21st Mar 2013 16:53
ZHEJIANG EXPRESSWAY CO LD - 2012 Annual Results AnnouncementZHEJIANG EXPRESSWAY CO LD - 2012 Annual Results Announcement
PR Newswire
London, March 21
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong KongLimited take no responsibility for the contents of this announcement, makeno representation as to its accuracy or completeness and expressly disclaim
any liability whatsoever for any loss howsoever arising from or in relianceupon 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) 2012 Annual Results Announcement-- Revenue amounted to Rmb6,700.26 million, representing a slight decrease of
1.2% year-on-year.
-- Profit attributable to owners of the Company amounted to
Rmb1,686.27 million, representing a decrease of 6.6% year-on-year.
-- Earnings per share was Rmb38.83 cents.
-- A final dividend of Rmb24 cents per share is recommended.
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the"Company") announced the audited consolidated results of the Company and itssubsidiaries (collectively the "Group") for the year ended December 31, 2012(the "Period"), with the basis of preparation as stated in note 1 set out below. RESULTS AND DIVIDENDSDuring the Period, revenue for the Group was Rmb6,700.26 million,representing a slight decrease of 1.2% over 2011. Profit attributable toowners of the Company was Rmb1,686.27 million, representing a decrease of6.6% year-on-year. Earnings per share for the Period was Rmb38.83 cents(2011: Rmb41.57 cents).
The Directors have recommended to pay a final dividend of Rmb24 cents pershare (2011: Rmb25 cents), subject to shareholders' approval at the annualgeneral meeting of the Company. Together with an interim dividend of Rmb6cents per share already paid, the annual dividend payout during the Periodis Rmb30 cents per share (2011: Rmb31 cents).
The audit committee of the Company has reviewed the Group's annual resultsof the Period. Set out below are the audited consolidated statement ofcomprehensive income for the Period and consolidated statement offinancial position as at December 31, 2012, together with the comparativefigures for 2011:
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2012 2011 Notes Rmb'000 Rmb'000 ---------- ---------- Revenue 3 6,700,258 6,781,352Operating costs (4,369,641) (4,077,403) ---------- ---------- Gross profit 2,330,617 2,703,949Securities investment gains 99,783 7,925Other income 4 288,644 281,929Administrative expenses (82,092) (84,380)Other expenses (46,154) (38,565)Share of loss of associates (17,341) (7,035)Share of loss of a jointly controlled entity (3,516) -Finance costs (53,995) (80,043) ---------- ---------- Profit before tax 2,515,946 2,783,780Income tax expense 5 (646,864) (717,838) ---------- ---------- Profit for the year 1,869,082 2,065,942 ---------- ---------- For the year ended December 31, 2012 2011 Note Rmb'000 Rmb'000 ---------- ----------Other comprehensive income (loss)Available-for-sale financialassets:
- Fair value gain (loss) during
the year 4,800 (9,746)- Reclassification adjustments for
cumulative gain included in
profit or loss upon disposal (175) (4,072)Income tax relating to components
of other comprehensive income (1,156) 3,455 ---------- ----------Other comprehensive income (loss)
for the year (net of tax) 3,469 (10,363) ---------- ----------Total comprehensive income for
the year 1,872,551 2,055,579 ============== ==============Profit for the year attributable
to: Owners of the Company 1,686,270 1,805,345 Non-controlling interests 182,812 260,597 ---------- ---------- 1,869,082 2,065,942 ============== ============== Total comprehensive income attributable to: Owners of the Company 1,688,079 1,799,941 Non-controlling interests 184,472 255,638 ---------- ---------- 1,872,551 2,055,579 ============== ==============Earnings per share - basic and
diluted 7 Rmb38.83 cents Rmb41.57 cents ============== ==============CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31, 2012 2011 Note Rmb'000 Rmb'000 ---------- ---------- NON-CURRENT ASSETS Property, plant and equipment 1,357,844 1,294,465 Prepaid lease payments 66,931 68,983 Expressway operating rights 10,732,058 11,364,938 Goodwill 86,867 86,867 Other intangible assets 155,633 157,594 Deposit paid for acquisition of a property - 323,800 Interests in associates 465,513 446,679 Interest in a jointly controlled entity 369,954 - Available-for-sale investments 133,000 1,000 Other receivables 325,035 382,000 ---------- ---------- 13,692,835 14,126,326 ---------- ---------- CURRENT ASSETS Inventories 27,418 26,400 Trade receivables 8 57,847 48,013 Loans to customers arising from margin financing business 724,123 - Other receivables and prepayments 701,627 844,142 Prepaid lease payments 2,052 2,052 Available-for-sale investments 134,899 60,274 Held for trading investments 1,486,772 1,260,021 Financial assets held under resale agreement 280,066 - Bank balances held on behalf of customers 7,491,625 7,177,508 Bank balances and cash - Time deposits with original maturity over three months 1,483,408 2,467,793 - Cash and cash equivalents 3,362,709 3,120,430 ---------- ---------- 15,752,546 15,006,633 ---------- ---------- As at December 31, 2012 2011 Notes Rmb'000 Rmb'000 ---------- ----------CURRENT LIABILITIES
Accounts payable to customers arising from securities business 7,481,819 7,143,067 Trade payables 9 378,364 317,188 Tax liabilities 223,592 491,619 Other taxes payable 53,082 61,753 Other payables and accruals 973,031 724,216 Dividends payable 94,998 94,971 Long-term bonds due in one-year 1,000,000 - Bank loans - 462,553 Derivative financial instrument - 6,426 ---------- ---------- 10,204,886 9,301,793 ---------- ----------NET CURRENT ASSETS 5,547,660 5,704,840 ---------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES 19,240,495 19,831,166 ---------- ---------- NON-CURRENT LIABILITIES Long-term bonds - 1,000,000 Deferred tax liabilities 224,220 232,066 ---------- ---------- 224,220 1,232,066 ---------- ---------- 19,016,275 18,599,100 ============== ============== CAPITAL AND RESERVES Share capital 4,343,115 4,343,115 Reserves 11,177,137 10,835,424 ---------- ---------- Equity attributable to owners of the Company 15,520,252 15,178,539 Non-controlling interests 3,496,023 3,420,561 ---------- ---------- 19,016,275 18,599,100 ============== ============== Notes: 1. Basis of preparationThe consolidated financial statements have been prepared in accordance
with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong
Kong Institute of Certified Public Accountants (the "HKICPA"). In addition,
the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "HKEx") (the "Listing Rules") and by the Hong Kong Companies Ordinance.2. Principal Accounting Policies
The consolidated financial statements have been prepared on the historical
cost basis except for certain financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for goods. In the current year, the Group has applied the following revised HKFRSs issued by the HKICPA: Amendments to HKAS 12 Deferred Tax: Recovery of Underlying Asset; and Amendments to HKFRS 7 Financial Instruments: Disclosures - Transfers of Financial AssetsThe application of the amendments to HKFRSs in the current year has had no
material impact on the Group's financial performance and positions for the
current and prior years and/or on the disclosures set out in these
consolidated financial statements.
The Group has not early applied the following new and revised HKFRSs that
have been issued but are not yet effective: Amendments to HKFRSs Annual Improvements to HKFRSs 2009 - 2011 Cycle (Note 1) Amendments to HKFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities (Note 1) Amendments to HKFRS 9 Mandatory Effective Date of HKFRS 9 and and HKFRS 7 Transition Disclosures (Note 3) Amendments to HKFRS 10, Consolidated Financial Statements, Joint HKFRS 11 and HKFRS 12 Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Note 1) Amendments to HKFRS 10, Investment Entities (Note 2) HKFRS 12 and HKAS 27 HKFRS 9 Financial Instruments (Note 3) HKFRS 10 Consolidated Financial Statements (Note 1) HKFRS 11 Joint Arrangements (Note 1) HKFRS 12 Disclosure of Interests in Other Entities (Note 1) HKFRS 13 Fair Value Measurement (Note 1) HKAS 19 (as revised in 2011) Employee Benefits (Note 1) HKAS 27 (as revised in 2011) Separate Financial Statements (Note 1) HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures (Note 1) Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income (Note 4) Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities (Note 2) HK(IFRIC) - Int 20 Stripping Costs in the Production Phase of a Surface Mine (Note 1) Note 1: Effective for annual periods beginning on or after January 1, 2013 Note 2: Effective for annual periods beginning on or after January 1, 2014 Note 3: Effective for annual periods beginning on or after January 1, 2015 Note 4: Effective for annual periods beginning on or after July 1, 2012 Annual Improvements to HKFRSs 2009 - 2011 Cycle issued in June 2012 The Annual Improvements to HKFRSs 2009 - 2011 Cycle include a number ofamendments to various HKFRSs. The amendments are effective for annual periods
beginning on or after 1 January 2013. Amendments to HKFRSs include the amendments to HKAS 1 Presentation of Financial Statements, amendments to HKAS 16 Property, Plant and Equipment and the amendments to HKAS 32 Financial Instruments: Presentation.HKAS 1 requires an entity that changes accounting policies retrospectively,
or makes a retrospective restatement or reclassification to present a
statement of financial position as at the beginning of the preceding period
(third statement of financial position). The amendments to HKAS 1 clarify
that an entity is required to present a third statement of financial position
only when the retrospective application, restatement or reclassification has
a material effect on the information in the third statement of financial position and that related notes are not required to accompany the third statement of financial position.The amendments to HKAS 16 clarify that spare parts, stand-by equipment and
servicing equipment should be classified as property, plant and equipment
when they meet the definition of property, plant and equipment in HKAS 16
and as inventory otherwise. The directors do not anticipate that the application of the amendments will have a material effect on the Group's consolidated financial statements. The amendments to HKAS 32 clarify that income tax on distributions to holders of an equity instrument and transaction costs of an equitytransaction should be accounted for in accordance with HKAS 12 Income Taxes.
The directors anticipate that the amendments to HKAS 32 will have no effect
on the Group's consolidated financial statements as the Group has already
adopted this treatment.
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities
and amendments to HKFRS 7 Disclosures - Offsetting Financial Assets and
Financial Liabilities
The amendments to HKAS 32 clarify existing application issues relating to
the offset of financial assets and financial liabilities requirements.
Specifically, the amendments clarify the meaning of "currently has a legally
enforceable right of set-off" and "simultaneous realisation and settlement".
The amendments to HKFRS 7 require entities to disclose information about
rights of offset and related arrangements (such as collateral posting
requirements) for financial instruments under an enforceable master netting
agreement or similar arrangement.
The amendments to HKFRS 7 are effective for annual periods beginning on or
after January 1, 2013 and interim periods within those annual periods. The
disclosures should also be provided retrospectively for all comparative
periods. However, the amendments to HKAS 32 are not effective until annual
periods beginning on or after January 1, 2014, with retrospective
application required.
The directors anticipate that the application of these amendments to HKAS 32
and HKFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future. HKFRS 9 Financial InstrumentsHKFRS 9 issued in 2009 introduces new requirements for the classification
and measurement of financial assets. HKFRS 9 amended in 2010 includes the
requirements for the classification and measurement of financial liabilities
and for derecognition. Key requirements of HKFRS 9 are described as follows: -- All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are subsequentlymeasured at amortised cost or fair value. Specifically, debt investments
that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that aresolely payments of principal and interest on the principal outstanding
are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equityinvestment (that is not held for trading) in other comprehensive income,
with only dividend income generally recognised in profit or loss.
-- With regard to the measurement of financial liabilities designated as at
fair value through profit or loss, HKFRS 9 requires that the amount of
change in the fair value of the financial liability that is attributable
to changes in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the effects of changes in
the liability's credit risk in other comprehensive income would create or
enlarge an accounting mismatch in profit or loss. Changes in fair value
of financial liabilities attributable to changes in the financial
liabilities' credit risk are not subsequently reclassified to profit or
loss. Under HKAS 39, the entire amount of the change in the fair value of
the financial liability designated as fair value through profit or loss
was presented in profit or loss.
HKFRS 9 is effective for annual periods beginning on or after January 1, 2015,
with earlier application permitted. The directors anticipate that the adoption of HKFRS 9 in the future willaffect the classification and measurement of the Group's available-for-sale
("AFS") investments but not the Group's financial liabilities. Regarding the
Group's AFS investments, it is not practicable to provide a reasonable
estimate of that effect until a detailed review has been completed.
New and revised standards on consolidation, joint arrangements, associates
and disclosures In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10,HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in
2011).
Key requirements of these five standards that are applicable to the Group are
described below.
HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial
Statements that deal with consolidated financial statements. HK (SIC) -
Int 12 Consolidation - Special Purpose Entities will be withdrawn upon the
effective date of HKFRS 10. Under HKFRS 10, there is only one basis for
consolidation, that is, control. In addition, HKFRS 10 includes a new
definition of control that contains three elements: (a) power over an
investee, (b) exposure, or rights, to variable returns from its involvement
with the investee, and (c) the ability to use its power over the investee to
affect the amount of the investor's returns. Extensive guidance has been added
in HKFRS 10 to deal with complex scenarios.
HKFRS 11 replaces HKAS 31 Interests in Joint Ventures. HKFRS 11 deals with
how a joint arrangement of which two or more parties have joint control
should be classified. HK (SIC) - Int 13 Jointly Controlled Entities -
Non-monetary Contributions by Venturers will be withdrawn upon the effective
date of HKFRS 11. Under HKFRS 11, joint arrangements are classified as joint
operations or joint ventures, depending on the rights and obligations of the
parties to the arrangements. In contrast, under HKAS 31, there are three types
of joint arrangements: jointly controlled entities, jointly controlled assets
and jointly controlled operations. In addition, joint ventures under HKFRS
11 are required to be accounted for using the equity method of accounting,
whereas jointly controlled entities under HKAS 31 can be accounted for using
the equity method of accounting or proportionate consolidation.
HKFRS 12 is a disclosure standard and is applicable to entities that have
interests in subsidiaries, joint arrangements, associates and/or
unconsolidated structured entities. In general, the disclosure requirements
in HKFRS 12 are more extensive than those in the current standards.
In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued
to clarify certain transitional guidance on the application of these five
HKFRSs for the first time. These five standards, together with the amendments relating to the transitional guidance, are effective for annual periods beginning on orafter January 1, 2013 with earlier application permitted provided that all
of these standards are applied at the same time.
The directors anticipate that these five standards will be adopted in the
Group's consolidated financial statements for the annual period beginning
January 1, 2013. The application of these five standards is not expected to
have material impact on amounts reported in the consolidated financial statements. HKFRS 13 Fair Value MeasurementHKFRS 13 establishes a single source of guidance for fair value measurements
and disclosures about fair value measurements. The standard defines fair
value, establishes a framework for measuring fair value, and requires
disclosures about fair value measurements. The scope of HKFRS 13 is broad;
it applies to both financial instrument items and non-financial instrument
items for which other HKFRSs require or permit fair value measurements and
disclosures about fair value measurements, except in specified circumstances.
In general, the disclosure requirements in HKFRS 13 are more extensive than
those in the current standards. For example, quantitative and qualitative
disclosures based on the three-level fair value hierarchy currently required
for financial instruments only under HKFRS 7 Financial Instruments:
Disclosures will be extended by HKFRS 13 to cover all assets and liabilities
within its scope.
HKFRS 13 is effective for annual periods beginning on or after January 1,
2013, with earlier application permitted. The directors anticipate that the
application of the new standard may affect certain amounts reported in the
consolidated financial statements and result in more extensive disclosures
in the consolidated financial statements.
3. Segment Information
Information reported to the Chief Executive Officer of the Company, being
the chief operating decision maker, for the purposes of resource allocation
and assessment of segment performance focuses on types of goods or services
delivered or provided. Specifically, the Group's reportable and operating segments under HKFRS 8 are as follows: (i) Toll operation - the operation and management of high grade roads and the collection of the expressway tolls. (ii) Service area and advertising businesses - the sale of food, restaurant operation, automobile servicing, operation of petrol stations and design and rental of advertising billboards along the expressways.(iii) Securities operation - the securities broking, margin financing and
securities lending services and proprietary trading. Segment revenue and resultsThe following is an analysis of the Group's revenue and results by reportable
and operating segment. For the year ended December 31, 2012 Service area and Toll advertising Securities Total operation businesses operation Segment Elimination Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 ---------- ----------- ----------- ---------- ----------- ----------- Revenue External sales 3,548,692 2,025,429 1,126,137 6,700,258 - 6,700,258 Inter-segment sales - 7,919 - 7,919 (7,919) - ---------- ----------- ----------- --------------------- -----------
Total 3,548,692 2,033,348 1,126,137 6,708,177(7,919) 6,700,258
========== =========== =========== ===================== ===========
Segment profit 1,637,244 66,169 165,669 1,869,082 1,869,082 ========== =========== =========== ========== =========== For the year ended December 31, 2011 Service area and Toll advertising Securities Total operation businesses operation Segment Elimination Total Rmb'000 Rmb'000 Rmb'000 Rmb'000Rmb'000 Rmb'000
---------- ----------- ----------- ---------- ----------- ----------- Revenue External sales 3,522,510 1,916,564 1,342,278 6,781,352 - 6,781,352 Inter-segment sales - 8,004 - 8,004 (8,004) - ---------- ----------- ----------- ---------- ----------- ----------- Total 3,522,510 1,924,568 1,342,278 6,789,356(8,004) 6,781,352
========== =========== =========== ===================== ===========
Segment profit 1,695,078 71,763 299,101 2,065,942 2,065,942 ========== =========== =========== ========== ===========Segment profit represents the profit after tax of each operating segment.
This is the measure reported to the chief operating decision maker, the
Group's Chief Executive Officer, for the purposes of resource allocation
and performance assessment. Inter-segment sales are charged at prevailing market rates. Segment assets and liabilities The following is an analysis of the Group's assets and liabilities by reportable and operating segment: Segment assets Segment liabilities As at December 31, As at December 31, 2012 2011 2012 2011 Rmb'000 Rmb'000 Rmb'000 Rmb'000 ---------- ---------- ---------- ---------- Toll operation 15,458,159 15,636,388 (2,402,463) (2,806,522)Service area and advertising
businesses 553,479 597,281 (157,674) (231,303) Securities operation 13,346,876 12,812,423 (7,868,969) (7,496,034) ---------- ---------- ---------- ---------- Total segment assets (liabilities) 29,358,514 29,046,092 (10,429,106) (10,533,859) Goodwill 86,867 86,867 - - ---------- ---------- ---------- ---------- Consolidated assets (liabilities) 29,445,381 29,132,959 (10,429,106) (10,533,859) ========== ========== ============ ============Segment assets and segment liabilities represent the assets and liabilities
of the subsidiaries operating in the respective reportable and operating segment.
Other segment information Amounts included in the measure of segment profit or segment assets: Service area and Toll advertising Securities operation businesses operation Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 ---------- ----------- ---------- ----------For the year ended December 31, 2012
------------------------------------
Income tax expense 567,031 19,710 60,123 646,864 Interest income 138,924 10,693 29,282 178,899 Interest expense 53,749 246 - 53,995 Interests in associates 185,456 234,005 46,052 465,513 Interest in a jointly controlled entity 369,954 -- 369,954
Share of result of associates (12,827) 7,366(11,880) (17,341)
Share of loss of a jointly controlled entity (3,516) - - (3,516) Gain on fair value changes on held for trading investments 10,290 -89,318 99,608
Additions to non-current assets (Note) 604,822 14,333 105,406 724,561
Depreciation and amortisation 742,318 28,62496,298 867,240
Loss on disposal of property,
plant and equipment 4,722 1,223 250 6,195 ========== =========== ========== ========== Service area and Toll advertising Securities operation businesses operation Total Rmb'000 Rmb'000 Rmb'000 Rmb'000 ---------- ----------- ---------- ----------For the year ended December 31, 2011
------------------------------------
Income tax expense 575,759 24,281 117,798 717,838 Interest income 112,843 28,344 - 141,187 Interest expense 69,650 10,393 - 80,043 Interests in associates 198,285 236,386 12,008 446,679 Share of result of associates (15,968) 19,566(10,633) (7,035)
Gain on fair value changes on held
for trading investments 6,800 -(2,947) 3,853
Additions to non-current assets (Note) 239,949 21,258 414,792 675,999
Depreciation and amortisation 740,363 28,69692,573 861,632
Impairment loss on interest in an associate - 11,979
- 11,979
(Gain) loss on disposal of property,
plant and equipment (528) 164 308 (56) ========== =========== ========== ========== ---------- ----------- ---------- ---------- Note: Non-current assets excluded financial instruments. Revenue from major services An analysis of the Group's revenue, net of discounts and taxes, for the year is as follows: Year ended December 31, 2012 2011 Rmb'000 Rmb'000 ---------- ---------- Toll operation revenue 3,548,692 3,522,510 Service area businesses revenue (mainly sales of goods) 1,934,501 1,834,422 Advertising business rental revenue 90,473 81,765 Commission income from securities operation 832,213 985,754 Interest income from securities operation 293,924 356,524 Others 455 377 ---------- ---------- Total 6,700,258 6,781,352 =========== =========== Geographical informationThe Group's operations are located in the PRC (country of domicile). All
non-current assets of the Group are located in the PRC. All of the Group's revenue from external customers is attributed to the group entities' country of domicile (i.e., the PRC). Information about major customers During the years ended December 31, 2012 and 2011, there are no individual customer with sales over 10% of the total sales of the Group. 4. Other Income Year ended December 31, 2012 2011 Rmb'000 Rmb'000 --------- --------- Interest income on bank balances, entrusted loan receivables and financial products investment 159,532 141,187 Rental income 72,335 69,165 Handling fee income 5,685 24,526 Towing income 9,303 8,782 Other interest income 19,367 - Gain on disposal of an associate 12 - Exchange (loss) gain, net (2,155) 8,672 Fair value gain on derivative financial instrument 2,841 - Others 21,724 29,597 ---------- ---------- Total 288,644 281,929 =========== =========== 5. Income Tax Expense Year ended December 31, 2012 2011 Rmb'000 Rmb'000 --------- --------- Current tax: PRC Enterprise Income Tax 655,910 750,856 Deferred tax (9,046) (33,018) ---------- ---------- 646,864 717,838 =========== =========== 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%. No Hong Kong Profits Tax has been provided as the Group's income neither arises in, nor is derived from Hong Kong during the year. The tax charge for the year can be reconciled to the profit before tax per the consolidated statement of comprehensive income as follows: Year ended December 31, 2012 2011 Rmb'000 Rmb'000 --------- --------- Profit before tax 2,515,946 2,783,780 =========== =========== Tax at the PRC enterprise income tax rate of 25% 628,987 695,945 Tax effect of share of loss of associates 4,335 1,759 Tax effect of share of loss of a jointly controlled entity 879 - Tax effect of income not taxable for tax purposes (17) (16) Tax effect of expenses not deductible for tax purposes 12,680 20,150 ---------- ---------- Tax charge for the year 646,864 717,838 =========== =========== 6. Dividends 2012 2011 Rmb'000 Rmb'000 Dividends recognised as ---------- ---------- distribution during the year: 2012 Interim - Rmb6 cents (2011: 2011 interim Rmb6 cents) per share 260,587 260,587 2011 Final - Rmb25 cents (2011: 2010 Final Rmb25 cents) per share 1,085,779 1,085,779 ---------- ---------- 1,346,366 1,346,366 =========== =========== The final dividend of Rmb24 cents per share in respect of the year ended December 31, 2012 (2011: final dividend of Rmb25 cents per share in respect of the year ended December 31, 2011) has been proposed by the directors and is subject to approval by the shareholders in the annual general meeting. 7. Earnings per share The calculation of the basic earnings per share is based on profit for the year attributable to owners of the Company of Rmb1,686,270,000 (2011: Rmb1,805,345,000) and the 4,343,114,500 (2011: 4,343,114,500) ordinary shares in issue during the year. Diluted earnings per share presented is the same as basic earnings per share as there were no potential ordinary shares outstanding for the years ended December 31, 2012 and 2011. 8. Trade Receivables The Group has no credit period granted to its trade customers of toll operation and service area businesses. The following is an aged analysis of trade receivables presented based on the invoice date at the end of the reporting period, which approximated the respective revenue recognition dates: As at December 31, 2012 2011 Rmb'000 Rmb'000 --------- --------- Within 3 months 57,538 47,742 3 months to 1 year - - 1 to 2 years 146 - Over 2 years 163 271 --------- --------- Total 57,847 48,013 ========= ========= 9. Trade payables Trade payables mainly represent the construction payables for the improvement projects of toll expressways. The following is an aged analysis of trade payables presented based on the invoice date: As at December 31, 2012 2011 Rmb'000 Rmb'000 ---------- ---------- Within 3 months 227,946 93,602 3 months to 1 year 35,678 32,295 1 to 2 years 26,876 116,005 2 to 3 years 48,922 58,618 Over 3 years 38,942 16,668 ---------- ---------- Total 378,364 317,188 ========= ========= BUSINESS REVIEW Despite that China's economy remained generally stable in 2012, its macro-economic growth was under greater downward pressure as a result of persistent deterioration of the European sovereign debt crisis and significant slowdown in the global economic growth. As a result, China's GDP grew by 7.8% over 2012. Moreover, although Zhejiang's economy, which relied heavily on foreign trade, was hit by weakened overseas import and export markets, the province's economic growth rate showed signs of stabilization in the second half of the year. Its GDP increased by 8.0% year-on-year during the Period, 2 percentage points higher than that of the national level. As a result of some ongoing uncertainties in the macro environment, including weakened foreign trade and sluggish domestic consumption, organic growth in the traffic volume on the Group's expressways tended to decelerate, and revenue from the toll road operations was also undermined by the implementation of certain new policies during the year. Impacted by the gloomy Chinese domestic stock market, revenue from the securities business fell significantly year-on-year during the period. Therefore, revenue from the Group's overall operations fell slightly year-on-year as well, with a total income of Rmb6,898.43 million, representing a decrease of 1.1% year-on-year; of which Rmb3,670.89 million was attributable to the two major expressways operated by the Group, representing 53.2% of the total income; Rmb2,046.67 million was attributable to the Group's toll road-related businesses such as service area operations, gas stations, advertising business and so forth, representing 29.7% of the total income; and Rmb1,180.87 million was attributable to the securities business, representing 17.1% of the total income. A breakdown of the Group's income for the Period is set out below: 2012 2011 Rmb'000 Rmb'000 % Change ---------- ---------- Toll income Shanghai-Hangzhou-Ningbo Expressway 2,968,396 2,954,949 0.5% Shangsan Expressway 702,489 688,984 2.0% Other income Service areas 1,941,924 1,842,206 5.4% Advertising 104,276 89,756 16.2% Road maintenance 471 377 24.9% Securities business income Commission 886,946 1,044,415 -15.1% Bank interest 293,924 356,524 -17.6% ---------- ---------- Subtotal 6,898,426 6,977,211 -1.1% Less: Revenue taxes (198,168) (195,859) 1.2% ---------- ---------- Revenue 6,700,258 6,781,352 -1.2% ========== ========== TOLL ROAD OPERATIONSAs Zhejiang's economy showed signs of stabilization and recovery inthe third and fourth quarters, organic growth in the traffic volumeon the Group's expressways during the Period was also slightly betterthan that 2011. In particular, growth in the traffic volume onShangsan Expressway, along which most of the enterprises are smalland medium sized, picked up faster. However, upon the implementationof the toll-by-weight policy, the rapid growth in the number of largevehicles such as container trucks resulted in an overall decliningnumber of small and medium sized trucks. This in turn led to acontinued decline in the proportion of trucks to total trafficvolume, and an increase in toll income from expressways being lessthan the increase in traffic volume during the Period.
Meanwhile, since the implementation of the tolling policy based onactual travel routes in Zhejiang Province on May 15, 2012, theCompany adopted a number of measures of promotion and guidance inorder to achieve greater growth in traffic volume on some sectionsof the Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway.
However, the abolition of the "Unified Toll Card" policy onJanuary 1, 2012, the adjustment to the rounding of the last figuresof tolls for passenger vehicles on May 15, 2012 and the launch ofthe policy for adjusting passenger vehicle classification onAugust 1, 2012 resulted in a slight decrease in the Group's tollincome, resulted in a total loss of approximately 3.2% in tollincome for the whole year. The implementation of the new policyon September 30, 2012 for exemption from toll charges of passengervehicles with seven seats and less travelling on expresswaysduring major festivals and holidays led to a total decrease ofapproximately Rmb58.00 million in the Group's toll revenue duringthe Period, equivalent to a decrease of approximately 1.6% in tollincome for the whole year.
Tackling the challenging toll road operations in 2012, the Groupcontinued to commit more resources to operational andmanagement facilities for enhancing service quality and raisingtolling efficiency, while further strengthening the initiativesfor reducing costs, increasing benefits and income as well asplugging loopholes. During the Period, the constructionof the second phase project for ETC (Electronic Toll Collection)lanes was completed ahead of the National Day long holiday to ensurethat all ETC lanes at the toll stations along the Group'sexpressways were opened to traffic smoothly prior to the NationalDay long holiday, as part of our efforts to deliver safe and smoothdriving during the holiday season.
Average daily traffic volume in full-trip equivalents along theGroup's Shanghai- Hangzhou-Ningbo Expressway was 41,963 during thePeriod, representing an increase of 3.8% year-on-year. Inparticular, average daily traffic volume in full-trip equivalentsalong the Shanghai-Hangzhou Section of the Shanghai-Hangzhou-NingboExpressway was 42,659, representing an increase of 4.9% year-on-year,and that along the Hangzhou-Ningbo Section was 41,466, representingan increase of 3.0% year-on-year. Average daily traffic volume infull-trip equivalents along the Shangsan Expressway was 16,787 duringthe Period, representing an increase of 2.7% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-NingboExpressway and the 142km Shangsan Expressway amounted toRmb3,670.89 million during the Period, representing an increase of0.7% year-on-year. In respect of such income, toll income from theShanghai-Hangzhou-Ningbo Expressway amounted to Rmb2,968.40 million,representing an increase of 0.5% year-on-year while toll income fromthe Shangsan Expressway amounted to Rmb702.49 million, representingan increase of 2.0% year-on- year.
TOLL ROAD-RELATED BUSINESS OPERATIONS
The Company also operates certain toll road-related businessesalong its expressways through its subsidiaries and associatedcompanies, including gas stations, restaurants and shops in serviceareas, as well as roadside advertising and vehicle service businesses.
During the Period, the number of customers at service areas along theexpressways decreased as a result of slackened growth in trafficvolume along the Group's two expressways, the impact of trafficdiversions from the Shaoxing Section of Shanghai- Hangzhou-NingboExpressway following the opening of the Shaozhu Expressway, and theclosure of Yuyao Service Area for expansion construction work sinceJune.
Meanwhile, sales of refined oil products continued to increaseyear-on-year on the rising prices of these products. Accordingly,income from overall toll road-related businesses amounted toRmb2,046.67 million during the Period, representing a year-on-yearincrease of 5.9%.
SECURITIES BUSINESSAlthough China's stock market rebounded in the last month of2012 and shown a hint of stabilizing, the aggregate trading volumenevertheless fell by approximately 25% year-on-year as the marketfluctuated downward throughout 2012, which continued to dampeninvestor sentiment. Meanwhile, benefiting from the new commissionpolicy - the "Notice on Further Strengthening Customer Servicesand the Management of Securities Trading Commissions of SecuritiesFirms" implemented in early 2011, the decline in the commissionrate has begun to stabilize and has remained basically unchangedyear-on-year.
Hit by the repeated volatility at low levels in the stockmarket, revenue from Zheshang Securities' securities brokeragebusiness, investment banking and asset management businesses showeddeclines in varying degrees year-on-year during the Period.
Nevertheless, Zheshang Securities continued to increase the numberof its branches and the total number of customers, and acceleratedthe launch of the margin trading business for further expandingnew business capabilities. Zheshang Securities had 64 securitiessales outlets during the Period, an increase of six outletsyear-on-year.
During the Period, Zheshang Securities realized an operatingincome of Rmb1,180.87 million, a decrease of 15.7% year-on-year.Of such income, brokerage commission income amounted toRmb886.95 million, a year-on-year decrease of 15.1%; and interestincome from the securities business amounted to Rmb293.92 million,a year-on-year decrease of 17.6%. Moreover, securities investmentgains from Zheshang Securities accounted for in the consolidatedstatement of comprehensive income amounted to Rmb89.49 millionduring the Period.
LONG-TERM INVESTMENTSZhejiang Expressway Petroleum Development Co., Ltd. (a 50% ownedassociate company of the Company) benefited from a rise in theretail prices of petroleum products and a growth in the sales ofpetroleum products during the Period, the associate companyrealized an income of Rmb6,090.71 million during the Period,representing an increase of 18.5% year-on-year. During the Period,net profit of the associate company amounted to Rmb15.02 million(2011: net profit of 14.71 million).
The growth of traffic volume of the 69.7km Jinhua Section ofthe Yongjin Expressway, operated by Zhejiang Jinhua YongjinExpressway Co., Ltd. (a 23.45% owned associate company of theCompany), declined during the Period as domestic economic growthslowed down. This section recorded an average daily traffic volumeof 12,084 in full- trip equivalents, an increase of 12.2%year-on-year, while toll income amounted to Rmb231.48 million,an increase of 6.1% year-on-year. Due to its heavy financialburden, the associate company still incurred a loss ofRmb54.70 million during the Period (2011: a loss ofRmb68.10 million).
JoinHands Technology Co., Ltd. (a 27.582% owned associatecompany of the Company) generated its income primarily from itsproperty leasing activities. As the associate company did notmake any significant improvements to its operations, it incurreda net profit of Rmb0.15 million during the Period (2011: a lossof Rmb1.81 million).
The Company entered into a transfer agreement with GuangzhouKaixin Consulting Co., Ltd. ("Kaixin Company") in July 2011.As Kaixin Company has failed to pay the consideration for theequity interest transfer according to the terms of the contract,the Company lodged a lawsuit against Kaixin Company. OnMarch 23, 2012, the court ruled that Kaixin Company pay theremaining consideration of Rmb28.587 million for the equityinterest transfer and liquidated damages. The Company continuedto appeal against the said percentage of the liquidated damagesand the dismissed priority right for claim against the mortgagedreal estate of JoinHands Technology. The case is pending a finaljudgment to be made by the Intermediate People's Court inHangzhou City.
Shengxin Expressway Co., Ltd. ("Shengxin Company", a jointlycontrolled entity in which the Company owns a 50% equity interest)operates the Shaoxing Section of the 73.4km Ningbo-JinhuaExpressway. On July 6, 2012, the Company entered into a transferagreement with Shaoxing Communications Investment Group Co., Ltd.("SXCI") for the acquisition of a 50% equity interest in ShengxinCompany, a wholly- owned subsidiary of SXCI, for a cashconsideration of Rmb355.03 million plus interest accrued on theconsideration. As at November 30, 2012, the Company had completedthe industrial and commercial changes of registration to ShengxinCompany. In December 2012, Shengxin Company's profit was accountedfor in the Group's consolidated income statement. As atDecember 2012, toll revenue from the jointly controlled entityamounted to Rmb23.91 million, and loss amounted to Rmb7.03 million.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provideshareholders of the Company with sound returns over the long term.
During the Period, profit attributable to owners of the Companyfor the year was approximately Rmb1,686.27 million, representing adecline of 6.6% year-on-year, return on owners' equity was 10.9%,representing a decline of 8.7% year-on-year, while earnings pershare for the Company was Rmb38.83 cents.
Liquidity and Financial Resources
As at December 31, 2012, current assets of the Group amounted toRmb15,752.55 million in aggregate (2011: Rmb15,006.63 million),of which bank balances and cash accounted for 30.8% (2011: 37.2%),bank balances held on behalf of customers accounted for 47.6%(2011: 47.8%), and held-for-trading investments accounted for9.4% (2011: 8.4%). Current ratio (current assets over currentliabilities) of the Group as at December 31, 2012 was 1.5(2011: 1.6). Excluding the effect of customer deposits arising fromthe securities business, the resultant current ratio of the Group(current assets less balance of cash held on behalf of customersover current liabilities less balance of accounts payable to customerarising from securities business) was 3.0 (2011:3.6).
The amount for held-for-trading investments of the Group as atDecember 31, 2012 amounted to Rmb1,486.77 million(2011: Rmb1,260.02 million), of which 97.6% was invested in bonds,0.6% was invested in stocks, and the rest was invested in open-endequity funds.
During the Period, net cash inflow generated from the Group'soperating activities amounted to Rmb1,537.71 million.
The Directors do not expect the Company to experience anyproblem with liquidity and financial resources in the foreseeablefuture.
Borrowings and SolvencyAs at December 31, 2012, total liabilities of the Group amountedto Rmb10,429.11 million, of which 9.6% was corporate bonds and71.7% was payables to customers arising from securities business.
Total interest-bearing borrowings of the Group as atDecember 31, 2012 amounted to Rmb1 billion, representing a decreaseof 31.6% comparing to that as at December 31, 2011. The borrowingswas totally corporate bonds amounting to Rmb1 billion which wasissued by the Company in 2003 with a term of 10 years. The annualcoupon rate for corporate bonds was fixed at 4.29%, with interestpayable annually. On January 24, 2013, the principal and relevantinterests of the corporate bonds have been fully repaid. Besides,the annual interest rate for accounts payable to customer arisingfrom the securities business was fixed at 0.35%.
Total interest expenses for the Period amounted to Rmb54.00 million,while profit before interest and tax amounted to Rmb2,569.94 million.The interest cover ratio (profit before interest and tax overinterest expenses) stood at 47.6 times (2011: 35.8).
The asset-liability ratio (total liabilities over total assets) was
35.4% as at December 31, 2012 (December 31, 2011: 36.2%).Excluding the effect of customer deposits arising from thesecurities business, the resultant asset-liability ratio (totalliabilities less balance of accounts payable to customer arisingfrom securities business over total assets less balance of cashheld on behalf of customers) of the Group was 13.4%(December 31, 2011: 15.4%).
Capital StructureAs at December 31, 2012, the Group had Rmb19,016.28 million intotal equity, Rmb8,481.82 million in fixed-rate liabilities andRmb1,947.29 million in interest- free liabilities, representing64.6%, 28.8% and 6.6% of the Group's total capital, respectively.The gearing ratio, which was computed by dividing the totalliabilities less accounts payable to customer arising fromsecurities business by total equity, was 15.5% as atDecember 31, 2012 (December 31, 2011: 18.2%).
Capital Expenditure Commitments and Utilization
During the Period, capital expenditures of the Group totaledRmb724.56 million, while capital expenditure of the Companytotaled Rmb467.96 million. Amongst the total capital expendituresof the Group, Rmb373.47 million was incurred for acquiring50% equity interest in Shengxin Company, Rmb50.00 million wasincurred for capital increase of Zheshang Fund Management Co., Ltd.(an associate of Zheshang Securities that held 25% equity interest),Rmb120.30 million was incurred for acquisition and constructionof properties, Rmb162.33 million was incurred for purchase andconstruction of equipment and facilities, and Rmb12.39 millionwas incurred for service area renovation and expansion,Rmb6.07 million was incurred for the road widening projectbetween the Shaoxing-Zhuji hub of the Shangsan Expressway.
As at December 31, 2012, capital expenditures committed bythe Group and the Company totaled Rmb1,086.40 million andRmb450.08 million, respectively. Amongst the total capitalexpenditures committed by the Group, Rmb497.05 million willbe used for acquisition and construction of properties,Rmb238.50 million for acquisition and construction of equipmentand facilities, Rmb70.85 million for service area renovationand expansion and Rmb280.00 million for investment in an associate.
The Group will finance the above mentioned capitalexpenditure commitments mainly with internally generated cashflow and will consider using debt financing to meet anyshortfalls in priority to using other methods.
Contingent Liabilities and Pledge of Assets
As at December 31, 2012, the Group did not have any contingentliabilities nor any pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the repayment of a domestic foreign bank loan in HongKong dollars amounting to an equivalent of Rmb312.51 millionand dividend payments to the holders of H shares in Hong Kongdollars, the Group's principal operations were transacted andbooked in Renminbi.
With an aim to hedge against foreign exchange risks arising from
borrowings denominated in Hong Kong dollars, the Group purchasedHong Kong dollar equivalent forward contracts with one-year termat a rate lower than the spot exchange rate on the borrowing datein the year of 2011. The transaction completed on May 31, 2012.Other than the above, the Group has not used other financialinstruments for hedging purposes during the Period.
Although the Directors do not foresee any material foreign exchangerisks for the Group, there is no assurance that foreign exchangerisks will not affect the operating results of the Group in thefuture.
OUTLOOKDue to influences by the macro and regional economic developmenton the overall performance of toll road operations, it isanticipated that the domestic economy will maintain steadydevelopment in 2013 under the government's macro-controlinitiatives. In addition, based on available data, it issuggested that Zhejiang's economy is stabilising and improving,which would be conducive to the continued organic growth in thetraffic volume on the Group's expressways in 2013.
Meanwhile, Jiaxing-Shaoxing Expressway, which is scheduled toopen in the second half of 2013, is anticipated to create aslight negative impact on the Group's Shanghai- Hangzhou-NingboExpressway, but a greater boost to the traffic volume on theGroup's Shangsan Expressway. As the income and profitcontribution from Shangsan Expressway is smaller than that fromShanghai-Hangzhou-Ningbo Expressway, the opening of theJiaxing-Shaoxing Expressway is unlikely to significantly impacton the Group's toll income for the whole year overall.
Moreover, as a new round of quantitative easing policies isbeing launched globally, it is expected that China may makeappropriate adjustments to its monetary policy in 2013, whichmay provide new impetus to the sluggish Chinese securitiesmarket. This will help Zheshang Securities to seize anopportunity in that while strengthening cost control and riskcontrol, Zheshang Securities will further develop innovativebusiness, broaden the sources of income and speed up the processof the proposed listing of its shares on the Shanghai StockExchange to address the challenges posed by market environmentand intense competition for facilitating the sound developmentof the securities business.
Looking ahead in 2013, the world economy is expected to remainin a major adjustment period; the Chinese domestic economy isseeking a new balance in its development and the impact ofnational policies on the toll road industry will continue. Allof these factors have added to uncertainty to the Group'sbusiness development.
However, the Company's management also observed that a numberof positive factors are emerging as well: strengthened U.S.economic recovery; China's implementation of the four majornational strategies and commencement of the four majorconstruction projects in Zhejiang Province at full speed, whichwill present a rare opportunity for the Group's development.In addition to continuous consolidation of the Group'sprincipal expressway business as well as advancing thesecurities and financial business, the Group will also beactively seeking suitable investment projects and nurturingmanagement capabilities on diversified businesses. The Groupwill also utilize its financial resources advantage togenerate strategic synergies with its parent company forexpanding development space and improving profitability infuture.
Purchase, Sale and Redemption of the Company's Shares
Neither the Company nor any of its subsidiaries hadpurchased, sold, redeemed or cancelled any of the Company'sshares during the Period.
Compliance with Listing Rules Appendix 14
During the period, the Company has complied with all codeprovisions in the Corporate Governance Code and CorporateGovernance Report (the "Code") set out in Appendix14 to the Listing Rules, and has adopted the recommendedbest practices in the Code as and when applicable.
By order of the Board Zhejiang Expressway Co., Ltd. Zhan Xiaozhang ChairmanHangzhou, PRC, March 19, 2013
As at the date of this announcement, the executive directorsof the Company are: Messrs. ZHAN Xiaozhang, LUO Jianhu andDING Huikang; the non-executive directors of the Company are:Messrs. LI Zongsheng, WANG Weili and WANG Dongjie; and theindependent non-executive directors of the Company are:Messrs. ZHANG Junsheng, ZHOU Jun and PEI Ker-Wei.
Statement:
A full electronic version of the Company's 2012 AnnualResults Announcement is available at www.zjec.com.cn
Related Shares:
ZHEH.L