Interim Results

AUHUA CLEAN ENERGY PLC

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

INTERIM RESULTS

29 September 2014: Auhua Clean Energy plc (AIM: ACE), the AIM quoted environmental technology group based in the Shandong Province of Eastern China, today announces its unaudited results for the six months ended 30 June 2014.

Highlights

· Revenue increased by 5.3% to RMB 116.2 million: GBP 11.1 million (30 June 2013: RMB 110.3 million: GBP 11.8 million).

· Strong focus on selling to property developers resulted in a 4.3% increase in number of units sold to 36,500 (30 Jun 2013: 35,000).

· Gross profits remained stable at RMB 50.9 million: GBP 4.8 million (30 Jun 2013: RMB 51.7 million: GBP 5.5 million) as did gross margins at 44% (30 June 2013: 47%).

· Net profit before tax fell to RMB 25.6 million: GBP 2.4 million (30 June 2013: RMB 32.5 million: GBP 3.5 million) due to increased expenditure expanding distribution network in China and research and development in Taiwan Ziolar.

· Net assets of RMB 236.8 million: GBP 22.6 million (30 June 2013: RMB 155.5 million: GBP 16.7 million).

· Cash balances at 30 June 2014 of RMB 45.5 million: GBP 4.3 million (30 June 2013: RMB 40.3 million: GBP 4.3 million).

· Earnings per share at half year of RMB 0.21: 2.0 pence (30 June 2013: RMB 0.37: 4.0 pence).

· Order book as at 30 June 2014 was RMB 80 million: GBP 7.6 million (30 June 2013: RMB 64.8 million: GBP 6.9 million).

· Post period end:

- Auhua entered into a joint development agreement in August 2014 with Lyles School of Civil Engineering, Purdue University, Indiana, US, to enhance its existing solar thermal technologies by further developing its advanced composite material and proprietary coating technologies. All technologies developed under the agreement will belong exclusively to Auhua.

- Auhua appointed WH Ireland as broker to the Company on 27 August 2014 to assist in broadening its investor base and reach.

Outlook

· The Group will continue to invest in research and development to remain at the forefront of its field.

· The thermal coating line at Taiwan Ziolar Technology Co. Ltd ("Taiwan Ziolar") is progressing well with completion expected during Q4 2014. This will provide the Group with enhanced solar thermal technologies and increase the energy efficiency of its products.

· The Group's revenue has grown by 5.3% to RMB 116.2 million and profit before tax for 2014 is expected to be in line with market expectation.

· The Group will continue to focus on working with larger property developers to drive sales growth and it expects to increase its production capacity during 2015 following the completion of its current round of fund raising.

* All RMB amounts translated using an exchange rate:

RMB 1 : GBP 0.095270 (as at 30 June 2014)

RMB 1 : GBP 0.107107 (as at 30 June 2013)

David Sumner, non-executive Chairman of Auhua, said, "I am pleased to report a solid set of results for the six months ended 30 June 2014. In spite of a bearish property sector in China, we have continued to grow the business, increase revenues and maintain excellent margins. The successful acquisition of Taiwan Ziolar will enable us to greatly enhance efficiencies of our technologies and our partnership with Purdue University in the US this year will help ensure continued innovation so that we remain leaders in our field. China has the world's largest total capacity for solar heating with 64% market share. The Shandong province, where Auhua operates, is the leader in China's solar thermal initiatives and Auhua's products are the only five star rated split-unit solar water heaters. This gives us significant edge and our strategic focus remains to continue investing in research and development to ensure we remain on the cutting-edge of solar thermal technological innovation."

Media Enquiries

Further information

Notes to Editors:

About Auhua Clean Energy

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 split-unit solar 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.

Information about the solar industry in China

China was again the main demand driver in 2013, adding 46.2 GWth (up 3.3% on 2012) and using 64% of the world's total capacity for solar heating. The Shandong province is the leader in China's solar thermal initiatives, manufacturing one third of China's solar water heaters.

In China, solar water heaters cost considerably less over their lifetime than electric or gas water heaters - a major factor driving the market. Currently still dominated by uni-body systems purchased directly by end consumers, the Shandong government is shifting its focus to promote split-unit water heater systems to property developers. Consequently they have introduced regulations to increase demand by requiring all buildings with more than 12 floors (which traditional unibody systems cannot support) to utilise solar water heater systems. Government subsidies are also available to property developers when they incorporate solar water heater systems into their building plans.

As a result, China's use of solar thermal on urban apartment buildings (including roof and façade-integrated systems) is expanding rapidly. The urban sector represented nearly half of the 2013 market, with growth continually driven by green building policies and solar mandates.

(Source: 2014 Global Status Report)

Chairman's Statement

Business Review

On behalf of the Board of Directors, I am pleased to present the unaudited accounts for the Group for the six month period ended 30 June 2014.

The Group has made positive progress and this has been reflected with revenue rising by 5.3% to RM 116.2 million: GBP 11.1 million (30 June 2013: RMB 110.3 million: GBP 11.8 million).

Gross profits remained stable at RMB 50.9 million: GBP 4.8 million (30 June 2013: RMB 51.7 million: GBP 5.5 million) with gross margins falling slightly to 44% (30 June 2013: 47%). Net profit after tax reduced to RMB 17.4 million: GBP 1.7 million (30 June 2013: RMB 23.6 million: GBP 2.5 million). The Group focused on expanding its distribution network in China and investing additional research and development into Taiwan Ziolar, as well as attracting larger property developers by offering discount pricing. We expect this increased pace of investment to deliver significantly increased capabilities and efficiencies in the longer term.

Taiwan Ziolar

On 2 August 2013, the Group announced the business and share acquisition of Taiwan Ziolar, which was duly completed on 23 May 2014 and which will significantly advance Auhua's solar thermal panel technology. In August 2014, Auhua and Taiwan Ziolar entered into a joint agreement with Lyles School of Civil Engineering, Purdue University in the US to further develop its advanced composite material and proprietary coating technologies.

Taiwan Ziolar is also working with leading technology institutes including Tsinghua University in Taiwan. Two US patents and two China patents have been filed with commercial production borne out of these collaborations expected in Q1 2015. The Group expects further patents to be filed pending the completion of projects with these prestigious institutions.

This acquisition has transformed Auhua from being a predominantly solar powered water heater manufacturer into a much broader solar thermal technology firm. Auhua's products are already the only five star rated split-unit solar water heaters in the Shandong market - this acquisition enables Auhua to be more advanced, cost-effective and efficient than its competitors. Moreover, the acquisition has brought world-class technology into the Group and will propel Auhua's expansion into new opportunities in international markets.

Financial Performance

Gross profits remained stable at RMB 50.9 million: GBP 4.8 million (30 June 2013: RMB 51.7 million: GBP 5.5 million) with gross margins falling slightly to 44% (30 June 2013: 47%) as the Group offered discounted prices to secure projects with larger property developers.

Administrative expenses increased during the period by RMB 4.6 million (GBP 0.4 million) to RMB 13.0 million (GBP 1.2 million). This was due to the Taiwan Ziolar acquisition and the increased expenditure on research, development and innovation and corporate overheads. As a result, profit before tax fell to RMB 25.6 million: GBP 2.4 million (30 June 2013: RMB 32.5 million: GBP 3.5 million)

Our trade receivables increased to RMB 84.5 million: GBP 8.1 million (H1 2013: RMB 66.5 million: GBP 7.1 million), as a result of higher sales but also in part due to the tight domestic debt markets affecting our customers. In our move to the larger property developers, we have provided some of our larger clients with longer credit terms. Some of our customers have also slowed down their property roll-out plan and have requested longer installation periods and commissioning phases, thereby affecting the collection period. As a result, our debtor days increased from 88 days for FY 2013 to 131 days for H1 2014 (93 days for H1 2013) with 63% of the debtors less than 180 days. Overall, trade receivables represent 72% of our H1 2014 turnover (H1 2013: 60%).

Inventory levels were maintained at RMB 7.0 million: GBP 0.7 million (FY 2013: RMB 7.6 million: GBP 0.8 million) and due to these relatively low levels we do not hedge against raw material price fluctuations. Inventory was kept low despite the increase in activity due to the increase in trade receivables and the Group maintained a prudent cash management policy.

As such, the Group maintained a strong financial position with a balance sheet debt ratio of 14.3%. Cash and cash equivalents held at 30 June 2014 were RMB 45.5 million: GBP 4.3 million compared to RMB 40.3 million: GBP 4.3 million at 30 June 2013.

Currently the Group has a combined capacity of an estimated 90,000 units per annum but has the potential to increase production capacity by a further 60,000 units in the factory in Weihai city.

China Property Market

The China property market continued to slow down in H1 2014 due to rising inventory and a tightening debt market which saw banks continue to rein in lending to the property sector.

Despite this, larger property developers' sales in August 2014 outperformed the market, achieving circa 20% month-on-month (MoM) and 3% year-on-year (YoY) growth, with expectations for continued growth during the remainder of 2014. Year to August 2014 residential investment growth was up 12.4% YoY, exceeding RMB 4 trillion. The floor space of residential buildings started in the year amounted to 1.2 billion square metres, up by 18%. At an average of 100 square metres per apartment, this equates to an estimated 12 million apartments launched during 2013.

We expect the Chinese property market to continue to remain stable and healthy. The government has recently announced an USD 81 billion bank injection and has also targeted numerous measures to support the property market, such as relaxing home purchasing restrictions (HPR) in 37 of 46 cities in China so far since July 2014.

Despite this, we do not foresee the same unregulated growths as experienced in recent years. Instead, we anticipate the property market to experience further consolidation and moderate expansion with the larger property developers taking a bigger market share of real estate launches, hence the Group's commitment to moving towards working with larger property developers.

Outlook

While the overall property climate in China remains bearish, the property industry in our markets continues to grow. Interest in solar thermal water systems has increased following stricter criteria being placed on new project approvals and higher end-user expectations. New property developments are mostly driven by the larger property developers with smaller developers leaving due to credit constraints. Auhua has been concentrating its efforts towards these larger property developers for some time with good success. As a result, margins have reduced slightly.

Securing contracts with larger property developers places us in a highly competitive arena, however, there are fewer peers and a more visible pipeline of projects forecasted. Within this context, we remain bullish on the growth of the Chinese solar industry and our significant part in this.

We are also excited about our distribution agreement with Istidama to expand into the United Arab Emirates (UAE). Discussions are on-going between the Group, Istidama and potential customers and we expect to secure our first order during Q4 2014.

On the technology front, we continue to invest and expect to realise significant improvements to both the existing split-unit solar water heater and the Taiwan Ziolar solar thermal panels. Other pipeline projects such as the composite geo-solar systems and the 100% renewal energy systems are progressing well. We are also excited about the developments with our technology partnerships and we expect to roll-out these products by Q1 2015. We intend to make further significant investment in technology and resources as these are all strategic and vital to the growth and continued success of the Group.

David Sumner

Non-executive Chairman

Auhua Clean Energy Plc

Unaudited Consolidated Statement of Comprehensive Income

For the six month period ended 30 June 2014

Unaudited Consolidated Statement of Changes in Equity

For the six month period ended 30 June 2014

Consolidated Statement of Financial Position

As at 30 June 2014

Consolidated Statement of Cash Flows

For the six month period ended 30 June 2014

Basis of Presentation and Summary of Significant Accounting Policies

1. General information and principal activities

The financial information for the six months ended 30 June 2014 and 30 June 2013 set out in this interim financial information is unaudited and does not constitute statutory financial statements. The financial information for the year ended 31 December 2013 set out in this interim financial information does not comprise the Group's statutory financial statements but has been extracted from those financial statements.

The directors approved the interim financial information for the six months ended 30 June 2014 on 26 September 2014.

Copies of this interim financial information will be available on the Company's website:

www.auhuacleanenergy.com

The interim financial information has been prepared in accordance with the principles of IFRS as adopted by the European Union. The standards have been applied consistently (except as otherwise stated).

The statutory financial statements for the year ended 31 December 2013, which have been filed at Jersey Registrar of Companies, were prepared under IFRS and IFRIC interpretations as adopted by the European Union.

The accounting policies adopted by the Group in this interim financial information is consistent with those set out in the Annual Report for the year ended 31 December 2013, have been consistently applied to all periods presented and are consistent with those accounting policies the Group expects to be using in the Annual Report for the year ended 31 December 2014.

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. Auhua is an environmental technology group specialising in the development and application of green energy and energy efficient solar water heating solutions. The Group's revenue and profit before taxation were all derived from its principal activity. Revenues from all periods were derived from external customers based in China. The operations are based in China and its assets and liabilities related to this single business segment. The CODM therefore considers that the business of the Group comprises a single activity and that therefore only one reportable segment exists

3. Taxation

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 liabilities are recognised, principally as result of the taxable profit for the Group equating to accounting profit.

4. Property, plant and equipment

5. Other intangible assets

The Company completed the acquisition of the entire stated capital of Ziolar Pte Ltd ("Ziolar") and Taiwan Ziolar Technology Co Ltd ("Taiwan Ziolar") on 23 May 2014 for a total consideration of USD 4.5 million via the issue of shares in the Company.

The value of the identifiable net assets of the company has only been determined on a provisional basis as the valuation exercise of certain assets has not been finalised.

6. Stated capital

7. Reserves

7.1 Capital 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 its 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.

7.2 Share based payment reserve

During 2012 the Company granted Northland Capital Partners Limited an option to subscribe for 635,650 ordinary shares at 40 pence at any time during the period of three years following admission. These were granted in respect of the services they provided during the listing of the Company on the Alternative Investment Market. These options have been valued at the fair value of the services received. At the period ending 30 June 2014, these options remain unexercised.

Movement in the year:

The following table illustrates the number and weighted average exercise prices ("WAEP") of, and movements in, share options during the year:

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

b) Key management personnel compensation is analysed as follows:

Key management personnel are the Directors.

c) Payment to Augrains Capital Pte Ltd

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

9. Commitments

As at 30 June 2014, the capital commitment for the Group amounted to RMB 36.1 million. This related to the purchasing of new equipment and the construction of a new office building at Weihai Auhua New Energy Co., Ltd.  The Group's capital commitments as at 30 June 2013 were RMB 27.5 million.

10. Earnings per share

The calculation of earnings per share is based on the following earnings and number of shares.

-Ends-