Interim Results
Zhejiang Expressway Co
28 September 2004
Creating Value through Service Excellence.
Ever since its establishment, Zhejiang Expressway has never departed from the
conviction that it operates a people business. We put relentless efforts in
continuously enhancing the facilities of our expressways and their ancillary
services, with a view to creating comfortable, safe and highly efficient travel
conditions to our expressway users. We have the conviction that only through
providing high-quality services to satisfy our expressway users' needs will we
be able to ensure continued growth of our business, thereby creating maximum
value for our shareholders.
At Zhejiang Expressway, the management and staff share the same value: Service
is our mission, Excellence is our standard. Together, we work toward Creating
Value for our expressway users, our business partners, our shareholders and our
community.
CONTENTS
2 2004 Interim Results
3 Business Review
5 Financial Analysis
9 Outlook
10 Disclosure of Interests and Other Matters
12 Consolidated Income Statement
13 Consolidated Balance Sheet
14 Condensed Consolidated Summary Statement of Changes in
Equity
15 Condensed Consolidated Cash Flow Statement
16 Notes to Condensed Financial Statements
Appendices
24 Corporate Information
26 Corporate Structure of the Group
27 Financial Highlights
29 Location Map of Expressways Operated by the Group
2004 Interim Results (Unaudited)
The directors (the 'Directors') of Zhejiang Expressway Co., Ltd. (the 'Company')
are pleased to announce the unaudited consolidated operating results of the
Company and its subsidiaries (collectively the 'Group') for the six months ended
June 30, 2004 (the 'Period'), prepared in conformity with accounting principles
generally accepted in Hong Kong, with basis of preparations as stated in Note 1
to the consolidated financial statements below.
During the Period, the Group benefited from the continuing strong economic
expansion of the Yangtze River Delta Region, and achieved robust business
growth, a growth that was further amplified by a lower-than-usual comparison
basis of the same period in 2003. Turnover for the Group grew by 34.0% to
Rmb1,474.4 million while net profit from ordinary activities attributable to
shareholders increased by 22.4% to Rmb602.4 million. Earnings per share for the
Period was Rmb13.87 cents, representing an increase of 22.4% over the same
period in 2003.
The Directors have recommended the payment of an interim dividend of Rmb4.0
cents per share in respect of the Period (same period in 2003: Rmb4.0 cents per
share), subject to shareholders' approval at the extraordinary general meeting
of the Company to be held on October 12, 2004.
BUSINESS REVIEW
During the Period, both the core business of toll road operations and other
businesses of toll road-related operations underwent substantial growth, a
growth fueled by an estimated year-on-year GDP growth rate of 15.5% in Zhejiang
Province where all of the Group's business operations are carried out.
Compared to the same period in 2003, overall turnover grew 34.0% to Rmb1,474.4
million during the Period, of which turnover attributable to toll road
operations grew 32.3% while turnover attributable to toll road-related business
operations grew at an extraordinary rate of 65.0%, reflecting a higher rate of
growth in demand for ancillary services along the expressways operated by the
Group.
Toll Road Operations
Shanghai-Hangzhou-Ningbo Expressway remained the major revenue generator of the
Group during the Period, contributing to approximately 76.2% of the Group's
total toll income. Traffic volume on the expressway grew 31.2% year-on-year,
averaging 32,926 full-trip equivalents per day, while toll income grew 29.8%,
totaling approximately Rmb1,106.1 million.
Phase I of the project to widen the Shanghai-Hangzhou-Ningbo Expressway from
four lanes to eight lanes (the 'Widening Project') was completed in December
2003. This had substantially improved traveling conditions along the 44km
section between Hongken and Guzhu, allowing higher average travel speed and less
congestion, in addition to increasing the vehicle handling capacity of the
widened section from 55,000 passenger-car-units ('pcu') per day to 100,000 pcu
per day.
As a newer expressway in terms of operation history, Shangsan Expressway
continued to enjoy a higher growth rate than the Shanghai-Hangzhou-Ningbo
Expressway in traffic volume and toll income, increasing its share of
contribution to the Group's total toll income from 22.4% in 2003 to 23.8% during
the Period. During the Period, traffic volume on the expressway grew 40.3%
year-on-year to an average of 18,987 full-trip equivalents per day, and toll
income grew 41.0%, totaling approximately Rmb345.9 million.
Large-scale maintenance works on the Shanghai-Hangzhou-Ningbo Expressway,
including the road surface-overlaying project that started in 2002, was drawing
to a conclusion for the most part during the first half of this year. While some
of these maintenance works have inevitably brought inconvenience to expressway
travelers at times, the overall impact on the normal traffic flow has been
limited as a result of the successful implementation of extensive site
management measures.
Toll Road-Related Business Operations
Established in May 2003, Zhejiang Expressway Investment Development Co., Ltd. ('
Development Co'), a 51% owned subsidiary of the Company, is engaged in the
operation of service areas where facilities such as restaurants, gas stations
and shops are made available to travelers, as well as roadside advertising and
vehicle servicing businesses, along the two expressways operated by the Group.
The strong growth in traffic volume on the two expressways was accompanied by
tremendous increase in demand for ancillary services, leading to substantial
expansion in the relevant business operations during the Period. Turnover
attributable to service areas and roadside advertising operations grew 70.5% and
44.9%, respectively, compared to the same period in 2003 on a pro forma basis.
Net profit realized by Development Co was approximately Rmb13.7 million during
the Period, representing a pro forma increase of 43.5% compared to the same
period in 2003.
To further explore roadside advertising businesses opportunities along other
operational expressways within Zhejiang Province, a new subsidiary company named
Hangzhou Lutong Advertising Co., Ltd. was established under Development Co on
July 27, 2004, with Development Co holding 51% equity interest. Registered
capital for the new advertising company is Rmb3 million.
Long-term Investments
The Company also had a number of long-term investments that included a 50%
interest in Hangzhou Shida Highway Co., Ltd. ('Shida Co'), a jointly-controlled
entity that operates the 9.45km Shida Road; a 50% interest in Zhejiang
Expressway Petroleum Development Co., Ltd. ('Petroleum Co'), an associate
company that operates retail and wholesale petroleum products throughout
Zhejiang Province; and a 27.58% interest in JoinHands Technology Co., Ltd.
('JoinHands Technology'), a computer software and hardware company.
Owing to continued enhancement to the expressway network around Hangzhou City,
Shida Road had seen its traffic volume grow 72.2% and toll income grow 71.6%
during the Period, compared to the same period in 2003. Net profit achieved by
Shida Co was approximately Rmb20.4 million, representing an increase of 205.0%
over the same period in 2003.
Faced with oil supply shortages in China and rise in global oil prices,
Petroleum Co capitalized on its strong retail presence in key locations within
Zhejiang Province and expanded its turnover by 26.1% during the Period, while
increasing its net profit by 81.4% to Rmb14.3 million compared to the same
period in 2003.
During the Period, sales of computer networking equipments by JoinHands
Technology continued to slide due to market saturation, while additional efforts
were made in expanding its fledgling digital printing business and developing a
new technology software park located in Hangzhou High-tech Industrial
Development Zone. With a decrease of 38.5% in turnover, JoinHands Technology
recorded a loss of approximately Rmb1.2 million during the Period.
Into second half of the year, while growth momentum at Shida Co is expected to
be maintained, and business performance of Petroleum Co to remain steady,
prospects for JoinHands Technology is not expected to change in the near term.
Human Resources
A main objective of the Company's human resources strategy is to build a team
that is highly professional, with leading qualifications in the toll road
industry across all levels. Since the beginning of this year, further emphasis
has been placed on attracting and retaining professional talents whose
qualifications are crucial to our business operations.
Other than the above, there were no significant changes to the Company's overall
number of employees, the remuneration policies, bonus schemes and training
schemes since December 31, 2003 as disclosed in its latest annual report.
FINANCIAL ANALYSIS
During the Period, the Group was able to maintain a high rate of growth in
operating results, with sound financial position and steady growth in cash flow
from operating activities.
For the six months ended June 30, 2004, the Group recorded turnover of
Rmb1,474.4 million and profit attributable to shareholders of Rmb602.4 million,
representing increases of 34.0% and 22.4%, respectively, over the same period
last year. Earnings per share increased by 22.4% to Rmb13.87 cents.
Borrowings and Debt Repayment Ability
Interest-bearing Borrowings
As at June 30, 2004, the Group's interest-bearing borrowings was Rmb2,447.2
million in aggregate, representing a decrease of Rmb273.0 million from that in
the beginning of the Period. Of the total interest-bearing borrowings,
short-term interest-bearing borrowings and long-term interest-bearing borrowings
amounted to Rmb726.0 million and Rmb1,721.2 million respectively, representing
decreases of 25.6% and 1.3% from that in the beginning of the Period. Details
are as follows:
Maturity profiles
Gross Within 2-5 years Beyond
amount 1 year inclusive 5 years
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rate
World Bank loan 824,610 127,950 341,191 355,469
Fixed rate
Commercial bank loans 550,000 550,000 - -
Corporate bonds 1,000,000 - - 1,000,000
Government loans 72,600 48,000 24,020 580
Total as at June 30, 2004 2,447,210 725,950 365,211 1,356,049
Total as at December 31, 2003 2,720,126 975,950 365,211 1,378,965
The Group's finance costs decreased by 15.8% during the Period to Rmb56.0
million. The decrease was mainly attributable to the further reduction in the
borrowings from domestic commercial banks by the Company and its subsidiary,
Shangsan Co. At the end of the Period, the Group's borrowings from domestic
commercial banks decreased from Rmb1,170 million at the end of the same period
last year to Rmb550 million.
During the Period, the coupon rate of the corporate bonds issued by the Company
was 4.29% per annum, with interests payable once a year. Interest rates of the
Group's semi-annual and annual borrowings from domestic commercial banks in
Renminbi were 4.536% and 5.045%, respectively, during the Period, whereas the
effective interest rate of US Dollar loans extended by the World Bank was 4.85%.
Interest rate of government loans in Renminbi was the same as that applicable on
December 31, 2003.
Except for the US Dollar loans extended by the World Bank that bears interest at
a floating rate, the interest rates of the Group's other interest-bearing
borrowings were fixed.
Asset-liability Ratio
As at June 30, 2004, the Group's asset-liability ratio was 24.8%, representing a
decrease from 26.0% at the end of 2003. The continuous decrease in
asset-liability ratio during recent years has provided ample room for debt
financing. Subject to the macroeconomic control measures introduced by the PRC
government during the first half of the year, the banks implemented more
stringent controls over credit facilities, which has enhanced the Group's
comparative advantage in obtaining debt financing.
Liability to Equity Ratio
Liability to equity ratio is also known as gearing ratio, which reflects the
Group's solvency in the context of capital structure.
As at June 30, 2004, shareholders' equity, fixed rate liabilities, floating rate
liabilities and interest-free liabilities of the Group amounted to Rmb10,270.6
million, Rmb1,622.6 million, Rmb824.6 million and Rmb2,345.2 million
respectively, representing 68.2%, 10.8%, 5.5% and 15.5% to total assets of the
Group. Gearing ratio (total liabilities over shareholders' equity) was 46.7%
(December 31, 2003: 51.1%), which reflected a relatively reasonable debt capital
structure and strong solvency of the Group.
Interest Cover Ratio
During the Period, with interest expenses at Rmb56.0 million (corresponding
period in 2003: Rmb80.7 million, including capitalized interests of Rmb14.1
million), profit before interest and tax at approximately Rmb987.8 million, the
Group's interest cover ratio (profit before interest and tax over interest
expenses) was 17.6 (corresponding period in 2003: 10.2).
Financial Resources and Liquidity
Financial Resources
As at June 30, 2004, the Group had cash and cash equivalents of Rmb508.4 million
in aggregate, time deposits of Rmb258.8 million and short-term investments of
Rmb895.1 million, totaling Rmb1,662.3 million, representing a decrease of 13.6%
compared with Rmb1,923.1 million at the end of 2003. Of which, short-term
investments decreased by 18.9% compared with Rmb1,104.3 million at the end of
2003. Details are as follows:
As at As at
June 30, December 31,
2004 2003
Rmb'000 Rmb'000
Cash and cash equivalents 508,426 567,195
Renminbi 506,525 565,251
US dollar equivalent 1,640 1,393
Euro equivalent 141 59
HK equivalent 120 492
Time deposits 258,750 251,600
Renminbi 217,314 251,598
US dollar equivalent - -
Euro equivalent 41,436 -
HK equivalent - 2
Short term investments 895,153 1,104,266
Renminbi 895,153 1,104,266
Total 1,662,329 1,923,061
Renminbi 1,618,992 1,921,115
US dollar equivalent 1,640 1,393
Euro equivalent 41,577 59
HK equivalent 120 494
During the Period, among the Group's short-term investments, the amount held in
treasury bonds fell by 23.6%. As at June 30, 2004, treasury bonds accounted for
86.7% of the Group's total investments whereas the remaining comprised mainly of
close-ended securities investment funds.
During the Period, average annual interest rates of the Group's bank deposits in
Renminbi, US Dollar, Euro and Hong Kong Dollar were similar to those at the end
of year 2003.
Cash Flow and Liquidity
The Group's ordinary operating activities generated strong and stable cash
inflow. As at June 30, 2004, net cash flow from operating activities amounted to
Rmb1,030.3 million.
As at June 30, 2004, the Group's current assets amounted to Rmb1,743.6 million
in aggregate, of which account receivables, other receivables and inventories
accounted for 4.7% (December 31, 2003: 3.8%). Current ratio (current assets over
current liabilities) was 1.1, reflecting adequate working capital held by the
Group.
Liquidity of the Group's assets was also reflected by 'cash ratio', which is the
ratio of cash asset (comprising cash, cash equivalents and time deposits and
short-term investments) to current liabilities. As at June 30, 2004, cash ratio
was 1.0, reflecting the Group's strong short-term solvency and relatively small
risks in loss of realization.
In view of the above, the Directors believe that the Group has sufficient
financial resources to meet its operational needs in the foreseeable future.
Capital Expenditure Commitments and Utilization
As at December 31, 2003, capital expenditure committed by the Group was
Rmb5,053.0 million. During the Period, Rmb408.0 million was utilized, of which
Rmb390.0 million was used on the Widening Project.
As at June 30, 2004, capital expenditure committed by the Group was Rmb4,645.0
million, of which approximately Rmb4,052.0 million would be used on the Widening
Project.
The above capital expenditures will be financed by the Group's internal
financial resources, and any shortfall will be financed by other appropriate
means, with a preference for debt financing.
Contingent Liabilities and Pledge of Assets
Other than a loan guarantee of Rmb30.0 million provided in favor of Hangzhou
Shida Highway Co., Ltd. ('Shida Co,') a jointly controlled entity, in respect of
a commercial bank loan of the same amount extended to Shida Co from September
2001 to September 2009, the Group did not have any contingent liabilities as at
June 30, 2004. In addition, the Group had no pledge of assets during the Period.
Foreign Exchange Exposure
The Group has a World Bank loan of approximately Rmb824.6 million, denominated
in US Dollars and borrowed for the construction of the Shanghai-Hangzhou-Ningbo
Expressway. In addition, dividends for H shares payable by the Company are
settled in HK dollars.
In view of the stable exchange rate between Renminbi and US dollars, the
Directors do not foresee any material foreign exchange risk for the Group.
However, there is no assurance that any foreign exchange exposure will not
adversely affect the operating results of the Group in the future.
OUTLOOK
The macroeconomic controls that had taken place in the PRC during the Period are
expected to have lasting impact well into the second half of this year. In
Zhejiang Province, economic growth in the second half of the year is expected to
slow down from the extraordinary 15.5% GDP growth rate attained in the first
half. Latest forecasts on the annual GDP growth rate for the Province, however,
remains at 14.0%, a rate that should continue to create strong demand for road
transport in and around the Yangtze River Delta Region.
Since June 20, 2004, concerted efforts of the relevant authorities to crack down
on overloading practices by trucks are already showing encouraging results.
There may be additional corresponding measures to be carried out in the second
half of this year, the immediate impact of which is difficult to predict, but we
are confident that the stated goal of creating a safer, more orderly road
transport system will be achieved, and that such prospects should be beneficial
to toll road operators such as the Company in terms of increased truck traffic
and reduced damage to roads and bridges.
The ongoing Phase II of the Widening Project has been progressing as planned,
with completion date remaining unchanged around the end of 2005, though recent
fluctuations in the prices of construction materials have led to a small
increase in construction costs for the time being. Commencement of construction
for Phase III, however, has been delayed due to a slowdown by the relevant
authorities in granting land use rights, though it is not expected to adversely
affect the normal operation of the Shanghai-Hangzhou-Ningbo Expressway.
Slower traffic volume growth is expected for the expressways operated by the
Group for the second half of the year compared to the first half due to a number
of short-term factors: anticipated slowdown in economic growth; uncertainties
created by the efforts to stop overloading practices by trucks; short-term
interferences from the ongoing Widening Project and road maintenance projects at
certain sections of Shanghai-Hangzhou-Ningbo Expressway; and a higher basis of
comparison during the same period last year. Despite the above, however,
prospects for continued strong business growth for both the toll road operations
and the toll road-related operations of the Group remain positive, as economic
fundamentals of the Yangtze River Delta Region remain strong.
DISCLOSURE OF INTERESTS AND OTHER MATTERS
Purchase, Sale and Redemption of the Company's Shares
Neither the Company nor its subsidiaries had purchased, sold, redeemed or
cancelled any of the Company's shares during the Period.
Disclosure of Directors', Supervisors' and Chief Executive's Interests and Short
Positions in the Shares, Underlying Shares and Debentures
As at June 30 2004, the interests of the Directors, Supervisors and chief
executive in the share capital of the Company's associated corporations (within
the meaning of Part XV of the Securities and Futures Ordinance (the 'SFO')), as
recorded in the register required to be kept by the Company pursuant to Section
352 of the SFO were as follows:
Percentage
Contribution of registered
Interest in of registered Nature capital in
Name Position Development Co capital (Rmb) of interest Development Co
Mr. Geng Xiaoping Chairman Interest 2,400,000 beneficially owned 3.00
Mr. Fang Yunti Director/Chief executive Same as above 1,920,000 Same as above 2.40
Mr. Zhang Jingzhong Director Same as above 550,000 Same as above 0.69
Mr. Xuan Daoguang Director Same as above 1,100,000 Same as above 1.38
Mr. Fang Zhexing Supervisor Sane as above 700,000 Same as above 0.88
Save as disclosed above, none of the Directors, Supervisors and chief executive
had any interest or short position in the shares, underlying shares or
debentures of the Company or any other associated corporations that was recorded
in the registrar required to be kept pursuant to Section 352 of the SFO, or as
otherwise notified to the Company and the Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors of Listed Companies, as at June
30, 2004.
Other Interests Discloseable under the SFO
As at June 30, 2004, the following persons (other than the Directors,
Supervisors and chief executive of the Company) had interests in the shares of
the Company as recorded in the register required to be kept by the Company
pursuant to Section 336 of SFO:
Percentage of share capital
Name Number of shares (domestic shares)
Zhejiang Communications Investment Group Co., Ltd. 2,432,500,000 83.61
Huajian Transportation Economic Development Center 476,760,000 16.39
Percentage of share capital
Name Number of shares (H shares)
Aberdeen Asset Management Asia Ltd. 159,881,000 11.15
J.P. Morgan Chase & Co. 96,596,700 6.74
The Capital Group Companies, Inc. 97,840,800 6.82
Sumitomo Mitsui Asset Management Co., Ltd. 86,784,000 6.05
State Street Corporation 83,303,500 5.81
Commonwealth Bank of Australia 71,093,000 4.96
Schroder Investment Management (S'pore) Limited 66,344,961 4.63
Save as disclosed above, no other person had any interests or short positions
(other than the Directors, Supervisors and chief executive of the Company) in
the shares and underlying shares of the Company as recorded in the register
required to be kept pursuant to Section 336 of the SFO, as at June 30, 2004.
Compliance with the Code of Best Practice and Model Code
The Directors are not aware of any information that would reasonably indicate
that the Company is, or was for any part of the Period, not in compliance with
the Code of Best Practice set out in Appendix 14 to the Rules Governing the
Listing of Securities on the Stock Exchange of Hong Kong (the 'Listing Rules').
The Company has adopted a code of conduct regarding Directors' securities
transactions on terms no less exacting than the required standard set out in the
Model Code in Appendix 10 to the Listing Rules. The Directors have confirmed to
the Company their full compliance with the required standard set out in the
Model Code and its code of conduct regarding Directors' securities transactions
during the Period.
Appreciations
Let me take this opportunity to thank all our employees and staff for their good
work and dedication in bringing yet another set of satisfactory results.
By Order of the Board
GENG Xiaoping
Chairman
Hangzhou, August 16, 2004
Consolidated Income Statement (Unaudited)
For the six months ended June 30,
2004 2003
Notes Rmb'000 Rmb'000
Turnover 2 1,474,367 1,099,917
Operating costs (447,026) (316,266)
Gross profit 1,027,341 783,651
Other revenue 3 (6,361) 56,033
Administrative expenses (37,959) (29,908)
Other operating expenses (15,255) (12,846)
Profit from operating activities 2, 4 967,766 796,930
Finance costs (56,009) (66,518)
Share of profit of associates 8,940 5,936
Share of profit of a jointly-controlled entity 11,089 3,810
Profit before tax 931,786 740,158
Tax 5 (266,895) (203,370)
Profit before minority interests 664,891 536,788
Minority interests (62,481) (44,641)
Net profit from ordinary activities
attributable to shareholders 602,410 492,147
Proposed Interim dividends 6 173,725 173,725
Earnings per share 7 13.87 cents 11.33 cents
Consolidated Balance Sheet
As of As of
June 30, December 31,
2004 2003
Unaudited Audited
Notes Rmb'000 Rmb'000
Non-current assets
Fixed assets 8 12,782,549 12,537,616
Interest in a jointly-controlled entity 70,831 62,554
Interest in associates 171,868 164,498
Expressway operating rights 201,595 205,945
Long-term investments 1,000 1,000
Goodwill 91,592 97,717
13,319,435 13,069,330
Current assets
Short-term investment 895,153 1,104,266
Inventories 4,885 3,056
Trade receivables 9 12,084 21,771
Other receivables 64,307 51,469
Cash and cash equivalents 767,176 818,795
1,743,605 1,999,357
Current liabilities
Trade payables 10 344,078 367,521
Profit tax payable 230,385 189,848
Other taxes payable 16,782 27,946
Other payables and accruals 289,570 260,077
Interest-bearing bank and other borrowings 725,950 975,950
Dividend payable 53,348 19,070
1,660,113 1,840,412
Net current assets/(liabilities) 83,492 158,945
Total assets less current liabilities 13,402,927 13,228,275
Non-current liabilities
Interest-bearing bank and other borrowings 721,260 744,176
Long-term bonds 1,000,000 1,000,000
Deferred tax 11 353,907 325,703
2,075,167 2,069,879
Minority interests 1,057,114 1,012,417
10,270,646 10,145,979
Capital and reserves
Issued capital 4,343,115 4,343,115
Reserves 12 5,753,806 5,325,121
Proposed dividend 173,725 477,743
10,270,646 10,145,979
Condensed Consolidated Summary Statement of Changes in Equity (Unaudited)
For the six months ended June 30,
2004 2003
Rmb'000 Rmb'000
Total equity
Balance at beginning of year 10,145,979 9,701,791
Net profit from ordinary activities
attributable to shareholders 602,410 492,147
Dividends paid on ordinary shares (477,743) (390,880)
Balance at end of year 10,270,646 9,803,058
Condensed Consolidated Cash Flow Statement (Unaudited)
For the six months ended June 30,
2004 2003
Rmb'000 Rmb'000
Net cash inflow from operating activities 1,030,302 902,770
Net cash inflow from investing activities (359,132) (477,825)
Net cash inflow from financing activities (809,697) (421,318)
Increase in cash and cash equivalents (138,527) (3,627)
Cash and cash equivalents at the beginning of
the Period 567,195 666,291
Cash and cash equivalents at the end of the Period 428,668 669,918
Analysis of cash and cash equivalents
Cash and bank balances 373,235 372,430
Time deposits with original maturity of less
than 3 months 55,433 297,488
428,668 669,918
Notes to Condensed Financial Statements
1. BASIS OF PRESENTATION
The condensed consolidated interim financial statements have been prepared
in accordance with the Hong Kong Statement of Standard Accounting Practice
('SSAP') No. 25 'Interim Financial Reporting' and the disclosure
requirements of the Hong Kong Companies Ordinance. These statements have
been prepared under the historical cost convention, modified with respect
to the measurement of investments in securities.
2. TURNOVER AND SEGMENT INFORMATION
During the Period, the principal activities of the Group did not change.
The operating results by principal activities are summarized as follows:
For the six months ended June 30,
2004 2003
Profit Profit
Turnover contribution Turnover contribution
Unaudited Unaudited Unaudited Unaudited
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Segment by business activities
- Toll 1,376,019 997,021 1,040,329 764,572
- Service areas 79,921 20,099 46,871 11,549
- Advertising 18,427 10,221 12,717 7,530
1,474,367 1,027,341 1,099,917 783,651
Other revenue (6,361) 56,033
Administrative expenses (37,959) (29,908)
Other operating expenses (15,255) (12,846)
Profit from operating activities 967,766 796,930
No further analysis of the turnover and profit from operating activities by
geographical segment was prepared as the turnover and profit from operating
activities of the Group were all generated from Zhejiang Province, the PRC,
during the Period.
3. OTHER REVENUE
For the six months ended June 30,
2004 2003
Unaudited Unaudited
Rmb'000 Rmb'000
Revenue/(loss) from short-term securities investments (36,648) 30,683
Interest income 5,295 8,208
Rental income 10,629 11,199
Trailer income 8,719 4,573
Exchange gain 137 -
Other miscellaneous income 5,507 1,307
* Total (6,361) 56,033
4. PROFIT FROM OPERATING ACTIVITIES
The Group's profit from operating activities is arrived at after charging
the following:
For the six months ended June 30,
2004 2003
Unaudited Unaudited
Rmb'000 Rmb'000
Depreciation 139,721 113,508
Amortization of expressway operating rights 4,350 4,350
Amortization of goodwill 6,126 6,317
Staff costs 44,035 39,428
5. TAXATION
As the Group had no taxable profits in Hong Kong during the Period, no
Hong Kong profits tax has been provided.
The Group was subject to Corporate Income Tax ('CIT') in the PRC levied
at a rate of 33% of taxable income based on income for financial reporting
purposes prepared in accordance with the laws and regulations in the PRC.
For the six months ended June 30,
2004 2003
Unaudited Unaudited
(Re-stated)
Rmb'000 Rmb'000
Group
Tax charged 270,078 189,081
Tax refunded (34,360) (33,250)
Deferred 28,204 45,184
263,922 201,015
Share of tax attributable to associates 2,242 2,601
Share of tax attributable to a
joint-controlled entity 444 -
Share of deferred tax attributable to an associate (153) (712)
Share of deferred tax attributable to a
jointly-controlled entity 440 466
Tax charge for the year 266,895 203,370
According to the relevant national tax rules, Zhejiang Shangsan Expressway
Co., Ltd. ('Shangsan Co'), a subsidiary of the Company, was entitled to a
30% CIT exemption for the year ended December 31, 2003 pursuant to relevant
policies regarding the hiring of redundant workers, while Zhejiang
Expressway Investment Development Co., Ltd. ('Development Co'), a
subsidiary of the Company, and Zhejiang Expressway Vehicle Towing and
Rescue Services Co., Ltd. ('Services Co'), a subsidiary of the Development
Co, both being newly established enterprises in the urban service industry,
were each entitled to a 100% CIT exemption for the year ended December 31,
2003 for having hired sufficient number of unemployed workers. In
accordance with the approval given by relevant tax authorities,
Rmb27,000,000 taxation was refunded to Shangsan Co, while Rmb6,550,000 and
Rmb810,000 taxation were refunded to Development Co and Services Co,
respectively, during the Period.
5. TAXATION (CONT'D)
A reconciliation of the tax expense applicable to profit before tax using
the statutory rates for the PRC to the tax expense at the effective tax
rates is as follows:
For the six months ended June 30,
2004 2003
Unaudited Unaudited
(Re-stated)
Rmb'000 Rmb'000
Group
Profit before tax 931,786 740,158
Tax at the statutory tax rate of 33% 307,489 244,252
Tax refunded (34,360) (33,250)
Tax effect of net (income)/expense that is
not (taxable)/deductible in determining
taxable profit (6,234) (7,632)
Tax charge at the Group's effective tax rate 266,895 203,370
6. DIVIDENDS
The Directors recommend the payment of an interim dividend of Rmb4.0 cents
(approximately HK3.8 cents) per share (for the six months ended June 30,
2003: Rmb4.0 cents) to holders of domestic shares and H shares of the
Company whose names appear on the register of members of the Company as at
September 17, 2004. The recommendation has been set out in the financial
statements.
7. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the net profit from
ordinary activities attributable to shareholders for the Period of
Rmb602,410,000 (2003: Rmb492,147,000) and the 4,343,114,500 shares (2003:
4,343,114,500 shares) in issue during the Period.
Diluted earnings per share for the Period have not been calculated, as no
diluting event occurred during these years.
8. FIXED ASSETS
There were no significant changes to the Group's fixed assets during the
Period.
9. TRADE RECEIVABLES
The aging analysis of trade receivables as at June 30, 2004 and the
comparative figures of December 31, 2003 are as follows:
As of As of
June 30, December 31,
2004 2003
Unaudited Audited
Rmb'000 Rmb'000
Within 1 year 9,483 19,116
1 to 2 years - 54
Over 2 years 2,601 2,601
Total 12,084 21,771
The Group allows an average credit period of approximately 180 days to its
trade customers.
10. TRADE PAYABLES
The aging analysis of trade payables as at June 30, 2004 and the
comparative figures of December 31, 2003 are as follows:
As of As of
June 30, December 31,
2004 2003
Unaudited Audited
Rmb'000 Rmb'000
Within 1 year 332,613 318,116
1 to 2 years 7,560 44,844
2 to 3 years 1,878 2,218
Over 3 years 2,027 2,343
Total 344,078 367,521
11. DEFERRED TAX
As of As of
June 30, December 31,
2004 2003
Unaudited Audited
Rmb'000 Rmb'000
At beginning of period/year 325,703 240,920
(Income)/Expense for the period/year 28,204 84,783
At end of period/year 353,907 325,703
Analysed by principal components
Revaluation on marketable securities
at market price of the end of period/year - 8,399
Temporary differences resulting from
depreciation method 353,907 317,304
353,907 325,703
12. RESERVES
For the six months ended June 30, 2004
Share Capital/ Statutory Public
premium (goodwill) surplus welfare Retained
account reserve reserve fund profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
As at January 1, 2004 3,645,726 (352,860) 710,497 340,221 981,537 5,325,121
Net profit for the
Period - - - - 602,410 602,410
Proposed interim dividend - - - - (173,725) (173,725)
As at June 30, 2004 3,645,726 (352,860) 710,497 340,221 1,410,222 5,753,806
For the six months ended June 30, 2003
Share Capital/ Statutory Public
premium (goodwill) surplus welfare Retained
account reserve reserve fund profits Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
As at January 1, 2003 3,645,726 (352,860) 533,815 253,511 887,604 4,967,796
Net profit for the
Period - - - - 492,147 492,147
Proposed interim dividend - - - - (173,725) (173,725)
As at June 30, 2003 3,645,726 (352,860) 533,815 253,511 1,206,026 5,286,218
13. COMMITMENTS
For the six months ended June 30, 2004
Commitments Utilization Balance
Rmb million Rmb million Rmb million
Shanghai-Hangzhou-Ningbo
expressway widening project
From Hongken to Guzhu 106 25 81
From Dajing to Fengjing 2,036 344 1,692
From Guzhu to Dazhujia 2,300 21 2,279
Acquisition of additional 18.4%
equity interest in Shangsan Co 485 - 485
Renovation of Sanjiang service area 5 1 4
Construction works under contract
No.11 of the Shanghai-Hangzhou
Expressway 1 - 1
Remaining construction works
of the Shangsan Expressway 44 - 44
Purchase of machinery 76 17 59
Total 5,053 408 4,645
14. RELATED PARTY TRANSACTIONS
The following is a summary of related party transactions carried out in the
ordinary course of business between the Company, its subsidiaries during
the Period.
Under a reorganization agreement, Zhejiang Provincial High Class Highway
Investment Co., Ltd. (Replaced by Zhejiang Communications Investment
Group Co., Ltd. 'CIG') gave a number of undertakings to the Company
pursuant to the reorganizations and general indemnity provisions against
any breach of representation warranty and undertakings contained in the
agreement.
During the Period, the undertaking and indemnities given were executed in
accordance with relevant terms of the reorganization agreement.
Pursuant to several rental agreements with Zhejiang Expressway Petroleum
Development Co., Ltd ('Petroleum Co'), an associate of the Company, the
Group leased five oil stations to Petroleum Co. During the Period, the
Group recorded a total rental income of Rmb4,450,000 from Petroleum Co
(2003: Rmb3,748,000). The rental income was based on negotiations between
the Group and Petroleum Co with reference to the market prices.
15. POST BALANCE SHEET EVENTS
Hangzhou Lutong Advertising Co., Ltd ('Lutong Advertising Co') was
established on July 27, 2004, with a registered capital of Rmb3 million, in
which 51% of the equity interest is owned by Development Co, 29% of the
equity interest is owned by Hangzhou Huada Road Engineering Company ('Huada
Co') and remaining 20% is owned by ZHU Xiaowei. Both Huada Co and ZHU
Xiaowei are independent third parties in respect of the Company. Lutong
Advertising Co is principally engaged in billboard advertising business
along the roads not operated by the Group.
16. CONTINGENT LIABILITIES AND PLEDGE OF ASSETS
Other than a loan guarantee of Rmb30.0 million provided in favor of
Hangzhou Shida Highway Co., Ltd. ('Shida Co,') a jointly controlled entity,
in respect of a commercial bank loan of the same amount extended to Shida
Co from September 2001 to September 2009, the Group did not have any
contingent liabilities as at June 30, 2004. In addition, the Group had no
pledge of assets during the Period.
17. COMPARATIVE AMOUNTS
Certain comparative amounts have been reclassified to conform with the
Period's presentation.
18. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved and authorized for issue by the
board of directors on August 16, 2004.
CORPORATE INFORMATION
EXECUTIVE DIRECTORS
Geng Xiaoping
Fang Yunti
Zhang Jingzhong
Xuan Daoguang
NON-EXECUTIVE DIRECTORS
Zhang Luyun
Zhang Yang
INDEPENDENT NON-EXECUTIVE DIRECTORS
Tung Chee Chen
Zhang Junsheng
Zhang Liping
SUPERVISORS
Ma Kehua
Fang Zhexing
Sun Xiaoxia
Zheng Qihua
Jiang Shaozhong
COMPANY SECRETARY
Zhang Jingzhong
AUTHORISED REPRESENTATIVES
Geng Xiaoping
Zhang Jingzhong
STATUTORY ADDRESS
19/F, Zhejiang World Trade Centre
122 Shuguang Road
Hangzhou City, Zhejiang Province
PRC 310007
Tel: 86-571-8798 5588
Fax: 86-571-8798 5599
REPRESENTATIVE OFFICE IN
HONG KONG
Suite 2910
29/F, Bank of America Tower
12 Harcourt Road
Hong Kong
Tel: 852-2537 4295
Fax: 852-2537 4293
LEGAL ADVISERS
As to Hong Kong law:
Herbert Smith
23rd Floor, Gloucester Tower
11 Pedder Street, Central
Hong Kong
As to English and US law:
Herbert Smith
Exchange House
Primrose Street
London EC2A 2HS
United Kingdom
As to PRC law:
T & C Law Firm
11/F, Block A
Dragon Century Square
1 Hang da Road
Hangzhou, Zhejiang
PRC 310007
AUDITORS AND REPORTING ACCOUNTANTS
Ernst & Young
Certified Public Accountants
15th Floor
Hutchison House
10 Harcourt Road, Central
Hong Kong
FINANCIAL ADVISOR & CORPORATE BROKER IN THE UNITED KINGDOM
Cazenove & Co. Ltd
20 Moorgate
London EC2R 6DA
United Kingdom
INVESTOR RELATIONS CONSULTANT
Rikes Communications Limited
Room 1312, Wing On Centre
111 Connaught Road Central
Hong Kong
Tel: 852-2520 2201
Fax: 852-2520 2241
PRINCIPAL BANKERS
Bank of China, Zhejiang Branch
Industrial and Commercial Bank of China,
Zhejiang Branch
China Construction Bank, Zhejiang Branch
Shanghai Pudong Development Bank,
Hangzhou Branch
H SHARE REGISTRAR AND TRANSFER OFFICE
Hong Kong Registrars Limited
Room 1901-1905
19th Floor, Hopewell Centre
183 Queen's Road East
Hong Kong
H SHARES LISTING INFORMATION
The Stock Exchange of Hong Kong Limited
Code: 0576
London Stock Exchange plc
Code: ZHEH
ADRS INFORMATION
US Exchange: OTC
Symbol: ZHEXY
CUSIP: 98951A100
ADR: H Shares 1:3 0
This information is provided by RNS
The company news service from the London Stock Exchange
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