Click here for the complete Half Year 2008 Financial Statement
Click here for the previous Full Year 2007 Financial Statement

As at 30 June 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 the 6 months ended 30 June 2008 ("1H08") grew by 23.7% to RMB 141.4 million compared to that of RMB 114.3 million for the same period ended 30 June 2007 ("1H07"). The increase was supported mainly by Liquefied Natural Gas ("LNG") business, which contributed RMB 32.1 million for 1H08 compared to that of RMB2.5 million for 1H07. In addition, sales from energy business increased by RMB 3.6 million from RMB13.0 million in 1H07. Industrial boiler business saw a decline in revenue by RMB 4.1 million compared with that of RMB 22.8 million in 1H07.

Cost of Sales & Gross Margin

Group gross profit increased by RMB 2.5 million or 8.0% to RMB 33.5 million compared with that of RMB 31.0 million in 1H07. Gross margin decreased to 23.7% from 27.1% in 1H07. The fall in margin was due mainly to higher raw material cost, especially for steel.

Expenses

Distribution expenses decreased by approximately RMB 1.4 million compared with corresponding period in the previous year, which was due mainly to reduction in staff cost, as some salespersons converted into independent sales agents. The increase in administrative expenses by 30.9% or RMB 3.1 million compared with that of 1H07 was due mainly to Group expansion, GDET was incorporated in Feb 2007 and Shaoxing Aike was acquired in April 2008, which contributed administrative expenses of RMB 2.6 million and RMB 0.1 million in 1H08 compared with those of RMB 0.3 million and nil in 1H07 respectively. Financial costs had increased due to higher borrowing interest rates.

Balance Sheet / Cashflow Statement

The increase in receivables by RMB 24.9 million was mainly due to the higher sales volume for LNG business in 1H08; the higher level of payables and inventories were in line with higher sales orders in hand for domestic boiler and industrial boiler products.

The Company acquired 51% equity interest in Shaoxing Aike Electric Co., Ltd at a consideration of RMB 2,040,000. The fair values of net assets acquired are as follows:

The widespread rise in material and labour cost in PRC will bring pressure to the Group operations, especially the rocketing price of petroleum coke, which would defer the popularizing of the Group's Emulsified Green Coke ("EGC") business. In addition, the appreciation of Chinese currency will squeeze the profit margin of the export sales of domestic boiler products. However, the Group will continue its R&D efforts to explore alternative raw materials, and had seen good progress in using ultra pure coal as raw material to replace petroleum coke in EGC business. Barring unforeseen circumstances, the Group expects to remain profitable for the year.

In addition, the Company is exploring certain acquisition opportunities to further expand its energy-related business. The Company will release a relevant announcement at the appropriate time.