Interim Report H1 2014
Transcrição
Interim Report H1 2014
Interim Report H1 2014 Group Key Data kEUR H1 2014 H1 2013 Selected income statement data Sales revenues 180,169 173,747 Cost of sales -130,816 -125,190 Gross profit 49,353 48,557 Other operating income 1,146 785 -12,491 -10,926 Administrative expenses -7,959 -6,726 Research and Development -3,469 -2,950 -257 -289 Operating profit 26,323 28,451 Finance income 665 501 Finance costs -5,079 -4,771 Profit before income tax 21,909 24,181 Income tax -6,978 -11,027 Profit for the period 14,931 13,154 Selling and distribution expenses Other operating expenses Selected balance sheet data Total assets 554,059 495,175 Total liabilities 183,959 132,292 Total equity 370,100 362,883 Selected cash flow data Cash flow from operating activities Cash flow used in investing activities Cash flow from financing activities Cash and cash equivalents at the end of the period 27,136 17,302 -13,379 -16,364 -3,789 -2,472 136,329 79,661 Other selected financial data Gross profit margin1) EBIT2) 27.4% 27.9% 26,323 28,451 EBIT margin3) 14.6% 16.4% Adjusted EBITDA4) 30,818 32,607 Adjusted EBITDA margin5) 17.1% 18.8% Number of employees6) 3,924 3,272 Number of stores 4,154 4,104 Gross profit margin is calculated as gross profit divided by revenues times 100 EBIT is calculated as net income less interest income plus interest expense plus tax expenses less tax refundable EBIT margin is EBIT divided by revenues times 100 4) Adjusted EBITDA is calculated as net income less interest income plus interest expense plus tax expenses plus depreciation and amortisation plus expenses from land-use rights in Mainland China 5) Adjusted EBITDA divided by revenues times 100 6) Own employees including contract workers and trainees 1) 2) 3) Content 1 Letter to the Shareholders 2 Interim Group Management Report 14Condensed Half-Year Consolidated Financial Statements 27 Responsibility Statement 28 Review Report 29 Financial Calendar, Imprint Joyou AG Interim Report H1 2014 Letter to the Shareholders 1 Letter to the Shareholders Dear Shareholders, the sales revenues rose to nearly EUR 180.2 million in the first half of 2014, which was an increase of 3.7% over the first half of the previous year in Euro terms and 9.2% in RMB terms, which was in line with our guidance. Internationally, the near doubling of international sales is testimony to the successful cooperation of the collaborative strategy with our group companies, and I am confident that this will continue to provide future benefits to the Joyou Group. This was despite that in the first six months 2014 the growth of China’s gross domestic product slowed down to 7.4% from the first six months of 2013 of 7.6%, and a month-on-month house prices growth rate decline, Joyou’s China domestic sales showed an increase of 0.5% in Euro terms and 5.8% in RMB terms. International sales overall showed a dramatic increase of 84.4% in Euro terms, and 94.1% in RMB terms. In January 2014 the acquisition of our parent company by a joint venture vehicle owned by the LIXIL Group and the Development Bank of Japan, has opened up further expansion potential and since the close, there have been several initial meetings in China with various teams from the LIXIL Group to start exploring potential synergies and how they may be utilised which have already lead the first trial order delivered to LIXIL. Gross margin saw a slight decrease by 0.5 percentage points to 27.4%, which was mainly the due to lower gross margin of international sales due to their lower sales price. The EBIT margin declined by 1.8 percentage points to 14.6%. Which was the result of decreased Gross Margin and due to increases in operational expenses. Net Profit showed strong gains of 13.5% mainly due to the non-occurrence of one off revocation of preferential tax rate that was booked in the second quarter of 2013. Our core growth strategy comprises of international sales, project development sales and increasing sales per store. Based on this strategy, we will continue to build on favourable macro-economic growth drivers, particularly urbanisation and the growing consumer class in China. Even if the market environment is still somewhat challenging in the short term, nationally from the restrictive measures around the construction industry in China, and slowing GDP growth rates and internationally due to the general economic turmoil, we still give a positive outlook forecast stretching into 2014. We expect growth of between 5% and 10% in RMB terms. Domestically, in the China market, I am very proud of our excellent network of franchised retail stores. We are continuing to expand some well performing stores and improving the sales per square metre in existing stores. Our Experience Centres support the company’s move into project business by acting as showrooms to project developers. On behalf of Management, I would like to thank you for your continued support! Mr Jianshe CAI CEO Joyou AG 2 Interim Group Management Report Joyou AG Interim Report H1 2014 Interim Group Management Report for the half year 2014 page 3–13 Joyou AG Interim Report H1 2014 1 Foundations of the Group The business model and strategy of Joyou Group as described in the Combined Management Report of Joyou AG and the Group for the business year 2013 remain unchanged. Interim Group Management Report 3 The following graph depicts the number of cities where the sales price of New Homes (excluding affordable state housing), and Existing Homes, increased in the statistical pool of 70 major cities in China in last 12 months to June 2014. 70 The organisational and management structure of the Joyou Group is almost unchanged to the structure disclosed in the consolidated annual financial statements as at 31 December 2013. In May 2014 Joyou Building Materials finalized the incorporation of a 100% subsidiary which is named Xiamen X-Time Trading Co. Ltd. The company’s principal activity is intended to be the trading of Joyou’s luxury brand products. Currently the company is registered without any capital subscribed. It is intended that the issued share capital will amount to RMB 10 Mio. 2 Economic Report 60 50 40 30 20 10 0 J ul. A ug. S ep. Oct. Nov. Dec. J an. F eb. Mar. New Homes A pr. May J un. E xisting Homes The following graph shows the month-on-month change (%) of sales prices of New Homes (excluding affordable state housing), and Existing Homes, in the statistical pool of 70 major cities in China in last 12 months to June 2014. 2.1 Economic Development China's economy showed strong resilience in the first half of 2014, with growth momentum rebounding in the second quarter and expansion in the first six months reaching 7.4% year on year. Helped by an export recovery since April, and new sources of growth emerging from the structural adjustment, expansion accelerated to 7.5% in the second quarter from 7.4% in the previous one, according to the Chinese National Bureau of Statistics (NBS). The Chinese government has set an official GDP target of 7.5% for the full year 2014. That compares with GDP growth of 7.7% in each of the past two years, 9.3% in 2011 and 10.5% in 2010. Retail sales in China grew 12.1% year on year to RMB 12.42 trillion (USD 2.02 trillion) in the January-June 2014 period, quickening from the 12.0% growth registered for the first quarter according to the NBS. The actual growth rate was 10.8% with inflation deducted. This growth was boosted by strong figures in the online sector, according to data released by NBS. Retail sales growth in rural areas continued to outpace that in urban China. In January-June 2014 period, sales in rural regions rose 13.2% from a year ago to RMB1.69 trillion, while that in urban areas climbed 12.0%. Overall sales in the Chinese online sector witnessed strong growth in the first six months, surging 48.3% year on year to RMB 1.14 trillion showing the increasing importance of online sales as consumer sentiment moves towards acceptance on this relatively new channel, while overall sales of consumer goods amounted to RMB 11.12 trillion, up 12.4% year on year according to the NBS. The Chinese consumer price index, a main gauge of inflation, grew 2.3% year on year in June, down from 2.5 % in May according to the NBS. In June, inflation in the country's urban regions grew 2.4%, higher than the 2.1% in the rural regions, NBS data showed. The figure remained below the full year target set by the Chinese government at 3.5%. 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1 % 0.0% -0.1 % -0.2% -0.3% -0.4% -0.5% -0.6% J ul. A ug. S ep. Oct. Nov. Dec. J an. New Homes F eb. Mar. A pr. May J un. E xisting Homes Note: Calculation is based on cumulative change across cities, divided by number of cities. Considering the efforts of the Chinese government to cool down China’s housing prices as reported in previous periods, it appears that such measures are having the desired effects. Although house sales prices do not directly affect Joyou’s business, which is driven more by urbanisation and increased consumer spending, these changes may cause volatility in the housing market, in particular in project business new starts. 4 Interim Group Management Report Joyou AG Interim Report H1 2014 2.2 Development of Joyou Group In the first six months of 2014 the following key developments occurred for Joyou: →→ LIXIL and DBJ Complete the Acquisition of 87.5% of GROHE Group S.à r.l →→ Capacity Expansion in Meiyu Ceramics Facility →→ Joyou Promotes its Online Internet Sales Promotion Strategy →→ Joyou supports Youth Rural Literary and Art Performance →→ Jilin CAI Honoured at the “15th Fujian Outstanding Entrepreneur Award” →→ Joyou Rolls Out “Serving China”-Customer Service Strategy →→ Joyou's First Half-Year Marketing Plan LIXIL and DBJ Complete the Acquisition of 87.5% of GROHE Group S.à r.l. On 21 January 2014, LIXIL Corporation ("LIXIL") and the Development Bank of Japan Inc. (“DBJ”), via their joint holding company GraceB S.à r.l. ("GraceB"), completed the acquisition of 87.5% of the share capital of GROHE Group S.à r.l. (“GROHE”), Joyou AG´s controlling entity. Via GraceB and GROHE, LIXIL and DBJ together thereafter held 72.3% of the shares in Joyou AG. 27.7% of the shares remain in free float. With the completion of the acquisition, GROHE and Joyou AG became part of the LIXIL Group on 21 January 2014. For more information on the transaction, refer to section 2.2.1 of the Combined Management Report of Joyou AG and the Group of the 2013 Annual Report. Since the close, there have been several initial meetings in China with various teams from the LIXIL Group exploring potential synergies for LIXIL, Grohe and Joyou and how they may be utilised. As a result of these consultations, the first test orders were delivered to the LIXIL group in June. Capacity Expansion in Meiyu Ceramics Facility In June, Joyou finished the construction of the first flow kiln on in second phase of Meiyu ceramics facility which is expected to start commercial production in August. When it reaches full utilisation, this first of three kilns to be installed in the facility will increase Joyou’s existing in-house production capacity of ceramic products by around 100%. This second phase of the Meiyu ceramics facility has a production floor space of some 120,000 square meters and the three kilns will each have a length of 148 meters. The three-storey facility will have a total of three environmentally friendly, natural gas powered flow kilns station on the ground floor. It is designed to be a high-volume, multiple-product ceramics facility, with maximum flexibility to adapt to market conditions. After the successful testing phase, the first kiln will commence commercial operation. The further two kilns are expected to be installed and go into operation in line with sales ramp-up. Joyou Promotes its Online Internet Sales Promotion Strategy Online sales, like in the rest of the world, are growing in China, and Joyou’s centralised online sales team has been devising new strategies to ensure that Joyou remains at the forefront of this fast growth sales channel in China. Joyou launched the promotion using TMall , which ranked one of the number one Chinese B2C retail websites in terms of transaction volume, serving over 180 million buyers. TMall is owned by Alibaba, a privately owned Hangzhoubased group of Internet-based e-commerce businesses including business-to-business online web portals, online retail and payment services. On the May Day Special Discount Program of Joyou offered a varied array of incentives and marketing activities. In addition to the special-price products during the sales promotion, a lottery was drawn for big prizes such as international tourist excursion. The activities stressed Joyou’s efforts to grow its online sales and hence its role as leader of the Chinese sanitary-ware industry. Joyou supports Youth Rural Literary and Art Performance As part of its efforts in Corporate Social Responsibility, Joyou coorganised and supported the locals arts with a series of events titled “Wonderful Youth: China Dream” with the Youth Literary and Art by Nan’an Municipal Youth League Committee, and Quanzhou Normal College. Event performances were held on the premises of the Joyou China Head Quarters on May 9, 2014. Secretary of Nan’an Municipal Youth League Committee, Mr. Qinglin FU, Youth League Committee Secretary of Quanzhou Normal College, Mr. Zhixiong FU, Director of Joyou HR Administration Centre, Mr. Xuncai WENG, Administration Manager of HR Administration Centre, Mr. Fuyuan WU and Director of Quality Assurance Centre Mr. Jiangshan JI watched the performance jointly with the employees of the company. This event was held to jointly support the local arts culture in the city, and to give a welcome performance to Joyou’s employees. Joyou AG Interim Report H1 2014 Interim Group Management Report 5 contributions. In addition to that, quick consulting services will be available 24 hours a day, 7 days a week and service for speedy servicing of installations within 48 hours will be offered. For VIP customers, Joyou “Happy Family” service teams will provide doorto-door maintenance, cleaning and repair services for products installed within the past two years. Joyou “Happy Family” campaign, part of the wider ‘Serving China’ campaign, seeks to achieve full customer satisfaction as a strategic competence. Joyou's First Half-Year Marketing Plan Jilin CAI Honoured at the “15th Fujian Outstanding Entrepreneur Award” The Entrepreneur Day & Annual Meeting of Chinese Entrepreneurs 2014 was held in Fuzhou. Leaders from relevant ministries, association of enterprises at national, provincial and municipal levels, entrepreneurs as well as experts and scholars from all over China attended the “seeking reform-based breakthrough and innovation– Chinese entrepreneurs” themed conference. State councillor Mr. Wang Yong attended the meeting. In his speech he emphasised that enterprises and entrepreneurs should implement the essence of the 18th CPC Congress and the Third Plenary Session of the 18th Central Committee, keep responsibility and mission in mind, work on reform and innovation, seek growth, improvement and efficiency in stability, and make greater contribution to sustainable economic and social development. Joyou Rolls Out “Serving China”-Customer Service Strategy On 20 February, at the Macalline Super-Mall in Suzhou, Joyou kicked off a series of events and activities, including a press conference, informing the Jiangsu market about the strategic service system, and its differentiating characteristics. Since 2013 Joyou has been focusing on customer service as a key strength, and thereby launched the “Serving China” service strategy, which encompasses a five-year customer service plan. Joyou is in the process of building 40 service teams with its independent distributors with 180 members per team, in Jiangsu, a province of nearly 80 million people, to provide services at stores in 20 districts of 14 counties, and will be rolled out across China. Furthermore, the new service program “Happy Family” developed by Joyou with certain independent distributors covers free consulting services for all sale stages from the pre-sale stage, onsale stage and post-sale stage, delivery and installation services as well as a life-long maintenance service packages. While the fulfilment of this service program rests with Joyou’s independent distributors, Joyou supports its distributors and provides cost In accordance to the group's marketing plan, Joyou established the “Serving China and Love Around” marketing strategy for 2014 and launched four distinctive campaigns in the form of national tours, i.e. March 15th Customer Service Day, May 1st Bathroom Cabinet Day and Shower Head day, and a series of unique Buying-together Festival in the first half of 2014. These campaigns generated a lot of buzz amongst the industry and consumers immediately after their launch. Joyou analysis shows that Joyou has carried out over 2,000 sessions in the first half of 2014 through a wide range of marketing activities throughout China, where over 20 successive large-scale Buying-Together Festivals covered 200 cities of China and attracted up to 100,000 visitors, and ignited a craze for Joyou Buying-Together Festival in China's bathroom market. 2.3. Results of Operations, Financial Position, Net Assets and Segment Analysis 2.3.1 Results of Operations Revenues increased from kEUR 173,747 in the six-month period ended 30 June 2013 by kEUR 6,422, or 3.7%, to kEUR 180,169 in the six-month period ended 30 June 2014. Measured in RMB terms, Group revenues increased by 9.2% during this period. This increase resulted from sales increases in GROHE Products (which includes de-stocking of inventories and increased customer sales), Copper and Semi-Finished Products and Shower Products but was offset by a decrease in revenues from Bathroom Accessories, Ceramics and Bathtubs and Other Faucets and Sanitary Hardware. Cost of sales comprises costs of purchasing copper, zinc, other metals and other parts, labour costs for personnel and contract workers employed in production, depreciation of fixed assets used for production purposes, trading goods and others. Cost of sales increased from kEUR 125,190 in the six-month period ended 30 June 2013 by kEUR 5,626, or 4.5%, to kEUR 130,816 in the sixmonth period ended 30 June 2014. The growth was higher than the sales growth-rate mainly due to lower gross margin of international sales due to their lower sales price. In addition, Cost of Sales was affected by increased costs for copper, various components and also increased salaries. Joyou AG Interim Report H1 2014 6 Interim Group Management Report Gross Margin amounts to 27.4% for the six-month period ended 30 June 2014 and has decreased compared to the 27.9% for the six-month period ended 30 June 2013. Sales increased by 3.7% compared with cost of sales which increased by 4.5% as described above. Selling and distribution expenses increased from kEUR 10,926 in the six-month period ended 30 June 2013 by kEUR 1,565, or 14.3%, to kEUR 12,491 in the six-month period ended 30 June 2014. This increase primarily resulted from an increase in advertising expenses as a result of expanding into regions in order to strengthen competition among the players on the Chinese sanitary-ware market, leading to growth in revenue and also commissions paid to non-exclusive agents for products delivered to projects that were introduced by them. Research and development expenses increased from kEUR 2,950 in the six-month period ended 30 June 2013 by kEUR 519 or 17.6% to kEUR 3,469 in the six-month period ended 30 June 2014. The increase was mainly attributable to an increase in research and development on moulds of new products. Administrative expenses increased from kEUR 6,726 in the sixmonth period ended 30 June 2013 by kEUR 1,233 or 18.3% to kEUR 7,959 in the six- month period ended 30 June 2014. The increase was mainly attributable to an increase in provisions for bad debts and also welfare benefits for employees. Group Earnings Before Interest and Tax (EBIT) decreased from kEUR 28,451 in the six-month period ended 30 June 2013 by kEUR 2,128 or 7.5% to kEUR 26,323 in the six-month period ended 30 June 2014. EBIT Depreciation and amortisation on fixed assets EBITDA Expenses on land-use rights 1 Jan. to 30 Jun. 2014 1 Jan. to 30 Jun. 2013 kEUR kEUR kEUR % 26,323 28,451 -2,128 -7.5 4,183 3,834 349 9.1 30,506 32,285 -1,779 -5.5 Variance Finance costs, which mostly comprises of interest expense, bank charges, and exchange rate losses, increased from kEUR 4,771 in the six-month period ended 30 June 2013 by kEUR 308, or 6.5%, to kEUR 5,079 in the six-month period ended 30 June 2014. The increase was mainly attributable to an increase in exchange rate losses due to increased bank loan. The change was mainly caused by the USD denominated 100 million USD Nomura syndicated loan, which was drawn down on by Joyou in July 2013. This increase in comparison to the first six months of 2013 was partly offset by the effects of the non-recurring interest expenses in the prior year period arising from the revocation of the preferential tax rate for hightech enterprises in relation to Joyou Sanitation. Note: Over the periods being reported there was a decline of 5.3% in the value of the RMB against the Euro with the average rate for the six-month period ended 30 June 2013 of 8.1209 rising to 8.5488 for the six-month period ended 30 June 2014. 2.3.2 Financial Position Joyou Group presents its financial position using, among other financial measures, cash flows from operating, investing and financing activities as well as economic debt. 1 Jan. to 30 Jun. 2014 1 Jan. to 30 Jun. 2013 Variance kEUR kEUR kEUR Cash flow from operating activities 27,136 17,302 9,834 Cash flow used in investing activities -13,379 -16,364 2,985 Cash flow used in financing activities -3,789 -2,472 -1,317 Changes in cash and cash equivalents 9,968 -1,534 11,502 128,008 79,620 48,388 -1,647 1,575 -3,222 136,329 79,661 56,668 Cash and cash equivalents at the start of the reporting period Foreign exchange movements 312 322 -10 -3.1 EBITDA adjusted 30,818 32,607 -1,789 -5.5 EBT 21,909 24,181 -2,272 -9.4 Finance income, which mostly comprises of interest income and exchange rate gains, increased from kEUR 501 in the six-month period ended 30 June 2013 by kEUR 164, or 32.7% to kEUR 665 in the six-month period ended 30 June 2014. Cash and cash equivalents at the end of the reporting period Net cash generated from operating activities increased from kEUR 17,302 in the six-month period ended 30 June 2013 by kEUR 9,834, or 56.8%, to kEUR 27,136 in the six-month period ended 30 June 2014. The increase was mainly due to the net changes in working capital, specifically increases in notes payable and decreases in inventories. Cash flow used in investing activities decreased from kEUR -16,364 in the six-month period ended 30 June 2013 by kEUR 2,985 or 18.2%, to kEUR -13,379 in the six-month period ended 30 June 2014. This decrease was mainly attributable to the acquisition of Yongsheng galvanisation facility in Q2 2013. Joyou AG Interim Report H1 2014 Finally, cash flow used in financing decreased from kEUR -2,472 in the six-month period ended 30 June 2013 by kEUR 1,317, or 53.3%, to kEUR -3,789 in the six-month period ended 30 June 2014. This was caused by Joyou having settled the current portion of its longterm loans falling due for repayment. Joyou is required to deposit cash with certain banks to serve as collateral, mainly for letters of credit and notes payable, and therefore may not be used in the ordinary course of business of these companies; so-called “Restricted cash”. Restricted cash as at 30 June 2014, 31 December 2013 and 30 June 2013 was kEUR 10,812, kEUR 12,673 and kEUR 12,860 respectively. 2.3.3 Net Assets The development of the asset and capital structure between the dates 30 June 2013 and 30 June 2014, and between 31 December 2013 and 30 June 2014 is as follows: Inventories decreased from kEUR 88,187 as at 30 June 2013 by kEUR 11,473, or 13.0%, to kEUR 76,714 as at 30 June 2014 due to decreases in Grohe products and finished goods. There was an increase in inventories from kEUR 73,576 as at 31 December 2013 by kEUR 3,138, or 4.3% to kEUR 76,714 as at 30 June 2014. The increase was due to increases in finished goods. Property plant and equipment increased from kEUR 161,861 as at 30 June 2013 by kEUR 18,070, or 11.2%, to kEUR 179,931 as at 30 June 2014. This increase was mainly attributable increases in the extension of the Yongsheng galvanisation plant, the continuing construction of Meiyu ceramics plant phase 2, and Luncang employee accommodation block. The figure increased from kEUR 172,589 as at 31 December 2013 by kEUR 7,342, or 4.3% to kEUR 179,931 as at 30 June 2014. This increase was mainly attributable to the investments in expansion of Yongsheng galvanisation facility and second phase of the Meiyu ceramics facility. Cash and cash equivalents increased from kEUR 79,661 as at 30 June 2013 by kEUR 56,668, or 71.1%, to kEUR 136,329 as at 30 June 2014. The increase was mainly due to the taking out of a long-term syndicated loan. The figure increased from kEUR 128,008 as at 31 December 2013 by kEUR 8,321, or 6.5% to kEUR 136,329 as at 30 June 2014. The increase was mainly due to increases in cash flows from operating activities. Non-current liabilities increased from kEUR 22,780 as at 30 June 2013 by kEUR 43,754, or 192.1%, to kEUR 66,534 as at 30 June 2014. The major item stated under non-current liabilities refers to a long-term bank loan. The increase was mainly due to increases Interim Group Management Report 7 in long-term loans. The figure decreased from kEUR 87,594 as at 31 December 2013 by kEUR 21,060, or 24.0% to kEUR 66,534 as at 30 June 2014. The decrease was mainly due to the reclassification of the current portion of the long-term loans. As our growth strategy is affecting our working capital needs, we focus on monitoring its development. The development of our net working capital is as follows in the periods under review: 30 Jun. 2014 31 Dec. 2013 30 Jun. 2013 kEUR % kEUR % kEUR % Inventories 76,714 55.8 73,576 53.8 88,187 61.9 Trade receivables 93,390 68.0 85,518 62.5 89,471 62.8 Amounts due from Grohe Group 6,085 4.4 5,571 4.1 5,210 3.7 Trade payables -3,829 -2.8 -5,526 -4.0 -5,761 -4.0 Amounts due to Grohe Group -1,362 -1.0 -959 -0.7 0 0.0 Notes payable -33,628 -24.5 -21,427 -15.7 -34,576 -24.3 Net working capital 137,370 100.0 136,753 100.0 142,531 100.0 Joyou AG Interim Report H1 2014 8 Interim Group Management Report 2.3.4 Performance by Segment The following table presents Joyou’s revenue broken down by product segment categories for each of the six month periods ended 30 June 2013 and 30 June 2014. The table also presents each item as a percentage of total revenues. kEUR Other Faucets and Sanitary Bathroom Bathroom Cabinets Accessories Hardware Copper and Semi- Finished Products Grohe Products Total Bathroom Faucets Kitchen Products Shower Products Ceramics and Bathtubs 62,616 23,090 32,639 20,855 8,025 6,216 12,847 9,084 4,797 180,169 34.8 12.8 18.1 11.6 4.5 3.5 7.1 5.0 2.7 100.0 H1/2014 Revenue % of sales H1/2013 61,811 22,469 32,387 20,900 7,800 6,302 13,225 6,154 2,699 173,747 % of sales Revenue 35.6 12.9 18.6 12.0 4.5 3.6 7.6 3.5 1.6 100.0 Variance 805 621 252 -45 225 -86 -378 2,930 2,098 6,422 1.3 2.8 0.8 -0.2 2.9 -1.4 -2.9 47.6 77.7 3.7 Variance in % CORE BUSINESS 2.3.4.1 Bathroom Faucets Bathroom Faucets includes basin faucets, bathtub faucets, bidet faucets, and sensor faucets which were manufactured by Joyou, except for limited sales of Bathroom Faucets, the production of which was out-sourced to external manufacturers. Revenues from the sale of Bathroom Faucets increased from kEUR 61,811 in H1 2013 by kEUR 805, or 1.3%, to kEUR 62,616 in H1 2014. Measured in RMB terms, revenues from the sale of Bathroom Faucets increased by 6.6% between the two periods under review. There was an increase in volumes and also an increase in ASPs in the category. The percentage of revenues from Bathroom Faucets to total revenues decreased from 35.6% in H1 2013 to 34.8% in H1 2014. 2.3.4.2 Kitchen Products Kitchen Products includes kitchen faucets, basin faucets and kitchen basins. All faucets within this product category were manufactured by Joyou except for some kitchen faucets whose production was outsourced to external manufacturers and all kitchen sinks were sourced from external manufacturers. Revenues from the sale of Kitchen Products increased from kEUR 22,469 in H1 2013 by kEUR 621, or 2.8%, to kEUR 23,090 in H1 2014. Measured in RMB terms, revenues from the sale of Kitchen Products increased by 8.2% between the two periods under review. There was an increase in volumes and also an increase in ASPs in the category. The percentage of revenues from Kitchen Products to total revenues decreased from 12.9% in H1 2013 to 12.8% in H1 2014. 2.3.4.3 Shower Products Shower Products mainly comprises of shower faucets, shower heads, and shower enclosures. All shower faucets were manufactured by Joyou except for limited sales, whose production was outsourced to external manufacturers. Shower heads were mostly sourced from external manufacturers. All shower enclosures were manufactured by Joyou. Revenues from the sale of Shower Products increased from kEUR 32,387 in H1 2013 by kEUR 252, or 0.8%, to kEUR 32,639 in H1 2014. Measured in RMB, revenues from the sale of Shower Products increased by 6.1% between the two periods under review, due to aggressive marketing campaigns. Joyou AG Interim Report H1 2014 Although the volumes of Shower Products increased over the period, this was offset in part by a decrease of the average sales prices (ASPs). The percentage of revenues from Shower Products to total revenues decreased from 18.6% in H1 2013 to 18.1% in H1 2014. 2.3.4.4 Ceramics and Bathtubs Ceramics and Bathtubs mainly comprises of ceramic sanitary-ware such as wash basins and toilets, as well as bath-tubs. This product category was supplied through a mixture of out-sourced and self-produced products, with self-produced products representing an increasing proportion of sales. Revenues from the sale of Ceramics and Bathtubs decreased from kEUR 20,900 in H1 2013 by kEUR 45 or 0.2%, to kEUR 20,855 in H1 2014. Measured in RMB, revenues from the sale of Ceramics and Bathtubs increased by 5.0% between the two periods under review. Interim Group Management Report 9 2.3.4.6 Bathroom Accessories Bathroom Accessories mainly comprises of baskets, soap trays, robe hooks, corner shelves and toilet paper holders. A mix of these products comes from products produced by Joyou and products bought from external manufacturers. Revenues from the sale of Bathroom Accessories decreased from kEUR 6,302 in H1 2013 by kEUR 86 or 1.4%, to kEUR 6,216 in H1 2014. Measured in RMB, revenues from the sale of Bathroom Accessories increased by 3.8% between the two periods under review. The percentage of revenues from Bathroom Accessories to total revenues decreased from 3.6% in H1 2013 to 3.5% in H1 2014. COMMODITY BUSINESS 2.3.4.7 Other Faucets and Sanitary Hardware In RMB terms, there was an increase in ASPs and also an increase in volumes overall. The volume increases came from increases in self-manufactured products which were offset by volume decreases in out-sourced products, whilst there was an increase in ASPs for self-manufactured products and also for out-sourced products. due to marketing campaigns. The percentage of revenues from Ceramics and Bathtubs to total revenues decreased from 12.0% in H1 2013 to 11.6% in H1 2014. 2.3.4.5 Bathroom Cabinets Bathroom Cabinets mainly comprises of free standing and wallhung cabinets. This product category was supplied through a mixture of outsourced and self-produced products, with self-produced products representing the vast majority, and an increasing proportion of sales. Other Faucets and Sanitary Hardware mainly comprises of finished small faucets, drainage covers, angle valves, and crude products. Most of these products were produced by Joyou. Revenues from the sale of Other Faucets and Sanitary Hardware decreased from kEUR 13,225 in H1 2013 by kEUR 378 or 2.9%, to kEUR 12,847 in H1 2014. Measured in RMB, revenues from the sale of Other Faucets and Sanitary Hardware increased by 2.3% between the two periods under review. The increase was mainly attributable to an increase in volume which was partly offset by a decrease in ASPs. The percentage of revenues from Other Faucets and Sanitary Hardware to total revenues decreased from 7.6% in H1 2013 to 7.1% in H1 2014. 2.3.4.8 Copper and Semi-Finished Products Revenues from the sale of Bathroom Cabinets increased from kEUR 7,800 in H1 2013 by kEUR 225, or 2.9%, to kEUR 8,025 in H1 2014. Measured in RMB, revenues from the sale of Bathroom Cabinets increased by 8.3% between the two periods under review. The increase was a result of Joyou’s strategy in relation to marketing and related promotions. The percentage of revenues from Bathroom Cabinets to total revenues stayed the same at 4.5% between the two periods under review. Copper and Semi-Finished Products mainly comprise unfinished products such as copper tubing and accessories. Most of these products were produced by Joyou. Revenues from the sale of Copper and Semi-Finished Products increased from kEUR 6,154 in H1 2013 by kEUR 2,930 or 47.6%, to kEUR 9,084 in H1 2014. Measured in RMB, revenues from the sale of Copper and Semi-Finished Products increased by 55.4% during this period. The increase was the result of increased component sales to GROHE group. Joyou AG Interim Report H1 2014 10 Interim Group Management Report The percentage of revenues from Copper and Semi-Finished Components to total revenues increased from 3.5% in H1 2013 to 5.0% in H1 2014. Grohe Products 1 Jan. to 30 Jun. 2014 Domestic Grohe Products comprises of sales of Grohe products including those gained from Asian Product Lines for which Joyou is the master China distributor. These products mainly comprise of shower faucets, shower heads, basin faucets, and bathtub faucets. All of these products were purchased from Grohe. Revenues from the sale of GROHE Products increased from kEUR 2,699 in H1 2013 by kEUR 2,098 or 77.7%, to kEUR 4,797 in H1 2014. Measured in RMB, revenues from the sale of GROHE Products increased by 87.1% during this period. The increase was partly based on de-stocking of inventories and partly based on increased customer sales. Variance kEUR % kEUR % 167,999 93.2 167,148 96.2 851 0.5 12,170 6.8 6,599 3.8 5,571 84.4 180,169 100.0 173,747 100.0 6,422 3.7 International* Sales revenues 2.3.4.9 Grohe Products 1 Jan. to 30 Jun. 2013 kEUR % * International includes Direct Exports, sales of components to Grohe group companies, and international sales through Grohe and LIXIL group companies including Joyou International Trading (JIT) Domestic sales (including GROHE Products) increased from kEUR 167,148 in H1 2013 by kEUR 851 or 0.5%, to kEUR 167,999 in H1 2014. Measured in RMB, revenues from the sale of Domestic sales increased by 5.8% during this period. The percentage of revenues from GROHE Products to total revenues increased from 1.6% in H1 2013 to 2.7% in H1 2014. International sales (direct exports and sales to Grohe group companies and international sales through Grohe and LIXIL group companies including Joyou International Trading (JIT)) increased from kEUR 6,599 in H1 2013 by kEUR 5,571 or 84.4% to kEUR 12,170 in H1 2014. Measured in RMB, revenues from the sale of International sales increased by 94.1% between the two periods under review. The increase was mainly due to an increase of sales to Grohe group companies and international sales through Grohe. 2.3.4.10 Sales split 2.3.5 Employees The following table presents Joyou’s revenues breakdown by domestic, i.e. sales to PRC customers (including Grohe products), International sales (including sales through Joyou International) for each of the six month periods ended 30 June 2013 and 30 June 2014. The table also presents each item as a percentage of total revenues. The number of employees engaged by Joyou Group as at 30 June 2014, 31 December 2013 and 30 June 2013 are 3,924, 3,379 and 3,272 employees, respectively. Joyou AG Interim Report H1 2014 Interim Group Management Report 11 3 Report on Events after the Reporting Period 4 Report on Forecast, Opportunities and Risks On 31 July 2014, Joyou Hong Kong entered into a USD 300,000,000 facility agreement with three mandated lead arrangers being Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Mizuho Bank Ltd. The single currency facility has two separate usable facilities of USD 150,000,000 each. They have a contract period of five years with regular repayment instalments and a final repayment of 50% on the termination date. The first facility, Facility A, of USD 150,000,000 will be used to settle Joyou Group’s existing loan agreements with Nomura and Standard Chartered. The second facility, Facility B, of USD 150,000,000 is available to Joyou Group within the next two years to provide additional funding for certain investments for PPE, working capital as well as certain costs to be incurred to execute the growth plans of Joyou Group. Joyou Hong Kong will have to pay an interest-rate of LIBOR plus a margin of 2.5 % as well as a commitment fee of 0.5 % with respect to unused and uncancelled amounts of Facility B. Furthermore, Joyou will have to pay arrangement, agency and security agent fees as well as certain transaction expenses. Beside a number of usual securities, Joyou Group will have to observe certain financial covenants. Finally, the facility agreement is subject to certain change of control clauses and will restrict Joyou AG’s ability to pay out dividends during the contract period of the agreement. 4.1 Forecast Report Following the early repayment of facilities provided by Nomura and Standard Chartered, Joyou Group will have to recognize unamortized arrangement fees of EUR 268 (based on the €/RMB exchange rate applicable at 30 June 2014). There have been no other events material to the financial position or financial performance of Joyou AG or the Joyou Group that have occured after the reporting period. Based on the experience in the first six months of 2014, we continue to believe that the statements about economic growth, and the growth derived from the cooperation with GROHE Group to be still valid, and unchanged. With respect to the Chinese economic environment, a report, which was released by the International Finance Research Institute under the Bank of China, a major state-owned commercial bank, predicts that the third-quarter growth of GDP will rise to 7.6% on expectations of improved external demand, domestic policies to stabilise exports and the depreciation of the RMB. According to the Economic Update June 2014 on China by the Beijing office of the Worldbank, industrial production is expected to gain momentum in the rest of 2014, supported by recently taken growth-supporting measures by the Chinese government. Building on the foundation of the strong pillars of growth, namely urbanisation, the growing consumer class and its place as a market leader, Joyou believes that it is well positioned for future profitable growth. For 2014, Joyou expects continued solid growth of its consolidated revenues amounting to be between 5% and 10% in RMB terms. International sales overall increased mainly through sales gained through the collaborative efforts with Grohe Group. We anticipate gross margin decline due to rapidly increased international sales, which have lower gross margins compared to domestic sales, and this decline will also affect our operating profit compared to 2013. In addition, the growth margin of several of our segments were affected in the first six months by increasing labour and raw material cost outpacing the development of average sales prices. Management believes that this development may prevail for certain segments during the remainder of 2014 and the Chinese economy as a whole may see lengthened declines in growth rates. Consequently, statements relating to group revenue growth and gross margin decline remain unchanged. The net income and hence earnings per share (EPS) were affected by unexpected increased foreign exchange losses caused by the RMB’s devaluation in the first six months. As a significant part of our longterm debt financing is denominated in US Dollars, with the Group using no financial instruments to hedge foreign exchange risks, this fluctuation affected the Group’s profitability significantly in the first six months. Joyou believes that a wider analyst consensus has moved towards a prolonged devalued period around or marginally above current levels. As certain other financing and tax items affecting our profitability in 2013 are not to recur in 2014, we continue to expect a substantial growth of our net profit for the period compared to 2013, and hence EPS, although somewhat below our initial plan for 2014. 12 Interim Group Management Report Investments in the main projects, upgrading of the Luncang brassware facility, the second Meiyu ceramics facility, the Luncang plastics facility, expansion of the Yongsheng galvanisation plant, and the Luncang accommodation block for the employees, have continued and all of which are expected to see phases completed in the second half of 2014. Financing for these investments was secured at the end of 2012 and during 2013 thereby leading to a strong cash position at the end of 2013. For 2014, we continue to expect a significant negative cash flow and a reduction of the cash position following the significant increase in cash outflows from the aforementioned investment programme. To finance these intended investments, Joyou will continue to explore further opportunities of financial instruments currently being used by the group. The new partnership with LIXIL has also opened up new financing opportunities and strengthened existing relationships. 4.2 Opportunities and Risks In the Combined Management Report 2013, prepared by Joyou AG for the group’s financial year ended 31 December 2013, Joyou Group reported extensively on the opportunities and risks arising from business activities and other resources. Following the completion of the acquisition of the GROHE Group by LIXIL, LIXIL, the GROHE Group, and Joyou have started to explore potential synergies that may generate new opportunities for Joyou to improve sourcing, technology, and sales. To date this has already resulted in the first trial order shipped to LIXIL. Based on the Management Board’s judgement the overall risk resulting from the sum of all individual risks remains in a good relationship to the opportunities identified. As such, the statements expressed in the risk and opportunities section of the Combined Management Report 2013, in addition to the new opportunities described above, continue to apply. Joyou AG Interim Report H1 2014 Joyou AG Interim Report H1 2014 Interim Group Management Report 13 5 Significant Transactions with Related Parties As disclosed in Note 30 to the consolidated financial statements of Joyou AG for the twelve-months period ended 31 December 2013, Joyou Group companies entered into some transactions with related parties. Related parties to the Company also include GROHE Holding GmbH, Hemer, and Joyou GROHE Holding AG, Düsseldorf, Germany, as well as all companies affiliated with the GROHE Group. In addition, related parties also include all members of the Management Board including their close family members and companies over which members of the Management Board or Supervisory Board of Joyou AG or their family members can exercise considerable influence or hold a substantial amount of the voting rights. The persons and entities to be considered to be related parties have changed significantly to those disclosed in the consolidated financial statements of Joyou AG for the twelve months period ended 31 December 2013. In addition to those disclosed in that report, as of the closing of the acquisition of GROHE Group S. à r. l. by GraceB S. à r. l., on 21 January 2014, the Development Bank of Japan, Inc. (DBJ), the LIXIL Corporation, and their respective subsidiaries and affiliated entities also became related parties of the Joyou Group. For a full listing of LIXIL’s group companies, reference is made to the Annual Report 2013 of LIXIL available on LIXIL’s website at www.lixil-group.co.jp/e in the investor relations section. For a full listing of DBJ’s group companies, reference is made to the Annual Report & CSR Report 2013 of DBJ available on DBJ’s website at www.dbj.jp/en/ in the investor relations section. Of particular importance to the Joyou Group of these new related parties are AS America, Inc., doing business as American Standard Brands ("American Standard") and LIXIL Corporation with its INAX brand and their respective subsidiaries because they operate in the same industry and geographic markets as the Joyou Group. Consequently, they are in competition with the Joyou Group in such markets. In addition, LIXIL-Haier Housing Products (Qingdao) Co., Ltd. is of some importance to the Joyou Group as the LIXIL Group intends to expand sales channels through this joint venture with China’s Haier Group, a leading producer of household appliances, to expand from the kitchen business to other businesses to support growth of its plumbing fixtures business. For transactions with related parties in the first half of 2014 refer to Note 11 of the selected notes to the condensed interim consolidated financial statements as at 30 June 2014. Hamburg, 11 August 2014 Joyou AG Management Board Jianshe CAI Jilin CAI Zufang LI Gerald MULVIN 14 Condensed Half-Year Consolidated Financial Statements Joyou AG Interim Report H1 2014 Condensed Half-Year Consolidated Financial Statements for the half year 2014 page 15–26 Joyou AG Interim Report H1 2014 Condensed Half-Year Consolidated Financial Statements 15 Condensed Half-Year Consolidated Financial Statements Condensed Half-Year Consolidated Statement of Comprehensive Income kEUR Six months ended 30 Jun. 2014 Six months ended 30 Jun. 2013 April to June 2014 (2nd quarter) April to June 2013 (2nd quarter) Revenue 180,169 173,747 98,405 96,303 Cost of sales -130,816 -125,190 -72,125 -69,486 49,353 48,557 26,280 26,817 1,146 785 532 522 -12,491 -10,926 -6,583 -5,688 Gross profit Other operating income Selling and distribution expenses Administrative expenses -7,959 -6,726 -4,009 -3,690 Research and development expenses -3,469 -2,950 -1,853 -1,279 -257 -289 -113 -229 26,323 28,451 14,254 16,453 Other operating expenses Operating profit 665 501 304 112 Finance costs Finance income -5,079 -4,771 -1,331 -3,362 Profit before income tax 21,909 24,181 13,227 13,203 Income tax -6,978 -11,027 -3,746 -8,709 Profit for the period 14,931 13,154 9,481 4,494 Exchange differences on translating foreign operations -4,996 8,182 4,425 -3,031 Other comprehensive income for the period -4,996 8,182 4,425 -3,031 Total comprehensive income for the period 9,935 21,336 13,906 1,463 14,979 13,017 -48 137 9,992 21,190 -57 146 Earnings per share Euro Euro Basic 0.62 0.55 Profit attributable to: Owners of the parent Non controlling interests Total comprehensive income attributable to: Owners of the parent Non controlling interests Joyou AG Interim Report H1 2014 16 Condensed Half-Year Consolidated Financial Statements Condensed Half-Year Consolidated Statement of Financial Position kEUR 30 Jun. 2014 31 Dec. 2013 30 Jun. 2013 ASSETS Current assets Inventories 76,714 73,576 88,187 Trade receivables 93,390 85,518 89,471 Other receivables and prepayments 30,138 31,270 37,815 6,085 5,571 5,210 160 90 93 136,329 128,008 79,661 342,816 324,033 300,437 179,931 172,589 161,861 2,943 3,058 3,255 508 358 388 25,269 25,962 26,737 Amounts due from Grohe group Amounts due from related parties other than Grohe group Cash and cash equivalents Non-current assets Property, plant and equipment Investment property Intangible assets Lease prepayments for land-use rights Deferred tax assets 2,592 2,155 2,497 211,243 204,122 194,738 554,059 528,155 495,175 Short term loans 26,828 20,743 25,333 Short term portion of long term loans 28,629 14,147 14,667 Total assets LIABILITIES Current liabilities Trade payables 3,829 5,526 5,761 Notes payable 33,628 21,427 34,576 Other payables and accruals 17,540 14,147 19,630 822 17 15 1,362 959 0 0 0 5,264 Amounts due to related parties other than Grohe group Amounts due to Grohe group Provisions Income tax payable 4,787 3,432 4,266 117,425 80,398 109,512 65,566 86,658 22,000 968 936 780 66,534 87,594 22,780 183,959 167,992 132,292 Non-current liabilities Long term loans Provisions Total liabilities CAPITAL AND RESERVES Equity attributable to owners of the parent: Share capital 23,967 23,967 23,967 Capital reserves 115,546 115,546 115,710 Statutory reserves Currency translation reserve Retained earnings Equity attributable to shareholders Non-controlling interests 11,703 11,703 10,724 20,462 25,449 39,263 197,821 182,840 172,653 369,499 359,505 362,317 601 658 566 Total equity 370,100 360,163 362,883 Total liabilities and equity 554,059 528,155 495,175 Joyou AG Interim Report H1 2014 Condensed Half-Year Consolidated Financial Statements 17 Condensed Half-Year Consolidated Statement of Changes in Equity kEUR Share capital Capital reserves Statutory Reserves Currency translation reserve Balance as at 1 January 2013 23,967 115,710 10,710 31,090 Retained earnings Equity attributable to owners of the parent Noncontrolling interests Total equity 159,650 341,127 420 341,547 Transfer to reserves 0 0 14 0 -14 0 0 0 Total comprehensive income 0 0 0 8,173 13,017 21,190 146 21,336 Balance as at 30 June 2013 23,967 115,710 10,724 39,263 172,653 362,317 566 362,883 Withdrawals from reserves 0 0 979 0 -979 0 0 0 Transfer to reserves 0 -164 0 0 164 0 0 0 Total comprehensive income 0 0 0 -13,814 11,004 -2,812 92 -2,720 23,967 115,546 11,703 25,449 182,842 359,505 658 360,163 Balance as at 31 December 2013 Total comprehensive income Balance as at 30 June 2014 0 0 0 -4,987 14,979 9,992 -57 9,935 23,967 115,546 11,703 20,462 197,821 369,497 601 370,098 18 Condensed Half-Year Consolidated Financial Statements Joyou AG Interim Report H1 2014 Condensed Half-Year Consolidated Statement of Cash Flows kEUR Six months ended 30 Jun. 2014 Six months ended 30 Jun. 2013 21,909 24,181 Operating activities Profit before tax Adjustments for non-cash items 7,682 7,721 Net changes in working capital 3,616 -11,061 Income tax paid -6,071 -3,539 Cash flow from operating activities 27,136 17,302 Cash flow from investing activities Purchase of intangible assets Purchase of property, plant and equipment Acquisition of subsidiaries, net of cash -45 -29 -14,132 -4,701 0 -12,135 Proceeds from disposal of property, plant and equipment 133 0 Interest received 665 501 -13,379 -16,364 6,329 720 Cash flow used in investing activities Cash flow from financing activities Increase in short-term bank borrowings Repayment of long-term bank borrowings -7,019 0 Interest paid -3,099 -3,192 Cash flow used in financing activities -3,789 -2,472 Net increase in cash and cash equivalents 9,968 -1,534 128,008 79,620 Cash and cash equivalents at beginning of period Foreign exchange movements Cash and cash equivalents at end of period -1,647 1,575 136,329 79,661 Joyou AG Interim Report H1 2014 Selected Notes to the Condensed Half-Year Consolidated Financial Statements 19 Selected Notes to the Condensed HalfYear Consolidated Financial Statements General Notes 1 Nature of Operations Joyou AG and its subsidiaries (“Joyou” or “the Group”) design, produce and sell products for bathrooms in China and internationally under its brand name “Joyou” and are also engaged as a manufacturer of Original Equipment Manufacturing (“OEM”) / Original Design Manufacturing (“ODM”) products for international sanitary-ware companies, wholesalers and trading companies in the United States and Europe, as well as in certain emerging markets, as well as Joyou branded international sales. In addition, Joyou sells some products, components for faucets and semi-finished products to trading companies and sanitary-ware companies in China and the GROHE Group and also sells its products internationally through Joyou International Trading Limited (“Joyou International”), a 100% owned subsidiary of the GROHE Group. It also sells, through a master distributor agreement, certain GROHE branded products within China. Joyou’s operating facilities are based in Nan’an near Quanzhou in the Fujian Province in China. The Group has established an extensive distribution network in China. Its retail distribution network consists of stores being operated by unaffiliated store operators who have been engaged by unaffiliated regional distributors that Joyou has chosen for specific regions of China. Joyou also sells its own brand products to large-scale construction projects in China, such as commercial, civil and residential buildings. With the closing of the acquisition on 21 January 2014, the GROHE Group and hence Joyou AG and its affiliated companies became part of the LIXIL Group, Tokyo, Japan. As a result the ultimate parent company of Joyou AG now is GraceA k.k., a Japanese holding company, of which the LIXIL Group and the Development Bank of Japan Inc. each hold a 50% interest. 2 General Information and Statement of Compliance with IFRS Joyou AG is the Group’s legal parent company. The company is a publicly traded German limited liability stock corporation which is domiciled in Germany. The business address of Joyou AG is Gasstraße 18, Haus 6A, 22761 Hamburg. Joyou AG’s shares are traded on the Prime Standard, a special segment of the regulated market (Regulierter Markt) of the Frankfurt Stock Exchange. The Group has its significant business operations including all the manufacturing operations in the PRC, held via a Hong Kong registered holding company, Hong Kong Zhongyu Sanitary Technology Limited (“Joyou Hong Kong”). The address of the registered office is Suite 3104-6, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong, Special Administrative Region of the PRC. The principal activity of the company is the holding of investments. These condensed half-year consolidated financial statements of the Joyou Group are prepared for the six-month period ended 30 June 2014 with comparative financial statements as at 31 December 2013 and 30 June 2013. The condensed half-year consolidated financial statements have been prepared in accordance with Section 37w of the German Securities Trading Act (WpHG) and the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and its interpretations of the IFRS Interpretations Committee (IFRS-IC) for half-year financial information effective within the European Union. Accordingly, these condensed half-year consolidated financial statements do not include all of the information required in annual consolidated financial statements by IFRS. The condensed half-year consolidated financial statements have been reviewed. In the opinion of Joyou AG’s Management Board, the condensed half-year consolidated financial statements include all adjustments required for a fair presentation of results for half-year periods. Results of the period ended 30 June 2014 are not necessarily indicative of future results. The preparation of half-year consolidated financial statements in conformity with IAS 34 “Interim Financial Reporting” requires the Management Board to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The accounting principles and practices, as applied in the condensed consolidated half-year financial statements, correspond to those pertaining to the most recent annual consolidated financial statements. A detailed description of the accounting policies is published in the notes to the consolidated financial statements of Joyou AG for the year ended 31 December 2013. The condensed half-year consolidated financial statements of Joyou Group are drawn up in Euros. Amounts are stated in thousands of Euros (kEUR) except where otherwise indicated. Because the calculations of the individual items included are based on the full figures, rounding differences may occur where amounts are shown in thousands of Euros. The half-year financial statements of the individual consolidated companies are prepared as of the closing date for the Group half-year financial statements. 20 Selected Notes to the Condensed Half-Year Consolidated Financial Statements The condensed half-year consolidated financial statements of Joyou AG and subsidiaries for the period from 1 January to 30 June 2014 were authorised for issue in accordance with a resolution of the Management Board on 11 August 2014. 3 Significant Accounting Policies and Changes in Estimates 3.1 Overall considerations and change in presentation These condensed half-year consolidated financial statements have been prepared using accounting policies specified by those IFRSs that are in effect at the end of the reporting period (30 June 2014). With reference to the change in presentation as set out below, the consolidated half-year financial statements have been prepared in accordance with the accounting policies adopted in the consolidated financial statements for the year ended 31 December 2013. The accounting policies have been applied consistently throughout the Group for the purpose of the preparation of these consolidated financial statements. As stated in the annual report 2013, to improve the transparency of the half-year report the Group enhanced the disclosure of administrative expenses as follows: Administrative expenses previously included inter alia expenses for research and development. As research and development is a key driver of Joyou’s future development, those expenses are now disclosed as a separate line item within the statement of comprehensive income. Accordingly administrative expenses are reduced by the amount of research and development expenses, which are now disclosed separately. The disclosures of the comparative period are reclassified accordingly. 3.2 Standards, amendments and interpretations to existing standards applied for the first time in the reporting period The Group had to apply the following new standards, amendments to existing standards or new interpretations for the first time: →→ IAS 27 - Separate Financial Statements →→ IAS 28 - Investments in Associates and Joint Ventures →→ IAS 32 (Amendments) - Presentation – Offsetting Financial Assets and Financial Liabilities →→ IAS 36 (Amendments) - Recoverable Amount Disclosures for Non-Financial Assets →→ IAS 39 (Amendments) - Novation of Derivatives and Continuation of Hedge Accounting →→ IFRS 10 - Consolidated Financial Statements →→ IFRS 11 - Joint Arrangements →→ IFRS 12 - Disclosures of Interests in other entities Joyou AG Interim Report H1 2014 →→ IFRIC 21 - Levies →→ Amendments to IFRS 10, IFRS 11 and IFRS 12:Transition Guidance →→ Amendments to IFRS 10, IFRS 12 and IAS 27: Investment Entities The first-time application of these standards and interpretations did not have a significant impact on the net assets, financial position and results of operations of the Group 3.3 Published but not yet applied Standards, Amendments and interpretations At the time of preparation of the Group half-year consolidated financial statements, the following standards and interpretations of the IASB as well as their changes and revisions either had not been endorsed by the European Union or were not compulsorily applicable in the reporting period to which these half-year financial statements relate, and were therefore not applied by the Joyou Group. →→ IAS 19 (Amendments) - Employee Contributions →→ IFRS 9 - Financial Instruments and Subsequent Amendments (Amendments to IFRS 9 and IFRS 7) →→ Amendments to IFRS 9 and IFRS 7 - Mandatory effective date and transitional requirements →→ Amendments to IFRS 9, IFRS 7 and IAS 39 - Hedge accounting →→ IFRS 11 (Amendments) - Accounting for Acquisitions of Interests in Joint Operations →→ IFRS 14 - Regulatory Deferral Accounts →→ IFRS 15 – Revenue from Contracts with Customers →→ Annual Improvements to IFRSs 2010 – 2012 Cycle →→ Annual Improvements to IFRSs 2011 – 2013 Cycle The aforementioned standards and interpretations are to be applied in the Consolidated Financial Statements of the Group from the 2015 financial year or later. Aside from additional or modified disclosure requirements, Management currently expects there to be only a marginal effect on the consolidated financial statements from the first-time application of these standards, interpretations and amendments. Joyou AG Interim Report H1 2014 Selected Notes to the Condensed Half-Year Consolidated Financial Statements 3.4 Currency translation The Management Board has determined the currency of the primary economic environment in which Joyou Group operates, i.e. the functional currency, to be Renminbi (“RMB”). Sales and major costs arising from the provision of goods and services including major operating expenses are primarily influenced by fluctuations in RMB. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised as part of profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated statement of financial position and reported as part of profit or loss on disposal of the subsidiary. The presentation currency of the Group is EUR, being the presentation currency of its German domiciled legal parent and holding company, and therefore the financial information has been translated from RMB to EUR at the following rates: EUR 1.00 = Currency Period end rates Average rate 30 June 2014 RMB 8.4722 8.5488 31 Dec. 2013 RMB 8.3491 8.1769 30 June 2013 RMB 8.0280 8.1209 4 Significant Events and Transactions As stated in note 1 with the closing of the acquisition on 21 January 2014 the GROHE Group and hence Joyou AG and its affiliated companies became part of the LIXIL Group, Tokyo, Japan. As published in the BSRIA’s China Bathroom Study 2013, the LIXIL Group sells taps and mixers, sanitary-ware and bath tubs of its American Standard brand on the domestic Chinese market. While the market position of the Joyou Group and the LIXIL Group for sanitary ware and bath tubs was comparable according to BSRIA, Joyou has a significantly higher market share in the taps and mixers segment. Joyou AG will remain independent within the LIXIL Group. In particular there are no intentions for a delisting of Joyou AG. Joyou AG´s management team will remain in place. Consequently, the Management Board of Joyou does not expect limitations for the execution of its growth strategy on both the domestic Chinese sanitary-ware market and abroad. In May 2014 Joyou Building Materials finalized the incorporation of a 100% subsidiary which is named Xiamen Xtime Trading Co. Ltd. The company’s principal activity is intended to be the trading 21 of Joyou’s premium X-Time brand products. Currently the company is registered without any capital subscribed. It is intended that the issued share capital will amount to RMB 10 Mio. 5 Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Management Board of Joyou AG that makes strategic decisions. In identifying its nine operating segments, the Management Board generally follows the Group’s product categories. These operating segments are monitored and strategic decisions are made on the basis of segmental gross margins. These segments also represent reportable segments under IFRS 8. The activities undertaken by the “Bathroom Faucets” segment include the sale of basin faucets, bathtub faucets, bidet faucets, and sensor faucets which were manufactured by Joyou, except for limited sales of bathroom faucets, the production of which was outsourced to external manufacturers. The “Kitchen Products” segment includes the sale of kitchen faucets and kitchen basins. The “Shower Products” segment represents the sale of shower faucets, shower-heads and shower enclosures. The segment of “Ceramics and Bathtubs” mainly comprises bathtubs and ceramic sanitary ware such as basins and t oilets. The segment “Bathroom Cabinets” includes free standing and wall-hung cabinets. The segment “Bathroom Accessories” mainly comprises baskets, soap trays, robe hooks, corner shelves and toilet paper holders. “Other Faucets and Sanitary Hardware” mainly comprise small faucets, drainage covers, angle valves, and crude products. In the segment of “Copper and Semi-Finished Products” unfinished products such as copper tubing and accessories are combined. Finally, the segment “GROHE Products” comprises sales of GROHE products including those gained from Asian product lines, for which Joyou is the master China distributor. The operating segments are not yet managed separately as Joyou has grown significantly only in the past few years and the technologies and other resources used in the segments do not differ significantly. Hence revenue and costs are allocated to segments only up to gross profit. With the exception of the assets recorded in the GROHE Products and Ceramics and Bathtubs segment, which can be separately identified, segment assets are allocated based on the proportionate share in revenues. Due to the strategic goals of Joyou, the intended further growth of the Group and its ongoing organisational development, a change in the segmental structure may become indispensable in the future. Joyou AG Interim Report H1 2014 22 Selected Notes to the Condensed Half-Year Consolidated Financial Statements During the period under review, there were no inter-segment transfers. The accounting policies the Group uses for segment reporting under IFRS 8 are the same as those used in its consolidated financial statements for the year ended 31 December 2013. The gross profit disclosed in the segment reporting equals the segment operating profit. All of the Group’s non-current assets are located in the PRC. 2014 kEUR Bathroom Faucets Kitchen Products Shower Products Ceramics and Bathtubs Bathroom Bathroom Cabinets Accessories Other Faucets and Sanitary Hardware Copper Semi Finished Products Grohe Products Total Six months ended 30 June 2014 Revenue Cost of sales Gross Profit Segment assets 62,616 23,090 32,639 20,855 8,025 6,216 12,847 9,084 4,797 180,169 -44,286 -17,051 -23,000 -14,775 -5,767 -4,292 -10,468 -7,625 -3,552 -130,816 18,330 6,039 9,639 6,080 2,258 1,924 2,379 1,459 1,245 49,353 168,600 62,172 87,884 132,134 21,608 16,737 34,592 24,460 5,872 554,059 Shower Products Ceramics and Bathtubs Bathroom Bathroom Cabinets Accessories Other Faucets and Sanitary Hardware Copper Semi Finished Products Grohe Products Total 2013 kEUR Bathroom Faucets Kitchen Products Six months ended 30 June 2013 Revenue Cost of sales Gross Profit Segment assets 61,811 22,469 32,387 20,900 7,800 6,302 13,225 6,154 2,699 173,747 -42,922 -16,025 -22,865 -14,675 -5,351 -4,394 -10,786 -4,907 -3,265 -125,190 18,889 6,444 9,522 6,225 2,449 1,908 2,439 1,247 -566 48,557 140,533 51,085 73,635 141,632 17,734 14,328 30,068 13,992 12,167 495,175 The Group’s revenues from external customers are divided into the following geographical areas: kEUR Domestic International* Total Six months ended 30 Jun. 2014 Six months ended 30 Jun. 2013 167,999 167,148 12,170 6,599 180,169 173,747 * International includes Direct Exports, sales of components to Grohe group companies, and international sales through Grohe and LIXIL group companies including Joyou International Trading (JIT) In comparison to the reporting for the first half-year 2013 indirect exports are allocated into domestic sales as Joyou’s customers are located in the PRC and the decision to export the goods sold is not made under Joyou’s authority. The prior figures are adjusted accordingly. Revenues from external customers in the Group’s economic domicile, PRC, have been identified on the basis of the internal reporting system. Domestic means sales to customers located in the PRC, which includes sales of merchandise products acquired from the GROHE Group, and indirect export. Indirect export relates to sales to domestic customers that normally export the goods for resale. International means direct exports and sales through Joyou International and GROHE Group. Direct exports relate to sales to customers located outside the PRC, i.e. the rest of the world. Sales through Joyou International and GROHE Group mean sales made by Joyou International and GROHE Group. Joyou AG Interim Report H1 2014 Selected Notes to the Condensed Half-Year Consolidated Financial Statements The totals presented for the Group’s operating segments reconcile to its key financial figures as presented in the financial statements as follows: kEUR Gross profit Other operating income Selling and distribution expenses Six months ended 30 Jun. 2014 Six months ended 30 Jun. 2013 49,353 48,557 1,146 785 -12,491 -10,926 23 Administrative expenses amounted to kEUR 7,959 in the reporting period (previous period: kEUR 6,726). In comparison to the first six months of 2013 the expenses increased by kEUR 1,233, which was mainly attributable to to an increase in provisions for bad debts and also welfare benefits for employees. Finance costs increased by kEUR 308 and amount to kEUR 5,079 (previous period: kEUR 4,771). The item comprises interest on bank loans, bank charges and provisions as well as exchange losses. The following table shows a breakdown of finance costs for the period under review for each category: Administrative expenses -7,959 -6,726 Research and development expenses -3,469 -2,950 -257 -289 Operating profit 26,323 28,451 Finance income 665 501 Finance costs -5,079 -4,771 Profit before income tax 21,909 24,181 Interest on provision Income tax -6,978 -11,027 Exchange losses 1,788 222 Profit for the period 14,931 13,154 Total 5,079 4,771 Other operating expenses kEUR Interest on bank loans Bank charges Interest expenses capitalised Total finance costs Six months ended 30 Jun. 2014 Six months ended 30 Jun. 2013 2,841 2,793 435 628 15 1,128 1,310 0 6,389 4,771 6 Seasonality Joyou’s business is, to a certain degree, subject to the effects of seasonality. Sales generally decrease in the first quarter of a year but increase in the second quarter, and are then weaker in the third, and fourth quarters. This is mainly due to the Chinese New Year Holiday, the exact date of which is ruled by the lunar calendar, which inevitably falls in first quarter. This week long festival, coupled with the winter weather leads to a slowdown in the Group’s business cycle. 7 Analysis of Selected Items of the Statement of Comprehensive Income Selling and distribution expenses show an increase of kEUR 1,565 in comparison to the comparative period in 2013 and amount to kEUR 12,491 in the reporting period (kEUR 10,926 in the first halfyear 2013). This increase primarily resulted from an increase in advertising expenses as a result of expanding into regions in order to strengthen competition among the players on the Chinese sanitary-ware market, leading to growth in revenue and also commissions paid to non-exclusive agents for products delivered to projects that were introduced by them. Research and development expenses amounted to kEUR 2,950 in the previous period and increased due to an increase in research and development on moulds for new products by kEUR 519 to kEUR 3,469 in the reporting period. In total, finance costs increased slightly by kEUR 308. The increase was mainly attributable to an increase in exchange rate losses, mainly caused by the 100 million USD Nomura syndicated loan, which was drawn down on by Joyou in July 2013. This increase in comparison to the first six months of 2013 was partly offset by the effects of the non-recurring interest expenses in the prior year period arising from the revocation of the preferential tax rate for hightech enterprises in relation to Joyou Sanitation. Joyou AG Interim Report H1 2014 24 Selected Notes to the Condensed Half-Year Consolidated Financial Statements 8 Analysis of Selected Items of the Statement of Financial Position The movements in all items in the statement of financial position between the annual financial statements as at 31 December 2013 and the interim financial statements as at 30 June 2014 are described in the interim group management report. In addition to these explanations we provide the following information regarding the carrying amounts of property, plant and equipment. Buildings Machinery Office equipment Motor vehicles Construction in progress Total Balance as at 01 Jan. 2013 77,154 50,533 2,894 2,752 35,486 168,819 Currency translation adjustment 1,898 1,320 72 65 877 4,232 Acquisition through business combination 2,752 7,058 21 24 999 10,854 4,701 kEUR Cost: Additions Reclassifications Reclassifications to investment property Balance as at 30 June 2013 Currency translation adjustment Acquisition through business combination Additions Disposal 63 1,951 81 46 2,560 1,094 234 0 0 -1,328 0 0 0 0 0 -33 -33 82,961 61,096 3,068 2,887 38,561 188,573 -3,166 -2,407 -119 -110 -1,746 -7,548 -653 -193 0 0 -13 -859 543 3,791 46 26 18,381 22,787 -80 -71 -8 -1 0 0 750 3,935 0 0 -4,685 0 80,364 66,214 2,994 2,803 50,498 202,873 -1,161 -943 -43 -41 -636 -2,824 88 1,570 77 69 12,328 14,132 Disposal -10 -174 -52 -89 -38 -362 Reclassifications 619 671 0 0 -1,290 0 0 0 0 0 -142 -142 79,900 67,338 2,976 2,742 60,721 213,677 6,871 13,529 1,188 798 0 22,386 180 347 32 22 0 580 Charge for the period 1,378 1,890 267 210 0 3,746 Balance as at 30 June 2013 8,429 15,766 1,487 1,030 0 26,712 -348 -649 -60 -41 0 -1,097 1,633 2,698 216 127 0 4,673 0 -3 -1 0 0 -4 9,714 17,812 1,642 1,116 0 30,284 -130 -239 -22 -14 0 -405 1,249 2,344 262 226 0 4,080 Reclassifications Balance as at 31 Dec. 2013 Currency translation adjustment Additions Reclassifications to intangible assets Balance as at 30 June 2014 Accumulated depreciation: Balance as at 01 Jan. 2013 Currency translation adjustment Currency translation adjustment Charge for the period Disposal Balance as at 31 Dec. 2013 Currency translation adjustment Charge for the period Disposal Balance as at 30 June 2014 0 -140 -46 -27 0 -213 10,833 19,777 1,835 1,301 0 33,747 Net carrying amount As at 30 June 2013 74,532 45,330 1,581 1,857 38,561 161,861 As at 31 Dec. 2013 70,650 48,402 1,352 1,687 50,498 172,589 As at 30 June 2014 69,067 47,561 1,141 1,441 60,721 179,931 As at 30 June 2014, property, plant and equipment with a total carrying values of kEUR 33,630 (30 June 2013: kEUR 769) and land-use rights with a total carrying value of kEUR 16,884 (30 June 2013: kEUR 1,442) are subject to a first charge to secure the Group’s bank loans. It was caused by a new mortgage agreement with Standard Chartered Bank and with ICBC Bank. Joyou AG Interim Report H1 2014 Selected Notes to the Condensed Half-Year Consolidated Financial Statements 9 Earnings per Share The basic earnings per share have been calculated using the profit attributable to shareholders of Joyou AG (the legal parent) as the numerator. The weighted average number of outstanding shares used for basic earnings per share for the six-month period ended 30 June 2014 and for the six-month period ended 30 June 2013 amounted to 23,967,492 shares. The weighted average number of outstanding shares used was calculated on the basis of the number of ordinary shares of Joyou AG. There were no contingent rights to the issue of shares as at 30 June 2014 or 30 June 2013. Consequently, there were no potentially dilutive ordinary shares at either reporting date. 25 LIXIL’s website at www.lixil-group.co.jp/e in the investor relations section. For a full listing of DBJ’s group companies, reference is made to the Annual Report & CSR Report 2013 of DBJ available on DBJ’s website at www.dbj.jp/en/ in the investor relations section. The ultimate parent company of Joyou AG now is GraceA k.k., which became the majority shareholder of GROHE Group S.à r.l. Related parties have provided guarantees for certain of Joyou Building Material’s bank loans and for Joyou Sanitation Technology’s bank loans as shown in the following table: Million EUR Joyou Building Materials 30 Jun. 2014 31 Dec. 2013 30 Jun. 2013 10.1 5.9 5.9 Joyou Sanitation Technology 11.2 11.2 9.1 Total 17.1 17.1 19.2 10 Commitments and Contingencies As at 30 June 2014, Joyou Group has contractual commitments from the construction of new plants of kEUR 18,447 (previous period: kEUR 4,071). Except for this, no material changes in commitments have occurred between the consolidated financial statements of the Group for the accounting period ended 31 December 2013 and the accounting period of the half-year consolidated financial statements ending 30 June 2014. As at 30 June 2014 Joyou Group has no contingent liabilities to be disclosed. Transactions and amounts due from/to related parties The composition of the amounts due from related parties is as follows: 30. Jun. 2014 31. Dec. 2013 30. Jun. 2013 Joyou International Trading 3,502 3,057 2,294 GROHE Siam Ltd. 1,449 845 661 GROHE Hemer 385 0 0 GROHE Portugal 364 174 215 GROHE USA 19 kEUR 124 52 GROHE Group S.á r.l. 99 284 0 11 Related Party Disclosures GROHE Shanghai 87 763 1,549 GROHE DAL 49 0 0 An entity or individual is considered a related party of the Group for the purposes of the financial statements if: (i) it possesses the ability, directly or indirectly, to control or exercise significant influence over the operating and financial decisions of the Group or vice versa; or (ii) it is subject to common control or common significant influence. GROHE Canada 26 33 23 GROHE AG GROHE Group 363 449 5,571 5,210 0 LIXIL Philippines 72 0 LIXIL Group 72 0 0 Mr Jianshe CAI 88 90 93 6,245 5,661 5,303 6,085 5,571 5,210 Total Related party information The persons and entities to be considered to be related parties have changed significantly to those disclosed in the consolidated financial statements of Joyou AG for the twelve months period ended 31 December 2013. In addition to those disclosed in that report, as of the closing of the acquisition of GROHE Group S. à r. l. by GraceB S. à r. l., on 21 January 2014, the Development Bank of Japan, Inc. (DBJ), the LIXIL Corporation, and their respective subsidiaries and affiliated entities also became related parties of the Joyou Group. For a full listing of LIXIL’s group companies, reference is made to the Annual Report 2013 of LIXIL available on 0 6,085 Reconciliation Amounts due from GROHE Group Amounts due from related parties other than GROHE Group Total 160 90 93 6,245 5,661 5,303 Joyou AG Interim Report H1 2014 26 Selected Notes to the Condensed Half-Year Consolidated Financial Statements The composition of the amounts due to related parties is as follows: kEUR GROHE Shanghai Sanitary Products Company Ltd. 30 Jun. 2014 31 Dec. 2013 30 Jun. 2013 1,248 959 0 GROHE Pacific Pte Ltd. 114 0 0 Subtotal GROHE Group 1,362 959 0 822 17 15 2,184 976 15 1,362 959 0 Mr Jianshe CAI Total Reconciliation Amounts due to GROHE Group Amounts due to related parties other than GROHE Group Total 822 17 15 2,184 976 15 During the period from 1 January to 30 June 2014, Joyou purchased inventory from GROHE Group companies in a total amount of kEUR 1,800 (previous period: kEUR 1,236) and realised sales on deliveries to GROHE companies in a total amount of kEUR 12,231 (previous period: kEUR 7,903) in the same period. The sales and costs of sales contain the resale of GROHE products to GROHE at an amount of kEUR 1,724 (previous period: kEUR 1,939) to support the reduction in the holding of the products not selling well in China. 12 Events after the Reporting Period On 31 July 2014, Joyou Hong Kong entered into a USD 300,000,000 facility agreement with three mandated lead arrangers being Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Mizuho Bank Ltd. The single currency facility has two separate usable facilities of USD 150,000,000 each. They have a contract period of five years with regular repayment instalments and a final repayment of 50% on the termination date. The first facility, Facility A, of USD 150,000,000 will be used to settle Joyou Group’s existing loan agreements with Nomura and Standard Chartered. The second facility, Facility B, of USD 150,000,000 is available to Joyou Group within the next two years to provide additional funding for certain investments for PPE, working capital as well as certain costs to be incurred to execute the growth plans of Joyou Group. Joyou Hong Kong will have to pay an interest-rate of LIBOR plus a margin of 2.5 % as well as a commitment fee of 0.5 % with respect to unused and uncancelled amounts of Facility B. Furthermore, Joyou will have to pay arrangement, agency and security agent fees as well as certain transaction expenses. Beside a number of usual securities, Joyou Group will have to observe certain financial covenants. Finally, the facility agreement is subject to certain change of control clauses and will restrict Joyou AG’s ability to pay out dividends during the contract period of the agreement. Following the early repayment of facilities provided by Nomura and Standard Chartered, Joyou Group will have to recognize unamortized transfer cost of both facilities of EUR 268 (based on the €/RMB exchange rate applicable at 30 June 2014). There have been no other events material to the financial position or financial performance of Joyou AG or the Joyou Group that have occured after the reporting period. Hamburg, 11 August 2014 Joyou AG Management Board Jianshe CAI Jilin CAI Zufang LI Gerald MULVIN Joyou AG Interim Report H1 2014 Responsibilty Statement 27 Responsibility statement To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, 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 material opportunities and risks associated with the expected development of the Group for the remaining months of the financial year. Hamburg, 11 August 2014 Joyou AG Management Board Jianshe CAI Jilin CAI Zufang LI Gerald MULVIN Joyou AG Interim Report H1 2014 28 Review Report Review Report To Joyou AG, Hamburg We have reviewed the condensed interim consolidated financial statements – comprising the statement of financial position, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and selected explanatory notes – and the interim group management report of Joyou AG, Hamburg, for the period from 1 January 2014 to 30 June 2014 which form part of the half-year financial reporting in accordance with section 37w German Securities Trading Act (Wertpapierhandelsgesetz – WpHG). The preparation of the condensed interim consolidated financial statements in accordance with those IFRS applicable to interim financial reporting as adopted by the EU, and of the interim group management report in accordance with the requirements of the German Securities Trading Act applicable to interim group management reports, is the responsibility of the Company’s management. Our responsibility is to issue a report on the condensed interim consolidated financial statements and on the interim group management report based on our review. Based on our review, no matters have come to our attention that cause us to believe that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, or that the interim group management report has not been prepared, in material respects, in accordance with the regulations of the German Securities Trading Act applicable to interim group management reports. We conducted our review of the condensed interim consolidated financial statements and the interim group management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed interim consolidated financial statements have not been prepared, in material aspects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, and that the interim group management report has not been prepared, in material aspects, in accordance with the regulations of the German Securities Trading Act applicable to interim group management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot issue an auditor’s report. Joachim Riese Wirtschaftsprüfer (German Public Auditor) Düsseldorf, 12 August 2014 Warth & Klein Grant Thornton AG Wirtschaftsprüfungsgesellschaft Ralf Clemens Wirtschaftsprüfer (German Public Auditor) Joyou AG Interim Report H1 2014 Financial Calendar 2014 29 Financial Calendar 2014 November 14 Interim Report January through September of 2014, Analyst Meeting Contact information Imprint Joyou AG Ian M. OADES Vice President of Finance & Head of Investor Relations Owner and publisher Joyou AG Gasstraße 18, Haus 6A 22761 Hamburg Germany Tel.: +86 595 8618 8887 Fax: +86 595 8618 7886 e-mail: [email protected] Internet: www.joyou.de Kirchhoff Consult AG Financial Communications Herrengraben 1 20459 Hamburg Germany Tel: +49 40-609 186 0 Fax: +49 40-609 186 60 e-mail: [email protected] Internet: www.kirchhoff.de Download This half-year report is available in English and German on our websites www.joyou.de or www.joyou.com. Design concept Kirchhoff Consult AG, Hamburg www.kirchhoff.de Gasstraße 18, Haus 6A 22761 Hamburg Germany Tel.: +86 595 8618 8887 Fax: +86 595 8618 7886 e-mail: [email protected] Internet: www.joyou.com