2011 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)
(Hong Kong Stock Exchange Stock code: 0576)
2011 Annual Results Announcement
-- Revenue amounted to Rmb6,781.35 million, representing an increase of
0.2% year-on-year.
-- Profit attributable to owners of the Company amounted to Rmb1,805.35
million, representing a decrease of 3.5% year-on-year.
-- Earnings per share was Rmb41.57 cents.
-- A final dividend of Rmb25 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, 2011 (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 Rmb6,781.35 million,
representing an increase of 0.2% over 2010. Profit attributable to owners
of the Company was Rmb1,805.35 million, representing a decrease of 3.5%
year-on-year. Earnings per share for the Period was Rmb41.57 cents (2010:
Rmb43.09 cents).
The Directors have recommended to pay a final dividend of Rmb25 cents per
share (2010: Rmb25 cents), subject to shareholders' approval at the annual
general meeting of the Company to be held on May 28, 2012. Together with
an interim dividend of Rmb6 cents per share already paid, the annual
dividend payout during the Period is Rmb31 cents per share (2010: 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, 2011, together with the comparative
figures for 2010:
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
December 31,
2011 2010
Notes Rmb'000 Rmb'000
------------ ------------
Revenue 3 6,781,352 6,769,064
Operating costs (4,077,403) (3,760,494)
------------ ------------
Gross profit 2,703,949 3,008,570
Securities investment gains 7,925 126,532
Other income 4 281,929 199,791
Administrative expenses (84,380) (83,189)
Other expenses (38,565) (21,904)
Share of (loss) profit of (7,035) 2,453
associates
Finance costs (80,043) (120,979)
------------ ------------
Profit before tax 2,783,780 3,111,274
Income tax expense 5 (717,838) (798,785)
------------ ------------
Profit for the year 2,065,942 2,312,489
------------ ------------
For the year ended
December 31,
2011 2010
Notes Rmb'000 Rmb'000
-------------- --------------
Other comprehensive loss
Available-for-sale financial
assets:
- Fair value (loss) gain during
the year (9,746) 14,342
- Reclassification adjustments
for cumulative gain included
in profit or loss upon disposal (4,072) (25,052)
Income tax relating to components
of other comprehensive income 3,455 2,678
-------------- --------------
Other comprehensive loss for the
year (net of tax) (10,363) (8,032)
-------------- --------------
Total comprehensive income for
the year 2,055,579 2,304,457
============== ==============
Profit for the year attributable
to:
Owners of the Company 1,805,345 1,871,499
Non-controlling interests 260,597 440,990
2,065,942 2,312,489
============== ==============
Total comprehensive income for
the year attributable to:
Owners of the Company 1,799,941 1,867,332
Non-controlling interests 255,638 437,125
-------------- --------------
2,055,579 2,304,457
============== ==============
EARNINGS PER SHARE - BASIC 7 Rmb41.57 cents Rmb43.09 cents
============== ==============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31,
2011 2010
Notes Rmb'000 Rmb'000
-------------- --------------
NON-CURRENT ASSETS
Property, plant and equipment 1,294,465 1,120,626
Prepaid lease payments 68,983 71,035
Expressway operating rights
Goodwill 86,867 86,867
Other intangible assets 157,594 155,020
Deposit paid for acquisition
of a property 323,800 -
Interests in associates 446,679 472,910
Other receivables 382,000 -
Available-for-sale investments 1,000 1,000
-------------- --------------
14,126,326 13,978,955
-------------- --------------
CURRENT ASSETS
Inventories 26,400 17,715
Trade receivables 8 48,013 50,768
Other receivables 844,142 953,153
Prepaid lease payments 2,052 2,052
Available-for-sale investments 60,274 71,928
Held for trading investments 1,260,021 803,772
Financial assets held under
resale agreement - 80,163
Bank balances held on behalf
of customers 7,177,508 11,685,951
Bank balances and cash
- Time deposits with
original maturity over
three months 2,467,793 325,545
- Cash and cash equivalents 3,120,430 5,682,053
-------------- --------------
15,006,633 19,673,100
-------------- --------------
As at December 31,
2011 2010
Notes Rmb'000 Rmb'000
-------------- --------------
CURRENT LIABILITIES
Accounts payable to customers
arising 7,143,067 11,631,030
Trade payables 9 317,188 548,695
Tax liabilities 491,619 450,708
Other taxes payable 61,753 51,002
Other payables and accruals 724,216 1,049,301
Dividends payable 94,971 120,319
Bank loans 462,553 822,000
Provisions 10 - 21,238
Derivative financial instrument 6,426 -
-------------- --------------
9,301,793 14,694,293
-------------- --------------
NET CURRENT ASSETS 5,704,840 4,978,807
-------------- --------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 19,831,166 18,957,762
-------------- --------------
NON-CURRENT LIABILITIES
Long-term bonds 1,000,000 1,000,000
Deferred tax liabilities 232,066 262,647
-------------- --------------
1,232,066 1,262,647
-------------- --------------
18,599,100 17,695,115
============== ==============
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 10,835,424 10,380,137
-------------- --------------
Equity attributable to owners
of the Company 15,178,539 14,723,252
Non-controlling interests 3,420,561 2,971,863
-------------- --------------
18,599,100 17,695,115
============== ==============
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.
The accounting policies used in the consolidated financial statements
are consistent with those applied in the preparation of the
Group's annual financial statements for the year ended December
31, 2010 except as described below.
In the current year, the Group has applied the following new and
revised HKFRSs issued by the HKICPA.
Amendments to HKFRSs Improvements to HKFRSs issued in 2010
Amendments to HKAS 32 Classification of Rights Issues
Amendments to HK(IFRIC) Prepayments of a Minimum Funding
- Int 14 Requirement
HK(IFRIC) - Int 19 Extinguishing Financial Liabilities with
Equity Instruments
The application of the new and revised 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 HKFRS 7 Disclosures - Transfers of Financial
Assets (Note 1)
Amendments to HKFRS 7 Disclosures - Offsetting Financial
Assets and Financial Liabilities
(Note 2)
Amendments to HKFRS 9 Mandatory Effective Date of HKFRS 9 and
and HKFRS 7 Transition Disclosures (Note 3)
HKFRS 9 Financial Instruments (Note 3)
HKFRS 10 Consolidated Financial Statements (Note 2)
HKFRS 11 Joint Arrangements (Note 2)
HKFRS 12 Disclosure of Interests in Other Entities
(Note 2)
HKFRS 13 Fair Value Measurement (Note 2)
Amendments to HKAS 1 Presentation of Items of Other
Comprehensive Income (Note 5)
Amendments to HKAS 12 Deferred Tax - Recovery of Underlying
Assets (Note 4)
HKAS 19 (Revised 2011) Employee Benefits (Note 2)
HKAS 27 (Revised 2011) Separate Financial Statements (Note 2)
HKAS 28 (Revised 2011) Investments in Associates and
Joint Ventures (Note 2)
Amendments to HKAS 32 Offsetting Financial Assets and Financial
Liabilities (Note 6)
HK(IFRIC) - Int 20 Stripping Costs in the Production Phase
of a Surface Mine (Note 2)
Note 1: Effective for annual periods beginning on or after July 1, 2011.
Note 2: Effective for annual periods beginning on or after January 1,
2013.
Note 3: Effective for annual periods beginning on or after January 1,
2015.
Note 4: Effective for annual periods beginning on or after January 1,
2012.
Note 5: Effective for annual periods beginning on or after July 1, 2012.
Note 6: Effective for annual periods beginning on or after January 1,
2014.
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:
HKFRS 9 requires all recognised financial assets that are within the
scope of HKAS 39 Financial Instruments: Recognition and Measurement
to be 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.
The most significant effect of HKFRS 9 regarding the classification
and measurement of financial liabilities relates to the presentation
of changes in the fair value of a financial liability (designated as
at fair value through profit or loss) attributable to changes in the
credit risk of that liability. Specifically, under HKFRS 9, for
financial liabilities that are designated as at fair value through
profit or loss, 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
attributable to a financial liability's credit risk are not
subsequently reclassified to profit or loss. Previously, under HKAS
39, the entire amount of the change in the fair value of the financial
liability designated as at fair value through profit or loss was
presented in profit or loss.
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 investments but not the Group's financial
liabilities. Regarding the Group's available-for-sale 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 and HK (SIC)-Int 12 Consolidation - Special
Purpose Entities. 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 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.
These five standards are effective for annual periods beginning on or
after January 1, 2013. Earlier application is permitted provided that
all of these five standards are applied early 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.
3. Revenue
An analysis of the Group's revenue, net of discounts and taxes, for
the year is as follows:
Year ended December 31,
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Toll operation revenue 3,522,510 3,475,319
Service area businesses revenue 1,834,422 1,633,628
Advertising business revenue 81,765 77,997
Commission income from securities
operation 985,754 1,352,051
Interest income from securities
operation 356,524 226,630
Others 377 3,439
-------------- --------------
Total 6,781,352 6,769,064
============== ==============
4. Other Income
Year ended December 31,
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Interest income on bank balances and
entrusted loan receivables 141,187 56,278
Interest income from structured deposit - 136
Rental income 69,165 66,369
Net exchange gain 8,672 15,303
Handling fee income 24,526 23,689
Towing income 8,782 11,056
Others 29,597 26,960
-------------- --------------
Total 281,929 199,791
============== ==============
5. Income Tax Expense
Year ended December 31,
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Current tax:
PRC Enterprise Income Tax 750,856 794,590
Deferred tax (33,018) 4,195
717,838 798,785
============== ==============
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and
Implementation Regulation of the EIT Law, the tax rate of the Group is
25% from January 1, 2008 onwards.
No Hong Kong Profits Tax has been provided as the Group's income neither
arises in, nor is derived from Hong Kong during the year.
The tax charge for the year can be reconciled to the profit per the
consolidated statement of comprehensive income as follows:
Year ended December 31,
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Profit before tax 2,783,780 3,111,274
============== ==============
Tax at the PRC enterprise income tax
rate of 25% 695,945 777,819
Tax effect of share of loss (profit)
of associates 1,759 (613)
Tax effect of income not taxable for
tax purposes (16) (12)
Tax effect of expenses not deductable
for tax purposes 20,150 21,591
-------------- --------------
Tax charge for the year 717,838 798,785
============== ==============
6. Dividends
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Dividends recognised as distribution
during the year:
2011 Interim - Rmb6 cents
(2010: 2010 interim Rmb6 cents)
per share 260,587 260,587
2011 Final - Rmb25 cents
(2010: 2009 Final Rmb25 cents)
per share 1,085,779 1,085,779
1,346,366 1,346,366
============== ==============
The final dividend of Rmb25 cents per share in respect of the year
ended December 31, 2011 (2010: final dividend of Rmb25 cents per share
in respect of the year ended December 31, 2010) 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 Rmb1,805,345,000
(2010: Rmb1,871,499,000) and the 4,343,114,500 (2010: 4,343,114,500
ordinary shares) ordinary shares in issue during the year.
No diluted earnings per share has been presented as there were no
potential ordinary shares outstanding for the years ended December 31,
2011 and 2010.
8. Trade Receivables
The Group has no credit period granted to its trade customers of toll
operation, service area businesses and securities operation. The
following is an aged analysis of trade receivables presented based on
the invoice date at the end of reporting period.
As at December 31,
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Within 3 months 47,742 49,666
3 months to 1 year - -
1 to 2 years - -
Over 2 years 271 831
-------------- --------------
Total 48,013 50,768
============== ==============
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 invoice date.
As at December 31,
2011 2010
Rmb'000 Rmb'000
-------------- --------------
Within 3 months 93,602 166,438
3 months to 1 year 32,295 232,122
1 to 2 years 116,005 60,701
2 to 3 years 58,618 83,256
Over 3 years 16,668 6,178
-------------- --------------
Total 317,188 548,695
============== ==============
10. With respect to the relevant disclosure made under "Provisions" in the
Company's Annual Report 2010 (p114-115), the provision amounting to
Rmb21,238,000 made for additional interest compensation for the
customers under the state bond investment agency agreements and the
fund trust agreements was reversed in full as a result of plaintiff's
withdrawal of the lawsuit during the Period.
BUSINESS REVIEW
In 2011, amid complex and volatile economic situations internationally
and new problems affecting domestic economic operations, the Chinese
government continued to implement initiatives to strengthen and improve
its macroeconomic control, and thus keep the national economy on its path
of continued, healthy growth. China's GDP grew 9.2% year-on-year in 2011,
with an increase of 8.9% in the fourth quarter. Although Zhejiang Province
also experienced stable economic growth in 2011, its GDP growth rate
actually fell quarter by quarter. The province's GDP rose 9.0% year-on-year
in 2011, 0.2 percentage points lower than that of the national level.
Revenue from the Group's overall operations fell slightly year-on-year,
mainly as a result of Zhejiang Province's slackening macroeconomic growth.
During the Period, the Group realized a total income of Rmb6,977.21
million, representing a decrease of 0.03% year-on-year; of which
Rmb3,643.93 million was attributable to the two major expressways
operated by the Group, representing 52.2% of the total income; Rmb1,932.34
million was attributable to the Group's toll road-related businesses such
as service area operations, gas stations, advertising business and
so forth, representing 27.7% of the total income; and Rmb1,400.94
million was attributable to the securities business, representing 20.1% of
the total income.
A breakdown of the Group's income for the Period is set out below:
2011 2010
Rmb'000 Rmb'000 % Change
----------- ----------- --------
Toll income
Shanghai-Hangzhou-Ningbo
Expressway 2,954,949 2,848,805 3.7%
Shangsan Expressway 688,984 741,652 -7.1%
Other income
Service areas 1,842,206 1,641,748 12.2%
Advertising 89,756 85,881 4.5%
Road maintenance 377 3,439 -89.0%
Securities business income
Commission 1,044,415 1,431,416 -27.0%
Bank interest 356,524 226,630 57.3%
----------- ----------- --------
Subtotal 6,977,211 6,979,571 0.0%
Less: Revenue taxes (195,859) (210,507) -7.0%
----------- ----------- --------
Revenue 6,781,352 6,769,064 0.2%
=========== =========== ========
TOLL ROAD OPERATIONS
In 2011, automobile sales volume declined substantially due to the
macroeconomic deceleration. The traffic volume recorded on the Group's
two expressways was also hit to varying degrees during the Period as a
result of several unfavorable factors, such as the traffic diversion to
the Zhuyong Expressway and the abolition of toll tariffs for certain
neighbouring Class II highways.
Trucks travelling on the Group's expressways have been gradually diverted
to other expressways since the abolition of toll tariffs for certain
neighbouring Class II highways and the implementation of the toll-by-weight
policy for trucks travelling in Zhejiang Province since March 2010. In
particular, there was a heavy diversion of trucks away from the
Shanghai-Hangzhou Expressway to ordinary Class II highways as a result
of the abolition of toll tariffs for the Yuhang section and a number of
surrounding Class II highways. The removal of tariffs also led to a
substantial decline in traffic volume along the Yuhang section during
the Period.
In addition to the ongoing negative impact caused by the opening of the
Zhuyong Expressway in July 2010, in terms of the respective traffic volumes
along some sections of the Group's Hangzhou-Ningbo Expressway and
Shangsan Expressway during the Period, the higher incidence of severe
weather conditions in the first half of 2011 and the complete closure of
two-way travel along the Xinchang section of the Shangsan Expressway in
November 2011 for maintenance work on its side slopes also negatively
impacted traffic volume and toll income to certain extents.
Consequently, the average daily traffic volume in full-trip equivalents
along the Shanghai-Hangzhou-Ningbo Expressway was 40,438 during the
Period, representing an increase of 4.3% 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 40,675, an increase of 2.9% year-on-year, and that along the
Hangzhou-Ningbo section was 40,268, an increase of 5.3% year-on-year.
The average daily traffic volume in full-trip equivalents along the
Shangsan Expressway was 16,344 during the Period, representing a
decrease of 7.1% year-on-year.
The Group remains committed to enhancing the quality of operational
management despite various uncertainties lying ahead. Upon completion
of the expansion project for the Hangzhou toll station during the
Period, the traffic capacity at the exit of the toll station was
raised from 2,000 vehicles per hour to 2,500 per hour. Moreover, the
development of more than 80 various accessory software items for toll
collection offered an assurance to the stable operation of the
toll-by-weight policy and the electronic toll collection ("ETC")
system. In particular, the toll collection efficiency was improved
significantly following the completion of 38 ETC lanes on
Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway,
which accounted for 25% of the total number of ETC lanes in terms
of usage rate across the province.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway
and the 142km Shangsan Expressway amounted to Rmb3,643.93 million
during the Period, representing an increase of 1.5% year-on-year.
In respect of such income, toll income from the Shanghai-Hangzhou-Ningbo
Expressway amounted to Rmb2,954.95 million, an increase of 3.7%
year-on-year, while toll income from the Shangsan Expressway amounted
to Rmb688.98 million, a decrease of 7.1% year-on-year.
TOLL ROAD-RELATED BUSINESS OPERATIONS
The Company also operates certain toll road-related businesses along its
expressways through its subsidiaries and associated companies, including
gas stations, restaurants and shops in service areas, as well as roadside
advertising and vehicle service businesses.
As a result of slackened growth in traffic volume along the Group's two
expressways and the impact of traffic diversions to the Zhuyong
Expressway during the Period, the traffic volume of certain large
passenger vehicles was pulled down. However, owing to increases in the
sale prices of petroleum products which has in turn led to a substantial
increase in sales revenue of petroleum products, the overall income from
the service areas was satisfactory. Income from toll road-related
businesses amounted to Rmb1,932.34 million during the Period, representing
a year-on-year increase of 11.6%.
SECURITIES BUSINESS
In 2011, China's domestic stock market as a whole remained volatile and
declined in value year-on-year as a result of low market activity levels.
During the Period, it was unable to offset falling commission rates
despite efforts to continue to steadily increase the market share of
Zheshang Securities' securities brokerage business, with the addition
of 8 new sales outlets. Moreover, the increase in overheads caused by
the greater number of operational networks and employees both raised the
operational costs of Zheshang Securities and undermined its profitability
during the Period.
Nevertheless, confronted by an adverse external environment, Zheshang
Securities not only managed to cope with the adverse conditions but also
endeavoured to expand its various businesses. Consequently, in 2011, its
securities brokerage market share and customer base continued to rise,
and its operational network increased to 58 branches. Moreover, its
investment banking business topped Rmb100 million in revenue for the
first time, the revenue and net profit from its futures business
continued to grow, and its preparatory work on various new businesses
continued to progress steadily.
During the Period, Zheshang Securities realized an operating income of
Rmb1,400.94 million, a decrease of 15.5% year-on-year. Of such income,
brokerage commission income amounted to Rmb1,044.42 million,
a year-on-year decrease of 27.0%; and bank interest income amounted
to Rmb356.52 million, a year-on-year increase of 57.3%. During the
period, the securities investment gains from Zheshang Securities
accounted for in the consolidated statement of comprehensive income
amounting to Rmb1.13 million.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned
associate company of the Company) was blessed by 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
Rmb5,137.97 million during the Period, representing an increase of 44.7%
year-on-year. During the Period, net profit of the associate company
amounted to Rmb14.71 million.
The 69.7km Jinhua Section of the Ningbo-Jinhua Expressway, operated by
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate
company of the Company), the Company achieved a satisfactory growth in
toll income benefitting from an increase in traffic volume driven by the
opening of nearby road networks. The Jinhua Section of the
Ningbo-Jinhua Expressway recorded an average daily traffic
volume of 10,773 in full-trip equivalents, while toll income amounted
to Rmb218.10 million, an increase of 14.8% year-on-year. Due to its
heavy financial burden, the associate company still incurred a loss
of Rmb68.10 million during the Period.
To solve Zhejiang Jinhua Yongjin Expressway Co., Ltd.'s funding problem,
its shareholders, which include the Company, agreed to provide a loan of
Rmb82 million. The loan was divided among the shareholders according to
their respective shareholding proportions as of November 18, 2011.
JoinHands Technology Co., Ltd. (a 27.582%-owned associate company of
the Company) generated its income primarily from its property leasing
activities during the Period. As the associate company did not make any
significant improvements to its operations in 2011, it incurred a net loss
of Rmb1.81 million during the Period.
Under the 27.582% Equity Interest Transfer Agreement for JoinHands
Technology Co., Ltd. entered into in July 2011 between the Company
and Guangzhou Kaixin Consulting Co., Ltd., the Company will transfer
all of its 27.582% equity interest in JoinHands Technology Co., Ltd.
to Guangzhou Kaixin Consulting Co., Ltd. at a consideration of
Rmb31.43 million. However, as Guangzhou Kaixin Consulting Co., Ltd. has
failed to pay the consideration for the equity transfer according to the
terms of the contract, the Company lodged a lawsuit against it in August
2011 at the People's Court of Xihu District, Hangzhou City. The case was
heard in February 2012 and is pending a final court ruling.
Financial Analysis
The Group adopts a prudent financial policy with an aim to provide
shareholders with sound returns over the long-term.
During the Period, profit attributable to owners of the Company for
the year was approximately Rmb1,805.35 million, representing a decline
of 3.5% year-on-year, while earnings per share for the Company was
Rmb41.57 cents.
Liquidity and Financial Resources
As at December 31, 2011, current assets of the Group amounted to
Rmb15,006.63 million in aggregate (2010: Rmb19,673.10 million), of
which bank balances and cash accounted for 37.2% (2010: 30.5%), bank
balances held on behalf of customers accounted for 47.8% (2010: 59.4%),
and held-for-trading investments accounted for 8.4% (2010: 4.1%).
Current ratio (current assets over current liabilities) of the Group
as at December 31, 2011 was 1.6 (2010: 1.3). 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 dealings) was 3.6 (2010:
2.6).
The amount for held-for-trading investments of the Group as at December
31, 2011 amounted to Rmb1,260.02 million (2010: Rmb803.77 million), of
which 84.1% was invested in corporate bonds, 15.5% was invested in the
stock market, and the rest was invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating
activities amounted to Rmb2,285.93 million, representing a decline of
10.4%.
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, 2011, total liabilities of the Group amounted to
Rmb10,533.86 million, of which 13.9% was borrowings and 67.8% was
payables to customers arising from securities dealing business.
Total interest-bearing borrowings of the Group as at December 31, 2011
amounted to Rmb1,462.55 million, representing a decrease of 19.7% over
the beginning of the year. The borrowings comprised outstanding balances
of loan from domestic foreign bank, denominated in HK dollar, totaling
approximately Rmb312.55 million equivalent; outstanding balances of
loans from domestic commercial banks totaling Rmb150.00 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, 68.4% were not repayable within one year.
As at December 31, 2011, the Group's loans from domestic commercial
banks comprised one-year short-term loans, of which Rmb50.00 million
was fixed-rate loans with interest rates ranging from 5.81% to 6.06%
per annum, Rmb100.00 million was floating-rate loans with interest
rates ranging from 6.31% to 6.56% per annum. The annual coupon rate
for corporate bonds was fixed at 4.29%, with interest payable
annually. The annual interest rate for accounts payable to customer
arising from the securities dealing business was fixed at 0.5%.
The annual interest rate for the Group's loan from domestic foreign
bank, denominated in HK dollar, totaling approximately Rmb312.55
million equivalent was 4.95%.
Total interest expenses for the Period amounted to Rmb80.04 million,
while profit before interest and tax amounted to Rmb2,863.82 million.
The interest cover ratio (profit before interest and tax over interest
expenses) stood at 35.8 (2010: 26.7).
The asset-liability ratio (total liabilities over total assets) was
36.2% as at December 31, 2011 (December 31, 2010: 47.4%).
Excluding the effect of customer deposits arising from the
securities business, the resultant asset-liability ratio (total
liabilities less balance of accounts payable to customer arising
from securities dealings over total assets less balance of cash
held on behalf of customers) of the Group was 15.4% (December 31,
2010: 19.7%).
Capital Structure
As at December 31, 2011, the Group had Rmb18,599.10 million total
equity, Rmb8,505.62 million fixed-rate liabilities, Rmb100.00 million
floating-rate liabilities and Rmb1,928.24 million interest-free
liabilities, representing 63.9%, 29.2%, 0.3% 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 dealing by total equity, was 18.2% as at
December 31, 2011 (December 31, 2010: 24.4%).
Capital Expenditure Commitments and Utilization
During the Period, capital expenditures of the Group totaled
Rmb676.00 million, while capital expenditure of the Company totaled
Rmb32.45 million. Amongst the total capital expenditures of the Group,
Rmb523.84 million was incurred for acquisition and construction of
properties, Rmb115.53 million was incurred for purchase of equipment,
Rmb30.36 million was incurred for the road widening project between
the Shaoxing- Zhuji hub of the Shangsan Expressway, and Rmb6.27
million was incurred for service area renovation and expansion.
As at December 31, 2011, capital expenditures committed by the Group
and the Company totaled Rmb1,265.29 million and Rmb222.28 million,
respectively. Amongst the total capital expenditures committed by the
Group, Rmb485.70 million will be used for acquisition of office
building, Rmb407.20 million will be used for acquisition and
construction of properties, Rmb345.34 million for acquisition of
equipment, Rmb6.07 million for the widening project between the
Shaoxing-Zhuji hub and the Shaoxing- Jiaxing hub of the Shangsan
Expressway, and Rmb20.97 million for service area renovation and
expansion.
The Group will finance its above mentioned capital expenditure
commitments mainly with internally generated cash flow, with a
preference for debt financing to meet any shortfalls thereof.
Contingent Liabilities and Pledge of Assets
As at December 31, 2011, the Group did not have any contingent
liabilities nor any pledge of assets or guarantees.
Foreign Exchange Exposure
Save for the repayment of a domestic foreign bank loan in HK dollar
amounting to an equivalent of approximately Rmb312.55 million and
dividend payments to the holders of H shares in HK dollars, the
Group's principal operations are transacted and booked in Renminbi.
With an aim to hedge against foreign exchange risks arising from
borrowings denominated in HK dollar, the Group has purchased Hong
Kong dollar equivalent forward contracts with one-year term at a
rate lower than the spot exchange rate on the borrowing date during
the Period. Therefore, the Group's exposure to foreign exchange
fluctuations is limited. Save for the above-mentioned, the Group has
not used other 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
Although the economy currently continues to develop steadily and
relatively quickly at the macroeconomic level, the recent slowdown
in economic growth, the significant decline in automobile sales volume
and the clean-up and rectification programme for toll roads will
continue to negatively impact the operating results of expressways. As
a result, the Group does not expect its two expressways to witness
significant growth in terms of either traffic volume or toll revenue
in 2012.
Meanwhile, although traffic diversion from the Group's expressways to
the Zhuyong Expressway since it opened to traffic in July 2010 has
presently stabilized, the opening of the Shaozhu Expressway on December
29, 2011 has since caused slight traffic diversions from some sections
of the Hangzhou-Ningbo Expressway.
To raise the travelling speeds of vehicles arriving at the Group's
tolling stations, more fast and convenient electronic toll collection
(ETC) services are being introduced along the Group's expressways. Upon
completion of 38 ETC lanes on the Group's two expressways in 2011, the
remaining 50 ETC lanes are also expected to be constructed in
2012, which will further strengthen the expressway's traffic capacity,
as well as improve their tolling efficiency and levels of service and
management.
As China's stock market is expected to be a larger degree of uncertainty
in 2012, Zheshang Securities will adopt various initiatives to help both
withstand any potentially- adverse market conditions and successfully
combat intense competition. These initiatives include carrying out an
aggressive transformation of the securities brokerage business, promoting
the growth of the investment banking business, introducing an asset
management business with innovative, breakthrough solutions and enhancing
the developmental capabilities of the futures business. Zheshang
Securities will also aggressively strengthen its cost and risk
control, and continue to carry out its operations prudently and
efficiently in order to facilitate the sound development of all
aspects of the securities business.
In light of the macroeconomic situation likely remaining very complex and
challenging in 2012, the Company's management will continue to closely
monitor any policy changes for the expressway sector and their potential
impacts on the road network in Zhejiang Province, while promptly
adjusting the Group's business strategies as and when required. Besides
continuing to become a market leader in its principal business of
expressway operations, the Company will continue to cultivate its
management capabilities for its diversified operations, make use of
its excellent cash flow, continue to seek suitable investment in and
acquisition of expressway projects and work in a diligent and focused
manner, all for the steady development of the Company and fruitful
shareholder returns.
Purchase, Sale and Redemption of the Company's Shares
Neither the Company nor any of its subsidiaries had purchased, sold,
redeemed or cancelled any of the Company's shares during the Period.
Compliance with Listing Rules Appendix 14
During the Period, the Company met all provisions in the Code on
Corporate Governance Practices (the "Code") in Appendix 14, and adopted
the recommended best practices contained in the Code wherever applicable.
By order of the Board
Zhejiang Expressway Co., Ltd.
Jisong Chen
Chairman
Hangzhou, PRC, March 20, 2012
As at the date of this announcement, the executive directors of the
Company are: Messrs. Jisong Chen, Xiaozhang Zhan, Wenyao Jiang,
Jingzhong Zhang and Huikang Ding; the non-executive director is Ms.
Luyun Zhang; and the independent non- executive directors are: Messrs.
Chee Chen Tung, Junsheng Zhang and Liping Zhang.
Statement:
A full electronice version of the Company's 2011 Annual Results
Announcement is available at www.zjec.com.cn
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