Final Results

AUHUA CLEAN ENERGY PLC

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

FINAL RESULTS

Auhua Clean Energy plc, the AIM quoted (AIM: ACE) environmental technology group based in the Shandong Province of Eastern China, today announces the final consolidated results of its trading group for the year ended 31 December 2011, together with the final results of the Company for the period ended 31 December 2011.

Auhua Holdings Group highlights 1

·; Revenue for the year increased by 24.2% to RMB 168.5 million: GBP 16.3 million (2010: RMB 135.6 million: GBP 13.0 million)

·; Net profit after tax rose by 12.5% to RMB 42.3 million: GBP 4.1 million (2010: RMB 37.6 million: GBP 3.6 million)

·; Gross profit margin of 46% (2010: 45%)

·; Cash balances at 31 December 2011 of RMB 11.9 million: GBP 1.1 million (2010: RMB 2.4 million: GBP 0.23 million)

·; Pro-forma basic earnings per share of RMB 0.71; 6.8 pence (2010: RMB 0.63; 6.0 pence)

·; Net assets of RMB 86.1 million: GBP 8.3 million (2010: RMB 64.6 million: GBP 6.2 million)

·; Real estate investment in China grew by 23.5% in Q1/2012 with growth derived predominantly from 2nd and 3rd tier cities where the majority of the Company's customers are based

·; China's State Council remains committed to renewal energy by approving RMB 36.3 billion (GBP 3.5 billion) in subsidy programmes to promote the sales of energy-saving products

·; For the first four months of 2012 trading is in line with management expectations. Achieved revenues of RMB 61.0 million (GBP £6.0 million) and sales of 19,000 units. Book orders as at 30 April amounted to RMB 86.0 million (GBP 8.4 million)

* RMB amounts translated using the following exchange rates as appropriate:

RMB 1 : GBP 0.10207 (as at 30 April 2012)

RMB 1 : GBP 0.10358 (for 2011)

RMB 1 : GBP 0.10454 (for 2010)

1. Auhua Holdings Group comprises Auhua Holdings Pte Ltd and its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd and Weihua Auhua New Energy Co., Ltd. Auhua Holdings Pte Ltd was acquired by the Company on 12 December 2011. The Company's first set of consolidated accounts will be in respect of the six months ended 30 June 2012. As the Company was incorporated only on 21 November 2011 for the purposes of the AIM listing and has no other activities, the results for the year ended 31 December 2011 reflect only Auhua Holdings Group.

Raphael Tham, Non-Executive Chairman of Auhua Clean Energy plc, commented:

"We are pleased with the successful listing of Auhua on AIM in April when we became the first solar water heater company to be listed from China. The listing provides us with a platform for future growth and raises our profile in the solar water heater industry in China. We are well positioned to take advantage of the growing demand for efficient renewable energy solutions which are supported by government policies and incentives."

For further information:

Notes to Editors:

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 solar energy 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

Introduction

Auhua successfully listed on AIM on 2 April 2012. Our listing represents a significant milestone and we believe it will create new business opportunities as well as raise the Group's profile in the solar water heater industry in China.

We are in a growing market for solar water heating systems, supported by the Chinese government's continued emphasis and commitment to reduce carbon emissions by 45 per cent per unit of GDP from 2005 levels by 2020. In May this year, the National Development and Reform Commission of China (the country's top economic planning agency) named six regions for their failure to do enough to conserve energy in the first quarter of 2012. In the same month, China's State Council announced the approval of RMB 36.3 billion (GBP 3.5 billion) in subsidy programmes to promote sales of energy-saving products. China faces both heavy pollution issues and an urgency to reduce energy consumption. It is committed to the renewable energy sector and the solar water heater industry. As a technology leader in split-unit solar water heater systems, we are well positioned to capitalise on the growing demand for efficient renewable energy solutions which are supported by government policies and incentives.

In the period under review, trading was in line with expectations, driven by strong demand and supportive government policies. Revenues increased by 24.2% to RMB 168.5 million (2010: RMB 135.6 million) and profit before tax rose to RMB 57.1 million from RMB 50.1 million in 2010. Net profit after tax rose by 12.5% to RMB 42.3 million (RMB 37.6 million). Cash balances as at 31 December 2011 were RMB 11.9 million (2010: RMB 2.4 million) and book orders amounted to RMB 93.0 million.

Domestic China Market

In October 2011, the Purchasing Managers' Index ("PMI") of China contracted for the first time since February 2009 to 49.0. PMI is an indicator of purchasing managers' acquisition of goods and services and anything below 50.0 shows a decline or contraction of manufacturing.

This disappointing manufacturing data coupled with the Eurozone debt crisis and a weak US economy resulted in the Central Bank of China reducing the reserve-ratio requirement ("RRR") three times since December 2011. In December 2011 it reduced RRR by 50 basis points, which was the first reduction since 2008. Then in February 2012, the Central Bank of China reduced RRR by 50 basis points and in May 2012 they cut the RRR by a further 50 basis points.

The cuts will provide much needed liquidity for the market to ensure continued economic growth. It is widely believed that China's decision to reduce RRR will benefit smaller banks, brokerages, material producers, property developers and insurance companies the most.

China Property Market

The Chinese government's measures in 2011 to slow down the property market have been effective in the residential sector, with prices stalling in a number of cities. These measures include banning of second home purchases, increasing minimum down payments for properties, scaling back housing-related tax breaks and introducing property tax in two cities (Shanghai and Chongqing). Despite the slower economic conditions, real estate investment in China grew by 23.5% in Q1/2012, concentrated in the 2nd and 3rd tier cities, according to the China Economic Information Network.

The recent cuts in RRR are a positive sign for the property market and equities alike. The cuts signal a shift in policy focus from anti-inflation to growth stability. The latest cut releases an estimated RMB 400 billion that can be used for bank lending. In early February, China also made it easier for the village population to get a pass to work in 3rd and 4th tier cities. This, coupled with the seven million public housing units announced by the Central government to be built in 2012, provides a positive indication that the property market (at least in the 2nd-4th tier cities) will continue to grow in the short term.

Strategy

Business-to-Business Focus

The Group's focus this year is to build strategic relationships with mid-to-large scale pan-provincial property developers in China. These property developers tend to be more conscious of overall project quality and therefore pay more attention to the quality of the products and fittings they use in their developments. While the sales cycle may be longer, the projects are usually larger and carry less risk. Additionally, working with property developers in the longer term should also provide a steadier revenue stream.

Grow Market Share

The Group will be expanding its sales team to reinforce its market share in Shandong and neighbouring north-eastern provinces. This will include the introduction of sales representative offices to build relationships with the local urban development authorities and property developers. In non-key provinces, the Group will continue to work with distributors to sell its products. This will involve providing continuous training and technical support to ensure that projects are delivered effectively and on time.

The Group also acts as an OEM (Original Equipment Manufacturer) and supplies products to other customers for sale under their brand name. This is expected to increase overall production in the short-term. As the Company grows and achieves its objectives, it is expected that OEM sales opportunities will be scaled back and the related production capacity redeployed to the Group's own brand products.

Since its listing, the Group has also initiated discussions with several overseas solar water heater distributors, installers and property developers. We believe that while China remains our core market, our technology and lower manufacturing costs will make our products competitive in the developed and developing markets in Europe, the Americas and South East Asia.

Enhance Research and Development

Auhua continues to invest in its in-house research team to explore new energy efficient and clean-energy technologies. The team's focus includes integrating the Group's solar water heating systems with geothermal heating and cooling systems, the continuous improvement in energy transference in Auhua's products and stress-testing of water heaters. We are also collaborating with the research teams of local Chinese universities in several projects.

To support the first stage of our international strategy, we have also initiated discussions with research institutes in other countries and are currently reviewing a number of joint research possibilities.

New Production Line - Rushan, Weihai City

The Group is well placed to scale its production with its new 40,000 units per annum Rushan factory completed. The factory in Rushan commenced trial production in September 2011 and was fully commissioned in October 2011. We expect that the full benefits of the new production facility will be reflected in FY 2012.

In addition to the increased capacity, the new factory has been designed to improve workflow integration and is semi-automated. This is expected to reduce production costs and increase quality and efficiency. Our technical team also designed and built many of the specialty stamping and moulding equipment for our manufacturing process and these new designs are currently patent-pending.

People

The Board recognises the importance of building an international business to meet overseas demand. In order to facilitate the development phase of the Group's international business, the Board is delighted to announce the appointment of Beh Chee Yang, Ph.D. as General Manager (Singapore) and Vice President, Business Development of the Group. Dr. Beh, aged 45 was previously head of the Singapore-based private equity operations of the Sharjah, UAE Sovereign Wealth Fund, covering the South East Asia, Oceania and the Greater China regions. Dr. Beh has been involved in technological ventures and was a Senior Research Fellow with a research institute under the umbrella of the Agency for Science, Technology and Research (A*STAR) in Singapore. He holds a Ph.D. in Electrical Engineering from the National University of Singapore and M.A. in Physics, M.S. and B.S. in Electrical Engineering from Washington University in St. Louis, Missouri, U.S.A.

Outlook

With the ongoing global economic uncertainty, the main challenge for FY 2012 will be to increase market share, while building up relationships with domestic clients especially in the Shandong and neighbouring north-eastern provinces where demand is growing. The Group's sales team has been promoting the development of our technology and new products at recent trade fairs held during the first quarter of FY 2012. We continue to see demand in the 2nd and 3rd tier cities where real estate investments are still expected to grow in FY 2012. Trading to date is on target with revenues reaching RMB 61.0 million for the first four months of 2012 with an order book of RMB 86.0 million as at 30 April 2012.

As an ongoing exercise to regulate and improve the industry, the Shandong government will be rolling out a grading system for solar water heater systems and products. Auhua has been invited to play a key role in setting the standards. The first consultation paper is targeted to be circulated to all the industry players in Shandong by June 2012. Separately, Auhua has also been invited to advise Xi'an City to set up their classification system for solar water heater products. This is in recognition of the Group's technology superiority and commitment to quality. We believe that the rolling out of such standards and grading will further consolidate the industry and bodes positively for Auhua.

This has so far been a landmark year for Auhua, with our successful AIM listing and there are many opportunities for the Company to exploit. The listing is only a start.

The Directors remain optimistic about 2012 despite the world economic turmoil. We should continue to perform fuelled by our sales and marketing expansion, our ready production capacity and the Chinese government initiatives to reduce energy consumption and pollution.

On behalf of the board, I would like to thank everyone who has devoted time and effort to supporting the Company. Their support has ensured that we are able to take the business to the next phase of growth. I would like to extend my thanks to the Board of Directors for their commitment and support, the senior management and operations teams for their dedication, confidence and hard work.

I would also like to take this opportunity to extend our appreciation to our clients, business partners, vendors and investors for their unwavering trust and support.

Tham Wai Mun Raphael

Non-executive Chairman

20 June 2012

Auhua Holdings Group2

Consolidated Statement of Comprehensive Income

Auhua Holdings Group comprises Auhua Holdings Pte Ltd and its wholly owned subsidiaries Shandong Auhua New Energy Co., Ltd and Weihua Auhua New Energy Co., Ltd. Auhua Holdings Pte Ltd was acquired by the Company on 12 December 2011. The Company's first set of consolidated accounts will be in respect of the six months ended 30 June 2012. As the Company was incorporated only on 21 November 2011 for the purposes of the AIM listing and has no other activities, the results for the year ended 31 December 2011 reflect only Auhua Holdings Group.

Auhua Holdings Group

Proforma Consolidated Statement of Changes in Equity

Auhua Holdings Group

Consolidated Statement Of Financial Position

Auhua Holdings Group

Consolidated Cash flow statement

Auhua Holdings Group

1. General information and principal activities

The Company is the holding company for the Auhua Group, with Auhua Holdings Pte Ltd ("Auhua Holdings") as its intermediate subsidiary. Auhua Holdings owns two subsidiaries, Shandong Auhua New Energy Co. Ltd and Weihai Auhua New Energy Co. Ltd (together the "Auhua Holdings Group"). The principal activities of the Auhua Group are those relating to technology research and development of solar energy to facilitate household energy appliances for sale and services. The geographical focus of its activities is currently principally in the People's Republic of China ("PRC").

The registration number of Auhua Holdings is 201104035E and the address of the registered office is 12 Eu Tong Sen Street, #08-166 Central, Singapore 059819. During the year, the Company, incorporated in Jersey, became the immediate and ultimate holding company of Auhua Holdings.

The financial information set out in this announcement, which does not constitute financial statements of the Auhua Holdings Group but was derived from them. The auditors to Auhua Holdings have reported on the non-statutory financial statements for the year ended 31 December 2011; this report was unqualified.

The financial information set out in this announcement was approved by the Company's board on 20 June 2012.

The directors do not recommend the payment of a final dividend.

2. Significant accounting policies

The financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The financial information has been prepared and presented in accordance with the accounting policies adopted in the proforma aggregated financial information for the Auhua Trading Group in the AIM Admission document of the Company (which acquired the Auhua Holdings Group on 21 November 2011) except for the following accounting policy:

2.1 Acquisition of Weihai Auhua New Energy Co., Ltd and Shandong Auhua New Energy Co., Ltd

In July and November 2011, Auhua Holdings Pte. Ltd. ("Auhua Holdings") completed the acquisition of Weihai Auhua New Energy Co., Ltd. ("Weihai Auhua") and Shandong Auhua New Energy Co., Ltd ("Shandong Auhua") (together, the "Auhua Holdings Group") respectively for a total purchase consideration of RMB 14,200,000.

Due to the relative values of the companies, the former shareholders, management and advisers of Weihai Auhua and Shandong Auhua maintained control over the enlarged ordinary share capital in Auhua Holdings. Further, the executive management of Weihai Auhua and Shandong Auhua became that of Auhua Holdings. A qualitative and quantitative analysis of these factors leads the Directors to conclude that in this transaction Weihai Auhua and Shandong Auhua have the controlling interest and should be treated as the accounting acquirers in each transaction.

In determining the appropriate accounting treatment for the acquisition, the directors have considered the Application Supplement to IFRS 3, Business Combinations. However, they have concluded that this transaction falls outside of the scope of IFRS 3, since Auhua Holdings, whose activities prior to the acquisition were limited to the management of cash resources, did not constitute a business. It has therefore been determined that the transaction should be accounted for in a manner that is similar to the reverse accounting as described in IFRS 3, but without recognising goodwill.

In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting policy, the directors have considered the pronouncements of other standard-setting bodies and specifically looked to accounting principles generally accepted in the United States of America ("US GAAP") for guidance (FAS 141, Business Combinations) as well as SEC rules. Under US GAAP, in a reverse acquisition, the target companies (Weihai Auhua and Shandong Auhua) are treated as the acquiring company for financial reporting purposes (no purchase accounting adjustments) and the fair value of the acquisitions is recognised, together with adjustments necessary to reflect the net tangible and identifiable intangible assets at their fair value with any remainder assigned to goodwill (full application of purchase accounting).

Under US GAAP, such a transaction is treated as an issuance by the operating entity (in this case, Auhua Holdings). As a result, the cost of the combination is deemed to equal the net monetary assets of the acquiree plus transaction costs. Only costs incurred by the "target" company can be capitalised.

The proforma aggregated financial information of the Auhua Trading Group in the AIM admission document was presented under Standards for Investment Reporting ("SIR") comprising the two underlying trading entities, Weihai Auhua New Energy Co., Ltd and Shandong Auhua New Energy Co., Ltd. However, the basis of presentation applied in these results comprise those of the Auhua Holdings Group and is consistent with the basis of consolidation described above.

3. Taxation

3.1 The major components of the income tax expense are as follows:

Auhua Holdings is subject to a Singapore Tax rate of 17%. As Auhua Holdings has no trading income, the expenses incurred cannot be carried forward as tax losses.

Auhua Holdings Group is subject to a PRC Enterprise Income tax rate of 25%.

3.2 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 liability is recognised, principally as result of the taxable profit for the Auhua Holdings Group equating to accounting profit.

3.3 There was no material unprovided deferred tax as at 31 December 2011 (2010: nil).

4. Property, plant and equipment

5. Share capital

31 December 2010

The share capital of Auhua Holdings Group as at 31 December 2010 was nil, as Auhua Holdings was incorporated on 18 February 2011. The group reconstruction, whereby Auhua Holdings acquired Weihai Auhua New Energy Co., Ltd and Shandong Auhua New Energy Co., Ltd in July and November 2011 respectively, gave rise to the reconstruction reserve which represents the difference between (i) the cost of the investment in the subsidiaries and (ii) the share capital and share premium of those subsidiaries on acquisition.

31 December 2011

The share capital of the Auhua Holdings Groupas at 31 December 2011 represents that of Auhua Holdings.

*On incorporation, one ordinary share of One Singapore dollar ("S$") was issued for a cash consideration of S$1.

On 18 November 2011, Auhua Holdings Pte Ltd undertook a share split of 100,000 ordinary shares into 1,000,000 ordinary shares.

During the period, 295,999 ordinary shares are issued for cash amounting to S$2,599,999 equivalent to RMB12,612,600 to provide for additional working capital.

Following the Share Swap Agreement on 12 December 2011, a share purchase agreement was entered into whereby the Company agreed to acquire the entire issued share capital of the Auhua Holdings Group in consideration for the issue and allotment and/or transfer of 59.8 million ordinary shares of the Company.

6. Reserves

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

During the financial year, in addition to those disclosed elsewhere in this pro forma aggregated financial information, the following significant transactions took place at terms agreed between the parties:

b) Key management personnel compensation is analysed as follows:

Key management personnel are considered to be the previous and/or current directors and their emoluments are included in Note (a) above.

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

8. Amount due from holding company

The amount due from Auhua Holdings represents the listing expenses incurred.

9. Proforma earnings per share

The financial information has been prepared as set out in note 2. It is of limited significance to calculate earnings per share based on the historical weighted average number of shares.

Accordingly, a proforma earnings per share has been included based on the relevant number of shares in the Company following the Group reorganisation (whereby the Company acquired the whole of the issued share capital of Auhua Holdings Pte Ltd) but prior to the issue of shares to raise new funds at the time of the AIM listing. The calculation of earnings per share is based on the following earnings and number of shares.

Auhua Clean Energy plc

Statement of Comprehensive Income for the period ended 31 December 2011

The statement of comprehensive income of the Company for the period from incorporation on 21 November 2011 to 31 December 2011 is stated as below:-

Statement of Changes in Equity for the period ended 31 December 2011

*Issued share capital was £0.02, being two shares of £0.01 each.

Auhua Clean Energy plc

Statement of Financial Position as at 31 December 2011

Auhua Clean Energy plc

Statement of Cashflows for the period ended 31 December 2011

Auhua Clean Energy plc

Notes to the financial information

1. General information and principal activities

The principal activity of Auhua Clean Energy Plc (the "Company") is to act as a holding company for a group engaged in technology research and the development of solar energy to facilitate household energy appliances for sale and service.

The Company was incorporated in Jersey, Channel Islands on 21 November 2011 and the registered office is Queensway House, Hilgrove Street, St. Helier, Jersey JE1 1ES, Channel Islands. The Company's shares are listed on the AIM Market of the London Stock Exchange.

The financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and using accounting policies as set out in the AIM Admission document of the Company.

The financial information set out in this announcement, which does not constitute financial statements of the Company but was derived from them. The auditors have reported on the non-statutory financial statements for the period ended 31 December 2011; this report was unqualified.

The financial information set out in this announcement was approved by the board on 20 June 2012.

The directors do not recommend the payment of a final dividend.

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. The Company acts as a holding company and the Directors therefore consider that the business of the Company comprises of a single activity being a holding company and therefore that only one reportable segment exists.

3. Investments

As at 31 December 2011, the Company had the following subsidiaries:

4. Share Capital

On 21 November 2011, the Company was incorporated and had an unlimited share capital. On incorporation, the Company issued 2 ordinary shares of £0.01 each for a cash consideration of £0.02.

Following the Share Swap Agreement on 12 December 2011, a share purchase agreement was entered into whereby the Company agreed to acquire the entire issued share capital of Auhua Holdings Pte Ltd ("Auhua Holdings") in consideration for the issue and allotment and of 59.8 million ordinary shares of the Company. The share purchase agreement was completed on 12 December 2012 and 59,799,998 ordinary shares were issued and allotted on the same date.

5. Contingencies

The Company had no material contingent liabilities as at 31 December 2011.

6. Related party transactions

An entity or individual is considered a related party of the Group for the purpose of the financial statements if: 

(i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group or vice versa; or 

(ii) it is subject to common control

Inaddition to related party information disclosedelsewhere in the financial statements, the followingsignificant related party transactions took place duringthe year on terms agreed between the parties:

6.1 Auhua Holdings Pte Ltd

Auhua Holdings Pte Ltd ("Auhua Holdings") is a Singapore incorporated holding company. On 12 December 2011, the Company entered into a share purchase agreement with the shareholders of Auhua Holdings whereby the Company became the immediate and ultimate holding company of Auhua Holdings.

The amount due to represents payment made by Auhua Holdings, a subsidiary on behalf of the Company. It was incurred for listing expenses and is unsecured, interest free and has no fixed terms of repayment.

7. Subsequent events

7.1 Fee shares

On 27 March 2012, 1,257,445 Ordinary Shares were allotted conditional on Admission to Augrains Capital Pte. Ltd. at 40 pence per share.

7.2 Placing and Subscription Agreements

On 27 March 2012, the Company entered into separate placing and subscription agreements pursuant to which, conditional on Admission, it allotted 2,507,500 Ordinary Shares at 40 pence per share.

7.3 Admission to trade on AIM

63,564,945 Ordinary Shares were admitted to trading on AIM on 2 April 2012.