China Shoto plc

("China Shoto" or "the Company" or "the Group")

Unaudited Interim Results

China Shoto plc (AIM:CHNS), a leading Chinese producer of industrial batteries and power supply systems, announces its unaudited Interim Results for the six months ended 30 June 2006.

Highlights

Commenting on the unaudited Interim Results, Cao Guifa, Executive Chairman, said: "Building on a strong performance in 2005 the Group has continued its progress, which is an endorsement of our strategy of focusing our sales efforts on growth opportunities in our core markets.  We will continue to focus on continuous and sustainable growth, both organically and, where appropriate, through selective acquisitions.  Our core objectives remain unchanged, to grow shareholder value, and the whole of our team is committed to achieving this.  I am confident that we will continue to produce good returns and I look forward to reporting continued progress for the whole year."

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Chairman¡¯s Statement

I am delighted to present China Shoto¡¯s interim results for the six months ended 30 June 2006.  Building on a strong performance in 2005 the Group has continued its progress, which is an endorsement of our strategy of focusing our sales efforts on growth opportunities in our core markets.

Operational Review

AGM, Gel and Flooded Batteries:  During the first half of the year our strongest trading has been within our core business division of AGM, Gel and Flooded batteries, which are mainly applied as backup batteries in the telecoms industry.  This division realised turnover of £14.5 million for the first six months of 2006, representing 51% of the Group¡¯s total, and produced a gross profit of £5.3 million, representing 69% of the Group¡¯s total.

The sales to telecom service providers are continuing to grow.  China Mobile, China Netcom, China Telecom and China Unicom continue to be the major clients of the Group, the orders from which increased by 30% compared to the same period of last year.  The Group is the major supplier of batteries to these clients, ranking first or second in the centralised tender ordering of China Mobile, China Netcom and China Unicom in the first half of this year.

Power Type VRLA Batteries: In January 2006 Jiangsu Best Power Supply Co., Ltd. ("Best Co.¡±) was set up, specialising in the production of power type VRLA batteries for use powering electric bicycles.  £3.2 million of the IPO proceeds was used for the construction of the new plant covering 28,000 square meters and also the purchase of manufacturing equipment.  The plant was commissioned in May and full daily production capacity of 12,000 units was achieved by 31 July.  The plant continues to run at full capacity with round the clock working.

The sales of power type batteries in this half year (without any significant contribution from the new factory, which only came onstream in June) reached £6.6 million.  The Group¡¯s primary market for these batteries are electric bicycle manufacturers in Tianjin, and in Jiangsu and Zhejiang provinces, and the Group has also become the major supplier to one of the biggest manufacturers in Beijing.  In our primary market, we target those large manufacturers with an annual production of over 100,000 bicycles.  In addition we are gradually increasing our share in the retail market for electric bicycles and accessories, which we regard as the secondary market for these products and we intend to make the secondary market the main market for the Company¡¯s power type batteries in the future.

The electric bicycle market continues to grow strongly.  According to the latest statistics from the Jiangsu Bicycle Association, the production volume of the major 50 electric bicycle manufacturers in the first half of 2006 increased by more than 75% compared to the same period of last year.  To secure our expansion in this market, Best Co. has set up 15 new offices in the last six months, expanding its sales and service network to cover 27 provinces.  At the same time, the company has ensured that each of its main clients and potential major clients have been visited personally by sales staff.

Turbine Business:  Since 6 January 2006, the Group has increased its interest in FTD from 30% to 51%.  During the first half FTD¡¯s turnover was £6.6 million, and gross profit was £0.9 million.

During the period FTD successfully completed contracts to supply 150 MW turbines to Minjiang Power Plant and Yibin Power Plant.  In March FTD signed a contract to supply a 150MW turbine to Shandong Haihua Group, with a total contract value of £4.1 million.  In April, FTD signed a contract for the refurbishment of two sets of 125MW turbines with Shandong Linyi Power Company, with a total contract value of £3.5 million.  FTD will continue its technology research, and develop further series models of the 150MW turbine, which will be the main thrust of the company¡¯s business in the foreseeable future.

Financial Review

During the period under review, Group turnover increased by 141% as a result of strong growth from existing customers, especially our key customers in the telecoms sector.  Resulting from growing demand from the telecoms sector, the turnover of AGM, GEL and flooded batteries increased by 27% compared to the same period of last year.  Booming sales of power type batteries and our recently acquired turbine business FTD, together with a good performance from our existing business, caused Group revenues to increase substantially.

The Group continues its efforts to accelerate the collection of accounts receivables.  With good quality clients located in Guangdong, Jiangsu, Hebei, Zhejiang and Shanghai, representing an increased proportion of our customers, we have succeeded in reducing average debtor days from 122 days (the average in 2005) to 102 days in the first half year.

Further Share Issue

Following our IPO, China Shoto successfully completed a further issue of 3.1 million ordinary shares at a placing price of 160 pence per share in the first half, raising £5 million (before expenses).  The new shares were admitted to trading on AiM on 12 June 2006.  Proceeds of this new issue have been or will be used in clearly identified projects, mainly for the expansion of manufacturing capacity.

Dividend policy

As stated in the annual report for 2005, it is the Board's intention to pay interim and final dividends for the year ending 31 December 2006, with the aggregate dividend payable currently intended to be 25% to 30% of the Company¡¯s net income.  Given the encouraging first half results, the Board has decided to pay an interim dividend of 1.5 pence per share.  The record date will be 6 October 2006, and the dividend will be paid on 3 November 2006.  The Board intends that a final dividend for the year will be declared at the announcement of the full year results.

Outlook

We will continue to focus on continuous and sustainable growth, both organically and, where appropriate, through selective acquisitions.  In the first half year, the Company acquired Yangzhou Zhenghe Power Supply Company, to increase both production capacity and our product lines, with a smaller capital investment and within a shorter timescale than internal development could provide.  The GFM horizontally-installed battery of Zhenghe is expected to have substantial applications in the telecom and power industries.  The Group is currently negotiating to acquire the power type battery production line of Jiangsu Shuangdeng Electrical Appliance and Cable Company.  Following this acquisition the total Group production capacity of power type batteries will be increased to 18,000 units per day.

Our core objectives remain unchanged, to grow shareholder value, and the whole of our team is committed to achieving this.  I am confident that we will continue to produce good returns and I look forward to reporting continued progress for the whole year.

Cao Guifa

Chairman

26 September 2006

Consolidated income statement

For the six months ended 30 June 2006

All amounts relate to continuing operations.

Consolidated balance sheet

As at 30 June 2006

Consolidated cash flow statements

For the six months ended 30 June 2006

Notes to the consolidated financial statements

For the six months ended 30 June 2006

1.  General information

China Shoto plc is a company incorporated in the United Kingdom on 10 May 2005 under the Companies Act 1985.  The consolidated financial statements of the Company for the six months ended 30 June 2006 comprise China Shoto plc (the'Company') and its subsidiary undertakings (the 'Group').  The consolidated interim financial statements were authorised for issue on 26 September 2006.

2.  Accounting policies

The consolidated financial statements for the six months ended 30 June 2006 have been prepared in accordance with those International Financial Reporting Standards and Interpretations in force ('IFRS') and those parts of the Companies Act 1985 applicable to companies preparing financial statements under IFRS.

Basis of consolidation

The consolidated financial statements include the financial statements of China Shoto plc and all of its subsidiary undertakings as at 30 June 2006 using the acquisition method of accounting.  The results of subsidiary undertakings are included from the date of acquisition.

The acquisition of Leadstar Enterprises Limited by China Shoto plc on 30 November 2005 has been accounted for as a reverse acquisition, in accordance with IFRS 3 ¡®Business Combinations¡¯, on the basis that the management, who are the former majority shareholders of Leadstar Enterprises Limited, retained effective control of the Group.  The fair value of the assets of China Shoto plc at the date of the business combination were equivalent to the fair value of the company and the fair value of the notional number of equity instruments which would have been issued by Leadstar Enterprises Limited to acquire China Shoto plc, and therefore no goodwill arises in respect of this business combination.  The comparative financial statements and the results up to the date of the business combination represent those of the Leadstar Enterprises Limited group.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group¡¯s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associated undertaking at the date of acquisition.  Goodwill is recognised as an asset and reviewed for impairment at least annually.  Any impairment is recognised immediately in the income statement, through administrative expenses and is not subsequently reversed.

Any excess of the Group¡¯s interest, in the net fair value of the identifiable assets and liabilities acquired, over cost will be recognised as income after considering the future losses and expenses identified in the Group¡¯s acquisition plan and the aggregate fair value of acquired identifiable non-monetary assets.

Subsidiary undertakings

An entity is treated as a subsidiary undertaking when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.  The financial statements of subsidiary undertakings are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Foreign currencies

The functional currency of the subsidiary undertakings is Renminbi (¡®RMB¡¯), and the unaudited financial statements of the subsidiary undertakings have been drawn up in RMB.  As sales and purchases are denominated primarily in RMB and receipts from operations are usually retained in RMB, the directors are of the opinion that RMB reflects the economic substance of the underlying events and circumstances relevant to the Group. Monetary assets and liabilities maintained in currencies other than RMB are translated into RMB at the rates of exchange ruling at the balance sheet date.

Transactions in currencies other than RMB are translated at rates ruling on the transaction dates. All resulting exchange differences are dealt with in the income statements.

The presentation currency of the Group is pounds sterling and therefore the financial statements have been translated from RMB to pounds sterling at the following exchange rates:

Assets and liabilities are translated into sterling at the closing rate, and all income and expenses are translated at the average rate during the financial period, being an approximation for the actual rates at the date of the transactions.  All resulting exchange differences are taken to the Exchange reserve within equity.

The functional currency and the presentation currency of the Company is pounds sterling.  Monetary assets and liabilities maintained in currencies other than pounds sterling are translated into pounds sterling at the approximate rates of exchange ruling at the balance sheet date. Transactions in currencies other than pounds sterling are translated at rates ruling on the transaction dates.  All resulting exchange differences are dealt with in the income statement.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.  The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Depreciation is calculated on the straight-line method so as to write off the cost of property, plant and equipment reduced by the estimated residual value of the assets over their estimated useful lives.  The estimated residual value and annual depreciation rates used for this purpose are as follows: