Trading Update

Aquatic Foods Group Plc

("Aquatic Foods", the "Company" or the "Group")

Trading Update

Revenue up 14%, gross profit up 4% and intention to recommend a full year dividend

Aquatic Foods Group Plc (AIM: AFG), a leading Chinese marine foods and seafood processor and producer, supplying to export and local markets, is pleased to provide the following trading update for the full year ended 31 December 2015.

Highlights:

• Unaudited Group revenue for the FY 2015 increased by 14.3% to RMB 978.7 million (c£107.4m) (2014: RMB 856.1 million)

• Unaudited gross profit margins came under pressure during the second half of the year due to more challenging market conditions; pricing pressure from AFG's customers, along with upper income consumer purchases being impacted by the Chinese economy, resulted in a lower average price per Kilo of fish sold during the period.

• Unaudited Gross profit during FY 2015 increased by 3.9% to RMB 280.2 million (c£30.8 million) (2014: RMB 269.7 million), although the gross margin reduced from an average of 32% during FY 2014 to 29% during FY 2015. This reflects a decline in gross margin during the year from an average 33% during H1 to an average 25% during H2. Average gross margins have now stabilised at around 25%.

• Unaudited profit after tax for the FY 2015 is expected to be similar to that achieved during 2014, which is slightly down on previous expectations

• Unaudited cash balance at 31 December 2015 of RMB 380.2 million (c£41.7m) (2014: RMB 193.9 million), the growth in cash reflects the net IPO proceeds of £8.3 million received in February 2015 as well as cash generated from operations during the year

• The Board continues to progress the appointment of a replacement CFO and will provide updates as appropriate

• As previously indicated, the Board intends to recommend a full year dividend for the full year ended 31 December 2015

Revenue breakdown by product category

\* The illustrative exchange rate as at 29 February 2016 is 1GBP: 9.11RMB

Gross Profit margin by Product Category

Fish

The revenue generated from fish products increased by over 20% on the previous year and has continued to represent SFG's largest product category, representing 72% of sales for the full year ended 31 December 2015 (2014: 68%).

The revenue generated from fish increased by approximately 20%, this increase was principally generated from higher sales of mackerel, cod and saury which tend to be lower priced and margin products.

The weight of processed fish during FY 2015 increased by 24% compared with that processed during FY 2014.

Sea Cucumbers

The sales value of Sea Cucumber products have increased slightly, but average prices have fallen leading to a reduction in gross profit margin to 36% from 44%.

Cephalopods

The sales of Cephalopods (principally squid and cuttlefish) for the full year ended 31 December 2015 were down approximately 4% compared to the prior year. Gross profit margins were down slightly from 30% to 29%.

Shrimp and Shellfish

Sales have increased by 12.2% for the full year ended 31 December 2015, whilst the Gross profit margins for the full year ended 31 December 2015 were down to approximately 30%, reflecting the general price pressure in the market.

Other revenue

This includes gift boxes. Sales have decreased by 6.4% for the full year ended 31 December 2015, whilst the Gross profit margins for the full year ended 31 December 2015 were up slightly to approximately 27%.

Export markets

The revenue from exports for the full year ended 31 December 2015 were RMB 69 million (c£7.6m) which represented 7% of revenue, down from the previous year where exports represented 10% of revenue. The Group began to supply products to Yihe, distributor to Walmart and other US supermarkets, under a sales contract announced in September 2015, and the Company expects to secure more similar export contracts from US and Europe markets as their economies continue to recover.

Appointment of new Finance Director

Following the departure of Sean Lim the Finance Director on 3 February 2016, the Company has been reviewing potential candidates for the position. The Company will make a further announcement regarding this in due course.

Cash and working capital

The Group maintains a strong cash position, the majority of which is held in the PRC although funds are also held in the UK and Hong Kong in order to more easily meet international payments. The Group continues to actively manage its trade debtor balances. The Group has not been required to provide for any bad debts at the present time.

New Facility

As previously noted, the Group is currently awaiting final regulatory approval for its expansion plans from the relevant regional authorities. Due to the current demand environment the Group has not been actively chasing this consent although it is expected that as demand increases the Group will still seek to acquire additional processing and cold storage capacity.

Market environment and Outlook

While the Group expects to report strong results for 2015, the trading environment continues to be challenging in the domestic PRC market, particularly in the higher income consumer sector. Consequently, the Group is seeking to grow new sales channels by specifically targeting sales to supermarkets in the PRC. This will be achieved through expanding the distribution partners as well as focusing on export markets due to the fall in value of the Renminbi, although the latter will tend to attract lower gross profit margins.

The Directors expect the current market conditions to continue during H1 2016, resulting in a more measured growth trajectory during 2016. The Directors will focus their growth strategy to capitalise on renewed economic growth in China from 2017 and onwards as well as seeking to grow exports into the US and European markets.

The Group intends to pay a full year dividend for the year ended 31 December 2015 in addition to the 0.7p interim dividend already paid. Further details relating to the dividend payment will be made following the publication of the Company's annual report for 2015.

Li Xianzhi, Chief Executive Officer of Aquatic Foods Group Plc, said: "China's economy grew 6.9% last year, its slowest rate in a quarter of a century, as the leadership steers the economy on a more qualitative growth path by, inter alia, overseeing the closure of outdated factories in the steel, coal and cement sectors and supporting new areas of growth such as green energy or the service sector. During the last year whilst our gross margin declined, primarily as a result of this slower growth, it has now stabilised at an aggregate of 25%. We expect the current market conditions to continue during H1 2016 and AFG will seek to overcome this by concentrating on operational efficiency, developing new sales channels including supermarkets, increasing sales to our existing distribution network, expanding our distribution network and increasing our focus on export markets."

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Notes to Editors:

Aquatic Foods Group is a leading marine foods and seafood processor and supplier based in China. The Group initially built its business through focusing on the export market (principally Japan under the "Kanwa Foods" brand), and subsequently established the "Zhenhaitang" brand in 2007 in mainland China to take advantage of the growing market driven by growing disposable income within the Chinese middle-classes and a more health conscious consumer base.

The Group benefits from excellent food safety procedures developed over many years which have helped the Group to build a strong track record of supplying its products into overseas markets. This track record has enhanced the perception of the quality and reliability of the Group's products in China and has allowed the Group to expand significantly into local markets as demand for seafood products has increased. In a market that has seen regular public health scares relating to food safety, the Group considers that its adherence to these standards to be a key strength. The Group has obtained the following key standards:

- ISO 9001 Quality Management System certification

- HACCP Food Safety System certification

- BRC certification; and

- Marine Stewardship Council certification

Aquatic Foods works with a network of distributors to effectively market its products in China. The Group has continued to grow its distributor relationships and now distributes its products in 16 provinces, municipalities and autonomous regions in China through 50 regional distributors. These distributors in turn sell the Group's products to sub-distributors and retailers, including supermarket chains and hypermarkets.

Further information can be viewed at www.aquatic-foods.com.