2010 Interim 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 Interim Results Announcement
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company") announced
the unaudited consolidated operating results of the Company and its subsidiaries
(collectively the "Group") for the six months ended June 30, 2010 (the "Period"), with the
basis of preparation as stated in note 1 to the condensed consolidated financial statements
set out below.
During the Period, revenue for the Group was Rmb3,130.90 million, representing an increase
of 13.1% over the same period in 2009. Profit for the Period attributable to owners of the
Company was Rmb855.61 million, representing an increase of 10.8% year-on-year. Earnings per
share for the Period was Rmb19.70 cents, representing an increase of 10.8% over the same
period in 2009.
The Directors have recommended to pay an interim dividend of Rmb6 cents per share, subject
to shareholders' approval at the extraordinary general meeting of the Company expected to
be held on October 18, 2010.
The audit committee of the Company has reviewed the interim results. Set out below are the
unaudited condensed consolidated statement of comprehensive income and condensed
consolidated statement of financial position for the Period, with comparative figures for
2009 and relevant notes to the condensed consolidated financial statements:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the six months
ended June 30,
2010 2009
Notes Rmb'000 Rmb'000
Revenue 3 3,130,902 2,768,855
Operating costs (1,756,462) (1,392,646)
--------- ---------
Gross profit 1,374,440 1,376,209
Securities investment gains 51,605 27,204
Other income 4 77,453 62,392
Administrative expenses (30,843) (30,230)
Other expenses (7,010) (101,927)
Share of losses of associates (6,394) (11,281)
Share of profit of a jointly
controlled entity -- 13,073
Finance costs (47,007) (35,755)
--------- ---------
Profit before tax 1,412,244 1,299,685
Income tax expenses 5 (362,597) (326,104)
--------- ---------
Profit for the Period 1,049,647 973,581
--------- ---------
Other comprehensive income
Available-for-sale financial
assets:
-- Fair values loss during the
Period (841) --
-- Reclassification adjustments (23,453) --
for cumulative gain included in
profit or loss upon disposal
Income tax relating to components
of other comprehensive income 6,074 --
--------- ---------
Other comprehensive loss for the
Period (net of tax) (18,220) --
--------- ---------
Total comprehensive income for the
Period 1,031,427 973,581
=========== ===========
Profit for the Period attributable to:
Owners of the Company 855,609 772,452
Non-controlling interests 194,038 201,129
--------- ---------
1,049,647 973,581
=========== ===========
Total comprehensive income for the
Period attributable to:
Owners of the Company 846,157 772,452
Non-controlling interests 185,270 201,129
--------- ---------
1,031,427 973,581
=========== ===========
Earnings per Share-basic 7 19.70 cents 17.79 cents
=========== ===========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
June 30, December
2010 31, 2009
Rmb'000 Rmb'000
Notes Unaudited Audited
Non-current Assets
Property, plant and equipment 1,037,325 1,035,628
Prepaid lease payments 72,534 30,342
Expressway operating rights 12,410,438 12,755,338
Goodwill 86,867 86,867
Other intangible assets 150,757 154,819
Interests in associates 439,063 435,007
Available-for-sale investments 1,000 1,000
--------- ---------
14,197,984 14,499,001
--------- ---------
Current Assets
Inventories 21,206 17,342
Trade receivables 8 48,018 50,570
Other receivables 481,530 451,167
Prepaid lease payments 2,014 1,421
Available-for-sale investments 79,286 54,704
Held for trading investments 618,700 517,895
Financial assets held under resale
agreement 100,000 --
Bank balances held on behalf of
customers 10,534,757 11,532,284
Bank balances and cash
-- Restricted bank balances -- 942
-- Time deposits with original 326,901 228,452
maturity over three months
-- Cash and cash equivalents 4,649,622 5,049,003
--------- ---------
16,862,034 17,903,780
--------- ---------
Current Liabilities
Accounts payable to customers
arising from securities dealing
business 10,503,837 11,502,930
Trade payables 9 657,308 647,373
Tax liabilities 191,498 512,551
Other taxes payable 27,273 30,492
Other payables and accruals 598,325 637,665
Dividends payable 328,128 18
Interest-bearing bank and other 490,487 478,055
loans
Provisions 10 119,777 122,477
--------- ---------
12,916,633 13,931,561
--------- ---------
Net Current Assets 3,945,401 3,972,219
--------- ---------
Total Assets Less Current
Liabilities 18,143,385 18,471,220
--------- ---------
Non-current Liabilities
Interest-bearing bank and other 101,023 144,329
loans
Long-term bonds 1,000,000 1,000,000
Deferred tax liabilities 251,808 262,037
--------- ---------
1,352,831 1,406,366
--------- ---------
16,790,554 17,064,854
=========== ===========
Capital and Reserves
Share capital 4,343,115 4,343,115
Reserves 9,600,883 9,840,505
--------- ---------
Equity attributable to owners of the 13,943,998 14,183,620
Company
Non-controlling interests 2,846,556 2,881,234
--------- ---------
16,790,554 17,064,854
============ ============
Notes:
1. Basis of Preparation
The condensed consolidated financial statements have been prepared in
accordance with the applicable disclosure requirements of Appendix 16 to
the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the "Listing Rules") and with Hong Kong Accounting
Standard 34 ("HKAS 34") "Interim Financial Reporting".
2. Principal Accounting Policies
The condensed consolidated financial statements have been prepared on
the historical cost basis except for certain financial instruments,
which are measured at fair value, as appropriate.
The accounting policies used in the condensed consolidated financial
statements are consistent with those followed in the preparation of the
Group's annual financial statements for the year ended December 31, 2009
except as described below.
During the Period, the Group has applied for the first time, the following
new and revised standards, amendments and interpretations ("new and revised
HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants
("HKICPA").
HKFRSs (Amendments) Amendments to HKFRS 5 as part of Improvements to HKFRSs 2008
HKFRSs (Amendments) Improvements to HKFRSs 2009
HKAS 27 (Revised) Consolidated and Separate Financial Statements
HKAS 39 (Amendment) Eligible Hedged Items
HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters
HKFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions
HKFRS 3 (Revised) Business Combinations (Revised)
HK(IFRIC)-Int 17 Distribution of Non-cash Assets to Owners
The Group applies HKFRS 3 (Revised) Business Combinations prospectively to
business combinations for which the acquisition date is on or after January 1, 2010.
The requirements in HKAS 27 (Revised) Consolidated and Separate Financial Statements
in relation to accounting for changes in ownership interests in a subsidiary after
control is obtained and for loss of control of a subsidiary are also applied
prospectively by the Group on or after January 1, 2010.
As there was no transaction during the current interim period in which HKFRS 3
(Revised) and HKAS 27 (Revised) are applicable, the application of HKFRS 3 (Revised),
HKAS 27 (Revised) and the consequential amendments to other HKFRSs had no effect
on the condensed consolidated financial statements of the Group for the current
or prior accounting periods.
Results of the Group in future periods may be affected by future transactions
for which HKFRS 3 (Revised), HKAS 27 (Revised) and the consequential amendments
to the other HKFRSs are applicable.
The application of the other new and revised HKFRSs had no material effect on the
condensed consolidated financial statements of the Group for the current or prior
accounting periods.
The Group has not prematurely applied the following new and revised standards,
amendments or interpretations that have been issued but are not yet effective.
HKFRSs (Amendments) Improvements to HKFRSs 2010(1)
HKAS 32 (Amendment) Classification of Right Issues(2)
HKFRS 1(Amendment) Limited Exemption from Comparative HKFRS 7 Disclosures
for First-time Adopters(3)
HKFRS 9 Financial Instruments (relating to the classification
and measurement of financial assets) (5)
HK(IFRIC)-Int 14
(Amendment) Prepayments of a Minimum Funding Requirement(4)
HK(IFRIC)-Int 19 Extinguishing Financial Liabilities with Equity
Instruments (3)
1 Effective for annual periods beginning on or after July 1, 2010 or
January 1, 2011, as appropriate
2 Effective for annual periods beginning on or after February 1, 2010
3 Effective for annual periods beginning on or after July 1, 2010
4 Effective for annual periods beginning on or after January 1, 2011
5 Effective for annual periods beginning on or after January 1, 2013
HKFRS 9 Financial Instruments introduces new requirements for the classification
and measurement of financial assets and will be effective from January 1, 2013,
with earlier application permitted. The Standard requires all recognised financial
assets that are within the scope of HKAS 39 Financial Instruments: Recognition and
Measurement to be measured at either amortised cost or fair value. Specifically,
debt investments that (i) are held within a business model whose objective is to
collect the contractual cash flows and (ii) have contractual cash flows that are solely
payments of principal and interest on the principal outstanding are generally measured
at amortised cost. All other debt investments and equity investments are measured at
fair value. The application of HKFRS 9 might affect the classification and measurement
of the Group's financial assets.
The directors of the Company anticipate that the application of the other new and
revised standards, amendments or interpretations will have no material impact on
the results and the financial position of the Group.
3. Revenue
An analysis of the Group's revenue, net of discounts and taxes, for the Period is
as follows:
For the six months
ended June 30,
2010 2009
Rmb'000 Rmb'000
Unaudited Unaudited
Toll operation revenue 1,684,074 1,509,470
Service area business revenue 754,265 540,920
Advertising business revenue 37,671 37,859
Commission income from securities operation 557,350 619,792
Interest income from securities operation 97,509 59,425
Others 33 1,389
--------- ---------
Total revenue 3,130,902 2,768,855
============= =============
4. Other Income
For the six months
ended June 30,
2010 2009
Rmb'000 Rmb'000
Unaudited Unaudited
Interest income on bank
balances and an entrusted
loan receivable 21,734 11,028
Rental income 30,729 28,727
Net exchange gain 3,135 283
Towing income 7,090 7,409
Interest income from structured deposit -- 3,114
Others 14,765 11,831
--------- ---------
Total 77,453 62,392
============= =============
5. Income Tax Expenses
For the six months
ended June 30,
2010 2009
Rmb'000 Rmb'000
Unaudited Unaudited
PRC Enterprise Income Tax;
Current tax 372,826 347,697
--------- ---------
Deferred tax:
Current period (10,229) (21,593)
--------- ---------
362,597 326,104
============= =============
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and Implementation
Regulation of the EIT Law, the tax rate of the Group is 25% from January 1, 2008 onwards.
No Hong Kong Profit Tax has been provided as the Group's income neither arises in,
nor is derived from Hong Kong during the Period.
The tax charge for the Period can be reconciled to the profit per the condensed
consolidated statements of comprehensive income as follows:
For the six months
ended June 30,
2010 2009
Rmb'000 Rmb'000
Unaudited Unaudited
Profit before tax 1,412,244 1,299,685
============= =============
Tax at the PRC enterprise
income tax rate of 25% 353,061 324,921
Tax effect of share of
losses of associates 1,599 2,820
Tax effect of share of -- (3,268)
profit of a jointly
controlled entity
Tax effect of
(income)/expense that is
not (taxable) and
deductible for tax purposes 7,937 1,631
--------- ---------
Tax charge for the Period 362,597 326,104
============= =============
6. Dividends
The Directors have recommended the payment of an interim dividend of Rmb6
cents per share (2009: Rmb6 cents per share), subject to shareholders' approval
at the extraordinary general meeting of the Company expected to be held on
October 18, 2010.
7. Earnings Per Share
The calculation of the basic earnings per share is based on profit attributable
to owners of the Company for the Period of Rmb855,609,000 (2009: Rmb772,452,000)
and the 4,343,114,500 shares (2009: 4,343,114,500 shares) in issue during the Period.
No diluted earnings per share have been calculated as there were no potential
dilutive ordinary shares in issue in both periods.
8. Trade Receivables
The Group has no credit period granted to its trade customers of toll operation,
service area businesses and securities operation. The following is an aged
analysis of trade receivables presented based on invoice date at the end of
the reporting period.
As at As at
June 30, December
2010 31, 2009
Rmb'000 Rmb'000
Unaudited Audited
Within 3 months 47,187 49,739
3 months to 1 year -- --
1 to 2 years 10 218
Over 2 years 821 613
--------- ---------
Total 48,018 50,570
============= =============
9. Trade payables
The following is an aged analysis of trade payables presented based on payment
due date at the end of the reporting period.
As at As at
2010 June 30, December
2010 31, 2009
Rmb'000 Rmb'000
Unaudited Audited
Within 3 months 375,220 410,900
3 months to 1 year 126,476 77,793
1 to 2 years 62,481 136,065
2 to 3 years 78,312 22,011
Over 3 years 14,819 604
--------- ---------
Total 657,308 647,373
============= =============
10. Provisions
Subsequent to the relevant disclosure made in the Company's 2009 annual
report (pages 105 - 106) relating to "Provisions", as at the date of this
announcement, there was no material change for the Period save as disclosed below.
Prior to the restructuring of Zheshang Securities Co., Ltd.("Zheshang Securities")
by the Company, the original person-in-charge of one of the sales departments
under Zheshang Securities illegally misappropriated customers' deposits and funds,
which caused a loss of approximately Rmb90,000,000 to the relevant customers. Zheshang
Securities had made in 2009 a provision amounting to Rmb94,860,000 for the principal
and related interests involved in the lawsuits, of which Rmb7,047,000 had been
settled in 2009 and Rmb2,700,000 has been settled in the current period.
BUSINESS REVIEW
Affected by the relatively high comparison basis for the same period in 2009 and the
State's macro-economic control measures, the growth pace of China's economy has slowed
during the second quarter of the year. However, the economy as a whole kept a sound
developing trend in the first half, with the national GDP increasing by 11.1% as compared
to the same period last year. Although the growth pace of Zhejiang Province also slowed
in the second quarter, the province did keep a positive recovery trend with continuous
optimization of its whole economic structure. GDP of Zhejiang Province recorded a
year-on-year growth of 13% in the first half of 2010.
Benefiting from a sound development momentum of the domestic economy and an increase in
automobile sales, traffic volume and toll income on the Group's expressways maintained
a satisfactory growth during the first half of the year. Therefore, during the Period,
income for the Group recorded a rise of 13.0% to Rmb3,227.49 million, of which
Rmb1,739.65 million, or 53.9% of total income, was generated from the two major
expressways owned and operated by the Group. Rmb799.39 million was generated from
toll road-related businesses, which accounted for 24.8% of total income. Affected by a
sharp decline of China's stock market during the period, income from the securities
business dropped slightly to Rmb688.45 million, accounting for 21.3% of the total income.
During the Period, toll income from toll road operations increased by 11.6% over the same
period in 2009, while income from toll road-related businesses increased by 36.1%.
A breakdown of the Group's income for the Period is set out below:
For the six months
ended June 30,
2010 2009
Rmb'000 Rmb'000 %
Change
Toll income
Shanghai-Hangzhou-Ningbo
Expressway 1,361,787 1,178,291 15.6%
Shangsan Expressway 377,864 380,650 -0.7%
Other income
Service areas 758,195 545,883 38.9%
Advertising 41,166 40,094 2.7%
Securities business 688,445 710,811 -3.1%
Others 33 1,389 -97.6%
--------- ---------
Subtotal 3,227,490 2,857,118 13.0%
Less: Revenue taxes (96,588) (88,263) 9.4%
--------- ---------
Revenue 3,130,902 2,768,855 13.1%
=========== ===========
Toll Road Operations
During the Period, benefiting from the effective macro-economic control
measures, China's economy developed positively toward the expected goal.
Domestic demand stimulated domestic automobile sales. At the same time, the
widening project of the Shanghai Section of the Shanghai-Hangzhou Expressway
was completed in early 2010, and together with the implementation of the
toll-by-weight policy, the natural growth of traffic volume on the Group's
expressways was quite significant, with the growth rate of toll income being
much steeper than that of traffic volume.
On January 1, 2010, construction on the Shanghai Section of the
Shanghai-Hangzhou Expressway was completed. Through a series of promotion,
traffic volume on the Shanghai-Hangzhou Expressway resumed in no time to the
same level as that before the construction. At the same time, the
toll-by-weight policy implemented in mid-April 2010 brought about a notable
increase in toll income for the road section. From the first half's operation
figures, we are happy to witness that both traffic volume and toll income
recorded double-digit increases for the Shanghai-Hangzhou-Ningbo Expressway.
Despite the advantages brought to the Shangsan Expressway by both sound
macro-economic growth and the implementation of the toll-by-weight policy in
the first half of the year, the launch of the dual path identification system
in mid-October 2009 has offset the traffic volume increase on the Shangsan
Expressway, resulting in a slight drop in traffic volume and toll income for
the road section during the Period.
The average daily traffic volume in full-trip equivalents along the
Shanghai-Hangzhou-Ningbo Expressway was 37,933 during the Period, representing
an increase of 12.4% year-on-year. The average daily traffic volume in
full-trip equivalents along the Shanghai-Hangzhou Section of the
Shanghai-Hangzhou-Ningbo Expressway increased by 17.2% year-on-year, and that
along the Hangzhou-Ningbo Section increased by 9.2% year-on-year. The average
daily traffic volume in full-trip equivalents along the Shangsan Expressway was
18,844 during the Period, representing a decrease of 1.4% year-on-year.
Toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted to
Rmb1,361.79 million during the Period, representing an increase of 15.6%
year-on-year; while toll income from the Shangsan Expressway amounted to
Rmb377.86 million during the Period, representing a decrease of 0.7%
year-on-year.
Toll Road-related Businesses
The Company also operates certain toll road-related businesses along 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, with a steady recovery of the domestic economy, traffic
volume along the Group's expressways increased significantly. The opening of
Shanghai Expo also lifted traffic volume and thus enhanced income for the
service areas. Meanwhile, both sales and prices of petroleum products increased
substantially, which has in turn boosted the income of the gas station
operation. Consequently, income of toll road-related businesses of the Group
amounted to Rmb806.48 million during the Period, an increase of 35.6%
year-on-year.
Securities Business
During the Period, the macro-economy was under structural adjustments, leading
to a sharp drop of Shanghai and Shenzhen stock market indices and a decrease in
transaction volume. Competition in the brokerage market became intensified,
resulting in a reduction on average commission rates. Despite the severe
external environment, Zheshang Securities continued to maintain a smooth
operation through active business developments. The market share of its
brokerage business continued to be enhanced, as well as its number of clients.
In the meantime, Zheshang Securities achieved growth on investment banking,
asset management and futures businesses, which to some extent offset the impact
on Zheshang Securities caused by intense market competition and share index
drop.
During the Period, the offering scale of the Zheshang Securities' first
accumulated asset management plan "Zheshang Huijin No.1" reached Rmb2.3
billion, boosting the total scale of the asset management business to exceed
Rmb3.0 billion. Zheshang Securities set up five new branches in coastal
provinces and cities like Fujian and Guangdong, and the number of operating
offices was extended to 46, thereby further enhancing its network deployment.
During the Period, the securities business realized an operating income of
Rmb688.45 million, representing a decrease of 3.2% year-on-year. Of such
income, brokerage commission income amounted to Rmb590.94 million, representing
a year-on-year decrease of 9.3%; and bank interest income amounted to Rmb97.51
million, representing a year-on-year increase of 64.1%. Apart from these, the
proprietary securities trading business recorded a profit of Rmb51.61 million
as accounted for in the income statement (2009 Interim: Rmb27.20 million).
Long-term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate of
the Company) ("Petroleum Co") benefited from a recovery of the macro-economy
and an increase in petroleum products prices during the Period. It recorded a
substantial increase in sales of petroleum products and a revenue of
Rmb1,599.90 million, a 37.4% increase year-on-year. In the Period, Petroleum
Co. achieved a net profit of Rmb11.52 million.
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate of the
Company) ("Jinhua Co") operates the 69.7km Jinhua Section of Ningbo-Jinhua
Expressway. During the Period, benefiting from a recovery of the domestic
economy and the toll income increase brought about by the toll-by-weight
policy, the average daily full-trip traffic volume along the road section was
9,066 vehicles, a 26.1% increase as compared to the same period last year. Toll
income was Rmb88.37 million, an increase of 34.9% year-on-year. A loss of
Rmb39.93 million was recorded due to Jinhua Co's heavy financial burden, though
the loss was gradually decreasing year after year.
JoinHands Technology Co., Ltd. (a 27.582% owned associate of the Company)
generated its income mainly from its printing operation and property leasing
during the Period. Due to a lack of improvement in its operations, the
associate company incurred a loss of Rmb1.79 million during the Period.
Others
On May 20, 2010, the Company entered into the agreement with Zhejiang
Communications Investment Group Co., Ltd. ("Communications Investment Group")
and Yiwu Communications Development Co., Ltd., pursuant to which the Company
agree to inject a further capital to the amount of Rmb23.45 million, in
proportion to its share of capital contributions, into Jinhua Co by cash to
alleviate a shortage in project and working capital at Jinhua Co. After the
further capital injection by the Company and Communications Investment Group,
the registered capital of Jinhua Co. increased from Rmb800 million to Rmb900
million and the Company continued to own as to 23.45% in the capital of Jinhua
Co.
On July 2, 2010, to further leverage the investment and financing platform of
the Company as a listed company in the future, one of the Company's major
shareholders, Huajian Transportation Economic Development Centre ("Huajian"),
transferred approximately 11% (476,760,000 shares) of its holding shares to the
Company's majority shareholder, Communications Investment Group, at no
consideration. After the transfer, the equity interest in the Company held by
Communications Investment Group will be lifted to around 67% (2,909,260,000
shares).
HUMAN RESOURCES
There were no significant changes to the Company's overall number of employees,
remuneration policies, bonus schemes and training schemes from what have been
disclosed in the Company's latest annual report.
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with the aim to provide
shareholders with sound returns over the long-term.
During the Period, return on equity was 6.1%, representing an increase of 12.7%
over the same period in 2009.
Liquidity and Financial Resources
As at June 30, 2010, current assets held by the Group amounted to Rmb16,862.03
million in aggregate (December 31, 2009: Rmb17,903.78 million), of which bank
balances and cash accounted for 29.5% (December 31, 2009: 29.5%), bank balances
held on behalf of customers accounted for 62.5% (December 31, 2009: 64.4%) and
held-for-trading investments accounted for 3.7% (December 31, 2009: 2.9%).
Current ratio (current assets over current liabilities) as at June 30, 2010 was
1.3 (December 31, 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 accounts payable to customers arising from securities dealing business)
was 2.6 (December 31, 2009: 2.6).
The amount for held-for-trading investments of the Group as at June 30, 2010
amounted to Rmb618.70 million (December 31, 2009: Rmb517.90 million), of which
93.0% was invested in corporate bonds, 5.5% was invested in the stock market,
while the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating
activities, amounted to Rmb962.12 million.
The Directors do not expect the Company to experience any problem with
liquidity and financial resources in the foreseeable future.
Borrowings and Solvency
As at June 30, 2010, total liabilities of the Group amounted to Rmb14,269.46
million (December 31, 2009: Rmb15,337.93 million), of which 11.2% was
borrowings and 73.6% was accounts payable to customers arising from securities
dealing business.
Total interest-bearing borrowings of the Group as at June 30, 2010 amounted to
Rmb1,591.51 million, representing a decrease of 1.9% over December 31, 2009.
The borrowings comprised outstanding balances of the World Bank loans,
denominated in US dollar, of approximately Rmb391.51 million in Renminbi
equivalent; loans from domestic commercial banks totaling Rmb200 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, 69.2% were not
repayable within one year.
As at June 30, 2010, the Group's loans from domestic commercial banks comprised
1-year short-term loans, with interest rates fixed at 5.31% and 5.25% 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
customers arising from securities dealing business was fixed at 0.36%; the
annual floating rate of the Group's World Bank loans, denominated in US dollar,
was 7.54%.
Total interest expense for the Period amounted to Rmb47.01 million, while
profit before interest and tax amounted to Rmb1,459.25 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
31.0 (June 30, 2009: 37.4).
The asset-liability ratio (total liabilities over total assets) was 45.9% as at
June 30, 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 accounts payable to customers arising from
securities dealing business over total assets less bank balances held on behalf
of customers) of the Group was 18.3% (December 31, 2009: 18.4%).
Capital Structure
As at June 30, 2010, the Group had Rmb16,790.55 million total equity,
Rmb11,703.84 million fixed-rate liabilities, Rmb391.51 million floating-rate
liabilities and Rmb2,174.12 million interest-free liabilities, representing
54.1%, 37.7%, 1.2% and 7.0% 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 22.4% as at June 30, 2010 (December 31, 2009: 22.5%).
Capital Expenditure Commitments and Utilization
Capital expenditures of the Group and of the Company for the Period totaled
Rmb134.49 million and Rmb32.09 million, respectively, with Rmb51.58 million
incurred by acquisition and construction of properties, Rmb32.97 million
incurred by purchase of equipment, Rmb23.45 million for capital injection into
Jinhua Co and Rmb 24.30 million for a widening project in between the
Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hub on the Shangsan Expressway.
Capital expenditures committed by the Group and by the Company as at June 30,
2010 totaled Rmb314.75 million and Rmb104.15 million, respectively. Amongst the
total capital expenditures committed by the Group, Rmb164.42 million will be
used on the acquisition and construction of properties, Rmb95.03 million will
be used for purchase of equipment, Rmb25.70 million will be used for the
widening project in between the Shaoxing-Zhuji hub and the Shaoxing-Jiaxing hub
on the Shangsan Expressway, and Rmb29.60 million will be used in the
renovations and expansions of the service areas.
The Group will finance its above mentioned capital expenditure commitments
mainly with internally generated cash flow, with a preference for debt
financing to meet any shortfalls thereof.
Contingent Liabilities and Pledge of Assets
As at June 30, 2010, the Group did not have any contingent liabilities nor any
other pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the repayment of a World Bank loan of Rmb391.51 million equivalent in
US dollars, as well as dividend payments to the holders of H shares 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
during the Period.
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
In the first half of this year, China's economy continued to develop steadily
according to the direction led by the macro-economic control measures. Under an
improving external environment, fast growth on foreign export and a low
comparison basis last year, Zhejiang Province's economy continued to develop
positively in the first half of 2010. However, we expect a slowdown on the
growth rate of the economy in the second half under vigorous structural
adjustment policies carried out by the government. As a result of the slowdown
of economic growth, the rapid growth on domestic car ownership will also slow,
which in turn will affect the natural traffic growth along the Group's
expressways.
Although the opening of the Shanghai-Jiaxing-Huzhou-Hangzhou Expressway in
early February this year caused little impact on the Group's expressways, the
opening of Zhuyong Expressway on July 22, 2010 will bring about negative
effect, especially causing significant traffic diversions on the Shangsan
Expressway.
Introduction of the toll-by-weight policy created a decrease in truck traffic
volume for a short period of time, but from existing figures, it already
brought a notable increase in toll income. In the second half of this year,
through strengthened promotion and measures to attract more empty vans, we
expect truck traffic volume to resume to the level before the policy was
implemented.
During the Period, benefiting from a better economic environment in Zhejiang
Province, the Group's toll road-related businesses achieved significant growth.
In the second half of the year, the Company will apply various measures,
including introducing and refining quality operational projects and
intensifying our promotion, to enhance management standards and service quality
at the service areas.
As China's economy is in the course of transformation, despite the rapid GDP
growth in the first half of the year, the stock market will remain sluggish.
Although the Group's securities business may be affected by the turbulent A
share market in the short run, Zheshang Securities will carry out various
measures including further expanding its investment banking business and
grouping financing product marketing with the futures agency business, with a
view to continuously gaining industry influence and market share. We expect
good profit contribution from Zheshang Securities in the future.
2010 will be a complicated year for China's economy. Given a slowdown on
economic growth in the second half, we expect that the Group will be affected
in respect of its expressway traffic volume, service areas operation and
capital market performance. Faced with the not-so-optimistic situation, the
management of the Company will continue to build up its core expressway
business while actively seeking and cultivating new business opportunities and
new sources of profit growth. It will strive unremittingly to contribute to the
Company's sustainable development and bring forth satisfactory results for
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
The Company was in compliance with the code provisions in the Code on Corporate
Governance Practices set out in Appendix 14 to the Listing Rules during the
Period.
By Order of the Board
Chen Jisong
Chairman
Hangzhou, PRC, August 29, 2010
As at the date of this announcement, the executive Directors of the Company
are: Messrs. Chen Jisong, Zhan Xiaozhang, Jiang Wenyao and Zhang Jingzhong; the
non-executive Director is: Ms. Zhang Luyun; and the independent non-executive
Directors are: Messrs. Tung Chee Chen, Zhang Junsheng and Zhang Liping.
Statement
1. An electronic version of the Company's 2010 Interim Results Announcement is
available at www.zjec.com.cn
2. A copy of this document has been submitted to the UK Listing Authority and
will shortly be available for inspection at the UK Listing Authority Document
Viewing Facility which is situated at the Financial Services Authority, 25 The
North Colonnade, Canary Wharf, London E14 5HS.
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