2009 Interim Results Announcement
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this announcement, make no
representation as to its accuracy or completeness and expressly disclaim any
liability whatsoever for any loss howsoever arising from or in reliance upon
the whole or any part of the contents of this announcement.
Zhejiang Expressway Co., Ltd.
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock code: 0576)
2009 Interim Results Announcement
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the
"Company") announced the unaudited consolidated operating results of the
Company and its subsidiaries (collectively the "Group") for the six months
ended June 30, 2009 (the "Period"), with the basis of preparation as stated in
note 1 to the condensed consolidated financial statements set out below.
During the Period, revenue for the Group was Rmb2,768.86 million,
representing a decrease of 18.8% over the same period in 2008. Profit for the
Period attributable to equity holders of the Company was Rmb772.45 million,
representing a decrease of 26.4% year-on-year. Earnings per share for the
Period was Rmb17.79 cents, representing a decrease of 26.4% over the same
period in 2008.
The Directors have recommended to pay an interim dividend of Rmb6 cents per
share, subject to shareholders' approval at the extraordinary general meeting
of the Company expected to be held on September 29, 2009.
The audit committee of the Company has reviewed the interim results. Set
out below are the unaudited condensed consolidated statement of comprehensive
income and condensed consolidated statement of financial position for the
Period, with comparative figures for 2008 and relevant notes to the condensed
consolidated financial statements:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the six months
ended June 30,
2009 2008
Notes Rmb'000 Rmb'000
Revenue 3 2,768,855 3,410,095
Operating costs (1,392,646) (1,628,366)
Gross profit 1,376,209 1,781,729
Securities investment gains
(losses) 27,204 (172,467)
Other income 4 62,392 107,956
Administrative expenses (30,230) (35,720)
Other expenses (101,927) (18,520)
Finance costs (35,755) (42,521)
Share of (loss) profit of
associates (11,281) 15,459
Share of profit of a jointly
controlled entity 13,073 10,627
Profit before tax 1,299,685 1,646,543
Income tax expense 5 (326,104) (366,604)
Profit for the Period 973,581 1,279,939
Other comprehensive income
Fair value changes of
available-for-sale
investments -- (221,553)
Deferred tax related to fair
value changes of
available-for-sale
investments -- 55,388
Other comprehensive income for
the Period, net -- (166,165)
Total comprehensive income for
the Period 973,581 1,113,774
Profit for the Period
attributable to:
Equity holders of the
Company 772,452 1,049,372
Minority interests 201,129 230,567
973,581 1,279,939
Total comprehensive income for
the Period attributable to:
Equity holders of the Company 772,452 963,170
Minority interests 201,129 150,604
973,581 1,113,774
Dividends
Proposed interim 6 (260,587) (304,018)
Earnings per share - Basic 7 Rmb17.79 Rmb24.16
cents cents
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
June 30, December 31,
2009 2008
(unaudited) (audited)
Notes Rmb'000 Rmb'000
Non-current assets
Property, plant and
equipment 1,078,369 1,031,248
Prepaid lease payments 47,022 47,654
Expressway operating rights 12,598,308 12,923,977
Goodwill 86,867 86,867
Other intangible assets 153,210 158,065
Interests in associates 457,230 464,262
Interest in a jointly
controlled entity 137,325 124,251
Available-for-sale
investments 1,000 1,000
14,559,331 14,837,324
Current assets
Inventories 20,224 16,303
Trade receivables 8 59,452 75,999
Other receivables 126,326 177,170
Prepaid lease payments 1,265 1,265
Available-for-sale
investments -- 28,001
Held-for-trading
investments 457,513 247,587
Structured deposit -- 204,667
Bank balances held on
behalf of customers 6,644,541 5,643,192
Bank balances and cash
- Restricted bank balances -- 35,000
- Time deposits with
original maturity
over three months 1,198,719 284,068
- Cash and cash equivalents 2,745,076 3,736,945
11,253,116 10,450,197
As at As at
June 30, December 31,
2009 2008
(unaudited) (audited)
Notes Rmb'000 Rmb'000
Current liabilities
Accounts payable to
customers arising from
securities dealing business 6,622,262 5,607,473
Trade payables 9 455,329 415,096
Tax liabilities 196,613 447,884
Other taxes payable 23,773 32,760
Other payables and accruals 480,022 537,762
Dividends payable 75,975 33,388
Interest-bearing bank and
other loans 359,658 380,897
Provisions 10 122,934 33,864
8,336,566 7,489,124
Net current assets 2,916,550 2,961,073
Total assets less current
liabilities 17,475,881 17,798,397
Non-current liabilities
Interest-bearing bank and
other loans 185,712 228,867
Long-term bonds 1,000,000 1,000,000
Deferred tax liabilities 250,669 272,262
1,436,381 1,501,129
16,039,500 16,297,268
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 9,070,040 9,339,935
Equity attributable to
equity holders of
the Company 13,413,155 13,683,050
Minority interests 2,626,345 2,614,218
16,039,500 16,297,268
Notes:
1. Basis of Preparation
The condensed consolidated financial statements have been prepared in
accordance with the applicable disclosure requirements of Appendix 16 to the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited (the "Listing Rules") and with Hong Kong Accounting Standard 34 ("HKAS
34") "Interim Financial Reporting".
2. Principal Accounting Policies
The condensed consolidated financial statements have been prepared on the
historical cost basis except for certain financial instruments, which are
measured at fair value.
The accounting policies used in the condensed consolidated financial
statements are consistent with those applied in the preparation of the Group's
annual financial statements for the year ended December 31, 2008 except as
described below.
During the Period, the Group has applied, for the first time, the following
new standards, amendments and interpretations ("new HKFRSs") issued by the Hong
Kong Institute of Certified Public Accountants ("HKICPA") which are or have
become effective.
HKFRSs (Amendments) Improvements to HKFRSs
HKAS 1 (Revised) Presentation of Financial Statements
HKAS 23 (Revised) Borrowing Costs
HKAS 32 & 1 (Amendments) Puttable Financial Instruments and
Obligations Arising on Liquidation
HKFRS 1 & HKAS 27 (Amendments) Cost of an Investment in a Subsidiary,
Jointly Controlled Entity or Associate
HKFRS 2 (Amendment) Vesting Conditions and Cancellations
HKFRS 7(Amendment) Improving Disclosures about Financial
Instruments
HKFRS 8 Operating Segments
HK(IFRIC)-Int 13 Customer Loyalty Programmes
HK(IFRIC)-Int 15 Agreements for the Construction of Real
Estate
HK(IFRIC)-Int 16 Hedges of a Net Investment in a Foreign
Operation
Except for the adoption of the HKAS 1 (Revised), which has resulted in
revised titles for the condensed consolidated financial statements and changes
in the presentation and disclosure, the adoption of the other new HKFRSs had no
material effect on how the results and financial position for the current or
prior accounting periods have been prepared and presented.
The Group has not applied in advance the following new and revised
standards, amendments or interpretations that have been issued but are not yet
effective.
HKFRSs (Amendments) Improvements to HKFRSs (1)
HKAS 27 (Revised) Consolidated and Separate Financial Statements (2)
HKAS 39 (Amendment) Eligible Hedged Items (2)
HKAS 28 (Revised) In Investments in Associates (2)
HKFRS 3 (Revised) Business Combinations (2)
HK(IFRIC)-Int 17 Distribution of Non-cash Assets to Owners (2)
HK(IFRIC)-Int 18 Transfer of Assets from Customers (3)
(1) The amendments to the HKFRS 5 shall be effective for annual
periods beginning on or after July 1, 2009
(2) Effective for annual periods beginning on or after July 1, 2009
(3) Effective for transfer on or after July 1, 2009
The application of HKFRS 3 (Revised) may affect the accounting for which
the acquisition date is on or after January 1, 2010. The Directors anticipate
that the application of the other new and revised standards, amendments or
interpretations will have no material impact on the results and the financial
position of the Group.
3. Segment Information
Comparing to the same period last year, there were no material changes in
the principal activities of the Group during the Period. The operating results
by principal activities are summarized as follows:
For the six months ended June 30,
2009 2008
Segment Segment
Revenue Profit Revenue Profit
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Unaudited Unaudited Unaudited Unaudited
Segment by business
activities
- Toll income 1,509,470 938,452 1,820,284 1,255,421
- Service areas 542,309 6,934 883,465 33,295
- Advertising 37,859 16,433 39,900 20,128
- Securities operation 679,217 414,390 666,446 472,885
2,768,855 1,376,209 3,410,095 1,781,729
Securities investment
income (loss) 27,204 (172,467)
Other income 62,392 107,956
Administrative expenses (30,230) (35,720)
Other expenses (101,927) (18,520)
Finance costs (35,755) (42,521)
Share of (loss) profit of
associates (11,281) 15,459
Share of profit of
a jointly controlled
entity 13,073 10,627
Profit before tax 1,299,685 1,646,543
No further analysis of the revenue and segment profit by geographical
segment was prepared as the revenue and segment profit of the Group were all
generated from within the People's Republic of China (the "PRC") during the
Period.
4. Other Income
For the six months
ended June 30,
2009 2008
Rmb'000 Rmb'000
Unaudited Unaudited
Interest income on bank balances
and entrusted loan 11,028 24,704
Rental income 28,727 15,238
Net exchange gain 283 41,398
Handling fee income 2,667 6,305
Towing income 7,409 9,845
Interest from structured deposit 3,114 438
Others 9,164 10,028
Total 62,392 107,956
5. Income Tax Expense
No Hong Kong profits tax has been provided as the Group had no taxable
profits derived in Hong Kong during the Period.
During the Period, the Group did not enjoy any preferential tax policy and
is subject to the PRC enterprise income tax ("EIT") levied at a tax rate of 25%
(2008: 25%).
For the six months
ended June 30,
2009 2008
Rmb'000 Rmb'000
Unaudited Unaudited
PRC income tax 347,697 493,141
Deferred tax:
Current period (21,593) (126,537)
326,104 366,604
The tax charge for the Period can be reconciled to the profit before tax
per the condensed consolidated statement of comprehensive income as follows:
For the six months
ended June 30,
2009 2008
Rmb'000 Rmb'000
Unaudited Unaudited
Profit before tax 1,299,685 1,646,543
Tax at the PRC statutory income tax
rate 324,921 411,636
Tax effect of share of losses
(profits) of associates 2,820 (3,865)
Tax effect of share of profit of a
jointly controlled entity (3,268) (2,657)
Tax effect of (income)/expense that
is not (taxable) and deductible for
tax purposes 1,631 (419)
PRC income tax over provision in
prior year (i) -- (38,091)
Tax charge for the Period 326,104 366,604
(i) Certain staff costs incurred by Zheshang Securities Co., Ltd.
("Zheshang Securities") in 2007 in excess of maximum amount deductible
was considered as a non-deductible expense and accordingly, income tax
provision was made in 2007. In 2008, Zheshang Securities has obtained
an approval from the government authority for the deduction of these
staff costs, so the relevant income tax provision is released to the
consolidated statement of comprehensive income.
6. Dividend
The Directors have recommended the payment of an interim dividend of Rmb6
cents per share (2008: Rmb7 cents per share), subject to shareholders' approval
at the extraordinary general meeting of the Company expected to be held on
September 29, 2009. The recommendation has been set out in the condensed
consolidated financial statements.
7. 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 Rmb772,452,000
(2008: Rmb1,049,372,000) and the 4,343,114,500 shares (2008: 4,343,114,500
shares) in issue during the Period.
No diluted earnings per share have been calculated as there were no
potential dilutive ordinary shares in issue in both periods.
8. Trade Receivables
The Group has no credit period granted to its trade customers of toll
operation, service area operation and securities operation. An aging analysis
of trade receivables at the statement of financial position date, based on
invoice date, is as follows:
As at As at
June 30, December 31,
2009 2008
Rmb'000 Rmb'000
Unaudited Audited
Within 3 months 58,581 71,640
3 months to 1 year -- 3,408
1 to 2 years 208 288
Over 2 years 663 663
Total 59,452 75,999
9. Trade Payables
An aging analysis of trade payables at the statement of financial position
date, based on invoice date, is as follows:
As at As at
June 30, December 31,
2009 2008
Rmb'000 Rmb'000
Unaudited Audited
Within 3 months 166,100 216,913
3 months to 1 year 247,057 169,772
1 to 2 years 17,489 24,778
2 to 3 years 21,859 2,336
Over 3 years 2,824 1,297
Total 455,329 415,096
10. Provisions
Subsequent to the relevant disclosure made in the Company's 2008 annual
report (pages 103 - 104) relating to "Provisions", as at the date of this
announcement, there is no material change for the Period except for the
following lawsuit.
Prior to the restructuring of Zheshang Securities by the Company, the
original person-in-charge of one of the Sales Departments under Zheshang
Securities illegally absorbed public deposits and appropriated funds, which
caused a loss of approximately Rmb90,000,000. As at the date of this
announcement, clients who incurred losses due to the case have filed civil
lawsuit against Zheshang Securities. Taking into account the prudent principles
applied to operations involving normal risks in the PRC financial industry,
Zheshang Securities has made during the Period a provision amounting to
Rmb89,070,000 for all the principal involved in the lawsuit.
BUSINESS REVIEW
As the PRC government implemented an array of economic stimulus plans, the
PRC economy has shown signs of gradual stabilization in the second quarter of
2009, registering a GDP growth of 7.1% year-on-year in the first half of 2009.
Although the Zhejiang Province's economy, an export trade-led economy, has
stabilized and picked up momentum in general in the second quarter, its growth
rate has not exhibited a significant rebound during the Period as its foreign
trade and export remained sluggish. Zhejiang Province's GDP growth rate
increased by 6.3% year-on-year in the first half of 2009.
In the first half of 2009, affected by a slump in foreign trade and export
within the province, the volume of regional goods transport witnessed a
significant decrease which brought certain impact to the traffic on the Group's
two expressways. Meanwhile, the opening of neighboring new expressways and
bridge continued to divert certain traffic from the Group's two expressways. As
a result, income of the Group decreased by 18.8% year-on-year during the
Period. The Group realized a total income of Rmb2,857.12 million, of which
Rmb1,558.94 million was attributable to the two major expressways owned and
operated by the Group, representing 54.6% of the total income; and Rmb587.37
million was attributable to the Group's toll road-related businesses,
representing 20.5% of the total income. As the PRC securities market has shown
signs of improvement during the Period, the securities business posted a growth
year-on-year and contributed Rmb710.81 million to the total income,
representing 24.9% of the total income.
During the Period, toll income from toll road operations decreased by 17.1%
over the same period in 2008, while income from toll road-related businesses
decreased by 36.9% over the same period in 2008. A breakdown of the Group's
income for the Period is set out below:
For the six months
ended June 30,
2009 2008
Rmb'000 Rmb'000 %Change
Toll income
Shanghai-Hangzhou-Ningbo
Expressway 1,178,291 1,453,567 -18.9%
Shangsan Expressway 380,650 426,970 -10.8%
Other income
Service areas 547,272 888,000 -38.4%
Advertising 40,094 42,196 -5.0%
Securities business 710,811 706,454 0.6%
Subtotal 2,857,118 3,517,187 -18.8%
Less: Revenue taxes (88,263) (107,092) -17.6%
Revenue 2,768,855 3,410,095 -18.8%
Toll Road Operations
Although the Rmb4 trillion stimulus measures implemented by the State have
gradually proved their effectiveness on the macro-economy, the conditions of
the Zhejiang Province's export trade remained grim. Therefore, the organic
growth rate of traffic volume on the Group's two expressways remained sluggish
in the first half of 2009, although, according to the data for the second
quarter, the organic growth rate has shown a trend of slight recovery.
During the Period, the average daily traffic volume in full-trip
equivalents along the Shanghai-Hangzhou-Ningbo Expressway saw a significant
decrease, mainly because the Hangpu Expressway and the Hangzhou Bay Bridge,
which were opened to traffic in phases in February, May and October 2008
respectively, have significantly diverted traffic from the entire
Shanghai-Hangzhou-Ningbo Expressway. Meanwhile, the closure of the Shanghai
Section of the Shanghai-Hangzhou Expressway for its widening project carried
out since May 2009 has further diverted traffic from the Shanghai-Hangzhou
Section operated by the Group. This was the main reason behind a higher rate of
decline in traffic volume along the Shanghai-Hangzhou Section than that along
the Hangzhou-Ningbo Section.
During the Period, the Shangsan Expressway lost some through-traffic
because of the opening of the Hangzhou Bay Bridge in May 2008. In addition,
given that mainly small and medium foreign trade enterprises reside along the
Shangsan Expressway, traffic volume declined in the region as the province's
export trade slumped.
Although traffic volumes and toll incomes along the Group's toll roads
showed a trend of continued decline year-on-year during the Period, given the
macro-economy having exhibited signs of stabilization in the second quarter,
the rates of decline in traffic volumes and toll incomes along the Group's two
expressways have gradually narrowed.
The average daily traffic volume in full-trip equivalents along the
Shanghai-Hangzhou-Ningbo Expressway was 33,736 during the Period, representing
a decrease of 16.2% year-on-year. The average daily traffic volume in full-trip
equivalents along the Shanghai-Hangzhou section of the Shanghai-Hangzhou-Ningbo
Expressway decreased by 19.1% year-on-year, and that along the Hangzhou-Ningbo
section decreased by 13.9% year-on-year. The average daily traffic volume in
full-trip equivalents along the Shangsan Expressway was 19,103 during the
Period, representing a decrease of 10.8% year-on-year.
Toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted to
Rmb1,178.29 million during the Period, representing a decrease of 18.9%
year-on-year; while toll income from the Shangsan Expressway amounted to
Rmb380.65 million during the Period, representing a decrease of 10.8%
year-on-year.
Toll Road-related Businesses
The Company also operates certain toll road-related businesses along its
expressways through its subsidiaries and associated companies, including gas
stations, restaurants and shops in service areas, as well as roadside
advertising and vehicle service businesses.
During the Period, income from the service areas along the
Shanghai-Hangzhou-Ningbo Expressway and the Shangsan Expressway was affected.
On the one hand, the opening of the Hangzhou Bay Bridge led to falling traffic
volumes along the Shanghai-Hangzhou-Ningbo Expressway and the Shangsan
Expressway. On the other hand, weakening consumption sentiments amid the
Zhejiang Province's economic downturn undermined the purchasing power of
drivers and passengers for products in the service areas. Meanwhile, a
significant decrease in the sales of petroleum products had a negative impact
on the income from the gas station operation. As a result, during the Period,
income from the aforementioned toll road-related businesses amounted to
Rmb594.78 million, representing a year-on-year decrease of 36.7%.
Securities Business
During the Period, a relaxed credit policy gave a boost to investment
growth. Meanwhile, an adequate capital flow in the market stimulated the PRC's
stock market to bottom out and rebound ahead of the real economy. In the first
half of 2009, the stock indices showed steady rises while trading activities
saw significant surges in the securities market. However, fierce business
competition led to declining commission rates. During the Period, the
securities business realized an operating income of Rmb710.81 million,
representing an increase of 0.6% year-on-year. Of such income, brokerage
commission income amounted to Rmb651.39 million, representing a year-on-year
increase of 3.9%; and bank interest income amounted to Rmb59.42 million,
representing a year-on-year decrease of 25.4%. Apart from these, the
proprietary securities trading business recorded a profit of Rmb27.20 million
as accounted for in the income statement (2008 Interim: a loss of Rmb172.47
million).
Long-term Investments
During the Period, benefiting from a gradual traffic rebound due to the
opening of the entire Shida Road in July 2008 upon the completion of its
widening project, traffic volume on this 9.45km Shida Road (operated by
Hangzhou Shida Highway Co., Ltd., a 50% owned jointly-controlled entity of the
Company) increased by 13.5% year-on-year, while toll income amounted to
Rmb51.38 million, up 18.5% year-on-year. Net profit realized was Rmb26.15
million, up 20.9% year-on-year.
For Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned
associate of the Company), sales of petroleum products were hit by the slowdown
of the macro-economy and a consequential fall in traffic volume. During the
Period, income realized by the associate company decreased by 26.7%
year-on-year while net profit realized was Rmb10.72 million, representing a
decrease of 10.9% year-on-year.
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate of
the Company) operates the 69.7km Jinhua section of Ningbo-Jinhua Expressway.
During the Period, affected by traffic diversions caused by new road networks
nearby, the average daily traffic volume in full-trip equivalents along the
toll road was 7,188, representing a decrease of 5.6% year-on-year; while toll
income amounted to Rmb65.52 million, a decrease of 10.6% year-on-year. As the
financial burden of the associate company was too heavy, it incurred a loss of
Rmb56.64 million during the Period.
JoinHands Technology Co., Ltd. (a 27.582% owned associate of the Company)
generated its income mainly from its printing operation and property leasing
during the Period. Due to a lack of improvement in its operations, the
associate company incurred a loss of Rmb1.68 million during the Period.
HUMAN RESOURCES
There were no significant changes to the Company's overall number of
employees, remuneration policies, bonus schemes and training schemes from what
have been disclosed in the Company's latest annual report.
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with the aim to provide
shareholders with sound returns over the long-term.
During the Period, return on equity was 5.8%, representing a decrease of
27.8% over the same period in 2008.
Liquidity and Financial Resources
As at June 30, 2009, current assets held by the Group amounted to
Rmb11,253.12 million in aggregate (December 31, 2008: Rmb10,450.20 million), of
which bank balance and cash accounted for 35.0% (December 31, 2008: 38.8%),
bank balance held on behalf of customers accounted for 59.0% (December 31,
2008: 54.0%) and held-for-trading investments accounted for 4.1% (December 31,
2008: 2.4%). Current ratio (current assets over current liabilities) as at June
30, 2009 was 1.3 (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 2.7 (December 31, 2008: 2.6).
The amount for held-for-trading investments of the Group as at June 30,
2009 amounted to Rmb457.51 million (December 31, 2008: Rmb247.59 million), of
which 1.0% was invested in the stock market, 97.9% was invested in corporate
bonds, while the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating
activities was adequate, amounting to Rmb1,131.72 million.
The Directors do not expect the Company to experience any problem with
liquidity and financial resources in the foreseeable future.
Borrowings and Solvency
As at June 30, 2009, total liabilities of the Group amounted to Rmb9,772.95
million (December 31, 2008: Rmb8,990.25 million), of which 15.8% was borrowings
and 67.8% was customer deposits arising from securities dealings.
Total interest-bearing borrowings of the Group as at June 30, 2009 amounted
to Rmb1,545.37 million, representing a decrease of 4.0% over December 31, 2008.
The borrowings comprised outstanding balances of the World Bank loans,
denominated in US dollar, of approximately Rmb450.37 million in Renminbi
equivalent; loans from domestic commercial banks totaling Rmb95.00 million; and
corporate bonds amounting to Rmb1 billion that was issued by the Company in
2003 for a term of 10 years. Of the interest-bearing borrowings, 76.7% were not
repayable within one year.
As at June 30, 2009, the Group's loans from domestic commercial banks
comprised 7-months and 1-year short-term loans, with an annual floating rate of
5.31%; and the annual coupon rate for corporate bonds was fixed at 4.29%, with
interest payable annually. The annual interest rate for customer deposits
arising from securities dealings was fixed at 0.36%; the annual floating rate
of the Group's World Bank loans, denominated in US dollar, was 4.55%.
Total interest expense for the Period amounted to Rmb35.76 million, while
profit before interest and tax amounted to Rmb1,335.44 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
37.4 (June 30, 2008: 39.7).
The asset-liability ratio (total liabilities over total assets) was 37.9%
as at June 30, 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 16.4% (December 31, 2008: 17.2%).
Capital Structure
As at June 30, 2009, the Group had Rmb16,039.50 million total equity,
Rmb7,622.26 million fixed-rate liabilities, Rmb545.37 million floating-rate
liabilities and Rmb1,605.32 million interest-free liabilities, representing
62.2%, 29.5%, 2.1% and 6.2% 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 dealings by total equity,
was 19.6% as at June 30, 2009 (December 31, 2008: 20.8%).
Capital Expenditure Commitments and Utilization
Capital expenditures of the Group and of the Company for the Period totaled
Rmb103.32 million and Rmb13.24 million, respectively, with Rmb63.37 million
incurred by the remaining construction works of the widening project, and
Rmb28.96 million incurred by purchase of equipment.
Capital expenditures committed by the Group and by the Company as at June
30, 2009 totaled Rmb1,614.40 million and Rmb844.55 million, respectively.
Amongst the total capital expenditures committed by the Group, Rmb939.89
million will be used on the remaining construction work of the widening
project, while Rmb101.04 million will be used for purchase of equipment and
Rmb82.86 million will be used for purchase and construction of properties.
The Group will finance its above mentioned capital expenditure commitments
mainly with internally generated cash flow, with a preference for debt
financing to meet any shortfalls thereof.
Contingent Liabilities and Pledge of Assets
As at June 30, 2009, the Group did not have any contingent liabilities nor
any other pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the repayment of a World Bank loan of Rmb450.37 million equivalent
in US dollars, as well as dividend payments to the holders of H shares in Hong
Kong dollars, the Group's principal operations are transacted and booked in
Renminbi. Therefore, the Group's exposure to foreign exchange fluctuations is
limited and the Group has not used financial instrument for hedging purposes
during the Period.
Although the Directors do not foresee any material foreign exchange risks
for the Group, there is no assurance that foreign exchange risks will not
affect the operating results of the Group in the future.
OUTLOOK
As the PRC's macro-economy has stabilized and improved in the second
quarter of 2009, the Zhejiang Province's economy has begun to show significant
improvement in general, although the GDP growth rate of the Zhejiang Province
in the first half was lower than the national average as its economy was
dragged by the continued sluggish foreign trade and export. It is expected that
a further improvement of the economy in the second half of 2009 will help boost
the organic growth of traffic volumes along the road sections of the Group.
Traffic diversions caused by the Hangpu Expressway and the Hangzhou Bay
Bridge have basically stabilized while the opening of the Zhuyong Expressway,
originally scheduled to be opened to traffic in the second half of 2009, will
be delayed until the end of 2009. Although these factors will create positive
impact on the traffic volumes on the Group's road sections in the second half
of the year, certain traffic along the Shanghai-Hangzhou-Ningbo Expressway will
continue to be diverted in the second half of the year as the closure of the
Shanghai Section of the Shanghai-Hangzhou Expressway for its widening project
will be extended until the end of 2009. Meanwhile, driven by a rebound of the
provincial economy and a growth of vehicles sales, traffic volumes on the
Group's road sections may resume growth. Nevertheless, the diversion impact
caused by new road networks may lead to a slowdown of growth in traffic volumes
on the Group's road sections.
The long-awaited toll-by-weight policy has been approved by the Zhejiang
Provincial Government and the policy is expected to be implemented by the end
of 2009. We believe that the implementation of the policy will help lower road
surface maintenance costs of the Group and will create positive impact on the
toll incomes of the Group in the long run.
During the Period, the toll road-related businesses of the Group saw a
significant slump as impacted by the slowdown of the real economy in the
province. However, it is expected, with a stabilization of the economy and
through expanding the sales of goods categories and increasing the strength of
sales promotion, as well as the renovations and expansions of the service
areas, the rate of decline in the toll road-related businesses will narrow
gradually.
The proactive fiscal policies and moderately relaxed monetary policies
implemented by the PRC government led to a rebound in the PRC's securities
market in 2009. It is believed that with the PRC's real economy showing further
recovery, the securities business of the Group will be positively impacted in
the long run. However, the business of Zheshang Securities will continue to be
impacted by a number of uncertainties in the short run.
The year of 2009 is a tough year for the global and domestic economies as
well as for the Group. Facing such grim situation, we will, under the
management's leadership and its staff's concerted efforts, while focusing on
our principal business, actively seek new acquisitions and sources of profit
growth and will unremittingly strive to bring satisfactory results for
investors.
PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S SHARES
Neither the Company nor any of its subsidiaries had purchased, sold,
redeemed or cancelled any of the Company's shares during the Period.
COMPLIANCE WITH LISTING RULES APPENDIX 14
The Company was in compliance with the code provisions in the Code on
Corporate Governance Practices set out in Appendix 14 to the Listing Rules
during the Period.
By Order of the Board
Chen Jisong
Chairman
Hangzhou, PRC, August 11, 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 Interim Results
Announcement is available at http://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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