2010 Annual Results Announcement
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 Annual Results Announcement
Change in Company Secretary
-- Revenue amounted to Rmb6,769.06 million, representing an increase of 12.1%
year-on-year.
-- Profit attributable to owners of the Company amounted to Rmb1,871.50
million, representing an increase of 4.2% year-on-year.
-- Earnings per share was Rmb43.09 cents.
-- A final dividend of Rmb25 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 its
subsidiaries (collectively the "Group") for the year ended December 31, 2010
(the "Period"), with the basis of preparation as stated in note 1 set out
below.
RESULTS AND DIVIDENDS
During the Period, revenue for the Group was Rmb6,769.06 million, representing
an increase of 12.1% over 2009. Profit attributable to owners of the Company
was Rmb1,871.50 million, representing an increase of 4.2% year-on-year.
Earnings per share for the Period was Rmb43.09 cents (2009: Rmb41.34 cents).
The Directors have recommended to pay a final dividend of Rmb25 cents per share
(2009: Rmb25 cents), subject to shareholders' approval at the annual general
meeting of the Company to be held on May 9, 2011. Together with an interim
dividend of Rmb6 cents per share already paid, the annual dividend payout
during the Period is Rmb31 cents per share (2009: Rmb31 cents).
The audit committee of the Company has reviewed the Group's annual results of
the Period. Set out below are the audited consolidated statement of
comprehensive income for the Period and consolidated statement of financial
position as at December 31,2010, together with the comparative figures for
2009:
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
December 31,
2010 2009
Notes Rmb'000 Rmb'000
Revenue 3 6,769,064 6,036,294
Operating costs (3,760,494) (3,145,294)
--------- ---------
Gross profit 3,008,570 2,891,000
Securities investment gains 126,532 35,967
Other income 4 199,791 426,280
Administrative expenses (83,189) (69,845)
Other expenses (21,904) (133,640)
Share of profit (loss) of associates 2,453 (24,164)
Share of profit of a jointly controlled
entity -- 21,254
Finance costs (120,979) (62,724)
--------- ---------
Profit before tax 3,111,274 3,084,128
Income tax expense 5 (798,785) (840,055)
--------- ---------
Profit for the year 2,312,489 2,244,073
--------- ---------
Other comprehensive (loss) income
Available-for-sale financial assets
- Fair value gain during the year 14,342 34,234
- Reclassification adjustments for
cumulative gain included in profit
or loss upon disposal (25,052) (13,632)
Income tax relating to components of
other comprehensive income 2,678 (5,150)
--------- ---------
Other comprehensive (loss) income for
the year (net of tax) (8,032) 15,452
--------- ---------
Total comprehensive income for the year 2,304,457 2,259,525
========= =========
Profit for the year attributable to:
Owners of the Company 1,871,499 1,795,488
Non-controlling interests 440,990 448,585
--------- ---------
2,312,489 2,244,073
========= =========
Total comprehensive income for the year
attributable to:
Owners of the Company 1,867,332 1,803,504
Non-controlling interests 437,125 456,021
--------- ---------
2,304,457 2,259,525
========= =========
EARNINGS PER SHARE-BASIC 7 Rmb43.09 Rmb41.34
cents cents
========= =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31,
2010 2009
Notes Rmb'000 Rmb'000
NON-CURRENT ASSETS
Property, plant and equipment 1,120,626 1,035,628
Prepaid lease payments 71,035 30,342
Expressway operating rights 12,071,497 12,755,338
Goodwill 86,867 86,867
Other intangible assets 155,020 154,819
Interests in associates 472,910 435,007
Available-for-sale investments 1,000 1,000
---------- ----------
13,978,955 14,499,001
---------- ----------
CURRENT ASSETS
Inventories 17,715 17,342
Trade receivables 8 50,768 50,570
Other receivables 953,153 451,167
Prepaid lease payments 2,052 1,421
Available-for-sale investments 71,928 54,704
Held for trading investments 803,772 517,895
Financial assets held under resale
agreement 80,163 --
Bank balances held on behalf of customers 11,685,951 11,532,284
Bank balances and cash
- Restricted bank balances -- 942
- Time deposits with original maturity
over three months 325,545 228,452
- Cash and cash equivalents 5,682,053 5,049,003
---------- ----------
19,673,100 17,903,780
---------- ----------
CURRENT LIABILITIES
Accounts payable to customers arising
from securities dealing business 11,631,030 11,502,930
Trade payables 9 548,695 647,373
Tax liabilities 450,708 512,551
Other taxes payable 51,002 30,492
Other payables and accruals 1,049,301 637,665
Dividends payable 120,319 18
Interest-bearing bank and other loans 822,000 478,055
Provisions 10 21,238 122,477
---------- ----------
14,694,293 13,931,561
---------- ----------
NET CURRENT ASSETS 4,978,807 3,972,219
---------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 18,957,762 18,471,220
---------- ----------
NON-CURRENT LIABILITIES
Interest-bearing bank and other loans -- 144,329
Long-term bonds 1,000,000 1,000,000
Deferred tax liabilities 262,647 262,037
---------- ----------
1,262,647 1,406,366
---------- ----------
17,695,115 17,064,854
========== ==========
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 10,380,137 9,840,505
---------- ----------
Equity attributable to owners of
the Company 14,723,252 14,183,620
Non-controlling interests 2,971,863 2,881,234
---------- ----------
17,695,115 17,064,854
========== ==========
Notes:
1. Basis of Preparation
The consolidated financial statements have been prepared in accordance with
Hong Kong Financial Reporting Standards 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 value.
Historical cost is generally based on the fair value of the consideration given
in the exchange for goods.
The accounting policies used in the consolidated financial statements are
consistent with those applied in the preparation of the Group's annual
financial statements for the year ended December 31, 2009 except as described
below.
In the current year, the Group has applied the following new and revised
standards and interpretations issued by the HKICPA.
HKFRS 2 (Amendments) Group Cash-settled Share-based Payment
Transactions
HKFRS 3 (as revised in 2008) Business Combinations
HKAS 27 (as revised in 2008) Consolidated and Separate Financial
Statements
HKAS 39 (Amendments) Eligible Hedged Items
HKFRSs (Amendments) Improvements to HKFRSs issued in
2009
HKFRSs (Amendments) Amendments to HKFRS 5 as part of
Improvements to HKFRSs issued in
2008
HK(IFRIC) - Int 17 Distributions of Non-cash Assets to
Owners
HK - Int 5 Presentation of Financial
Statements - Classification by the
Borrower of a Term Loan that
Contains a Repayment on Demand
Clause
Except as described below, the application of the new and revised standards and
interpretations in the current year has had no material effect on the
consolidated financial statements of the Group.
Amendments to HKAS 17 Leases
As part of Improvements to HKFRSs issued in 2009, HKAS 17 Leases has been
amended in relation to the classification of leasehold land. Before the
amendments to HKAS 17, the Group was required to classify leasehold land as
operating leases and to present leasehold land as prepaid lease payments in the
consolidated statement of financial position. The amendments to HKAS 17 have
removed such a requirement. The amendments require that the classification of
leasehold land should be based on the general principles set out in HKAS 17,
that is, whether or not substantially all the risks and rewards incidental to
ownership of a leased asset have been transferred to the lessee.
In accordance with the transitional provisions set out in the amendments to
HKAS 17, the Group reassessed the classification of unexpired leasehold land as
at January 1, 2010 based on information that existed at the inception of the
leases. The application of the amendments to HKAS 17 has had no impact on the
consolidated financial statements of the Group and therefore no adjustment is
required.
HKAS 27 (as revised in 2008) Consolidated and Separate Financial Statements
The Group has applied HKAS 27(as revised in 2008) for changes in ownership
interests in existing subsidiaries of the Group in the current year.
Specifically, the revised Standard has affected the Group's accounting policies
regarding changes in the Group's ownership interests in its subsidiaries that
do not result in loss of control. Under HKAS 27 (as revised in 2008), all such
increases or decreases are dealt with in equity, with no impact on goodwill or
profit or loss. These changes have been applied prospectively from January 1,
2010 in accordance with the relevant transitional provisions.
The application of the revised Standard has affected the accounting for the
Group's acquisition of additional equity interest in subsidiaries, Zhejiang
Expressway Investment Development Co., Ltd. ("Development Co") and Zhejiang
Expressway Vehicle Towing and Rescue Service Co., Ltd. ("Service Co"), in the
current year. The change in policy has resulted in the difference of
Rmb18,666,000 between the consideration paid of Rmb98,880,000 and the
non-controlling interests recognised of Rmb117,546,000 being recognised
directly in equity, instead of in profit or loss. Therefore, the change in
accounting policy has resulted in a decrease in the profit for the year of
Rmb18,666,000 and a decrease in the basic earnings per share for the year of
Rmb0.4 cents. In addition, the cash consideration paid in the current year of
Rmb98,880,000 has been included in cash flows used in financing activities.
The Group has not early applied the following new and revised standards and
interpretations that have been issued but are not yet effective:
HKFRSs (Amendments) Improvements to HKFRSs issued in
2010(1)
HKFRS 7 (Amendments) Disclosures - Transfers of
Financial Assets(3)
HKFRS 9 Financial Instruments(4)
HKAS 12 (Amendments) Deferred Tax: Recovery of
Underlying Assets(5)
HKAS 32 (Amendments) Classification of Rights Issues(7)
HK (IFRIC) - Int 14 (Amendments) Prepayments of a Minimum Funding
Requirement(6)
HK (IFRIC) - Int 19 Extinguishing Financial Liabilities
with Equity Instruments(2)
(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 July 1, 2010.
(3) Effective for annual periods beginning on or after January 1, 2011.
(4) Effective for annual periods beginning on or after January 1, 2013.
(5) Effective for annual periods beginning on or after January 1, 2012.
(6) Effective for annual periods beginning on or after January 1, 2011.
(7) Effective for annual periods beginning on or after February 1, 2010.
HKFRS 9 Financial Instruments (as issued in November 2009) introduces new
requirements for the classification and measurement of financial assets. HKFRS
9 Financial Instruments (as revised in November 2010) adds requirements for
financial liabilities and for derecognition.
Under HKFRS 9, all recognised financial assets that are within the scope of
HKAS 39 Financial Instruments: Recognition and Measurement are subsequently
measured at either 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 are solely
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 accounting periods.
In relation to financial liabilities, the significant change relates to
financial liabilities that are designated as at fair value through profit or
loss. Specifically, under HKFRS 9, for financial liabilities that are
designated as at fair value through profit or loss, 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 presentation 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 attributable to a financial
liability's credit risk are not subsequently reclassified to profit or loss.
Previously, under HKAS 39, the entire amount of the change in the fair value of
the financial liability designated as at 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, 2013,
with earlier application permitted.
The directors anticipate that HKFRS 9 will be adopted in the Group's
consolidated financial statements for financial year ending December 31, 2013
and that the application of the new Standard will affect the classification and
measurement of the Group's available-for-sale investments and may affect the
classification and measurement of the Group's other financial assets but not on
the Group's financial liabilities.
3. Revenue
An analysis of the Group's revenue, net of discounts and taxes, for the year is
as follows:
Year ended December 31,
2010 2009
Rmb'000 Rmb'000
Toll operation revenue 3,475,319 3,107,505
Service area businesses revenue 1,633,628 1,178,318
Advertising business revenue 77,997 77,786
Commission income from securities operation 1,352,051 1,498,827
Interest income from securities operation 226,630 170,074
Others 3,439 3,784
--------- ---------
Total revenue 6,769,064 6,036,294
========= =========
4. Other Income
Year ended December 31,
2010 2009
Rmb'000 Rmb'000
Interest income on bank balances and entrusted
loan receivables 56,278 27,613
Rental income 66,369 58,697
Net exchange gain 15,303 547
Handling fee income 23,689 28,644
Towing income 11,056 11,243
Gain on disposal of a jointly controlled entity -- 274,494
Interest income from structured deposit 136 3,114
Others 26,960 21,928
------- -------
Total 199,791 426,280
======= =======
5. Income Tax Expense
Year ended December 31,
2010 2009
Rmb'000 Rmb'000
Current tax:
PRC Enterprise Income Tax 794,590 841,722
Deferred tax 4,195 (1,667)
------- -------
798,785 840,055
======= =======
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 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 per the
consolidated statement of comprehensive income as follows:
Year ended December 31,
2010 2009
Rmb'000 Rmb'000
Profit before tax 3,111,274 3,084,128
========= =========
Tax at the PRC enterprise income tax rate of 25% 777,819 771,032
Tax effect of share of (profit) loss of associates (613) 6,041
Tax effect of share of profit of a jointly
controlled entity -- (5,314)
Tax effect of income not taxable for tax purposes (12) (22)
Tax effect of expenses not deductible for tax
purposes 21,591 68,318
--------- ---------
Tax charge for the year 798,785 840,055
========= =========
6. Dividends
2010 2009
Rmb'000 Rmb'000
Dividends recognised as distribution during the year:
2010 Interim-Rmb6 cents（2009：2009 interim
Rmb6 cents）per share 260,587 260,587
2009 Final-Rmb25 cents（2009：2008 Final
Rmb24 cents）per share 1,085,779 1,042,347
--------- ---------
1,346,366 1,302,934
========= =========
The final dividend of Rmb25 cents per share in respect of the year ended
December 31, 2010 (2009: final dividend of Rmb25 cents per share in respect of
the year ended December 31, 2009) 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 Rmb1,871,499,000 (2009:
Rmb1,795,488,000) and the 4,343,114,500 (2009: 4,343,114,500) ordinary shares
in issue during the year.
No diluted earnings per share has been presented as there were no potential
ordinary shares outstanding for the year ended December 31, 2009 and 2010.
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 the invoice date at
the end of the reporting period.
As at December 31,
2010 2009
Rmb'000 Rmb'000
Within 3 months 49,666 49,739
3 months to 1 year -- --
1 to 2 years 271 218
Over 2 years 831 613
------- -------
Total 50,768 50,570
======= =======
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 payment due date at the end of the reporting
period.
As at December 31,
2010 2009
Rmb'000 Rmb'000
Within 3 months 166,438 410,900
3 months to 1 year 232,122 77,793
1 to 2 years 60,701 136,065
2 to 3 years 83,256 22,011
Over 3 years 6,178 604
------- -------
Total 548,695 647,373
======= =======
10. Provisions
With respect to the relevant disclosure made under "Provisions" in the
Company's Annual Report 2009 (p. 105 - 106), as of the date of this
announcement, there were no other significant changes during the Period save as
described below.
Of a provision amounting to Rmb21,683,000 made for additional interest
compensation for the customers under the state bond investment agency
agreements and the fund trust agreements, Rmb445,000 was an over-provided
portion and was reversed during the Period;
A provision amounting to Rmb94,860,000 made in 2009 for the principal and
partial interests thereon in connection with the illegal misappropriation from
Zheshang Securities customers' deposits and funds by the former
person-in-charge of one of the Sales Departments was settled in full during the
Period;
With respect to the dispute over the asset management entrustment contract
entered into between Sinobase International Ltd. ("Sinobase") and Zheshang
Securities, an amount involving Rmb12,981,000 was reversed in full as a result
of Sinobase's withdrawal of the lawsuit during the year.
BUSINESS REVIEW
In 2010, as the Government applied a number of initiatives to strengthen and
improve macro-economic controls and accelerated economic restructuring, China
has managed to consolidate and expand the achievements in countering the impact
of the global financial crisis, thereby enabling the Chinese economy to operate
well in general. In 2010, China's national GDP grew by 10.3% year-on-year. As a
result of the overall economic recovery, Zhejiang Province also experienced
stable and relatively fast development in 2010 and saw various sectors
gradually returning to balanced developments. GDP in Zhejiang Province rose
11.8% during the Period as compared to the same period of the previous year.
As China's domestic macro economy stabilized and improved, revenue from the
Group's overall operations grew during the Period compared to the same period
of the previous year. However, performance varied across the different
operations. During the Period, the Group realized a total income of Rmb6,979.57
million, representing an increase of 11.9% year-on-year; of which Rmb3,590.46
million was attributable to the two major expressways operated by the Group,
representing 51.4% of the total income; Rmb1,731.07 million was attributable to
the Group's toll road-related businesses such as service area operations, gas
stations, advertising business and so forth, representing 24.8% of the total
income; and Rmb1,658.05 million was attributable to the securities business,
representing 23.8% of the total income.
A breakdown of the Group's income for the Period is set out below:
2010 2009
Rmb'000 Rmb'000 % Change
Toll income
Shanghai-Hangzhou-Ningbo Expressway 2,848,805 2,451,957 16.2%
Shangsan Expressway 741,652 759,434 -2.3%
Other income
Service areas 1,641,748 1,185,813 38.4%
Advertising 85,881 85,076 0.9%
Road maintenance 3,439 3,784 -9.1%
Securities business income
Commission 1,431,416 1,582,623 -9.6%
Bank interest 226,630 170,074 33.3%
--------- --------- -----
Subtotal 6,979,571 6,238,761 11.9%
Less: Revenue taxes (210,507) (202,467) 4.0%
--------- --------- -----
Revenue 6,769,064 6,036,294 12.1%
========= ========= =====
TOLL ROAD OPERATIONS
The Group saw a relatively high rate of organic growth in traffic volume along
its two expressways during the Period, as a result of a number of favorable
factors in 2010 such as the growth in cargo throughput on the highways,
increasing automobile sales volume and resumed growth in exports in Zhejiang
Province.
Meanwhile, upon completion of the works on the Shanghai section of the
Shanghai-Hangzhou Expressway on January 1, 2010 and after the Company had
stepped up various promotional activities, traffic volume along the
Shanghai-Hangzhou section quickly returned to the level prior to traffic
diversions. In addition, the World Expo held in Shanghai contributed to an
increase in traffic volume of passenger vehicles traveling on the two
expressways of the Group.
The implementation of the toll-by-weight policy for trucks in April 2010 has
effectively reduced excessive overloading of trucks and boosted toll income
from trucks. It has also changed the past few years' trend whereby the increase
in toll income from the Group's expressways had been lower than the increase in
traffic volume, with the increase in toll income being approximately three
percentage points higher than the increase in traffic volume in 2010.
The dual-path identification system for expressways in Zhejiang Province
launched in mid-October 2009 led to a growth in traffic volume along the
Shanghai-Hangzhou-Ningbo Expressway while having a negative impact on the
traffic volume along the Group's Shangsan Expressway. This was the major reason
for a decline in toll income and traffic volume along the Shangsan Expressway
compared to the same period of the previous year. However, the implementation
of the system during the Period had a slightly positive impact on toll income
from the two expressways as a whole.
In order to improve tolling efficiency and to facilitate the access by drivers
and passengers to toll stations on expressways in a more efficient and
convenient way, the Company has commenced full operation of eight electronic
toll stations at the first stage in April 2010. Since the official operation,
the electronic tolling system has accounted for 30% of the utilization of
electronic toll collection on all expressways throughout the province, and the
system was well-received by users.
The official operation in February 2010 of the Shenjia Huhang Expressway
adjacent to the Shanghai-Hangzhou Expressway had a minor impact on the traffic
volume along the Group's expressways. However, the opening of the Zhuyong
Expressway on July 22, 2010 had a more significant negative impact on the
Shangsan Expressway, apart from creating slight traffic diversions upon the
Group's Shanghai-Hangzhou-Ningbo Expressway.
Consequently, the average daily traffic volume in full-trip equivalents along
the Shanghai-Hangzhou-Ningbo Expressway was 38,784 during the Period,
representing an increase of 13.3% year-on-year. In particular, the average
daily traffic volume in full-trip equivalents along the Shanghai-Hangzhou
section of the Shanghai- Hangzhou-Ningbo Expressway was 39,548, an increase of
19.7% year-on-year, and that along the Hangzhou-Ningbo section was 38,238, an
increase of 8.9% year-on-year. The average daily traffic volume in full-trip
equivalents along the Shangsan Expressway was 17,584 during the Period,
representing a decrease of 6.2% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway and the
142km Shangsan Expressway amounted to Rmb3,590.46 million during the Period,
representing an increase of 11.8% year-on-year. In respect of such income, toll
income from the Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb2,848.81
million, an increase of 16.2% year-on-year, while toll income from the Shangsan
Expressway amounted to Rmb741.65 million, a decrease of 2.3% 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.
During the Period, the stabilization and recovery of the macro economy,
continued growth in vehicle ownership in the province, and the hosting of the
Shanghai World Expo not only brought an increase in traffic volume along the
Group's two expressways, but also stimulated a rise in the spending will among
travelers in the service areas. A rebound in traffic volume, a substantial
growth in sales of petroleum products and a rise in the prices of petroleum
products also brought income growth to gas stations, resulting in a substantial
increase in income from the service areas as well. Income from toll
road-related businesses amounted to Rmb1,742.12 million during the Period,
representing a year-on-year increase of 35.5%.
SECURITIES BUSINESS
The domestic stock market in China remained volatile and showed a falling trend
in 2010, with a decrease in trading volume compared to the past. Meanwhile, the
establishment of additional operation networks by various major domestic
securities firms had further intensified competition among securities firms,
causing commission rates to continue to decline.
Zheshang Securities has been taking a positive approach to cope with the
intensely competitive environment and endeavoring to expand various businesses,
and consequently the market share of its securities brokerage business and the
total number of customers continued to rise, and its operation network
increased to 54 branches. The asset management business grew substantially,
having been approved to launch five integrated asset management plans in 2010
and ranked among the top domestic securities firms in terms of net operating
income. Meanwhile, Zheshang Securities' investment banking and futures
businesses achieved satisfactory growth as well.
During the Period, Zheshang Securities realized an operating income of
Rmb1,658.05 million, a decrease of 5.4% year-on-year. Of such income, brokerage
commission income amounted to Rmb1,431.42 million, a year-on-year decrease of
9.6%; and bank interest income amounted to Rmb226.63 million, a year-on-year
increase of 33.3%. In order to control risks, Zheshang Securities invested more
than 70% of its proprietary securities business in bonds with relatively lower
risks and as such, the securities investment income as accounted for in the
consolidated statement of comprehensive income amounted to Rmb119.91 million.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) was blessed by a rise in the retail prices of petroleum
and a growth in petroleum sales during the Period, and consequently realized an
income of Rmb3,551.90 million in 2010, representing an increase of 32.3%
year-on-year. However, the opening of five new gas stations in 2010 resulted in
increases in corresponding rental expenses, labor costs and repair expenses.
During the Period, net profit of the associate company amounted to Rmb17.52
million, which remained at basically the same level as the previous year.
The 69.7km Jinhua Section of the Ningbo-Jinhua Expressway, operated by Zhejiang
Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company of the
Company), benefited from an increase in toll income in 2010 compared to a lower
operating income base in 2009, as a result of the introduction of the
toll-by-weight system and the introduction of the more accurately analyzed
dual-path identification system. It recorded an average daily traffic volume of
9,277 in full-trip equivalents during the Period, while toll income amounted to
Rmb189.95 million, an increase of 37.3% year-on-year. Due to its heavy
financial burden, the associate company still incurred a loss of Rmb68.45
million during the Period but the loss is gradually decreasing.
JoinHands Technology Co., Ltd. (a 27.582% owned associate company of the
Company) generated its income primarily from its printing operations and
property leasing. During the Period, it did not show any improvement to its
operations but had reduced the percentage of its shareholding in a subsidiary,
and consequently it managed to realize a net profit of Rmb4.27 million during
the Period.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provide shareholders
with sound returns over the long-term.
During the Period, profit attributable to owners of the Company for the year
was approximately Rmb1,871.50 million, representing an increase of 4.2%
year-on-year, while earnings per share for the Company was Rmb43.09 cents.
Liquidity and Financial Resources
As at December 31, 2010, current assets of the Group amounted to Rmb19,673.10
million in aggregate (2009: Rmb17,903.78 million), of which bank balances and
cash accounted for 30.5% (2009: 29.5%), bank balances held on behalf of
customers accounted for 59.4% (2009: 64.4%), and held-for-trading investments
accounted for 4.1% (2009: 2.9%). Current ratio (current assets over current
liabilities) as at December 31, 2010 was 1.3 (2009: 1.3). Excluding the effect
of customer deposits arising from the securities business, the resultant
current ratio of the Group (current assets less bank balances held on behalf of
customers over current liabilities less balance of accounts payable to
customers arising from securities dealing business) was 2.6 (2009: 2.6).
The amount for held-for-trading investments of the Group as at December 31,
2010 amounted to Rmb803.77 million (2009: Rmb517.90 million), of which 74.7%
was invested in corporate bonds, 24.6% was invested in the stock market, and
the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating
activities amounted to Rmb2,550.50 million, representing a decrease of 14.8%.
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 December 31, 2010, total liabilities of the Group amounted to
Rmb15,956.94 million, of which 11.4% was borrowings and 72.9% was accounts
payable to customers arising from securities dealing business.
Total interest-bearing borrowings of the Group as at December 31, 2010 amounted
to Rmb1,822.00 million, representing an increase of 12.3% over the beginning of
the year. The borrowings comprised outstanding balances of loans from domestic
commercial banks totaling Rmb822.00 million, and corporate bonds amounting to
Rmb1 billion that was issued by the Company in 2003 for a term of 10 years. Of
the interest-bearing borrowings, 54.9% were not repayable within one year.
As at December 31, 2010, the Group's loans from domestic commercial banks
comprised half-year and 1-year short-term loans, of which Rmb472.00 million was
fixed-rate loans with interest rates ranging from 5.10% to 5.81% per annum,
Rmb350.00 million was floating-rate loans with interest rates ranging from
5.00% to 5.52% per annum. The annual coupon rate for corporate bonds was fixed
at 4.29%, with interest payable annually. The annual interest rate for accounts
payable to customer arising from the securities dealing business was fixed at
0.36%. The Group's World Bank loans, denominated in US dollar, of approximately
Rmb422.38 million equivalent, have been fully repaid during the Period.
Total interest expense for the Period amounted to Rmb120.98 million, while
profit before interest and tax amounted to Rmb3,232.25 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
26.7 (2009: 50.2).
The asset-liability ratio (total liabilities over total assets) was 47.4% as at
December 31, 2010 (December 31, 2009: 47.3%). Excluding the effect of customer
deposits arising from the securities business, the resultant asset-liability
ratio (total liabilities less balance of accounts payable to customers arising
from securities dealing business over total assets less bank balances held on
behalf of customers) of the Group was 19.7% (December 31, 2009: 18.4%).
Capital Structure
As at December 31, 2010, the Group had Rmb17,695.12 million total equity,
Rmb13,103.03 million fixed-rate liabilities, Rmb350.00 million floating-rate
liabilities and Rmb2,503.91 million interest-free liabilities, representing
52.6%, 38.9%, 1.0% and 7.5% of the Group's total capital, respectively. The
gearing ratio, which was computed by dividing the total liabilities less
accounts payable to customers arising from securities dealing business by total
equity, was 24.4% as at December 31, 2010 (December 31, 2009: 22.5%).
Capital Expenditure Commitments and Utilization
During the Period, capital expenditures of the Group totaled Rmb461.82 million,
while capital expenditures of the Company totaled Rmb169.16 million. Amongst
the total capital expenditures of the Group, Rmb149.48 million was incurred for
acquisition and construction of properties, Rmb133.48 million for purchase of
equipment, Rmb97.09 million for the acquisition of 49% equity interests in
Zhejiang Expressway Investment Development Co., Ltd., Rmb23.45 million due to
the further capital contribution into Zhejiang Jinhua Yongjin Expressway Co.,
Ltd., Rmb24.30 million for the road widening project between the Shaoxing-Zhuji
hub and the Shaoxing-Jiaxing hub of the Shangsan Expressway and Rmb25.00
million for the establishment of Zheshang Fund Management Co.,Ltd.(a 25% owned
associate of Zheshang Securities Co., Ltd.).
As at December 31, 2010, capital expenditures committed by the Group and the
Company totaled Rmb765.66 million and Rmb226.72 million, respectively. Amongst
the total capital expenditures committed by the Group, Rmb360.18 million will
be used for acquisition and construction of properties, Rmb342.76 million for
acquisition of equipment, Rmb46.62 million for the widening project between the
Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hub of the Shangsan Expressway, and
Rmb16.10 million for service area renovation and expansion.
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 December 31, 2010, the Group did not have any contingent liabilities nor
any pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the dividend payments to overseas shareholders in Hong Kong dollars,
the Group's principal operations are transacted and booked in Renminbi.
Therefore, the Group's exposure to foreign exchange fluctuations is limited and
the Group has not used financial instrument for hedging purposes.
Although the Directors do not foresee any material foreign exchange risks for
the Group, there is no assurance that foreign exchange risks will not affect
the operating results of the Group in the future.
OUTLOOK
The Chinese economy has improved in general despite encountering a highly
complex domestic and international economic environments as well as multiple
and frequent natural disasters. In Zhejiang Province, under the current
environment underpinned by a significant improvement in infrastructure
developments and an increasing stimulation of the economy by consumption,
foreign trade exports resumed high growth and automotive retail sales
registered a continuous rapid increase. With the above favorable factors, the
Group's two expressways are expected to continue to undergo significant organic
growth in traffic volume in 2011.
However, the opening of the Zhuyong Expressway in July 2010 will continue to
divert traffic flows from the Group's Hangzhou-Ningbo Expressway and Shangsan
Expressway. While the operation of the Shanghai-Hangzhou High-speed Railway on
October 26, 2010 has a certain negative impact on passenger buses running
between Hangzhou and Shanghai, it is not expected to have a major impact on the
Group's total toll income in 2011.
The implementation of the toll-by-weight policy for trucks on April 16, 2010
has generated more satisfactory growth in the Group's toll income. This policy
is anticipated to continue to have a more positive impact on the Group's toll
income in 2011. Coupled with this is the initial launch of an electronic
tolling system for expressways in Zhejiang Province. After achieving a
satisfactory result at the Stage-One launch of the system, Stage Two will be
implemented at the end of 2011, which will cover all of the Group's toll
stations by 2015.
As China is anticipated to further tighten liquidity in order to curb
inflation, there will be increasing uncertainties about the stock market in
2011. Coupled with the fact that fierce competition among securities firms has
not shown any sign of subsiding, Zheshang Securities will continue to face
intense competition. By making aggressive efforts to develop its core
businesses such as investment banking, asset management and fixed income,
Zheshang Securities will steadily expand its operation network and strive to
deliver satisfactory operating results.
2011 will be the first year of the 12th Five-year Plan where the Company aims
to upgrade its capabilities for business evolution. While endeavoring to become
a market leader in its principal business of expressway operations, the Company
will devote aggressive efforts to cultivating management capabilities for
diversified operations. We will make use of our good cash flow, continuing to
strive to seek suitable investments and acquisitions or operate other external
expressway projects entrusted to the Group. Through various means such as debt
and/or equity financing, we will strive to fully leverage our existing
financing capabilities to expand the room for business development. Ultimately,
the Company's management and staff will continue to strive for good operating
results for the Company and create greater value for our shareholders.
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
During the Period, the Company met all provisions in the Code on Corporate
Governance Practices (the "Code") in Appendix 14, and adopted the recommended
best practices contained in the Code wherever applicable.
Change in Company Secretary
The Board announces that Mr. Tony Zheng has been appointed as the Company
Secretary in replacement of Mr. Zhang Jingzhong ("Mr. Zhang") with effect from
March 13, 2011. Mr. Zhang continues to serve as Director and Deputy General
Manager of the Company. The Board would like to thank Mr. Zhang for his
valuable contribution in serving as Company Secretary since 1997.
By order of the Board
Zhejiang Expressway Co., Ltd.
Chen Jisong
Chairman
Hangzhou, PRC, March 13, 2011
As at the date of this announcement, the executive directors of the Company
are: Messrs. Chen Jisong, Zhan Xiaozhang, Jiang Wenyao, Zhang Jingzhong and
Ding Huikang; the non-executive director is Ms. Zhang Luyun; and the
independent non-executive directors are: Messrs. Tung Chee Chen, Zhang Junsheng
and Zhang Liping.
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