MayAir Group Regulatory News (MAYA)

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

MayAir Group plc

('MayAir' or the 'Group')

Final Results

MayAir Group plc (AIM: MAYA.L), a leading specialist provider of air purification technology, announces its final results for the year ended 31 December 2016 (the 'period').

OPERATIONAL HIGHLIGHTS

· Significant projects successfully delivered for Huawei Technologies Co. Ltd. and the Chinese State Grid Corporation.

· MayAir is delivering on its strategy to grow the market sectors which generate higher margins and recurring revenues, principally Commercial and Replacement sales.

· Commercial, Replacement and Residential market sectors delivered record performance with strong growth in revenue.

· Completion of an industrial mega project after the period end resulted in lower FY-2016 Industrial sales revenue, however, the industrial mega project will be reflected in the current financial year's results.

· Construction of the new factory in Nanjing is progressing well and within budget. The factory is on track for completion and occupancy in the final quarter of 2017, providing significant increased long-term production capacity.

· To support demand, during the year the Group invested in an additional PTFE filter production line, significantly increasing capacity.

· The focus on sales and marketing has continued to support the objective of expanding the Group's business internationally beyond the PRC.

· The Group's workforce increased by 6.0% during the period from 465 to 493 to increase project delivery capacity.

FINANCIAL HIGHLIGHTS

* Earnings before interest, tax, depreciation and amortisation

Commenting on the final results, Yap Wee Keong, Chief Executive Officer of MayAir Group, said:

"The Board is pleased to report another profitable year and continued revenue growth for MayAir. We are focused on continuing to tackle the ever-important air pollution problems in China which drive the market for MayAir's services. Commercial sales have enjoyed growth with several projects completed for large customers including Huawei and the State Grid Jiangsu Electric Power Company.

Despite profit for the year being lower than originally anticipated, we consider that the additional operating expenses incurred have positioned the Group well as we invest in new production equipment and our new factory to support demand, while our balance sheet continues to strengthen. We also see further opportunities for growth in Replacement sales and will maintain our efforts to boost this area of the business.

We finish the year pleased with the progress we have made across the business, and are now focused on 2017 as we remain confident that the Group will continue to deliver strong and sustainable long-term growth."

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About MayAir

Notes to Editors

Founded in 2001, MayAir Group is a leading specialist provider of air purification technology for use in industrial cleanrooms, commercial buildings and residential markets. The Group's core business is in providing air filtering equipment and filters for use in industrial cleanrooms, an area in which MayAir has established itself as one of the leading providers in China. MayAir's customers comprise large multinational manufacturers. In recent years, MayAir has strategically grown and established itself as key player in the indoor clean air solutions for the commercial and residential markets in China. Key flagship commercial projects include providing solutions for airport terminals, convention centers, subways, offices and schools. MayAir was admitted to trading on AIM in May 2015 with the ticker MAYA.L.

For additional information please visit: www.mayairgroup.com

Chairman's Statement

On behalf of the Board, I am pleased to introduce MayAir's second set of full year results since the Group's successful admission to trading on AIM in May 2015. The Group has made steady progress in the financial year ended 31 December 2016, with sustainable growth achieved overall and we continue to see a healthy pipeline of long-term opportunities in all four core market sectors; Industrial, Commercial, Residential and Replacement.

Strategy

MayAir's overall strategy is to become a leading global provider of clean air solutions with a focus on developing new geographic segments and revenue streams.

I am pleased to report that the Group is making solid progress on delivering its stated strategy. Our end markets, both in China and internationally, continue to offer considerable opportunity for future growth. The Group's overall performance during the year was less than originally anticipated, despite encouraging growth achieved in both Commercial and Replacement sales. Performance was impacted due to the timing of completion of an Industrial mega project which was expected to occur prior to the end of the period. More details of this mega project are covered in the CEO's Review.

A key reason for MayAir's AIM IPO was to provide the Group with a solid platform for future growth, enhancing its reputation with existing and potential customers and supporting the development of the MayAir brand in Asia and globally, as well as expanding our production capabilities with a larger and more modern manufacturing facility. I am pleased to say that we have seen the benefits of our listing and are focused now on delivering against our stated objectives.

Corporate Governance

At MayAir, corporate governance remains ingrained in every aspect of the organisation. The practice of good corporate governance continues to be strengthened in line with MayAir's aspiration to be a leading global business, coupled with corporate values that uphold strong ethics and integrity. A high level of corporate governance is integral to the next phase of MayAir's corporate development and is crucial in ensuring continued enhancement of shareholder value through financial performance while maintaining business sustainability.

Together with the Board, we will continue our efforts in enhancing MayAir's corporate governance framework, internal processes, guidelines and systems to ensure that they remain robust and relevant as the business grows.

Dividend

In line with the Group's strategy for growth, MayAir does not recommend the payment of a dividend for the 2016 financial year. No dividend was paid in the prior year.

Our employees and stakeholders

MayAir's continuous success has been based on the skills, experience and commitment of our employees. Through all their efforts, the Group has maintained and improved its status as a leading brand and operator in the indoor clean air industry in China. The strong performance of the Group reflects the dedication and quality of the Group's employees. Their enthusiasm, innovation and performance remain key assets of the Group and are vital to its future success as we develop the business internationally.

On behalf of the Board, I would like to thank all our employees, customers, suppliers, business partners and shareholders for their strong support, which provide us with the opportunity for long-term development of our business.

In conclusion, MayAir remains well placed in its chosen industry and has an exciting future due to the pipeline of opportunities visible to the Group. The long-term drivers remain firmly in place and I am confident that these, together with our strategic direction, should ensure the continued growth of the Group over the coming years.

Martin Bloom

Non-Executive Chairman

11 April 2017

Chief Executive Officer's Review

I am pleased by the Group's progress over the last year and remain excited about its future potential. MayAir has had another year of solid growth as the Group continues to benefit from environmental pressures driving demand. As part of the Group's growth strategy set out at the time of admission to AIM, MayAir continued to grow all four core market sectors; Industrial, Commercial, Residential and Replacement. The Group delivered on commitments, completing several projects during the period with blue chip customers including Huawei and the Jiangsu Electric Power Company. Plans to expand operations outside of China continue to gain traction and the pipeline across all markets remains healthy.

Results

Group revenue increased by 3.1% to US$65.6 million (2015: US$63.6 million). This revenue growth was below the Board's original expectations due to a delay in the completion of a mega project for Tianma Micro Electronics Co Ltd. Gross profit increased by 1.5% to US$20.3 million during the period (2015: US$20.0 million). Gross margin was 31.0% compared with 31.5% in 2015. This slight decrease in gross margin resulted from a combination of the negative impact of competitive pricing for Industrial sales, which was compensated by improved margins in Replacement sales and Commercial sales maintaining its gross margin in the period.

EBITDA decreased by 21.1% to US$7.2 million (2015: US$9.0 million) with profit after tax reducing by 30.0% to US$4.4 million (2015: US$6.3 million). This reduction in profitability resulted from an 18.4% increase in operating expenses to US$14.2 million (2015: US$12.0 million) reflecting greater expenditure in Research & Development, Sales & Marketing, and the impact of employee recruitment as the Group scaled from 465 to 493 employees during the period.

Market Growth

The Group's products and services are sold to customers in the industrial, commercial and residential markets, as well as the sale of replacement parts. Industrial sales continues to dominate the revenue mix, accounting for almost 60% of total Group revenue for the period, compared with 76% for the equivalent period in 2015. In addition, Replacement sales, which is aimed at generating recurring revenues primarily from the sale of replacement parts to customers of previously-completed industrial market projects, accounted for 19% of total Group revenue compared with 13% for the equivalent period in 2015. Commercial sales contributed 19% of total Group revenue during the period compared with 10% for the prior year. Overall, the mix is becoming more balanced as we diversify across our core markets.

Industrial sales

MayAir's customers for its industrial clean air solutions consist primarily of businesses that require cleanrooms as part of their own manufacturing processes, including technology companies, semiconductor manufacturers, pharmaceutical companies, hospitals and food & beverage businesses.

During the period, industrial market sales decreased by 18% to US$39.5 million (FY-2015: US$48.4 million), largely as a result of increased competition and the timing of a mega project. Projects delivered during the year included cleanroom solutions for customers such as Chongqing HKC Optoelectronics Technology Co Ltd, Nanchang O-film Tech Co Ltd and BOE Technology Group Co. Ltd.

Replacement sales

Notwithstanding the decrease in sales in Industrial sales, the Board is pleased with the significant increase in Replacement revenues, which are derived from previously installed Industrial projects. As we continue to increase the number of completed Industrial projects, we anticipate an increased contribution from Replacement sales. During the period, revenue from Replacement sales increased by 45% to US$12.6 million (FY-2015: US$8.7 million).

Commercial sales

In the commercial market, MayAir provides clean air solutions for venues such as commercial office buildings, airports, subways, hotels, exhibition centres and schools. Demand for the Group's solutions in the commercial market is driven by the desire for improved air quality to protect against health issues such as asthma and other respiratory conditions, skin conditions, allergies, increased cardiovascular risks, nausea and fatigue; and thereby improving quality of life.

During the period, sales in the commercial market increased by 105% to US$12.5 million (FY-2015: US$6.1 million). Noteworthy projects during the period include providing clean solutions for the office buildings of the State Grid Jiangsu Electric Power Company and Huawei Technologies Co. Ltd.

Residential sales

The Group expects demand in the residential market for clean air solutions to improve (as with the commercial market) health and quality of life. In this market, MayAir focused on developing unique solutions targeted at property developers rather than the existing 'off the shelf' products for consumers. During the period, revenues from residential sales increased by 150% to US$1.0 million (FY-2015: US$0.4 million).

International Expansion

In pursuit of the Group's stated strategy to expand the Group's business internationally beyond the PRC, it is pleasing to report that revenue generated outside of China in the period grew by 34% to US$3.2 million, a marginal geographical mix improvement. MayAir's revenue generated in China remains significant at 95% of total revenue (FY-2015: 96%).

During 2017, the Group has a number of sales and marketing activities and initiatives that it plans to implement in the South-East Asia market. Although these activities and initiatives may not result in immediate returns for the Group, they are an important focus in terms of delivering long-term future growth and profitability in this region.

Product Development

Research and Development at MayAir is critical to the Group's long-term success and its ability to maintain its competitive advantage within the Group's end markets. For this reason, MayAir continues to invest heavily into R&D and the development of new products. A key goal of the Group is to continually research new materials and technologies that provide even greater efficiency and effective solutions for MayAir's indoor clean air quality products.

As clean air solutions become more of an increasing necessity for people, businesses and governments, due to the rising rates of pollution and greater awareness, MayAir aims to offer an even wider range of products with increasing production capacity to support the demand. New contract wins signed during 2017 to date have provided reassurance that the research undertaken is being translated into demand for MayAir's products in the Group's core markets.

Production Capacity Expansion

The construction of the new factory in Nanjing, which will provide increased long-term production capacity, is progressing well and within budget and is on track for completion and occupancy in the final quarter of 2017. This new 38,500m2 manufacturing facility will double the existing leased manufacturing facility when it is replaced. The Board anticipates that the additional space in the new factory will provide a number of business benefits to the Group, including increased facilities for research and new product development.

Trading Outlook

The completion of the Industrial mega project that was originally scheduled for Q4-2016, in the first quarter of this year, has provided MayAir with an early contribution to revenue for FY-2017 and a good foundation for the Group's operations during the current financial year. Furthermore, China's continued initiative to raise overall investment into high technology manufacturing capacity provides the Group with excellent visibility for ongoing market demand for its products and bodes well for the Industrial sector outlook. However, due to increased competition, the Group has less visibility on Industrial revenues, due to the impact on market share and margins the increased competition is expected to cause. MayAir will continue to leverage on its robust fundamentals and the completion of the new factory this year provides additional support to further grow market share.

The Board anticipates that the demand from Commercial sales will continue its strong growth. The rising level of pollution around the world, in particular within China, has led to increased publicity within the global media, highlighting the negative effects it has on human health. Governments are beginning to act and in Beijing it has become mandatory for schools to install clean air solutions in all classrooms. The Board believes that MayAir has the right technologies and solutions, as well as strong brand recognition, to grow sales in these markets over the coming year.

Our continuous investment and efforts in strengthening Replacement sales, together with other measures to develop new geographic segments and revenue streams, will ensure sustainable and profitable growth in the long term for MayAir.

The Group looks forward to another year of good progress.

Yap Wee Keong

Chief Executive Officer

11 April 2017

Financial Review

The financial year to 31 December 2016 has seen another year of growth, with improvements in revenue and gross profit. Since MayAir's admission to AIM in May 2015 the Group has continued to strengthen its balance sheet.

Revenue

Revenue increased by 3.1% to US$65.6 million (FY-2015: US$63.6 million). The revenue mix continues to be dominated by Industrial sales at 60% (FY-2015: 76%). The increase in Group revenues is due to the strong performance of the Commercial and Replacement sales, in addition to a growing contribution from Residential sales.

Due to increased competition and a delay in the timing of the completion of a mega project, Industrial sales recorded lower revenues of US$39.5 million (FY-2015: US$48.4 million). The Board will continue to monitor carefully these mega projects as, whilst they are clearly of benefit to the Group, their scale and timing continues to prove challenging.

Replacement sales contributed 19% of the Group's total revenue with total sales of US$12.6 million (FY-2015: US$8.7 million). The stable and recurring revenues achieved in this market sector provides growing support for MayAir as it continues to invest to become a major player in the sector.

Commercial sales contributed 19% of Group revenue with sales of US$12.5 million (FY-2015: US$6.1 million). Demand from corporate customers for clean air solutions has been very encouraging and MayAir expects strong growth to continue in FY-2017 and beyond. During 2016, MayAir completed several notable projects, including projects for customers such as Huawei and State Grid Jiangsu Electric Power Company.

MayAir has continued its efforts to expand sales globally beyond the PRC resulting in another positive year and an encouraging 34% growth to US$3.2 million in sales outside the PRC. Revenue generated in the PRC was US$62.4 million, representing 95% of total Group revenue in the period.

Gross Profit

Gross profit increased by 1.5% to US$20.3 million (FY-2015: US$20.0 million). Gross margin reduced slightly from 31.5% to approximately 31.0% due to a combination of the competitive pricing of new larger contracts and increased raw material prices. MayAir expects the sales contribution from Commercial and Residential sales to help improve margins in 2017.

Operating Profit and EBITDA

Operating profit reduced by 23.1% to US$6.2 million (FY-2015: US$8.1 million) and EBITDA reduced by 21.1% to US$7.2 million (FY-2015: US$9.0 million). Operating profit and EBITDA levels reflect higher operating expenses from increased expenditure on Research & Development and Sales & Marketing and new staff recruitment as the Group scaled from 465 to 493 employees during the period.

Earnings Per Share

EPS for the period was US$0.09 per ordinary share (2015:US$0.15).

Taxation

The Group's effective tax rate increased to 26% from 16% due to a one-off PRC irrecoverable withholding tax on dividends paid by subsidiary undertakings in the PRC. MayAir's operation in the PRC continues to benefit from a concessionary corporate tax rate of 15% under the 'Hi-Technology Industry Incentive', profits from which would otherwise be taxed at the standard corporate tax rate of 24% (2015: 25%).

Cash Flow

The Group recorded an encouraging net cash inflow of US$3.4 million from operating activities. This has been offset by cash used for long term structural investing activities on the construction of the new factory in Nanjing (US$1.3 million) and purchase of plant of equipment (US$0.8 million). During the period, the Group spent a total of US$0.47 million (2015: US$ Nil) for the share buy-back programme.

The Group's cash position has remained stable since the fund raising and admission to AIM in May 2015. Total cash at 31 December 2016 was US$20.5 million (2015: US$19.4 million).

The Group ended 2016 with net cash of US$14.3 million (2015: US$14.9 million). The Board anticipates that the Group is sufficiently funded for its current expansion plan.

Koh Tat Seng

Chief Financial Officer

11 April 2017

Consolidated Statements of Financial Position

As at 31 December 2016

Consolidated Statements of Comprehensive Income

For the financial year ended 31 December 2016

Consolidated Statements of Changes in Equity

For the financial year ended 31 December 2016

Consolidated Statements of Changes in Equity

For the financial year ended 31 December 2015

Consolidated Statements of Cash Flows

For the financial year ended 31 December 2016

Consolidated Statements of Cash Flows (Cont'd)

For the financial year ended 31 December 2016

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

MayAir Group Plc ("the Company" or "the Group") was incorporated in Jersey on 6 February 2015. Its primary listing on the AIM market of the London Stock Exchange ("LSE") was on 7 May 2015 and whose shares are publicly traded on the LSE. The Company is domiciled in Jersey and its registered address is 12 Castle Street, St. Helier, Jersey JE2 3RT, Channel Islands.

The Company's nature of operations is to act as the holding company of a group of subsidiaries that are involved in production, marketing and distribution of clean air products and equipment and provision of related services.

The financial information set out in this announcement above does not constitute the Company's statutory accounts for the year ended 31 December 2016, but is derived from those accounts. The statutory accounts will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified. Comparative information has been extracted from the Company's statutory accounts for the year ended 31 December 2015 which have been delivered to the Jersey registrar.

The financial information set out in this announcement was approved and authorised for issue by the board of directors on 11 April 2017. 

2. PLANT AND EQUIPMENT

2. PLANT AND EQUIPMENT (CONT'D)

Included in the assets of the Group at the end of the reporting period were motor vehicles with a total net book value of USD91,000 (2015 - USD127,000), which were acquired under hire purchase terms.

3. CONSTRUCTION IN PROGRESS

4. LAND USE RIGHTS

The Group has land use rights over a piece of vacant state-owned land in the PRC and is planning for its factory construction on the said land subsequent to year end. The land use rights have remaining tenure of 48 years as at 31 December 2016 (2015: 49 years).

5. INVENTORIES

6. AMOUNT DUE FROM CONTRACT CUSTOMERS

7. TRADE RECEIVABLES

The Group's normal trade credit terms range from 30 to 90 days. Other credit terms are assessed and approved on a case-by-case basis.

Included in trade receivables are the following:-

Included in trade receivables is USD73,000 owing from related parties (2015 - USD87,000).

8. CASH AND BANK BALANCES

For the purpose of the statements of cash flows, cash and cash equivalents comprise the following:-

The Chinese Renminbi is not freely convertible into foreign currencies. Under The People's Republic of China ("PRC") Foreign Exchange Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Group is permitted to exchange Chinese Renminbi for foreign currencies through banks that are authorised to conduct foreign exchange business.

The cash and bank balances of the Group in The People's Republic of China amounting to USD9,963,000 (2015 - USD4,132,000) are subject to exchange control restrictions.

9. STATED CAPITAL ACCOUNT

The movements in the registered capital of the Company are as follows:-

The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company.

The consolidated financial information includes the assets and liabilities of the MayAir Group Plc's Employee Benefit Trust ("EBT'') within its Statement of Financial Position. In the event of the winding up of the Company, neither the shareholders nor creditors would be entitled to the assets of the EBT. The cost of ordinary shares held by the EBT is deducted from shareholders' funds and classified as 'Own Shares' until such time as they vest unconditionally to participating employees. At 31 December 2016, the EBT held 2,554,650 (2015 - 2,554,650) ordinary shares in the Company at a cost of $nil and no shares has been awarded to any employees.

On admission to AIM in May 2015, the Company granted warrants to its professional advisers to subscribe for 212,375 new Ordinary Shares at £1.30 at any time up to the tenth anniversary of admission. The fair value of the services received in consideration for the issue of the warrants was measured at the date of grant was approximately US$192,000. A charge of US$192,000 was recognised in equity in the year ended 31 December 2015 within stated capital with an equivalent increase in stated capital.

10. TREASURY STOCK

At 31 December 2016, the Company had, as part of a repurchase programme, repurchased 514,500 ordinary shares at an aggregate cost of US$472,681 (£372,705) under this programme. The reasons for the repurchase programme were set out in an announcement made by the Company through RNS on 5 August 2016 in relation to the commencement of Share Buy-Back Programme.

All of the shares acquired under these programmes were held as treasury shares. The number of treasury shares held at 31 December 2016 was 514,500 (2015: nil), representing 1.21% of the issued share capital excluding treasury shares.

As at 31 December 2016, the total number of shares issued is 42,475,000 (Note 9) of which 514,500 shares are held in treasury. The number of shares with voting rights is therefore 41,960,500.

11. BORROWINGS

The short-term borrowings bore interest ranging from 5.22% - 5.46% (2015 - 4.35% to 6.27%) per annum.

The long-term borrowings have a tenure of 5 years, bore effective interest rate of 5.46% at the end of the reporting period, and is repayable through quarterly instalments of RMB1,000,000 commencing on the 12th month from the date of first drawdown until 21st month. The remaining balance is to be repaid through quarterly instalments of RMB2,000,000 commencing on the 24th month from the date of first drawdown until 57th month with a final instalment of RMB12,000,000 on the 60th month. The long-term borrowing is secured by way of:-

(a) A charge over a parcel of land and construction in progress as disclosed in Note 4 and Note 3 respectively; and

(b) A corporate guarantee of the ultimate holding company.

12. REVENUE

13. INCOME TAX EXPENSE