31st Aug 2010 07:00
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. ZHEJIANG EXPRESSWAY CO., LTD. (A joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock code: 0576) 2010 Interim Results AnnouncementThe directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company") announced the unaudited consolidated operating results of the Company and its subsidiaries (collectively the "Group") for the six months ended June 30, 2010 (the "Period"), with the basis of preparation as stated in note 1 to the condensed consolidated financial statements set out below. During the Period, revenue for the Group was Rmb3,130.90 million, representing an increase of 13.1% over the same period in 2009. Profit for the Period attributable to owners of the Company was Rmb855.61 million, representing an increase of 10.8% year-on-year. Earnings per share for the Period was Rmb19.70 cents, representing an increase of 10.8% over the same period in 2009. The Directors have recommended to pay an interim dividend of Rmb6 cents per share, subject to shareholders' approval at the extraordinary general meeting of the Company expected to be held on October 18, 2010. The audit committee of the Company has reviewed the interim results. Set out below are the unaudited condensed consolidated statement of comprehensive income and condensed consolidated statement of financial position for the Period, with comparative figures for 2009 and relevant notes to the condensed consolidated financial statements:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the six months ended June 30, 2010 2009 Notes Rmb'000 Rmb'000 Revenue 3 3,130,902 2,768,855 Operating costs (1,756,462) (1,392,646) --------- --------- Gross profit 1,374,440 1,376,209 Securities investment gains 51,605 27,204 Other income 4 77,453 62,392 Administrative expenses (30,843) (30,230) Other expenses (7,010) (101,927) Share of losses of associates (6,394)
(11,281)
Share of profit of a jointly controlled entity -- 13,073 Finance costs (47,007) (35,755) --------- --------- Profit before tax 1,412,244 1,299,685 Income tax expenses 5 (362,597) (326,104) --------- --------- Profit for the Period 1,049,647 973,581 --------- --------- Other comprehensive income Available-for-sale financial assets: -- Fair values loss during the Period (841) -- -- Reclassification adjustments (23,453) -- for cumulative gain included in profit or loss upon disposal Income tax relating to components of other comprehensive income 6,074 -- ---------
---------
Other comprehensive loss for the Period (net of tax) (18,220) -- --------- --------- Total comprehensive income for the Period 1,031,427 973,581 ===========
===========
Profit for the Period attributable to: Owners of the Company 855,609
772,452
Non-controlling interests 194,038 201,129 --------- --------- 1,049,647 973,581 =========== =========== Total comprehensive income for the Period attributable to: Owners of the Company 846,157
772,452
Non-controlling interests 185,270 201,129 --------- --------- 1,031,427 973,581 =========== ===========
Earnings per Share-basic 7 19.70 cents 17.79
cents =========== ===========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at June 30, December 2010 31, 2009 Rmb'000 Rmb'000 Notes Unaudited Audited Non-current Assets Property, plant and equipment 1,037,325
1,035,628
Prepaid lease payments 72,534
30,342
Expressway operating rights 12,410,438 12,755,338 Goodwill 86,867 86,867 Other intangible assets 150,757 154,819 Interests in associates 439,063 435,007
Available-for-sale investments 1,000
1,000 --------- --------- 14,197,984 14,499,001 --------- --------- Current Assets Inventories 21,206 17,342 Trade receivables 8 48,018 50,570 Other receivables 481,530 451,167 Prepaid lease payments 2,014 1,421 Available-for-sale investments 79,286
54,704
Held for trading investments 618,700
517,895
Financial assets held under resale agreement 100,000 -- Bank balances held on behalf of customers 10,534,757
11,532,284
Bank balances and cash -- Restricted bank balances --
942
-- Time deposits with original 326,901
228,452
maturity over three months -- Cash and cash equivalents 4,649,622 5,049,003 --------- --------- 16,862,034 17,903,780 --------- --------- Current Liabilities Accounts payable to customers arising from securities dealing business 10,503,837 11,502,930 Trade payables 9 657,308 647,373 Tax liabilities 191,498 512,551 Other taxes payable 27,273 30,492 Other payables and accruals 598,325
637,665
Dividends payable 328,128
18
Interest-bearing bank and other 490,487 478,055 loans Provisions 10 119,777 122,477 --------- --------- 12,916,633 13,931,561 --------- --------- Net Current Assets 3,945,401 3,972,219 --------- --------- Total Assets Less Current Liabilities 18,143,385 18,471,220 --------- --------- Non-current Liabilities Interest-bearing bank and other 101,023
144,329
loans Long-term bonds 1,000,000
1,000,000
Deferred tax liabilities 251,808 262,037 --------- --------- 1,352,831 1,406,366 --------- --------- 16,790,554 17,064,854 =========== =========== Capital and Reserves Share capital 4,343,115 4,343,115 Reserves 9,600,883 9,840,505 --------- --------- Equity attributable to owners of the 13,943,998
14,183,620
Company Non-controlling interests 2,846,556 2,881,234 --------- --------- 16,790,554 17,064,854 ============ ============ Notes:1. Basis of Preparation The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and with Hong Kong Accounting Standard 34 ("HKAS 34") "Interim Financial Reporting".
2. Principal Accounting Policies
The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value, as appropriate. The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended December 31, 2009 except as described below.
During the Period, the Group has applied for the first time, the following
new and revised standards, amendments and interpretations ("new and revised
HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). HKFRSs (Amendments) Amendments to HKFRS 5 as part of Improvements to HKFRSs 2008 HKFRSs (Amendments) Improvements to HKFRSs 2009 HKAS 27 (Revised) Consolidated and Separate Financial Statements HKAS 39 (Amendment) Eligible Hedged Items HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters HKFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions HKFRS 3 (Revised) Business Combinations (Revised) HK(IFRIC)-Int 17 Distribution of Non-cash Assets to Owners
The Group applies HKFRS 3 (Revised) Business Combinations prospectively to
business combinations for which the acquisition date is on or after January 1, 2010.
The requirements in HKAS 27 (Revised) Consolidated and Separate Financial Statements
in relation to accounting for changes in ownership interests in a subsidiary after
control is obtained and for loss of control of a subsidiary are also applied
prospectively by the Group on or after January 1, 2010.
As there was no transaction during the current interim period in which HKFRS 3
(Revised) and HKAS 27 (Revised) are applicable, the application of HKFRS 3 (Revised),
HKAS 27 (Revised) and the consequential amendments to other HKFRSs had no effect
on the condensed consolidated financial statements of the Group for the current
or prior accounting periods.
Results of the Group in future periods may be affected by future transactions
for which HKFRS 3 (Revised), HKAS 27 (Revised) and the consequential amendments
to the other HKFRSs are applicable.
The application of the other new and revised HKFRSs had no material effect on the
condensed consolidated financial statements of the Group for the current or prior
accounting periods.
The Group has not prematurely applied the following new and revised standards,
amendments or interpretations that have been issued but are not yet effective. HKFRSs (Amendments) Improvements to HKFRSs 2010(1) HKAS 32 (Amendment) Classification of Right Issues(2) HKFRS 1(Amendment) Limited Exemption from Comparative HKFRS 7 Disclosures for First-time Adopters(3) HKFRS 9 Financial Instruments (relating to the classification and measurement of financial assets) (5) HK(IFRIC)-Int 14 (Amendment) Prepayments of a Minimum Funding Requirement(4) HK(IFRIC)-Int 19 Extinguishing Financial Liabilities with Equity Instruments (3) 1 Effective for annual periods beginning on or after July 1, 2010 or January 1, 2011, as appropriate 2 Effective for annual periods beginning on or after February 1, 2010 3 Effective for annual periods beginning on or after July 1, 2010 4 Effective for annual periods beginning on or after January 1, 2011 5 Effective for annual periods beginning on or after January 1, 2013
HKFRS 9 Financial Instruments introduces new requirements for the classification
and measurement of financial assets and will be effective from January 1, 2013,
with earlier application permitted. The Standard requires all recognised financial
assets that are within the scope of HKAS 39 Financial Instruments: Recognition and
Measurement to be measured at either amortised cost or fair value. Specifically,
debt investments that (i) are held within a business model whose objective is to
collect the contractual cash flows and (ii) have contractual cash flows that are solely
payments of principal and interest on the principal outstanding are generally measured
at amortised cost. All other debt investments and equity investments are measured at
fair value. The application of HKFRS 9 might affect the classification and measurement
of the Group's financial assets.
The directors of the Company anticipate that the application of the other new and
revised standards, amendments or interpretations will have no material impact on
the results and the financial position of the Group.
3. Revenue
An analysis of the Group's revenue, net of discounts and taxes, for the Period is as follows: For the six months ended June 30, 2010 2009 Rmb'000 Rmb'000 Unaudited Unaudited Toll operation revenue 1,684,074 1,509,470 Service area business revenue 754,265
540,920
Advertising business revenue 37,671
37,859
Commission income from securities operation 557,350 619,792
Interest income from securities operation 97,509 59,425 Others 33 1,389 --------- --------- Total revenue 3,130,902 2,768,855 ============= ============= 4. Other Income For the six months ended June 30, 2010 2009 Rmb'000 Rmb'000 Unaudited Unaudited Interest income on bank balances and an entrusted loan receivable 21,734 11,028 Rental income 30,729 28,727 Net exchange gain 3,135 283 Towing income 7,090 7,409
Interest income from structured deposit --
3,114 Others 14,765 11,831 --------- --------- Total 77,453 62,392 ============= ============= 5. Income Tax Expenses For the six months ended June 30, 2010 2009 Rmb'000 Rmb'000 Unaudited Unaudited PRC Enterprise Income Tax; Current tax 372,826 347,697 --------- --------- Deferred tax: Current period (10,229) (21,593) --------- --------- 362,597 326,104 ============= =============
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation
Regulation of the EIT Law, the tax rate of the Group is 25% from January 1, 2008 onwards.
No Hong Kong Profit Tax has been provided as the Group's income neither arises in,
nor is derived from Hong Kong during the Period.
The tax charge for the Period can be reconciled to the profit per the condensed
consolidated statements of comprehensive income as follows: For the six months ended June 30, 2010 2009 Rmb'000 Rmb'000 Unaudited Unaudited Profit before tax 1,412,244 1,299,685 ============= ============= Tax at the PRC enterprise income tax rate of 25% 353,061
324,921
Tax effect of share of losses of associates 1,599
2,820
Tax effect of share of --
(3,268)
profit of a jointly controlled entity Tax effect of (income)/expense that is not (taxable) and deductible for tax purposes 7,937
1,631 --------- --------- Tax charge for the Period 362,597 326,104 ============= ============= 6. Dividends
The Directors have recommended the payment of an interim dividend of Rmb6
cents per share (2009: Rmb6 cents per share), subject to shareholders' approval
at the extraordinary general meeting of the Company expected to be held on
October 18, 2010.7. Earnings Per Share
The calculation of the basic earnings per share is based on profit attributable
to owners of the Company for the Period of Rmb855,609,000 (2009: Rmb772,452,000)
and the 4,343,114,500 shares (2009: 4,343,114,500 shares) in issue during the Period.
No diluted earnings per share have been calculated as there were no potential
dilutive ordinary shares in issue in both periods.
8. Trade Receivables
The Group has no credit period granted to its trade customers of toll operation,
service area businesses and securities operation. The following is an aged
analysis of trade receivables presented based on invoice date at the end of the reporting period. As at As at June 30, December 2010 31, 2009 Rmb'000 Rmb'000 Unaudited Audited Within 3 months 47,187 49,739 3 months to 1 year -- -- 1 to 2 years 10 218 Over 2 years 821 613 --------- --------- Total 48,018 50,570 ============= ============= 9. Trade payables
The following is an aged analysis of trade payables presented based on payment
due date at the end of the reporting period. As at As at 2010 June 30, December 2010 31, 2009 Rmb'000 Rmb'000 Unaudited Audited Within 3 months 375,220 410,900 3 months to 1 year 126,476 77,793 1 to 2 years 62,481 136,065 2 to 3 years 78,312 22,011 Over 3 years 14,819 604 --------- --------- Total 657,308 647,373 ============= ============= 10. Provisions
Subsequent to the relevant disclosure made in the Company's 2009 annual
report (pages 105 - 106) relating to "Provisions", as at the date of this
announcement, there was no material change for the Period save as disclosed below.
Prior to the restructuring of Zheshang Securities Co., Ltd.("Zheshang Securities")
by the Company, the original person-in-charge of one of the sales departments
under Zheshang Securities illegally misappropriated customers' deposits and funds,
which caused a loss of approximately Rmb90,000,000 to the relevant customers. Zheshang
Securities had made in 2009 a provision amounting to Rmb94,860,000 for the principal
and related interests involved in the lawsuits, of which Rmb7,047,000 had been
settled in 2009 and Rmb2,700,000 has been settled in the current period.
BUSINESS REVIEWAffected by the relatively high comparison basis for the same period in 2009 and theState's macro-economic control measures, the growth pace of China's economy has slowedduring the second quarter of the year. However, the economy as a whole kept a sounddeveloping trend in the first half, with the national GDP increasing by 11.1% as comparedto the same period last year. Although the growth pace of Zhejiang Province also slowedin the second quarter, the province did keep a positive recovery trend with continuousoptimization of its whole economic structure. GDP of Zhejiang Province recorded ayear-on-year growth of 13% in the first half of 2010.Benefiting from a sound development momentum of the domestic economy and an increase inautomobile sales, traffic volume and toll income on the Group's expressways maintaineda satisfactory growth during the first half of the year. Therefore, during the Period,income for the Group recorded a rise of 13.0% to Rmb3,227.49 million, of which Rmb1,739.65 million, or 53.9% of total income, was generated from the two majorexpressways owned and operated by the Group. Rmb799.39 million was generated from toll road-related businesses, which accounted for 24.8% of total income. Affected by asharp decline of China's stock market during the period, income from the securities business dropped slightly to Rmb688.45 million, accounting for 21.3% of the total income.During the Period, toll income from toll road operations increased by 11.6% over the sameperiod in 2009, while income from toll road-related businesses increased by 36.1%.A breakdown of the Group's income for the Period is set out below: For the six months ended June 30, 2010 2009 Rmb'000 Rmb'000 % Change Toll income Shanghai-Hangzhou-Ningbo Expressway 1,361,787 1,178,291 15.6% Shangsan Expressway 377,864 380,650 -0.7% Other income Service areas 758,195 545,883 38.9% Advertising 41,166 40,094 2.7% Securities business 688,445 710,811 -3.1% Others 33 1,389 -97.6% --------- --------- Subtotal 3,227,490 2,857,118 13.0% Less: Revenue taxes (96,588) (88,263) 9.4% --------- --------- Revenue 3,130,902 2,768,855 13.1% =========== =========== Toll Road OperationsDuring the Period, benefiting from the effective macro-economic controlmeasures, China's economy developed positively toward the expected goal.Domestic demand stimulated domestic automobile sales. At the same time, thewidening project of the Shanghai Section of the Shanghai-Hangzhou Expresswaywas completed in early 2010, and together with the implementation of thetoll-by-weight policy, the natural growth of traffic volume on the Group'sexpressways was quite significant, with the growth rate of toll income beingmuch steeper than that of traffic volume.On January 1, 2010, construction on the Shanghai Section of theShanghai-Hangzhou Expressway was completed. Through a series of promotion,traffic volume on the Shanghai-Hangzhou Expressway resumed in no time to thesame level as that before the construction. At the same time, thetoll-by-weight policy implemented in mid-April 2010 brought about a notableincrease in toll income for the road section. From the first half's operationfigures, we are happy to witness that both traffic volume and toll incomerecorded double-digit increases for the Shanghai-Hangzhou-Ningbo Expressway.Despite the advantages brought to the Shangsan Expressway by both soundmacro-economic growth and the implementation of the toll-by-weight policy inthe first half of the year, the launch of the dual path identification systemin mid-October 2009 has offset the traffic volume increase on the ShangsanExpressway, resulting in a slight drop in traffic volume and toll income forthe road section during the Period.The average daily traffic volume in full-trip equivalents along theShanghai-Hangzhou-Ningbo Expressway was 37,933 during the Period, representingan increase of 12.4% year-on-year. The average daily traffic volume infull-trip equivalents along the Shanghai-Hangzhou Section of theShanghai-Hangzhou-Ningbo Expressway increased by 17.2% year-on-year, and thatalong the Hangzhou-Ningbo Section increased by 9.2% year-on-year. The averagedaily traffic volume in full-trip equivalents along the Shangsan Expressway was18,844 during the Period, representing a decrease of 1.4% year-on-year.
Toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb1,361.79 million during the Period, representing an increase of 15.6% year-on-year; while toll income from the Shangsan Expressway amounted to Rmb377.86 million during the Period, representing a decrease of 0.7% year-on-year.
Toll Road-related Businesses
The Company also operates certain toll road-related businesses along itsexpressways through its subsidiaries and associated companies, including gasstations, restaurants and shops in service areas, as well as roadsideadvertising and vehicle service businesses.During the Period, with a steady recovery of the domestic economy, trafficvolume along the Group's expressways increased significantly. The opening ofShanghai Expo also lifted traffic volume and thus enhanced income for theservice areas. Meanwhile, both sales and prices of petroleum products increasedsubstantially, which has in turn boosted the income of the gas stationoperation. Consequently, income of toll road-related businesses of the Groupamounted to Rmb806.48 million during the Period, an increase of 35.6%year-on-year.
Securities Business
During the Period, the macro-economy was under structural adjustments, leadingto a sharp drop of Shanghai and Shenzhen stock market indices and a decrease intransaction volume. Competition in the brokerage market became intensified,resulting in a reduction on average commission rates. Despite the severeexternal environment, Zheshang Securities continued to maintain a smoothoperation through active business developments. The market share of itsbrokerage business continued to be enhanced, as well as its number of clients.In the meantime, Zheshang Securities achieved growth on investment banking,asset management and futures businesses, which to some extent offset the impacton Zheshang Securities caused by intense market competition and share indexdrop.
During the Period, the offering scale of the Zheshang Securities' first accumulated asset management plan "Zheshang Huijin No.1" reached Rmb2.3 billion, boosting the total scale of the asset management business to exceed Rmb3.0 billion. Zheshang Securities set up five new branches in coastal provinces and cities like Fujian and Guangdong, and the number of operating offices was extended to 46, thereby further enhancing its network deployment.
During the Period, the securities business realized an operating income ofRmb688.45 million, representing a decrease of 3.2% year-on-year. Of suchincome, brokerage commission income amounted to Rmb590.94 million, representinga year-on-year decrease of 9.3%; and bank interest income amounted to Rmb97.51million, representing a year-on-year increase of 64.1%. Apart from these, theproprietary securities trading business recorded a profit of Rmb51.61 millionas accounted for in the income statement (2009 Interim: Rmb27.20 million).
Long-term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate ofthe Company) ("Petroleum Co") benefited from a recovery of the macro-economyand an increase in petroleum products prices during the Period. It recorded asubstantial increase in sales of petroleum products and a revenue ofRmb1,599.90 million, a 37.4% increase year-on-year. In the Period, PetroleumCo. achieved a net profit of Rmb11.52 million.Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate of theCompany) ("Jinhua Co") operates the 69.7km Jinhua Section of Ningbo-JinhuaExpressway. During the Period, benefiting from a recovery of the domesticeconomy and the toll income increase brought about by the toll-by-weightpolicy, the average daily full-trip traffic volume along the road section was9,066 vehicles, a 26.1% increase as compared to the same period last year. Tollincome was Rmb88.37 million, an increase of 34.9% year-on-year. A loss ofRmb39.93 million was recorded due to Jinhua Co's heavy financial burden, thoughthe loss was gradually decreasing year after year.
JoinHands Technology Co., Ltd. (a 27.582% owned associate of the Company) generated its income mainly from its printing operation and property leasing during the Period. Due to a lack of improvement in its operations, the associate company incurred a loss of Rmb1.79 million during the Period.
Others
On May 20, 2010, the Company entered into the agreement with ZhejiangCommunications Investment Group Co., Ltd. ("Communications Investment Group")and Yiwu Communications Development Co., Ltd., pursuant to which the Companyagree to inject a further capital to the amount of Rmb23.45 million, inproportion to its share of capital contributions, into Jinhua Co by cash toalleviate a shortage in project and working capital at Jinhua Co. After thefurther capital injection by the Company and Communications Investment Group,the registered capital of Jinhua Co. increased from Rmb800 million to Rmb900million and the Company continued to own as to 23.45% in the capital of JinhuaCo.On July 2, 2010, to further leverage the investment and financing platform ofthe Company as a listed company in the future, one of the Company's majorshareholders, Huajian Transportation Economic Development Centre ("Huajian"),transferred approximately 11% (476,760,000 shares) of its holding shares to theCompany's majority shareholder, Communications Investment Group, at noconsideration. After the transfer, the equity interest in the Company held byCommunications Investment Group will be lifted to around 67% (2,909,260,000shares).
HUMAN RESOURCES
There were no significant changes to the Company's overall number of employees,remuneration policies, bonus schemes and training schemes from what have beendisclosed in the Company's latest annual report.
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with the aim to provide shareholders with sound returns over the long-term.
During the Period, return on equity was 6.1%, representing an increase of 12.7% over the same period in 2009.
Liquidity and Financial Resources
As at June 30, 2010, current assets held by the Group amounted to Rmb16,862.03million in aggregate (December 31, 2009: Rmb17,903.78 million), of which bankbalances and cash accounted for 29.5% (December 31, 2009: 29.5%), bank balancesheld on behalf of customers accounted for 62.5% (December 31, 2009: 64.4%) andheld-for-trading investments accounted for 3.7% (December 31, 2009: 2.9%).Current ratio (current assets over current liabilities) as at June 30, 2010 was1.3 (December 31, 2009: 1.3). Excluding the effect of customer deposits arisingfrom the securities business, the resultant current ratio of the Group (currentassets less bank balances held on behalf of customers over current liabilitiesless accounts payable to customers arising from securities dealing business)was 2.6 (December 31, 2009: 2.6).The amount for held-for-trading investments of the Group as at June 30, 2010amounted to Rmb618.70 million (December 31, 2009: Rmb517.90 million), of which93.0% was invested in corporate bonds, 5.5% was invested in the stock market,while the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating activities, amounted to Rmb962.12 million.
The Directors do not expect the Company to experience any problem with liquidity and financial resources in the foreseeable future.
Borrowings and Solvency
As at June 30, 2010, total liabilities of the Group amounted to Rmb14,269.46million (December 31, 2009: Rmb15,337.93 million), of which 11.2% wasborrowings and 73.6% was accounts payable to customers arising from securitiesdealing business.Total interest-bearing borrowings of the Group as at June 30, 2010 amounted toRmb1,591.51 million, representing a decrease of 1.9% over December 31, 2009.The borrowings comprised outstanding balances of the World Bank loans,denominated in US dollar, of approximately Rmb391.51 million in Renminbiequivalent; loans from domestic commercial banks totaling Rmb200 million; andcorporate bonds amounting to Rmb1 billion that was issued by the Company in2003 for a term of 10 years. Of the interest-bearing borrowings, 69.2% were notrepayable within one year.As at June 30, 2010, the Group's loans from domestic commercial banks comprised1-year short-term loans, with interest rates fixed at 5.31% and 5.25% perannum; the annual coupon rate for corporate bonds was fixed at 4.29%, withinterest payable annually. The annual interest rate for accounts payable tocustomers arising from securities dealing business was fixed at 0.36%; theannual floating rate of the Group's World Bank loans, denominated in US dollar,was 7.54%.Total interest expense for the Period amounted to Rmb47.01 million, whileprofit before interest and tax amounted to Rmb1,459.25 million. The interestcover ratio (profit before interest and tax over interest expenses) stood at31.0 (June 30, 2009: 37.4).The asset-liability ratio (total liabilities over total assets) was 45.9% as atJune 30, 2010 (December 31, 2009: 47.3%). Excluding the effect of customerdeposits arising from the securities business, the resultant asset-liabilityratio (total liabilities less accounts payable to customers arising fromsecurities dealing business over total assets less bank balances held on behalfof customers) of the Group was 18.3% (December 31, 2009: 18.4%).
Capital Structure
As at June 30, 2010, the Group had Rmb16,790.55 million total equity,Rmb11,703.84 million fixed-rate liabilities, Rmb391.51 million floating-rateliabilities and Rmb2,174.12 million interest-free liabilities, representing54.1%, 37.7%, 1.2% and 7.0% of the Group's total capital, respectively. Thegearing ratio, which was computed by dividing the total liabilities lessaccounts payable to customers arising from securities dealing business by totalequity, was 22.4% as at June 30, 2010 (December 31, 2009: 22.5%).
Capital Expenditure Commitments and Utilization
Capital expenditures of the Group and of the Company for the Period totaled Rmb134.49 million and Rmb32.09 million, respectively, with Rmb51.58 million incurred by acquisition and construction of properties, Rmb32.97 million incurred by purchase of equipment, Rmb23.45 million for capital injection into Jinhua Co and Rmb 24.30 million for a widening project in between the Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hub on the Shangsan Expressway.
Capital expenditures committed by the Group and by the Company as at June 30,2010 totaled Rmb314.75 million and Rmb104.15 million, respectively. Amongst thetotal capital expenditures committed by the Group, Rmb164.42 million will beused on the acquisition and construction of properties, Rmb95.03 million willbe used for purchase of equipment, Rmb25.70 million will be used for thewidening project in between the Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hubon the Shangsan Expressway, and Rmb29.60 million will be used in therenovations and expansions of the service areas.
The Group will finance its above mentioned capital expenditure commitments mainly with internally generated cash flow, with a preference for debt financing to meet any shortfalls thereof.
Contingent Liabilities and Pledge of Assets
As at June 30, 2010, the Group did not have any contingent liabilities nor any other pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the repayment of a World Bank loan of Rmb391.51 million equivalent inUS dollars, as well as dividend payments to the holders of H shares in HongKong dollars, the Group's principal operations are transacted and booked inRenminbi. Therefore, the Group's exposure to foreign exchange fluctuations islimited and the Group has not used financial instrument for hedging purposesduring the Period.Although the Directors do not foresee any material foreign exchange risks forthe Group, there is no assurance that foreign exchange risks will not affectthe operating results of the Group in the future.
OUTLOOK
In the first half of this year, China's economy continued to develop steadilyaccording to the direction led by the macro-economic control measures. Under animproving external environment, fast growth on foreign export and a lowcomparison basis last year, Zhejiang Province's economy continued to developpositively in the first half of 2010. However, we expect a slowdown on thegrowth rate of the economy in the second half under vigorous structuraladjustment policies carried out by the government. As a result of the slowdownof economic growth, the rapid growth on domestic car ownership will also slow,which in turn will affect the natural traffic growth along the Group'sexpressways.
Although the opening of the Shanghai-Jiaxing-Huzhou-Hangzhou Expressway in early February this year caused little impact on the Group's expressways, the opening of Zhuyong Expressway on July 22, 2010 will bring about negative effect, especially causing significant traffic diversions on the Shangsan Expressway.
Introduction of the toll-by-weight policy created a decrease in truck traffic volume for a short period of time, but from existing figures, it already brought a notable increase in toll income. In the second half of this year, through strengthened promotion and measures to attract more empty vans, we expect truck traffic volume to resume to the level before the policy was implemented.
During the Period, benefiting from a better economic environment in ZhejiangProvince, the Group's toll road-related businesses achieved significant growth.In the second half of the year, the Company will apply various measures,including introducing and refining quality operational projects andintensifying our promotion, to enhance management standards and service qualityat the service areas.As China's economy is in the course of transformation, despite the rapid GDPgrowth in the first half of the year, the stock market will remain sluggish.Although the Group's securities business may be affected by the turbulent Ashare market in the short run, Zheshang Securities will carry out variousmeasures including further expanding its investment banking business andgrouping financing product marketing with the futures agency business, with aview to continuously gaining industry influence and market share. We expectgood profit contribution from Zheshang Securities in the future.2010 will be a complicated year for China's economy. Given a slowdown oneconomic growth in the second half, we expect that the Group will be affectedin respect of its expressway traffic volume, service areas operation andcapital market performance. Faced with the not-so-optimistic situation, themanagement of the Company will continue to build up its core expresswaybusiness while actively seeking and cultivating new business opportunities andnew sources of profit growth. It will strive unremittingly to contribute to theCompany's sustainable development and bring forth satisfactory results forshareholders.
PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S SHARES
Neither the Company nor any of its subsidiaries had purchased, sold, redeemed or cancelled any of the Company's shares during the Period.
COMPLIANCE WITH LISTING RULES APPENDIX 14
The Company was in compliance with the code provisions in the Code on CorporateGovernance Practices set out in Appendix 14 to the Listing Rules during thePeriod. By Order of the Board Chen Jisong Chairman
Hangzhou, PRC, August 29, 2010
As at the date of this announcement, the executive Directors of the Companyare: Messrs. Chen Jisong, Zhan Xiaozhang, Jiang Wenyao and Zhang Jingzhong; thenon-executive Director is: Ms. Zhang Luyun; and the independent non-executiveDirectors are: Messrs. Tung Chee Chen, Zhang Junsheng and Zhang Liping.
Statement
1. An electronic version of the Company's 2010 Interim Results Announcement is available at www.zjec.com.cn
2. A copy of this document has been submitted to the UK Listing Authority andwill shortly be available for inspection at the UK Listing Authority DocumentViewing Facility which is situated at the Financial Services Authority, 25 TheNorth Colonnade, Canary Wharf, London E14 5HS.
vendorRelated Shares:
ZHEH.L