Half Yearly Report

Taihua plc

("Taihua" or the "Company")

Interim Results for the six months ended 30 June 2015

Highlights 

· Sales in 2015 H1 RMB 5,399,000 (2014 H1: RMB 4,266,000)

· Profit after Tax in 2015 H1 RMB 848,000 (Loss after tax in 2014 H1 RMB (326,000))

Chairman's Statement 

As the forsythia harvest is sold in the second half of the year, H1 financial performance is as a result of the supply and sale of the Company's Paclitaxel and Homoharringtonine products along with its range of prescription-only finished TCM products.

Forsythia 

All costs associated with cultivation during the first half of the year are included in inventory for release when sales are made in the second half of the year. Therefore the forsythia plantation has no effect on the consolidated statement on comprehensive income. As at the end of the reporting period, trade debtors generated from forsythia sales were RMB 49,700,000 at the end of this reporting period. Approximately RMB 20,000,000 of cash has been received from forsythia customers post period end.

The Company is aware that the growing conditions in 2015 were poor. The region suffered frosts during the key flowering period. On April 14 the minimum temperature recorded was minus 2.2 degrees C and as a result the harvest is likely to be significantly effected

Prescription - only Traditional Chinese Medicines

Sales in 2015 H1 were RMB 3,383,000 (2014 H1: 2,382,000)

There were increases in the sales of Bian Tong Pian and Zao Ren An Shen. These increases were due to two factors; firstly Taihua has been working to penetrate new markets such as Sichuan Province and we are seeing some initial successes. Secondly, customers are anticipating disruptions to our manufacturing as we upgrade some facilities to meet Chinese GMP standards and have increased orders accordingly.

Paclitaxel 

Paclitaxel sales were 4,150g at an average price of RMB 391.48 per gram, generating a total revenue of RMB 1,614,000 (2014 H1: RMB 1,326,000). Given the recent historic falls in both volumes and prices of this product it is encouraging that this is the first period for several years where we have seen increases both in volume and price

Homoharringtonine 

Sales in the reporting period was RMB 552,000 (2014 H1: RMB 676,000)

Whilst the volumes have fallen considerably in the past years the Company intends to remain in the business of Homoharringtonine supply as there is still, in the opinion of the Board, the possibility that volumes may recover once we have gone through the GMP reaccreditation process. Homoharringtonine has always been a relatively high Gross Margin % product (2014 H1 45.1%) and any upturn in volumes would have a significant positive profit effect.

Consolidated Statement of Financial Position 

Cashflow was significantly negative in the period as we invested in upgrading our facilities to meet Chinese GMP standards. Cash at the end of the period stood at RMB 25,546,000 (2014 H1: 36,353,000)

Strategic Direction 

Following the realignment of the business to focus more on Traditional Chinese Medicines and less on Active Pharmaceutical Ingredients the business has become more exposed to one-off weather events. In recent years these weather events have adversely effected the harvest of the key forsythia crop. However, the Board consider that with input from external agencies the performance of the forsythia plantations can be improved.

Reaccreditation to Chinese GMP is a key target to achieve. Considerable investment has been made. A large number of smaller suppliers did not have Taihua's strong cash position and as such have had to exit this market. Taihua believes that this presents an opportunity over the coming years.

For more information please contact:

Nicholas Lyth, Taihua plc 0776 990 6686

Katy Mitchell, WH Ireland Limited +44 161 832 2174

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2015

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2015

TAIHUA PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 JUNE 2015

TAIHUA PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE PERIOD ENDED 30 JUNE 2015

1. GENERAL INFORMATION

Taihua Plc (the "Company") was incorporated and registered in England and Wales on 29 August 2006 under the Companies Act 1985 as a public company limited by shares with the name "China Natural plc" with registered number 05918155. On 8 September 2006, the Company changed its name to "Taihua plc". The address of the registered office is 4 Harefield Place, St. Albans, Hertfordshire AL4 9JQ. 

The Company is an investment holding company and its subsidiaries are principally engaged in the manufacturing and sales of pharmaceutical products, and the principal place of business is Room 201, Unit 3, No. 16 Zhong Hua, ShiJiCheng, FuZeYuan, 239 KeJi Road, Hi-tech Zone, XiAn, 710077, People's Republic of China (the "PRC").

2. BASIS OF PREPARATION

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

The consolidated condensed financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The consolidated condensed financial statements are rounded to the nearest thousand ('000) and they are presented in Chinese Renminbi (RMB), the official currency of the People's Republic of China. RMB is the functional currency of the Company.

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.

The interim report was approved by the Board of Directors on 30 September 2015. The report is unaudited and does not constitute the company's statutory accounts for the six months ended 30 June 2015.

3. SIGNIFICANT ACCOUNTING POLICIES

These consolidated condensed 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 2015.

The presentation currency of the Group is RMB and therefore the financial statements have been translated from GBP and HKD to RMB at the following exchange rates:

Period end rates Average rates

30 June 2015 GBP1=RMB9.57 GBP1=RMB9.3112

HKD1=RMB0.7906 HKD1=RMB0.79164

4. REVENUE

Revenue on sale of goods represents the invoiced value of goods sold, net of value added tax ("VAT"), consumption tax ("CT") and other sales taxes, after allowances for goods returns and trade discounts.

An analysis of the Group's turnover and other revenue is set out below:-

5. OPERATING SEGMENTS

For the purposes of resources allocation and performance assessment, the chief operating decision makers, who are the Board of Directors, regularly review revenue and cost of sales for each product. The financial information provided to the Board of Directors contains profit or loss information of each product line.  Therefore, the operation of the Group constitutes four reportable segments.

The Group's reportable segments under IFRS 8 Operating Segments are as follows:

· Paclitaxel - Paclitaxel is extracted from the bark of the yew tree (Taxus). This drug is one of the main-stream treatments for cancer of the ovaries, breast, certain types of lung cancer, and a cancer of the skin and mucous membranes more commonly found in patients with acquired immunodeficiency syndrome (AIDS).

· Homoharringtonine - Homoharringtonine is an alkaloid extracted from the branches and leaves of the Cephalotaxus tree. This drug has been prescribed for acute myeloid leukaemia and other cancers in China.

· TCM products - Traditional Chinese Medicine has recognition as a viable alternative health treatment and has been recognised by the World Health Organisation for its effectiveness in the treatment of certain forms of illnesses and diseases. The Company currently manufactures eight TCM products which are Gengnianan Tablet, Duzhong Pingya Tablet, Zaoren Anshen Keli, Bunao Anshen Tablet, Jiangzi Jianfei Tablet, Dabaidu Capsule, Runing Tablet and Bian Tong Pian.

· Forsythia - Known as lian qiao in PRC, is a flowering shrub. The seeds and seed cases of this are harvested and, when dried, form the basis of TCM preparations. Forsythia TCMs are primarily sold to alleviate flu and cold like symptons.

The Group's revenues are significantly impacted by the seasonality of the forsythia sales. Forsythia is mainly harvested during autumn every year and therefore sales of forsythia are recognised in the fourth quarter. Costs incurred to 30 June with regard to the forsythia plantations have been included in inventories for release when the forsythia is harvested later in the year.

The following is an analysis of the Group's revenue and cost of sales by reportable segments:-