As at 31 December 2008, Devotion Energy Group Limited has 5 subsidiaries: Guangzhou Devotion Thermal
Facility Co., Ltd("GDTF"), Guangzhou Devotion Domestic Boilers Manufacturing Co., Ltd("GDD"),
Guangzhou Devotion Energy Technology Co., Ltd("GEDT"), Guangzhou Devotion Engineering Installation
Co., Ltd("GDEI") and Shaoxing Aike Electric Co., Ltd("Shaoxing Aike").
Revenue
Group revenue for 2008 grew by RMB 33.5 million or 10.9% to RMB 340.5 million compared to that of RMB
307.0 million in 2007, the growth was contributed by domestic wall hung boiler business and industrial boiler
business & LNG, which achieved approximately RMB 196.3 million and RMB 107.7 million in 2008
respectively compared with that of RMB 180.0 million and RMB87.3 million in 2007 respectively.
Cost of Sales & Gross Margin
Gross margin of the Group decreased from 27.1% in 2007 to 20.0% in 2008, the sharp fall in margin was
mainly caused by the following factors:
- The rising petroleum coke price and higher depreciation expenses of production facilities of energy
projects, which turned energy sector's gross profit margin from 31.8% in 2007 into negative this year.
- Higher steel price, which dropped profit margin of industrial boiler products significantly in 2008.
As a result the Group's gross profit decreased by RMB 15.1 million or 18.1% to RMB 68.2 million compared
with that of RMB 83.3 million in 2007.
Distribution, Administrative and Finance expenses
Distribution costs in 2008 decreased by approximately RMB 2.0 million compared with 2007, which was due
mainly to reduction in staff cost, for some of salespersons converted into independent sales agents.
Administrative expenses relatively unchanged compared with 2007. Finance expenses in 2008 increased
RMB 1.9 million compared with that of RMB 7.06 million in 2007, which was due to unrealised exchange loss
of RMB 1.32 million and an increase of RMB 0.5 million in bank borrowing interest.
Other Operating Income
Other operating income decreased by RMB 4.0 million compared with 2007, as a Government subsidy of
RMB 4.2 million was granted in 2007 to support Group's renewable energy business development.
Other Operating Expense
The increase in other operating expense was due to following factors:
- Additional provision for doubtful debts of RMB 1.9 million;
- Additional provision for slow moving inventory of RMB 1.4 million;
- Breakdown cost of one of EGC plant of RMB 2.5 million, which was due to low production demand.
Minority interests
Minority interests refers to 49% of equity interest in Shaoxing Aike Electric Co., Ltd, which the Company
acquired its 51% of equity interest in April 2008 through its wholly owned subsidiary, Guangzhou Devotion
Domestic Boiler Manufacturing Co., Ltd ("GDD").
Balance Sheet
The Group's receivables in 2008 reduced by RMB 29.9 million compared with that in 2007, which was due
mainly to the following:
- Cooperation with more independent sales agents to supplant direct sales in 2008 for industrial boiler
and domestic wall hung boiler business, which contributed better payment terms and shorter debt
aging;
- Lower order received and sales executed in Quarter 4 of 2008 than that in the same period of 2007
as a result of recent financial crisis.
- There was a subsidy of RMB 4.2 million receivable in 2007 from PRC government for motivation of
renewable energy business development.
The Group's payables in 2008 reduced by RMB 18.4 million compared with that in 2007, which was mainly
due to lower level of raw material purchased in Quarter 4 of 2008 as a result of relatively lower sales order in
hand compared with the same period in 2007.
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