united power technology interim report 3 months 2014 1 · 2014-05-15 · united power...

United Power Technology⏐Interim report 3 months 2014 1

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United Power Technology AG

KEY FINANCIALS

3 months 2014 (consolidated)

3 months 2013 (consolidated)

+/–%

Revenues EUR million 23.66 23.72 -0.3%

Gross profit EUR million 4.31 4.59 -6.1%

Gross profit margin % 18.2 19.4 -1.1 pp

EBIT EUR million 2.87 3.75 -23.5%

EBIT margin % 12.1 15.8 -3.7 pp

Profit for the period EUR million 2.34 3.20 -26.9%

Net profit margin % 9.9 13.5 -3.6 pp

Earnings per share1 EUR 0.19 0.26 -26.9%

1 Earnings per share (EPS) for 3 months 2013 are based on 12.3m shares and for 3 months 2014 are based on 12.3m shares


Content

04 Letter to Shareholders 05 The Share 06 Interim Group Management Report 18 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 close to 70 countries around the world.


DEAR FELLOW SHAREHOLDERS, In the first three months of 2014 our industry environment remained challenging. Nevertheless, we were able to achieve revenues of EUR 23.7 million which is comparable to the first quarter of last year (Q1 2013: EUR 23.7 million). This is all the more encouraging as the first quarter of 2013 was a strong quarter. In addition the Euro was stronger in the first quarter 2014 compared to the same period of last year. In fact in RMB terms our revenues in the first quarter this year exceed the revenues of the strong first quarter in 2013. The continued focus on the commercial generator segment continues to pay off with an increase of 3.3% to EUR 12.7 million. The growth in our new markets and in most cases emerging markets further has also been encouraging, as sales in these markets are typically of the higher margin commercial generator type which are mostly used for construction and as back-up power. The segment of residential generators decreased by 4.7% to EUR 9.4 million. The outdoor power equipment segment remained stable with EUR 1.34 million. Our EBIT was EUR 2.9 million (Q1 2013: EUR 3.7 million) in the first three months 2014. The decrease of 23.5% was mainly due to a decreased gross profit margin, currency losses associated with a strong Euro and lower government grants received in the first quarter. On the other hand we were able to lower our administrative expenses in line with our efforts to streamline the 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 approx. 40% in the first quarter. Due to the above mentioned reasons our EBIT-margin decreased by 3.7 percentage points to 12.1% in the first three months 2014. We achieved moderate growth in our European business, despite the Ukraine crisis and a weak 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 appreciation. Nevertheless, we expect to maintain a strong position in our home market despite the current price competition and consolidations phase. The North American market declined in comparison to the same period last year due to the quiet hurricane season last year. In 2014, we will continue our pursuit of the three-pronged strategy. In line with this, we plan to commence our investment in buildings and structures for the third phase expansion of our newest and third factory, Gaoqi Industrial Park. We believe that investments in our capacity expansion will start bearing fruit after the completion of our first new production lines towards the end of the current financial year or the beginning of next year. The prospects and the financial outlook haven’t changed since the publication of the annual report 2013 in April. Given the reasons mentioned in the annual report, we expect a slight decline in our group revenue for 2014 resulting from slightly lower revenues of our commercial generator segment and our residential generator segment. However, we do anticipate our outdoor power segment to grow this year, a segment for which we see overall good growth prospects. As far as our profitability is concerned we expect somewhat lower gross profit and EBIT margins compared to 2013, as we expected further RMB appreciation against the USD, higher fixed asset depreciation as well as a larger research and development budget. Despite the challenges we face in our key markets, we remain confident about our continuing profitable growth prospects particularly over the medium to long term. Our versatile business model allows us to find solutions for various customer groups and hence react to changing market developments. Yours sincerely, Xu Wu, Chairman of the Management Board


THE SHARE

General market sentiment remains optimistic in 2014 The positive market sentiment at the end of 2013 continued in the first three months of 2014. Consequently, the lead indices continued to develop positively, due to the low interest rate environment and a positive overall valuation of shares. In this overall benign market environment, the SDAX showed a volatile but generally positive development with a low of 6,835 points on 2 February and a high at 7,269 points on 17 February 2014. As of 31 March 2014, the index closed at 7,169 points. All in all the SDAX performed well with a plus of approximately 5% in the first three months of 2014. Volatile share price with positive momentum Following a period of decline at the end of 2013, the share price of United Power went further down at the beginning of January and reached its low on 14 January with EUR 2.90. This was followed by a strong increase during the next two days, which brought the share to its high of EUR 3.33 on 16 January 2014. The share price remained volatile and declined in February and March before it stabilized at a level of around EUR 2.95. The share closed the reporting period on 31 March at EUR 2.95. The market capitalization of United Power was EUR 36.3 million on 31 March 2014. This represents a decrease of approximately 5% compared to 31 December 2013. The average trading volume during the first quarter 2014 was 5,633 shares per day. New research note After the end of the reporting period, Kepler Cheuvreux published a new research note. The analysts issued a “Reduce” recommendation with target prices of EUR 3.0. 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 of peers. Share performance (January – April)

Shareholder structure (as of 31 March 2014)

Basic 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 (Mio. EUR) as at 31 March 2014 36.3


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 close to 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) or 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 World Economic Outlook issued in April 2014 by the International Monetary Fund (IMF) global growth for 2013 was 3.0% and therefore slightly slower growth than in 2012 (2012: 3.2%). Growth in industrialized countries was estimate to have grown by 1.3% in 2013 (prior year: 1.4%), and growth in emerging economies was estimated at 4.7% in 2013 (prior year: 4.9%). Also, the IMF estimated GDP growth in the US at 1.9% in 2013 (2012: 2.8%). Compared to the prior year this was a significant decrease. According to the IMF, GDP growth in Europe has been estimated at –0.5%. This was a slight improvement after –0.7% in 2012. Economic indicators suggest the peripheral states are close to stabilizing their economies, though growth there is still constrained by restrictive lending policies for the time being. In core euro zone economies, on the other hand, the recovery is largely already underway. The economy in Germany notably benefited from exports and low inflation. The IMF estimated 0.5% GDP growth for 2013 after 0.9% in 2012. Despite the decrease it was still the highest estimated projected growth rate for any of Europe’s core economies in the reporting period. The emerging economies estimated to have grown at a rate of 4.7% in 2013, slightly lower than in 2012. According to the IMF, emerging markets are facing the challenge of reconciling deceleration both with the difficult global financial situation and, in many cases, with recently falling currencies and rising inflation. As in the prior years, Chinese growth remained the highest amongst major of the emerging markets. The IMF estimated a growth rate of 7.7% which is a stable GDP growth compared to 2012.


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 2012–2016. 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 believe that United Power will emerge from this as a stronger player with a reputation of quality and reliability. In the generator market in Western Europe we have seen the introduction of new technical and environmental requirements in 2013, which temporarily make it more difficult for non-EU players until products are suitably modified. However, it is to yet too early to assess the full extent the current Ukraine crisis and weaker rouble will have on our business.


REVENUES AND EARNINGS POSITION

in EUR mill ion United Power AG

3M 2014 United Power AG

3M 2013 +/– %

Revenue 23.66 23.72 -0.3%

Cost of sales -19.35 -19.13 1.2%

Gross profit 4.31 4.59 -6.1%

Other operating income 0.28 0.85 -67.1%

Distribution and selling expenses -0.29 -0.31 -6.5%

Administrative expenses -0.84 -0.95 -11.6%

Research and development expenses -0.34 -0.24 41.7%

Other expenses -0.25 -0.19 31.6%

Profit from operations (EBIT) 2.87 3.75 -23.5%

Interest income1 0.15 0.05 200.0%

Interest expense -0.17 -0.05 240.0%

Profit before tax 2.85 3.75 -24.0%

Income taxes 0.51 0.55 -7.3%

Profit for the period 2.34 3.20 -26.9%

Earnings per shares in EUR1 0.19 0.26 -26.9%

1 EPS for 3 months 2013 are based on 12.30m shares and for 3 months 2014 are based on 12.3m shares

REVENUE United Power’s revenue was stable at EUR 23.66 million in the first three months of 2014 compared with EUR 23.72 million for the same period last year. We should also note that we had a strong start to the year last year and that revenues of a similar magnitude this year is an encouraging start into 2014 particularly as this follows two weak quarters in the second half last year. The weakness last year was 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 three months of 2014 we saw revenue growth mainly in other growth markets where we continue to see good growth prospects. Our European business increased slightly despite the Ukraine crisis and weakened rouble in line with a general perception of stabilization of the European economy. 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. Our commercial generator segment outgrew our residential segment sector, which is partly explained by the growth in new growth markets as the commercial generators are mainly used for construction.


COST OF SALES Our cost of sales grew from EUR 19.13 million for the first three months of 2013 by 1.15% to EUR 19.35 million for the comparable period of 2014. This was mainly due to RMB appreciation as well as higher fixed assets 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 from EUR 4.59 million for the first three months of 2013 by 6.10% to EUR 4.31 million for the same period this year. Compared to the same period last year, United Power’s gross profit margin decreased by 1.13 percentage points to 18.22% in the first three months of 2014. 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 0.85 million for the first three months of 2013 by 67.1% to EUR 0.28 million for the same period last 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 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 We believe that Government budgets for grants this year have been reduced due to ongoing austerity measures

DISTRIBUTION AND SELLING EXPENSES Our distribution and selling expenses slightly declined to EUR 0.29 million for the first three months of 2014 compared to EUR 0.31 million for the reporting period of 2013. As a percentage of revenues, distribution and selling expenses decreased to 1.23% in the first three months of 2014 from 1.31% for the comparable period of 2013. The decrease is mainly due to lower distribution and transportation costs.

ADMINISTRATIVE EXPENSES United Power’s administrative expenses decreased from EUR 0.95 million for the first three months of 2013 compared to EUR 0.84 million for the comparable period of 2014. As a percentage of revenues, administrative expenses decreased from 4.01% for the first three months of 2013 to 3.55% for the same period in 2014.


RESEARCH AND DEVELOPMENT EXPENSES In the first three months of 2014 research and development costs increased to EUR 0.34 million compared to EUR 0.24 million for the comparable period of 2013. As percentage of revenues, research and development expenses have increased from 1.01% to 1.44% for the first three months of 2013 to first three months of 2014. The increase in research and development expenses was due to intensified R&D activities in the first three months of 2014 compared to 2013. 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 increased from EUR 0.19 million in the first three months of 2013 by 31.6% to EUR 0.25 million for the comparable period of 2014. As a percentage of revenues, other expenses increased from 0.80% to 1.06% for the first three months of 2014. Other expenses typically include various government taxes and levies and bank charges. The increase is mainly due to increased government taxes and levies. Profit from operations (EBIT) Our EBIT for the first three months of 2014 decreased by 23.47% to EUR 2.87 million mainly reflecting the decrease in gross profits and decline in other operating income. As a percentage of revenues, EBIT decreased from 15.81% to 12.13% for the first three months 2014. Interest Income Interest income has increased from EUR 0.05 million in the first three months of 2013 to EUR 0.15 million the same period of 2014 mainly due to improved cash management. Interest Expense Interest expense of United Power increased from EUR 0.05 million for the first three months 2013 to EUR 0.17 million for the comparable period of 2014 due to higher borrowings. As a percentage of revenues interest expenses remained insignificant in the reporting period. Income taxes In first three months 2014 income tax decreased to EUR 0.51 million from EUR 0.55 million for the same period last year. Our main PRC operating company UPEC (which accounts for approximately 90% of group revenues) enjoys a favourable corporate tax rate of 15% due to the fact that we have been certified as a high technology company in China. 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 3.20 million in 2013 by 26.88% to EUR 2.34 million in the comparable period of 2014. As a percentage of revenues, profit for the period increased from 13.49% for the first three months of 2013 to 9.89% for the comparable period of 2014. The earnings per share (EPS) in the first three months of 2014 were EUR 0.19, a decrease of 26.92% year-on-year. The reason for the decrease in profit and EPS was mainly due to the decrease in gross profit margin and decrease in other operating revenues.


SEGMENT INFORMATION Residential generators Revenue for residential generators has decreased by around 4.66% in the first three months of 2014 compared to the first three months of 2013. Total segment revenue for the first three months of 2014 was EUR 9.41 million compared to the first three months last year of EUR 9.87 million. This is mainly due to our continuing efforts to change the revenue mix to products with larger engine sizes. Commercial generators Our largest segment commercial generators showed an increase of 3.25% from EUR 12.30 million for the first three months 2013 to EUR 12.70 million for the same period 2014. This is in line with the Company’s strategy of increasingly focusing on generators with higher output and selling in categories with larger engine sizes and also due to the sales growth in our home market as well as other new growth markets. Outdoor power equipment The outdoor power equipment segment remained stable at EUR 1.34 million for the first three months this year. Components The components segment is currently 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 30.65% from EUR 1.24 million for the first three months 2013 to EUR 0.86 million for the first three months of 2014.


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 31 March 2014:


31 Mar. 2014 United Power AG

31 Dec. 2013

Current assets 74.69 61.57

Non-current assets 69.69 68.12

Total assets 144.38 129.69

Current liabilities 31.57 18.46

Non-current liabilities 1.71 1.74

Total l iabil it ies 33.28 20.20

Total equity 111.10 109.49

Total l iabil it ies and equity 144.38 129.69

Current Assets Inventories Inventories include raw materials, work in progress and finished goods. Inventories decreased slightly by 0.79% from EUR 5.05 million as at 31 December 2013 to EUR 5.01 million as at 31 March 2014.

Trade and other receivables Trade and other receivables increased by 43.89% from EUR 13.58 million at year-end 2013 to EUR 19.54 million for the end of first three months 2014. 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 2014.

Cash and cash equivalents Cash and cash equivalents amounted to EUR 47.9 million at the end of the first three months 2014 – an increase of 23.5% from the EUR 38.8 million at the end of fiscal year 2013. 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.


Non-current assets Property, plant and equipment Property, plant and equipment increased by 3.00% from EUR 58.97 million as of 31 December 2013 to EUR 60.74 million as of 31 March 2014 mainly due to investment related to our third factory.

Liabil it ies Trade and other payables Trade and other payables increased from EUR 9.32 million as of 31 December 2013 to EUR 14.04 million as of 31 March 2014. This was mainly due to increased sales. Borrowings and amount due to shareholders Borrowings at the end of March 2014 increased to EUR 15.19 million from EUR 7.02 million as of 31 December 2013 representing an increase of 116.38%. This was due to new short-term borrowings. The borrowing is used to fund working capital as well as for our investment in capacity expansion.

Equity to total assets ratio The total equity increased from EUR 109.49 million by 1.47% to EUR 111.10 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 76.95% as of 31 March 2014.


CASH FLOWS Over all cash amounted to EUR 47.86 million as of 31 March 2014 year-on-year compared to the figure from 31 March 2013 of EUR 38.92 million. Overall, the cash generated from our operations plus cash from financing activities exceeded the cash flow from investing activities there by increasing our over all cash position.


3M 2014 United Power AG

3M 2013

Operating cash flow before working capital changes 4.11 4.81 Cash generated from operations before interest and taxes 4.73 7.42

Cash generated from operating activities 4.19 6.81

Cash flow from investing activities -3.32 -0.60

Cash flow from financing activities 8.26 0.00

Net increase in cash and cash equivalents 9.13 6.21

Cash at beginning of year 38.80 30.94

Effect of exchange rate changes -0.07 1.78

Cash and bank balances at end of the period 47.86 38.92

Cash generated from operations before tax and interest During the first three months 2014, cash generated from operations decreased by EUR 2.69 million to EUR 4.73 million compared with the reporting period 2013. This was mainly due to increased inventory and 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 three months of 2014, the Company invested EUR 3.47 million, mainly for the preparation of the land for our third phase expansion.

Cash flow from financing activities Cash from financing activities during the first three months of 2014 was EUR 8.26 million due to new short-term borrowings.

Cash at end of period Overall cash increased to EUR 47.86 million compared to EUR 38.92 million for the same period last year, an increase of 22.97%.


HUMAN RESOURCES United Power’s total number of employees decreased from 638 at the end of December 2013 to 630 at 31 March 2014. We 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 and continued automation. The streamlining is a result of continuous internal improvements of processes and optimization of responsibilities and resource allocation. The employee split by function as of 31 March 2014 and 31 December 2013 is shown in the table below:

31 Mar. 2014 31 Dec. 2013

Management 30 30 R&D 58 57 Sales & Marketing 38 37 Administration 85 85 Production 419 429 Total 630 638 United Power intends to continue strengthening its management, sales and marketing and R&D teams through further recruitment of qualified mostly university-educated staff. We also continue strengthening the interface between our sales and R&D department. This will allow us to more quickly develop products in the future to meet customer demands.

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 2013.

REPORT ON POST-BALANCE SHEET EVENTS

There were no transactions or other events of special significance after the balance sheet date of 31 March 2014.


OUTLOOK According to the update of the World Economic Outlook issued in January 2014 by the International Monetary Fund (IMF) global growth is projected to be around 3.7% in 2014, and therefore higher than in the previous year. In the United States growth is expected to be 2.8% in 2014, up from 1.9% in 2013 and in the euro area growth is projected to strengthen to 1.0% in 2014. In our “home” market China the Government recently announced a target growth rate of 7.5% for 2014, which is in line with the expectations from IMF. This means a further slight 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. In 2014, 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. We believe that investments in our capacity expansion will start bearing fruit after the completion of our first new production lines towards the end of the current financial year or the beginning of next year. In the meantime, we will focus on laying the foundation for further profitable growth through capacity expansion and general strengthening of our company in particular the sales and distribution and research and development efforts. Overall at this stage we reiterate our financial guidance provided in our annual report 2013: we expect the financial results in full year 2014 to be somewhat weaker than in 2013. We expect a slight decline in our group revenue for 2014 resulting from slightly lower revenues of our commercial generator segment and our residential generator segment. However, we do anticipate our outdoor power segment to grow this year, a segment where we see overall good growth prospects. 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 somewhat lower gross profit and EBIT margins compared to 2013 due to expected further RMB appreciation against the USD, higher fixed asset depreciation as well as a larger research and development budget. Our guidance assumes a EUR:RMB exchange rate comparable to 2013 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, 14 May 2014 Management Board United Power Technology AG Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO


Financial Statements United Power Technology AG CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF 31 MARCH 2014

in EUR thousand 31 Mar. 2014 31 Dec. 2013

Non-current assets

Property, plant and equipment 60,743 58,975

Intangible assets 848 894

Deferred tax assets 578 586

Other non-current assets 7,520 7,667

69,689 68,122

Current assets

Inventories 5,009 5,049

Trade and other receivables 19,535 13,584

Amounts due from related parties 0 594

Current recoverable income taxes 7 7

Other current financial assets 2,224 3,474

Other current assets 53 54

Cash and cash equivalents 47,863 38,802

74,691 61,564

Total assets 144,380 129,686

CAPITAL AND RESERVES

Share capital 12,300 12,300

Additional paid-in capital 55,883 55,883

Currency translation difference 4,413 5,141

Retained earnings including net earnings 37,466

35,115

Equity attributable to owners of the parent 110,062 108,439

Non-controlling interests 1,034 1,046

Total equity 111,096 109,485


LIABILITIES

Non-current l iabil it ies

Deferred tax liabilities 93 94

Other liabilities 1,615 1,651

1,708 1,745

Current l iabil it ies

Borrowings 15,188 7,023

Trade and other payables 14,036 9,317

Other provisions 38 80

Current tax liabilities 2,314 2,036

31,576 18,455

Total l iabil it ies 33,284 20,201

Total l iabil it ies and equity 144,380 129,686


CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD FROM 1 JANUARY TO 31 MARCH 2014

in EUR thousand 3M 2014 3M 2013

Revenue 23,660 23,721

Cost of sales -19,352 -19,134

Gross profit 4,308 4,587

Other operating income 282 850

Distribution and selling expenses -286 -315

Administrative expenses -838 -945

Research and development expenses -342 -239

Other expenses -250 -191

Profit from operations (EBIT) 2,874 3,747

Interest income1 149 51

Interest expense1 -172 -45

Financial result -23 6

Profit before taxes 2,851 3,753

Income taxes 507 552

Profit for the period 2,344 3,201

Attributable to:

Owners of the Company 2,350 3,238

Non-controlling interests -6 -37

2,344 3,201

Earnings per share in EUR (diluted – basic)2 0.19 0.26

1 Interest income and interest expenses in prior year have been reclassified; see also note 5 2 EPS for Q1 2013 are based on 12.3m shares and for Q1 2014 are based on 12.3m shares


OTHER COMPREHENSIVE INCOME (EXPENSES)



Profit for the period 2,344 3,201

Exchange differences arising on translation -734 4,040

Net (loss) gain arising on revaluation 0 0

Other comprehensive income (expense) for the period -734 4,040

Total comprehensive income for the period 1,610 7,241

Total comprehensive income (expense) attributable to:

Owners of the Company 1,622 7,242

Non-controlling interests -12 -1


CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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Balance as at 31 Dec. 2013 12,300 55,883 5,141 35,115 108,439 1,046 109,485

Profit for the period - - 2,350 2,350 -6 2,344 Other comprehensive income (expense) for the year - - -728 - -728 -6 -734 Total comprehensive income (expense) - - -728 2,350 1,622 -12 1,610 Balance as at 31 Mar. 2014 12,300 55,883 4,413 37,465 110,061 1,034 111,095


CONSOLIDATED STATEMENT OF CASH FLOWS



Profit before tax 2,851 3,753

Adjustments for: Depreciation on intangible assets and property, plants and equipment 1,268 1,094

Interest (income) expense, net 23 -6

Other non-cash (income) expense -29 -29

(Increase)/decrease in current assets -4,066 -94

Increase/(decrease) in current liabilities 4,678 2,705

Cash generated from operations 4,725 7,423

Interest paid -172 -46

Income taxes paid -363 -568 Net cash generated from operating activities 4,190 6,809

Payments for acquisition of

Property, plant and equipment -3,471 -652

Interest income 149 51

Cash flow from investing activities -3,322 --601

Repayment of borrowings -1,860 -1,814

New borrowings raised 10,123 1,814

Cash flow from financing activities 8,263 0 Net increase (decrease) in cash and bank balances 9,131 6,208 Cash and bank balances at beginning of year 38,802 330,936

Effect of exchange rate changes -70 1,775

Cash and bank balances at end of period 47,863 338,919


CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 JANUARY TO 31 MARCH 2014 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 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 2013. The condensed interim consolidated financial statements of the Company for the period from 1 January 2014 through 31 March 2014 were authorised for issue by the Management Board on 14 May 2014. 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 2013. For further information regarding the Group’s accounting principles and policies we refer to these consolidated financial statements at 31 December 2013. 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.


There have been no changes in the Group's ownership interests in subsidiaries in the first three months of 2014. The interim financial statements include, besides United Power Technology AG, seven 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


Portable generators

Residential use unit 9,414 9,865

Commercial use unit 12,700 12,302

Outdoor power equipment

Industrial equipment 1,342 1,343

Components

Engines 91 119

Parts 612 946

Other 153 173

Total segment revenue 24,312 24,748

Inter-segment revenue elimination -583 -944

Other adjustments1 -69 -83

23,660 23,721

1 Other adjustments are related to freight expenses and sales tax surcharge included in the revenue


Segment result


Portable generators

Residential use unit 1,060 1,210

Commercial use unit 2,916 3,153

Outdoor power equipment

Industrial equipment 236 282

Components

Engines 13 24

Parts 18 -18

Other 46 132

Total segment result 4,289 4,783

Other adjustments1 19 -196

Consolidated gross profit 4,308 4,587

Unallocated items:

Other operating income 282 850 Distribution and selling Expenses -286 -315

Administrative expenses -838 -945 Research and development expenses -342 -239

Other expenses -250 -191

Interest income 149 51

Interest expenses -172 -45

Consolidated profit before tax 2,851 3,753

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 first three months 2014.


5. CASH AND CASH EQUIVALENTS AND OTHER CURRENT ASSETS in EUR thousand 31 March. 2014 31 Dec. 2013

Cash and cash equivalents 47,863 38,802

Pledged bank deposits 2,224 3,474

Other current assets 2,224 3,474

50,087 42,276

In addition to cash and cash equivalents in the amount of kEUR 47,863, kEUR 2,224 of bank deposits were used to secure short-term lines of credit. They are shown under the other financial assets.

6. EQUITY The ssubscribed 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 fforeign currency translation reserve of foreign operations amounts to kEUR 4,413. 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 2,350) 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 14 May 2014. Eschborn, 14 May 2014 Management Board United Power Technology AG

Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO


Responsibil ity 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, 14 May 2014 Management Board United Power Technology AG

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.

Xu Wu Zhong Dong Huang Oliver Kuan CO-CEO CO-CEO CFO


Financial Calendar PUBLICATION

Annual General Meeting 2014 22 May 2014 Half-year report 2014 14 August 2014 Interim report 9-months 2014 13 November 2014

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PUBLISHED BY United Power Technology AG Mergenthalerallee 10–12 65760 Eschborn, Germany Phone: +49 6196 400804 Telefax: +49 6196 400910 Email: [email protected]

CONCEPT AND DESIGN Kirchhoff Consult AG, Hamburg

INVESTOR RELATIONS Phone: +49 40 6091 8650 Fax: +49 40 6091 8616 E-mail: [email protected] www.unitedpower.de.com/en

united power technology interim report 3 months 2014 1 · 2014-05-15 · united power...

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