2013 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)
(Stock code: 0576)
(i) 2013 Annual Results Announcement and
(ii) Change of Chief Financial Officer
-- Revenue amounted to Rmb7,851.12 million, representing an increase of 13.3% year-on-year.
-- Profit attributable to owners of the Company amounted to Rmb1,907.47 million, representing an
increase of 15.6% year-on-year.
-- Earnings per share was Rmb43.92 cents.
-- A final dividend of Rmb25 cents per share is recommended.
-- Mr. Wang Dehua has been appointed as the Chief Financial Officer of the Company in replacement of
Mr. Wu Junyi.
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company") today announced the audited
consolidated results of the Company and its subsidiaries (collectively the "Group") for the year ended
December 31, 2013 (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 Rmb7,851.12 million, representing an increase of 13.3% over
2012. Profit attributable to owners of the Company was Rmb1,907.47 million, representing an increase of
15.6% year-on-year. Earnings per share for the Period was Rmb43.92 cents (2012 (restated): Rmb37.98 cents).
The Directors have recommended to pay a final dividend of Rmb25 cents per share (2012: Rmb24 cents). The
final dividend is subject to shareholders' approval at the annual general meeting of the Company to be held
on May 5, 2014. Together with an interim dividend of Rmb6 cents per share that has already been paid, the
annual dividend payout during the Period is Rmb31 cents per share (2012: Rmb30 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 profit or loss and other comprehensive income for the Period and
consolidated statement of financial position as at December 31, 2013, together with the comparative figures
for 2012:
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year
ended December 31,
2013 2012
Notes Rmb'000 Rmb'000
(Restated)
---------------- ----------------
Revenue 4 7,851,115 6,927,415
Operating costs (4,955,609) (4,574,040)
---------------- ----------------
Gross profit 2,895,506 2,353,375
Securities investment gains 99,663 99,783
Other income 5 241,056 291,990
Administrative expenses (84,792) (86,287)
Other expenses (70,061) (49,778)
Share of profit (loss) of associates 21,537 (4,513)
Share of loss of a joint venture (36,010) (3,516)
Finance costs (95,161) (139,765)
---------------- ----------------
Profit before tax 2,971,738 2,461,289
Income tax expense 6 (756,761) (634,669)
---------------- ----------------
Profit for the year 2,214,977 1,826,620
---------------- ----------------
Other comprehensive income
Items that may be reclassified
to profit or loss:
Available-for-sale financial assets:
-- Fair value gain during the year 4,865 4,800
-- Reclassification adjustments for
cumulative gain included in
profit or loss upon disposal (1,381) (175)
Income tax relating to components of
other comprehensive income (871) (1,156)
Other comprehensive income for
the year (net of tax) 2,613 3,469
---------------- ----------------
Total comprehensive income for the year 2,217,590 1,830,089
================ ================
Profit for the year attributable to:
Owners of the Company 1,907,470 1,649,484
Non-controlling interests 307,507 177,136
---------------- ----------------
2,214,977 1,826,620
================ ================
Total comprehensive income
attributable to:
Owners of the Company 1,909,017 1,651,293
Non-controlling interests 308,573 178,796
---------------- ----------------
2,217,590 1,830,089
================ ================
Earnings per share -- Basic and diluted 8 Rmb43.92 cents Rmb37.98 cents
================ ================
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
December 31, December 31, January 1,
2013 2012 2012
Notes Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
---------------- ---------------- ----------------
Non-current Assets
Property, plant and equipment 1,762,042 1,634,299 1,582,832
Prepaid lease payments 68,156 70,321 72,476
Expressway operating rights 11,911,133 12,722,158 13,468,635
Goodwill 86,867 86,867 86,867
Other intangible assets 154,564 155,633 157,594
Deposit paid for acquisition
of a property -- -- 323,800
Interests in associates 574,733 280,057 248,395
Interest in a joint venture 333,944 369,954 --
Available-for-sale investments 143,514 133,000 1,000
Other receivables 401,400 325,035 300,000
---------------- ---------------- ----------------
15,436,353 15,777,324 16,241,599
---------------- ---------------- ----------------
Current Assets
Inventories 73,576 27,418 26,400
Trade receivables 9 101,428 64,447 52,475
Loans to customers arising from
margin financing business 2,946,911 724,123 --
Other receivables and prepayments 451,968 621,023 846,127
Prepaid lease payments 2,155 2,154 2,154
Available-for-sale investments 281,924 134,899 60,274
Held for trading investments 1,181,025 1,486,772 1,260,021
Financial assets held under resale
agreements 874,254 280,066 --
Bank balances held on behalf
of customers 8,228,160 7,491,625 7,177,508
Bank balances and cash
-- Time deposits with original
maturity over three months 704,459 1,483,408 2,467,793
-- Cash and cash equivalents 1,806,981 3,392,053 3,139,820
---------------- ---------------- ----------------
16,652,841 15,707,988 15,032,572
---------------- ---------------- ----------------
Current liabilities
Placements from other
financial institution 310,000 -- --
Accounts payable to
customers arising from
securities business 8,167,103 7,481,819 7,143,067
Trade payables 10 421,994 408,612 345,453
Tax liabilities 331,611 223,592 491,619
Other taxes payable 53,417 54,226 62,918
Other payables and accruals 995,496 991,260 741,031
Dividends payable 94,976 94,998 94,971
Bank and other borrowings 540,000 660,000 712,553
Long-term bonds due in one-year -- 1,000,000 --
Short-term loan note 1,000,000 -- --
Derivative financial instrument -- -- 6,426
---------------- ---------------- ----------------
11,914,597 10,914,507 9,598,038
---------------- ---------------- ----------------
Net current assets 4,738,244 4,793,481 5,434,534
---------------- ---------------- ----------------
Total assets less current liabilities 20,174,597 20,570,805 21,676,133
---------------- ---------------- ----------------
Non-current liabilities
Bank and other borrowings 300,000 680,000 1,140,000
Long-term bonds -- -- 1,000,000
Deferred tax liabilities 205,638 269,124 289,165
---------------- ---------------- ----------------
505,638 949,124 2,429,165
---------------- ---------------- ----------------
19,668,959 19,621,681 19,246,968
================ ================ ================
Capital and reserves
Share capital 4,343,115 4,343,115 4,343,115
Reserves 11,629,423 11,701,345 11,396,418
---------------- ---------------- ----------------
Equity attributable to owners
of the Company 15,972,538 16,044,460 15,739,533
Non-controlling interests 3,696,421 3,577,221 3,507,435
---------------- ---------------- ----------------
19,668,959 19,621,681 19,246,968
================ ================ ================
Notes:
1. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with Hong Kong Financial
Reporting Standards issued by Hong Kong Institute of Certified Public Accountants and with applicable
disclosures required by the Rules Governing the Listing of Securities (the "Listing Rules") on the
Stock Exchange of Hong Kong Limited (the "HKEX") and by Hong Kong Companies Ordinance.
2. MERGER ACCOUNTING RESTATEMENT
On March 20, 2013, the Group entered into share transfer agreements with Zhejiang Communications
Investment Group Co., Ltd. ("Communications Group") and Yiwu Communications Development Co., Ltd.
("Yiwu Development"), an independent third party, to acquire the 66.283% and 10.267% equity interests
in Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co") from Communications Group and Yiwu
Development, respectively, for cash consideration of Rmb655,356,000 and Rmb101,512,000, totaling
Rmb756,868,000. Jinhua Co is principally engaged in the operation and management of the Jinhua Section
of the Ningbo-Jinhua Expressway. Before the acquisition, Jinhua Co was a 23.45% owned associate of the
Group. After the completion of the acquisition, Jinhua Co then became a 100% owned subsidiary of the
Group. Since Communications Group is the parent company of the Company, the Group's acquisition of the
66.283% equity interest from Communications Group was regarded as a business combination involving
entities under common control and was accounted for through merger accounting method in accordance with
the guidance set out in Accounting Guideline 5 "Merger Accounting for Common Control Combinations"
("AG5") issued by the Hong Kong Institute of Certified Public Accountants ("the HKICPA") and the
acquisition of 10.267% equity interest in Jinhua Co from Yiwu Development was accounted for as
acquisition of additional interest in a subsidiary.
As a result, the comparative consolidated statement of profit or loss and other comprehensive income
and consolidated statement of cash flows for the year ended December 31, 2012 and the consolidated
statements of financial position as at December 31, 2012 have been restated, in order to include the
losses, assets and liabilities of the combing entities since the date on which they first come under
common control.
The adopting of merger accounting method in respect of the Group's acquisition of 66.283% equity
interest in Jinhua Co has resulted in a decrease in total comprehensive income attributable to owners
of the Company and a decrease in profit attributable to owners of the Company for the year ended
December 31, 2012 by Rmb36,786,000 and Rmb36,786,000, respectively.
The effect of the merger accounting restatement in respect of the Group's acquisition of 66.283%
equity interest in Jinhua Co described above on the consolidated statement of profit or loss and other
comprehensive income for the year ended December 31, 2012 by line items is as follows:
For the For the
year ended Merger year ended
December 31, accounting December 31,
2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000
(Originally
stated) (Restated)
---------------- ---------------- ----------------
Revenue 6,700,258 227,157 6,927,415
Operating costs (4,369,641) (204,399) (4,574,040)
---------------- ---------------- ----------------
Gross profit 2,330,617 22,758 2,353,375
Securities investment gains 99,783 -- 99,783
Other income 288,644 3,346 291,990
Administrative expenses (82,092) (4,195) (86,287)
Other expenses (46,154) (3,624) (49,778)
Share of loss of associates (17,341) 12,828 (4,513)
Share of loss of a joint venture (3,516) -- (3,516)
Finance costs (53,995) (85,770) (139,765)
---------------- ---------------- ----------------
Profit before tax 2,515,946 (54,657) 2,461,289
Income tax expense (646,864) 12,195 (634,669)
---------------- ---------------- ----------------
Profit for the year 1,869,082 (42,462) 1,826,620
Other comprehensive income
Items that may be reclassified to
profit or loss:
Available-for-sale financial assets:
-- Fair value gain during the year 4,800 -- 4,800
-- Reclassification adjustments for
cumulative gain included in profit
or loss upon disposal (175) -- (175)
Income tax relating to components of
other comprehensive income (1,156) -- (1,156)
---------------- ---------------- ----------------
Other comprehensive income for
the year (net of tax) 3,469 -- 3,469
---------------- ---------------- ----------------
Total comprehensive income for the year 1,872,551 (42,462) 1,830,089
================ ================ ================
Profit for the year attributable to:
Owners of the Company 1,686,270 (36,786) 1,649,484
Non-controlling interests 182,812 (5,676) 177,136
---------------- ---------------- ----------------
1,869,082 (42,462) 1,826,620
================ ================ ================
Total comprehensive income
attributable to:
Owners of the Company 1,688,079 (36,786) 1,651,293
Non-controlling interests 184,472 (5,676) 178,796
---------------- ---------------- ----------------
1,872,551 (42,462) 1,830,089
================ ================ ================
Earnings per share -- Basic
and diluted Rmb38.83 cents Rmb(0.85) cents Rmb37.98 cents
================ ================ ================
The effects of the merger accounting restatement in respect of the Group's acquisition of 66.283%
equity interest in Jinhua Co described above on the consolidated statement of financial position as
at January 1, 2012 and December 31, 2012 by line items are as follows:
As at Merger As at As at Merger As at
January 1, accounting January 1, December 31, accounting December 31,
2012 restatement 2012 2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Originally
stated) (Restated) stated) (Restated)
------------ ----------- ------------ ------------ ----------- ------------
Non-current assets
Property, plant and equipment 1,294,465 288,367 1,582,832 1,357,844 276,455 1,634,299
Prepaid lease payments 68,983 3,493 72,476 66,931 3,390 70,321
Expressway operating rights 11,364,938 2,103,697 13,468,635 10,732,058 1,990,100 12,722,158
Goodwill 86,867 -- 86,867 86,867 -- 86,867
Other intangible assets 157,594 -- 157,594 155,633 -- 155,633
Deposit paid for acquisition
of a property 323,800 -- 323,800 -- -- --
Interests in associates 446,679 (198,284) 248,395 465,513 (185,456) 280,057
Interest in a joint venture -- -- -- 369,954 -- 369,954
Available-for-sale investments 1,000 -- 1,000 133,000 -- 133,000
Other receivables 382,000 (82,000) 300,000 325,035 -- 325,035
------------ ----------- ------------ ------------ ----------- ------------
14,126,326 2,115,273 16,241,599 13,692,835 2,084,489 15,777,324
------------ ----------- ------------ ------------ ----------- ------------
Current assets
Inventories 26,400 -- 26,400 27,418 -- 27,418
Trade receivables 48,013 4,462 52,475 57,847 6,600 64,447
Loans to customers arising
from margin financing
business -- -- -- 724,123 -- 724,123
Other receivables and
prepayments 844,142 1,985 846,127 701,627 (80,604) 621,023
Prepaid lease payments 2,052 102 2,154 2,052 102 2,154
Available-for-sale
investments 60,274 -- 60,274 134,899 -- 134,899
Held for trading
investments 1,260,021 -- 1,260,021 1,486,772 -- 1,486,772
Financial assets held under
resale agreements -- -- -- 280,066 -- 280,066
Bank balances held on behalf
of customers 7,177,508 -- 7,177,508 7,491,625 -- 7,491,625
Bank balances and cash
-- Time deposits with
originally maturity
over three months 2,467,793 -- 2,467,793 1,483,408 -- 1,483,408
-- Cash and cash
equivalents 3,120,430 19,390 3,139,820 3,362,709 29,344 3,392,053
------------ ----------- ------------ ------------ ----------- ------------
15,006,633 25,939 15,032,572 15,752,546 (44,558) 15,707,988
------------ ----------- ------------ ------------ ----------- ------------
Current liabilities
Accounts payable to customers
arising from securities
business 7,143,067 -- 7,143,067 7,481,819 -- 7,481,819
Trade payables 317,188 28,265 345,453 378,364 30,248 408,612
Tax liabilities 491,619 -- 491,619 223,592 -- 223,592
Other taxes payable 61,753 1,165 62,918 53,082 1,144 54,226
Other payables and accruals 724,216 16,815 741,031 973,031 18,229 991,260
Dividends payable 94,971 -- 94,971 94,998 -- 94,998
Bank and other borrowings 462,553 250,000 712,553 -- 660,000 660,000
Long-term bonds due in
one-year -- -- -- 1,000,000 -- 1,000,000
Derivative financial
instrument 6,426 -- 6,426 -- -- --
------------ ----------- ------------ ------------ ----------- ------------
9,301,793 296,245 9,598,038 10,204,886 709,621 10,914,507
------------ ----------- ------------ ------------ ----------- ------------
Net current assets 5,704,840 (270,306) 5,434,534 5,547,660 (754,179) 4,793,481
------------ ----------- ------------ ------------ ----------- ------------
Total assets less current
liabilities 19,831,166 1,844,967 21,676,133 19,240,495 1,330,310 20,570,805
------------ ----------- ------------ ------------ ----------- ------------
Non-current liabilities
Bank and other borrowings -- 1,140,000 1,140,000 -- 680,000 680,000
Long-term bonds 1,000,000 -- 1,000,000 -- -- --
Deferred tax liabilities 232,066 57,099 289,165 224,220 44,904 269,124
------------ ----------- ------------ ------------ ----------- ------------
1,232,066 1,197,099 2,429,165 224,220 724,904 949,124
------------ ----------- ------------ ------------ ----------- ------------
18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
============ =========== ============ ============ =========== ============
Capital and reserves
Share capital 4,343,115 -- 4,343,115 4,343,115 -- 4,343,115
Reserves 10,835,424 560,994 11,396,418 11,177,137 524,208 11,701,345
------------ ----------- ------------ ------------ ----------- ------------
Equity attributable to owners of
the Company 15,178,539 560,994 15,739,553 15,520,252 524,208 16,044,460
Non-controlling interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221
------------ ----------- ------------ ------------ ----------- ------------
18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
============ =========== ============ ============ =========== ============
The effect of merger accounting restatement in respect of the Group's acquisition of 66.283% equity interest in
Jinhua Co described above on the Group's equity as at January 1, 2012 and December 31, 2012 is as follows:
As at Merger As at As at Merger As at
January 1, accounting January 1, December 31, accounting December 31,
2012 restatement 2012 2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Originally
stated) (Restated) stated) (Restated)
------------ ----------- ------------ ------------ ----------- ------------
Share capital 4,343,115 -- 4,343,115 4,343,115 -- 4,343,115
Share premium 3,645,726 -- 3,645,726 3,645,726 -- 3,645,726
Statutory reserves 2,968,634 -- 2,968,634 3,227,511 -- 3,227,511
Capital reserve 1,712 -- 1,712 1,712 -- 1,712
Investment revaluation reserve (1,555) -- (1,555) 254 -- 254
Dividend reserve 1,085,779 -- 1,085,779 1,042,347 -- 1,042,347
Special reserves 18,666 797,471 816,137 18,666 797,471 816,137
Retained profits 3,116,462 (236,477) 2,879,985 3,240,921 (273,263) 2,967,658
Non-controlling interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221
------------ ----------- ------------ ------------ ----------- ------------
Total 18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
============ =========== ============ ============ =========== ============
3. 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 value, as appropriate. Historical cost is generally based on
the fair value of the consideration given in exchange for goods.
Except as described below, the accounting policies applied in the consolidated financial statements for the
year are consistent with those in the preparation of the Group's annual financial statements for the year ended
December 31, 2012.
The Group has applied the following new and revised HKFRSs issued by the HKICPA for the first time in the
current year:
Amendments to HKFRSs Annual Improvements to HKFRSs 2009-2011 Cycle
Amendments to HKFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities
Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements
HKFRS 11 and HKFRS 12 and Disclosure of Interest in Other Entities:
Transition Guidance
HKFRS 10 Consolidated Financial Statements
HKFRS 11 Joint Arrangements
HKFRS 12 Disclosure of Interests in Other Entities
HKFRS 13 Fair Value Measurement
HKAS 19 (as revised in 2011) Employee Benefits
HKAS 27 (as revised in 2011) Separate Financial Statements
HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures
Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income
HK(IFRIC)-Int 20 Stripping Costs in the Production Phase of a Surface Mine
Except as disclosed below, 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.
Impact of the application of HKFRS 11
HKFRS 11 replaces HKAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation,
HK(SIC)-Int 13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporated in
HKAS 28 (as revised in 2011), HKFRS 11 deals with how a joint arrangement of which two or more parties have
joint control should be classified and accounted for. Under HKFRS 11, there are only two types of joint
arrangements - joint operations and joint ventures. The classification of joint arrangements under HKFRS 11 is
determined based on the rights and obligations of parties to the joint arrangements by considering the
structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement,
and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties
that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations
for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the
arrangement. Previously, HKAS 31 had three types of joint arrangements - jointly controlled entities, jointly
controlled operations and joint controlled assets. The classification of joint arrangement under HKAS 31 was
primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established
through a separate entity was classified as a jointly controlled entity).
The directors of the Company reviewed and assessed the classification of the Group's investments in joint
arrangements in accordance with the requirements of HKFRS 11. The directors concluded that the Group's
investments in Zhejiang Shaoxing Shengxin Expressway Co., Ltd. ("Shengxin Co"), which was classified as a
jointly controlled entity under HKAS 31 and was accounted for using the equity method, should be classified as
a joint venture under HKFRS 11 and accounted for using the equity method.
Impact of the application of HKFRS 12
HKFRS 12 is a new disclosure and is applicable to entities that have interests in subsidiaries, joint ventures
and associates. In general, the application of HKFRS 12 has resulted in more extensive disclosures in the
consolidated financial statements.
HKFRS 13 Fair Value Measurement
The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source of
guidance for, and disclosures about, fair value measurements.
The scope of HKFRS 13 is broad, and applies to both financial instrument items and non-financial instrument
items for which other HKFRSs require or permit fair value measurements and disclosures about fair value
measurements, subject to a few exceptions. HKFRS 13 contains a new definition for 'fair value' and defines fair
value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction in the principal (or most advantageous) market at the measurement date under current market
conditions. Fair value under HKFRS 13 is an exit price regardless of whether that price is directly observable
or estimated using another valuation technique. Also, HKFRS 13 includes extensive disclosure requirements.
In accordance with the transitional provisions of HKFRS 13, the Group has applied the new fair value
measurement and disclosure requirements prospectively.
Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income
The Group has applied the amendments to HKAS 1 Presentation of Items of Other Comprehensive Income. Upon the
adoption of the amendments to HKAS 1, the Group's 'statement of comprehensive income' is renamed as the
'statement of profit or loss and other comprehensive income'. Furthermore, the amendments to HKAS 1 require
additional disclosures to be made in the other comprehensive income section such that items of other
comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to
profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions
are met. Income tax on items of other comprehensive income is required to be allocated on the same basis --
the amendments do not change the option to present items of other comprehensive income either before tax or
net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other
comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation
changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other
comprehensive income and total comprehensive income.
The Group has not early applied the following new and revised HKFRSs issued but are not yet effective:
Amendments to HKFRS 10, Investment Entities[1]
HKFRS 12 and HKAS 27
Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions[2]
Amendments to HKFRS 9 Mandatory Effective Date of HKFRS 9 and
and HKFRS 7 Transition Disclosures[3]
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[1]
Amendments to HKAS 36 Recoverable Amount Disclosures for
Non-Financial Assets[1]
Amendments to HKAS 39 Novation of Derivatives and Continuation of
Hedge Accounting[1]
Amendments to HKFRSs Annual Improvements to HKFRSs 2010-2012 Cycle[4]
Amendments to HKFRSs Annual Improvements to HKFRSs 2011-2013 Cycle[2]
HKFRS 9 Financial Instruments[3]
HKFRS 14 Regulatory Deferral Accounts[5]
HK(IFRIC) -- Int 21 Levies[1]
[1] Effective for annual periods beginning on or after January 1, 2014
[2] Effective for annual periods beginning on or after July 1, 2014
[3] Available for application -- the mandatory effective date will be determined when the outstanding phases
of HKFRS 9 are finalized
[4] Effective for annual periods beginning on or after July 1, 2014, with limited exceptions
[5] Effective for first annual HKFRS financial statements beginning on or after January 1, 2016
Annual Improvements to HKFRSs 2010-2012 Cycle
The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of amendments to various HKFRSs, which are
summarised below.
The amendments to HKFRS 3 clarify that contingent consideration that is classified as an asset or a liability
should be measured at fair value at each reporting date, irrespective of whether the contingent consideration
is a financial instrument within the scope of HKFRS 9 or HKAS 39 or a non-financial asset or liability.
Changes in fair value (other than measurement period adjustments) should be recognised in profit and loss. The
amendments to HKFRS 3 are effective for business combinations for which the acquisition date is on or after
July 1, 2014.
The amendments to HKFRS 8 (i) require an entity to disclose the judgments made by management in applying the
aggregation criteria to operating segments, including a description of the operating segments aggregated and
the economic indicators assessed in determining whether the operating segments have "similar economic
characteristics"; and (ii) clarify that a reconciliation of the total of the reportable segments' assets to
the entity's assets should only be provided if the segment assets are regularly provided to the chief operating
decision-maker.
The amendments to the basis for conclusions of HKFRS 13 clarify that the issue of HKFRS 13 and consequential
amendments to HKAS 39 and HKFRS 9 did not remove the ability to measure short-term receivables and payables
with no stated interest rate at their invoice amounts without discounting, if the effect of discounting is
immaterial.
The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the accounting for accumulated
depreciation/amortisation when an item of property, plant and equipment or an intangible asset is revalued. The
amended standards clarify that the gross carrying amount is adjusted in a manner consistent with the
revaluation of the carrying amount of the asset and that accumulated depreciation/amortisation is the
difference between the gross carrying amount and the carrying amount after taking into account accumulated
impairment losses.
The amendments to HAKS 24 clarify that a management entity providing key management personnel services to a
reporting entity is a related party of the reporting entity. Consequently, the reporting entity should disclose
as related party transactions the amounts incurred for the service paid or payable to the management entity for
the provision of key management personnel services. However, disclosure of the components of such compensation
is not required.
The directors do not anticipate that the application of the amendments included in the Annual Improvements to
HKFRSs 2010-2012 Cycle will have a material effect on the Group's consolidated financial statements.
Annual Improvements to HKFRSs 2011-2013 Cycle
The Annual Improvements to HKFRSs 2011-2013 Cycle include a number of amendments to various HKFRSs, which are
summarised below.
The amendments to HKFRS 3 clarify that the standard does not apply to the accounting for the formation of all
types of joint arrangement in the financial statements of the joint arrangement itself.
The amendments to HKFRS 13 clarify that the scope of the portfolio exception for measuring the fair value of a
group of financial assets and financial liabilities on a net basis includes all contracts that are within the
scope of, and accounted for in accordance with, HKAS 39 or HKFRS 9, even if those contracts do not meet the
definitions of financial assets or financial liabilities within HKAS 32.
The directors do not anticipate that the application of the amendments included in the Annual Improvements to
HKFRSs 2011-2013 Cycle will have a material effect on the Group's consolidated financial statements.
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets.
HKFRS 9 was subsequently amended in 2010 to include the requirements for the classification and measurement of
financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for
hedge accounting.
Key requirements of HKFRS 9 are described as follows:
All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and
Measurement are 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.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss,
HKFRS 9 requires that 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 of financial liabilities
attributable to changes in the financial liabilities' credit risk are not subsequently reclassified to profit
or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated
as fair value through profit or loss was presented in profit or loss.
The new general hedge accounting requirements retain the three types of hedge accounting. However, greater
flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically
broadening the types of instruments that qualify for hedging instruments and the types of risk components of
non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been
overhauled and replaced with the principle of an "economic relationship". Retrospective assessment of hedge
effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management
activities have also been introduced.
The directors anticipate that the adoption of HKFRS 9 in the future may have a significant impact on the
amounts reported in respect of the Group's financial assets and financial liabilities (e.g. the Group's
investments in unlisted equity securities currently classified as available-for-sale investments may have to be
measured at fair value at the end of subsequent reporting periods, with changes in the fair value being
recognised in profit or loss). Regarding the Group's financial assets, it is not practicable to provide a
reasonable estimate of that effect until a detailed review has been completed.
Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets
The amendments to HKAS 36 remove the requirement to disclose the recoverable amount of a cash generating unit
(CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when there
has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduce
additional disclosure requirements regarding the fair value hierarchy, key assumptions and valuation techniques
used when the recoverable amount of an asset or CGU was determined based on its fair value less costs of
disposal.
The directors of the Company do not anticipate that the application of these amendments to HKAS 36 will have a
significant impact on the Group's consolidated financial statements.
4. SEGMENT INFORMATION
Information reported to the Chief Executive Officer of the Company, being the chief operating decision maker,
for the purposes of resource allocation and assessment of segment performance focuses on types of goods or
services delivered or provided.
Specifically, the Group's principle reportable and operating segments under HKFRS 8 are as follows:
(i) Toll operation -- the operation and management of high grade roads and the collection of the expressway
tolls.
(ii) Service area and advertising businesses -- the sales of food, restaurant operation, automobile servicing,
operation of petrol stations and design and rental of advertising billboards along the expressways.
(iii) Other toll road related service -- the toll road maintenance service and others.
(iv) Securities operation -- the securities broking, margin financing and securities lending services and
proprietary trading.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable and operating segment:
For the year ended December 31, 2013
Toll related operation
Service Other toll
area and road
Toll advertising related Securities Total
operation businesses service operation segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
------------ ----------- ------------ ------------ ----------- ------------ ------------
Revenue
External sales 4,019,867 2,158,469 21,447 1,651,332 7,851,115 -- 7,851,115
Inter-segment
sales -- 4,755 -- -- 4,755 (4,755) --
------------ ----------- ------------ ------------ ----------- ------------ ------------
Total 4,019,867 2,163,224 21,447 1,651,332 7,855,870 (4,755) 7,851,115
============ =========== ============ ============ =========== ============ ============
Segment profit 1,721,848 59,789 30,787 402,553 2,214,977 2,214,977
============ =========== ============ ============ =========== ============
For the year ended December 31, 2012
Toll related operation
Service Other toll
area and road
Toll advertising related Securities Total
operation businesses service operation segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
------------ ----------- ------------ ------------ ----------- ------------ ------------
Revenue
External sales 3,772,395 2,028,883 -- 1,126,137 6,927,415 -- 6,927,415
Inter-segment
sales -- 7,919 -- -- 7,919 (7,919) --
------------ ----------- ------------ ------------ ----------- ------------ ------------
Total 3,772,395 2,036,802 -- 1,126,137 6,935,334 (7,919) 6,927,415
============ =========== ============ ============ =========== ============ ============
Segment profit 1,598,710 62,241 -- 165,669 1,826,620 1,826,620
============ =========== ============ ============ =========== ============
Segment profit represents the profit after tax of each operating segment. This is the measure reported to the
chief operating decision maker -- the Group's Chief Executive Officer, for the purpose of resource allocation
and performance assessment.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by reportable and operating segment:
Segment assets Segment liabilities
As at As at As at As at As at As at
December 31, December 31, January 1, December 31, December 31, January 1,
2013 2012 2012 2013 2012 2012
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated) (Restated) (Restated)
------------ ----------- ------------ ------------ ------------ ------------
Toll operation 14,784,868 17,404,526 17,679,206 (2,082,988) (3,836,988) (4,299,866)
Toll related operation
Service area and
advertising businesses 926,171 647,043 695,675 (234,708) (157,674) (231,303)
Other toll road related
service 310,818 -- -- -- -- --
Securities operation 15,980,470 13,346,876 12,812,423 (10,102,539) (7,868,969) (7,496,034)
------------ ----------- ------------ ------------ ------------ ------------
Total segment assets
(liabilities) 32,002,327 31,398,445 31,187,304 (12,420,235) (11,863,631) (12,027,203)
Goodwill 86,867 86,867 86,867 -- -- --
------------ ----------- ------------ ------------ ------------ ------------
Consolidated assets
(liabilities) 32,089,194 31,485,312 31,274,171 (12,420,235) (11,863,631) (12,027,203)
============ =========== ============ ============ ============ ============
Segment assets and segment liabilities represent the assets and liabilities of the subsidiaries operating in
the respective reportable and operating segment.
Other segment information
Amounts included in the measure of segment profit or segment assets:
For the year ended December 31, 2013
Toll related operation
Service Other
area and toll road
Toll advertising related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
-------- -------- -------- -------- --------
Income tax expense 585,570 18,252 (10) 152,949 756,761
Interest income 82,114 7,457 - 6,351 95,922
Interest expense 84,764 - - 10,397 95,161
Interests in associates - 224,035 310,818 39,880 574,733
Interest in a joint venture 333,944 - - - 333,944
Share of profit (loss) of
associates - 40 27,669 (6,172) 21,537
Share of loss of a joint
venture (36,010) - - - (36,010)
Gain on fair value changes
on held for trading
investments 14,242 - - 84,040 98,282
Additions to non-current
assets (Note) 236,487 62,072 280,000 43,697 622,256
Depreciation and amortisation 900,966 31,500 - 90,057 1,022,523
Loss (gain) on disposal of
property, plant and equipment 2,798 (783) - 134 2,149
-------- -------- -------- -------- --------
For the year ended December 31, 2012 (Restated)
Toll related operation
Service Other
area and toll road
Toll advertising related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
-------- -------- -------- -------- --------
Income tax expense 556,468 18,078 - 60,123 634,669
Interest income 141,684 10,693 - 29,282 181,659
Interest expense 139,519 246 - - 139,765
Interests in associates - 234,005 - 46,052 280,057
Interest in a joint venture 369,954 - - - 369,954
Share of profit (loss) of
associates - 7,367 - (11,880) (4,513)
Share of loss of a joint
venture (3,516) - - - (3,516)
Gain on fair value changes on
held for trading investments 10,290 - - 89,318 99,608
Additions to non-current
assets (Note) 617,984 14,333 - 105,406 737,723
Depreciation and amortisation 880,323 28,624 - 96,298 1,005,245
Loss on disposal of property,
plant and equipment 5,409 1,223 - 250 6,882
-------- -------- -------- -------- --------
Note: non-current assets excluded financial instruments.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year is
as followed:
For the year
ended December 31,
2013 2012
Rmb'000 Rmb'000
(Restated)
---------- ----------
Toll operation revenue 4,019,867 3,772,395
Service area businesses revenue (mainly sales of
goods) 2,054,543 1,937,955
Advertising business revenue 103,926 90,473
Commission income from securities operation 1,197,315 832,213
Interest income from securities operation 454,017 293,924
Others 21,447 455
---------- ----------
Total revenue 7,851,115 6,927,415
---------- ----------
Geographical information
The Group's operations are located in the PRC (country of domicile). All
non-current assets of the Group are located in the PRC.
All of the Group's revenue from external customers is attributable to the group
entities' country of domicile (i.e. the PRC).
Information about major customers
During the years ended December 31, 2013 and 2012, there were no individual
customers with sales over 10% of the total sales of the Group.
5. OTHER INCOME
For the year
ended December 31,
2013 2012
Rmb'000 Rmb'000
(Restated)
---------- ----------
Interest income on bank balances, entrusted loan
receivables and financial products investment 95,922 162,292
Other interest income - 19,367
Rental income 88,739 72,796
Handling fee income 2,781 5,685
Towing income 10,155 9,303
Gain on deregistration of an associate 16 -
Gain on disposal of an associate - 12
Exchange loss, net (957) (2,155)
Fair value gain on derivative financial
instrument - 2,841
Loss on commodity trading, net (1,351) -
Others 45,751 21,849
---------- ----------
Total 241,056 291,990
---------- ----------
6. INCOME TAX EXPENSE
For the year
ended December 31,
2013 2012
Rmb'000 Rmb'000
(Restated)
---------- ----------
Current tax:
PRC Enterprise Income Tax 821,118 655,910
Deferred tax (64,357) (21,241)
---------- ----------
756,761 634,669
---------- ----------
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%.
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 before tax per the
consolidated statement of profit or loss and other comprehensive income as
follows:
For the year
ended December 31,
2013 2012
Rmb'000 Rmb'000
(Restated)
---------- ----------
Profit before tax 2,971,738 2,461,289
---------- ----------
Tax at the PRC enterprise income tax rate of 25%
(2012: 25%) 742,935 615,322
Tax effect of share of (profit) loss of
associates (5,384) 1,128
Tax effect of share of loss of a joint venture 9,003 879
Tax effect of income not taxable for tax purposes - (17)
Tax effect of expenses not deductible for tax
purposes 10,207 17,357
---------- ----------
Tax charge for the year 756,761 634,669
---------- ----------
7. DIVIDENDS
2013 2012
Rmb'000 Rmb'000
---------- ----------
Dividends recognised as distribution during the year
2013 Interim - Rmb6 cents (2012:
2012 Interim - Rmb6 cents) per share 260,587 260,587
2012 Final - Rmb24 cents (2012:
2011 Final - Rmb25 cents) per share 1,042,347 1,085,779
---------- ----------
1,302,934 1,346,366
---------- ----------
The Directors have recommended the payment of a final dividend of Rmb25 cents
(2012: Rmb24 cents) per share in respect of the year ended December 31, 2013,
which is subject to approval by the shareholders in the annual general meeting.
8. 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 Rmb1,907,470,000 (2012 (restated):
Rmb1,649,484,000) and the 4,343,114,500 (2012: 4,343,114,500) ordinary shares
in issue during the year.
Diluted earnings per share presented is the same as basic earnings per share
since there were no potential ordinary shares outstanding for the year ended
December 31, 2013 and 2012.
9. TRADE RECEIVABLES
As at As at As at
December 31, December 31, January 1,
2013 2012 2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
------------ ----------- ----------
Trade receivables comprise:
A fellow subsidiary 3,077 3,010 2,431
Third parties 99,023 62,393 50,875
------------ ----------- ----------
Total trade receivables 102,100 65,403 53,306
Less: Allowance for doubtful debts (672) (956) (831)
------------ ----------- ----------
101,428 64,447 52,475
------------ ----------- ----------
The following is an aged analysis of trade receivables, net of allowance for
doubtful debts presented based on the invoice date at the end of the reporting
period, which approximated the respective revenue recognition dates:
As at As at As at
December 31, December 31, January 1,
2013 2012 2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
------------ ----------- ----------
Within 3 months 90,812 64,138 49,773
3 months to 1 year 10,453 - 2,431
1 to 2 years - 146 -
Over 2 years 163 163 271
------------ ----------- ----------
Total 101,428 64,447 52,475
------------ ----------- ----------
Movement of allowance for doubtful debts
As at As at As at
December 31, December 31, January 1,
2013 2012 2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
------------ ----------- ----------
At the beginning of the year 956 831 -
Impairment recognised for the year 7 125 831
Amount reversed during the year (291) - -
------------ ----------- ----------
At the end of the year 672 956 831
------------ ----------- ----------
10. 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 the invoice date at the end of the reporting
period:
As at As at As at
December 31, December 31, January 1,
2013 2012 2012
Rmb'000 Rmb'000 Rmb'000
(Restated) (Restated)
------------ ----------- ----------
Within 3 months 214,669 236,246 103,264
3 months to 1 year 82,048 37,328 32,552
1 to 2 years 29,518 29,117 116,641
2 to 3 years 8,496 49,122 58,618
Over 3 years 87,263 56,799 34,378
------------ ----------- ----------
Total 421,994 408,612 345,453
------------ ----------- ----------
BUSINESS REVIEW
In 2013, China's economy maintained a relatively fast pace of GDP growth of
7.7% compared with last year. Though Zhejiang's economy saw a slight decrease
in its growth rate during the fourth quarter, the Province's economy and
overall investment levels generally maintained solid momentum. During the
Period, Zhejiang Province's GDP increased 8.2% year-on-year.
As Zhejiang Province's economy steadily improved and its foreign trade showed
signs of recovery, traffic volume on the Group's expressways continued to see
steady organic growth. In addition, stock market trading volumes also resumed.
As a result, income from the Group's overall operations increased 13.4%
year-on-year. Total income reached Rmb8,092.98 million, of which Rmb4,158.34
million was attributable to the three major expressways operated by the Group,
representing an increase of 6.6% year-on-year and 51.4% of the total income;
Rmb2,192.48 million was attributable to the Group's toll road-related
businesses, representing an increase of 6.9% year-on-year and 27.1% of the
total income; and Rmb1,742.17 million was attributable to the securities
business, representing an increase of 47.5% year-on-year and 21.5% of the total
income.
A breakdown of the Group's income for the Period is set out below:
2013 2012
Rmb'000 Rmb'000 % Change
(Restated)
------------ -----------
Toll income
Shanghai-Hangzhou-Ningbo Expressway 3,122,022 2,968,396 5.2%
Shangsan Expressway 769,723 702,489 9.6%
Jinhua section, Ningbo-Jinhua Expressway 266,594 231,481 15.2%
Other income
Service areas (mainly sales of goods) 2,062,558 1,945,614 6.0%
Advertising 107,692 104,276 3.3%
Road maintenance 22,227 471 4619.1%
Securities business income
Commission 1,288,151 886,946 45.2%
Bank interest 454,017 293,924 54.5%
------------ -----------
Subtotal 8,092,984 7,133,597 13.4%
Less: Revenue taxes (241,869) (206,182) 17.3%
------------ -----------
Revenue 7,851,115 6,927,415 13.3%
------------ -----------
Toll Road Operations
As the economy in Zhejiang Province stabilized with positive signs of progress
and improvements were seen in foreign trade, the Group's expressways achieved a
high level of organic growth in traffic volume. Traffic volume on the Shangsan
Expressway grew at an even higher rate, benefiting from a higher concentration
of small and medium sized enterprises along its route, while the Jinhua Section
of the Ningbo-Jinhua Expressway benefited from a strong growth in trade at the
nearby Yiwu small commodities market with the container truck traffic growing
at a fast pace.
In the meantime, the toll free policy on small passenger vehicles during major
holidays led to a loss of approximately Rmb140 million in toll income in 2013.
In addition, the Group's toll income suffered a combined loss of approximately
Rmb100 million during the Period as a result of a gradual phasing out of the
"Unified Toll Card" policy, adjustments made to the rounding off of the last
figures for passenger vehicle tolls, as well as the policy adjusting passenger
vehicle classifications.
Although the Jiaxing-Shaoxing Expressway (not operated by the Group), which
first opened to passenger vehicles in July, 2013, diverted some traffic away
from the Group's Shanghai-Hangzhou-Ningbo Expressway, the loss in traffic was
partly offset by a rise in traffic on the Group's Shangsan Expressway. However,
the positive impact on Shangsan Expressway was not fully realized until the
Jiaxing-Shaoxing Expressway opened to trucks at the end of November, 2013.
Overall the Company's toll income was adversely affected by approximately Rmb8
million in 2013. Additionally, bad weather caused by Typhoon "Fitow" and other
short-term unfavorable factors had also affected the Group's toll income, which
led to a loss of approximately Rmb15 million.
Although the Group's toll road operations were challenged by various negative
factors in 2013, the management was still able to deliver solid results and
increase toll income by taking more initiatives to plug loopholes, conducting
marketing campaigns to attract traffic, and modifying weighing equipment for
accurate measurements.
By the end of June 2013, the Group completed the acquisition of a 76.55% equity
interest in Jinhua Co (which operates the 69.7km Jinhua Section of the
Ningbo-Jinhua Expressway). During the Period, as local roads that run parallel
to the Jinhua Section of the Ningbo-Jinhua Expressway were under construction,
a large number of vehicles on short-distance trips were redirected to the
Ningbo-Jinhua Expressway as a result to effective promotions and road signage.
This led to a further increase in traffic volume and helped to drive an
increase in toll income of Rmb10 million.
The average daily traffic volume in full-trip equivalents along the Group's
Shanghai-Hangzhou-Ningbo Expressway was 44,013 during the Period, representing
an increase of 4.9% year-on-year. In particular, average daily traffic volume
in full-trip equivalents along the Shanghai-Hangzhou Section of the
Shanghai-Hangzhou-Ningbo Expressway was 44,182, representing an increase of
3.4% year-on-year, and that along the Hangzhou-Ningbo Section was 43,891,
representing an increase of 5.9% year-on-year. Average daily traffic volume in
full-trip equivalents along the Shangsan Expressway was 18,317 during the
Period, representing an increase of 9.1% year-on-year. Average daily traffic
volume in full-trip equivalents along the Jinhua Section of the Ningbo-Jinhua
Expressway was 13,533 during the Period, representing an increase of 12.0%
year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142km
Shangsan Expressway and the 70km Jinhua Section of the Ningbo-Jinhua Expressway
amounted to Rmb4,158.34 million during the Period, representing an increase of
6.6% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo Expressway
amounted to Rmb3,122.02 million, representing an increase of 5.2% year-on-year;
toll income from the Shangsan Expressway amounted to Rmb769.72 million,
representing an increase of 9.6% year-on-year; while toll income from the
Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb266.59 million,
representing an increase of 15.2% year-on-year.
Toll Road-Related Business Operations
The Company 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 a roadside advertising
business.
During the Period, due to the renovation of the Jiaxing Service Area starting
in July 2013, income from service areas was adversely affected. However,
increasing sales of refined oil products and additional income from the
external road maintenance projects ensured solid growth in the Group's toll
road-related businesses. As a result, income from toll road-related operations
during the Period was Rmb2,192.48 million, representing an increase of 6.9%
year-on-year.
Securities Business
During the Period, the total trading volume of the Shanghai and Shenzhen stock
markets increased 49.60% compared with last year due to a revival of activity
in the domestic securities market. Though the securities brokerage business of
Zheshang Securities Co., Ltd. ("Zheshang Securities") saw a slight decline in
market share, there was a solid rise in income as a result of higher trading
volumes.
Zheshang Securities continued to increase the number of its branches to
facilitate the further development of its securities brokerage business and to
stabilize and increase its market share. Zheshang Securities had 108 business
outlets during the Period.
While accelerating the all-round development of each business segment, Zheshang
Securities has been actively working to improve its income and profit
structure, and accelerate the development of the margin financing and
securities lending business to enhance its capabilities to expand new
businesses. With continued business innovation, Zheshang Securities believes it
can diversify its business and reduce the dominant role that its brokerage
business had played in the past. Income from the securities brokerage,
investment banking, asset management, margin financing and securities lending
businesses of Zheshang Securities all grew steadily year-on-year.
In addition, in order to accelerate its listing process on the Shanghai Stock
Exchange, Zheshang Securities submitted an IPO application, which was accepted
by the China Securities Regulatory Commission in May, 2013. Zheshang Securities
is now officially on the wait list for an IPO.
During the Period, Zheshang Securities' total operating income was Rmb1,742.17
million, an increase of 47.5% year-on-year. Of such income, brokerage
commission income amounted to Rmb1,288.15 million, up by 45.2%, and interest
income from the securities business amounted to Rmb454.02 million, up by 54.5%.
Moreover, securities investment gains of Zheshang Securities included in the
consolidated statement of profit or loss and other comprehensive income of the
Group was Rmb85.42 million during the Period.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) recorded income of Rmb6,481.14 million, an increase of
6.4% year-on-year. The rise was due to an increase in both the retail price and
sales volume of petroleum products. During the period, net profit of Zhejiang
Expressway Petroleum Development Co., Ltd. was Rmb21.63 million (2012: net
profit of Rmb15.02 million).
Shengxin Co (a 50% owned joint venture of the Company) operates the 73.4km long
Shaoxing Section of the Ningbo-Jinhua Expressway. During the Period, the
traffic volume of the Shaoxing Section of the Ningbo-Jinhua Expressway rose due
to the improving provincial economy. The average daily traffic volume in
full-trip equivalents was 12,692, an increase of 6.28% year-on-year. Toll
income during the Period was Rmb294.46 million. However, due to its relatively
heavy financial burden, the joint venture reported a loss of Rmb72.02 million.
JoinHands Technology Co., Ltd. (a 27.58%-owned associate company of the
Company) operates a property leasing business. There was no substantial
improvement in its operations during the Period. The Company instituted legal
proceedings with regards to the transfer of the equity interest in the
associated company. The Company then lodged an appeal against the subsequent
judgment of the Company's priority of compensation for the mortgaged
properties. The appeal was ruled in favor of the Company by the Hangzhou
Intermediate People's Court on April 28, 2013. These mortgaged properties in
the associated company were auctioned off on December 24, 2013. In accordance
with the judicial auction procedures, the court will transfer the full payment
received from the auction to the Company after the buyer finishes all
procedures for ownership transfer of the auctioned properties.
On March 30, 2013, the Company entered into a capital increase agreement with
Zhejiang Communications Investment Group Finance Co., Ltd. ("Zhejiang
Communications Finance") and its existing shareholders. The Company
conditionally agreed to carry out a capital injection of Rmb280 million in
cash, and upon completion of the capital contribution, the Company beneficially
owned a 35% equity interest in Zhejiang Communications Finance. During the
Period, income from the associated company were mainly derived from fees and
commissions for providing financial services, including arranging loans and
receiving deposits from subsidiaries of Communications Group, and were
accounted for as a share of gain of associates of the Company from May 1, 2013.
Zhejiang Communications Finance realized a net profit of Rmb79.05 million from
May 1, 2013 to the end of the Period.
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with an aim to provide shareholders
of the Company with sound returns over the long term.
During the Period, profit attributable to owners of the Company was
approximately Rmb1,907.47 million, representing an increase of 15.6%
year-on-year, return on owners' equity was 11.9%, representing an increase of
16.1% year-on-year, while earnings per share for the Company was Rmb43.92
cents.
Liquidity and financial resources
As at December 31, 2013, current assets of the Group amounted to Rmb16,652.84
million in aggregate (December 31, 2012 (restated): Rmb15,707.99 million), of
which bank balances and cash accounted for 15.1% (December 31, 2012 (restated):
31.0%), bank balances held on behalf of customers accounted for 49.4% (December
31, 2012 (restated): 47.7%), and held for trading investments accounted for
7.1% (December 31, 2012 (restated): 9.5%). Current ratio (current assets over
current liabilities) of the Group as at December 31, 2013 was 1.4 (December
31, 2012 (restated): 1.4). Excluding the effect of the 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 securities business) was 2.2 (December 31, 2012 (restated): 2.4).
The amount of held for trading investments of the Group as at December 31, 2013
was Rmb1,181.03 million (December 31, 2012: Rmb1,486.77 million), of which
92.9% was invested in bonds, 6.7% was invested in stocks, 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 Rmb979.98 million.
The Directors do not expect the Company to experience any problems with
liquidity and financial resources in the foreseeable future.
Borrowings and solvency
As at December 31, 2013, total liabilities of the Group amounted to
Rmb12,420.24 million (December 31, 2012 (restated): Rmb11,863.63 million), of
which 6.8% was bank and other borrowings, and 65.8% was accounts payable to
customers arising from securities business.
Total interest-bearing borrowings of the Group as at December 31, 2013 amounted
to Rmb1,840.00 million, representing a decrease of 21.4% compared to that as at
December 31, 2012. The borrowings comprised outstanding balances of domestic
commercial bank loans of Rmb500.00 million, loans from a domestic non-bank
financial institution of Rmb340.00 million, and short-term loan note amounting
to Rmb1 billion that was issued by Zheshang Securities in 2013 for a term of 3
months. Of the interest-bearing borrowings, 16.3% was not payable within one
year.
As at December 31, 2013, the Group's loans from domestic commercial banks
include short-term loans and long-term loans, with floating interest rate
ranging from 6.22% to 6.77% per annum; loans from a domestic non-bank financial
institution were short-term loans, with the interest rate fixed at 5.04% per
annum. The annual coupon rate for short-term loan note was fixed at 5.50%,
while the annual interest rate for accounts payable to customers arising from
the securities business was fixed at 0.35%.
Total interest expenses for the year amounted to Rmb95.16 million, while profit
before interest and tax amounted to Rmb3,066.90 million. The interest cover
ratio (profit before interest and tax over interest expenses) stood at 32.2
(2012 (restated): 18.6) times.
As at December 31, 2013, the asset-liability ratio (total liabilities over
total assets) was 38.7% (December 31, 2012 (restated): 37.7%). Excluding the
effect of customer deposits arising from the securities business, the resultant
asset-liability ratio (total liabilities less balance of accounts payable to
customers arising from securities business over total assets less bank balances
held on behalf of customers) of the Group was 17.8% (December 31, 2012
(restated): 18.3%).
Capital structure
As at December 31, 2013, the Group had Rmb19,668.96 million in total equity,
Rmb9,817.10 million in fixed-rate liabilities, Rmb500.00 million in
floating-rate liabilities, and Rmb2,103.13 million in interest-free
liabilities, representing 61.3%, 30.6%, 1.6% and 6.5% of the Group's total
capital, respectively. The gearing ratio, which computed is by dividing the
total liabilities less accounts payable to customers arising from the
securities business by total equity, was 21.6% as at December 31, 2013
(December 31, 2012 (restated): 22.3%).
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb2,379.31
million, while capital expenditure of the Company totaled Rmb2,087.69 million.
Amongst the total capital expenditure of the Group, Rmb756.87 million was
incurred for acquiring 76.55% equity interest in Jinhua Co, Rmb280.00 million
was incurred for 35% equity investment in Zhejiang Communications Finance, Rmb1
billion was incurred for capital injection to Jinhua Co, Rmb184.33 million was
incurred for acquisition and construction of properties, Rmb90.00 million was
incurred for purchase and construction of equipments and facilities, and
Rmb68.12 million was incurred for service area renovation and expansion.
As at December 31, 2013, the capital expenditure committed by the Group and the
Company totaled Rmb1,717.02 million and Rmb311.06 million, respectively.
Amongst the total capital expenditures committed by the Group, Rmb1,324.08
million will be used for acquisition and construction of properties, Rmb344.94
million for acquisition and construction of equipments and facilities, Rmb18.00
million for service area renovation and expansion and Rmb30.00 million for
setting up a l00% owned subsidiary of the Company, Zhejiang Expressway
Maintenance Co., Ltd.
The Group will finance the above-mentioned capital expenditure commitments with
internally generated cash flow first and then will consider using debt
financing to meet any shortfalls in priority to using other methods. Pursuant
to the resolution of shareholder's meeting dated June 21, 2013 of the Company,
the shareholders of the Company have approved the proposed issue of domestic
corporate bonds by the Company with an aggregate principal amount of up to Rmb1
billion.
Contingent liabilities and pledge of assets
Pursuant to the board resolution of the Company dated November 16, 2012, the
Company and Shaoxing Communications Investment Group Co., Ltd. (the other joint
venture partner that holds 50% equity interest in Shengxin Co) provided
Shengxin Co with joint guarantee for its bank loans of Rmb2,200.00 million, in
accordance with their proportionate equity interest in Shengxin Co.
Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of
Zhejiang Yuhang Expressway Co., Ltd. ("Yuhang Co", a 51% equity interest owned
subsidiary of the Company), Yuhang Co provided a property under construction as
a mortgaged asset for its domestic commercial bank loan of Rmb100.00 million.
As at December 31, 2013, the carrying amount of the mortgaged asset was
Rmb422.17 million.
Pursuant to the board resolution dated June 24, 2008 of Jinhua Co, Jinhua Co
provided the operating right of the expressway operated by it as pledged asset
for its domestic commercial bank loans of Rmb300.00 million. As at December 31,
2013, the carrying amount of the pledged asset was Rmb1,882.28 million.
Except for the above, as at December 31, 2013, the Group did not have any other
contingent liabilities, pledge of assets or guarantees.
Foreign exchange exposure
Save for dividend payments to the holders of H shares in Hong Kong dollars, the
Group's principal operations were transacted and booked in Renminbi. Therefore,
the Group's exposure to exchange fluctuation is limited. During the Period, the
Group has not used any financial instruments for hedging purpose.
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
With the steady and rapid development of China's economy and an upturn in
Zhejiang Province's domestic and foreign trade, it is anticipated that in 2014,
the Group's toll road business, which is closely tied to macro and regional
economic development, will see traffic volume on its expressways grow steadily,
although organic growth rate is expected to be slower compared with 2013.
In addition, the Jiaxing-Shaoxing Expressway, which opened to passenger
vehicles in July last year and opened to trucks at the end of November 2013, is
expected to have a sustainable positive impact on the Group's Shangsan
Expressway. Meanwhile, the Group will reinforce its initiatives to plug
loopholes and increase the efficiency of toll collection, and strengthen its
promotion efforts in order to attract more vehicles to its expressways and ease
the negative impact of traffic diversion.
The establishment of the Shanghai Pilot Free Trade Zone is anticipated to
facilitate the growth in traffic volume of the surrounding areas of the Yangtze
River Delta with the promotion of import and export trading. In the future, it
is believed that with the growth of trade and increasing demand of
transportation and logistics, the Group's expressways will see higher traffic
volumes.
In response to the current uncertainties about the recovery of the securities
market, Zheshang Securities is seeking new profit growth drivers by trying to
actively develop innovative businesses, and enhance cost and risk controls.
Meanwhile, Zheshang Securities will further accelerate the process of its
proposed listing on the Shanghai Stock Exchange to facilitate its sustainable
and sound development.
Looking ahead to 2014, with the policies of China's new leadership to deepen
reforms achieving early success, the Group's management believes that the new
round of economic reforms will bring new opportunities and challenges to the
Group's reform and development. The Group will continue to focus on its core
expressway business, raise service quality, further improve operational
management ability, push forward with its development of innovative securities
businesses and improve its securities businesses. The Company will also look
for appropriate investment projects, cultivate diversified business management
capabilities, leverage the strategic synergies with its parent company, and
enhance the utilization of capital, in order to further increase its
profitability and deliver satisfactory results.
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 Corporate Governance
Code and Corporate Governance Report (the "Code") in Appendix 14 to the listing
Rules, and adopted the recommended best practices contained in the Code
wherever applicable.
Change of Chief Financial Officer
Mr. Wu Junyi, the Chief Financial Officer of the Company, has been
re-designated as the Manager of the Financial Management Department of Zhejiang
Communications Investment Group Co., Ltd. (the controlling shareholder of the
Company) due to a change to the Group's management arrangements. As approved by
the Board, Mr. Wang Dehua has been appointed as the Chief Financial Officer of
the Company, succeeding Mr. Wu Junyi, with effect from March 17th, 2014.
Mr. Wang Dehua, who was born in 1974, graduated with an undergraduate degree in
Accounting from Hangzhou Institute of Electronics Engineering in 1996. He
worked in the Foreign Funds Utilization Audit Department of Zhejiang Provincial
Audit Office from 1996 to 2003. Mr. Wang worked at the Corporation Division of
the Administrative and Finance Department of Liaison Office of the Central
Government in the Hong Kong S.A.R. from 2003 to 2011, serving as its Deputy
Director upon departure. Mr. Wang studied at School of Economics and Finance of
the Faculty of Business and Economics of the University of Hong Kong from 2005
to 2007, and graduated in 2007 with a master's degree in Economics. He worked
at Zhejiang Communications Investment Group Co., Ltd. from 2011 to 2014,
serving as its Deputy General Manager upon departure.
Mr. Wu Junyi has confirmed that he has no disagreement with the Board and there
is no matter relating to the change of Chief Financial Officer that needs to be
brought to the attention of the shareholders of the Company.
The Board would like to take this opportunity to express its appreciation for
Mr. Wu Junyi's valuable contribution to the development of the Company.
By order of the Board
Zhejiang Expressway Co., Ltd.
ZHAN Xiaozhang
Chairman
Hangzhou, PRC, March 17, 2014
As at the date of this announcement, the executive directors of the Company
are: Mr. ZHAN Xiaozhang, Ms. LUO Jianhu, and Mr. DING Huikang ; non-executive
directors of the company are Mr. LI Zongsheng, Mr. WANG Weili, and
Mr. WANG Dongjie; independent non-executive directors are Mr. ZHANG Junsheng,
Mr. ZHOU Jun, and Mr. PEI Ker-Wei.
Statement: A full electronic version of the Company's 2013 Annual Results
Announcement is available at www.zjec.com.cn
END
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