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')

Interim Results

MayAir Group plc (AIM: MAYA.L), a leading specialist provider of air purification technology, announces its interim results for the six months ended 30 June 2017 (the 'period').

OPERATIONAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS

Yap Wee Keong, Chief Executive Officer of MayAir Group, said: "Trading in the first half of the current financial year has been good. Whilst it remains early in the second half of the financial year, the Board remains confident that the Group's results for the full year will be in line with current market expectations.

"We are excited that our new factory in Nanjing, China will soon be complete, allowing us to meet growing demand in our chosen markets. The new factory has been designed to meet higher standard requirements, cope with higher volume of inventory and will improve the efficiency of our inventory management and distribution to improve margins.

"The market drivers underpinning MayAir's business model remain and this has been demonstrated with the growing demand for our products. The Board maintains its resolve to pursue growth by focusing on continually improving our products, retaining our competitiveness and exploiting strategic opportunities across the Group."

For further information:

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 a leading provider in China. MayAir's customers comprise large multinational and domestic manufacturers. In recent years, MayAir has strategically grown and established itself as key player in the indoor clean air solutions for the commercial 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

Operational Review

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. Our end markets, both in China and internationally, continue to offer considerable opportunity for growth. Continuous efforts are being made to develop the MayAir brand across Asia and globally, as well as expanding our production capabilities to improve margins with a larger and more modern manufacturing facility.

Market Growth

MayAir's strategy is to focus on benefiting from the high growth in the Chinese market in parallel with its intention to foster international expansion. The strong performance in H1-2017 was a result of a solid contribution from all core divisions - industrial, commercial, replacement and residential. The Group's new factory in Nanjing, which will soon be completed, will support the Company's future growth and provide significant increased long-term production capacity.

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 H1-2017, industrial market sales increased by 96% to US$21.5 million (H1-2016: US$11.0 million), accounting for 64% of Group revenues for the period (H1-2016: 58%). This significant jump in revenues was due primarily to the recognition of the Tianma Project during the period, which amounted to US$9.74 million. Gross margin contribution from Industrial sales in H1-2017 was lower at 23% (H1-2016: 29%). This was largely due to increased competition from key established competitors as well as rising competition from new market entrants. The market outlook for the industrial sector remains positive as investment in high technology related industries is expected to continue, particularly in China and some emerging nations in Asia.

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.

Commercial sales contributed 14% of Group revenue in H1-2017 (H1-2016: 12%) and generated revenues totaling US$4.7 million (H1-2016: US$2.4 million), an increase of 94%. The growth from the commercial sector remains very positive and as a result of this growth, many new players have entered the marketplace. MayAir plans to further strengthen its brand and product positioning to manage rising competition and is confident of maintaining its market position. Gross margin contribution from commercial sales in H1-2017 was steady at 45% (H1-2016: 45%).

Replacement sales

MayAir's strategy is to provide long term, stable, recurring income by growing its replacement sales.

During H1-2017, MayAir saw encouraging levels of revenue growth in replacement sales of 38% to US$7.3 million (H1-2016: US$5.3million). The replacement division contributed 21% of the Group revenue in H1-2017 (28% in H1-2016). Gross margin contribution from replacement sales in H1-2017 was lower at 43% (H1-2016: 49%), largely due to a more aggressive pricing strategy being adopted in order to be competitive in gaining new customers and to drive growth.

Residential sales

MayAir expects residential sales to account for a relatively small proportion of the Group's revenue - in H1-2017 it accounted for 1% of Group revenues. H1-2017 revenues, whilst small, increased 34% to US$0.4 million (H1-2016: US$0.3 million). Gross margin contribution from Residential sales in H1-2017 was lower at 29% (H1-2016: 43%).

Production Capacity Expansion

The construction of the new factory in Nanjing, which will provide MayAir with increased production capacity, has progressed well in H1-2017 and remains within budget. The anticipated target date for completion and occupancy is within the early part of Q4-2017. This new 38,500m2 manufacturing facility will double the size of our manufacturing base and replace a leased facility. The Board anticipates that the additional space in the new factory will provide a number of benefits to the Group, including increased facilities for research and new product development.

Financial Review

Group revenue for H1-2017 was US$34 million (H1-2016: US$19 million). Gross profit margin of 30.2% was lower than the comparative period (H1-2016: 36.8%). This decrease in gross margin was mainly due to increased competition in industrial sales from key established competitors as well as rising competition from new market entrants and, in replacement sales, a more aggressive pricing strategy had to be adopted in order to be competitive in gaining new customers to drive growth.

In H1-2017, operating expenses increased by 29% to US$7.65 million (H1-2016: US$5.92 million). Selling and distribution expenses increased to US$4.34 million (H1-2016: US$3.26 million) representing an increase of US$1.08 million or 33%. Administrative expenses increased to US$3.31 million (H1-2016: US$2.66 million), representing an increase of US$0.65 million or 24%. The increase across both these categories has been due mainly to salaries and staff related costs, including an increased headcount to support our growth.

The Group's effective tax rate for H1-2017 was higher at 17.6% compared to previous period as H1-2016 benefit from deferred tax assets of certain subsidiaries. The Group recorded earnings per share of 4.68 US$ cents in H1-2017, on a fully diluted basis (H1-2016: 2.53 US$ cents).

Total cash decreased by US$3.3 million to US$17.2 million as at 30 June 2017, of which US$8.5 million was held in fixed deposits. The net cash position after debt as at 30 June 2017 is lower at US$5.7 million compared to US$16.2 million as at 30 June 2016. The Group's current cash position is a result of increased drawdown of banking facilities to finance the construction of the new factory and operational working capital needs.

Trading Outlook

The Group has made good progress in the first half of the current financial year. Post the period end, MayAir announced on 3 August 2017 that Industrial sales had secured a US$13.6 million contract to supply Chengdu CEC Panda Display Technology Co Limited with fan filtration units, filters and related clean room equipment. This was an excellent start to H2-2017 and whilst it remains early in the second half of the financial year, the Board remains confident that the Group's results for the full year will be in line with current market expectations.

The Group is particularly excited about the completion of a larger and modern factory, which will enhance MayAir's effectiveness and provide additional strategic opportunities. MayAir will continue to focus on building its pipeline to fuel long term success, delivering sustainable revenue and earnings growth.

Yap Wee Keong

Chief Executive Officer

18 September 2017

Condensed Consolidated Statements of Comprehensive Income

For the six months ended 30 June 2017

Condensed Consolidated Statements of Financial Position

As at 30 June 2017

Condensed Consolidated Statements of Changes in Equity

For the six months ended 30 June 2017

Condensed Consolidated Statements of Changes in Equity (Cont'd)

For the six months ended 30 June 2016

Condensed Consolidated Statements of Changes in Equity

Audited for the financial year ended 31 December 2016

Condensed Consolidated Statements of Cash Flows

For the six months ended 30 June 2017

NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the six months ended 30 June 2017

1. GENERAL INFORMATION

MayAir Group plc (the "Company" or the "Group") was incorporated as a public limited company in Jersey with its registered office at 12 Castle Street, St. Helier, Jersey JE2 3RT, Channel Islands. The Company has its primary listing on the AIM market of the London Stock Exchange. 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 condensed consolidated interim financial report has been prepared on a historical cost basis, with the fair value method being used if it is relevant.

The directors do not recommend the payment of an interim dividend.

This condensed interim financial report was approved by the Board of Directors for issue on 15 September 2017.

2. ACCOUNTING POLICIES

2.1 BASIS OF PREPARATION

The condensed unaudited interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34, "Interim Financial Reporting" and historical costs basis. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at the year ended 31 December 2016. The results for the period ended 30 June 2017 are unaudited.

The condensed unaudited consolidated financial statements for the period ended 30 June 2017 have adopted accounting policies consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2016.

In accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting policy for the group reconstruction in which the Company became the holding company of the Group , the Directors considered the pronouncements of other standard setting bodies and specifically looked to accounting principles generally accepted in the United Kingdom ("UK GAAP") for guidance (FRS 6 - Acquisitions and Mergers) which does not conflict with IFRS and reflects the economic substance of the transaction.

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.

The condensed unaudited consolidated financial statements for the period ended 30 June 2017 have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future.

The condensed unaudited consolidated financial statements for the period ended 30 June 2017 are presented in United States Dollar ("USD"), which is the presentation currency for the consolidated annual financial statements. All financial information presented in USD has been recorded to the nearest thousand.

2. ACCOUNTING POLICIES (CONT'D)

2.2 BASIS OF CONSOLIDATION

The condensed unaudited consolidated financial information for the period ended 30 June 2017 includes the financial information of the subsidiaries made up to the end of the reporting periods. The consolidated financial information includes the assets and liabilities of the MayAir Group plc 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 30 June 2017 the EBT held 2,554,650 ordinary shares in the Company at a cost of USD nil.

3. SEASONAL OR CYCLICAL FACTORS

There are no significant seasonal factors that materially affect the operations of any company in the Group.

4. ITEMS OF AN UNUSUAL NATURE

There were no unusual items affecting assets, liabilities, equity, net income or cash flows due to their nature, size or incidence for the financial period ended 30 June 2017.

5. SIGNIFICANT EVENTS

There were no significant events during the current financial period under reviewed.

6. MATERIAL CHANGES IN ACCOUNTING ESTIMATES

The preparation of the unaudited interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses for the current and its corresponding financial period under review. Actual results may differ from these estimates.

In preparing the unaudited interim financial report, the significant judgements made by the management in applying the Group's accounting policies and the sources of estimates uncertainty were consistent as to those applied to the 2016 audited financial statements.

There were no changes in estimates of amounts of the Group that may have a material effect on the financial period ended 30 June 2017.

7. ISSUANCE AND/ OR REPAYMENT OF DEBT AND EQUITY INSTRUMENTS

There was no issuance, repurchase and/ or repayment of debt and equity instruments for the financial period ended 30 June 2017 except for subsequent share buy-back programme as referred to in Note 18 of this report.

8. DIVIDENDS

No interim dividend was recommended by the directors in respect of the financial period under review.

9. OPERATING SEGMENTS

Operating segments are prepared in a manner consistent with the internal reporting provided to management as its chief operating decision maker in order to allocate resources to segments and to assess their performance.

Information on business segments is not presented as the Group operates mainly in production, marketing and distribution of clean air products and equipment and provision of related services, and 96% of its assets are situated in, and 96% of its revenues are derived from, operations in the People's Republic of China.

Geographical Segments

The analysis of the Group's revenue by geographical segments based on customers' locations is as follows:-

Non-Current Operating Assets

10. SUBSEQUENT EVENTS

There were no significant events subsequent to the end of the current financial period up to the date of this report that have not been reflected in the interim financial report for the current period under review except as below:

(a) On 21 July 2017, MayAir Manufacturing (M) Sdn. Bhd. ("MAMM") a wholly-owned subsidiary of the Company entered into a conditional sale and purchase agreement to purchase a unit of leasehold land with an existing industrial premises located in Bandar Teknologi Kajang, Selangor, Malaysia with a land area measuring approximately 4667.64 square metres for a total consideration of RM8,550,000.00 (Ringgit Malaysia: Eight Million Five Hundred and Fifty Thousand Only); and

(b) On 5 July 2017 MayAir Technology (China) Co., Ltd. ("MAT"), a 83.38% owned subsidiary of the Company completed a joint venture with Aeropro Filter Industrial (Shanghai) Co., Ltd. ("Aeropro") to jointly undertake related research and development, production and sales of air filter media materials. The joint venture company is named "Nanjing MayAir Filter Technology Co., Ltd." ("MFT"). MAT and Aeropro each own 50% of MFT and MFT has a registered capital of RMB2 million of which RMB1 million has been injected.

11. CHANGES IN CONTINGENT LIABILITIES AND CONTINGENT ASSETS

There were no major contingent liabilities and contingent assets that had arisen during the interim financial period ended 30 June 2017.

12. CAPITAL COMMITMENTS

13. TAXATION

The taxation charge for the period is based on management's best estimate of the Group's weighted average annual tax rate (at its prevailing tax legislation) expected for the full financial year.

The Group's operation in the PRC continues to benefit from a concessionary corporate tax rate of 15% under the "Hi-Technology Industry Incentive" granted by the State Revenue Department of Jiangsu, profits from which would otherwise be taxed at the standard corporate tax rate of 25% (30 June 2016 and 31 December 2016: 25%).

14. EARNINGS PER SHARE

The calculation of basic and diluted earnings per ordinary share at 30 June 2017 was based on the profit attributable to the equity holders of the Company and a weighted average number of ordinary shares outstanding as follows:

The basic EPS were computed by dividing the Group attributable profit to equity holders of the Company by the weighted average number of ordinary shares in issue (net of treasury shares and EBT).

The diluted EPS were computed by dividing the Group attributable profit to equity holders of the Company by the weighted average number of ordinary shares in issue (net of treasury shares), adjusted for the dilutive effects of potential ordinary shares, i.e. EBT granted pursuant to the Plan Rule as established by the Company in 2015 (Note 16 and Note 17).

15. CASH AND BANK BALANCES

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

15. CASH AND BANK BALANCES (Cont'd)

The Chinese Renminbi is not freely convertible into foreign currencies. Under the 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 PRC amounting to USD8,203,000 (30 June 2016 - USD4,614,000; 31 December 2016 - USD9,963,000) are subject to exchange control restrictions.

16. STATED CAPITAL ACCOUNT

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 30 June 2017, the EBT held 2,554,650 (31 December 2016/ 30 June 2016 - 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.

17. EMPLOYEE BENEFIT TRUST

In 2015 the Company established the EBT and adopted the Plan Rules, the purpose of which is to motivate and reward key senior employees and executives and to do so in a manner that aligns their interest with that of the shareholders. At the inception of the EBT a total of 2,554,650 ordinary shares in the Company were deposited by certain founder shareholders of the Company at $nil cost to the Company.

During the financial period, the Company awarded 2,175,000 ordinary shares to its eligible employees.

18. TREASURY STOCK

At 30 June 2017 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 30 June 2017 was 514,500 (30 June 2016: nil; 31 December 2016: 514,500), representing 1.21% of the issued share capital excluding treasury shares.

As at 30 June 2017, the total number of shares issued is 42,475,000 (Note 16) of which 514,500 shares are held in treasury. The number of shares with voting rights is therefore 41,960,500.

19. MERGER RESERVE

Accounting for group reorganisations is scoped out of IFRS 3. Accordingly, as required under IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors the Group referred to current UK GAAP to assist its judgement in identifying a suitable accounting policy to apply in accounting for the group reorganisation in which the Company became the holding company of the Group. The introduction of the new holding company has been accounted for as a capital reorganisation using the merger accounting principles prescribed under current UK GAAP. Therefore the consolidated financial statements of MayAir Group Plc are presented as if MayAir Group Plc had always been the holding company for the Group.

The use of merger accounting principles has resulted in a balance on Group capital and reserves that has been classified as a merger reserve and included in shareholders' funds. The consolidated interim financial report includes the results of the Company and all its subsidiary undertakings made up to the same accounting date.

20. borrowings

The short term borrowings bore interest ranging from 4.785% to 5.60% (30 June 2016 - 4.35% to 6.72%, 31 December 2016 - 5.22% to 5.46%) per annum at the end of the interim financial period.

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:-