurement criteria of IFRS, it does not include sufficient information to comply with IFRS.

This interim report was approved by the Board of directors on 30 September 2016.

2. Ordinary shares

The substantial shareholders have not changed from 31 May 2016 we outlined in the annual report.The Group has one class of ordinary shares which carry no right to fixed income.

3. Property, plant and equipment

4. Intangible assets

5. Earnings per share

Earnings per share ("EPS")on a basic and diluted basis are as follows:

Earnings per share ("EPS") on a basic and diluted basis are as follows:

6. Directors' interests

The following Directors have held office during the period and their interests as at 30 June 2016, all of which are beneficial unless otherwise stated, whether direct or indirect, of the Directors and their families in the issued share capital of the company and options over Ordinary Shares which had been granted, are as follows:

7. Business Segment

A business segment is a Group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. 

The Group's revenue breakdown by geographical location is determined based on its customers' country of incorporation. The Group's cost of sales and operating expenses are aggregated on a cumulative basis and are not attributable to specific geographical regions. Therefore, a breakdown of gross profit for the financial years by geographical regions is not shown.

The CNE Group's assets, liabilities and capital expenditure are almost entirely attributable to a single business segment of provision of technology and engineering services to ethanol, ethanol downstream product and biobutanol producers. Therefore, the CNE Group does not have separately reportable business segments under IFRS 8 Segmental Reporting.