News

Second Quarter Financial Statement For The Period Ended 30/06/2004 - The Sponsor For The Initial Public Offering Of China Petrotech Holdings Limited's Shares Was Kim Eng Capital Pte. Ltd.

BackAug 11, 2004
PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3),
        HALF-YEAR AND FULL YEAR RESULTS


1(a) An income statement (for the group) together with a comparative statement for the
      corresponding period of the immediately preceding financial year.
      Group
      Group
      3 months ended
      30 June 2004
      3 months ended
      30 June 2003



      +/(-)
      6 months ended
      30 June 2004
      6 months ended
      30 June 2003

      +/(-)
      (Unaudited)
      Rmb'000
      (Unaudited)
      Rmb'000
      Change
      (%)
      (Unaudited)
      Rmb'000
      (Unaudited)
      Rmb'000
      Change
      (%)
      REVENUE
      19,505
      2,808
      595
      21,104
      3,316
      536
      Cost of sales
      (1,681)
      (411)
      309
      (2,620)
      (588)
      346
      GROSS PROFIT (Note 1)
      17,824
      2,397
      644
      18,484
      2,728
      578
      Other income (Note 2)
      2,404
      6
      39,967
      2,418
      939
      158
      Research and development costs
      (Note 3)
      (918)
      (629)
      46
      (1,467)
      (1,147)
      28
      Selling and distribution costs (Note 4)
      (704)
      (352)
      100
      (1,794)
      (642)
      179
      Administrative expenses (Note 5)
      (1,186)
      (791)
      50
      (2,101)
      (1,195)
      76
      Other operating expenses (Note 6)
      (1,824)
      (500)
      265
      (1,790)
      (500)
      258
      PROFIT FROM OPERATING ACTIVITIES
      15,596
      131
      11,805
      13,750
      183
      7,413
      Finance costs
      (17)
      -
      100
      (80)
      (1)
      7,900
      PROFIT BEFORE TAX
      15,579
      131
      11,792
      13,670
      182
      7,411
      Income tax
      -
      -
      -
      -
      -
      -
      NET PROFIT AFTER TAX ATTRIBUTABLE TO SHAREHOLDERS
      15,579
      131
      11,792
      13,670
      182
      7,411

      Explanatory notes:

      1. Gross profit margins increased slightly from 85% to 91% for 2Q 2004 and from 82% to 88% for 1H 2004 as compared to that of the corresponding periods of 2003 because the oil industry has increasing demand on IT solutions especially, in oil exploration fields. The efficiency and effectiveness of the Group's human resource functions had increased and brought the cost savings benefit to the Group, thereby improving the gross profit margins for the said periods.

      2.

      3 months ended
      30 June 2004

      Rmb'000
      3 months
      ended
      30 June 2003
      Rmb'000
      6 months ended
      30 June 2004

      Rmb'000
      6 months ended
      30 June 2003

      Rmb'000
      Other income
      Foreign exchange gain
      -
      -
      -
      -
      Reversal of allowance for doubtful trade receivables
      287
      -
      287
      -
      VAT refund*
      2,113
      -
      2,113
      931
      Others
      4
      6
      18
      8
      2,404
      6
      2,418
      939


      * The Group is entitled to a refund of value added taxes ("VAT") on the sales of self-developed software. The VAT refund represents the amount of VAT paid in excess of 3% of software sales. The amount of VAT refund is calculated on a monthly basis and recognised as other revenue when the relevant tax authorities approve the refund.

      3. The research and development costs increased 46% for 2Q 2004 and 28% for 1H 2004 respectively as compared to the corresponding periods in 2003. The increase is mainly due to increase in amortisation of intangible assets attributable to more development expenditure incurred and capitalised during the current periods under review.

      4. The increase in selling and distribution expenses is in line with the higher sales revenue for 2Q 2004 and 1H 2004.

      5. The increase in administrative expenses in 2Q 2004 and 1H 2004 is mainly due to additional payment of directors' remuneration.

      6. An allowance for doubtful trade receivables amounting to Rmb 500,000 was made in 2Q 2003, but an amount of Rmb 287,000 was written back in 2Q 2004. In addition, IPO expenses of Rmb 1.8 million relating to listing of vendor's shares were expensed off to the profit and loss account during the period.
Notes to Income Statement
Group
Group
3 months ended
30 June 2004
3 months ended
30 June 2003
Change


+/(-)%
6 months ended
30 June 2004
6 months ended
30 June 2003
Change


+/(-)%
Rmb'000
Rmb'000
Rmb'000
Rmb'000
Other income
2,404
6
39,967
2,418
939
158
Interest income
5
3
67
13
5
160
Finance cost (Note 1)
22
3
633
93
6
1,450
Depreciation of property, plant and equipment
71
49
45
134
97
38
Amortisation of intangible assets (Note 2)
690
180
283
1,158
342
239
Foreign exchange (gain)/loss
-
-
-
(34)
3
1,233
Allowance for doubtful trade receivables
-
500
(100)
-
500
(100)
Reversal of allowance for doubtful trade receivables
(287)
-
100
(287)
-
100

      Notes:

      1. Finance costs for 2Q 2004 / 1H 2004 represented amortised discount on convertible loan in a subsidiary, Market Wisdom, prior to its conversion on 27 April 2004.

      2. Amortisation of intangible assets increased as compared with last period in line with a corresponding increase in development expenditure during the current period under review.


1(b)(i) A balance sheet (for the issuer and group), together with a comparative statement
      as at the end of the immediately preceding financial year.
      Group
      Company
      30 June 2004
      31 December 2003
      30 June 2004
      31 December 2003
      (Unaudited)
      (Unaudited)
      (Unaudited)
      (Unaudited)
      Non-Current Assets
      Note
      Rmb'000
      Rmb'000
      Rmb'000
      Rmb'000
      Investment in subsidiary
      1
      -
      -
      38,059
      -
      Property, plant and equipment
      2
      1,030
      709
      -
      -
      Intangible assets
      3
      5,046
      3,205
      -
      -
      6,076
      3,914
      38,059
      -
      Current Assets
      Inventories
      12
      18
      -
      -
      Trade and other receivables
      4
      27,540
      22,089
      11
      3,628
      Cash and cash equivalents
      5
      107,172
      37,342
      76,298
      10
      134,724
      59,449
      76,309
      3,638
      Current Liabilities
      Short-term loan
      (150)
      (150)
      -
      -
      Trade and other payables
      6
      (11,143)
      (7,861)
      (5,355)
      (3,261)
      Amounts due to subsidiaries
      7
      -
      -
      (1,225)
      -
      Amounts due to directors
      8
      (1,375)
      (294)
      (721)
      (377)
      (12,668)
      (8,305)
      (7,301)
      (3,638)
      Net Current Assets
      122,056
      51,144
      69,008
      -
      128,132
      55,058
      107,067
      -
      Non-Current Liability
      Convertible loan
      9
      -
      (10,256)
      -
      -
      NET ASSETS
      128,132
      44,802
      107,067
      -
      CAPITAL AND RESERVES
      Share capital
      10
      47,425
      10,083
      47,425
      -
      Reserves
      80,707
      34,719
      59,642
      -
      128,132
      44,802
      107,067
      -


      Notes:

      1. On 27 April 2004, the Company entered into a sale and purchase agreement to acquire the entire issued and paid-up capital of Market Wisdom, at a consideration of S$7,821,414 (Rmb 38,059,000), with all rights and benefits attaching thereto with effect from 27 April 2004. The consideration was satisfied by the allotment and issue of an aggregate of 195,535,350 Shares, credited as fully paid.

      2. The increase in property, plant and equipment is mainly due to the acquisition of a motor vehicle costing Rmb 356,650 by a subsidiary during the period under review.

      3. Development expenditure capitalised is moderately increased.

      4. The increase in trade receivables is in line with the higher sales of software products for the current period. However, the increase is partially set off by a reduction in prepayments as at 30 June 2004. Included in prepayments as at 31 December 2003 was an amount of Rmb 3.6 million representing listing expenses accrued by the Group. A portion of these listing expenses was set off against the share premium of the Company and the remaining portion was expensed to the profit and loss account upon the successful listing of the Company on the SGX.

      5. The increase in cash and cash equivalents is mainly due to the proceeds from the issuance of 49,000,000 new ordinary shares of S$0.04 each at an issue price of S$0.34 each pursuant to the public invitation during the current period.

      6. The increase in trade and other payables is mainly caused by an increase in the accrual for IPO expenses and miscellaneous tax payable for the 2Q 2004.

      7. The amounts due to subsidiaries at the Company level represented the IPO expenses paid by the subsidiaries on behalf of the Company during the 2Q 2004.

      8. The increase in the amounts due to directors is mainly attributable to the IPO expenses paid by the directors on behalf of the Company during the 2Q 2004.

      9. Convertible loan of a subsidiary has been converted into share capital upon completion of the Restructuring Exercise on 27 April 2004.

      10. Please refer to the notes under section 1d(i) for details.


1(b)(ii) Aggregate amount of group's borrowings and debt securities.
      Amount repayable in one year or less, or on demand

      As at 30/06/2004
      As at 31/12/2003
      Secured
      Unsecured
      Secured
      Unsecured
      Rmb Nil
      Rmb150,000
      Rmb Nil
      Rmb150,000


      Amount repayable after one year

      As at 30/06/2004
      As at 31/12/2003
      Secured
      Unsecured
      Secured
      Unsecured
      Rmb Nil
      Rmb Nil
      Rmb Nil
      Rmb Nil


      Details of any collateral

      The government loan is unsecured, interest-free and has no fixed repayment terms.


1(c) A cash flow statement (for the group), together with a comparative statement for
      the corresponding period of the immediately preceding financial year.
      Group
      Group
      3 months ended 30 June 2004
      3 months ended 30 June 2003
      6 months ended 30 June 2004
      6 months ended 30 June 2003
      Note
      Rmb'000
      Rmb'000
      Rmb'000
      Rmb'000
      Operating activities
      Profit from ordinary activities before taxation
      15,579
      131
      13,670
      182
      Adjustments for :-
      Depreciation of property, plant and equipment
      71
      49
      134
      97
      Amortisation of intangible assets
      690
      180
      1,158
      342
      IPO expenses relating to the offer of
      vendor shares
      1,824
      -
      1824
      -
      (Reversal of)/Allowance for doubtful trade receivables
      (287)
      500
      (287)
      500
      Finance costs
      22
      3
      93
      6
      Interest income
      (5)
      (3)
      (13)
      (5)
      Operating profit before changes in working capital
      17,894
      860
      16,579
      1,122
      Changes in working capital:
      Inventories
      (1)
      (411)
      6
      (843)
      Trade and other receivables
      (9,719)
      (3,009)
      (5,160)
      855
      Trade and other payables
      8,252
      (182)
      3,282
      (1,774)
      Amounts due to directors
      (104)
      -
      1,081
      -
      Cash generated from/(used in) operations
      16,322
      (2,742)
      15,788
      (640)
      Interest received
      5
      3
      13
      5
      Interest paid
      -
      (3)
      -
      (6)
      Net cash generated from/(used in) operating activities
      16,327
      (2,742)
      15,801
      (641)
      Investing activities
      Purchase of property, plant and equipment
      (68)
      (3)
      (454)
      (18)
      Acquisition of XCTC's undertakings
      -
      -
      (12,037)
      -
      Intangible assets
      -
      (21)
      (3,000)
      (21)
      Net cash flows used in investing activities
      (68)
      (24)
      (15,491)
      (39)
      Financing activities
      Proceeds from bank loans
      -
      3,000
      -
      3,000
      Repayment of bank loans
      -
      -
      -
      (3,150)
      Proceeds from issue of new shares, net of IPO expenses
      69,520
      -
      69,520
      -
      Net cash generated from/(used in) financing activities
      69,520
      3,000
      69,520
      (150)
      Net increase/(decrease) in cash and cash equivalents
      85,779
      234
      69,830
      (830)
      Cash and cash equivalents at beginning of the period
      21,393
      1,418
      37,342
      2,482
      Cash and cash equivalents at end of the period
      107,172*
      1,652
      107,172*
      1,652


      * Included in cash and cash equivalents of the Group at the end of the period is an amount of Rmb 8.8 million which relates to sales collections received by XCTC on behalf of XCPT pursuant to the Restructuring Exercise. These amounts were transferred to XCPT in July 2004.

      Note 1: This relates to the acquisition of XCTC's undertakings on 30 January 2004 as part of the Group's Restructuring Exercise for the IPO.


1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or
      (ii) changes in equity other than those arising from capitalisation issues and
      distributions to shareholders, together with a comparative statement for the
      corresponding period of the immediately preceding financial year.
Statement of Changes in Equity
The Group
Share Capital
Share Premium
Convertible Loan Reserve
Merger Reserve
Statutory Reserves
Accumulated Profits
Foreign Exchange Reserve
Total
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
At 1 January 2004
10,083
-
433
-
4,962
29,324
-
44,802
Acquisition of XCTC's undertakings
(10,000)
-
-
32,249
(4,962)
(29,324)
-
(12,037)
Loss for the period
-
-
-
-
-
(1,909)
8
(1,901)
At 31 March 2004
83
-
433
32,249
-
(1,909)
8
30,864
Conversion of convertible loan
19
10,763
(433)
-
-
-
-
10,349
New shares issued pursuant to the Restructuring Exercise
37,884
(10,763)
-
(27,194)
-
-
73
-
New shares issued pursuant to the invitation
9,439
70,786
-
-
-
-
-
80,225
IPO expenses
-
(8,881)
-
-
-
-
-
(8,881)
Profit for the period
-
-
-
-
-
15,579
(4)
15,575
At 30 June 2004
47,425
61,905
-
5,055
-
13,670
77
128,132
The Group
Share Capital
Share Premium
Convertible Loan Reserve
Capital Reserve
Statutory Reserves
Accumulated Profits
Foreign Exchange Reserve
Total
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
At 1 January 2003
10,083
-
-
-
681
3,546
-
14,310
Profit for the period
-
-
-
-
-
50
-
50
At 31 March 2003
10,083
-
-
-
681
3,596
-
14,360
Profit for the period
-
-
-
-
-
131
-
131
At 30 June 2003
10,083
-
-
-
681
3,727
-
14,491
The Company
Share Capital
Share Premium
Convertible Loan Reserve
Capital Reserve
Statutory Reserves
Accumulated Profits
Foreign Exchange Reserve
Total
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
Rmb '000
At 1 January 2004
-
-
-
-
-
-
-
-
Loss for the period
-
-
-
-
-
-
-
-
At 31 March 2004
-
-
-
-
-
-
-
-
New shares issued pursuant to the Restructuring Exercise (note 1)
37,986
-
-
-
-
-
-
37,986
New shares issued pursuant to the invitation (note 2)
9,439
70,786
-
-
-
-
-
80,225
IPO expenses
-
(8,881)
-
-
-
-
-
(8,881)
Loss for the period
-
-
-
-
-
(2,426)
163
(2,263)
At 30 June 2004
47,425
61,905
-
-
-
(2,426)
163
107,067

      Note 1: Upon completion of the Restructuring Exercise on 27 April 2004, the Company issued 195,535,350 ordinary shares at par of S$0.04 each in exchange for the entire share capital of Market Wisdom and its subsidiary.

      Note 2: The Company issued 49,000,000 new ordinary shares of S$0.04 each pursuant to the public invitation at an issue price of S$0.34 on 9 June 2004.

      Note 3: China Petrotech Holdings Limited was incorporated in Singapore on 11 June 2003 (formerly known as Cenozoic Holdings Pte. Ltd.) for acquiring the shares in the existing companies of Market Wisdom and its subsidiary on 27 April 2004. Accordingly, the Company did not exist in the first half year of 2003 and no financial information could be presented for the statement of changes in equity for 2Q 2003 and 1H 2003. Therefore, the Company only presented the financial information for the half-year ended 30 June 2004.

      Basis of Preparation of Financial Information

      The financial statements of China Petrotech Holdings Limited (the "Company") and its subsidiaries (the "Group") for the second quarter ended 30 June 2004 ("2Q 2004") and first half year ended 30 June 2004 ("1H 2004") which combined the financial results of its subsidiaries acquired upon the completion of the Restructuring Exercise on 27 April 2004. Details of the Restructuring Exercise are described in the Company's prospectus dated 31 May 2004.

      The Company was incorporated in Singapore on 11 June 2003 (formerly known as Cenozoic Holdings Pte. Ltd.). On 27 April 2004, the Company completed the acquisition of the entire share capital in Market Wisdom International Limited ("Market Wisdom") and its subsidiary, Xi'an Cenozoic Petro Tech Co., Ltd ("XCPT"), which are principally engaged in the provision of information technology solutions, design, development and sale of standardized software solutions. The Company was admitted to the Official list of the Singapore Exchange Securities Trading Limited ("SGX-ST") on 9 June 2004.

      For the purpose of inclusion in the prospectus of the Company, the combined financial statements of the Group for the period from 6 August 2001 to 31 December 2001 and the two years ended 31 December 2002 and 2003 (the "relevant period") were prepared in a manner similar to the "pooling of interest" method as if the Restructuring Exercise and the transfer of all the assets, liabilities and undertakings of Xi'an Cenozoic Technology Co., Ltd ("XCTC") (the "Transfer") had been completed on 6 August 2001. Such manner of presentation reflects the economic substance of the combining companies (namely XCTC, XCPT, Market Wisdom and the Company), which were under common control throughout the relevant period, as a single economic enterprise, although the legal parent-subsidiary relationships were not established until 27 April 2004.

      The combined financial statements for the year ended 31 December 2003 principally reflected the results and financial status of XCTC. However, it does not form part of the listing group pursuant to the Transfer on 30 January 2004.

      As the Group's acquisitions of the undertakings of XCTC and Market Wisdom on 30 January 2004 and 27 April 2004 constitute common control transactions, the consolidated financial statements of the Group for the financial year ending 31 December 2004 will be prepared in a manner similar to the "pooling of interest" method.

      All intra-group transactions and balances among the companies comprising the Group are eliminated in the preparation of the consolidated financial statements.


1(d)(ii) Details of any changes in the company's share capital arising from rights issue,
      bonus issue, share buy-backs, exercise of share options or warrants, conversion of
      other issues of equity securities, issue of shares for cash or as consideration for
      acquisition or for any other purpose since the end of the previous period reported
      on. State also the number of shares that may be issued on conversion of all the
      outstanding convertibles as at the end of the current financial period reported on
      and as at the end of the corresponding period of the immediately preceding
      financial year.
      Cenozoic Holdings Pte. Ltd. was incorporated in Singapore on 11 June 2003 as a private company limited by shares. It has authorised share capital of S$100,000 divided into 100,000 ordinary shares of S$1 each and the issued and fully paid share capital of the Company was S$2 divided into 2 ordinary shares of S$1 each. On the completion of the Restructuring Exercise on 27 April 2004 the Company changed its name to China Petrotech Holdings Limited.

      During the quarter ended 30 June 2004, the following events took place:

      (i) the increase of authorised share capital from S$100,000 divided into 100,000 ordinary shares of S$1.00 each to S$20,000,000 divided into 20,0000,000 ordinary shares of S$1.00 each;

      (ii) the sub-division (the "share split") of every one ordinary share of S$1.00 each in the authorised and issued share capital of the Company into 25 ordinary shares of S$0.04 each;

      (iii) the allotment and issue of an aggregate of 195,535,350 shares to Mag. Andreas Werner, Kim Eng Securities Pte Ltd, Power Century Holdings Limited, Metrolink Technology Limited, Cai Qiang, Li Ming, Li Wo Hing, Zhao Tong, Zhao Ying, Zhou Hong, William Chan and Guidance Limited pursuant to the Restructuring Exercise; and

      (iv) pursuant to the Company's Initial Public Offering, 49,000,000 new ordinary shares and 13,000,000 vendor shares were offered at an issue price of S$0.34 each. The net proceeds attributable to the Company (after deducting the issue expenses) arising from the issue of the New shares were approximately S$14.4 million (Rmb 69.5 million). The Company was listed on the SGX-ST on 9 June 2004.

      After the Company was successfully listed on the Main Board of SGX on 9 June 2004, the issued and fully paid share capital of the Company increased to S$9,781,416 (244,535,400 ordinary shares at par value of S$0.04 each), due to new ordinary shares issued pursuant to the Initial Public Offering ("IPO") of S$1,960,000 (49,000,000 ordinary shares at an issue price of S$0.34 each) quoted on the Official list of SGX-ST.

      Apart from the above, there were no movements in the Company's share capital at 30 June 2004.


2. Whether the figures have been audited or reviewed and in accordance with
      which auditing standard or practice.

The figures have been reviewed by the Company's auditors.


3. Where the figures have been audited or reviewed, the auditors' report (including
      any qualifications or emphasis of a matter).
      The figures have been reviewed by the Auditors. Please refer to the attached independent review report at the end of the announcement.


4. Whether the same accounting policies and methods of computation as in the
      issuer's most recently audited annual financial statements have been applied.
      The same accounting policies and methods of computation in the financial statements have been consistently applied by the Group for the period presented.


5. If there are any changes in the accounting policies and methods of computation,
      including any required by an accounting standard, what has changed, as well as
      the reasons for, and the effect of, the change.
      Not applicable.


6. Earnings per ordinary share of the group for the current financial period reported
      on and the corresponding period of the immediately preceding financial year,
      after deducting any provision for preference dividends.
      3 months ended 30 June 2004
      3 months ended 30 June 2003
      6 months ended 30 June 2004
      6 months ended 30 June 2003
      Earnings per ordinary share for the period based on net profit attributable to shareholders:
      Basic (Rmb cents) (Note 1)
      7.51
      0.07
      6.78
      0.09
      Fully diluted (Rmb cents) (Note 1)
      7.51
      0.07
      6.78
      0.09
      Note 1:
      Basic and fully diluted earnings per share were based on:
      Net profit for the period (Rmb'000)
      15,579
      131
      13,670
      182
      No. of shares
      No. of shares
      No. of shares
      No. of shares
      Shares outstanding at beginning of the period (Note 2)
      195,535,400
      195,535,400
      195,535,400
      195,535,400
      Weighted average number of new shares issued during the period pursuant to the public invitation
      11,846,154
      -
      5,955,801
      -
      Weighted average number of shares issued during the period
      (Basic and diluted)
      207,381,554
      195,535,400
      201,491,201
      195,535,400

      Note 2. For illustrative purposes, it was assumed that the Restructuring Exercise had been completed on 1 January 2003 and the pre-invitation share capital of 195,535,400 shares had already been in issue on 1 January 2003.


7. Net asset value (for the issuer and group) per ordinary share based on issued share
      capital of the issuer at the end of the:-

      (a) current financial period reported on; and
      (b) immediately preceding financial year.

      Group
      Company
      30 June 2004
      31 December 2003
      30 June 2004
      31 December 2003
      Net asset value
      (Rmb'000)
      128,132
      44,802
      107,067
      N/a
      Issued and fully paid ordinary shares (actual) (Note 1)
      244,535,400
      N/a
      244,535,400
      N/a
      (on combined basis) (Note 2)
      N/a
      195,535,400
      N/a
      N/a
      Net asset value per ordinary shares (Rmb cents)
      (actual) (Note 1)
      52.40
      N/a
      43.78
      N/a
      (on combined basis) (Note 2)
      N/a
      22.91
      N/a
      N/a

      Note 1. The net asset value per ordinary share of the Group and of the Company as at 30 June 2004 are calculated based on the issued ordinary shares of 244,535,400 at 30 June 2004 after public invitation.

      Note 2. The net asset value per ordinary share of the Group as at 31 December 2003 is calculated based on 195,535,400 ordinary shares, on the assumption that the Restructuring Exercise had been completed on 31 December 2003.

8. A review of the performance of the group, to the extent necessary for a reasonable
      understanding of the group's business. It must include a discussion of the
      following:-

      (a) any significant factors that affected the turnover, costs, and earnings of the
      group for the current financial period reported on, including (where applicable)
      seasonal or cyclical factors; and

      (b) any material factors that affected the cash flow, working capital, assets or
      liabilities of the group during the current financial period reported on.

      (a) any significant factors that affected the turnover, costs, and earnings of the group for current financial period reported on, including ( where applicable) seasonal or cyclical factors; and (b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on.

      Review of the Group Performance

      2Q 2004 versus 2Q 2003

      Turnover

      The Group's turnover for the 3 months ended 30 June 2004 ("2Q04") was approximately RMB 19.5 million, an increase of 595% from RMB 2.8 million in 2Q03. The increase in turnover is mainly attributable to the growing demand for IT solutions in China's oil and gas industry. It also reflects the strong acceptance and growing adoption of our standard IT solutions within the operating units of the three PRC oil majors.

      In the quarter under review, our customers have begun upgrading of IT solutions implemented more than 18 months ago. Solutions upgrades will be a regular feature in our business going forward.

      Profitability

      The Group's net profit attributable to shareholders for 2Q04 amounted to RMB 15.6 million, representing an increase of 118 times compared to RMB 0.1 million for the corresponding period in 2003. The increase in profit is due to the rapid increase in sales over the operating expenses of the Group, in line with the operating nature of our business.

      1H 2004 versus 1H 2003

      Turnover

      The Group's turnover for the 6 months ended 30 June 2004 ("1H04") increased by 536% to RMB 21.1 million from RMB 3.3 million in 1H03 mainly due to the significant increase in revenue in 2Q04.

      We recognise revenue upon completion of the project, i.e. after the installation of our IT solutions and the acceptance by our customer. Traditionally, the first half of the financial year is slower than the second half due to the seasonality effects that tend to be more pronounced in the first quarter due to Chinese festive season and new budget allocation. These affect the revenue recognition trends of the Group as the typical period required for standard solutions implementation is three months.

      Profitability

      The Group's net profit attributable to shareholders for 1H04 amount to RMB 13.7 million, representing an increase of 74 times as compared with RMB 0.2 million in 1H03. These were in line with the increase in business activities. Furthermore, we observed moderate increases in operating expenses.


9. Where a forecast, or a prospect statement, has been previously disclosed to
      shareholders, any variance between it and the actual results.
      Not applicable.


10. A commentary at the date of the announcement of the significant trends and
      competitive conditions of the industry in which the group operates and any
      known factors or events that may affect the group in the next reporting period
      and the next 12 months.
      The Directors are optimistic of the industry demand for IT solutions in the exploration, development and production of oil and gas in the PRC. This is based on the growing oil and gas demand in PRC, the increasing acceptance and adoption of our IT solutions in PRC oil and gas industry, increasing digitisation of PRC exploration and production data and a growing recognition of the needs for PRC oil companies to outsource products and services to increase capital productivity.

      In recognition of the above industry trend, the Group will continue to expand the range of our IT solutions. Some newly developed solutions are in the process of registration in PRC. Initial product feedbacks from our customers are encouraging. These products are expected to contribute to further growth of our IT solution sales.

      In addition, we plan to offer technical support, consulting services and sales of specialised equipment used PRC in exploration and production operation. We also are in discussion with several parties for the setting up of a joint research and development centre to develop technical solutions for the oil and gas industry.

      As earlier solutions implemented by the Group become obsolete, the Group expects sales from solutions upgrades to increase.

      Barring unforeseen circumstances, the Directors expect the financial performance of the Group in FY04 to be better than that in FY03.


11. Dividend
      (a) Current Financial Period Reported On

      Any dividend declared for the current financial period reported on? None
      (b) Corresponding Period of the Immediately Preceding Financial Year

      Any dividend declared for the corresponding period of the immediately preceding financial year? None

      (c) Date payable

      Not applicable.


      (d) Books closure date
Not applicable.


12. If no dividend has been declared/recommended, a statement to that effect.

No dividend was declared for the 6 months ended 30 June 2004.



PART II - ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT
        (This part is not applicable to Q1, Q2, Q3 or Half Year Results)


13. Segmented revenue and results for business or geographical segments (of the
      group) in the form presented in the issuer's most recently audited annual financial
      statements, with comparative information for the immediately preceding year.
      Not applicable.


14. In the review of performance, the factors leading to any material changes in
      contributions to turnover and earnings by the business or geographical segments.
      Not applicable.


15. A breakdown of sales.
      Not applicable.


16. A breakdown of the total annual dividend (in dollar value) for the issuer's latest
      full year and its previous full year.

      Total Annual Dividend (Refer to Para 16 of Appendix 7.2 for the required details)

      Latest Full Year ()
      Previous Full Year ()
      Ordinary
      0
      0
      Preference
      0
      0
      Total:
      0
      0




BY ORDER OF THE BOARD

William Chan Shut Li
Chairman of the Board
11/08/2004

Attachments

  1. China Petrotech Independent Review Report.pdf (Size: 55,738 bytes)