Medlive Technology Co., Ltd. — Interim / Quarterly Report 2004

Apr 20, 2004

The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) 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.

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) (Stock Code: 921)

ANNOUNCEMENT ON RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2004

This announcement is made pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

1. IMPORTANT NOTICE

• 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 directors are jointly and severally responsible for the truthfulness, accuracy and completeness of the contents of this report.

• 1.2 These quarterly results of the Company for the three months ended 31 March 2004 (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 .

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2. COMPANY INFORMATION

2.1 Company Profile

Stock Abbreviation Kelon Stock Code 000921

Representative of Secretary for the Board securities related affairs Name Liu Cong Meng (acting at the same time as Executive Vice President) Gary Li Chi Sing Zhong Liang Correspondence No. 8, Ronggang Road, No. 8, Ronggang Road, Address Ronggui Shunde, Ronggui Shunde, Foshan City, Foshan City, Guangdong Province Guangdong Province Telephone 0757-28362570 0757-28362570 Fax 0757-28361055 0757-28361055 Email sec@kelon.com zhong.liang@kelon.com

2.2 Financial Information

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

			% of Increase/
	End of	End of	Decrease over
	the	Last	End of Last
	Reporting	Financial	Financial
	Period	Year	Year (%)
Total assets	9,602,972,471	9,432,791,214	1.8
Shareholders’ equity
(excluding minority interests)	2,855,958,377	2,808,730,941	1.68
Net assets per share	2.88	2.83	1.68
Adjusted net assets per share	2.68	2.64	1.27

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			Beginning of	% of
			Financial	Increase/
			Year to End	Decrease over
		The	of the	Corresponding
	Reporting		Reporting	Period of
	Period		Period	Last Year (%)
Net cash flows from operating
activities	276,510,456		276,510,456	760.61
Earnings per share		0.05	0.05	40.81
Return on net assets		1.66	1.66	28.63
Return on net assets after
extraordinary items		1.70	1.70	21.13
				Unit: RMB
Extraordinary profit and loss items				Amount
Non-operating income				1,214,232
Non-operating expenses				-2,425,712
Total				-1,211,480

2.2.2 Statement of Income and Profit Appropriation (attached below)

• 2.3. As at the end of the Reporting Period, there were 67,744 shareholders in total.

3. MANAGEMENT DISCUSSION AND ANALYSIS

3.1 Brief analysis on the overall operation of the Company during the reporting period

During the Reporting Period, in the face of intense competition in the global domestic appliance market, the Group and other domestic appliance manufacturers were all adversely affected by the rising costs of raw materials such as steel and the price cut of major products such as refrigerators and air-conditioners. By adhering to the operating principle of “Technologically Led and Profitability Driven”, the Group continued to record strong growth in its operating results during the Reporting Period, with an overall net profit reaching RMB47,250,000. The Group’s sales revenue increased 57.5% over the corresponding period in 2003. Export sales, in particular, recorded a strong growth of 170.88% over the corresponding period last year. The Group will implement stringent cost control measures and “Project of Perfection” to lower production costs and enhance product quality. Meanwhile, it will endeavour to cut operating expenses further through various means to improve operating efficiency. This will help to assure the overall competitive advantages of the Group’s products, further establishing a solid foundation for the Group to become one of the leading international domestic appliance manufacturers.

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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’0000

	Income from	Cost of
	principal	principal
Product	operations	operations	Gross profit (%)
Refrigerators	62,155	48,008	22.76
Air-Conditioners	85,740	68,663	19.92
Others	13,166	10,846	17.63
Including: Related party
transactions	0	0	0
Total	161,061	127,517	20.83

• 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 fluctuations. The Reporting Period was amid the low season for the sales of such products.

• 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’0000

	January to	January to		January to	January to
	December	2003		March 2004		Change in
		Proportion			Proportion	proportion
		of total			of total	of total
Item	Amount	profit (%)		Amount	profit (%)	profit (%)
Total profit	22,000		100	4,561	100	–
Profit from principal operations	168,454		765.7	33,541	735.41	-3.95
Profit from other operations	4,840		22	1,177	25.81	17.33
Costs for the period	146,769	667.13		29,707	651.33	-2.37
Investment income	-5,018		-22.81	-330	-7.23	-68.26
Subsidy income	2		–	0	0	–
Net non-operating income	491		2.23	-121	-2.66	-219.05

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Explanation:

• (1) Percentage to total profit for investment loss is higher in the 2003 reporting period than the current reporting period due to a significant loss incurred by Huayi Compressor, an associated company of the Company, in the 2003 reporting period.

• (2) Profit margin of principle operations is basically similar to that of the previous reporting period.

• (3) As non-operating income decreased when compare to that of the previous reporting period, non-operating income attributable to total profit has also decreased accordingly. However, it only has minimal effect to net profit due to its low net amount.

• 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

     - a. In February 2004, the Company acquired Xi’an Hi-Tech Far East Refrigerating Co. Ltd (西安高科遠東製冷有限公司 ) and changed its registered name as Xi’an Kelon Co. Ltd. (“Xi’an Kelon”) (西安科龍有限公司 ) (「西安科龍」). The Company now holds a 60% interest in the capital of Xi’an Kelon through a capital contribution of RMB121,000,000, while Xi’an Hi-Tech Far East Refrigerating Co. Ltd holds another 40% based on the valuation of net assets. Xi’an Kelon is principally engaged in the production of compressors for refrigerators and its components;

     - b. In March 2004, the Company entered into a cooperative production agreement with Nanjing Bole Group (南京伯樂集團 ), whereby the Company will make use of Nanjing Bole’s existing refrigerator production facilities for the production of refrigerators;

     - c. In March 2004, the Company entered into a cooperative tenancy agreement with Nanchang Qiluowa Electric Co. Ltd (南昌齊洛瓦 電器有限公司 ), whereby the Company will lease the refrigerator production facilities of Nanchang Qiluowa Electric Co. Ltd for the production of refrigerators for a consideration of RMB500,000.

• 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

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• 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 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

STATEMENT OF INCOME AND PROFIT APPROPRIATION

Prepared by: Guangdong Kelon Electrical Holdings Limited

Unit: RMB

			January to	January to	January to	January to
			March	2004	March 2003
Items			the Group	the Company	the Group	the Company
1.	Revenue from principal operations		1,610,610,152	886,147,502	1,022,746,561	702,708,142
	Less:	Costs of sales	1,275,168,240	663,134,495	751,443,589	516,289,742
		Sales tax	25,532	14,344	146,661	91,207
2.	Profit from principal operations		335,416,380	222,998,663	271,156,311	186,327,193
	Add:	Other operating profit/(loss)	11,773,282	-1,969,047	6,026,840	-1,294,543
	Less:	Administrative expenses	75,528,243	22,340,101	65,416,677	10,065,730
		Distribution costs	193,964,420	176,034,782	154,856,364	132,895,769
	Less:	Financial expenses	27,580,503	15,030,960	24,127,180	11,980,352
3.	Operating profit		50,116,496	7,623,773	32,782,930	30,090,799
	Add:	Investment income	-3,295,557	41,710,259	-171,538	3,603,459
		Subsidy income	0	0	1,607	1,607
		Non-operating income	1,214,232	66,558	681,728	199,366
	Less:	Non-operating expenses	2,425,712	2,146,641	373,856	335,437
	Add:	Prior year adjustment on profit/(loss)	0	0	0	0
4.	Total profit		45,609,459	47,253,949	32,920,871	33,559,794
	Less:	Minority Interests	-2,396,805	0	-987,726	0
	Less:	Income tax	752,315	0	348,803	0

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5.	Net profit	Net profit	47,253,949	47,253,949	33,559,794	33,559,794
	Add:	Unappropriated profits (accumulated losses),
		beginning of the year	184,436,195	197,890,645	-1,211,930,161	-1,194,186,108
	Add:	Utilisation of statutory common reserve to make
		up accumulated losses	0	0	0	0
		Utilisation of capital reserve to make up
		accumulated losses	0	0	0	0
6.	Profit/(loss) available for appropriation		231,690,144	245,144,594	-1,178,370,367	-1,160,626,314
	Less:	Appropriations to statutory common
		reserve fund	0	0	0	0
		Appropriations to statutory common
		welfare fund	0	0	0	0
7.	Profit/(loss) available for appropriation to shareholders		231,690,144	245,144,594	-1,178,370,367	-1,160,626,314
	Less:	Appropriations to discretionary reserve	0	0	0	0
	Dividends on ordinary shares		0	0	0	0
8.	Unappropriated profits (accumulated losses),
	end of	the period	231,690,144	245,144,594	-1,178,370,367	-1,160,626,314

Person in charge of the Company: Gu Chu Jun Person in charge of financial matter: Li Zhi Cheng

Table prepared by: Yan Guo Ru

Guangdong Kelon Electrical Holdings Company Limited Gu Chu Jun Chairman

Foshan City, Guangdong, the PRC, 19 April 2004

As at the date of this announcement, the Company’s executive directors include Mr. Gu Chu Jun, Mr. Liu Cong Meng, Mr. Li Zhen Hua, Mr. Yan You Song, Mr. Zhang Hong and Mr. Fang Zhi Guo; and the independent non-executive directors include Mr. Chan Pei Cheong, Andy, Mr. Li Kung Man and Mr. Xu Xiao Lu.

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

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