2011 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)
(Stockcode:0576)
2011 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, 2011 (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 Rmb3,339.37 million, representing
an increase of 6.7% over the same period in 2010. Profit for the Period
attributable to owners of the Company was Rmb900.32 million, representing an
increase of 5.2% year- on-year. Earnings per share for the Period was Rmb20.73
cents, representing an increase of 5.2% over the same period in 2010.
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 13, 2011.
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 the same period in 2010 and relevant notes
to the condensed consolidated financial statements:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the six months
ended 30 June
2011 2010
Notes Rmb'000 Rmb'000
Revenue 3 3,339,367 3,130,902
Operating costs (1,986,690) (1,756,462)
Gross profit 1,352,677 1,374,440
Securities investment gains 27,885 51,605
Other income 4 119,926 77,453
Administrative expenses (36,032) (30,843)
Other expenses (19,323) (7,010)
Share of loss of associates (9,367) (6,394)
Finance costs (41,852) (47,007)
Profit before tax 1,393,914 1,412,244
Income tax expense 5 (352,347) (362,597)
Profit for the Period 1,041,567 1,049,647
Other comprehensive expenses
Available-for-sale financial assets:
- Fair values loss during the Period (8,662) (841)
- Reclassification adjustments for
cumulative gain included in profit
or loss upon disposal (4,072) (23,453)
Income tax relating to components of
other comprehensive income 3,184 6,074
Other comprehensive expenses
for the Period (net) (9,550) (18,220)
Total comprehensive income for the Period 1,032,017 1,031,427
Profit for the Period attributable to:
Owners of the Company 900,316 855,609
Non-controlling interests 141,251 194,038
1,041,567 1,049,647
Total comprehensive income for the Period
attributable to:
Owners of the Company 895,336 846,157
Non-controlling interests 136,681 185,270
1,032,017 1,031,427
Earnings per share-basic 7 20.73 cents 19.70 cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
June 30, December 31,
2011 2010
Notes Rmb'000 Rmb'000
Unaudited Audited
Non-current Assets
Property, plant and equipment 1,174,377 1,120,626
Prepaid lease payments 70,010 71,035
Expressway operating rights 11,725,839 12,071,497
Goodwill 86,867 86,867
Other intangible assets 152,520 155,020
Interests in associates 462,826 472,910
Available-for-sale investments 1,000 1,000
------- -------
13,673,439 13,978,955
Current Assets
Inventories 21,807 17,715
Trade receivables 8 47,607 50,768
Other receivables 1,407,717 953,153
Prepaid lease payments 2,052 2,052
Available-for-sale investments 61,359 71,928
Held-for-trading investments 1,309,511 803,772
Financial assets held under resale
agreement 51,063 80,163
Bank balances held on behalf of
customers 8,647,233 11,685,951
Bank balances and cash
- Time deposits with original maturity
over three months 759,563 325,545
- Cash and cash equivalents 4,321,951 5,682,053
--------- ---------
16,629,863 19,673,100
Notes As at As at
June 30, December 31,
2011 2010
Rmb'000 Rmb'000
Unaudited Audited
Current Liabilities
Accounts payable to customers arising
from securities dealing business 8,621,235 11,631,030
Trade payables 9 432,387 548,695
Tax liabilities 203,745 450,708
Other taxes payable 49,719 51,002
Other payables and accruals 641,349 1,049,301
Financial assets sold for repurchase 40,000 -
Dividends payable 215,264 120,319
Interest-bearing bank and other loans 952,611 822,000
Provisions 10 21,238 21,238
-------- --------
11,177,548 14,694,293
---------- ----------
Net Current Assets 5,452,315 4,978,807
---------- ----------
Total Assets Less Current Liabilities 19,125,754 18,957,762
---------- ----------
Non-current Liabilities
Long-term bonds 1,000,000 1,000,000
Deferred tax liabilities 252,055 262,647
--------- ---------
1,252,055 1,262,647
--------- ---------
17,873,699 17,695,115
---------- ----------
Capital and Reserves
Share capital 4,343,115 4,343,115
Reserves 10,191,749 10,380,137
---------- ----------
Equity attributable to owners of the
Company 14,534,864 14,723,252
Non-controlling interests 3,338,835 2,971,863
---------- ----------
17,873,699 17,695,115
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 that are
measured at fair value, as appropriate.
The accounting policies used in the condensed consolidated financial statements
are consistent with those applied in the preparation of the Group's annual
financial statements for the year ended December 31, 2010 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) Improvements to HKFRSs issued in 2010
HKAS 32 (Amendment) Classification of rights issues
HK(IFRIC)-Int 14 (Amendments) Prepayments of a minimum funding requirement
HK(IFRIC)-Int 19 Extinguishing financial liabilities with equity
instruments
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 early applied new and revised standards that have been issued
but are not yet effective. The following are the new and revised standard that
have been issued after the date of the consolidated financial statements for
the year ended December 31, 2010 were authorized for issuance and are not yet
effective:
HKFRS 10 Consolidated financial statements(2)
HKFRS 11 Joint arrangements(2)
HKFRS 12 Disclosure of interests in other entities(2)
HKFRS 13 Fair value measurement(2)
HKAS 1 (Amendments) Presentation of financial statements(1)
HKAS 19 (Amendments) Employee benefits(2)
HKAS 27 (Amendments) Separate in financial statements(2)
HKAS 28 (Amendments) Investments in associates and joint ventures(2)
(1) Effective for annual periods beginning on or after January 1, 2012.
(2) Effective for annual periods beginning on or after January 1, 2013.
The Directors 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
2011 2010
Rmb'000 Rmb'000
Unaudited Unaudited
Toll operation revenue 1,731,996 1,684,074
Service area business revenue 908,049 754,265
Advertising business revenue 39,245 37,671
Commission income from securities operation 506,696 557,350
Interest income from securities operation 153,381 97,509
Others - 33
Total revenue 3,339,367 3,130,902
4. Other Income
For the six months
ended June 30
2011 2010
Rmb'000 Rmb'000
Unaudited Unaudited
Interest income on bank balances and
an entrusted loan receivable 67,128 21,734
Rental income 32,754 30,729
Net exchange gain 2,252 3,135
Handling fee income 8,649 7,894
Towing income 5,805 7,090
Others(*) 3,338 6,871
Total 119,926 77,453
(*) During the Period, the Group has borrowed a loan from a domestic foreign
bank in HK dollar amounting to an equivalent of Rmb320.61 million with
one-year term. With an aim to hedge against foreign exchange risks arising
from the loan, the Group has purchased HK dollar equivalent forward contracts
with one-year term at a rate lower than the spot exchange rate on the
borrowing date. During the Period, the floating loss of the HK dollar forward
contracts amounted to Rmb2.72 million.
5. Income Tax Expense
For the six months
ended June 30
2011 2010
Rmb'000 Rmb'000
Unaudited Unaudited
Current tax:
PRC enterprise income tax 359,756 372,826
Deferred tax (7,409) (10,229)
352,347 362,597
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:
For the six months
ended June 30
2011 2010
Rmb'000 Rmb'000
Unaudited Unaudited
Profit before tax 1,393,914 1,412,244
--------- ---------
Tax at the PRC enterprise income tax rate of 25% 348,479 353,061
Tax effect of share of loss of a jointly
controlled entity 2,342 1,599
Tax effect of (income)/expense that is not
(taxable) and deductable for tax purposes 1,526 7,937
--------- ---------
Tax charge for the Period 352,347 362,597
--------- ---------
6. Dividends
The Directors have recommended the payment of an interim dividend of Rmb6 cents
per share (2010: Rmb6 cents per share), subject to shareholders' approval at
the extraordinary general meeting of the Company expected to be held on October
13, 2011.
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 Rmb900,316,000 (2010: Rmb855,609,000)
and the 4,343,114,500 (2010: 4,343,114,500) ordinary shares in issue during the
Period.
No diluted earnings per share has been presented as there were no potential
dilutive ordinary shares outstanding during 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 the invoice date at
the end of the reporting period.
As at As at
June 30, December 31,
2011 2010
Rmb'000 Rmb'000
Unaudited Audited
Within 3 months 46,505 49,666
3 months to 1 year - -
1 to 2 years 271 271
Over 2 years 831 831
Total 47,607 50,768
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
June 30, December 31,
2011 2010
Rmb'000 Rmb'000
Unaudited Audited
Within 3 months 116,494 166,438
3 months to 1 year 162,865 232,122
1 to 2 years 59,181 60,701
2 to 3 years 12,339 83,256
Over 3 years 81,508 6,178
Total 432,387 548,695
10. Provisions
Subsequent to the relevant disclosure made in the Company's 2010 annual report
(pages 114 - 115) relating to "Provisions", as at the date of this
announcement, there was no material change for the Period.
BUSINES SREVIEW
Although China's domestic economy continued to maintain a sound development
trend on the whole in the first half of 2011, its GDP growth had notably
decelerated, registering an increase of 9.6% over the same period last year due
to the impact from the macro-economic control initiatives of the PRC
Government. During the Period, the growth pace of Zhejiang Province's economy
also tended to slow in the second quarter of 2011, with the overall economic
structure undergoing the adjustment process of continuous improvement. The
province's GDP increased by 9.9% year-on-year during the Period.
Given the gradual slowdown of growth in the domestic economy and in automobile
sales in China, the organic growth of traffic volume on the Group's expressways
also showed a significant falling trend during the Period. As China's stock
market remained volatile and tumbled during the Period, revenue from the
securities business of the Group was generally on par with the same period last
year. Consequently, during the Period, income for the Group increased by 6.5%
year-on-year, amounting to Rmb3,436.13 million. Of such income, Rmb1,791.91
million was generated from the two major expressways owned and operated by the
Group, representing an increase of 3% year-on-year and accounting for 52.1% of
total income; and Rmb954.94 million was generated from the toll road-related
businesses, representing an increase of 19.5% year-on-year and accounting for
27.8% of total income. The securities business contributed an income of 689.28
million to the Group, representing an increase of 0.1% year-on-year and
accounting for 20.1% of total income.
A breakdown of the Group's income for the Period is set out below:
For the six months
ended June 30
2011 2010
Rmb'000 Rmb'000 Change%
Toll income
Shanghai-Hangzhou-Ningbo Expressway 1,437,224 1,361,787 5.5%
Shangsan Expressway 354,681 377,864 -6.1%
Other income
Service areas 911,890 758,195 20.3%
Advertising 43,053 41,166 4.6%
Others - 33 -100.0%
Securities business income
Commission 535,900 590,936 -9.3%
Bank interests 153,381 97,509 57.3%
--------- --------
Subtotal 3,436,129 3,227,490 6.5%
Less: Revenue taxes (96,762) (96,588) 0.2%
Revenue 3,339,367 3,130,902 6.7%
Toll Road Operations
The organic growth of traffic volume on the Group's expressways suffered
significantly due to the impact from the slowdown of growth in the
macro-economy of China. Meanwhile, the Shangsan Expressway continued to be hit
by traffic diversions to the Zhuyong Expressway after the new expressway had
been opened to traffic in July 2010. As a result, growth of traffic volume on
the Group's two expressways was relatively slower than expected during the
Period.
Coupled with the above said challenges were the frequent severe weather
conditions in Zhejiang Province during the first half of 2011. In addition to
frequent rains and snows between January and February, heavy rainfalls in June
also caused inconvenience to vehicle travels, thus bringing significant
negative impact on traffic volume and toll income.
The PRC government's abolition of toll tariffs for local Class II highways in
early March 2010 resulted in diversions of some trucks travelling on the
Group's expressways to ordinary highways and recent changes in vehicle mix on
the Group's expressways. Meanwhile, the gradual increase in large trucks has
led to a decrease in small and medium trucks, thereby weakening the positive
impact of the toll-by-weight policy on toll income of the Group on the whole.
Average daily traffic volume in full-trip equivalents along the Group's
Shanghai- Hangzhou-Ningbo Expressway was 39,703 during the Period, representing
an increase of 4.7% year-on-year. In particular, average daily traffic volume
in full-trip equivalents along the Shanghai-Hangzhou Section of the
Shanghai-Hangzhou-Ningbo Expressway increased by 3.3% year-on-year, and that
along the Hangzhou-Ningbo Section increased by 5.7% year-on-year. Average daily
traffic volume in full-trip equivalents along the Shangsan Expressway was
17,089 during the Period, representing a decrease of 9.3% year-on-year.
Toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted to
Rmb1,437.23 million during the Period, representing an increase of 5.5%
year-on- year; while toll income from the Shangsan Expressway amounted to
Rmb354.68 million during the Period, representing a decrease of 6.1%
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, income from the service areas (except for the gas station
business) declined as a result of the slackened growth in traffic volume on the
Group's two expressways, frequent adverse weather conditions and reduced
travels of coach buses and passenger cars after the Shanghai-Hangzhou
High-Speed Railway and Hangzhou- Wenzhou Train increased their frequency
schedules. However, the surge in the selling prices of petroleum products
prompted a significant rise in the sales of petroleum products, generating
satisfactory income on the whole. Consequently, income from the toll
road-related businesses of the Group amounted to Rmb954.94 million during the
Period, representing an increase of 19.5% year-on-year.
Securities Business
During the Period, competition in the securities business intensified further
due to the volatility and adjustments of the domestic stock market, compounded
with increasing sales outlets set up by various securities firms since 2010.
The positive effect from the increased market share of Zheshang Securities was
offset by a decline in commission rates, thereby impacting the performance of
the securities business.
Faced with an intensely competitive environment, Zheshang Securities endeavored
to expand various businesses, and consequently, the market share of its
securities brokerage business and the total number of customers continued to
increase in the Period, while the investment banking and asset management
businesses maintained steady growth. During the Period, the securities business
realized an operating income of Rmb689.28 million, representing an increase of
0.1% year-on-year. Of such income, brokerage commissions income amounted to
Rmb535.90 million, representing a decrease of 9.3% year-on-year; bank interests
income amounted to Rmb153.38 million, representing an increase of 57.3%
year-on-year; and the proprietary securities trading business recorded a profit
of Rmb27.89 million as accounted for in the income statement (Same period in
2010: Rmb51.61 million).
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) ("Petroleum Co") realized an income of Rmb2,393.40
million, representing an increase of 49.6% year-on-year due to a rise in the
prices of petroleum products and a growth in sales of petroleum products during
the Period. In the Period, Petroleum Co achieved a net profit of Rmb17.52
million.
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company
of the Company) operates the 69.7 kilometre Jinhua Section of the Ningbo-Jinhua
Expressway. During the Period, the Company achieved a satisfactory growth in
toll income benefitting from an increase in traffic volume driven by the
opening of nearby road networks. The Jinhua Section of the Ningbo-Jinhua
Expressway recorded an average daily traffic volume in full-trip equivalents of
10,604 during the Period, representing an increase of 17.2% year-on-year; while
toll income amounted to Rmb105.78 million, representing an increase of 19.7%
year-on-year. Due to its heavy financial burden, the associate company still
incurred a loss of Rmb30.13 million during the Period but the Directors believe
that the loss is gradually decreasing.
JoinHands Technology Co., Ltd. (a 27.582% owned associate company of the
Company) did not show any improvement to its operations during the Period and
realized a loss of Rmb1.20 million during the Period.
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 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 Rmb900.32 million, representing an increase of 5.2%
year-on-year; return on shareholders' equity was 6.2%, representing an increase
of 1.0% year-on-year; while earnings per share for the Company was Rmb20.73
cents.
Liquidity and Financial Resources
As at June 30, 2011, current assets of the Group amounted to Rmb16,629.86
million in aggregate (December 31, 2010: Rmb19,673.10 million), of which bank
balances and cash accounted for 30.6% (December 31, 2010: 30.5%), bank balances
held on behalf of customers accounted for 52.0% (December 31, 2010: 59.4%), and
held-for-trading investments accounted for 7.9% (December 31, 2010: 4.1%).
Current ratio (current assets over current liabilities) as at June 30, 2011 was
1.5 (December 31, 2010: 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 the securities
dealing business) was 3.1 (31 December 2010: 2.6).
The amount for held-for-trading investments of the Group as at June 30, 2011
amounted to Rmb1,309.51 million (December 31, 2010: Rmb803.77 million), of
which 81.6% was invested in corporate bonds, 18.0% 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 Rmb666.12 million.
The Directors do not expect the Company to experience any problem with
liquidity and financial resources in the foreseeable future.
Borrowing sand Solvency
As at June 30, 2011, total liabilities of the Group amounted to Rmb12,429.60
million (December 31, 2010: Rmb15,956.94 million), of which 15.7% was borrowings
and 69.4% was accounts payable to customers arising from the securities dealing
business.
Total interest-bearing borrowings of the Group as at June 30, 2011 amounted to
Rmb1,952.61 million, representing an increase of 7.2% over December 31, 2010.
The borrowings comprised outstanding balances of loans from domestic foreign
banks, denominated in HK dollar, totalling approximately Rmb320.61 million
equivalent; outstanding balances of loans from domestic commercial banks
totalling Rmb632.00 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, 51.2% were not repayable within one year.
As at June 30, 2011, the Group's loans from domestic commercial banks are
one-year short-term loans, of which Rmb100.00 million was fixed-rate loans with
interest rates ranging from 5.31% to 6.06% per annum and Rmb532.00 million was
floating-rate loans with interest rates ranging from 5.68% to 6.31% 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 annual
interest rate for the Group's loan denominated in HK dollars was 4.95% per
annum.
Total interest expense for the Period amounted to Rmb41.85 million, while
profit before interest and tax amounted to Rmb1,435.77 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
34.3 (June 30, 2010: 31.0).
The asset-liability ratio (total liabilities over total assets) was 41.0% as at
June 30, 2011 (December 31, 2010: 47.4%). 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 the securities dealing business over total assets less bank balances held
on behalf of customers) of the Group was 17.6% (December 31, 2010: 19.7%).
Capital Structure
As at June 30, 2011, the Group had Rmb17,873.70 million total equity,
Rmb10,041.85 million fixed-rate liabilities, Rmb532.00 million floating-rate
liabilities and Rmb1,855.75 million interest-free liabilities, representing
59.0%, 33.1%, 1.8% and 6.1% 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 the securities dealing business by
total equity, was 21.3% as at June 30, 2011 (December 31, 2010: 24.4%).
Capital Expenditure Commitments and Utilization
During the Period, capital expenditures of the Group totaled Rmb117.53 million,
while capital expenditures of the Company totaled Rmb4.97 million. Amongst the
total capital expenditures of the Group, Rmb76.24 million was incurred for
acquisition and construction of properties and Rmb38.14 million for purchase of
equipment.
As at June 30, 2011, capital expenditures committed by the Group and the
Company totaled Rmb648.12 million and Rmb221.75 million, respectively. Amongst
the total capital expenditures committed by the Group, Rmb283.94 million was
used for acquisition and construction of properties, Rmb304.62 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
Rmb12.94 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 June 30, 2011, the Group did not have any contingent liabilities nor any
pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the repayment of a domestic foreign bank loan in HK dollar amounting
to an equivalent of approximately Rmb320.61 and dividend payments to the
holders of H shares in HK dollars, the Group's principal operations are
transacted and booked in Renminbi. Therefore, the Group's exposure to foreign
exchange fluctuations is limited.
With an aim to hedge against foreign exchange risks arising from borrowings
denominated in HK dollar, the Group has purchased Hong Kong dollar equivalent
forward contracts with one-year term at a rate lower than the spot exchange
rate on the borrowing date during the Period. Save for the above-mentioned, 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
During the Period, China's economic growth slowed moderately as expected under
the State's policy of continuously strengthening and improving the
macro-economic control initiatives. The corresponding slowdown in growth in
domestic automobile sales and foreign trade exports had affected the organic
growth of traffic volume on expressways. It is anticipated that as inflationary
pressures begin to subside in the second half of
2011, the intensity of the macro-economic control initiatives is likely to be
eased such that economic growth may demonstrate a trend of "first decelerating
then accelerating".
Although the increase in both traffic volume and toll income of the Group's two
expressways dipped significantly during the Period as a result of slackened
growth in the province's economy as well as the impact of traffic diversions to
the Zhuyong Expressway, it is anticipated that the organic growth in traffic
volume on the Group's expressways is likely to improve in the second half of
2011 as the impact from traffic diversions to the Zhuyong Expressway is
stabilizing and the economic environment in Zhejiang Province is improving.
Meanwhile, following the commencement of operation of eight toll stations and
20 electronic toll collection (ETC) lanes, seven toll stations and 18 ETC lanes
commenced operation upon completion on 1 August 2011 as planned in the first
half of 2011. The remaining 17 toll stations and 52 ETC lanes are expected to
be built and to commence operation next year. The Group will then be able to
offer more convenient and efficient services to traveling vehicles and to
further enhance the traffic capacity of its expressways.
As regards the policy announced in mid-June 2011 by five national ministries
and commissions of China for specifically rectifying highway tolling, relevant
implementation policies expected to be formulated by Zhejiang Province in the
second half of the year will perhaps affect the current toll standards, thereby
triggering uncertainties over the toll income to be generated on the Group's
expressways.
As China's stock market will experience quite a high level of uncertainties
once the stock indices are being consolidated at low levels, the Group's
securities business will be affected by the volatility in the A-share market
and the intense competition in the securities brokerage industry. Zheshang
Securities will enhance the competitiveness of its operating network by
establishing more new outlets in the Zhejiang market. It will aggressively
expand investment banking, fixed income, asset management and other operations,
while striving to create new businesses for further promoting a sound
development of the securities business.
The Company will face unprecedented challenges, given the extremely complex
internal and external environments for economic development as well as the
uncertainties due to recent policy changes or adjustments for the toll road
industry. We expect that during the second half of 2011, we will be facing
increasing uncertainties regarding the traffic volumes on the Group's
expressways, the service area operations and the performance of the capital
market. Under such a complex situation, the Company's management will closely
monitor the changes in policies for the industry and the impact of road
networks within the province on the Group. We will adjust business strategies
on a timely basis to strengthen the expressway core business, and strive to
seek and cultivate new businesses and new income bases so as to achieve a
sustainable and healthy development of the Company.
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.
By order of the Board
Zhejiang Expressway Co., Ltd.
Chen Jisong
Chairman
Hangzhou, PRC, August 23, 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.
Latest directors dealings
- 8 hours ago Taylor Maritime Investments Limited NPV
- 9 hours ago NCC Group
- 10 hours ago Hammerson
- 10 hours ago Oxford Nanopore Technologies
- 10 hours ago Rotork