Medlive Technology Co., Ltd. — Interim / Quarterly Report 2003

Oct 29, 2003

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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GUANGDONG KELON ELECTRICAL HOLDINGS COMPANY LIMITED 廣東科龍電器股份有限公司

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

ANNOUNCEMENT ON RESULTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2003

This announcement is made in accordance with paragraph 2(2) of the Listing Agreement.

1. IMPORTANT NOTE

• 1.1 The board of directors (the “Board”) of Guangdong Kelon Electrical Holdings Company Limited (the “Company” together with its Subsidiaries, the “Group”) warrants that the information in this report is accurate and not misleading and does not contain any material omission. The Board is jointly and severally responsible for the truthfulness and completeness of the contents of this report.

• 1.2 These quarterly results of the Company for the three months ended 30 September 2003 (the “Reporting Period”) are prepared in accordance with the relevant PRC accounting principles and have not been audited.

• 1.3 The full version of the Company’s balance sheet, income statement and cash flow statement is published on the website designated by the Shenzhen Stock Exchange for release of information http://www.cninfo.com.cn/default.htm.

2. COMPANY INFORMATION

2.1 Company Profile

Stock Abbreviation	Kelon
Stock Code	000921
	Secretary of the Board	Representative of securities related affairs
Name	Liu Cong Meng (acting at the same	Zhong Liang
	time as Executive Vice President)
	Gary Li Chi Sing
Correspondence Address	No. 8, Ronggang Road, Ronggui Street Office,	No. 8, Ronggang Road, Ronggui Street Office,
	Shunde District, Foshan City,	Shunde District, Foshan City,
	Guangdong Province, the PRC	Guangdong Province, the PRC
Telephone	0765–8362570	0765–8362570
Fax	0765–8361055	0765–8361055
Email	sec@kelon.com	zhong.liang@kelon.com

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2.2 Financial Information

2.2.1 Major Accounting Data and Financial Indices (Unit: RMB)

				% of Increase/
		End of	End of	Decrease over End of
	the Reporting Period		Last Financial Year	Last Financial Year (%)
Total assets	9,202,137,624		7,656,539,329	20.19%
Shareholders’ equity
(excluding minority interests)	2,779,130,683		2,575,000,833	7.93%
Net assets per share		2.80	2.60	7.93%
Adjusted net assets per share		2.62	2.39	9.59%
				% of Increase/
			Beginning of Financial	Decrease over
			Year to End of the	Corresponding
	The Reporting Period		Reporting Period	Period of Last Year (%)
Net cash flows from
operating activities		178,953,211	513,086,991	–
Earnings per share		0.03	0.18	54%
Return on net assets		1.17%	6.37%	42.69%
Return on net assets
after extraordinary items		1.15%	6.42%	28.85%
		Unit:	RMB
Extraordinary profit and loss items		Amount
Non-operating income		5,406,009
Non-operating expenses		(2,166,452)
Amortisation of change in equity	investment	(3,333,312)
Interest received from related parties		496,485
Total		402,730

2.2.2 Income Statement

The Group

Unit: RMB

				2003		2002
			July to	January to	July to		January to
	Items		September	September	September		September
1.	Revenue from principal operations		1,717,504,879	5,032,571,326	1,171,754,470		3,722,260,877
	Less:	Costs of sales	1,314,629,762	3,822,397,129	842,033,749		2,675,203,266
		Sales tax	73,283	319,886	89,795		263,891

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2.	Profit from principal operations	402,801,834	1,209,854,311	329,630,926	1,046,793,720
	Add: Other operating profit	8,584,621	24,293,145	192,817	10,567,479
	Less: Administrative expenses	110,043,184	251,622,963	73,485,470	196,569,216
	Distribution expenses	238,256,525	705,021,848	213,932,435	660,876,224
	Financial expenses	28,766,812	82,410,634	19,314,621	60,862,205
3.	Operating profit	34,319,934	195,092,011	23,091,217	139,053,554
	Add: Investment income/(loss)	(4,026,860)	(16,810,062)	(2,903,849)	(7,188,771)
	Subsidy income	513	18,703	–	–
	Non-operating income	5,406,009	10,030,105	1,460,088	6,381,855
	Less: Non-operating expenses	2,166,452	2,966,420	1,238,961	2,213,942
	Add: Prior year adjustments	–	–	–	–
4.	Total profit	33,533,144	185,364,337	20,408,495	136,032,696
	Less: Minority Interest	271,348	1,562,348	(287,992)	(144,349)
	Income tax	873,241	6,807,329	(335,116)	2,464,140
5.	Net profit	32,388,555	176,994,660	21,031,603	133,712,905
	Add: (Accumulated losses),
	beginning of year		(1,211,930,161)		(1,313,207,151)
	Add: Transfer from statutory
	common reserve fund		229,161,802		–
	Transfer from statutory
	common welfare fund		965,024,306		–
6.	Profit/(loss) available for
	appropriation		159,250,607		(1,179,494,246)
	Less: Appropriations to statutory
	common reserve fund		–		–
	Appropriations to statutory
	common welfare fund		–		–
7.	Profit/(loss) available for
	appropriation
	to shareholders		159,250,607		(1,179,494,246)
	Less: Appropriations to
	discretionary reserve		–		–
	Dividends on ordinary shares		–		–
8.	Retained earnings/(accumulated
	losses), end of period		159,250,607		(1,179,494,246)

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The Company

Unit: RMB

				2003			2002
			July to		January to	July to	January to
	Items		September		September	September	September
1.	Revenue from principal operations		1,249,563,744	3,578,073,731		977,457,196	3,055,587,283
	Less:	Costs of sales	955,376,028	2,879,548,422		688,180,499	2,166,661,079
		Sales tax	62,478		198,629	47,176	167,448
2.	Profit	from principal operations	294,125,238		698,326,680	289,229,521	888,758,756
	Add:	Other operating profit/(loss)	841,254		2,050,602	(4,302,661)	(4,992,914)
	Less:	Administrative expenses	58,359,099		67,461,910	24,146,383	43,000,511
		Distribution expenses	195,767,641		604,427,521	197,689,521	612,471,591
		Financial expenses	8,103,592		32,385,158	12,496,881	46,464,040
3.	Operating profit/(loss)		32,736,160		(3,897,307)	50,594,075	181,829,700
	Add:	Investment income/(loss)	4,005,998		172,482,325	(36,740,388)	(57,463,468)
		Subsidy income	–		18,190	2,253,558	2,253,558
		Non-operating income/(loss)	4,629,975		7,136,781	(2,101,611)	354,726
	Less:	Non-operating expenses	1,664,172		2,241,993	340,350	627,930
	Add:	Prior year adjustments	–		–	–	–
4.	Total	profit	39,707,961		173,497,996	13,665,284	126,346,586
	Less:	Minority Interest	–		–	–	–
		Income tax	–		–	–	–
5.	Net profit		39,707,961		173,497,996	13,665,284	126,346,586
	Add:	(Accumulated losses)/retained
		earnings, beginning of year		(1,194,186,108)			(1,285,391,909)
	Add:	Transfer from statutory
		common reserve fund			229,161,802		–
		Transfer from statutory
		common welfare fund			965,024,306		–
6.	Profit/(loss) available for
	appropriation				173,497,996		(1,159,045,323)
	Less:	Appropriations to statutory
		common reserve fund			–		–
		Appropriations to statutory
		common welfare fund			–		–

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1. Profit/(loss) available for appropriation to shareholders 173,497,996 (1,159,045,323) Less: Appropriations to – – discretionary reserve – – Dividends on ordinary shares 8. Retained earnings/(accumulated losses), end of period 173,497,996 (1,159,045,323)

3. As at the end of the Reporting Period, there were 71,503 shareholders in total.

3. MANAGEMENT DISCUSSION AND ANALYSIS

3.1 Brief analysis of the Company’s operations during the Reporting Period

During the Reporting Period, facing intense competition in the global market of domestic appliances, the Company insisted to adopt the “Technologically Led and Profitability Driven” management concept. At the refrigerators front, the Company continued to launch its Ronshen and Kelon branded triple and quadruple cycling refrigerators which are industry-leading in terms of technologies. At the air-conditioners front, the “Shuang Xiao Wang” series of high efficiency air-conditioners which adopted the unique and patented double efficiency technologies were launched during the Reporting Period, which enabled the Company to maintain its leading position in air-conditioning technologies and laid a solid foundation for the Company to achieve notable results during the Reporting Period. And the continuous launch of the “Kombine” products series has enhanced the Company’s market coverage. At the same time, during the Reporting Period the Company continued to strengthen its cost control measures and actively develop its sales channels. And the on-going implementation of the “Project of Perfection” has raised the competitiveness of the Company’s products.

As a result of the aforegoing, despite the outbreak of SARS and a relatively cool summer, the Company still managed to attain remarkable results for the Reporting Period, recording a net profit of RMB32,390,000. Compared with the corresponding period in 2002, the total sales of refrigerators and air-conditioners increased by 46.58% of which export sales maintained a strong growth. For the Reporting Period, the Company’s total export sales increased by 113.45% as compared with the previous year. The Company will continue to pool in resources in improving product quality and production techniques and to elevate the competitiveness of the Company’s products through cost control measures and the “Project for Perfection” with the vision to achieving international standards and attaining a leading position globally.

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• 3.1.1 Principal business or products representing 10% or more of the income from principal operations or total profit from principal operations

Applicable Not Applicable

Unit: RMB’000

		Income from	Cost of
Product	principal operations		principal operations	Gross profit (%)
Refrigerators		1,045,050	780,530	25.31%
Air-Conditioners		591,890	470,910	20.44%
Others		80,560	63,180	21.57%
Including: Related party transactions		–	–	–
Total		1,717,500	1,314,620	23.46%

• 3.1.2 Seasonal or cyclical characteristics of the Company’s operations

Applicable Not Applicable

The sales of the major products of the Company such as refrigerators and air-conditioners are subject to seasonal fluctuation. During the Reporting Period, sale of air-conditioners gradually entered into the low season, however sales of refrigerators were relatively stable.

• 3.1.3 Profit structure for the Reporting Period (Material changes in the proportions of total profit attributable to total profit attributable

to profit from principal operations, profit from other operations, costs for the period, investment income, subsidy income and net non-operating income as compared with the previous reporting period and the explanation thereof)

Applicable Not Applicable

Unit: RMB’000

	July to September 2003	July to September 2003	January	to June 2003
					Change in
		Proportion		Proportion	proportion
		of total		of total	of total
Item	Amount	profit (%)	Amount	profit (%)	profit (%)
Total profit	33,530	100%	151,830	100%	0%
Profit from principal operations	402,800	1,201.21%	807,050	531.55%	126.00%
Profit from other operations	8,580	25.60%	15,710	10.35%	147.31%
Costs for the period	377,070	1,124.64%	661,990	436%	157.93%
Investment income/(loss)	(4,030)	-12.01%	(12,780)	-8.42%	42.79%
Subsidy income	0.5	0.00%	18.2	0.01%	-87.56%
Net Non-operating income	3,240	9.66%	3,820	2.52%	284.07%

Notes:

• (1) Since the costs incurred during the Reporting Period were higher than the previous reporting period, the Reporting Period saw a relatively substantial decrease in total profit compared with the previous reporting period, which resulted in relatively large changes in the proportions of total profit attributable to various items.

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• (2) The profit margin of the profit from principal operations during the Reporting Period was maintained more or less the same as that for the previous reporting period.

• (3) Compared with the previous reporting period, the costs for the Report Period had increased. This was primarily attributable to the write back of certain provisions during the previous reporting period and an one-off write off of the preliminary expenses relating to Jilin Kelon, a subsidiary of the Company.

• 3.1.4 Material changes in the profitability (gross profit margin) of principal operations as compared with the previous reporting period and the explanation thereof

Applicable Not Applicable

3.2 Analysis and illustration of significant events and their implications and resolutions

Applicable Not Applicable

• 3.3 Changes in accounting policies, estimates and scope of consolidation and major accounting errors and the explanation thereof

Applicable Not Applicable

• 3.4 Explanation of the Board and the Supervisory Committee in relation to any “non-standard opinion” arising from audit

Applicable Not Applicable

• 3.5 Loss forecast or alert of significant change in the accumulated net profit for the period from the beginning of the 2003 financial year to the end of the next reporting period as compared with the corresponding period in the previous year and the explanation thereof

Applicable Not Applicable

3.6 On-going adjustments on the Company’s published annual business plans or budget

Applicable Not Applicable

By the order of the Board of

Guangdong Kelon Electrical Holdings Company Limited Gu Chu Jun Chairman

Shunde, the PRC, 28 October 2003

“Please also refer to the published version of this announcement in China Daily”

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