9th May 2011 18:28
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take noresponsibility for the contents of this announcement, make no representationas to its accuracy or completeness and expressly disclaim any liability whatsoever for anyloss 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) 2011 FIRST QUARTERLY RESULTS ANNOUNCEMENT This quarterly results announcement of Zhejiang Expressway Co., Ltd. (the"Company") for the three months ended March 31, 2011 (the "Period) is madepursuant to the Rules Governing the Listing of Securities on The Stock Exchangeof Hong Kong Limited and has been prepared in compliance with section 4.3 ofthe Disclosure and Transparency Rules of the United Kingdom Listing Authority.The audit committee of the Company has reviewed the quarterly results of theCompany and its subsidiaries (collectively the "Group") for the Period. Set outbelow are the Group's unaudited condensed consolidated statement ofcomprehensive income, condensed consolidated statement of financial positionand condensed consolidated statement of cash flow for the Period together withthe comparative figures for the corresponding period of 2010:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the three months ended March 31, 2011 2010 Notes Rmb'000 Rmb'000 ---------- --------- Revenue 1 1,627,592 1,500,679 Operating costs (960,559) (835,362) ---------- --------- Gross profit 667,033 665,317 Securities investment (losses) gains (3,949) 37,352 Other income 2 51,271 33,071 Administrative expenses (19,680) (14,354)Other expenses (10,159) 3,029 Share of profit (loss) of associates 1,020 (4,903)Finance costs (19,489) (15,007) ---------- --------- Profit before tax 666,047 704,505 Income tax expense (167,366) (177,814) ---------- --------- Profit for the Period 498,681 526,691 ---------- --------- Other comprehensive expense Available-for-sale financial assets： - Fair value (loss) (4,130) 3,821gain during the Period - Reclassification (4,200) (17,365)adjustments for cumulative gain included in profit or loss upon disposal Income tax relating to 2,083 3,386 ---------- ---------components of other comprehensive income Other comprehensive (6,247) (10,158) ---------- ---------expense for the Period (net of tax) Total comprehensive income for the Period 492,434 516,533 ========= ========= Profit for the Period 425,004 418,495attributable to: Owners of the Company Non-controlling interests 73,677 108,196 --------- --------- 498,681 526,691 ========= ========= Total comprehensive income for the Period attributable to: Owners of the Company 421,746 413,225 Non-controlling interests 70,688 103,308 --------- --------- 492,434 516,533 ========= ========= Earnings per share â€" basic 3 9.79 cents 9.64 cents ========= =========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at March December 31, 2011 31, 2010 Rmb'000 Rmb'000 Unaudited Audited ------------ ------------Non-current assets 13,804,195 13,978,955Current assets 18,061,616 19,673,100Current liabilities 12,086,932 14,694,293 ------------ ------------Net current assets 5,974,684 4,978,807 ------------ ------------
Total assets less current liabilities 19,778,879 18,957,762
------------ ------------Non-current liabilities 1,252,976 1,262,647 ------------ ------------ 18,525,903 17,695,115 ============ ============Capital and Reserves Capital 4,343,115 4,343,115Reserves 10,803,938 10,380,137 ------------ ------------
Equity attributable to owners of the Company 15,147,053 14,723,252
Non-controlling interests 3,378,850 2,971,863 ------------ ------------ 18,525,903 17,695,115 ============ ============
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
For the three months ended March 31, 2011 2010 Rmb'000 Rmb'000 ---------- ----------
Net cash from operating activities 378,600 363,449 Net cash used in investing activities (812,459) (173,921) Net cash used in financing activities (180,000) - ---------- ---------- Net (decrease) /increase in cash and cash
equivalents (613,859) 189,528
Cash and cash equivalents at beginning of
the Period 5,682,053 5,049,003 ---------- ----------
Cash and cash equivalents at end of the
Period 5,068,194 5,238,531 ========== ========== Notes: 1. RevenueAn analysis of the Group's revenue, net of discounts and taxes, for the Periodis as follows For the three months ended March 31, 2011 2010 Rmb'000 Rmb'000 --------- -------- Unaudited UnauditedToll operation revenue 831,723 787,123 Service area business revenue 438,989 356,023 Advertising business revenue 19,364 18,298 Commission income from securities operation 262,680 293,188
Interest income from securities operation 74,836 46,047
--------- --------Total revenue 1,627,592 1,500,679 ========= =========2. Other Income For the three months ended March 31, 2011 2010 Rmb'000 Rmb'000 --------- ---------- Unaudited UnauditedInterest income on bank balances and entrusted loan receivables 27,655 9,930Rental income 15,165 13,779Net exchange gain 2 115Handling fee income 3,126 2,093Towing income 2,154 2,583Others 3,169 4,571 --------- ----------Total 51,271 33,071 ========= ==========3. Earnings per Share
The calculation of the basic earnings per share is based on profit for the yearattributable to owners of the Company of Rmb425,004,000 (2010: Rmb418,495,000)and the 4,343,114,500 (2010: 4,343,114,500) ordinary shares in issue during theyear.
No diluted earnings per share has been presented as there were no potential ordinary shares outstanding in both periods.
BUSINESS REVIEW
During the first quarter of 2011, China's overall economy maintained a soundoperation momentum, heading toward the desired development direction asanticipated under the prevailing macro-economic control policies. There was,however, a decline in the growth rates of automobile and housing consumptionrelated commodities, with the national GDP growth for the first quarter slowingto 9.7% year-on-year. While also showing a sign of slowdown, Zhejiang Province'seconomic growth maintained a stable trend during the Period and up to the dateof publication of this announcement, achieving a GDP growth of 10.4%year-on-year. Due to the complexity of the province's economic performanceduring the first quarter, the Group's two expressways also exhibited variedperformances on their respective traffic volumes and toll revenues during thePeriod and up to the date of publication of this announcement.
During the Period, the Group realized a total income of Rmb1,674.76 million, representing an increase of 8.2% year-on-year; of which Rmb860.09 million was
attributable to the two major expressways operated by the Group, representing51.4% of the total income; Rmb462.06 million was attributable to the Group'stoll road-related businesses such as service area operations, gas stations,advertising business and so forth, representing 27.6% of the total income; andRmb352.61 million was attributable to the securities business, representing21.0% of the total income.
TOLL ROAD OPERATIONS
As the weather in Zhejiang Province in January was characterized by more rainand snow than usual and the operation of the high-speed railway wasstrengthened during the Chinese New Year period in February, this resulted in areduction of the vehicles using the Group's expressways during the Period.Meanwhile, the slowing macro-economic growth has also caused a slowdown inorganic growth of traffic volumes on the Group's expressways.
In addition, due to successive openings of new expressways in the vicinity of the Hangzhou-Wuzhou direction, the Shanghai-Hangzhou Expressway suffered a minor degree of traffic diversions.
The Shangsan Expressway, another expressway under the Group, continued tosuffer the diversion impact from the Zhuyong Expressway, and consequentlycontinued to face negative growth in traffic volume during the first quarter.However, benefiting from the implementation of the toll-by-weight policy, theexpressway experienced a much lower magnitude of revenue decrease than trafficvolume decrease during the Period and up to the date of publication of thisannouncement.The average daily traffic volume in full-trip equivalents along theShanghai-Hangzhou-Ningbo Expressway was 38,551 during the Period, representingan increase of 4.6% year-on-year. In particular, the average daily trafficvolume in full-trip equivalents along the Shanghai-Hangzhou section of theShanghai- Hangzhou-Ningbo Expressway was 38,493, an increase of 2.5%year-on-year, and that along the Hangzhou-Ningbo section was 38,593, anincrease of 6.2% year-on-year. The average daily traffic volume in full-tripequivalents along the Shangsan Expressway was 17,768 during the Period,representing a decrease of 7.7% year-on-year.
During the Period, toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb683.49 million, an increase of 7.5% year-on-year, while toll income from the Shangsan Expressway amounted to Rmb176.60 million, a decrease of 0.2% year-on-year.
TOLL ROAD-RELATED BUSINESS OPERATIONS
The Company also operates certain toll road-related businesses along its expressways through its subsidiaries and associated companies, including gas stations, restaurants and shops in service areas, as well as roadside advertising and vehicle service businesses.
Income generated at the service areas dropped slightly during the Period and upto the date of publication of this announcement, primarily due to a slowdown intraffic volume growth on the Group's two expressways as well as a reduction inthe number of large coach vehicles and small vehicles traveling on the road dueto more frequent operations of Shanghai-Hangzhou high-speed trains andHangzhou-Wenzhou CRH trains. However, owing to an increase in the sale pricesof petroleum products which in turn led to a substantial increase in the salesrevenue of petroleum products, total income of the service areas operationperformed well. As a result, during the Period, the toll road-related businessrecorded an income of Rmb464.21 million, a year-on-year increase of 22.0%.
SECURITIES BUSINESS
During the first quarter of 2011, although the stock markets in Shanghai andShenzhen operated steadily, given the severe competition in the industry,commission rates continued to decrease. In addition, the growth of theoperation network and staff also led to an increase in business costs atZheshang Securities, affecting the earning performance of Zheshang Securitiesduring the Period and up to the date of publication of this announcement.During the Period, Zheshang Securities realized an operating income ofRmb352.61 million, a decrease of 1.1% year-on-year. Of such income, brokeragecommission income amounted to Rmb277.77 million, a year-on-year decrease of10.6%; and bank interest income amounted to Rmb74.84 million, a year-on-yearincrease of 62.5%. Meanwhile, the proprietary securities business of ZheshangSecurities suffered a loss on the shares held due to the market decline. Assuch, the loss accounted for in the consolidated statement of comprehensiveincome amounted to Rmb4.46 million.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associatecompany of the Company) was blessed by a further rise in the retail prices ofpetroleum and a significant growth in petroleum sales during the Period, andconsequently realized an income of Rmb1,123.50 million during the Period,representing an increase of 49.5% year-on-year. During the Period, net profitamounted to Rmb9.08 million (corresponding period of 2010: net profit amountedto Rmb 1.07 million).The 69.7km Jinhua Section of the Ningbo-Jinhua Expressway, operated by ZhejiangJinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company of theCompany), benefited from the introduction of the toll-by-weight system and thenetworking effect of nearby highways during the Period. It recorded an averagedaily traffic volume of 10,850 in full-trip equivalents, while toll incomeamounted to Rmb52.24 million, representing an increase of 27.9% year-on-year.Due to its heavy financial burden, the associate company still incurred a lossof Rmb15.20 million during the Period but the loss is gradually decreasing(corresponding period of 2010: net loss amounted to Rmb19.66 million).JoinHands Technology Co., Ltd. (a 27.582% owned associate company of theCompany) generated its income primarily from its property leasing during thePeriod and up to the date of publication of this announcement. It did not showany improvement to its operations and realized a net loss of Rmb1.04 millionduring the Period (corresponding period of 2010: net loss amounted to Rmb0.77million).FINANCIAL ANALYSIS
Liquidity and Financial Resources
As at March 31, 2011, current assets of the Group amounted to Rmb18,061.62million in aggregate (December 31, 2010: Rmb19,673.10 million), of which bankbalances and cash accounted for 32.0% (December 31, 2010: 30.5%), bank balancesheld on behalf of customers accounted for 54.6% (December 31, 2010: 59.4%), andheld-for-trading investments accounted for 4.9% (December 31, 2010: 4.1%). Thecurrent ratio (current assets over current liabilities) as at March 31, 2011was 1.5 (December 31, 2010: 1.3). Excluding the effect of customer depositsarising from the securities business, the resultant current ratio of the Group(current assets less bank balances held on behalf of customers over currentliabilities less balance of accounts payable to customers arising fromsecurities dealing business) was 3.6 (December 31,2010: 2.6).
During the Period, net cash inflow generated from the Group's operating activities amounted to Rmb378.60 million.
Borrowings and Solvency
As at March 31, 2011, total liabilities of the Group amounted to Rmb13,339.91million(December 31, 2010: Rmb15,956.94 million), of which 12.3% was borrowingsand 73.6% was accounts payable to customers arising from the securities dealingbusiness.
Total interest expenses for the Period amounted to Rmb19.49 million, while profit before interest and tax amounted to Rmb685.54 million. The interest cover ratio (profit before interest and tax over interest expenses) stood at 35.2 (corresponding period of 2010: 47.9).
The asset-liability ratio (total liabilities over total assets) was 41.9% as atMarch 31, 2011 (December 31, 2010: 47.4%). Excluding the effect of customer depositsarising from the securities business, the resultant asset-liability ratio(total liabilities less balance of accounts payable to customers arising fromsecurities dealing business over total assets less bank balances held on behalfof customers) of the Group was 16.0% (December 31, 2010: 19.7%).
Capital Structure
As at March 31, 2011, the Group had Rmb18,525.90 million total equity,Rmb11,109.99 million fixed-rate liabilities, Rmb350.00 million floating-rateliabilities and Rmb1,879.92 million interest-free liabilities, representing58.1%, 34.9%, 1.1% and 5.9% of the Group's total capital, respectively. The gearingratio, which was computed by dividing the total liabilities less accountspayable to customers arising from securities dealing business by total equity,was 19.0% (December 31, 2010: 24.4%).
PROSPECTS
Although China's overall economy maintained a sound operation momentum duringthe first quarter, there are signs that the country's economic growth is facingan initial slowdown as a result of the effective implementation of the State'smacro-economic control policies. Likewise, Zhejiang Province has witnesseddeclining growths of its major economic indices during the first quarter, andthe province's overall economy for the year is expected to be taken as"prudently optimistic".The expected slowdown of the province's economic growth means that the organicgrowth of traffic volumes generated on the Group's two expressways is alsoexpected to slow. However, as the diversions from the Zhuyong Expressway whichwas opened in July 2010 became more stabilized, the affected ShangsanExpressway is expected to end its negative growth in traffic volume in thesecond half of this year. This will mean that the Company will register anewtraffic volume growth for the Shangsan Expressway.Meanwhile, the electronic tolling system, of which Stage One was alreadyimplemented, has received favorable feedback from drivers. We expect tocomplete the installation of the system for an additional 7 toll stations and18 non-stop toll collection lanes within the first half of this year, ahead of the originalschedule. Accordingly, we aim to commence the operation of Stage Two of theelectronic tolling system in the second half of the year. This will furtherupgrade the convenience and efficiency of our service provided to travelingvehicles, and will further raise the traffic capacity of the Group'sexpressways.As to China's securities market, it is true that it has demonstrated an upwardtrend during the first quarter of this year. However, as the government isgradually undertaking currency adjustment measures to curb inflation, thesecurities market is expected to be faced with many more uncertain factors. Inview of an operating environment with intense competition, Zheshang Securitieswill continue to grow its securities sales operations and to optimize thedeployment of its sales network, effectively enhancing its market share so asto offset the impact of declining commission rates upon the profitability ofits brokerage business. Meanwhile, the Company will strive to seek furtherdevelopments of Zheshang Securities through enhancing the core competitivenessof the investment banking business and pursuing a brand building of theprofessional asset management business.Year 2011 is the first year of the commencement of the Twelfth Five-year Plan.The economic environments that we are faced with, both domestic andinternational, are complex and characterized by a number of unstable anduncertain factors. All the same, the management of the Company is confidentthat with the parent company's support, Zhejiang Expressway will be able tofully leverage its investing and financing capabilities, continuouslystrengthening its core expressway business whilst steadily expanding itssecurities business, with a view to creating better operating results for theCompany. By order of the Board Zhejiang Expressway Co.,Ltd. Jisong Chen ChairmanHangzhou, PRC, May 9, 2011
As at the date of this announcement, the executive directors of the Company are:Messrs. Jisong Chen, Xiaozhang Zhan, Wenyao Jiang, Jingzhong Zhang and Huikang Ding;the non-executive director of the Company is: Mrs. Luyun Zhang; and the independentnon-executive directors of the Company are: Messrs. Chee Chen Tung, Junsheng Zhangand Liping Zhang.
An electronic version of the Company's 2011 First Quarterly Results Announcement is available at www.zjec.com.cn.
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