2011 Third Quarterly Results Announcement
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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)
2011 Third Quarterly Results Announcement
This quarterly results announcement of Zhejiang Expressway Co., Ltd. (the "Company")
for the nine months ended September 30, 2011 (the "Period") is made pursuant to Rule
13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited and has been prepared in compliance with 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 (collectively the "Group") for the Period. Set out below are
the Group's unaudited condensed consolidated statement of comprehensive income,
condensed consolidated statement of financial position and condensed consolidated
statement of cash flow for the Period together with the comparative figures for the
corresponding period of 2010:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the nine months
ended September 30,
2011 2010
Notes Rmb'000 Rmb'000
------------ ------------
Revenue 1 5,088,656 4,794,815
Operating costs (3,008,659) (2,695,599)
------------ ------------
Gross profit 2,079,997 2,099,216
Securities investment gains 3,148 99,519
Other income 2 187,899 125,364
Administrative expenses (51,093) (47,278)
Other expenses (25,730) (17,943)
Share of loss of associates (10,017) (9,064)
Finance costs (62,918) (69,317)
------------ ------------
Profit before tax 2,121,286 2,180,497
Income tax expense (533,077) (555,841)
------------ ------------
Profit for the Period 1,588,209 1,624,656
------------ ------------
Other comprehensive (loss) income
Available-for-sale financial assets:
- Fair values (loss) during the
Period (4,632) 9,927
- Reclassification adjustments for
cumulative gain included in
profit or loss upon disposal (4,072) (24,856)
Gain from acquisition of
non-controlling interest in
subsidiaries -- 15,427
Income tax relating to components of
other comprehensive income 2,176 (125)
------------ ------------
Other comprehensive (loss) income for
the Period (6,528) 373
------------ ------------
Total comprehensive income for the Period 1,581,681 1,625,029
============ ============
Profit for the Period attributable to:
Owners of the Company 1,380,042 1,337,469
Non-controlling interests 208,167 287,187
------------ ------------
1,588,209 1,624,656
============ ============
Total comprehensive income for
the Period attributable to:
Owners of the Company 1,376,638 1,343,231
Non-controlling interests 205,043 281,798
------------ ------------
1,581,681 1,625,029
============ ============
Earnings per share - basic 3 31.78 cents 30.80 cents
============ ============
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
September 30, December 31,
2011 2010
Rmb'000 Rmb'000
Unaudited Audited
------------ ------------
Non-current assets 13,510,180 13,978,955
Current assets 15,396,412 19,673,100
Current liabilities 9,281,819 14,694,293
------------ ------------
Net current assets 6,114,593 4,978,807
------------ ------------
Total assets less current liabilities 19,624,773 18,957,762
------------ ------------
Non-current liabilities 1,238,983 1,262,647
------------ ------------
18,385,790 17,695,115
============ ============
Capital and Reserves
Capital 4,343,115 4,343,115
Reserves 10,672,707 10,380,137
------------ ------------
Equity attributable to owners of the Company 15,015,822 14,723,252
Non-controlling interests 3,369,968 2,971,863
------------ ------------
18,385,790 17,695,115
============ ============
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the nine months
ended September 30,
2011 2010
Rmb'000 Rmb'000
------------ ------------
Net cash from operating activities 1,410,895 1,706,432
Net cash used in investing activities (1,157,463) (584,530)
Net cash used in financing activities (1,528,530) (1,091,773)
------------ ------------
Net (decrease)/increase in cash and cash equivalents (1,275,098) 30,129
Cash and cash equivalents at beginning of the Period 5,682,053 5,049,003
------------ ------------
Cash and cash equivalents at end of the Period 4,406,955 5,079,132
============ ============
Notes:
1. Revenue
An analysis of the Group's revenue, net of discounts and taxes, for the Period
is as follows:
For the nine months
ended September 30,
2011 2010
Rmb'000 Rmb'000
------------ ------------
Toll operation revenue 2,646,680 2,586,138
Service area business revenue 1,372,091 1,136,643
Advertising business revenue 57,860 56,613
Commission income from securities operation 774,358 862,791
Interest income from securities operation 237,667 152,596
Others -- 34
------------ ------------
Total revenue 5,088,656 4,794,815
============ ============
2. Other Income
For the nine months
ended September 30,
2011 2010
Rmb'000 Rmb'000
------------ ------------
Interest income on bank balances and entrusted
loan 102,598 35,276
Rental income 48,955 46,185
Net exchange gain 8,501 8,312
Handling fee income 12,999 11,686
Towing income 9,195 11,676
Interest from structured deposit -- 136
Others 5,651 12,093
------------ ------------
Total 187,899 125,364
============ ============
3. 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 Rmb1,380,042,000 (2010:
Rmb1,337,469,000) and the 4,343,114,500 (2010: 4,343,114,500) ordinary shares in
issue during the Period.
No diluted earnings per share has been presented as there were no potential
ordinary shares outstanding during both Periods.
4. Provisions
Subsequent to the relevant disclosure made in the Company's 2010 annual report
(pages 114 - 115) relating to "Provisions", as at the date of this announcement,
there was no material change for the Period.
BUSINESS REVIEW
Despite a slight decline in growth in the third quarter, China's national economy
remained relatively steady in its operation and continued to move toward the
expected direction as set in the macro control initiatives. A GDP growth of 9.4%
year-on-year was achieved during the first three quarters. Economic growth in
Zhejiang Province also showed a slowdown trend during the Period, registering a GDP
growth of 9.5% year-on-year during the first three quarters. As a result of
slackened economic growth both inside and outside the province, organic growth in
traffic volume and increase in toll income along the Group's two expressways also
decelerated during the Period as compared to the same period of the previous year.
During the Period, the Group realized a total income of Rmb5,236.18 million,
representing an increase of 5.9% year-on-year; of which Rmb2,737.52 million was
attributable to the two major expressways owned and operated by the Group,
representing 52.3% of total income; Rmb1,441.32 million was attributable to the
Group's toll road-related businesses, representing 27.5% of total income; and
Rmb1,057.34 million was attributable to the securities business, representing 20.2%
of total income.
TOLL ROAD OPERATIONS
Because of continuous slowdown in economic growth, organic growth in traffic volume
along the Group's expressways also tended to slow accordingly in the third quarter
as compared to the previous quarter, hitting the lowest in July particularly but
then gradually picking up in August and September.
The abolition of toll charging for local Class II highways last year has gradually
made its impact in creating diversions of trucks from the Group's expressways, thus
weakening the positive effect of the toll-by-weight policy on overall toll income.
Moreover, the impact of the opening of the Zhuyong Expressway in July 2010 in
creating traffic diversions from the Shangsan Expressway began to stabilize
gradually in the third quarter, and traffic volume on the Shangsan Expressway picked
up again in August this year.
Average daily traffic volume in full-trip equivalents along the
Shanghai-Hangzhou-Ningbo Expressway amounted to 41,470 during the Period,
representing an increase of 4.6% year-on-year. In particular, average daily traffic
volume in full-trip equivalents along the Shanghai-Hangzhou section of the
Shanghai-Hangzhou-Ningbo Expressway amounted to 41,615, an increase of 2.3%
year-on-year, and that along the Hangzhou-Ningbo section amounted to 41,366, an
increase of 6.3% year-on-year. Average daily traffic volume in full-trip equivalents
along the Shangsan Expressway amounted to 16,456 during the Period, a decrease of
1.6% year-on-year.
During the Period, toll income from the Shanghai-Hangzhou-Ningbo Expressway amounted
to Rmb2,203.61 million, an increase of 4.6% year-on-year, while toll income from the
Shangsan Expressway amounted of Rmb533.91 million, a decrease of 5.5% 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
which has pulled down the traffic volume of certain large passenger vehicles, there
was a slight decline in revenue from the service areas. 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, thereby offsetting the decrease in
revenue from the service areas, the overall income from the service areas was
satisfactory. As a result, toll road-related businesses recorded an income of
Rmb 1,441.32 million during the Period, a year-on-year increase of 19.6%.
SECURITIES BUSINESS
During the third quarter of 2011, trading volumes on the stock exchanges in Shanghai
and Shenzhen decreased significantly as compared to the same period of the previous
year as a result of downturn volatilities in the entire Chinese stock market. Due to
falling commission rates, the positive impact of an expanded market share has
basically been offset by the lower commission rates. Moreover, the increase in the
number of operation networks and staff has also increased business costs at Zheshang
Securities, thus affecting the profitability of Zheshang Securities during the
Period.
Despite facing extremely intense competition in the industry, Zheshang Securities
continued to maintain satisfactory development of its investment banking and asset
management businesses during the Period, while the market share of its securities
brokerage business continued to increase as compared to the same period of the
previous year, with the total number of customers continuing to rise.
During the Period, Zheshang Securities realized an operating income of Rmb1,057.34
million, a decrease of 0.9% year-on-year. Of such income, brokerage commission
income amounted to Rmb819.67 million, a year-on-year decrease of 10.4%; and bank
interest income amounted to Rmb237.67 million, a year-on-year increase of 55.7%.
Meanwhile, the securities investment gains accounted for in the condensed
consolidated statement of comprehensive income amounting to Rmb3.15 million during
the Period.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate company
of the Company) was blessed by a further rise in the retail prices of petroleum
products and a significant growth in the sales of petroleum products during the
Period, and consequently realized an income of Rmb3,807.86 million during the
Period, representing an increase of 50.3% year-on-year. During the Period, net
profit amounted to Rmb20.61 million (corresponding period of 2010: net profit of
Rmb 15.55 million).
Zhejiang Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company of
the Company) operates the 69.7km Jinhua Section of the Ningbo-Jinhua Expressway.
During the Period, 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 10,651 in full-trip equivalents, an increase of 16.6%
year-on-year, while toll income amounted to Rmb161.05 million, an increase of 17.0%
year-on-year. Due to its heavy financial burden, the associate company still
incurred a loss of Rmb45.98 million during the Period (corresponding period of
2010: net loss of Rmb53.91 million) but the loss is gradually decreasing.
JoinHands Technology Co., Ltd. ("JoinHands Technology", a 27.582% owned associate
company of the Company) generated its income primarily from property leasing during
the Period. As the associate company did not show any improvement to its operations,
it realized a net loss of Rmb1.38 million during the Period (corresponding period
of 2010: net loss of Rmb2.46 million).
On July 4, 2011, the Company entered into an equity transfer agreement with
Guangzhou Kaixin Consulting Co., Ltd., to which the Company will transfer all its
27.582% equity interests in JoinHands Technology. As Guangzhou Kaixin Consulting
Co., Ltd. has failed to pay the consideration for equity transfer in accordance with
the terms of the contract, the Company lodged a lawsuit on August 31, 2011 at the
People's Court of Hangzhou City, Xihu District. At present, the case is pending for
a court hearing.
FINANCIAL ANALYSIS
Liquidity and Financial Resources
As at September 30, 2011, current assets of the Group amounted to Rmb15,396.41
million in aggregate (December 31, 2010: Rmb19,673.10 million), of which bank
balances and cash accounted for 33.9% (December 31, 2010: 30.5%), bank balances held
on behalf of customers accounted for 46.9% (December 31, 2010: 59.4%), and
held-for-trading investments accounted for 8.8% (December 31, 2010: 4.1%). The
current ratio (current assets over current liabilities) as at September 30, 2011 was
1.7 (December 31, 2010: 1.3). Excluding the effect of customer deposits arising from
the securities business, the resultant current ratio of the Group (current assets
less bank balances held on behalf of customers over current liabilities less balance
of accounts payable to customers arising from the securities dealing business) was
3.9 (December 31, 2010: 2.6).
During the Period, net cash inflow generated from the Group's operating activities
amounted to Rmb1,410.90 million.
Borrowings and Solvency
As at September 30, 2011, total liabilities of the Group amounted to Rmb10,520.80
million (December 31, 2010: Rmb15,956.94 million), of which 13.9% was borrowings and
68.3% was accounts payable to customers arising from the securities dealing business.
Total interest expenses for the Period amounted to Rmb62.92 million, while profit
before interest and tax amounted to Rmb2,184.20 million. The interest cover ratio
(profit before interest and tax over interest expenses) stood at 34.7 (corresponding
period of 2010: 32.5).
The asset-liability ratio (total liabilities over total assets) was 36.4% as at
September 30, 2011 (December 31, 2010: 47.4%). Excluding the effect of customer
deposits arising from the securities dealing business, the resultant asset-liability
ratio (total liabilities less accounts payable to customers arising from the
securities dealing business over total assets less bank balances held on behalf of
customers) of the Group was 15.4% (December 31, 2010: 19.7%).
Capital Structure
As at September 30, 2011, the Group had Rmb18,385.79 million total equity,
Rmb8,553.71 million fixed-rate liabilities, Rmb100 million floating-rate liabilities
and Rmb1,867.09 million interest-free liabilities, representing 63.6%, 29.6%, 0.3%
and 6.5% of the Group's total capital, respectively. The gearing ratio, which was
computed by dividing the total liabilities less accounts payable to customers
arising from the securities dealing business by total equity, was 18.1% as at
September 30, 2011 (December 31, 2010: 24.4%).
PROSPECTS
As a result of decelerated economic growth during the first three quarters, organic
growth in traffic volume along the Group's two expressways also slowed accordingly.
However, we expect that as the impact of traffic diversions due to the opening of
the Zhuyong Expressway in July 2010 began to stabilize, the Shangsan Expressway and
the relevant sections of the Shanghai-Hangzhou Expressway which had originally been
affected by traffic diversions will no longer see negative growth in traffic volume.
Instead, they will record new growth in overall traffic volume.
Meanwhile, the Company has commenced operation of 38 electronic toll collection
(ETC) lanes at 15 toll stations. While receiving favorable feedback from drivers, we
expect to complete the installation of the system for an addition of 18 ETC lanes at
17 toll stations next year. The Group will then be able to offer more convenient and
effective services to traveling vehicles, further enhancing the traffic capacity of
its expressways.
After entering the third quarter, the continuous spread of the European debt crisis
and the increasing turmoil in the global financial markets had created a certain
impact on the Chinese stock market as well. Zheshang Securities will actively
strengthen its cost control and risk control, whilst actively expanding the
development of investment banking, fixed income, futures IB (Note: IB system is an
operating mode where securities company introduces clients to futures company, and
futures company pays a considerable commission to securities company in return.) and
other businesses in order to mitigate the negative impact due to the market
environment and fierce competition.
Economic development is now faced with a domestic and international environment
which is more complex, unstable and uncertain. Following the roll-out of the State's
rectification project for expressways in 2011, an array of policies is anticipated
to be introduced in Zhejiang Province at the end of the year or early next year.
These policies are then likely to create an uncertain impact over expressways. The
Company's management will closely monitor the changes in policies for the industry
and the impact of road networks within the province, and will adjust its business
strategies on a timely basis, with a view to strengthen the core expressway
business, steadily expanding the securities business and actively seeking new
opportunities so as to continue a healthy development of the Company.
NO MATERIAL CHANGES
The board of directors of the Company (the "Board") has confirmed that there has
been no material events, transactions or changes in the financial position of the
Company, other than as set out in this announcement. Further, the Board is not aware
of any material events, transactions or changes in the financial position of the
Company which have occurred since 30 September 2011 up to and including 10 November
2011, being the latest practicable date before the publication of this announcement.
By order of the Board
Zhejiang Expressway Co., Ltd.
Chen Jisong
Chairman
Hangzhou, PRC, November 10, 2011
As at the date of this announcement, the executive directors of the Company are:
Messrs. Chen Jisong, Zhan Xiaozhang, Jiang Wenyao, Zhang Jingzhong and Ding Huikang;
the non-executive director is Ms. Zhang Luyun; and the independent non-executive
directors are: Messrs. Tung Chee Chen, Zhang Junsheng and Zhang Liping.
An electronic full version of the Company's 2011 Third Quarterly Results
Announcement is available at www.zjec.com.cn
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