2009 First Quarterly 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)
2009 First Quarterly Results Announcement For the Three Months Ended March 31
This set of 2009 first quarterly results announcement of Zhejiang Expressway
Co., Ltd. ("the Company") has been prepared pursuant to the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited and in
satisfaction of section 4.3 of the Disclosure and Transparency Rules of the
United Kingdom Listing Authority.
The audit committee of the Company has reviewed the quarterly results of the
Company and its subsidiaries (the "Group") for the three months ended March 31,
2009 (the "Period"). Set out below are the unaudited condensed consolidated
income statement, condensed consolidated balance sheet and condensed
consolidated cash flow statement for the Period together with the comparative
figures for the same period in 2008:
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the three months
ended March 31,
2009 2008
Notes Rmb′000 Rmb′000
Revenue 1 1,296,566 1,685,068
Operating costs (693,682) (807,073)
Gross profit 602,884 877,995
Security investment gains (losses) 20,184 (137,156)
Other income 2 27,810 56,240
Administrative expenses (14,507) (14,374)
Other expenses (6,841) (7,445)
Finance costs (15,150) (19,537)
Share of loss of associates (9,240) (4,946)
Share of profit of a jointly controlled 5,420 4,098
entity
Profit before tax 610,560 754,875
Income tax expense (154,547) (188,960)
Profit for the Period 456,013 565,915
============= ==============
Attributable to:
Equity holders of the Company 358,992 479,119
Minority interests 97,021 86,796
456,013 565,915
============== ==============
Earnings per share - Basic Rmb8.27 cents Rmb11.03 cents
============= ==============
CONDENSED CONSOLIDATED BALANCE SHEET
As As
at March at December
31, 2009 31, 2008
Rmb′000 Rmb′000
Unaudited Audited
Non-current assets 14,673,081 14,837,324
Current assets 11,934,741 10,450,197
Current liabilities 8,349,856 7,489,124
Net current assets 3,584,885 2,961,073
Total assets less current liabilities 18,257,966 17,798,397
Non-current liabilities 1,504,685 1,501,129
16,753,281 16,297,268
========== ==========
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 9,698,927 9,339,935
Equity attributable to equity holders of the Company 14,042,042 13,683,050
Minority interests 2,711,239 2,614,218
16,753,281 16,297,268
========== ==========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the three months
ended March 31,
2009 2008
Rmb′000 Rmb′000
Net cash from operating activities 485,529 533,648
Net cash used in investing activities (1,062,385) (204,294)
Net cash (used in) / from financing activities (63,373) 126,627
Net (decrease) increase in cash and cash equivalents (640,229) 455,981
Cash and cash equivalents at the beginning of the Period 3,736,945 2,773,811
Effect of exchange rate changes (2) 42
Cash and cash equivalents at the end of the Period 3,096,714 3,229,834
Notes:
1. Segment Information
Comparing to the same period last year, there was no change in the principal
activities of the Group during the Period. The operating results by principal
activities are summarized as follows:
For the three months ended March 31,
2009 2008
Profit Profit
Revenue Contribution Revenue Contribution
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Unaudited Unaudited Unaudited Unaudited
Segment by business activities
- Toll road 720,168 437,639 901,356 594,150
- Service areas 266,747 5,443 410,204 16,522
- Advertising 18,937 9,614 19,227 10,388
- Securities business 290,714 150,188 354,281 256,935
1,296,566 602,884 1,685,068 877,995
========== ==========
Security investment gains (losses) 20,184 (137,156)
Other income 27,810 56,240
Administrative expenses (14,507) (14,374)
Other expenses (6,841) (7,445)
629,530 775,260
======== ========
No further analysis of the revenue and profit from operating activities by
geographical segment was prepared as the revenue and profit from operating
activities of the Group were all generated from the People's Republic of China
(the "PRC") during the Period.
2. Other Income
For the three months
ended March 31,
2009 2008
Rmb'000 Rmb'000
Unaudited Unaudited
Interest income on bank balances 5,464 11,491
Rental income 9,621 9,887
Net exchange gain (93) 22,076
Handling fee income 2,272 2,595
Towing income 2,559 4,151
Interest from structured deposit 2,000 --
Others 5,987 6,040
Total 27,810 56,240
======== =======
3. Basic Earnings per Share
The calculation of the basic earnings per share is based on the profit
attributable to equity holders of the Company for the Period of Rmb358,992,000
(2008: Rmb479,119,000) and the 4,343,114,500 ordinary shares (2008:
4,343,114,500 ordinary shares) in issue during the Period.
No diluted earnings per share has been presented as there were no potential
dilutive ordinary shares in issue for the Period.
Business Review
Entering the first quarter of 2009, the impact of the global financial crisis
continued to spread and the real economy also slipped into further recession.
Affected by substantial decreases in various areas including export trade,
China, the most dynamic economic system, witnessed a continued slowdown of its
GDP growth for the first quarter of 2009, recording a year-on-year growth rate
of 6.1%, representing a decrease of 4.5 percentage-points over the same period
last year. During the Period, Zhejiang Province's economic growth was no
exception and saw a trend of continued decline, recording a GDP growth rate for
the first quarter of 3.4%, representing a decrease of 8.4 percentage-points
over the same period last year. The continued decline in the macro-economic
growth, decreases in organic growth of traffic volume, and the traffic
diversions caused by neighbouring newly constructed highways and bridge led to
a continued falling trend of traffic volumes and toll incomes for the Group's
two expressways.
The Group realized a total income of Rmb1,341.16 million during the Period,
representing a decrease of 23.1% year-on-year. Among the total income,
Rmb742.15 million was attributable to the two main expressways owned and
operated by the Group, representing 55.3% of the total income; Rmb292.42
million was attributable to toll road-related business operations of the Group,
representing 21.8% of the total income; and the securities business generated
an income of Rmb306.59 million for the Group, representing 22.9% of the total
income.
Toll Road Operations
During the Period, as impacted by the gradual decrease in the organic growth of
traffic volume caused by a continued slowdown in growth of the macro-economy,
coupled with marked diversions brought forth by the opening-to-traffic of the
Hangpu Expressway and the Hangzhou Bay Bridge, the Group's two expressways saw
their traffic volumes and toll incomes continue to incur substantial decreases.
Impacted by the fact that the Hangpu Expressway and the Hangzhou Bay Bridge
were opened to traffic in February and early-May 2008 respectively, especially
the opening to truck traffic of the Hangzhou Bay Bridge since mid-October 2008,
the traffic volumes of the Group's two expressways decreased significantly as
compared to the same period last year. Meanwhile, the commencement of widening
works on the Shanghai Section of the Shanghai-Hangzhou Expressway at the end of
year 2008 has also affected the traffic volume on the Group's Shanghai-Hangzhou
Expressway. In addition, the substantial decrease in Zhejiang Province's
foreign trade and export and the toll free policy for carrier vehicles carrying
fresh agricultural products and materials have also exerted their impact on the
traffic volume of the Group's expressways. The afore-mentioned factors resulted
in significant decreases in traffic volumes on the Shanghai-Hangzhou-Ningbo
Expressway and the Shangsan Expressway during the Period.
The average daily traffic volume in full-trip equivalents for the
Shanghai-Hangzhou-Ningbo Expressway was 32,488 during the Period, representing
a decrease of 19.7% year-on-year. In particular, the average daily traffic
volume in full-trip equivalents along the Shanghai-Hangzhou Section of the
Shanghai-Hangzhou-Ningbo Expressway was 31,888, representing a decrease of
23.2% year-on-year. The average daily traffic volume in full-trip equivalents
along the Hangzhou-Ningbo Section was 32,916, representing a decrease of 17.0%
year-on-year. The average daily traffic volume in full-trip equivalents along
the Shangsan Expressway was 19,112 during the Period, representing a decrease
of 13.4% year-on-year.
During the Period, toll income from the Shanghai-Hangzhou-Ningbo Expressway
amounted to Rmb557.04 million, representing a decrease of 22.3% year-on-year,
while toll income from the Shangsan Expressway amounted to Rmb185.11 million,
representing a 13.4% drop year-on-year.
Toll Road-related Business Operations
The Company also operates certain toll road-related businesses, including gas
stations, restaurants and shops in service areas, as well as roadside
advertising and vehicle service businesses, along the expressways through its
subsidiaries and associated companies.
During the Period, as impacted by the economic downturn in the PRC and the
diversions caused by the Hangzhou Bay Bridge, traffic volumes of large and
small passenger vehicles on the Shanghai-Hangzhou-Ningbo Expressway and the
Shangsan Expressway incurred significant decreases. Meanwhile, a weakened
consumption sentiment also led to decreases in business volume and income at
the service areas of these two expressways. In addition, a significant decrease
in the sales of petroleum products caused a considerable decline in income from
the gas station operation. Accordingly, income from toll road-related business
operations amounted to Rmb292.42 million during the Period, representing a
decrease of 33.1% year-on-year.
Securities Business
During the Period, the successive implementation of proactive financial
policies and the relaxing of the monetary policies by the government have given
a boost to the sluggish securities market in the PRC. Nevertheless, decreases
in turnover of stocks and funds in the securities market and escalating
competition in the brokering business led to decreases in commission rates. As
a result, the securities business realized an operating income of Rmb306.59
million during the Period, representing a decrease of 18.4% year-on-year, of
which brokerage commission income amounted to Rmb280.18 million, representing a
decrease of 16.5% year-on-year; and bank interest income amounted to Rmb26.41
million, representing a decrease of 34.4% year-on-year. In addition, the
proprietary securities trading business recorded Rmb20.18 million as accounted
for in the income statement during the Period.
Long-term Investments
1. Jointly-controlled entity
Hangzhou Shida Highway Co., Ltd. (a 50% owned jointly-controlled entity of the
Company) operates the 9.45 km Shida Road. During the Period, the widening
project on the Shida Road was completed and the entire Shida Road opened to
traffic on July 16, 2008. As a result, the traffic volume on the Shida Road
resumed growth and saw an increase of 19.9% year-on-year. Toll income totalled
Rmb23.35 million, representing an increase of 23.4% year-on-year. During the
Period, net profit for the jointly-controlled entity amounted to Rmb10.84
million, up 32.3% as compared to the same period last year.
2. Associates
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate of
the Company) recorded a decrease of 26.9% in income year-on-year with a loss of
Rmb2.68 million, resulting from a significant decrease in sales volume of
petroleum products as impacted by the downturn of the macro-economy during the
Period.
JoinHands Technology Co., Ltd. (a 27.582% owned associate of the Company)
obtained its income mainly from its printing operations and property leasing
during the Period. Due to a lack of improvement in its operating conditions,
the said associate company incurred a loss of Rmb0.53 million during the
Period.
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate of the
Company) owns 100% interest in the Jinhua Section of the Ningbo-Jinhua
Expressway. During the Period, the average daily traffic volume in full-trip
equivalents on the section was 7,201, while toll income amounted to Rmb32.19
million, representing a decrease of 10.1% year-on-year. However, due to heavy
financial burden, the associate company incurred a loss of Rmb28.56 million
during the Period.
Financial Analysis
Liquidity and Financial Resources
As at March 31, 2009, current assets of the Group amounted to Rmb11,934.74
million (December 31, 2008: Rmb10,450.20 million), of which bank balance and
cash accounted for 36.6% (December 31, 2008: 38.8%), bank balance held on
behalf of customers accounted for 57.1% (December 31, 2008: 54.0%) and
held-for-trading investments accounted for 2.3% (December 31, 2008: 2.4%).
Current ratio (current assets over current liabilities) as at March 31, 2009
was 1.4 (December 31, 2008: 1.4). 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 customer deposits arising from securities dealings)
of the Group was 3.3 (December 31, 2008: 2.6).
During the Period, net cash inflow generated from the operating activities of
the Group amounted to Rmb485.53 million, representing a decrease of 9.0%
year-on-year.
Borrowings and Solvency
As at March 31, 2009, the total liabilities of the Group amounted to
Rmb9,854.54 million (December 31, 2008: Rmb8,990.25 million), of which 16.0%
were borrowings and 68.9% were customer deposits arising from securities
dealings.
Total interest expenses for the Period amounted to Rmb15.15 million, whilst
profit before interest and tax amounted to Rmb625.71 million. Therefore, the
interest cover ratio (profit before interest and tax over interest expenses)
stood at 41.3 (March 31, 2008: 39.6).
The asset-liability ratio (total liabilities over total assets) was 37.0% as at
March 31, 2009 (December 31, 2008: 35.6%). Excluding the effect of customer
deposits arising from the securities business, the resultant asset-liability
ratio (total liabilities less balance of customer deposits arising from
securities dealings over total assets less balance of cash held on behalf of
customers) of the Group was 15.5% (December 31, 2008: 17.2%).
Capital Structure
As at March 31, 2009, the Group had Rmb16,753.28 million in total equity,
Rmb7,823.47 million of fixed-rate liabilities, Rmb542.46 million of
floating-rate liabilities and Rmb1,488.61 million of interest-free liabilities,
representing approximately 63.0%, 29.4%, 2.0% and 5.6% of the Group's total
capital, respectively. The gearing ratio, which was computed by dividing the
total liabilities less balance of customer deposits arising from securities
dealing by total equity, was 18.3% as at March 31, 2009 (December 31, 2008:
20.8%).
Outlook
Mired in the international financial crisis, the global economy continued to
see sluggish sentiment and recession. Although China's economy made some
initial improvements under the stimulation of the timely adjusted
macro-economic measures by the government, economic growths in different
regions continued to face tough challenges. The economic growth rate of the
Yangtze River Delta Region in 2009 is expected to continue to decline based on
the foundation of 2008.
Amid a downturn in the entire macro-economy, the prospect of the organic growth
of the Group's traffic volume is not optimistic. Although the impact of traffic
diversions caused by the neighbouring highways and bridge is stabilizing for
the time being, the opening-to-traffic of the Zhuyong Expressway in the second
half of 2009 is expected to cause traffic diversions from certain sections of
the Group's Shangsan Expressway and the Shanghai-Hangzhou-Ningbo Expressway in
the future. Meanwhile, with a decline in Zhejiang Province's economic growth
and a decrease in vehicles traveling on the Group's toll roads, it is expected
that income from the Group's toll road-related business operations will
continue to see a falling trend.
Following the rolling out of relaxed monetary policies, market valuations
tending to reasonable levels as well as the launching of various new
businesses, the PRC's securities market, which has been affected by the
domestic and global economic and financial environments as well as relevant
policies, is expected to bring forth a considerable positive impact on the
Group's securities business.
The situation in 2009 remains tough. Nevertheless, under the effective
implementation of economic growth revival policies and stimulation measures by
the government, the new management of the Company firmly believes that by
continuing to enhance service standards and economic benefits and increasing
the Company's mileage through project investments and acquisitions, it will
actively develop the financial business, strengthen its principal toll road
operations, and refine and enhance its derivative business operations, with a
view to achieving greater new developments and providing satisfactory returns
for shareholders.
By Order of the Board
CHEN Jisong
Chairman
Hangzhou, the PRC, May 4, 2009
As at the date of this announcement, the executive directors of the Company
are: Messrs. Chen Jisong, Zhan Xiaozhang, Zhang Jingzhong and Jiang Wenyao; the
non-executive directors are: Messrs. Zhang Luyun and Zhang Yang; and the
independent non-executive directors are: Messrs. Tung Chee Chen, Zhang Junsheng
and Zhang Liping.
Statement
1. An electronic version of the Company's 2009 First Quarterly Results
Announcement is available at www.zjec.com.cn
2. A copy of this document has been submitted to the UK Listing Authority
and will shortly be available for inspection at the UK Listing Authority
Document Viewing Facility which is situated at the Financial Services
Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.
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