United Power Technology Half-year report 2013 1 · 1 HY 2013 (consolidated) 1 HY 2012...

United Power Technology ⏐ Half-year report 2013 1


United Power Technology AG

KEY FINANCIALS

1 HY 2013 (consolidated)

1 HY 2012 (consolidated)

+/– %

Revenues EUR million 56.27 51.60 9.04

Gross profit EUR million 11.65 10.34 12.65

Gross profit margin % 20.70 20.03 0.67pp

EBIT EUR million 9.78 8.53 14.64

EBIT margin % 17.38 16.53 0.85pp

Profit for the period EUR million 8.37 7.38 13.38

Net profit margin % 14.88 14.31 0.57pp

Earnings per share1 EUR 0.68 0.60 13.33

1 Earnings per share (EPS) for the first six months 2012 and for the first six months 2013 are based on 12.3m shares.


Content

04 Letter to Shareholder 05 The Share 07 Interim Group Management Report 19 Interim Consolidated Financial Statements 31 Responsibility Statement 32 Financial Calendar, Imprint

COMPANY PROFILE

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 over 60 countries around the world.


DEAR FELLOW SHAREHOLDERS, In the first six months of the current financial year United Power recorded growth in sales and earnings. Revenues were driven by higher sales in the commercial generator segment and reached EUR 56.3 million, an increase of 9.0% compared to last year. We managed to increase our gross margin mainly due to changes in product mix and increased branded sales which kept our operating costs stable. We were thus able to improve our EBIT margin to over 17%. We recognized particularly strong growth in our home market of China and other markets outside Europe and the US in the first half 2013. The growth in China was largely due to government stimuli earlier in the year, which led to higher construction activity as well as strengthened sales efforts. In the first half 2013 we launched further new products in the domestic and international markets: The “UP2 series generator;” the “Vertical axis generator;” the “Vertical axis high pressure pump;” the “UD188 Diesel engine;” the “UP160 High-speed engine;” and the ”10kw silent gasoline generator”. We also completed the development of the “UP170 engine with purification technology” (without catalyst) ahead of schedule by three months. This technology is aimed at obtaining EPA III certification required for sales into the US market. Despite good first half results, overall economic sentiment remains challenging and the outlook for our domestic Chinese market was recently dampened due to the further deceleration in growth in the second quarter this year. Given the slowdown in China and the overall slower than expected global recovery, the risk to the downside of reaching our full year targets of 8% growth and an EBIT margin in line with 2012 has somewhat increased compared to earlier this year. However, we remain confident about our medium and long term growth and earnings prospects as the demand for our products is driven by a number of factors including general economic growth, changing consumer lifestyles and the accompanying demand for mobile and reliable sources of electricity. In addition, there are increasing supply uncertainties and disruptions due to aging or failing grids resulting from natural disasters and underdeveloped or under-maintained grids. In addition, we strive to continue gaining competitive advantages vis-a-vis our competitors’ through innovation, process improvements and overall strengthening of our company. I would like to thank you, our shareholders and business partners, for your trust and valued cooperation. Yours sincerely, Xu Wu, Chairman of the Management Board


THE SHARE Positive market sentiment The overall market sentiment during the first half of 2013 has generally been positive. The expansive monetary policies of the European Central Bank in Europe and the Federal Reserve in the US helped to stimulate equity markets. They were quick to recover and reached all time highs during the second quarter of the year. In line with the global development, the German stock market showed a strong performance during the first half of 2013. The SDAX had its low on the first trading day (2 January) with 5,338.05 points. Afterwards it increased and experienced a strong start into the year. The index lost its momentum at the end of March, when it fell into an interim low from which it recovered during April and May. The index reached its high on 28 May at 6,110.61 points. Afterwards the SDAX experienced downward pressure for most of the rest of the reporting period and closed after a short stabilization period at 5,795.18 points. This represented an improvement of 8.6% during the first half of 2013. Share price under pressure Despite the positive operational performance of United Power Technology, the share price showed a negative performance over the course of the first six months 2013. The share reached its period high of EUR 4.19 on 15 January. In the first quarter 2013 the share price was relatively stable and experienced relatively low volatility, while it traded mainly sideward until the beginning of March. Starting mid March, the share depreciated significantly with a phase of recovery in mid May. The publication of the annual report and the interim report 3-months 2013 had no sustainable positive effects on the share price development. The period low was at EUR 2.81 on 21 June. The share recovered somewhat from this low until the end of the reporting period, closing at EUR 3.05. The market capitalization of United Power was EUR 37.5 million on 28 June 2013. This represents a decline of approximately 27% compared to 31 December 2012. The average trading volume during the first half of 2013 was 715 shares per day.


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 28 June 2013

37.5


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 over 60 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 & BUSINESS ENVIRONMENT Economic and industry environment According to the World Economic Outlook issued by the International Monetary Fund (IMF) in April 2013 global economic prospects have somewhat improved but the road to recovery in the advanced economies will remain bumpy. World output growth is forecast to reach 3.3% in 2013 and 4% in 2014. While private demand in the United States has been showing strength as credit and housing markets are healing, a larger-than-expected fiscal adjustment is projected to keep real GDP growth at about 2% in 2013. In the Eurozone, better conditions for periphery sovereigns are not yet passing through to companies and households, because banks are still hobbled by poor profitability and low capital, constraining the supply of credit. Also in many economies activity will be held back by continued fiscal adjustment, competitiveness problems, and balance sheet weakness. Furthermore, new political and financial risks that could put a damper on the recovery have come to a fore. Accordingly, real GDP is projected to contract relative to 2012, by about 0.25% of GDP. China’s growth has further slowed in the second quarter 2013 to 7.5% down from 7.7% in the first quarter. The economy is weighed down by declining exports and weak fixed asset investment. The Chinese Government’s official growth target is 7.5% for 2013 which would be China’s lowest growth rate in more than 20 years. Annual consumer inflation accelerated to 2.7% but remains below the Government’s annual target of 3.5% for 2013.


While the overall economic environment remains challenging, we are confident about our long-term growth and earnings prospects for the following reasons: • We have introduced measures to strengthen our sales capabilities, which have already translated into sales

growth as well as further geographic diversification.

• We are growing from a relatively low base and continue to be able to capture market share both in our existing as well as new markets.

• We continue to capture growth opportunities in our domestic market China and in other developing and emerging markets.

• The recent concerns about global economic growth have also led to a general stabilisation of commodity prices, which should alleviate pressure on our cost side.

Global demand for our products is expected to grow at an average annual rate of 7.5% until 2015 based on a market study by US market research firm ‘Global Industry Analysts’ of July 2010. The demand for our products is driven by a number of factors including general economic growth, changing consumer lifestyles and the accompanying demand for mobile and reliable sources of electricity and the general increasing affordability and visibility of generators as they are increasingly sold directly to consumers through retail outlets. In addition, there are increasing 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. In addition, we expect that with the recent discussions surrounding nuclear power the supply uncertainties are likely to increase both in developed as well as developing markets.


REVENUES AND EARNINGS POSITION

in EUR mill ion United Power AG

1 HY 2013 United Power AG

1 HY 2012 +/– %

Revenue

56.27

51.60 9.04%

Cost of sales

-44.62

-41.26 8.14%

Gross profit

11.65

10.34 12.65%

Other operating income1

1.27

1.18 7.29%

Distribution and selling expenses

-0.62

-0.67 -7.04%

Administrative expenses

-1.79

-1.76 1.59%

Research and development expenses

-0.47

-0.54 -11.55%

Other expenses

-0.25

-0.02 >100.00%

Profit from operations (EBIT)

9.78

8.53 14.64%

Interest income1

0.18

0.10 75.25%

Interest expense

-0.10

-0.19 -48.72%

Profit before tax

9.86

8.44 16.83%

Income taxes

-1.49

-1.05 41.03%

Profit for the period

8.37

7.38 13.38%

Earnings per share in EUR 2

0.68

0.60 13.33%

1 Certain other interest income has been reclassified from Other Operating Income as Interest Income in 2012 and the same

classification has been adopted in 2013. 2 EPS for six months 2012 and for six months 2013 are based on 12.30m shares.


Revenue United Power’s revenue increased from EUR 51.60 million in the first half 2012 by 9.04% to EUR 56.27 million in the same period this year. In the first half 2013 we recognized particularly strong growth in our domestic market of China mainly due to government stimuli earlier in the year, which led to higher construction activity, which in turn translated, into higher sales for us. Most of the growth compared to last year was generated in the first quarter with second quarter sales increasing only marginally compared to the same period last year. It should be noted though that the first quarter last year was exceptionally weak and the second quarter last year was an all time record quarter in terms of revenue generation in Euro terms. Our commercial generator segment again outgrew our residential segment sector, which is partly explained by the strong growth in our home market as the commercial generators are mainly used for construction.

Cost of sales Our cost of sales grew from EUR 41.26 million for the first half of 2012 by 8.14% to EUR 44.62 million for the comparable period of 2013. This was mainly due to the revenue growth, appreciation of the local currency Renminbi (RMB) 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 commodity prices.

Gross profit Gross profit increased from EUR 10.34 million for the first half 2012 by 12.65% to EUR 11.65 million for the first half 2013. Compared to the first half 2012 United Power’s gross profit margin increased by 0.67 percentage points to 20.70% in the first half 2013. This was mainly due higher sales in the commercial segment where margins tend to be higher as well as to higher capacity utilization compared to the same period last year.

Other operating income Other operating income increased from EUR 1.18 million for the first half 2012 by 7.29% to EUR 1.27 million for the first half 2013. 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 increase was mainly due to higher rental income.

Distribution and sell ing expenses Our distribution and selling expenses slightly declined to EUR 0.62 million for the first half 2013 compared to EUR 0.67 million for the comparable period of 2012. As a percentage of revenues, distribution and selling expenses decreased to 1.10% in first half 2013 from 1.29% for the first half 2012. The decrease is mainly due to lower distribution and transportation costs.

Administrative expenses United Power’s administrative expenses remained relatively stable with EUR 1.76 million for the first half 2012 compared to EUR 1.79 million for the comparable period of 2013. As a percentage of revenues, administrative expenses have decreased from 3.41% for the six months of 2012 to 3.18% for the same period in 2013.


Research and development expenses Despite continuing emphasis on research and development activities we were able to decrease the corresponding expenses. For the first half 2013 research and development costs amounted to EUR 0.48 million compared to EUR 0.54 million for the comparable period of 2012. As percentage of revenues, research and development expenses have decreased from 1.04% to 0.84% for the first half of 2012 to first half 2013. The decrease in research and development expenses were mainly due to lower material costs relating to R&D activities incurred in the first half 2013 compared to 2012 and efficiency gains due to streamlining of the R&D processes.

Other expenses Other expenses increased from EUR 0.02 million in the first half 2012 by 1,027.27% to EUR 0.25 million for the first half 2013. As a percentage of revenues, other expenses have increased from 0.04% to 0.44% for the six months of 2012 to the comparable period of 2013. 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 half 2013 increased by 14.64% to EUR 9.78 million mainly reflecting the increase in gross profits. As a percentage of revenues, EBIT increased from 16.53% to 17.38% for the first half 2012 to first half 2013.

Interest Income Interest income has slightly increased from EUR 0.10 million in first half 2012 to EUR 0.18 million the same period of 2013.

Interest Expense Interest expense of United Power slightly decreased from EUR 0.19 million for the first half 2012 to EUR 0.10 million for the comparable period of 2013. As a percentage of revenues interest expenses remained insignificant in the reporting period 2013.

Income taxes In first half 2013 income tax increased from EUR 1.05 million for the first six months of 2012 by 41.03% to EUR 1.49 million. 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 grew from EUR 7.38 million in 2012 by 13.38% to EUR 8.37 million in the comparable period of 2013. As a percentage of revenues, profit for the period increased from 14.31% to 14.88% for the first half of 2012 to the comparable period of 2013. The earnings per share (EPS) in the six months of 2013 were EUR 0.68, an increase of 13.33% year-on-year. The reason for the increase in profit and EPS was mainly due to the increase in gross profits.


SEGMENT INFORMATION Residential generators Revenue for residential generators has decreased by 9.15% in the first six months of 2013 compared to the first six months of 2012. Revenue for the first half of 2012 was EUR 23.5 million compared to the first half this year of EUR 21.3 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 a strong revenue increase. Segment’s revenues increased by 27.67% from EUR 24.78 million for the first half of 2012 to EUR 31.63 million for the same period of 2013. 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 strong sales growth in our home market as well as other new markets.

Outdoor power equipments The outdoor power equipment segment increased by 5.69% in the first half of 2013 compared to the same period in 2012. Total segment revenue in the six months of 2013 was EUR 2.94 million compared to last year’s revenue of EUR 2.78 million.

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 an increase of 16.43% from EUR 2.23 million for the first six months 2012 to EUR 2.59 for the first six months of 2013.


ASSETS AND LIABILITIES POSITION The following table shows the consolidated balance sheet as at 30 June 2013 compared to the consolidated balance sheet as at 31 December 2012:


30 June 2013 United Power AG

31 Dec. 2012

Current assets 73.70 59.03

Non-current assets 59.64 59.84

Total assets 133.34 118.87

Current Liabilities 19.54 15.45

Non-current liabilities 1.88 1.89

Total l iabil it ies 21.42 17.33

Total equity 111.92 101.54

Total l iabil it ies and equity 133.34 118.87

Current Assets

Inventories Inventories include raw materials, work in progress and finished goods. Inventories increased by 57.63% from EUR 4.66 million as at 31 December 2012 to EUR 7.34 million as at 30 June 2013. The increase is mainly due to pre-production to prepare to counter potential labour bottlenecks ahead of the peak season.

Trade and other receivables Trade and other receivables increased by 28.91% from EUR 20.78 million at year-end 2012 to EUR 26.79 million for the end of first half 2013. The reason for this is the increased sales activity.

Amounts due from related parties There were no amounts due from related parties as at 30 June 2013.

Cash and cash equivalents Cash and cash equivalents amounted to EUR 37.4 million at the end of the first half 2013 – an increase of 20.89% from the EUR 30.94 million at the end of fiscal year 2012. The cash and cash equivalents were mainly increased by cash generated from operations.


Non-current assets

Property, plant and equipment Property, plant and equipment remained stable with EUR 56.09 million as of 31 December 2012 and EUR 56.03 million as of 30 June 2013.

Liabil it ies

Trade and other payables Trade and other payables increased from EUR 11.9 million as of 31 December 2012 to EUR 15.23 million as of 30 June 2013. This was mainly due to higher procurement activity to support the increase in sales.

Borrowings and amount due to shareholders Borrowings at the end of the first half of 2013 increased to EUR 2.48 million from EUR 2.40 million as of 31 December 2012 representing an increase of 3.24%. The borrowing is used to fund working capital. The amounts due to related parties increased to EUR 0.83 million at the end of the first half of 2013 from EUR 0.00 million at the end of 2012.

Equity to total assets ratio The total equity increased from EUR 101.54 million by 10.23% to EUR 111.92 million mainly due to the consolidated profit for the period.

The equity to total assets ratio reduced slightly from 85.42% as of 31 December 2012 to 83.94% as of 30 June 2013.


CASH FLOWS Overall cash amounted to EUR 37.40 million as of 30 June 2013 year-on-year compared to the figure from 30 June 2012 of EUR 32.04 million. Overall, the cash generated from operations exceeded the cash flow from investing activities thereby increasing our overall cash position.


1 HY 2013 United Power AG

1 HY 2012

Operating cash flow before working capital changes 11.92 10.55 Cash generated from operations before interest and taxes 7.88 10.47

Cash generated from operating activities 6.30 9.49

Cash flow from investing activities -0.49 -1.95

Cash flow from financing activities 0.00 -4.09

Net Increase in cash and cash equivalents 5.81 3.45

Cash at beginning of year 30.94 27.00

Effect of exchange rate changes 0.65 1.59

Cash and bank balances at end of the period 37.40 32.04

Cash generated from operations before tax and interest Cash generated from operations decreased by EUR 2.59 million to EUR 7.88 million at the end of the reporting period. This was mainly due to increased inventory and receivable levels.

Cash flow from investing activities The investment of the Company in property, plant and equipment for capacity and production expansion is reflected in the cash flow from investing activities. For the first half of 2013, the Company invested EUR 0.67 million in property, plant and equipment resulting in negative cash from investing activity of EUR 0.49 million.

Cash flow from financing activities Cash from financing activities during the first half year 2013 was zero.

Cash at end of period Overall cash increased to EUR 37.40 million compared to EUR 32.04 million for the same period last year representing a positive development of 16.73%.


HUMAN RESOURCES United Power’s total number of employees decreased from 705 as at the end of December 2012 to 662 as at 30 June 2013. While key areas such as management, R&D, sales and marketing remain stable overall employees decreased. This was mainly due to adjustments of our production personnel and some administrative personnel as a result of streamlining and continued automation. The streamlining is a result of continuous internal improvements of processes and optimization of responsibilities and resource allocation. Examples include the recent combination of the quality control and technical department (both part of the administration headcount).

The employee split by function as of 30 June 2013 and 31 December 2012 is shown in the table below:

30 June 2013 31 Dec. 2012

Management 28 28

R&D 57 57

Sales & Marketing 37 37

Administration 90 111

Production 450 472

Total 662 705

United Power intends to strengthen its management, sales and marketing and R&D teams through further recruitment of qualified mostly university-educated staff. We are also in the process of creating a new department to achieve a closer interface between our sales and R&D department. This will allow us to more quickly develop products in the future to meet customer demands.

Our revenue growth, despite a reduced work force, is the result of our continuous efforts to increase overall productivity through further automation and management improvements.

RISK AND OPPORTUNITY MANAGEMENT

There have been no significant changes in the opportunities or risks of the United Power Technology AG compared with the 31 December 2012. For detailed information, readers are therefore referred to the risk report included in the management report of the annual report for the fiscal year 2012.

REPORT ON POST-BALANCE SHEET EVENTS

There were no transactions or other events of special significance after the balance sheet date of 30 June 2013.


OUTLOOK Both our revenue growth and our EBIT margin in the first half exceed our full year guidance. However we saw a slowdown in our second quarter revenue growth. Second quarter revenues are almost unchanged compared to the (until then) record second quarter last year. Overall the macroeconomic environment remains more challenging than we expected earlier in the year. The deceleration of growth in China is to some extent a reflection of the still weak global demand situation affecting some of our key markets – most notably Europe. It is also a consequence of the structural changes which the Chinese economy is currently undergoing away from investment led growth towards more consumption driven growth. Also, Chinese government “mini stimuli” such as the one which has propelled our first quarter results have proven more short-lived than expected. On the positive side our change in product mix towards higher margin products and increased branded sales helped to stem margin erosion. Overall, while we remain optimistic that the macroeconomic situation will improve, and therefore maintain our targets of 8% revenue growth and EBIT margin for this year to be in line with our EBIT margin of 2012, we believe that the downside risk to our guidance has somewhat increased particularly if the challenging market environment continues to prevail. As previously stated our guidance assumes a stable EUR:RMB exchange rate and generally improving trading conditions. Having said this we would like to conclude by reiterating our confidence in our medium and long-term growth prospects. We strongly believe in the fundamental demand for our products and in our ability to continue to gain competitive advantages vis-a-vis our competitors through innovation, process improvements and overall strengthening of our company. Eschborn 13 August 2013 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 30 June 2013

in EUR thousand 30 June 2013 31 Dec. 2012

Non-current assets

Property, plant and equipment 56,025 56,090

Intangible assets 992 1,025

Available-for-sale investments 0 0

Deferred tax assets 588 583

Other non-current assets 2,034 2,141

59,639 59,839

Current assets

Inventories 7,341 4,657

Trade and other receivables 26,789 20,781

Amounts due from related parties 0 0

Current recoverable income taxes 0 9

Other current financial assets 2,088 2,598

Other current assets 87 47

Cash and cash equivalents 37,398 30,936

73,703 59,028

Total assets 133,342 118,867

CAPITAL AND RESERVES

Share capital 12,300 12,300

Additional paid-in capital 55,883 55,883

Revaluation Reserve -1 -1

Foreign currency translation reserve 9,259 7,288

Retained earnings 33,428 25,009

Equity attributable to owners of the parent 110,869 100,479

Non-controlling interests 1,055 1,056

Total equity 111,924 101,535


LIABILITIES

Non-current l iabil it ies

Deferred tax liabilities

90 97

Other liabilities

1,787 1,788

1,877 1,885

Current l iabil it ies

Borrowings

2,483 2,405

Trade and other payables

15,233 11,900

Amounts due to related parties

834 0

Other provisions

15 433

Current tax liabilities

976 709

19,541 15,447

Total l iabil it ies

21,418 17,332

Total l iabil it ies and equity

133,342 118,867


CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the period from 1 April to 30 June and 1 January to 30 June 2013

in EUR thousand Q2 2013 Q2 2012 1 HY 2013 1 HY 2012

Revenue 32,546 32,210 56,267 51,601

Cost of sales 25,487 25,264 44,621 41,263

Gross profit 7,059 6,946 11,646 10,338

Other operating income 416 739 1,266 1,180

Distribution and selling expenses -306 -340 -621 -668

Administrative expenses -845 -1,099 -1,790 -1,762

Research and development expenses -236 -261 -475 -537

Other expenses -57 2253 -248 -22

Profit from operations (EBIT) 6,031 6,210 9,778 8,529

Interest income1 126 48 177 101

Interest expense1 -55 -306 -100 -195

Financial result 71 -258 77 -94

Profit before taxes 6,102 5,952 9,855 8,435

Income taxes -933 -719 -1,485 -1,053

Profit for the period 5,169 5,232 8,370 7,382

Profit for the period attributable to:

Owners of the Company 5,180 5,254 8,419 7,404

Non-controlling interests -11 -22 -49 -22

5,169 5,232 8,370 7,382

Earnings per share in EUR (diluted – basic)2 0.42 0.43 0.68 0.60

1 Interest Income and interest expenses in prior year have been reclassified; see also note 5. 2 EPS for Q1 2012 as well as EPS for Q1 2013 is based on 12.3m shares. 3 The negative number results from a reclassification of EUR 238 thousand from other expenses in administrative expenses.


OTHER COMPREHENSIVE INCOME (EXPENSES)

for the period from 1 April to 30 June and 1 January to 30 June 2013

in EUR thousand Q2 2013 Q2 2012 1 HY 2013 1 HY 2012

Profit for the period

5,169 5,232 8,370 7,382

Exchange differences arising on translation -2,269 6,004 2,019 3,460

Net (loss) gain arising on revaluation 0 0 0 0 Other comprehensive income (expense) for the period -2,269 6,004 2,019 3,460 Total comprehensive income for the period 2,900 11,236 10,389 10,842 Total comprehensive income (expense) attributable to:

Owners of the Company 2,900 11,183 10,390 10,822

Non-controlling interests 0 53 -1 20

2,900 11,236 10,389 10,842


CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

as at 30 June 2013

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Balance as at 31 Dec. 2012 12,300 55,883 -1 7,288 25,009 100,479 1,056 101,535

Profit for the period - - - 8,419 8,419 -49 8,370 Other comprehensive income (expense) for the year - - - 1,971 - 1,971 48 2,019 Total comprehensive income (expense) - - - 1,971 8,419 10,390 -1 10,389 Balance as at 30 June 2013 12,300 55,883 -1 9,259 33,428 110,869 1,055 111,924


CONSOLIDATED STATEMENT OF CASH FLOWS

for the period from 1 January to 30 June 2013

in EUR thousand 1 HY 2013 1 HY 2012

Profit before tax 9,855 8,435

Adjustments for: Depreciation on intangible assets and property, plants and equipment 2,180 2,058

Interest (income) expense, net -177 -101

Other financial result 100 195

Other non-cash (income) expense -37 -38

(Increase)/decrease in current assets -8,206 -7,090

Increase/(decrease) in current liabilities 4,168 7,012

Cash generated from operations 7,883 10,471

Interest paid -100 -195

Income taxes paid -1,483 -787 Net cash generated from operating activities 6,300 9,489

Payments for acquisition of

Property, plant and equipment -663 -2,046

Interest income 177 101

Cash flow from investing activities -486 -1,945

Repayment of borrowings -2,418 -9,858

New borrowings raised 2,418 5,764

Cash flow from financing activities 0 -4,094 Net increase (decrease) in cash and bank balances 5,814 3,450 Cash and bank balances at beginning of year 30,936 27,002

Effect of exchange rate changes 648 1,590

Cash and bank balances at end of period 37,398 32,042


CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the period from 1 January to 30 June 2013

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 30 June 2013 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 2012. The condensed interim consolidated financial statements of the Company for the period from 1 January 2013 through 30 June 2013 were authorised for issue by the management board on 13 August 2013. 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, as explained below in the note no. 5 (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 2012. For further information regarding the Group’s accounting principles and policies we refer to these consolidated financial statements at 31 December 2012. 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 six months of 2013. The interim financial statements include, besides United Power Technology AG, 7 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 2013 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 turnover 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 21,310 23,456

Commercial use unit 31,631 24,775

Outdoor power equipment

Industrial equipment 2,932 2,736

Landscaping machines 5 43

Components

Engines 345 308

Parts 1,996 1,648

Other 252 271

Total segment revenue 58,471 53,237

Inter-segment revenue elimination -1,967 -1,457

Other adjustments1 -237 -179

56,267 51,601

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


Segment result


Portable generators

Residential use unit

2,962 3,291

Commercial use unit

8,150 6,317

Outdoor power equipment

Industrial equipment

605 539

Landscaping machines

1 9

Components

Engines

76 81

Parts

16 104

Other

69 26

Total segment result

11,879 10,367

Other adjustments1

-233 -29

Consolidated gross profit

11,646 10,338

Unallocated items:

Other operating income

1,266 1,180 Distribution and selling expenses

-621 -668

Administrative expenses

-1,790 -1,762 Research and development expenses

-475 -537

Other expenses

-248 -22

Interest income

177 101

Interest expenses

-100 -195

Consolidated profit before tax

9,855 8,435

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 six months 2013.


5. Interest Income In the quarterly reports 2012 interest income on bank deposits was reported in the other operating income. In the quarterly income statement 2013 interest income on bank deposits is reported in interest income.

6. Cash and Cash Equivalents and Other Current Assets in EUR thousand 30 June 2013 31 Dec. 2012

Cash and cash equivalents 37,398 30,936

Pledged bank deposits 2,088 2,598

Other current assets 2,088 2,598

39,486 33,534

In addition to cash and cash equivalents in the amount of kEUR 37,398, kEUR 2,088 of bank deposits were used to secure short-term lines of credit. They are shown under the other financial assets.

7. 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 9,259. 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 8,419) is recognised in retained earnings.

8. Borrowings The borrowings are related to secured bank borrowings. The average effective interest rates are approximately 7% per year.

in EUR thousand 30 June 2013 31 Dec. 2012

Secured bank borrowings 2,483 2,405


9. 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.

10. Auditor’s Review The condensed interim consolidated financial statements and the interim management report were neither reviewed nor audited by a public auditor (Section 37w Para. 5 of the German Securities Trading Act).

11. Approval of the Consolidated Financial Statements The financial statements were approved and authorised for issuance by the Management Board on 13 August 2013. Eschborn, 13 August 2013 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, 13 August 2013 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.


Financial Calendar PUBLICATION

Half-year report 2013 14 August 2013 Interim report 9-months 2013 12 November 2013

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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

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