2012 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)
2012 Annual Results Announcement
-- Revenue amounted to Rmb6,700.26 million, representing a slight decrease of
1.2% year-on-year.
-- Profit attributable to owners of the Company amounted to
Rmb1,686.27 million, representing a decrease of 6.6% year-on-year.
-- Earnings per share was Rmb38.83 cents.
-- A final dividend of Rmb24 cents per share is recommended.
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the
"Company") announced the audited consolidated results of the Company and its
subsidiaries (collectively the "Group") for the year ended December 31, 2012
(the "Period"), with the basis of preparation as stated in note 1 set out
below.
RESULTS AND DIVIDENDS
During the Period, revenue for the Group was Rmb6,700.26 million,
representing a slight decrease of 1.2% over 2011. Profit attributable to
owners of the Company was Rmb1,686.27 million, representing a decrease of
6.6% year-on-year. Earnings per share for the Period was Rmb38.83 cents
(2011: Rmb41.57 cents).
The Directors have recommended to pay a final dividend of Rmb24 cents per
share (2011: Rmb25 cents), subject to shareholders' approval at the annual
general meeting of the Company. Together with an interim dividend of Rmb6
cents per share already paid, the annual dividend payout during the Period
is Rmb30 cents per share (2011: 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, 2012, together with the comparative
figures for 2011:
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
December 31,
2012 2011
Notes Rmb'000 Rmb'000
---------- ----------
Revenue 3 6,700,258 6,781,352
Operating costs (4,369,641) (4,077,403)
---------- ----------
Gross profit 2,330,617 2,703,949
Securities investment gains 99,783 7,925
Other income 4 288,644 281,929
Administrative expenses (82,092) (84,380)
Other expenses (46,154) (38,565)
Share of loss of associates (17,341) (7,035)
Share of loss of a jointly
controlled entity (3,516) -
Finance costs (53,995) (80,043)
---------- ----------
Profit before tax 2,515,946 2,783,780
Income tax expense 5 (646,864) (717,838)
---------- ----------
Profit for the year 1,869,082 2,065,942
---------- ----------
For the year ended
December 31,
2012 2011
Note Rmb'000 Rmb'000
---------- ----------
Other comprehensive income (loss)
Available-for-sale financial
assets:
- Fair value gain (loss) during
the year 4,800 (9,746)
- Reclassification adjustments for
cumulative gain included in
profit or loss upon disposal (175) (4,072)
Income tax relating to components
of other comprehensive income (1,156) 3,455
---------- ----------
Other comprehensive income (loss)
for the year (net of tax) 3,469 (10,363)
---------- ----------
Total comprehensive income for
the year 1,872,551 2,055,579
============== ==============
Profit for the year attributable
to:
Owners of the Company 1,686,270 1,805,345
Non-controlling interests 182,812 260,597
---------- ----------
1,869,082 2,065,942
============== ==============
Total comprehensive income
attributable to:
Owners of the Company 1,688,079 1,799,941
Non-controlling interests 184,472 255,638
---------- ----------
1,872,551 2,055,579
============== ==============
Earnings per share - basic and
diluted 7 Rmb38.83 cents Rmb41.57 cents
============== ==============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31,
2012 2011
Note Rmb'000 Rmb'000
---------- ----------
NON-CURRENT ASSETS
Property, plant and equipment 1,357,844 1,294,465
Prepaid lease payments 66,931 68,983
Expressway operating rights 10,732,058 11,364,938
Goodwill 86,867 86,867
Other intangible assets 155,633 157,594
Deposit paid for acquisition of a property - 323,800
Interests in associates 465,513 446,679
Interest in a jointly controlled entity 369,954 -
Available-for-sale investments 133,000 1,000
Other receivables 325,035 382,000
---------- ----------
13,692,835 14,126,326
---------- ----------
CURRENT ASSETS
Inventories 27,418 26,400
Trade receivables 8 57,847 48,013
Loans to customers arising from
margin financing business 724,123 -
Other receivables and prepayments 701,627 844,142
Prepaid lease payments 2,052 2,052
Available-for-sale investments 134,899 60,274
Held for trading investments 1,486,772 1,260,021
Financial assets held under resale
agreement 280,066 -
Bank balances held on behalf of customers 7,491,625 7,177,508
Bank balances and cash
- Time deposits with original maturity
over three months 1,483,408 2,467,793
- Cash and cash equivalents 3,362,709 3,120,430
---------- ----------
15,752,546 15,006,633
---------- ----------
As at December 31,
2012 2011
Notes Rmb'000 Rmb'000
---------- ----------
CURRENT LIABILITIES
Accounts payable to customers
arising from securities
business 7,481,819 7,143,067
Trade payables 9 378,364 317,188
Tax liabilities 223,592 491,619
Other taxes payable 53,082 61,753
Other payables and accruals 973,031 724,216
Dividends payable 94,998 94,971
Long-term bonds due in one-year 1,000,000 -
Bank loans - 462,553
Derivative financial instrument - 6,426
---------- ----------
10,204,886 9,301,793
---------- ----------
NET CURRENT ASSETS 5,547,660 5,704,840
---------- ----------
TOTAL ASSETS LESS CURRENT
LIABILITIES 19,240,495 19,831,166
---------- ----------
NON-CURRENT LIABILITIES
Long-term bonds - 1,000,000
Deferred tax liabilities 224,220 232,066
---------- ----------
224,220 1,232,066
---------- ----------
19,016,275 18,599,100
============== ==============
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 11,177,137 10,835,424
---------- ----------
Equity attributable to owners
of the Company 15,520,252 15,178,539
Non-controlling interests 3,496,023 3,420,561
---------- ----------
19,016,275 18,599,100
============== ==============
Notes:
1. Basis of preparation
The consolidated financial statements have been prepared in accordance
with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong
Kong Institute of Certified Public Accountants (the "HKICPA"). In addition,
the consolidated financial statements include applicable disclosures
required by the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the "HKEx") (the "Listing Rules") and by
the Hong Kong Companies Ordinance.
2. Principal Accounting Policies
The consolidated financial statements have been prepared on the historical
cost basis except for certain financial instruments that are measured at
fair values. Historical cost is generally based on the fair value of the
consideration given in exchange for goods.
In the current year, the Group has applied the following revised HKFRSs
issued by the HKICPA:
Amendments to HKAS 12 Deferred Tax: Recovery of Underlying Asset;
and
Amendments to HKFRS 7 Financial Instruments: Disclosures -
Transfers of Financial Assets
The application of the amendments to HKFRSs in the current year has had no
material impact on the Group's financial performance and positions for the
current and prior years and/or on the disclosures set out in these
consolidated financial statements.
The Group has not early applied the following new and revised HKFRSs that
have been issued but are not yet effective:
Amendments to HKFRSs Annual Improvements to HKFRSs 2009 - 2011
Cycle (Note 1)
Amendments to HKFRS 7 Disclosures - Offsetting Financial Assets and
Financial Liabilities (Note 1)
Amendments to HKFRS 9 Mandatory Effective Date of HKFRS 9 and
and HKFRS 7 Transition Disclosures (Note 3)
Amendments to HKFRS 10, Consolidated Financial Statements, Joint
HKFRS 11 and HKFRS 12 Arrangements and Disclosure of Interests
in Other Entities:
Transition Guidance (Note 1)
Amendments to HKFRS 10, Investment Entities (Note 2)
HKFRS 12 and HKAS 27
HKFRS 9 Financial Instruments (Note 3)
HKFRS 10 Consolidated Financial Statements (Note 1)
HKFRS 11 Joint Arrangements (Note 1)
HKFRS 12 Disclosure of Interests in Other
Entities (Note 1)
HKFRS 13 Fair Value Measurement (Note 1)
HKAS 19 (as revised in 2011) Employee Benefits (Note 1)
HKAS 27 (as revised in 2011) Separate Financial Statements (Note 1)
HKAS 28 (as revised in 2011) Investments in Associates and Joint
Ventures (Note 1)
Amendments to HKAS 1 Presentation of Items of Other Comprehensive
Income (Note 4)
Amendments to HKAS 32 Offsetting Financial Assets and Financial
Liabilities (Note 2)
HK(IFRIC) - Int 20 Stripping Costs in the Production Phase of a
Surface Mine (Note 1)
Note 1: Effective for annual periods beginning on or after January 1, 2013
Note 2: Effective for annual periods beginning on or after January 1, 2014
Note 3: Effective for annual periods beginning on or after January 1, 2015
Note 4: Effective for annual periods beginning on or after July 1, 2012
Annual Improvements to HKFRSs 2009 - 2011 Cycle issued in June 2012
The Annual Improvements to HKFRSs 2009 - 2011 Cycle include a number of
amendments to various HKFRSs. The amendments are effective for annual periods
beginning on or after 1 January 2013. Amendments to HKFRSs include the
amendments to HKAS 1 Presentation of Financial Statements, amendments to
HKAS 16 Property, Plant and Equipment and the amendments to HKAS 32
Financial Instruments: Presentation.
HKAS 1 requires an entity that changes accounting policies retrospectively,
or makes a retrospective restatement or reclassification to present a
statement of financial position as at the beginning of the preceding period
(third statement of financial position). The amendments to HKAS 1 clarify
that an entity is required to present a third statement of financial position
only when the retrospective application, restatement or reclassification has
a material effect on the information in the third statement of financial
position and that related notes are not required to accompany the third
statement of financial position.
The amendments to HKAS 16 clarify that spare parts, stand-by equipment and
servicing equipment should be classified as property, plant and equipment
when they meet the definition of property, plant and equipment in HKAS 16
and as inventory otherwise. The directors do not anticipate that the
application of the amendments will have a material effect on the Group's
consolidated financial statements.
The amendments to HKAS 32 clarify that income tax on distributions to
holders of an equity instrument and transaction costs of an equity
transaction should be accounted for in accordance with HKAS 12 Income Taxes.
The directors anticipate that the amendments to HKAS 32 will have no effect
on the Group's consolidated financial statements as the Group has already
adopted this treatment.
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities
and amendments to HKFRS 7 Disclosures - Offsetting Financial Assets and
Financial Liabilities
The amendments to HKAS 32 clarify existing application issues relating to
the offset of financial assets and financial liabilities requirements.
Specifically, the amendments clarify the meaning of "currently has a legally
enforceable right of set-off" and "simultaneous realisation and settlement".
The amendments to HKFRS 7 require entities to disclose information about
rights of offset and related arrangements (such as collateral posting
requirements) for financial instruments under an enforceable master netting
agreement or similar arrangement.
The amendments to HKFRS 7 are effective for annual periods beginning on or
after January 1, 2013 and interim periods within those annual periods. The
disclosures should also be provided retrospectively for all comparative
periods. However, the amendments to HKAS 32 are not effective until annual
periods beginning on or after January 1, 2014, with retrospective
application required.
The directors anticipate that the application of these amendments to HKAS 32
and HKFRS 7 may result in more disclosures being made with regard to
offsetting financial assets and financial liabilities in the future.
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduces new requirements for the classification
and measurement of financial assets. HKFRS 9 amended in 2010 includes the
requirements for the classification and measurement of financial liabilities
and for derecognition.
Key requirements of HKFRS 9 are described as follows:
-- All recognised financial assets that are within the scope of HKAS 39
Financial Instruments: Recognition and Measurement are subsequently
measured at amortised cost or fair value. Specifically, debt investments
that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that 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 reporting
periods. In addition, under HKFRS 9, entities may make an irrevocable
election to present subsequent changes in the fair value of an equity
investment (that is not held for trading) in other comprehensive income,
with only dividend income generally recognised in profit or loss.
-- With regard to the measurement of financial liabilities designated as at
fair value through profit or loss, HKFRS 9 requires that the amount of
change in the fair value of the financial liability that is attributable
to changes in the credit risk of that liability is presented in other
comprehensive income, unless the recognition of the effects of changes in
the liability's credit risk in other comprehensive income would create or
enlarge an accounting mismatch in profit or loss. Changes in fair value
of financial liabilities attributable to changes in the financial
liabilities' credit risk are not subsequently reclassified to profit or
loss. Under HKAS 39, the entire amount of the change in the fair value of
the financial liability designated as fair value through profit or loss
was presented in profit or loss.
HKFRS 9 is effective for annual periods beginning on or after January 1, 2015,
with earlier application permitted.
The directors anticipate that the adoption of HKFRS 9 in the future will
affect the classification and measurement of the Group's available-for-sale
("AFS") investments but not the Group's financial liabilities. Regarding the
Group's AFS investments, it is not practicable to provide a reasonable
estimate of that effect until a detailed review has been completed.
New and revised standards on consolidation, joint arrangements, associates
and disclosures
In June 2011, a package of five standards on consolidation, joint
arrangements, associates and disclosures was issued, including HKFRS 10,
HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in
2011).
Key requirements of these five standards that are applicable to the Group are
described below.
HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial
Statements that deal with consolidated financial statements. HK (SIC) -
Int 12 Consolidation - Special Purpose Entities will be withdrawn upon the
effective date of HKFRS 10. Under HKFRS 10, there is only one basis for
consolidation, that is, control. In addition, HKFRS 10 includes a new
definition of control that contains three elements: (a) power over an
investee, (b) exposure, or rights, to variable returns from its involvement
with the investee, and (c) the ability to use its power over the investee to
affect the amount of the investor's returns. Extensive guidance has been added
in HKFRS 10 to deal with complex scenarios.
HKFRS 11 replaces HKAS 31 Interests in Joint Ventures. HKFRS 11 deals with
how a joint arrangement of which two or more parties have joint control
should be classified. HK (SIC) - Int 13 Jointly Controlled Entities -
Non-monetary Contributions by Venturers will be withdrawn upon the effective
date of HKFRS 11. Under HKFRS 11, joint arrangements are classified as joint
operations or joint ventures, depending on the rights and obligations of the
parties to the arrangements. In contrast, under HKAS 31, there are three types
of joint arrangements: jointly controlled entities, jointly controlled assets
and jointly controlled operations. In addition, joint ventures under HKFRS
11 are required to be accounted for using the equity method of accounting,
whereas jointly controlled entities under HKAS 31 can be accounted for using
the equity method of accounting or proportionate consolidation.
HKFRS 12 is a disclosure standard and is applicable to entities that have
interests in subsidiaries, joint arrangements, associates and/or
unconsolidated structured entities. In general, the disclosure requirements
in HKFRS 12 are more extensive than those in the current standards.
In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued
to clarify certain transitional guidance on the application of these five
HKFRSs for the first time.
These five standards, together with the amendments relating to the
transitional guidance, are effective for annual periods beginning on or
after January 1, 2013 with earlier application permitted provided that all
of these standards are applied at the same time.
The directors anticipate that these five standards will be adopted in the
Group's consolidated financial statements for the annual period beginning
January 1, 2013. The application of these five standards is not expected to
have material impact on amounts reported in the consolidated financial
statements.
HKFRS 13 Fair Value Measurement
HKFRS 13 establishes a single source of guidance for fair value measurements
and disclosures about fair value measurements. The standard defines fair
value, establishes a framework for measuring fair value, and requires
disclosures about fair value measurements. The scope of HKFRS 13 is broad;
it applies to both financial instrument items and non-financial instrument
items for which other HKFRSs require or permit fair value measurements and
disclosures about fair value measurements, except in specified circumstances.
In general, the disclosure requirements in HKFRS 13 are more extensive than
those in the current standards. For example, quantitative and qualitative
disclosures based on the three-level fair value hierarchy currently required
for financial instruments only under HKFRS 7 Financial Instruments:
Disclosures will be extended by HKFRS 13 to cover all assets and liabilities
within its scope.
HKFRS 13 is effective for annual periods beginning on or after January 1,
2013, with earlier application permitted. The directors anticipate that the
application of the new standard may affect certain amounts reported in the
consolidated financial statements and result in more extensive disclosures
in the consolidated financial statements.
3. Segment Information
Information reported to the Chief Executive Officer of the Company, being
the chief operating decision maker, for the purposes of resource allocation
and assessment of segment performance focuses on types of goods or services
delivered or provided.
Specifically, the Group's reportable and operating segments under HKFRS 8
are as follows:
(i) Toll operation - the operation and management of high grade roads
and the collection of the expressway tolls.
(ii) Service area and advertising businesses - the sale of food,
restaurant operation, automobile servicing, operation of petrol
stations and design and rental of advertising billboards along
the expressways.
(iii) Securities operation - the securities broking, margin financing and
securities lending services and proprietary trading.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
and operating segment.
For the year ended December 31, 2012
Service
area and
Toll advertising Securities Total
operation businesses operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------- ----------- ----------- ---------- ----------- -----------
Revenue
External sales 3,548,692 2,025,429 1,126,137 6,700,258 - 6,700,258
Inter-segment
sales - 7,919 - 7,919 (7,919) -
---------- ----------- ----------- ---------- ----------- -----------
Total 3,548,692 2,033,348 1,126,137 6,708,177 (7,919) 6,700,258
========== =========== =========== ========== =========== ===========
Segment profit 1,637,244 66,169 165,669 1,869,082 1,869,082
========== =========== =========== ========== ===========
For the year ended December 31, 2011
Service
area and
Toll advertising Securities Total
operation businesses operation Segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------- ----------- ----------- ---------- ----------- -----------
Revenue
External sales 3,522,510 1,916,564 1,342,278 6,781,352 - 6,781,352
Inter-segment
sales - 8,004 - 8,004 (8,004) -
---------- ----------- ----------- ---------- ----------- -----------
Total 3,522,510 1,924,568 1,342,278 6,789,356 (8,004) 6,781,352
========== =========== =========== ========== =========== ===========
Segment profit 1,695,078 71,763 299,101 2,065,942 2,065,942
========== =========== =========== ========== ===========
Segment profit represents the profit after tax of each operating segment.
This is the measure reported to the chief operating decision maker, the
Group's Chief Executive Officer, for the purposes of resource allocation
and performance assessment.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by
reportable and operating segment:
Segment assets Segment liabilities
As at December 31, As at December 31,
2012 2011 2012 2011
Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------- ---------- ---------- ----------
Toll operation 15,458,159 15,636,388 (2,402,463) (2,806,522)
Service area and advertising
businesses 553,479 597,281 (157,674) (231,303)
Securities operation 13,346,876 12,812,423 (7,868,969) (7,496,034)
---------- ---------- ---------- ----------
Total segment assets
(liabilities) 29,358,514 29,046,092 (10,429,106) (10,533,859)
Goodwill 86,867 86,867 - -
---------- ---------- ---------- ----------
Consolidated assets
(liabilities) 29,445,381 29,132,959 (10,429,106) (10,533,859)
========== ========== ============ ============
Segment assets and segment liabilities represent the assets and liabilities
of the subsidiaries operating in the respective reportable and operating segment.
Other segment information
Amounts included in the measure of segment profit or segment assets:
Service
area and
Toll advertising Securities
operation businesses operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------- ----------- ---------- ----------
For the year ended December 31, 2012
------------------------------------
Income tax expense 567,031 19,710 60,123 646,864
Interest income 138,924 10,693 29,282 178,899
Interest expense 53,749 246 - 53,995
Interests in associates 185,456 234,005 46,052 465,513
Interest in a jointly controlled entity 369,954 - - 369,954
Share of result of associates (12,827) 7,366 (11,880) (17,341)
Share of loss of a jointly controlled
entity (3,516) - - (3,516)
Gain on fair value changes on held
for trading investments 10,290 - 89,318 99,608
Additions to non-current assets (Note) 604,822 14,333 105,406 724,561
Depreciation and amortisation 742,318 28,624 96,298 867,240
Loss on disposal of property,
plant and equipment 4,722 1,223 250 6,195
========== =========== ========== ==========
Service
area and
Toll advertising Securities
operation businesses operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------- ----------- ---------- ----------
For the year ended December 31, 2011
------------------------------------
Income tax expense 575,759 24,281 117,798 717,838
Interest income 112,843 28,344 - 141,187
Interest expense 69,650 10,393 - 80,043
Interests in associates 198,285 236,386 12,008 446,679
Share of result of associates (15,968) 19,566 (10,633) (7,035)
Gain on fair value changes on held
for trading investments 6,800 - (2,947) 3,853
Additions to non-current assets (Note) 239,949 21,258 414,792 675,999
Depreciation and amortisation 740,363 28,696 92,573 861,632
Impairment loss on interest in an associate - 11,979 - 11,979
(Gain) loss on disposal of property,
plant and equipment (528) 164 308 (56)
========== =========== ========== ==========
---------- ----------- ---------- ----------
Note: Non-current assets excluded financial instruments.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year
is as follows:
Year ended December 31,
2012 2011
Rmb'000 Rmb'000
---------- ----------
Toll operation revenue 3,548,692 3,522,510
Service area businesses
revenue (mainly sales of
goods) 1,934,501 1,834,422
Advertising business rental
revenue 90,473 81,765
Commission income from
securities operation 832,213 985,754
Interest income from securities
operation 293,924 356,524
Others 455 377
---------- ----------
Total 6,700,258 6,781,352
=========== ===========
Geographical information
The Group's operations are located in the PRC (country of domicile). All
non-current assets of the Group are located in the PRC.
All of the Group's revenue from external customers is attributed to the
group entities' country of domicile (i.e., the PRC).
Information about major customers
During the years ended December 31, 2012 and 2011, there are no
individual customer with sales over 10% of the total sales of the Group.
4. Other Income
Year ended December 31,
2012 2011
Rmb'000 Rmb'000
--------- ---------
Interest income on bank balances,
entrusted loan receivables and
financial products investment 159,532 141,187
Rental income 72,335 69,165
Handling fee income 5,685 24,526
Towing income 9,303 8,782
Other interest income 19,367 -
Gain on disposal of an associate 12 -
Exchange (loss) gain, net (2,155) 8,672
Fair value gain on derivative
financial instrument 2,841 -
Others 21,724 29,597
---------- ----------
Total 288,644 281,929
=========== ===========
5. Income Tax Expense
Year ended December 31,
2012 2011
Rmb'000 Rmb'000
--------- ---------
Current tax:
PRC Enterprise Income Tax 655,910 750,856
Deferred tax (9,046) (33,018)
---------- ----------
646,864 717,838
=========== ===========
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law")
and Implementation Regulation of the EIT Law, the tax rate of the
Group is 25%.
No Hong Kong Profits Tax has been provided as the Group's income
neither arises in, nor is derived from Hong Kong during the year.
The tax charge for the year can be reconciled to the profit
before tax per the consolidated statement of comprehensive income
as follows:
Year ended December 31,
2012 2011
Rmb'000 Rmb'000
--------- ---------
Profit before tax 2,515,946 2,783,780
=========== ===========
Tax at the PRC enterprise
income tax rate of 25% 628,987 695,945
Tax effect of share of loss
of associates 4,335 1,759
Tax effect of share of loss
of a jointly controlled
entity 879 -
Tax effect of income not
taxable for tax purposes (17) (16)
Tax effect of expenses not
deductible for tax purposes 12,680 20,150
---------- ----------
Tax charge for the year 646,864 717,838
=========== ===========
6. Dividends
2012 2011
Rmb'000 Rmb'000
Dividends recognised as ---------- ----------
distribution during the year:
2012 Interim - Rmb6 cents
(2011: 2011 interim Rmb6 cents)
per share 260,587 260,587
2011 Final - Rmb25 cents
(2011: 2010 Final Rmb25 cents)
per share 1,085,779 1,085,779
---------- ----------
1,346,366 1,346,366
=========== ===========
The final dividend of Rmb24 cents per share in respect of the year
ended December 31, 2012 (2011: final dividend of Rmb25 cents per
share in respect of the year ended December 31, 2011) has been
proposed by the directors and is subject to approval by the
shareholders in the annual general meeting.
7. Earnings per share
The calculation of the basic earnings per share is based on profit
for the year attributable to owners of the Company of
Rmb1,686,270,000 (2011: Rmb1,805,345,000) and the 4,343,114,500
(2011: 4,343,114,500) ordinary shares in issue during the year.
Diluted earnings per share presented is the same as basic earnings
per share as there were no potential ordinary shares outstanding
for the years ended December 31, 2012 and 2011.
8. Trade Receivables
The Group has no credit period granted to its trade customers of
toll operation and service area businesses. The following is an
aged analysis of trade receivables presented based on the invoice
date at the end of the reporting period, which approximated the
respective revenue recognition dates:
As at December 31,
2012 2011
Rmb'000 Rmb'000
--------- ---------
Within 3 months 57,538 47,742
3 months to 1 year - -
1 to 2 years 146 -
Over 2 years 163 271
--------- ---------
Total 57,847 48,013
========= =========
9. Trade payables
Trade payables mainly represent the construction payables for
the improvement projects of toll expressways. The following
is an aged analysis of trade payables presented based on the
invoice date:
As at December 31,
2012 2011
Rmb'000 Rmb'000
---------- ----------
Within 3 months 227,946 93,602
3 months to 1 year 35,678 32,295
1 to 2 years 26,876 116,005
2 to 3 years 48,922 58,618
Over 3 years 38,942 16,668
---------- ----------
Total 378,364 317,188
========= =========
BUSINESS REVIEW
Despite that China's economy remained generally stable in
2012, its macro-economic growth was under greater downward
pressure as a result of persistent deterioration of the
European sovereign debt crisis and significant slowdown in
the global economic growth. As a result, China's GDP grew
by 7.8% over 2012. Moreover, although Zhejiang's economy,
which relied heavily on foreign trade, was hit by weakened
overseas import and export markets, the province's economic
growth rate showed signs of stabilization in the second
half of the year. Its GDP increased by 8.0% year-on-year
during the Period, 2 percentage points higher than that of
the national level.
As a result of some ongoing uncertainties in the macro
environment, including weakened foreign trade and sluggish
domestic consumption, organic growth in the traffic volume
on the Group's expressways tended to decelerate, and revenue
from the toll road operations was also undermined by the
implementation of certain new policies during the year.
Impacted by the gloomy Chinese domestic stock market,
revenue from the securities business fell significantly
year-on-year during the period. Therefore, revenue from
the Group's overall operations fell slightly year-on-year
as well, with a total income of Rmb6,898.43 million,
representing a decrease of 1.1% year-on-year; of which
Rmb3,670.89 million was attributable to the two major
expressways operated by the Group, representing 53.2% of
the total income; Rmb2,046.67 million was attributable
to the Group's toll road-related businesses such as service
area operations, gas stations, advertising business and
so forth, representing 29.7% of the total income; and
Rmb1,180.87 million was attributable to the securities
business, representing 17.1% of the total income.
A breakdown of the Group's income for the Period is set out
below:
2012 2011
Rmb'000 Rmb'000 % Change
---------- ----------
Toll income
Shanghai-Hangzhou-Ningbo
Expressway 2,968,396 2,954,949 0.5%
Shangsan Expressway 702,489 688,984 2.0%
Other income
Service areas 1,941,924 1,842,206 5.4%
Advertising 104,276 89,756 16.2%
Road maintenance 471 377 24.9%
Securities business income
Commission 886,946 1,044,415 -15.1%
Bank interest 293,924 356,524 -17.6%
---------- ----------
Subtotal 6,898,426 6,977,211 -1.1%
Less: Revenue taxes (198,168) (195,859) 1.2%
---------- ----------
Revenue 6,700,258 6,781,352 -1.2%
========== ==========
TOLL ROAD OPERATIONS
As Zhejiang's economy showed signs of stabilization and recovery in
the third and fourth quarters, organic growth in the traffic volume
on the Group's expressways during the Period was also slightly better
than that 2011. In particular, growth in the traffic volume on
Shangsan Expressway, along which most of the enterprises are small
and medium sized, picked up faster. However, upon the implementation
of the toll-by-weight policy, the rapid growth in the number of large
vehicles such as container trucks resulted in an overall declining
number of small and medium sized trucks. This in turn led to a
continued decline in the proportion of trucks to total traffic
volume, and an increase in toll income from expressways being less
than the increase in traffic volume during the Period.
Meanwhile, since the implementation of the tolling policy based on
actual travel routes in Zhejiang Province on May 15, 2012, the
Company adopted a number of measures of promotion and guidance in
order to achieve greater growth in traffic volume on some sections
of the Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway.
However, the abolition of the "Unified Toll Card" policy on
January 1, 2012, the adjustment to the rounding of the last figures
of tolls for passenger vehicles on May 15, 2012 and the launch of
the policy for adjusting passenger vehicle classification on
August 1, 2012 resulted in a slight decrease in the Group's toll
income, resulted in a total loss of approximately 3.2% in toll
income for the whole year. The implementation of the new policy
on September 30, 2012 for exemption from toll charges of passenger
vehicles with seven seats and less travelling on expressways
during major festivals and holidays led to a total decrease of
approximately Rmb58.00 million in the Group's toll revenue during
the Period, equivalent to a decrease of approximately 1.6% in toll
income for the whole year.
Tackling the challenging toll road operations in 2012, the Group
continued to commit more resources to operational and
management facilities for enhancing service quality and raising
tolling efficiency, while further strengthening the initiatives
for reducing costs, increasing benefits and income as well as
plugging loopholes. During the Period, the construction
of the second phase project for ETC (Electronic Toll Collection)
lanes was completed ahead of the National Day long holiday to ensure
that all ETC lanes at the toll stations along the Group's
expressways were opened to traffic smoothly prior to the National
Day long holiday, as part of our efforts to deliver safe and smooth
driving during the holiday season.
Average daily traffic volume in full-trip equivalents along the
Group's Shanghai- Hangzhou-Ningbo Expressway was 41,963 during the
Period, representing an increase of 3.8% year-on-year. In
particular, average daily traffic volume in full-trip equivalents
along the Shanghai-Hangzhou Section of the Shanghai-Hangzhou-Ningbo
Expressway was 42,659, representing an increase of 4.9% year-on-year,
and that along the Hangzhou-Ningbo Section was 41,466, representing
an increase of 3.0% year-on-year. Average daily traffic volume in
full-trip equivalents along the Shangsan Expressway was 16,787 during
the Period, representing an increase of 2.7% year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo
Expressway and the 142km Shangsan Expressway amounted to
Rmb3,670.89 million during the Period, representing an increase of
0.7% year-on-year. In respect of such income, toll income from the
Shanghai-Hangzhou-Ningbo Expressway amounted to Rmb2,968.40 million,
representing an increase of 0.5% year-on-year while toll income from
the Shangsan Expressway amounted to Rmb702.49 million, representing
an increase of 2.0% 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 number of customers at service areas along the
expressways decreased as a result of slackened growth in traffic
volume along the Group's two expressways, the impact of traffic
diversions from the Shaoxing Section of Shanghai- Hangzhou-Ningbo
Expressway following the opening of the Shaozhu Expressway, and the
closure of Yuyao Service Area for expansion construction work since
June.
Meanwhile, sales of refined oil products continued to increase
year-on-year on the rising prices of these products. Accordingly,
income from overall toll road-related businesses amounted to
Rmb2,046.67 million during the Period, representing a year-on-year
increase of 5.9%.
SECURITIES BUSINESS
Although China's stock market rebounded in the last month of
2012 and shown a hint of stabilizing, the aggregate trading volume
nevertheless fell by approximately 25% year-on-year as the market
fluctuated downward throughout 2012, which continued to dampen
investor sentiment. Meanwhile, benefiting from the new commission
policy - the "Notice on Further Strengthening Customer Services
and the Management of Securities Trading Commissions of Securities
Firms" implemented in early 2011, the decline in the commission
rate has begun to stabilize and has remained basically unchanged
year-on-year.
Hit by the repeated volatility at low levels in the stock
market, revenue from Zheshang Securities' securities brokerage
business, investment banking and asset management businesses showed
declines in varying degrees year-on-year during the Period.
Nevertheless, Zheshang Securities continued to increase the number
of its branches and the total number of customers, and accelerated
the launch of the margin trading business for further expanding
new business capabilities. Zheshang Securities had 64 securities
sales outlets during the Period, an increase of six outlets
year-on-year.
During the Period, Zheshang Securities realized an operating
income of Rmb1,180.87 million, a decrease of 15.7% year-on-year.
Of such income, brokerage commission income amounted to
Rmb886.95 million, a year-on-year decrease of 15.1%; and interest
income from the securities business amounted to Rmb293.92 million,
a year-on-year decrease of 17.6%. Moreover, securities investment
gains from Zheshang Securities accounted for in the consolidated
statement of comprehensive income amounted to Rmb89.49 million
during the Period.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned
associate company of the Company) benefited from a rise in the
retail prices of petroleum products and a growth in the sales of
petroleum products during the Period, the associate company
realized an income of Rmb6,090.71 million during the Period,
representing an increase of 18.5% year-on-year. During the Period,
net profit of the associate company amounted to Rmb15.02 million
(2011: net profit of 14.71 million).
The growth of traffic volume of the 69.7km Jinhua Section of
the Yongjin Expressway, operated by Zhejiang Jinhua Yongjin
Expressway Co., Ltd. (a 23.45% owned associate company of the
Company), declined during the Period as domestic economic growth
slowed down. This section recorded an average daily traffic volume
of 12,084 in full- trip equivalents, an increase of 12.2%
year-on-year, while toll income amounted to Rmb231.48 million,
an increase of 6.1% year-on-year. Due to its heavy financial
burden, the associate company still incurred a loss of
Rmb54.70 million during the Period (2011: a loss of
Rmb68.10 million).
JoinHands Technology Co., Ltd. (a 27.582% owned associate
company of the Company) generated its income primarily from its
property leasing activities. As the associate company did not
make any significant improvements to its operations, it incurred
a net profit of Rmb0.15 million during the Period (2011: a loss
of Rmb1.81 million).
The Company entered into a transfer agreement with Guangzhou
Kaixin Consulting Co., Ltd. ("Kaixin Company") in July 2011.
As Kaixin Company has failed to pay the consideration for the
equity interest transfer according to the terms of the contract,
the Company lodged a lawsuit against Kaixin Company. On
March 23, 2012, the court ruled that Kaixin Company pay the
remaining consideration of Rmb28.587 million for the equity
interest transfer and liquidated damages. The Company continued
to appeal against the said percentage of the liquidated damages
and the dismissed priority right for claim against the mortgaged
real estate of JoinHands Technology. The case is pending a final
judgment to be made by the Intermediate People's Court in
Hangzhou City.
Shengxin Expressway Co., Ltd. ("Shengxin Company", a jointly
controlled entity in which the Company owns a 50% equity interest)
operates the Shaoxing Section of the 73.4km Ningbo-Jinhua
Expressway. On July 6, 2012, the Company entered into a transfer
agreement with Shaoxing Communications Investment Group Co., Ltd.
("SXCI") for the acquisition of a 50% equity interest in Shengxin
Company, a wholly- owned subsidiary of SXCI, for a cash
consideration of Rmb355.03 million plus interest accrued on the
consideration. As at November 30, 2012, the Company had completed
the industrial and commercial changes of registration to Shengxin
Company. In December 2012, Shengxin Company's profit was accounted
for in the Group's consolidated income statement. As at
December 2012, toll revenue from the jointly controlled entity
amounted to Rmb23.91 million, and loss amounted to Rmb7.03 million.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provide
shareholders of the Company with sound returns over the long term.
During the Period, profit attributable to owners of the Company
for the year was approximately Rmb1,686.27 million, representing a
decline of 6.6% year-on-year, return on owners' equity was 10.9%,
representing a decline of 8.7% year-on-year, while earnings per
share for the Company was Rmb38.83 cents.
Liquidity and Financial Resources
As at December 31, 2012, current assets of the Group amounted to
Rmb15,752.55 million in aggregate (2011: Rmb15,006.63 million),
of which bank balances and cash accounted for 30.8% (2011: 37.2%),
bank balances held on behalf of customers accounted for 47.6%
(2011: 47.8%), and held-for-trading investments accounted for
9.4% (2011: 8.4%). Current ratio (current assets over current
liabilities) of the Group as at December 31, 2012 was 1.5
(2011: 1.6). Excluding the effect of customer deposits arising from
the securities business, the resultant current ratio of the Group
(current assets less balance of cash held on behalf of customers
over current liabilities less balance of accounts payable to customer
arising from securities business) was 3.0 (2011:
3.6).
The amount for held-for-trading investments of the Group as at
December 31, 2012 amounted to Rmb1,486.77 million
(2011: Rmb1,260.02 million), of which 97.6% was invested in bonds,
0.6% was invested in stocks, and the rest was invested in open-end
equity funds.
During the Period, net cash inflow generated from the Group's
operating activities amounted to Rmb1,537.71 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 December 31, 2012, total liabilities of the Group amounted
to Rmb10,429.11 million, of which 9.6% was corporate bonds and
71.7% was payables to customers arising from securities business.
Total interest-bearing borrowings of the Group as at
December 31, 2012 amounted to Rmb1 billion, representing a decrease
of 31.6% comparing to that as at December 31, 2011. The borrowings
was totally corporate bonds amounting to Rmb1 billion which was
issued by the Company in 2003 with a term of 10 years. The annual
coupon rate for corporate bonds was fixed at 4.29%, with interest
payable annually. On January 24, 2013, the principal and relevant
interests of the corporate bonds have been fully repaid. Besides,
the annual interest rate for accounts payable to customer arising
from the securities business was fixed at 0.35%.
Total interest expenses for the Period amounted to Rmb54.00 million,
while profit before interest and tax amounted to Rmb2,569.94 million.
The interest cover ratio (profit before interest and tax over
interest expenses) stood at 47.6 times (2011: 35.8).
The asset-liability ratio (total liabilities over total assets) was
35.4% as at December 31, 2012 (December 31, 2011: 36.2%).
Excluding the effect of customer deposits arising from the
securities business, the resultant asset-liability ratio (total
liabilities less balance of accounts payable to customer arising
from securities business over total assets less balance of cash
held on behalf of customers) of the Group was 13.4%
(December 31, 2011: 15.4%).
Capital Structure
As at December 31, 2012, the Group had Rmb19,016.28 million in
total equity, Rmb8,481.82 million in fixed-rate liabilities and
Rmb1,947.29 million in interest- free liabilities, representing
64.6%, 28.8% and 6.6% of the Group's total capital, respectively.
The gearing ratio, which was computed by dividing the total
liabilities less accounts payable to customer arising from
securities business by total equity, was 15.5% as at
December 31, 2012 (December 31, 2011: 18.2%).
Capital Expenditure Commitments and Utilization
During the Period, capital expenditures of the Group totaled
Rmb724.56 million, while capital expenditure of the Company
totaled Rmb467.96 million. Amongst the total capital expenditures
of the Group, Rmb373.47 million was incurred for acquiring
50% equity interest in Shengxin Company, Rmb50.00 million was
incurred for capital increase of Zheshang Fund Management Co., Ltd.
(an associate of Zheshang Securities that held 25% equity interest),
Rmb120.30 million was incurred for acquisition and construction
of properties, Rmb162.33 million was incurred for purchase and
construction of equipment and facilities, and Rmb12.39 million
was incurred for service area renovation and expansion,
Rmb6.07 million was incurred for the road widening project
between the Shaoxing-Zhuji hub of the Shangsan Expressway.
As at December 31, 2012, capital expenditures committed by
the Group and the Company totaled Rmb1,086.40 million and
Rmb450.08 million, respectively. Amongst the total capital
expenditures committed by the Group, Rmb497.05 million will
be used for acquisition and construction of properties,
Rmb238.50 million for acquisition and construction of equipment
and facilities, Rmb70.85 million for service area renovation
and expansion and Rmb280.00 million for investment in an associate.
The Group will finance the above mentioned capital
expenditure commitments mainly with internally generated cash
flow and will consider using debt financing to meet any
shortfalls in priority to using other methods.
Contingent Liabilities and Pledge of Assets
As at December 31, 2012, 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 Hong
Kong dollars amounting to an equivalent of Rmb312.51 million
and dividend payments to the holders of H shares in Hong Kong
dollars, the Group's principal operations were transacted and
booked in Renminbi.
With an aim to hedge against foreign exchange risks arising from
borrowings denominated in Hong Kong dollars, the Group purchased
Hong Kong dollar equivalent forward contracts with one-year term
at a rate lower than the spot exchange rate on the borrowing date
in the year of 2011. The transaction completed on May 31, 2012.
Other than the above, the Group has not used other financial
instruments 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
Due to influences by the macro and regional economic development
on the overall performance of toll road operations, it is
anticipated that the domestic economy will maintain steady
development in 2013 under the government's macro-control
initiatives. In addition, based on available data, it is
suggested that Zhejiang's economy is stabilising and improving,
which would be conducive to the continued organic growth in the
traffic volume on the Group's expressways in 2013.
Meanwhile, Jiaxing-Shaoxing Expressway, which is scheduled to
open in the second half of 2013, is anticipated to create a
slight negative impact on the Group's Shanghai- Hangzhou-Ningbo
Expressway, but a greater boost to the traffic volume on the
Group's Shangsan Expressway. As the income and profit
contribution from Shangsan Expressway is smaller than that from
Shanghai-Hangzhou-Ningbo Expressway, the opening of the
Jiaxing-Shaoxing Expressway is unlikely to significantly impact
on the Group's toll income for the whole year overall.
Moreover, as a new round of quantitative easing policies is
being launched globally, it is expected that China may make
appropriate adjustments to its monetary policy in 2013, which
may provide new impetus to the sluggish Chinese securities
market. This will help Zheshang Securities to seize an
opportunity in that while strengthening cost control and risk
control, Zheshang Securities will further develop innovative
business, broaden the sources of income and speed up the process
of the proposed listing of its shares on the Shanghai Stock
Exchange to address the challenges posed by market environment
and intense competition for facilitating the sound development
of the securities business.
Looking ahead in 2013, the world economy is expected to remain
in a major adjustment period; the Chinese domestic economy is
seeking a new balance in its development and the impact of
national policies on the toll road industry will continue. All
of these factors have added to uncertainty to the Group's
business development.
However, the Company's management also observed that a number
of positive factors are emerging as well: strengthened U.S.
economic recovery; China's implementation of the four major
national strategies and commencement of the four major
construction projects in Zhejiang Province at full speed, which
will present a rare opportunity for the Group's development.
In addition to continuous consolidation of the Group's
principal expressway business as well as advancing the
securities and financial business, the Group will also be
actively seeking suitable investment projects and nurturing
management capabilities on diversified businesses. The Group
will also utilize its financial resources advantage to
generate strategic synergies with its parent company for
expanding development space and improving profitability in
future.
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 has complied with all code
provisions in the Corporate Governance Code and Corporate
Governance Report (the "Code") set out in Appendix
14 to the Listing Rules, and has adopted the recommended
best practices in the Code as and when applicable.
By order of the Board
Zhejiang Expressway Co., Ltd.
Zhan Xiaozhang
Chairman
Hangzhou, PRC, March 19, 2013
As at the date of this announcement, the executive directors
of the Company are: Messrs. ZHAN Xiaozhang, LUO Jianhu and
DING Huikang; the non-executive directors of the Company are:
Messrs. LI Zongsheng, WANG Weili and WANG Dongjie; and the
independent non-executive directors of the Company are:
Messrs. ZHANG Junsheng, ZHOU Jun and PEI Ker-Wei.
Statement:
A full electronic version of the Company's 2012 Annual
Results Announcement is available at www.zjec.com.cn
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