Half Yearly Report

GTS Chemical Holdings plc

(The "Company" or "GTS")

Interim Results for the six months ended 30 June 2014

GTS Chemical Holdings plc (AIM: GTS), an established, profitable and fast growing specialty chemicals producer, is pleased to announce its results for the six months ended 30 June 2014, which will be available for download today from the Company's website www.gtschemical.com.

Financial Highlights

· Turnover up 73.7% to RMB 309 million (period to 30 June 2013: RMB 178 million)

· Gross profit up 61.5% to RMB 63 million (period to 30 June 2013: RMB 39 million)

· Gross margin of 20.4% (period to 30 June 2013: 22.0%)

· Net profit up 42.9% to RMB 39 million (period to 30 June 2013: RMB 27 million)

Chairman's Statement

The inaugural Chairman's statement accompanies the unaudited consolidated accounts relating to the period from 1 January 2014 to 30 June 2014.

I am pleased to report a strong increase in sales in H1 2014 of 73.7% to RMB 309 million from RMB 178 million in H1 2013.

Our main business, specialty chemicals, comprising ammonium sulfite and ammonium bisulfite, represented 69.3% of Group sales, generating RMB 214 million of revenue during the period, an increase of 20.4% compared to H1 2013.

Sales in the lubricating oils division, which began trading in July 2013, are line with the Company's expectations, reaching RMB 62 million in H1 2014 (H2 2013: RMB 47 million). The division now represents 20.3% of Group revenue (H2 2013: 15.4%). The increase in sales has been driven by enlarging the distributor network and increasing national coverage, from 18 distributors across 9 provinces at the beginning of the period to 43 covering 24 provinces by 30 June 2014.

The recarburizer division, which also began trading in July 2013, has performed consistently, generating revenue of RMB 32 million (H2 2013: RMB 31 million). The distributor network has also been expanded, from 11 distributors across 6 provinces at the beginning of the period to 13 distributors in 6 provinces as at 30 June 2014.

Gross profit in the period has risen by 61.5% to RMB 63 million from RMB 39 million in H1 2013.

(1) Comprises urban maintenance and construction tax, education and local education surtax and water conservation construction fund

Gross margin has decreased over the period to 20.4% from 22.0%, due in part to higher sales of lubricant oils. Sales of lubricant oils and purchases of base oils are generally subject to a RMB1/litre consumption tax; with consumption tax paid on the Group's base oil purchases deducted from consumption tax payable on the Group's lubricant oil sales.

When the Group commenced trading in lubricant oils, it purchased raw materials from distributors; consumption tax was not recoverable on these purchases. During the period, the Group began sourcing base oils directly from manufacturers; consumption tax on these purchases can be offset against consumption tax charged on sales, and as a result it is expected that the gross margin in the lubricating oils division will increase in H2 2014. It is expected that by the end of H2 2014, all purchases of base oils will be made directly from manufacturers.

Working Capital and Net Cash Flow

Net cash generated from operating activities over the period was RMB 18.5 million (H1 2013: net cash used in operating activities of RMB 18.4 million). Despite the rapid increase in sales, the Group continues to focus on managing its working capital.

During the period financing activities included a capital contribution and payment of dividend, which were related to the restructuring carried out in preparation for the Company's admission to AIM, including buying out of the minority shareholder. Further details of the restructuring are included in the Company's admission document dated 28 July 2014 and available for download on the Company's website, www.gtschemical.com.

Board of Directors

On admission to AIM, the Company significantly strengthened its Board through the addition of three non executive directors, David Weir, Derek Welch and Zhi (George) Zeng and myself as non executive chairman. Together with the executive management, the board today combines strong experience in chemicals, accountancy, public markets, corporate governance and Chinese operations.

Investment

In April 2014, the Group invested RMB 4.9 million in an additional liquid ammonium sulfite and liquid ammonium bisulfite production line, increasing capacity by 25% from 240,000 tonnes per year to 300,000 tonnes per year, based on an eight hour shift. Additional ancillary facilities, including a sulfur warehouse, were also constructed. Furthermore two of the existing liquid ammonium sulfite and liquid ammonium sulfite production lines were upgraded between December 2013 and February 2014, enabling GTS to produce higher quality chemicals on these lines.

I am also pleased to report the Group has received approval from the Quality and Technology Supervision of Shandong Province for the sale of brake fluid, a new product within the lubricant oils division, and since the end of the period has commenced sales of this new product.

Discussions with the local Government to acquire a long term land use right over land adjacent to the Group's existing site has progressed, and the Directors expect that the acquisition will take place by the end of 2014. Following the acquisition, the Group plans to expand its specialty chemicals operations in 2015 on its existing site and the adjacent land, with the installation of 2 additional liquid ammonium sulfite and bisulfite production lines and 2 further solid ammonium sulfite production lines. The majority of the new capacity will be used to satisfy the contract with Tralin Paper.

Dividend

The Group is committed to its dividend policy of a yield of approximately 5% per annum, as stated in the Company's AIM admission document.

Outlook

The outlook for each of our product segments is strong. Growth in specialty chemicals continues to be underpinned by our contract with Tralin Paper which itself is continuing with its own expansion plans. We expect the growth in lubricant oils sales to continue to rise as we increase our distributor network and brand recognition. Following the modest growth in recarburizer in the first six months (as compared to H2 2013), since 30 June we have added a further 5 distributors and expect the benefit of this to be seen in the second half results.

I would like to thank our Board of Directors, our employees and our shareholders for their support throughout the period and look forward to the rest of this year with confidence.

Andrew Harding

Non-Executive Chairman

30 September 2014

Enquiries:

About GTS Chemical Holdings plc

GTS was admitted to AIM on 1 August 2014. GTS is a Jersey holding company whose sole operating subsidiary Shandong Tiantai Steel-Plastic Co., Ltd ("Shandong Tiantai"), is the largest Chinese manufacturer of ammonium sulfite and the second largest producer of ammonium bisulfite in China. It benefits from access to lower cost raw materials through the use of low concentration waste products from nearby industry as well as proximity to key customers which is of particular benefit due to the degradable nature of ammonium sulfite. The Group's activities also include blending and distribution of lubricating oils and trading of recarburizer.

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 General information

The Company was incorporated in Jersey on 22 January 2014. The Company's sole operating subsidiary, Shandong Tiantai, a wholly foreign owned enterprise, was incorporated in China on 16 March 2005.

The address of the registered office is Luzhuang Village, Jiangdian Town, Gaotang County, Shandong Province. The principal place of business of the company's operation is same as the registered office.

The company is a leading enterprise specialising in recycling of waste ammonia and sulfur generated by energy intensive and fertilizer plants in China. Its principal activities during the period were the production of industrial ammonium sulfite and ammonium bisulfite and production of lubricating oils.

The consolidated condensed financial statements are rounded to the nearest thousand ('000) and they are presented in Chinese Renminbi (RMB).

2 Basis of preparation

The condensed financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.

Comparative

The comparatives information in the consolidated condensed financial statements is pro forma. On this basis, the Directors have decided that it is appropriate to reflect the combination using merger accounting policies as a group reconstruction under FRS6 - Acquisitions and mergers in order to give true and fair view. No fair value adjustments have been made as a result of the combination.

The consolidated condensed financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Merger accounting

The Group has been formed in stages since 25 October 2013, when Runtai Environment Protection International Limited ("Hong Kong Runtai"), a company incorporated in Hong Kong, acquired the entire share capital of Shandong Tiantai from its shareholders for a total cash consideration of RMB53,918,900. As a result of this, Shandong Tiantai become a wholly owned subsidiary of Hong Kong Runtai. The Company then acquired the shares of Hong Kong Runtai on 29 March 2014 by way of shares exchange.

Therefore, although the Group reconstruction did not become unconditional until 29 March 2014, these consolidated condensed financial statements are presented as if the Group structure has always been in place, including the activity from incorporation of the group's principal trading subsidiary. All entities had the same management as well as majority shareholders.

The interim report was approved by the Board of Directors on 29 September 2014. The report is unaudited and does not constitute the company's statutory accounts for the six months ended 30 June 2014.

3 Significant accounting policies

These financial statements have been prepared in accordance with International Financial Reporting Standards (''IFRS'') issued by the International Accounting Standard Board (IASB) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as adopted by European Union.

From the beginning of the reporting period the Company has adopted all relevant standards effective for accounting periods beginning on or after 1 January 2014.

4 Seasonality of interim operation

Traditionally and historically, the first quarter of the year is quiet due to the festive season in China. Due to this, the sales in the second half year are normally higher than the first half year.

5 Segment information

The sales revenue arises from the sale of ammonium sulfite, ammonium bisulfite, lubricant oils (including cutting oil) and recarburizer. All the activities are within China.

Analysis of revenue from the sale of goods and services are analysed as follows:

6 Taxation

The Company is regarded as resident for tax purposes in Jersey and on the basis that the company is neither a financial services company nor a utility company for the purposes of the Income Tax (Jersey) Law 1961, as amended; the company is subject to income tax in Jersey at a rate of zero per cent.

Hong Kong Runtai, an intermediate parent company is regarded as resident for tax purposes in Hong Kong.

The Group's operating subsidiary in China is subject to income tax rate at 25%. Due to its high technology enterprise status, the subsidiary is entitled to a reduced rate of 15% until 31 December 2019.

7 Earnings per share

Earnings per share are calculated by dividing the earnings attributable to equity shareholders of the company as at 30 June 2014.

There is no dilutive effect on earnings per share.

8 Property, plant and equipment

During the period, the company has built up one new production line for liquid ammonium sulfite and liquid ammonium bisulfite. Two existing production lines were upgraded between December 2013 and February 2014 to enable production of higher quality chemicals. The addition during the period was RMB6.9 million (June 2013: RMB1.7 million).

9 Subsidiaries

Details of the Company's subsidiaries at 30 June 2014 are as follows.

10 Share capital

On incorporation, 94 ordinary shares of £1 each and 6 ordinary shares of £1 each were issued fully paid to Trident Nominees Limited and Xenith Trust Company Limited respectively as the subscribers to the Memorandum of Association.

On 22 January 2014, Trident Nominees Limited and Xenith Trust Company Limited transferred 94 ordinary shares of £1 each and 6 ordinary shares of £1 each to SinoEuro Runtai Environmental Protection Resource Co., Ltd. ("SinoEuro Runtai"), and Bright Fortune Global Finance Co., Ltd. ("Bright Fortune") respectively.

On 29 March 2014 SinoEuro Runtai and Bright Fortune, as the shareholders of Hong Kong Runtai, entered into a share exchange agreement with the Company, pursuant to which each of SinoEuro Runtai and Bright Fortune transferred all of their shareholdings in Hong Kong Runtai to the Company. The consideration for the sale and purchase of the shares was the issue and allotment to the sellers of 1,000 ordinary shares of £1.00 each in the capital of the Company pro rata to their shareholdings in Hong Kong Runtai.

On 16 April 2014, the Company, by a written resolution of all of its shareholders (i) reduced the authorised but unissued share capital of the Company from £5,000,000 to £2,500,000, (ii) carried out a sub-division of the entire issued share capital of 2,500,000 ordinary shares of £1.00 each into 250,000,000 Ordinary Shares of £0.01 each and (iii) adopted the new Memorandum.

Prior to the period, in preparation for the Company's application for admission to trading on AIM, the Group underwent a number of restructuring activities, including, on 30 September 2013, the issue of a loan (the "Shareholders Loan") of an aggregate sum of USD 8,829,905 from SinoEuro Runtai and Bright Fortune to Hong Kong Runtai. Subsequent to this, on 16 April 2014, the obligation to repay the Shareholders Loan was novated from Hong Kong Runtai to the Company pursuant to a novation agreement, and by resolutions of the Board, on 16 April 2014 the Board approved the issue and allotment of 99,890,000 Ordinary Shares in aggregate to SinoEuro Runtai and Bright Fortune in settlement of the Shareholders Loan.

The total issued number of ordinary shares by the end of the reporting period is 100,000,000 at £0.01 per share.

The exchange rate used for the issued shares is £1: RMB10.

11 Capital Reserves

The initial amount of the capital contribution reserve was the difference between the proceeds of the loan received from Ms Li Guiping on 21 February 2014, and the amount of that loan measured at amortised cost using the effective interest method ("the discount"). An amount equal to the interest expense on the loan that will be recognised in the profit and loss account in the year is transferred from the capital contribution reserve to retained earnings annually. The amount of the capital contribution reserve will therefore equal the unamortised discount on the loan throughout the life of the loan (50 years). The net effect of the loan and its eventual repayment on retained earnings will be nil in each period and cumulatively.

12 Borrowings and notes payable

During the period, short term borrowings increased by RMB5 million while the notes payable decreased by RMB17.3 million. The average interest rate is 9.8%.

The short term bank borrowings are secured by:

- guarantee provided by Liaocheng Youjia Sewing Machinery Co;

- guarantee provided by Shandong Lingtong Heavy Machinery Co;

- guarantee provided by Gaotang Minshun Cotton Co;

- guarantee provided by Shandong Enterpprise Credit Guarantee Co;

- guarantee provided by Gaotang Hengxin Machinery Co;

- guarantee provided by Gaotang Botai Packaging Material Co;

- guarantee provided by Gaotang Huihuang Electronic Technology Co. Ltd;

- guarantee provided by Shandong Tianfang Biotechnology Co. Ltd;

- guarantee provided by Gaotang Lida Construction Material Co. Ltd;

- personal guarantee from Li Gui Ping (director of Hong Kong Runtai and Shandong Tiantai);

- personal guarantee from Liu Cheng (CEO of the Company and spouse of Li Gui Ping);

- personal guarantee from Guo Cui Cui (supervisor of Shandong Tiantai); and

- personal guarantee from Wang Jinqi (spouse of Guo Cui Cui).

13 Related party transactions

During the period, Shandong Tiantai purchased raw materials of RMB63 million (June 2013: RMB12 million) from Beijing Shizhu Co, a company controlled by Liang Jin Ping, who was a key management personnel of Shandong Tiantai. At the end of the period, the amount owed to Beijing Shizhu Co was RMB6.2 million (June 2013: RMB30.8 million).

At the end of the period, Shandong Tiantai owed RMB1.9 million (June 2013: RMB8K) to Li Guiping, a director of Hong Kong Runtai and Shandong Tiantai who is the spouse of Cheng Liu, the CEO of the group.

14 Events after the reporting date

Related party transactions

Due to Chinese foreign exchange restrictions, instead of taking part in the Placing, Cosmic Dawn Limited and Lofty Ambitious Limited acquired a total of 5,800,000 Existing Ordinary Shares from SinoEuro Runtai, a company wholly owned by Mr Cheng Liu, CEO of the Company, for an aggregate consideration of £2,320,000. Following these transactions on 15 July 2014, Cheng Liu agreed to lend an amount approximately equal to the proceeds of the sales, being the sum of RMB 24,267,200 to Shandong Tiantai (the "Equity Loan"). On 17 July 2014, the Equity Loan of RMB 24,267,200 was drawn down in full by Shandong Tiantai. The Equity Loan is repayable ten years from the date of the agreement and accrues interest at a rate of 3 per cent. per annum, payable annually in arrears.

Admission to AIM

On 1 August 2014, the company was admitted to AIM London Stock Exchange. On admission, 2,313,056 Placing shares were issued pursuant to the Placing and the total number of shares has increased to 102,313,056 at £0.01 per share. The issued price of the Placing Shares was £0.36 per share which represents a premium of £0.35 over their nominal value.

Appointment of Non Executive Directors

The company has appointed the following non executive directors effective from the date of admission:

· Andrew Harding - Non Executive Chairman

· David Weir - Senior Non Executive Director

· Derek Welch - Non Executive Director

· Zhi (George) Zeng - Non Executive Director

Share Option Scheme

On admission, Options were outstanding under the Share Option Scheme to subscribe for 804,888 new Ordinary Shares (equal to approximately 0.8 per cent of the Enlarged Share Capital) at an exercise price of £0.36 per share (being equal to the Placing Price). These Options were granted on 11 June 2014 and are exercisable in whole from the second anniversary of the date of the grant and on a change of control or winding up of the Company. These Options were granted to the newly appointed non-executive directors, Andrew Harding, David Weir, Derek Welch and Zhi (George) Zeng at 201,222 shares each.

Employee Conditional Share Transfer Agreements

SinoEuro Runtai has entered into conditional agreements with each of five employees of Shandong Tiantai under which SinoEuro Runtai has granted to each of the five employees an option to purchase from it 3,000,000 Ordinary Shares at a price of RMB 1 (being equivalent to £0.10). The Ordinary Shares can be acquired by the employee at any time from the first anniversary of Admission to the date which is six months following. An aggregate of 15,000,000 of the Ordinary Shares held by SinoEuro Runtai are subject to Employee Conditional Share Transfer Agreements. Ms Xueying Zhang, a Director of the Company, is party to an Employee Conditional Share Transfer Agreement pursuant to which she may acquire 3,000,000 Ordinary Shares.