United Power Technology Half-year report

Transcription

1 United Power Technology Half-year report

2 United Power Technology AG KEY FINANCIALS 1 HY 2014 (consolidated) 1 HY 2013 (consolidated) +/ % Revenues EUR million % Gross profit EUR million % Gross profit margin % pp EBIT EUR million % EBIT margin % pp Profit for the period EUR million % Net profit margin % pp Earnings per share 1 EUR % 1 Earnings per share (EPS) for six months 2013 and for six months 2014 are based on 12.3m shares United Power Technology Half-year report

3 Content 04 Letter to Shareholders 05 The Share 07 Interim Group Management Report 19 Interim Consolidated Financial Statements 30 Responsibility Statement 31 Financial Calendar, Imprint UNITED POWER TECHNOLOGY GROUP is a leading manufacturer of engine-driven power equipment in China. We design, develop, manufacture and sell an extensive range of generators, outdoor power equipment and components such as engines. Our major products comprise residential as well as commercial generators, which are currently delivered into around 70 countries around the world. United Power Technology Half-year report

4 DEAR FELLOW SHAREHOLDERS, As we anticipated the first half 2014 remained challenging. In the first half we saw a revenue decline of 5.5% to EUR million. Main reasons for the development were the strong comparable first half 2013, on-going industry consolidation and price competition in China and currency effects of a stronger Euro. Our business in Russia was negatively impacted by the continuing conflict in this area. As a result we saw a general weakening European business, significantly influenced by the Ukraine crisis and a weaker rouble. Sales in our domestic market China declined mainly due to a price adjustment, which brought RMB prices closer in line with USD prices given a long period of currency appreciation. While the on-going consolidation process in our industry in China is impacting our results, we nevertheless believe that this consolidation process will ultimately be good for United Power and that we will emerge from this in a stronger position. The North American market declined in comparison to the same period last year due to the quieter hurricane season. Referring to the segment performance we managed to maintain a stable income level within our residential generators segment with revenues amounting to EUR million. In our largest business segment, the commercial generators, revenues decreased by 7.9% in the reporting period to EUR million. This is mainly attributable to the reduction of construction spending in China. The revenues in the outdoor power equipment segment went down by 16.7% to EUR 2.45 million, because the segment tends to have fewer larger customers and the orders tend to be lumpier. On the profitability side, EBIT amounted to EUR 7.17 million (H1 2013: EUR 9.78 million) in the first six months The significant decrease was mainly due to a decreased gross profit margin, currency losses associated with a strong Euro and lower government grants in Also, we faced higher distribution and transportation costs and stepped up R&D spending in order to accelerate our development and innovation process to create high-quality products. On the other hand we were able to lower our administrative expenses as a result of our efforts to reduce overhead costs. In line with our efforts to continually enhance our product portfolio to meet the needs of international markets and the higher regulatory standards in the European Union, we increased our expenses for research and development activities by more than 30% in the first half year. Due to the above-mentioned reasons our EBIT-margin decreased by 3.9 percentage points to 13.5% in the first half of Despite the declining revenues we hold on to our investment plan in preparation for an upswing in our industry environment and in order to increase the overall efficiency but also the capacity of our production lines. We have made significant progress in the completion of our new factory buildings and expect to complete them according to our time schedule this year. We will closely monitor the market developments to decide on the timing for the installation of new production lines. We believe that the investment will start bearing fruits after the completion of our first new production lines. In line with the revenue development in the first half and as we expect the industry environment to continue to be challenging throughout this year, we are amending our previously given guidance for the full year Given the reasons mentioned above, for 2014 we expect a decline in the group's revenues in an amount possibly exceeding the percentage decrease for the first half year. As far as profitability is concerned, United Power anticipates a decrease in gross profit and EBIT margins of similar magnitude as the percentage point decline of the EBIT margin for the first half this year. We are not be satisfied with our financial results and therefore will increase our efforts in the second half of this year in order to steer us back on a growth path. We remain confident due to our versatile business model, which allows us to find solutions for various customer groups and hence react to changing market developments and current consolidations. We also are confident that we will come out of this current consolidation process as an even stronger business-partner with reliable high-quality products. Yours sincerely, Xu Wu, Chairman of the Management Board United Power Technology Half-year report

5 THE SHARE Generally optimistic markets for the first half of 2014 The positive market sentiment at the end of 2013 continued in the first half of Most of the lead indices developed positively and reached new all-time highs due to the low interest rate environment and a positive overall valuation of shares. In this overall positive market environment, the SDAX showed a slightly volatile but generally stable and positive development with a low of 6,890 points on 17 March and a high at 7,569 points on 11 June As of 30 June 2014, the index closed at 7,378 points. All in all the SDAX performed well with a plus of approx. 8% in the first six months of Declining share price despite positive start Following a period of decline at the end of 2013, the share price of United Power further decreased at the beginning of January 2014 and reached a temporary low of EUR 2.89 on 15 January. This was followed by a strong increase during the next days, which brought the share to its period-high of EUR 3.39 on 21 January The share price remained volatile and declined in February and March before it stabilized at a level of around EUR 2.95 until the release of the annual results for the year The share price climbed to a temporary high at the beginning of April due to a dividend announcement and decreased again with release of the financial figures for Q and thereafter. It hit its low on 23 June 2014 with a share price of EUR 2.22 and closed with EUR 2.27 on 30 June The market capitalization of United Power was EUR million on 30 June This represents a decrease of approximately 26% compared to 31 December The average trading volume during the first half of 2014 was 6,113 shares per day. New research note On 16 May 2014, Kepler Cheuvreux published a new research note. The analysts see a target price at EUR In contrast, a further market report published by Edison in April came to the conclusion that United Power s shares are being traded at a substantial discount to the average valuation of their peers. Share performance (January 1 to July 31, 2014) %! %! 75.00%! 50.00%! Jan '14! Feb '14! Mar '14! Apr '14! May '14! Jun '14! Jul '14! United Power Technology AG! SDAX! United Power Technology Half-year report

6 Shareholder Structure (as of 30 June 2014) Key data ISIN/WKN/Ticker/Reuters Market Segment/Stock exchange DE000A1EMAK2/A1EMAK/UP7/UP7G.DE Regulated Market (Prime Standard)/Frankfurt Stock Exchange First Trading Day 10 June 2011 Shares issued (in shares) 12,300,000 Market capitalization (Mio. EUR) as at 30 June United Power Technology Half-year report

7 United Power Technology Half-year report

8 Interim Management Report GROUP PROFILE United Power Technology Group designs, develops, manufactures and sells an extensive range of engine-driven power equipment, including generators, outdoor power equipment and components such as engines. Our major products comprise residential as well as commercial generators, which are currently delivered to our customers in around 70 countries around the world. Our main markets are Europe, North America and our domestic market China. Furthermore we sell our products to other overseas markets. In selected markets such as China, Canada, Africa (Nigeria, South Africa), Malaysia, Europe (Italy, Spain) and Russia we sell our own branded products. In the other markets our products are usually developed and manufactured by United Power and branded by third parties. United Power is a leading Original Design Manufacturer (ODM) which develops and produces its products for leading Original Equipment Manufacturers (OEMs), wholesalers and retailers such as Metro, GMC, B&Q and Hornbach. ECONOMIC ENVIRONMENT According to the update on the World Economic Outlook issued in July 2014 by the International Monetary Fund (IMF) the global growth projection for 2014 has been marked down by 0.3% to 3.4%, reflecting both the legacy of the weak first quarter, particularly in the United States, and a less optimistic outlook for several emerging markets. With somewhat stronger growth expected in some advanced economies next year, the global growth projection for 2015 remains at 4%. Growth in the euro area is expected to strengthen to 1.1% in 2014 (in comparison to -0.4% in 2013) and 1.5% in 2015 but to remain uneven across the region, reflecting continued financial fragmentation, impaired private and public sector balance sheets, and high unemployment in some economies. The economy in Germany notably benefited from exports and low inflation. The IMF estimated 1.9% GDP growth for 2014 after 0.5% in The emerging economies estimated to have grown at a rate of 4.6% in 2014, slightly lower than in According to the IMF, in some major emerging market economies, the negative growth effects of supply-side constraints and the tightening of financial conditions over the past year could be more protracted. In many advanced and emerging market economies, structural reforms are urgently needed to close infrastructure gaps, strengthen productivity, and lift potential growth. In China, domestic demand moderated more than expected, reflecting the authorities effort to reign in credit growth and a correction to real estate activity.the IMF estimated a growth rate of 7.4% in United Power Technology Half-year report

9 INDUSTRY ENVIRONMENT AND TRENDS There was no comprehensive market research in the reporting period covering all our market segments. According to a study of SBI Energy the value of the worldwide market for commercial generators was estimated at nearly USD 8.61 billion (Basis 2012). Global demand is expected to be strong due to different factors like supply uncertainties and disruptions due to aging grids (particularly in North America), failing grids due to natural disasters and underdeveloped grids particularly in emerging markets. The American Society of Civil Engineers (ASCE) evaluated and graded the U.S. electrical grid with a D+. Since 1990 the demand for electrical power has increased 400% faster than the transmission capacity. This trend also affects the residential segment. According to TechNavio's analysts the residential portable generator market in the US is expected to grow at a CAGR of 10.38% over the period In the first quarter 2014 the on-going consolidation process in the Chinese generator market continued. We expect that during the consolidation process there will be periods of intense price competition as some of the less competitive players are fighting for survival. We expect that the rate that competitors particularly smaller and financially weaker ones will withdraw will further accelerate. We believe that United Power will emerge from this as a stronger player with a reputation of quality and reliability. The current Ukraine crisis and weaker rouble have also an impact on our business as Russia in particular is an important market for us in Europe. The weaker rouble and current economic situation is translating in reduced demand from our Russian customers. United Power Technology Half-year report

10 REVENUES AND EARNINGS POSITION in EUR million United Power AG 1 HY 2014 United Power AG 1 HY / % Revenue % Cost of sales % Gross profit % Other operating income % Distribution and selling expenses % Administrative expenses % Research and development expenses % Other expenses % Profit from operations (EBIT) % Interest income % Interest expense % Profit before tax % Income taxes % Profit for the period % Earnings per shares in EUR % 1 EPS for six months 2013 and for six months 2014 are based on 12.30m shares REVENUE United Power s revenue decreased to EUR million in the first half year 2014 compared with EUR million for the same period last year. We should note though that we had a strong start to the year last year and that part of the reduction of revenues is due to the currency effect of a stronger Euro this year. Also, in the first half year revenue figures have to be seen in the context of a continued challenging industry environment which started to significantly affect us in the second half last year. This weakness is due to a variety of factors including a period of intense price competition in our domestic market, which we believe is temporary and related to continuous consolidation in our industry in China, the quiet hurricane season and a combination of a strengthening Euro and weakening USD versus our domestic currency RMB and new technical requirements in Europe. In the first half year of 2014 we saw revenue decline across all geographic regions. Our European business of which Russia is a considerable part decreased partly due to the Ukraine crisis and weakened rouble. The new technical requirements which have impeded sales in Europe have meanwhile to a large extent been addressed however the effect is still being reflected in the first half year figures. Revenues in our domestic market China declined mainly due to a price adjustment which brought our RMB prices more closely in line with our USD prices given a period of RMB appreciation over the last few years. Also, North America declined compared to the same period last year which is still mainly due to the quieter hurricane season last year which continued to impact sales this year due to reduced need for restocking by our North American customers. Revenues from other regions have been relatively stable in RMB terms but declined in Euro terms due to the currency effect. Our residential generator segment revenue was relatively stable compared to last year. However, our commercial generator segment declined mainly due to economic weakness in China and reduction of RMB prices. United Power Technology Half-year report

11 COST OF SALES Our cost of sales decreased from EUR million for the first half year of 2013 by 2.76% to EUR million for the comparable period of This was mainly due to lower sales. Cost of sales constitutes materials (e. g. copper, aluminium, steel), parts, factory level overheads and labour costs as well as fixed asset depreciation and is therefore affected by currency appreciation, investment as well as domestic wage inflation and commodities prices. GROSS PROFIT Gross profit decreased from EUR million for the first half year of 2013 by 15.88% to EUR 9.80 million for the same period this year. Compared to the same period last year, United Power s gross profit margin decreased by 2.28 percentage points to 18.43% in the first half year of The gross profit margin decreased mainly due to the RMB appreciation against the USD and resulting RMB price adjustment. The gross margin is affected by a number of factors such as product mix, capacity utilization and exchange rates and fixed asset depreciation. OTHER OPERATING INCOME Other operating income significantly decreased from EUR 1.27 million for the first half year of 2013 by 60.63% to EUR 0.50 million for the same period this year. Other operating income mainly consists of government grants in respect of our achievements in new product developments and environmental protection as well as rental income and exchange rate differences. The decrease was mainly due to more exchange rate losses on foreign currency working capital items and cash balances resulting from the strong Euro and to a lesser degree due to lower government grants compared to the same period last year. We believe that Government budgets for grants this year have been reduced due to on-going austerity measures. DISTRIBUTION AND SELLING EXPENSES Our distribution and selling expenses increased to EUR 0.67 million for the first half year of 2014 compared to EUR 0.62 million for the reporting period of As a percentage of revenues, distribution and selling expenses increased to 1.26% in the first half year of 2014 from 1.10% for the comparable period of 2013.The increase is mainly due to higher distribution and transportation costs as well as changes to the incentive system for sales staff. ADMINISTRATIVE EXPENSES United Power s administrative expenses decreased from EUR 1.79 million for the first half year of 2013 to EUR 1.64 million for the comparable period of As a percentage of revenues, administrative expenses decreased slightly to 3.08% for the first half year of 2014 compared with 3.18% for the same period last year. United Power Technology Half-year report

12 RESEARCH AND DEVELOPMENT EXPENSES In the first half year of 2014 research and development costs increased to EUR 0.62 million compared to EUR 0.47 million for the comparable period of As percentage of revenues, research and development expenses have increased from 0.84% to 1.17% for the first half year of 2013 to first half year of The increase in research and development expenses was due to intensified R&D activities in the first six months of 2014 compared to United Power s boards have decided to strategically strengthen our R&D effort and have significantly increased the budget for such activities. OTHER EXPENSES Other expenses decreased from EUR 0.25 million in the first half year of 2013 by 20.00% to EUR 0.20 million for the comparable period of As a percentage of revenues, other expenses decreased from 0.44% to 0.38% for the first half year of Other expenses typically include various government taxes and levies, bank charges and foreign currency losses. The decrease is mainly due to foreign currency adjustments. Profit from operations (EBIT) Our EBIT for the first half year of 2014 decreased by 26.69% to EUR 7.17 million mainly reflecting the decrease in gross profits and decline in other operating income. As a percentage of revenues, EBIT decreased from 17.38% to 13.48% for the first half year of Interest Income Interest income has increased from EUR 0.18 million in the first half year of 2013 to EUR 0.34 million the same period of 2014 mainly due to improved cash management. Interest Expense Interest expense of United Power significantly increased from EUR 0.10 million for the first half year of 2013 to EUR 0.51million for the comparable period of 2014 due to higher borrowings. As a percentage of revenues, interest expenses increased from 0.18% to 0.96% for the first half year of Income taxes In first half year of 2014 income tax increased to EUR 1.92 million from EUR 1.49 million for the same period last year. We are currently discussing with the tax authorities whether our main PRC operating company UPEC (which accounts for approximately 90% of group revenues) will continue to enjoy a favourable corporate tax rate of 15% for high technology companies in China this year. We expect final resolution on this issue only by May Until then we assume and pay the standard corporate tax rate of 25%. Our group level tax rate is expected to continue to exceed our nominal corporate tax rate due to non-tax-deductible expenses incurred outside the PRC. Profit for the period and EPS United Power s profit for the period declined from EUR 8.37 million for the first half year of 2013 by 39.31% to EUR 5.08 million in the comparable period of As a percentage of revenues, profit for the period decreased from 14.87% for the first half year of 2013 to 9.55% for the comparable period of The earnings per share (EPS) in the first half year of 2014 were EUR 0.41, a decrease of 39.71% year-on-year. The reason for the decrease in profit and EPS was mainly due to the decrease in gross profit margin, decrease in other operating revenues as well as higher corporate tax rate. United Power Technology Half-year report

13 SEGMENT INFORMATION Residential generators Revenue for residential generators remained stable for the first half year of Total segment revenue for the first half year of 2014 was EUR million compared to the reporting period last year of EUR million. Commercial generators Our largest segment commercial generators showed a decrease of 7.87% from EUR million for the first half year 2013 to EUR million for the same period This is mainly due to austerity measures in our home market and resulting reduced spending on construction activity. Outdoor power equipment The outdoor power equipment segment has decreased by around 16.67% from EUR 2.94 million for the first half year of 2013 to EUR 2.45 for the same period The reason for this is that the outdoor power equipment segment tends to have fewer larger customers and the orders tend to be more lumpy. Components The components segment is not a strategic sector for the Company but is rather taking advantage of opportunities in the market place. This segment represents a small part of the Company s total revenue. The component segment had a decrease of 32.05% from EUR 2.59 million for the first half year of 2013 to EUR 1.76 million for the same period United Power Technology Half-year report

14 ASSETS AND LIABILITIES POSITION The following table shows the consolidated balance sheet as at 31 December 2013 compared to the consolidated balance sheet as at 30 June 2014: in EUR million United Power AG 30 June 2014 United Power AG 31 Dec Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total equity Total liabilities and equity Current Assets Inventories Inventories include raw materials, work in progress and finished goods. Inventories increased by 28.12% from EUR 5.05 million as at 31 December 2013 to EUR 6.47 million as at 30 June 2014 mainly due to increased sales activity. Trade and other receivables Trade and other receivables increased by 70.62% from EUR million at year-end 2013 to EUR million for the end of first half year Major reason for the increase of other receivables is due to increase in sales and the general practise to settle invoices before calendar year end. Amounts due from related parties There were no amounts due to or from related parties as at 30 June Cash and cash equivalents Cash and cash equivalents amounted to EUR million at the end of the first half year 2014 an increase of 3.61% from the EUR 38.8 million at the end of fiscal year The net cash and cash equivalent were increased by cash generated from operations and new short-term borrowings, which more than offset the cash used for investment. United Power Technology Half-year report

15 Non-current assets Property, plant and equipment Property, plant and equipment increased by 20.23% from EUR million as of 31 December 2013 to EUR million as of 30 June 2014 mainly due to investment related to our third factory. Liabilities Trade and other payables Trade and other payables increased from EUR 9.32 million as of 31 December 2013 to EUR million as of 30 June This was mainly due to increased sales and the general practise to settle invoices before calendar year end. Borrowings and amount due to shareholders Borrowings at the end of June 2014 increased to EUR million from EUR 7.02 million as of 31 December 2013 representing an increase of %. This was due to new short-term borrowings. The borrowing is used to fund working capital as well as our investment in capacity expansion. Equity to total assets ratio The total equity increased from EUR million by 1.44% to EUR million mainly due to the consolidated profit for the period. The equity to total assets ratio changed from 84.42% as of 31 December 2013 to 73.03% as of 30 June United Power Technology Half-year report

16 CASH FLOWS Overall cash amounted to EUR million as of 30 June 2014 year-on-year compared to the figure from 30 June 2013 of EUR million. Overall, the cash generated from our operations plus cash from financing activities exceeded the cash flow from investing activities thereby increasing our over all cash position. in EUR million United Power AG 1 HY 2014 United Power AG 1 HY 2013 Operating cash flow before working capital changes Cash generated from operations before interest and taxes Cash generated from operating activities Cash flow from investing activities Cash flow from financing activities Net increase in cash and cash equivalents Cash at beginning of year Effect of exchange rate changes Cash and bank balances at end of the period Cash generated from operations before tax and interest During the first half year of 2014, cash generated from operations decreased by EUR 1.13 million to EUR 6.75 million compared with the reporting period This was mainly due to increased receivable levels and lower net profit. Cash flow from investing activities The investment of the Company in property, plant and equipment for capacity and production expansion is reflected in the cash flow from investing activities. For the first half year of 2014, the Company invested EUR million, mainly for the preparation of the land and buildings and structures for our third phase expansion as well as our acquisition of the remaining 49% share of our die casting subsidiary Fujian Di Sheng Wan Kai Machinery Co. Ltd. Cash flow from financing activities Cash from financing activities during the first half year of 2014 was EUR million mainly due to new short-term borrowings. Cash at end of period Overall cash increased to EUR million compared to EUR million for the same period last year, an increase of 7.46%. United Power Technology Half-year report

17 HUMAN RESOURCES United Power s total number of employees decreased from 638 at the end of December 2013 to 609 at 30 June We intend to continue to strengthen key areas such as R&D and sales and marketing and at the same time increase productivity in production through efficiency measures, streamlining, continued automation and increased usage of temporary labour for peak periods. This will allow us to more quickly develop products in the future to meet customer demands. The streamlining of the production is a result of continuous internal improvements of processes and optimization of responsibilities and resource allocation. We continue to recruit qualified mostly university-educated staff. The employee split by function as of 30 June 2014 and 31 December 2013 is shown in the table below: 30 June Dec Management R&D Sales & Marketing Administration Production Total RISK AND OPPORTUNITY MANAGEMENT There have been no significant changes in the opportunities or risks of United Power Technology AG compared with the period before. For detailed information, readers are therefore referred to the risk report included in the management report of the annual report for the fiscal year REPORT ON POST-BALANCE SHEET EVENTS There were no transactions or other events of special significance after the balance sheet date of 30 June United Power Technology Half-year report

18 OUTLOOK According to the update of the World Economic Outlook issued in July 2014 by the International Monetary Fund (IMF) the global growth rate is estimated to 3.4% in In the United States growth is expected to be 1.7% in 2014, down by 0.2 percentage points compared to 2013 and in the euro area growth is projected to strengthen to 1.1% in In our home market China the Government recently announced a target growth rate of 7.5% for 2014, which is fairly in line with the expectations from IMF. This means a further deceleration from the growth that was achieved in 2013 of 7.7%. On a most fundamental level our industry is driven by the economic environment in the geographies we sell our products. While we sell on a global basis our key markets are Europe, our domestic market in China and North America and hence the industry environment in these markets are of particular importance to us. Apart from the macroeconomic environment other key factors influencing each geography s industry environment are geographic factors. These include occurrence of natural disasters such as hurricanes particularly in North America, regulations particularly in markets such as Europe and industry consolidation, particularly in the China market. For the remaining half year, United Power Technology Group will continue its pursuit of the three-pronged strategy, which comprises further geographic expansion and penetration, broadening the range of engine-powered products and scaling up the size of its products in order to further expand the customer base and applications of its products. Despite the declining revenues we hold on to our investment plan in preparation for an upswing in our industry environment and in order to increase the overall efficiency but also the capacity of our production lines. We have made significant progress in the completion of our new factory buildings and expect to complete them according to our time schedule this year. We will closely monitor the market developments to decide on the timing for the installation of new production lines. We believe that the investment will start bearing fruits after the completion of our first new production lines. In line with the revenue development in the first half, we are amending our previously given guidance for the full year As we expect the industry environment to continue to be challenging throughout 2014 we expect a decline in the group's revenues in an amount possibly exceeding the percentage decrease for the first half year. As far as profitability is concerned, United Power anticipates a decrease in gross profit and EBIT margins of similar magnitude as the percentage point decline of the EBIT margin for the first half this year. We would like to reiterate that the current macroeconomic situation including in our home market China remains challenging and the resulting industry consolidation in our industry is impacting on our financial results in the short term. However, we believe that we will emerge out of the consolidation as a stronger competitor and that we are laying the foundation to reap the fruits from our unwavering commitment to quality and reliability. This makes us confident about our continuing profitable growth prospects particularly over the medium to long term. Eschborn, 13 August 2014 Management Board United Power Technology AG Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO United Power Technology Half-year report

19 United Power Technology Half-year report

20 Financial Statements UnitedPowerTechnologyAG CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF 30 JUNE 2014 in EUR thousand 30 June December 2013 Non-current assets Property, plant and equipment 70,896 58,975 Intangible assets Deferred tax assets Other non-current assets 7,470 7,667 79,759 68, 122 Current assets Inventories 6,467 5,049 Trade and other receivables 23,172 13,584 Amounts due from related parties Current recoverable income taxes 0 7 Other current financial assets 2,433 3,474 Other current assets Cash and cash equivalents 40,196 38,802 72,319 61, 564 Total assets 152, , 686 CAPITAL AND RESERVES Share capital 12,300 12,300 Additional paid-in capital 55,883 55,883 Currency translation difference 5,361 5,141 Retained earnings including net earnings 37,524 35,115 Equity attributable to owners of the parent 111, ,439 Non-controlling interests 0 1,046 Total equity 111, , 485 United Power Technology Half-year report

21 LIABILITIES Non-current liabilities Deferred tax liabilities Other liabilities 1,598 1,651 1,694 1,745 Current liabilities Borrowings 20,399 7,023 Trade and other payables 15,886 9,317 Other provisions 0 80 Current tax liabilities 3,031 2,036 39,316 18,455 Total liabilities 41,010 20,201 Total liabilities and equity 152, ,686 United Power Technology Half-year report

22 CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM 1 APRIL TO 30 JUNE AND 1 JANUARY TO 30 JUNE 2014 in EUR thousand Q Q HY HY 2013 Revenue 29,525 32,546 53,185 56,267 Cost of sales -24,035-25,487-43,387-44,621 Gross profit 5,490 7,059 9,798 11,646 Other operating income ,275 Distribution and selling expenses Administrative expenses ,638-1,790 Research and development expenses Other expenses Profit from operations (EBIT) 4,297 6,031 7,171 9,778 Interest income Interest expense Financial result Profit before taxes 4,153 6,102 7,004 9,855 Income taxes -1, ,920-1,485 Profit for the period 2,740 5,169 5,084 8,370 Profit for the period attributable to: Owners of the Company 2,734 5,180 5,084 8,419 Non-controlling interests ,740 5,169 5,084 8,370 Earnings per share in EUR (diluted basic) Other operating expenses in prior year of keur 9 have been reclassified. 2 EPS for H and for H are based on 12.3m shares United Power Technology Half-year report

23 OTHER COMPREHENSIVE INCOME (EXPENSES) FOR THE PERIOD FROM 1 APRIL TO 30 JUNE AND 1 JANUARY TO 30 JUNE 2014 in EUR thousand Q Q HY HY 2013 Profit for the period 2,740 5,169 5,084 8,370 Exchange differences arising on translation 954-2, ,019 Net (loss) gain arising on revaluation Other comprehensive income (expense) for the period 954-2, ,019 Total comprehensive income for the period 3,694 2,900 5,304 10,389 Total comprehensive income (expense) attributable to: Owners of the Company 3,682 2,900 5,304 10,390 Non-controlling interests ,694 2,900 5,304 10,389 United Power Technology Half-year report

24 CONDENSED INTERIMCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2014 in EUR thousand Share capital UP AG Capital reserves Foreign currency translation reserve Retained earnings Attributable to owners of the Company Non-controlling interests Total equity Balance as at 31 Dec ,300 55,883 5,141 35, ,439 1, ,485 Profit for the period ,084 5,084-5,084 Other comprehensive income (expense) for the year Total comprehensive income (expense) ,084 5,304-5,304 Effects arising on the acquisition of non-controlling interest in Fujian Di Sheng Wan Kai Machinery Co. Ltd ,675-2,675-1,046-3,721 Balance as at 30 June ,300 55,883 5,361 37, , ,068 United Power Technology Half-year report

25 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE 2014 in EUR thousand 1 HY HY 2013 Profit before tax 7,004 9,855 Adjustments for: Depreciation on intangible assets and property, plants and equipment 2,508 2,180 Interest (income) expense, net Other financial result Other non-cash (income) expense (Increase)/decrease in current assets -9,361-8,206 Increase/(decrease) in current liabilities 6,490 4,168 Cash generated from operations 6,750 7,883 Interest paid Income taxes paid ,483 Net cash generated from operating activities 5,333 6,300 Payments for acquisition of Property, plant and equipment -14, Non-controlling interests -3,566 0 Interest income Cash flow from investing activities -17, Repayment of borrowings -10,498-2,418 New borrowings raised 23,824 2,418 Cash flow from financing activities 13,326 0 Net increase (decrease) in cash and bank balances 671 5,814 Cash and bank balances at beginning of year 38,802 30,936 Effect of exchange rate changes Cash and bank balances at end of period 40,196 37,398 United Power Technology Half-year report

26 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE GENERAL INFORMATION United Power Technology AG, Eschborn, Germany, ( United Power or the Company ) is registered under the firm United Power Technology AG with the commercial register of the local court of Frankfurt am Main (HRB 88245). The address of the Company s registered office is: Mergenthalerallee 10 12, Eschborn, Germany. The Company and its subsidiaries (collectively the Group ) produce and sell generators and related equipment globally. The shares of the Company have been admitted to trading on the regulated market of the Frankfurt Stock Exchange. The condensed interim financial statements of the Group as of 30 June 2014 have been prepared in accordance with the requirements of IAS 34 in condensed form and with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board, London, as adopted by the European Union (EU) and applicable at the reporting date, as well as with the additional requirements as set forth in section 315a paragraph 1 of the German Commercial Code (HGB). The condensed consolidated interim financial statements do not include all disclosures and explanations that are required in a complete set of financial statements and should therefore be read together with the consolidated financial statements as of 31 December The condensed interim consolidated financial statements of the Company for the period from 1 January 2014 through 30 June 2014 were authorised for issue by the Management Board on 13 August The consolidated financial statements are presented in Euros. Amounts are stated in thousands of Euros (keur) except where otherwise indicated. The currency of the primary economic environment in which the Company and its subsidiaries operate is Renminbi ( RMB ) (the functional currency of the Company and its subsidiaries). The figures mentioned in the consolidated financial statements were subject to rounding adjustments that were carried out according to established commercial standards. As a result, the figures stated in a table may not exactly add up to the total values that may also be stated in the table. 2. BASIS OF PREPARATION The condensed interim consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values (available-for-sale investments). Historical cost is generally based on the fair value of the consideration given in exchange for goods. The condensed interim consolidated financial statements incorporate the financial statements of the Company and all entities controlled by the Company. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. The accounting policies and methods of computation applied by the Group in these interim financial statements are principally the same as those applied in the Group consolidated financial statements as at and for the year ended 31 December For further information regarding the Group s accounting principles and policies we refer to these consolidated financial statements at 31 December Preparation of interim financial statements requires management to make estimates and judgments related to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenue and expenses for the reporting period. Actual amounts could differ from those estimates. United Power Technology Half-year report

27 The number of consolidated Group companies has changed compared with the first quarter 2014.United Power Technology Group has acquired the remaining 49% share of the die casting subsidiary Fujian Di Sheng Wan Kai Machinery Co. Ltd. The interim financial statements include, besides United Power Technology AG, nine foreign subsidiaries that are all located in Hong Kong, the People s Republic of China or France. IFRS accounting standards and interpretations to be applied in the financial year 2014 for the first time are of no relevance to the condensed interim consolidated financial statements of the Group. 3. Seasonality of Interim Operations In general, the revenue in the first quarter of the year is significantly less than in other quarters because of Chinese New Year holidays. 4. Segment Information The Company has adopted IFRS 8 to report segment information. The segment information was analysed on the basis of the types of the sold goods. These are prepared by the operative business unit on the basis of internal information, which is regularly reviewed by the management. The information is also used for internal assessment of performance. The revenue and results by segments are as follows: Segment revenue in EUR thousand 1 HY HY 2013 Portable generators Residential use unit 21,216 21,310 Commercial use unit 29,137 31,631 Outdoor power equipment Industrial equipment 2,450 2,932 Landscaping machines 0 5 Components Engines Parts 1,305 1,996 Other Total segment revenue 54,560 58,471 Inter-segment revenue elimination -1,270-1,967 Other adjustments ,185 56,267 1 Other adjustments are related to freight expenses and sales tax surcharge included in the revenue United Power Technology Half-year report

28 Segment result in EUR thousand 1 HY HY 2013 Portable generators Residential use unit 2,574 2,962 Commercial use unit 6,704 8,150 Outdoor power equipment Industrial equipment Landscaping machines 0 1 Components Engines Parts Other Total segment result 9,869 11,879 Other adjustments Consolidated gross profit 9,798 11,646 Unallocated items: Other operating income 505 1,266 Distribution and selling expenses Administrative expenses -1,638-1,790 Research and development expenses Other expenses Interest income Interest expenses Consolidated profit before tax 7,004 9,855 1 Other adjustments are related to freight expenses included and sales tax surcharge in the revenue The accounting policies of the operating segments are based on the accounting requirements applicable to the PRC entities of the Group ( PRC GAAP ). Segment profit represents the gross profit earned by each segment prepared under PRC GAAP. Differences between accounting policies under PRC GAAP and IFRS are immaterial, insofar as it is not necessary to prepare reconciliations and explanations. Since information about assets and liabilities of different operating divisions is not regularly provided to the chief operating decision maker for the purpose of assessing performance and resource allocation, segment assets and segment liabilities are not presented. The basis of segmentation and the basis of measurement of segment results have not been changed for the half year United Power Technology Half-year report

29 5. CASH AND CASH EQUIVALENTS AND OTHER CURRENT ASSETS in EUR thousand 30 June Dec Cash and cash equivalents 40,196 38,802 Pledged bank deposits 2,433 3,474 Other current assets 2,433 3,474 42,629 42,276 In addition to cash and cash equivalents in the amount of keur 40,196, keur 2,433 of bank deposits were used to secure short-term lines of credit. They are shown under the other financial assets. 6. EQUITY The subscribed capital of the parent is 12,300,000 and is divided into no-par value bearer shares with a computed value of the participation in the share capital of EUR The foreign currency translation reserve of foreign operations amounts to keur 5,361. Differences from the translation of functional currencies of foreign operations are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. Translation differences from foreign currency translation are reclassified to profit or loss on the disposal of the foreign operation. The profit for the period allocated to the owners of the parent (keur 5,084) is recognised in retained earnings. 7. EVENTS AFTER THE REPORTING PERIOD No material events between the end of the reporting period and the date of the approval and authorisation for issuance of the financial statements have occurred. 8. AUDITOR S REVIEW The condensed interim consolidated financial statements and the interim management report were neither reviewed nor audited by an external auditor (Section 37w Para. 5 of the German Securities Trading Act). 9. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS The financial statements were approved and authorised for issuance by the Management Board on 13 August Eschborn, 13 August 2014 Management Board United Power Technology AG Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO United Power Technology Half-year report

30 Responsibility Statement Pursuant to section 37y of the German Securities Trading Act (WpHG) in conjunction with section 37w Para. 2 No. 3 WpHG To the best of our knowledge, and in accordance with the applicable financial reporting principles, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Eschborn, 13 August 2014 Management Board United Power Technology AG Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENT This document contains forward-looking statements, which are based on the current estimates and assumptions by the corporate management of United Power Technology AG. Forward-looking statements are characterised by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by United Power Technology AG and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside United Power Technology AG s control and cannot be accurately estimated in advance, such as the future economic environment or the actions of competitors and others involved in the marketplace. United Power Technology AG neither undertakes nor plans to update any forward-looking statements. United Power Technology Half-year report

31 Financial Calendar PUBLICATION Interim report 9-months November 2014 IMPRINT PUBLISHED BY United Power Technology AG Mergenthalerallee Eschborn, Germany Phone: Telefax: CONCEPT AND DESIGN Kirchhoff Consult AG, Hamburg INVESTOR RELATIONS Phone: Fax: United Power Technology Half-year report