UNITED POWER TECHNOLOGY 3 MONTHS REPORT 2015 United Power Technology Interim report 3 months 2015 1
Key Financials 3 months 2015 (consolidated) 3 months 2014 (consolidated) Revenues EUR million 26.89 23.66 13.64 Gross profit EUR million 4.23 4.31-1.94 Gross profit margin % 15.7 18.2-2.5pp EBIT EUR million 4.05 2.87 40.7 EBIT margin % 15.0 12.1 2.9pp Profit for the period EUR million 3.08 2.34 31.3 Profit for the period margin % 11.4 9.9 1.5pp Earnings per share 1) EUR 0.25 0.19 31.3 1) EPS for 3 months 2014 and 2015 is based on the weighted average of shares (12.30 million shares) +/ % United Power Technology Interim report 3 months 2015 2
Content 04 Letter to Shareholders 05 The Share 06 Interim Group Management Report 18 Interim Consolidated Financial Statements 28 Responsibility Statement 29 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 more than 70 countries around the world. United Power Technology Interim report 3 months 2015 3
Dear Fellow Shareholders, In the first quarter this year we saw a slight improvement of the overall business environment. Also we believe that our measures to strengthen United Power s sales and brand building are commencing to make some impact on our Group development. Nevertheless, we believe that the overall challenging industry environment will substantially continue to prevail in the current financial year. In summary, we can report an increase in Group revenues by 13.6% to EUR 26.9 million in the first three months 2015. The growth was to a large extent due to currency effects as a result of a weaker Euro compared to the same period last year as our revenues are denominated in RMB and USD. Our operating result (EBIT) increased by 40.7% to EUR 4.1 million. This represents an EBIT margin of 15.0% for the first three months 2015 compared to 12.1% in the same period last year. The strong increase was to a large extent due to the higher revenues as well as the exchange rate gains included in other operating income. On a segment level, revenues from the commercial generator segment increased by 11.0% to EUR 14.1 million and revenues from the residential generator segment rose by 25.3% to EUR 11.8 million. Sales in our outdoor power equipment segment however decreased by 19.9% to EUR 1.07 in the first three months 2015. In the first quarter 2015 we stayed cash positive: our operating cash flow was EUR 4.2 million and therewith remained on a similar level as compared to the same period last year. Our cash and cash equivalent increased to EUR 59.7 million by the end of the first three months 2015 compared with EUR 50.2 million as at 31 December 2014. In the current year we will focus on significantly stepping up the sales and brand building efforts as well as the development of larger generators including industrial generators. Both our sales and distribution budget as well as the R&D budget will be significantly increased towards meetings these objectives. In order to strengthen United Power s production we increased our workfore in the first quarter 2015. The total number of staff increased from 589 at the end of December 2014 to 630 at 31 March 2015. After a prolonged period of rationalization and productivity enhancement in production through efficiency measures, streamlining, continued automation and increased usage of temporary labour for peak periods, we have again increased the number of employees at our manufacturing facilities in anticipation of increased production activities. Our efforts in 2015 will strengthen our company, products and brand and are designed to optimally position us for the upswing in our industry. However, while we are confident that these measures will bear fruits over the mid and long term, we expect the overall financial results in the full year 2015 again to be weaker than in 2014: concerning the group revenues we expect to halt the downward trend in 2015 assuming a stable RMB:EUR exchange rate of 6.7:1. However, as far as our profitability is concerned we expect gross profit and EBIT margins to drop by 2 to 5 percentage points compared to 2014 due to further price adjustments, higher fixed asset depreciation as well as the aforementioned significant step up in sales, brand building and distribution as well as research and development budget. Nevertheless, we remain confident about our continuing profitable growth prospects particularly over the medium to long term. Kind regards, Xu Wu Chairman of the Management Board United Power Technology Interim report 3 months 2015 4
The Share Capital markets experience upturn In the first three months 2015, the market sentiment remained positve and experienced a slight upturn. The main reasons for this development were the launch of the European Central Bank, ECB s quantitative easing programme and the further weakening of the Euro. The SDAX as benchmark for United Power was also impacted by these aspects: The index started at 7,186.21 points into the first quarter and reached its low with 7,128 points on 6 January. It closed at 8,424 points at the end of March. This represents a gain of 18.2% in the first quarter 2015. Share price development During the first quarter 2015 the United Power share performed positive with brief exceptions of price fluctuations. The share price reached its low at EUR 1.22 on 21 th January. In February United Power s share price started to increase significantly. It reached its high at EUR 2.15 on 17 February. Over the course of March the share price decreased and closed at EUR 1.60 as at 31 March. On a quarterly basis the share increased by around 14.3%. Our market capitalization was EUR 19.7 million by the end of March 2015. The average trading volume during the three months 2015 was 3,335 shares per day. Share Performance (January 1 to March 31, 2015) 160% 140% 120% 100% 80% 01.01.15 23.01.15 14.02.15 08.03.15 30.03.15 United Power Technology AG SDAX Shareholder Structure (as of 31 March 2015) KEY DATA ISIN/WKN/Ticker/Reuters DE000A1EMAK2/A1EMAK/UP7/UP7G.DE Market Segment/Stock exchange Regulated Market (Prime Standard)/Frankfurt Stock Exchange First Trading Day 10 June 2011 Shares issued (in shares) 12,300,000 Market capitalization (EUR million) 19.7 as at 31 March 2015 United Power Technology Interim report 3 months 2015 5
Interim Management Report 3 Months 2015 United Power Technology Interim report 3 months 2015 6
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 more than 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, Bauhaus and Hornbach. Economic environment According to World Economic Outlook issued in April 2015 by the International Monetary Fund (IMF) the global growth projection for 2015 are 3.5%, largely due to uneven growth prospects across different geogaphies. Growth in the euro area is expected to increase from 0.9% in 2014 to 1.5% this year. While overall growth prospects remain moderate due to demography and structural issues, growth in Germany, france, Italy and Spain is expected to slightly accelerate this year. In the US the solid recovery is expected to continue wit growth of 3.1% this year due to lower energy prices, reduced fiscal drag and an improving housing market amongst other factors. In China, growth is expected to further decelerate to to 6.8% in 2015 below the Government s growth target. The growth forecast has been revised downwards as it is expected that the Government will continue to reign into past year s excesses in property, credit and investment growth. Other emerging economies as a group are also expected to further decelerate from 4.6% in 2014 to 4.3% in 2015. However, prospects vary widely ranging from a 3.8% contraction in Russia to an acceleration in India to 7.5%. The Middle East, North Africa and Eastern European economies are expected to grow on average around 2.9% with Latin America at 0.9%, mainly due to expected 1% contraction in Brazil and growth of 4.5% in Sub-Saharan Africa. United Power Technology Interim report 3 months 2015 7
INDUSTRY ENVIRONMENT AND TRENDS We are not aware of any 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 been estimated to increase 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 2012 2016. However, our industry is also closely correlated with overall global growth which has been weaker than expected in recent years. Our business is global and particularly depends on our largest markets namely Europe, China and the United States. During the first quarter of 2015 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 accelerate. We believe that United Power will emerge from this as a stronger player with a reputation of quality and reliability. The 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. Also the crisis in Syria and Iraq will bring further uncertainties for our sales region Middle East. United Power Technology Interim report 3 months 2015 8
REVENUES AND EARNINGS POSITION in EUR million 3M!2015 3M!2014 +/ % Revenue 26.89 23.66 13.64% Cost of sales -22.66-19.35 17.11% Gross profit 4.23 4.31-1.94% Other income 1.90 0.28 571.63% Distribution and selling expenses -0.42-0.29 46.72% Administrative expenses -1.16-0.84 38.26% Research and development -0.31-0.34-10.5% Other expenses -0.19-0.25-23.69% Profit from operations (EBIT) 4.05 2.87 40.72% Interest income 0.19 0.15 26.38% Interest expense -0.40-0.17 132.91% Profit before tax 3.83 2.85 34.39% Income taxes 0.75 0.51 48.54% Profit for the period 3.08 2.34 31.33% Earnings per share* (EUR) 0.25 0.19 31.33% * EPS for 3 months 2014 and 2015 is based on the weighted average of 12.30 m shares. 1 Certain other interest income has been reclassified from Other Operating Income as Interest Income in 2013 and the same classification has been adopted in 2014. 2 EPS for nine months 2013 and for nine months 2014 are based on 12.3 million shares. Revenue United Power s revenue increased by 13.64% to EUR 26.89 million in the first three months of 2015 compared with EUR 23.66 million for the same period last year. The increase in revenue is to a large extent due to the weaker Euro compared to the same period last year (our revenues are denominated in RMB and USD). While overall the challenging industry environment which started to significantly affect us in the second half 2013 continues to prevail we believe that both an uptick in global growth and measures to strengthen our sales and brand building will commence to have a positive impact. In the first quarter of 2015 we saw revenue increase across all geographic regions based on our internal management analysis by end customer. We saw particularly strong growth in the North American as well as new growth markets where revenues not only increased in Euro but also in RMB terms. We are encouraged by the growth in other new markets as we regard this as an important growth area going forward and our measures to strengthen sales and brand building in these regions start to bear fruit. Our North American sales tend to be more volatile compared to other regions as we have fewer customers but typically larger order sizes. Our home market China and the European market still suffer from the general macroeconomic deceleration as well as industry consolidation in China as well as sluggish growth in Europe and a weaker rouble in Russia. United Power Technology Interim report 3 months 2015 9
Cost of sales Our cost of sales increased from EUR 19.35 million for the first three months of 2014 by 17.11% to EUR 22.66 million for the comparable period of 2015. This was mainly due to higher sales as well as higher fixed asset depreciation. 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 slightly from EUR 4.31 million for the first three months of 2014 by 1.94% to EUR 4.23 million for the same period this year. Compared to the same period last year, United Power s gross profit margin decreased by 2.50 percentage points to 15.71% in the first three months of 2015. The gross profit margin decreased mainly due to the RMB price adjustment after extended past periods of RMB appreciation. 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 increased from EUR 0.28 million for the first three months of 2014 by 571.63% to EUR 1.90 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 large increase was mainly due to exchange rate gains on an intercompany loan, foreign currency working capital items, cash balances resulting from the weaker Euro. 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 by 46.72% to EUR 0.42 million for the first three months of 2015 compared to EUR 0.29 million for the reporting period of 2014. As a percentage of revenues, distribution and selling expenses increased to 1.56% in the first three months of 2015 from 1.21% for the comparable period of 2014.The increase is mainly due to higher total remuneration to our sales staff. Administrative expenses United Power s administrative expenses increased from EUR 0.84 million for the first three months of 2014 by 38.26% to EUR 1.16 million for the comparable period of 2014. This was mainly due to an allocation of depreciation expenses in respect of new not yet utilized buildings to administrative expenses. As a percentage of revenues, administrative expenses increased to 4.31% for the first three months of 2015 compared with 3.54% for the same period last year. Research and development expenses In the first three months of 2015 research and development costs slightly decreased to EUR 0.31 million compared to EUR 0.34 million for the comparable period of 2014. As percentage of revenues, research and development expenses have decreased from 1.45% to 1.14% for the first three months of 2014 to first three months of 2015. The decrease in research and development expenses was due to lower amortization of R&D laboratory fittings compared to last year. United Power Technology Interim report 3 months 2015 10
Other expenses Other expenses decreased from EUR 0.25 million in the first three months of 2014 by 23.69% to EUR 0.19 million for the comparable period of 2015. This was mainly because of lower government taxes and levies compared to the same period last year. As a percentage of revenues, other expenses decreased from 1.06% to 0.71% for the first three months of 2015. Other expenses typically include various government taxes and levies, bank charges and foreign currency losses. Profit from operations (EBIT) Our EBIT for the first three months of 2015 increased by 40.72% to EUR 4.05 million from EUR 2.87 million for the same period last year mainly due to the higher revenues as well as the exchange rate gains included in the Other Operating Income. Our EBIT margin increased from 12.15% to 15.05% for the first three months of 2015. Interest Income Interest income has increased from EUR 0.15 million in the first three months of 2014 to EUR 0.19 million in the same period of 2015 mainly due to higher cash reserves and improved cash management. Interest Expense Interest expense of United Power significantly increased from EUR 0.17 million for the first three months of 2014 to EUR 0.40 million for the comparable period of 2015 due to increased borrowings. As a percentage of revenues, interest expenses increased from 0.73% to 1.5% for the first three months of 2015. Income taxes In the first three months of 2015 income tax increased to EUR 0.75 million from EUR 0.51 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 and last year. We expect final resolution on this issue by the end of May 2015. Until then we assume and pay the standard corporate tax rate of 25%. Our group level tax rate typically exceeds 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 increased from EUR 2.34 million for the first three months of 2014 by 31.33% to EUR 3.08 million in the comparable period of 2015. As a percentage of revenues, profit for the period increased from 12.05% for the first three months of 2014 to 14.25% for the comparable period of 2015. The earnings per share (EPS) in the first three months of 2015 was EUR 0.25, an increase of 31.33% year-on-year. The reason for the increase in profit and EPS despite higher expenses was mainly due to the higher revenues and other income. United Power Technology Interim report 3 months 2015 11
Segment information Residential generators Revenue for residential generators increased by 25.28%. The segment growth exceeds overall revenue growth. This is mainly due to higher sales in North America which we believe is partly due to re-stocking activities of some of our key customers. Total segment revenue for the first three months of 2015 was EUR 11.79 million compared to the reporting period last year of EUR 9.41 million. Commercial generators Our largest segment commercial generators showed an increase of 11.01% from EUR 12.70 million for the first three months of 2014 to EUR 14.10 million for the same period 2015. This amounts to a slightly lower increase than overall revenues and 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 decreased by 19.92% from EUR 1.34 million for the first three months of 2014 to EUR 1.07 for the same period 2015. This is mainly due tot he fact that one of our key customers in this segment is believed to have increased their own production with resulting less orders of our products. 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 18.50% from EUR 0.86 million for the first three months of 2014 to EUR 0.70 million for the same period 2015. United Power Technology Interim report 3 months 2015 12
ASSETS AND LIABILITIES POSITION The following table shows the consolidated balance sheet as at 31 December 2014 compared to the consolidated balance sheet as at 31 March 2015: in EUR million 31 Mar 2015 31 Dec 2014 Current assets 88.20 72.07 Non-current assets 97.77 89.27 Total assets 185.97 161.34 Current Liabilities 44.31 36.13 Non-current liabilities 1.91 1.82 Total liabilities 46.22 37.95 Total equity 139.76 123.39 Total liabilities and equity 185.97 161.34 Current Assets Inventories Inventories include raw materials, work in progress and finished goods. Inventories decreased by 21.77% from EUR 6.13 million as at 31 December 2014 to EUR 4.80 million as at 31 March 2015 mainly due to increased shipment of finished products at the end oft he quarter. Trade and other receivables Trade and other receivables increased by 50.66% from EUR 14.06 million at year-end 2014 to EUR 21.18 million for the end of first three months of 2015. Major reason for the increase of other receivables is due to increase in sales. Amounts due from related parties There were no amounts due to or from related parties as at 31 March 2015. Cash and cash equivalents Cash and cash equivalents amounted to EUR 59.68 million at the end of the first three months of 2015 an increase of 18.97% from the EUR 50.17 million at the end of fiscal year 2014. Cash and cash equivalents mainly increased by cash generated from operations. United Power Technology Interim report 3 months 2015 13
Non-current assets Property, plant and equipment Property, plant and equipment increased by 9.63% from EUR 79.12 million as of 31 December 2014 to EUR 86.74 million as of 31 March 2015 mainly due to currency effects of a weaker Euro compared to the RMB Liabilities Trade and other payables Trade and other payables increased from EUR 12.20 million as of 31 December 2014 to EUR 17.46 million as of 31 March 2015. This was mainly due to increased sales. Borrowings and amount due to shareholders Borrowings at the end of March 2015 increased to EUR 23.07 million from EUR 20.71 million as of 31 December 2014 representing an increase of 11.42%. This was mainly due to currency effects. Equity to total assets ratio The total equity increased from EUR 123.39 million by 13.27% to EUR 139.76 million mainly due to the consolidated profit for the period. The equity to total assets ratio changed from 76.48% as of 31 December 2014 to 75.15% as of 31 March 2015. United Power Technology Interim report 3 months 2015 14
CASH FLOWS Overall cash amounted to EUR 59.68 million as of 31 March 2015 compared to EUR 47.86 million as of 31 March 2014. Overall, the cash generated from our operations plus cash from investing activities exceeded the cash flow from financing activities thereby increasing our over all cash position. in EUR million 3 months 2015 3 months 2014 Operating cash flow before working capital changes 5.74 4.11 Cash generated from operations before interest and taxes 4.23 4.73 Cash generated from operating activities 3.41 4.19 Cash flow from investing activities 0.18-3.32 Cash flow from financing activities -0.29 8.26 Net increase in cash and cash equivalents 3.30 9.13 Cash at beginning of year 50.17 38.80 Effect of exchange rate changes 6.21-0.07 Cash and bank balances at end of the period 59.68 47.86 Cash generated from operations before tax and interest During the first three months of 2015, cash generated from operations before tax and interest decreased by EUR 0.50 million to EUR 4.23 million compared with the reporting period 2014. This was mainly due to working capital and pledged bank deposit changes. 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 three months of 2015, the Company s cash flow from investing activities was EUR 0.18 million compared to EUR -3.32 million for the same period in 2014 which was mainly due to interest received on bank deposits. Cash flow from financing activities Cash from financing activities during the first three months of 2015 was EUR -0.29 million mainly due to the fact that repayment of borrowings exceeded new borrowings. Cash at end of period Overall cash increased to EUR 59.68 million by the end of the first three months 2015 compared with EUR 47.86 million for the same period last year, an increase of 24.70%. United Power Technology Interim report 3 months 2015 15
HUMAN RESOURCES United Power s total number of employees increased from 589 at the end of December 2014 to 630 at 31 March 2015. Key areas such as R&D, sales and marketing and brand building have been stable since the end of 2014. After a prolonged period of rationalization and productivity enhancement in production through efficiency measures, streamlining, continued automation and increased usage of temporary labour for peak periods, we have in the first quarter again increased our production employees in anticipation of increased production activities. We continue to recruit qualified mostly university-educated staff. The employee split by function as of 31 March 2015 and 31 December 2014 is shown in the table below: 31 March 2015 31 December 2014 Management 28 28 R&D 57 57 Sales & Marketing 38 38 Administration 87 87 Production 410 379 Total 620 589 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 2014. REPORT ON POST-BALANCE SHEET EVENTS There were no transactions or other events of special significance after the balance sheet date of 31 March 2015. United Power Technology Interim report 3 months 2015 16
Outlook The outlook hasn t changed compared to the outlook in the annual report 2014 except for slight changes in the Economic outlook. For detailed information we refer to the outlook in the annual report 2014. Economic and industry outlook Details of the updated economic outlook have been presented in previous sections. Overall, according to the World Economic Outlook issued in April 2015 by the International Monetary Fund the global growth projection for 2015 is 3.5% with acceleration from a low level in the advanced economies (US 3.1%, Euro Area 1.5%) and deceleration of growth in most larger developing economies with the exception of India (China 6.8%, Russia -3.8%, Brazil -1%). 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 continue to be 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 geography specific 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. Some of these factors are further discussed in the section below. Financial Outlook We believe that investments in our capacity expansion will start bearing fruit after the completion of our new production lines in 2015. In the meantime, we will focus on laying the foundation for further profitable growth through general strengthening of our company in particular the sales, distribution and brand building as well as our research and development efforts. While the overall economic environment is expected to improve, our sales still depend to some degree on factors such as the occurrence of hard to predict natural disasters, regulatory issues such as technical requirements as well as local industry consolidation. We believe that the temporary weakness in our industry environment which started to affect us in the second half of 2013 will gradually improve and that we will face more benign trading conditions going forward. However, given all the aforementioned factors we expect the financial results in full year 2015 to be weaker than in 2014. While in 2015 we expect to halt the downward trend of group revenues in 2015 (assuming a stable RMB:EUR exchange rate of approximately 6.7:1), we expect further gross margin and EBIT margin deterioration. We expect similar or higher revenues from our commercial generator segment, residential generator segment as well as outdoor power equipment segment compared to 2014. We may even see first revenues from our new industrial generator segment later this year. The components sector continues to be a less strategic sector, which will be driven by opportunities presenting themselves in the market place. As far as our profitability is concerned we expect gross profit and EBIT margins to decrease by 2 to 5 percentage points compared to 2014 due to further price adjustments, higher fixed asset depreciation as well as a significantly step up in sales, brand building and distribution and research and development budget. Our guidance assumes a stable RMB:EUR exchange rate of approximately 6.7:1 and generally stable or improving trading conditions. All in all, we remain confident about our continuing profitable growth prospects particularly over the medium to long term. Eschborn, 12 May 2015 Management Board United Power Technology AG Xu Wu CO-CEO Zhong Dong Huang CO-CEO Oliver Kuan CFO United Power Technology Interim report 3 months 2015 17
Condensed Interim Consolidated Financial Statements 3 Months 2015 United Power Technology Interim report 3 months 2015 18
Financial Statements United Power Technology AG CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION as of 31 March 2015 in EUR thousand 31 Mar. 2015 31 Dec. 2014 Non current assets Property, plant and equipment 86,745 79,125 Intangible assets 912 852 Other non-current assets 9,246 8,515 Deferred tax assets 871 779 Current assets 97,774 89,271 Inventories 4,799 6,134 Trade and other receivables 21,178 14,056 Current recoverable income taxes 0 7 Other current financial assets 2,473 1,665 Other current assets 63 37 Cash and cash equivalents 59,685 50,170 88,198 72,069 Total assets 185,972 161,340 Capital and reserves Share capital 12,300 12,300 Additional paid-in capital 55,883 55,883 Currency translation difference 30,113 16,822 Retained earnings including net earnings 41,459 38,381 Equity attributable to owners of the parent 139,755 123,386 Total equity 139,755 123,386 Non-current liabilities Other liabilities 1,907 1,735 Deferred tax liabilities 0 90 Current liabilities 1,907 1,825 Borrowings 23,075 20,709 Trade and other payables 17,789 12,520 Other provisions 0 166 Current tax liabilities 3,446 2,734 44,310 36,129 Total liabilities 46,217 37,954 Total liabilities and equity 185,972 161,340 United Power Technology Interim report 3 months 2015 19
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the periods from 1 January to 31 March 2015 in EUR thousand 3M 2015 3M 2014 Revenue 26,889 23,660 Cost of sales -22,664-19,352 Gross profit 4,225 4,308 Other income 1,895 282 Distribution and selling expenses -419-286 Administrative expenses -1,158-838 Research and development expenses -306-342 Other expenses -191-250 Profit from operations (EBIT) 4,046 2,874 Interest income 188 149 Interest expense -402-172 Financial result -214-23 Profit before taxes 3,832 2,851 Income taxes -754-507 Profit for the period 3,078 2,344 Attributable to: Owners of the Company 3,078 2,350 Non-controlling interests 0-6 3,078 2,344 Earnings per share in EUR (diluted basic) 1 0.25 0.19 1 EPS for Q1 2014 and for Q1 2015 are based on 12.3 million shares. United Power Technology Interim report 3 months 2015 20
OTHER COMPREHENSIVE INCOME (EXPENSES) for the period from 1 January to 31 March 2015 in EUR thousand 3M 2015 3M 2014 Profit for the period 3,078 2,344 Exchange differences arising on translation 13,291-734 Other comprehensive income (expense) for the period 13,291-734 Total comprehensive income for the period 16,369 1,610 Total comprehensive income (expense) attributable to: Owners of the Company 16,369 1,622 Non-controlling interests 0-12 16,369 1,610 United Power Technology Interim report 3 months 2015 21
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in EUR thousand Share capital Capital reserves Foreign currency translation reserve Retained earnings Total equity Balance as at 1 Jan 2015 12,300 55,883 16,822 38,381 123,386 Profit for the period 3,078 3,078 Other comprehensive income (expense) for the year 13,291 13,291 Total comprehensive income for the period 13,291 3,078 16,369 Balance as at 31 March 2015 12,300 55,883 30,113 41,459 139,755 United Power Technology Interim report 3 months 2015 22
CONSOLIDATED STATEMENT OF CASH FLOWS for the period from 1 January to 31 March 2015 in EUR thousand 3M 2015 3M 2014 Profit before tax 3,832 2,851 Adjustments for: Depreciation on intangible assets and property, plants and equipment 1,726 1,268 Interest (income) expense, net 214 23 Other non-cash (income) expense -33-29 (Increase)/decrease in current assets -6,614-4,066 Increase/(decrease) in current liabilities 5,103 4,678 Cash generated from operations 4,228 4,725 Interest paid -402-172 Income taxes paid -412-363 Cash generated from operating activities 3,414 4,190 Payments for acquisition of: Property, plant and equipment -6-3,471 Interest income 188 149 Cash flow from investing activities 182-3,322 Repayment of borrowings -13,133-1,860 New borrowings raised 12,841 10,123 Cash flow from financing activities -292 8,263 Net increase (decrease) in cash and bank balances 3,304 9,131 Cash and bank balances at beginning of year 50,170 38,802 Effect of exchange rate changes 6,211-70 Cash and bank balances at end of period 59,685 47,863 United Power Technology Interim report 3 months 2015 23
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period from 1 January to 31 March 2015 1. 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, 65760 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 31 March 2015 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 2014. The condensed interim consolidated financial statements of the Company for the period from 1 January 2015 through 31 March 2015 were authorised for issue by the Management Board on 12 May 2015. 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 2014. For further information regarding the Group s accounting principles and policies we refer to these consolidated financial statements at 31 December 2014. 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 Interim report 3 months 2015 24
The number of consolidated Group companies has changed compared with the first three months of 2014. The wholly owned subsidiary companies Hua Tong Zhong Chuang, Co. Ltd underneath Fujian United Power Equipment Co., Ltd. and United Power France SASU which had been dormant were both closed due to rationalisation. 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, six foreign subsidiaries that are all located in Hong Kong and the People s Republic of China. IFRS accounting standards and interpretations to be applied in the financial year 2015 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: Revenue by segments in EUR thousand 3M 2015 3M 2014 Portable generators Residential use unit 11,794 9,414 Commercial use unit 14,098 12,700 Outdoor power equipment 1,075 1,342 Components Engines 56 91 Parts 594 612 Other 48 153 Total segment revenue 27,665 24,312 Inter-segment revenue elimination -586-583 Other adjustments 1) -190-69 26,889 23,660 1) Other adjustments are related to freight expenses and sales tax surcharge included in the revenue. 1 Industrial equipment and landscaping machines are reported together in one item outdoor power equipment. 2 Other adjustments are related to freight expenses and sales tax surcharge included in the revenue. United Power Technology Interim report 3 months 2015 25
Segment result Results by segments in EUR thousand 3M 2015 3M 2014 Portable generators Residential use unit 1,427 1,060 Commercial use unit 2,888 2,916 Outdoor power equipment 163 236 Components Engines 8 13 Parts -86 18 Other 5 46 Total segment result 4,405 4,289 Other adjustments 1) -180 19 Consolidated gross profit 4,225 4,308 Unallocated items: Other operating income 1,895 282 Distribution and selling expenses -419-286 Administrative expenses -1,158-838 Research and development expenses -306-342 Other expenses -191-250 Interest income 188 149 Interest expenses -402-172 Consolidated profit before tax 3,832 2,851 1) Other adjustments are related to freight expenses included and sales tax surcharge in the revenue. 1 Industrial equipment and landscaping machines are reported together in one item outdoor power equipment. 2 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 first three months 2015. United Power Technology Interim report 3 months 2015 26
5. Cash and Cash Equivalents and Other Current Assets Cash and cash equivalents: in EUR thousand 31 Mar. 2015 31 Dec. 2014 Cash and cash equivalents 59,685 50,170 59,685 50,170 Other financial assets: in EUR thousand 31 Mar. 2015 31 Dec. 2014 Pledged bank deposits 2,473 1,665 2,473 1,665 In addition to cash and cash equivalents in the amount of keur 59,685, keur 2,473 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 1.00. The foreign currency translation reserve of foreign operations amounts to keur 30,113. 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 3,078) 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 12 May 2015. Eschborn, 12 May 2015 Management Board United Power Technology AG Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO United Power Technology Interim report 3 months 2015 27
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, 12 May 2015 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 Interim report 3 months 2015 28
Financial Calendar PUBLICATION Half-year Report 2015 20 August 2015 Annual General Meeting 2015 26 August 2015 Interim Report 9 Months 2015 18 November 2015 IMPRINT Published by United Power Technology AG Mergenthalerallee 10 12 65760 Eschborn, Germany Phone: +49 6196 400804 Telefax: +49 6196 400910 Email: ir@unitedpower.cn Concept and design Kirchhoff Consult AG, Hamburg Investor Relations Phone: +49 40 6091 86 0 Fax: +49 40 6091 86 60 E-mail: ir@unitedpower.cn www.unitedpower.de.com/en United Power Technology Interim report 3 months 2015 29
UNITED POWER AG United Power Technology AG Mergenthalerallee 10 12 65760 Eschborn Germany Phone: +49 61 96 40 08 04 Fax: +49 61 96 40 09 10 E-Mail: IR@unitedpower.cn United Power Technology Interim report 3 months 2015 30