2014 Interim Results Announcement
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited
take no responsibility for the contents of this announcement, make no representation
as to its accuracy or completeness and expressly disclaim any liability whatsoever
for any loss howsoever arising from or in reliance upon the whole or any part of
the contents of this announcement.
ZHEJIANG EXPRESSWAY CO., LTD.
(A joint stock limited company incorporated in the
People's Republic of China with limited liability)
(Stock code: 0576)
2014 INTERIM RESULTS ANNOUNCEMENT
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the "Company")
announce the unaudited consolidated operating results of the Company and its
subsidiaries (collectively the "Group") for the six months ended June 30, 2014
(the "Period"), with the basis of preparation as stated in note 1 to the
condensed consolidated financial statements set out below.
During the Period, revenue for the Group was Rmb4,121.82 million, representing
an increase of 13.0% over the same period in 2013. Profit for the Period
attributable to owners of the Company was Rmb1,063.43 million, representing
an increase of 14.3% year-on-year. Earnings per share for the Period was
Rmb24.49 cents (same period in 2013: Rmb21.42 cents).
The Directors have recommended to pay an interim dividend of Rmb6 cents
per share, subject to shareholders' approval at the extraordinary general
meeting of the Company, which is expected to be held on October 16, 2014.
The audit committee of the Company has reviewed the interim results. Set out
below are the unaudited condensed consolidated statement of profit or loss
and other comprehensive income for the Period and condensed consolidated
statement of financial position as at June 30, 2014, with comparative
figures for the same period in 2013 and relevant notes to the condensed
consolidated financial statements:
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the six months
ended June 30,
2014 2013
Notes Rmb'000 Rmb'000
(Unaudited) (Unaudited)
----------- -----------
Revenue 3 4,121,822 3,647,268
Operating costs (2,580,471) (2,283,848)
---------- -----------
Gross profit 1,541,351 1,363,420
Securities investment gains 87,240 79,786
Other income 4 140,164 103,890
Administrative expenses (33,552) (36,126)
Other expenses (26,556) (21,401)
Share of profit of associates 24,868 4,791
Share of loss of a joint venture (15,602) (13,938)
Finance costs (39,869) (43,079)
----------- ----------
Profit before tax 1,678,044 1,437,343
Income tax expense 5 (430,799) (374,175)
----------- ----------
Profit for the Period 1,247,245 1,063,168
----------- ----------
Other comprehensive loss
Items that may be subsequently
reclassified to profit or loss:
Available-for-sale financial assets
- Fair values loss during the Period (2,719) (3,681)
- Reclassification adjustments for
cumulative gain included in
profit or loss upon disposal - (1,381)
Income tax relating to components of
other comprehensive loss 680 1,266
------------ ------------
Other comprehensive loss
for the Period (net of tax) (2,039) (3,796)
------------ ------------
Total comprehensive income for the Period 1,245,206 1,059,372
============ ============
For the six months
ended June 30,
2014 2013
Note Rmb'000 Rmb'000
(Unaudited) (Unaudited)
------------- ------------
Profit for the Period attributable to:
Owners of the Company 1,063,433 930,385
Non-controlling interests 183,812 132,783
------------ -----------
1,247,245 1,063,168
============ ===========
Total comprehensive income for the
Period attributable to:
Owners of the Company 1,062,183 928,429
Non-controlling interests 183,023 130,943
------------ -----------
1,245,206 1,059,372
============ ============
Earnings per share - Basic and diluted 7 24.49 cents 21.42 cents
============ ============
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
June 30, December 31,
2014 2013
Note Rmb'000 Rmb'000
(Unaudited) (Audited)
----------- ----------
Non-current assets
Property, plant and equipment 1,801,968 1,762,042
Prepaid lease payments 67,079 68,156
Expressway operating rights 11,511,820 11,911,133
Goodwill 86,867 86,867
Other intangible assets 145,997 154,564
Interests in associates 597,414 574,733
Interest in a joint venture 318,342 333,944
Available-for-sale investments 160,500 143,514
Other receivables - 401,400
----------- ---------
14,689,987 15,436,353
------------ ----------
Current assets
Inventories 71,277 73,576
Trade receivables 8 116,871 101,428
Loans to customers arising from
margin financing business 3,256,393 2,946,911
Other receivables and prepayments 773,945 451,968
Prepaid lease payments 2,155 2,155
Available-for-sale investments 512,789 281,924
Held for trading investments 1,785,239 1,181,025
Financial assets held under resale agreements 1,130,604 874,254
Bank balances held on behalf of customers 9,726,025 8,228,160
Bank balances and cash
- Time deposits with original maturity
over three months 726,245 704,459
- Cash and cash equivalents 1,773,320 1,806,981
----------- ----------
19,874,863 16,652,841
------------ ----------
As at As at
June 30, December 31,
2014 2013
Note Rmb'000 Rmb'000
(Unaudited) (Audited)
------------- -----------
Current liabilities
Accounts payable to customers arising
from securities business 9,686,410 8,167,103
Trade payables 9 511,459 421,994
Tax liabilities 255,147 331,611
Other taxes payable 36,418 53,417
Other payables and accruals 1,071,569 995,496
Dividends payable 171,240 94,976
Bank and other borrowings 500,000 540,000
Financial assets sold under repurchase
agreements 630,531 -
Placements from other financial institution 560,000 310,000
Short-term loan note 1,000,000 1,000,000
----------- -----------
14,422,774 11,914,597
----------- -----------
Net current assets 5,452,089 4,738,244
----------- -----------
Total assets less current liabilities 20,142,076 20,174,597
---------- -----------
Non-current liabilities
Bank loans 200,000 300,000
Deferred tax liabilities 200,708 205,638
----------- -----------
400,708 505,638
---------- ----------
19,741,368 19,668,959
=========== ==========
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 11,605,827 11,629,423
----------- ----------
Equity attributable to owners of the Company 15,948,942 15,972,538
Non-controlling interests 3,792,426 3,696,421
----------- ----------
19,741,368 19,668,959
============ ===========
Notes:
1. BASIS OF PREPARATION
The condensed consolidated financial statements have been prepared in accordance
with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the
Hong Kong Institute of Certified Public Accountants (the "HKICPA") as well as
with the applicable disclosure requirements of Appendix 16 to the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing
Rules").
2. PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared on the
historical cost basis except for certain financial instruments that are measured
at fair value, as appropriate.
Except as disclosed below, the accounting policies and methods of computation
applied in the condensed consolidated financial statements for the Period are
consistent with those in the preparation of the Group's annual financial
statements for the year ended December 31, 2013.
Financial assets sold under repurchase agreements
Financial assets sold subject to agreements with a commitment to repurchase
at a specific future date are not derecognised in the condensed consolidated
statement of financial position. The proceeds from selling such assets are
presented under "financial assets sold under repurchase agreements" in the
condensed consolidated statement of financial position. The difference between
the selling price and repurchasing price is recognised as interest expense
during the term of the agreement using the effective interest method.
In the Period, the Group has applied, for the first time, new Interpretation
and amendments to Hong Kong Financial Reporting Standards (the "HKFRSs") issued
by HKICPA, which are effective for the Period. The application of the new
Interpretation and amendments to HKFRSs during the Period has had no material
effect on the condensed consolidated financial statements and/or relevant
disclosures set out in these condensed consolidated financial statements.
3. REVENUE AND SEGMENT INFORMATION
Compared to the same period last year, there were no major changes in the
reportable and operating segments of the Group during the Period.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
and operating segments:
For the six months ended June 30, 2014
Toll related operation
Service Other
area and toll 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
(unaudited) (unaudited)(unaudited) (unaudited)(unaudited) (unaudited) (unaudited)
------------ ---------- ----------- ---------- ---------- ----------- -----------
Revenue
External sales 2,041,188 1,183,241 19,050 878,343 4,121,822 - 4,121,822
Inter-segment
sales - 2,377 4,459 - 6,836 (6,836) -
------------ ---------- ---------- --------- ---------- ----------- ----------
Total 2,041,188 1,185,618 23,509 878,343 4,128,658 (6,836) 4,121,822
============ ========= ========= ========= ========= ========== =========
Segment profit 942,673 63,071 18,789 222,712 1,247,245 1,247,245
============ ========= ========= ========= ========= =========
For the six months ended June 30, 2013
Toll related operation
Service Other
area and toll 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
(unaudited) (unaudited)(unaudited) (unaudited)(unaudited) (unaudited) (unaudited)
------------ ---------- ----------- ---------- ---------- ----------- -----------
Revenue
External sales 1,921,545 1,010,644 - 715,079 3,647,268 - 3,647,268
Inter-segment
sales - 2,377 - - 2,377 (2,377) -
---------- ---------- ----------- ---------- -------- --------- ----------
Total 1,921,545 1,013,021 - 715,079 3,649,645 (2,377) 3,647,268
========== ========== =========== ========== ========= ========== ===========
Segment profit 868,464 20,250 7,589 166,865 1,063,168 1,063,168
========== ========== =========== ========== ========= ===========
Segment profit represents the profit after tax of each operating segment. This is the
measure reported to the chief operating decision maker - the Company's General Manager,
for the purpose of resource allocation and performance assessment.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the Period
is as followed:
For the six months
ended June 30,
2014 2013
Rmb'000 Rmb'000
(Unaudited) (Unaudited)
----------- -----------
Toll operation revenue 2,041,188 1,921,545
Service area businesses revenue (mainly sales of 1,134,635 958,740
goods)
Advertising business revenue 48,606 51,904
Commission income from securities operation 595,994 538,279
Interest income from securities operation 282,349 176,800
Others 19,050 -
----------- -----------
Total 4,121,822 3,647,268
----------- -----------
4. OTHER INCOME
For the six months
ended June 30,
2014 2013
Rmb'000 Rmb'000
(Unaudited) (Unaudited)
----------- -----------
Interest income on bank balances, entrusted loan
receivables and financial products investment 34,494 45,746
Rental income 55,155 32,652
Gain on disposal of an associate 24,490 -
Handling fee income 1,487 2,193
Towing income 4,695 4,883
Exchange gain, net 861 14
Others 18,982 18,402
----------- -----------
Total 140,164 103,890
=========== ===========
5. INCOME TAX EXPENSE
For the six months
ended June 30,
2014 2013
Rmb'000 Rmb'000
(Unaudited) (Unaudited)
----------- -----------
Current tax:
PRC Enterprise Income Tax 435,049 388,811
Deferred tax (4,250) (14,636)
----------- -----------
430,799 374,175
=========== ===========
Under the law of the PRC on Enterprise Income Tax (the "EIT Law") and
Implementation Regulation of the EIT Law, the applicable 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 Period.
6. DIVIDENDS
The Directors have recommended the payment of an interim dividend of Rmb6 cents
per share (corresponding period of 2013: Rmb6 cents per share), subject to
shareholders' approval at the extraordinary general meeting of the Company.
7. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on profit for the
Period attributable to owners of the Company of Rmb1,063,433,000 (corresponding
period of 2013: Rmb930,385,000) and the 4,343,114,500 (2013: 4,343,114,500)
ordinary shares in issue during the Period.
Diluted earnings per share presented is the same as basic earnings per share
since there were no potential ordinary shares outstanding during both periods.
8. TRADE RECEIVABLES
As at As at
June 30, December 31,
2014 2013
Rmb'000 Rmb'000
(Unaudited) (Audited)
---------- ----------
Trade receivables comprise:
A fellow subsidiary 1,500 3,077
Third parties 116,043 99,023
---------- ----------
Total trade receivables 117,543 102,100
Less: Allowance for doubtful debts (672) (672)
---------- ----------
116,871 101,428
========== ==========
The Group has no credit period granted to its trade customers of toll operation
and service area businesses. The Group's trade receivable balance for toll
operation is toll receivables from the Expressway Fee Settlement Centre of the
Highway Administration Bureau of Zhejiang Province, which are normally settled
within 3 months. All of these trade receivables were neither past due nor
impaired in both periods.
In respect of the Group's asset management service operated by Zheshang
Securities Co., Ltd. ("Zhejiang Securities", a 70.83% owned subsidiary of
Zhejiang Shangsan Expressway Co., Ltd. which is a subsidiary of the Company),
trading limits are set for customers. The Group seeks to maintain tight control
over its outstanding accounts receivable in order to minimise credit risk.
Overdue balances are regularly monitored by management.
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
June 30, December 31,
2014 2013
Rmb'000 Rmb'000
(Unaudited) (Audited)
---------- ----------
Within 3 months 97,317 90,812
3 months to 1 year 19,391 10,453
Over 2 years 163 163
---------- ----------
Total 116,871 101,428
========== ==========
9. TRADE PAYABLES
Trade payables mainly represent the construction payables for the maintenance
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
June 30, December 31,
2014 2013
Rmb'000 Rmb'000
(Unaudited) (Audited)
----------- ----------
Within 3 months 214,332 214,669
3 months to 1 year 193,375 82,048
1 to 2 years 39,635 29,518
2 to 3 years 6,652 8,496
Over 3 years 57,465 87,263
----------- ----------
Total 511,459 421,994
=========== ==========
BUSINESS REVIEW
As the government's macro economic control policies that are aimed at
sustaining stable growth and the implementation of deep level structural
reforms gradually took effect, the growth of the nation's economy has been
stabilizing. China recorded 7.4% GDP growth in the first half of 2014 compared
with the corresponding period of last year. During the first half of 2014,
though Zhejiang Province saw varied levels of growth in investment, consumption
and exports, the growth rate of Zhejiang Province's economy was slower than the
corresponding period of last year. During the Period, the GDP of Zhejiang
Province increased 7.2% compared with the corresponding period of last year.
Benefiting from the gradual recovery of Zhejiang Province's economy and an
improved environment for foreign trade, the Group's total income increased by
12.9% compared with the corresponding period of last year to Rmb4,244.23
million. Income generated from the three major expressways operated by the
Group was Rmb2,111.52 million, representing an increase of 6.3% over the
corresponding period of 2013 and 49.8% of total income. Income from the Group's
toll road-related businesses was Rmb1,208.56 million, representing an increase
of 18.9% over the corresponding period of 2013 and 28.5% of total income. The
Group's securities business contributed income of Rmb924.15 million,
representing an increase of 22.3% over the corresponding period of 2013 and
21.7% of total income.
A breakdown of the Group's income for the Period is set out below:
For the six months
ended June 30,
2014 2013
Rmb'000 Rmb'000 % Change
---------- --------- --------
Toll income
Shanghai-Hangzhou-Ningbo
Expressway 1,495,972 1,502,446 -0.4%
Shangshan Expressway 470,822 359,199 31.1%
Jinhua section, Ningbo-Jinhua 144,724 125,490 15.3%
Expressway
Other income
Service areas 1,138,682 962,830 18.3%
Advertising 50,027 53,815 -7.0%
Road maintenance 19,852 - N/A
Securities business income
Commission 641,797 579,077 10.8%
Interest income 282,349 176,800 59.7%
---------- --------- --------
Subtotal 4,244,225 3,759,657 12.9%
Less: Revenue taxes (122,403) (112,389) 8.9%
---------- --------- --------
Revenue 4,121,822 3,647,268 13.0%
========== ========= ========
Toll Road Operations
The organic growth in toll road traffic volume is closely associated with the
regional economy along the toll roads. During the Period, the traffic volume on
the Group's three expressways experienced varying levels of organic growth
corresponding to the regions in which they are located. Organic traffic volume
growth rates for the Shanghai-Hangzhou-Ningbo Expressway, Shangsan Expressway
and Jinhua Section of Ningbo-Jinhua Expressway were 7.0%, 6.7% and 11.7%,
respectively, of which the growth rate was slightly lower than the
corresponding period of last year for the Shanghai-Hangzhou-Ningbo Expressway,
at about equal level for the Shangsan Expressway, and at a slightly higher
level for the Jinhua Section of Ningbo-Jinhua Expressway.
Since the opening of Jiaxing-Shaoxing Bridge (not operated by the Group) in
July, 2013, a certain level of traffic diversion has taken place for the
Group's Shanghai-Hangzhou-Ningbo Expressway and resulted in a decrease of
Rmb75.00 million in terms of the Group's toll income during the Period.
However, the Jiaxing-Shaoxing Bridge has a more positive effect on the Shangsan
Expressway. Most of the vehicles passing through Jiangsu Province, Taizhou and
Wenzhou took the Shangsan Expressway, while a number of vehicles traveling
between Shanghai, Taizhou and Wenzhou and between Jiangsu and Ningbo also chose
to take the Shangsan Expressway or Hangzhou-Ningbo Section of the
Shanghai-Hangzhou-Ningbo Expressway as a result of the Company's effective
promotions to attract more traffic. During the Period, the opening of the
Jiaxing-Shaoxing Bridge led to an increase of Rmb86.00 million in terms of toll
income on the Shangsan Expressway.
The Jinhua Section of the Ningbo-Jinhua Expressway maintained a relatively high
organic growth in traffic volume as a result of continuing high speed economic
development in Yiwu and nearby regions, as well as a speedy increase in small
truck ownership in Yiwu. Construction work on roads surrounding the
Ningbo-Jinhua Expressway and the Company's effective promotions efforts also
had a positive impact on toll income. Container trucks traveling along the
Ningbo-Jinhua Expressway also posted a notable increase in miles driven. During
the Period, the Jinhua Section of the Ningbo-Jinhua Expressway recorded an
increase of approximately Rmb5.00 million in toll income as a result of factors
such as construction work on surrounding roads.
Meanwhile, toll income from the Shanghai-Hangzhou-Ningbo Expressway decreased
by approximately Rmb18.00 million as a result of construction on the Hangzhou
Airport road that began on April 15, 2014. Moreover, the opening of the
Qianjiang Road (not operated by the Group) on April 16, 2014, also led to a
decline in toll income of the Shanghai-Hangzhou-Ningbo Expressway by
approximately Rmb2.70 million.
The average daily traffic volume in full-trip equivalents along the Group's
Shanghai-Hangzhou-Ningbo Expressway was 43,764 during the Period, representing
an increase of 1.2% 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 42,211, representing a decrease of 3.3%
year-on-year. The average daily traffic volume in full-trip equivalents along
the Hangzhou-Ningbo Section was 44,873, representing an increase of 4.3%
year-on-year. The average daily traffic volume in full-trip equivalents along
the Shangsan Expressway was 22,435 during the Period, representing an increase
of 29.0% year-on-year. The average daily traffic volume in full-trip
equivalents along the Jinhua Section of the Ningbo-Jinhua Expressway was 15,162
during the Period, representing an increase of 17.3% year-on-year.
Total toll income from the 248 km Shanghai-Hangzhou-Ningbo Expressway, the 142
km Shangsan Expressway and the 70 km Jinhua Section of the Ningbo-Jinhua
Expressway amounted to Rmb2,111.52 million during the Period, representing an
increase of 6.3% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo
Expressway was Rmb1,495.97 million, representing a decrease of 0.4%
year-on-year; toll income from the Shangsan Expressway was Rmb470.82 million,
representing an increase of 31.1% year-on-year; while toll income from the
Jinhua Section of the Ningbo-Jinhua Expressway was Rmb144.73 million,
representing an increase of 15.3% 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, shops in service areas, advertising at service areas,
toll plazas and expressway interchanges, as well as road maintenance.
During the Period, with the opening of the Jiaxing-Shaoxing Bridge, the service
areas along Shangsan Expressway saw significant growth in income due to the
increase in traffic volume. However, the decrease in traffic volume on the
Shanghai-Hangzhou-Ningbo Expressway adversely affected income from service
areas along the expressway, and these service areas make a relatively large
contribution to income from service areas. Therefore, the overall income from
service areas declined. However, due to a solid increase in sales of refined
oil products and additional income from the external road maintenance projects,
the Group's toll road-related businesses achieved a solid increase in overall
income. Income from toll road-related businesses was Rmb1,208.56 million for
the Period, representing an increase of 18.9% year-on-year.
Securities Business
During the Period, although the Shanghai and Shenzhen stock indices declined
slightly, the aggregate trading volume increased by 4.7% compared with the
corresponding period of last year. Despite the slight growth in market share
and trading volume of Zheshang Securities, its average commission rate declined
from 0.08% to 0.072% due to intensified competition in the securities industry
and the gradual relaxation of controls on commissions. As a result, income from
Zheshang Securities' brokerage business was generally flattish compared with
the same period last year.
Additionally, while accelerating the comprehensive development of each business
segment, Zheshang Securities has been actively working to improve its income
and profit structure to gradually reduce the dominant role that its brokerage
business played in the past. During the Period, income from investment banking,
margin financing and securities lending, as well as asset management businesses
of Zheshang Securities all grew steadily year-on-year.
The IPO application submitted by Zheshang Securities was accepted by the China
Securities Regulatory Commission in May 2013. Zheshang Securities remains on
the waiting list for an IPO.
During the Period, Zheshang Securities' total operating income was Rmb924.15
million, an increase of 22.3% year-on-year. Brokerage commission income was
Rmb641.80 million, a year-on-year increase of 10.8%. Interest income from the
securities business was Rmb282.35 million, a year-on-year increase of 59.7%.
Moreover, securities investment gains from Zheshang Securities included in the
condensed consolidated statement of profit or loss and other comprehensive
income of the Group was Rmb79.15 million during the Period.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) recorded income of Rmb3,265.30 million, a year-on-year
increase of 5.8%. The increase was primarily attributable to an increase in
sales volume of refined oil products. During the Period, net profit realized
Rmb11.36 million (corresponding period of 2013: net profit of Rmb11.34
million).
Shengxin Expressway Co., Ltd. ("Shengxin Company", a 50% owned joint venture of
the Company) operates the 73.4km Shaoxing Section of the Ningbo-Jinhua
Expressway. During the Period, the traffic volume of the Shaoxing Section of
the Ningbo-Jinhua Expressway increased as the economy of Zhejiang Province grew
steadily. The average daily traffic volume in full-trip equivalents was 13,661,
an increase of 10.9% year-on-year. Toll income during the Period was Rmb152.92
million. However, due to an increase in road maintenance costs and its
relatively heavy financial burden, the joint venture reported a loss of
Rmb31.20 million (corresponding period of 2013: loss of Rmb27.88 million).
JoinHands Technology Co., Ltd. is a 27.582% owned associate company of the
Company. The Company instituted legal proceedings with regards to the transfer
of the equity interest in this associate company and then lodged an appeal
against the subsequent judgment. The appeal was ruled in favor of the Company
by the Hangzhou Intermediate People's Court on April 28, 2013 regarding the
Company's priority of compensation for the mortgaged properties. These
mortgaged properties were auctioned off by the court and the Company has
received proceeds of Rmb23.83 million as consideration for its equity interest
transfer on May 16, 2014. From then on, JoinHands Technology Co., Ltd. is no
longer an associate of the Company.
Zhejiang Communications Investment Group Finance Co., Ltd. (a 35% owned
associate company of the Company) derives income mainly from fees and
commissions for providing financial services, including arranging loans to, and
receiving deposits from subsidiaries of Zhejiang Communications Investment
Group Co., Ltd. (the controlling shareholder of the Company). Profit from
Zhejiang Communications Investment Group Finance Co., Ltd. was accounted for as
gain of associates of the Company starting from May 1, 2013 and realized a net
profit of Rmb66.89 million during 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 Rmb1,063.43 million, representing an increase of 14.3%
year-on-year, return on owners' equity was 6.7%, representing an increase of
9.8% year-on-year, while earnings per share for the Company was Rmb24.49 cents.
Liquidity and financial resources
As at June 30, 2014, current assets of the Group amounted to Rmb19,874.86
million in aggregate (December 31, 2013: Rmb16,652.84 million), of which bank
balances and cash accounted for 12.6% (December 31, 2013: 15.1%), bank balances
held on behalf of customers accounted for 48.9% (December 31, 2013: 49.4%) and
held for trading investments accounted for 9.0% (December 31, 2013: 7.1%).
Current ratio (current assets over current liabilities) of the Group as at June
30, 2014 was 1.4 (December 31, 2013: 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 2.1 (December 31, 2013: 2.2).
The amount of held for trading investments of the Group as at June 30, 2014 was
Rmb1,785.24 million (December 31, 2013: Rmb1,181.03 million), of which 93.4%
was invested in bonds, 6.2% 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 Rmb1,401.75 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 June 30, 2014, total liabilities of the Group amounted to Rmb14,823.48
million (December 31, 2013: Rmb12,420.24 million), of which 4.7% was bank and
other borrowings, 6.7% was short-term loan note and 65.3% was accounts payable
to customers arising from securities business.
As at June 30, 2014, total interest-bearing borrowings of the Group amounted to
Rmb1,700.00 million, representing a decrease of 7.6% compared to that as at
December 31, 2013. The borrowings comprised outstanding balances of domestic
commercial bank loans of Rmb300.00 million, loans from a domestic non-bank
financial institution of Rmb400.00 million and short-term loan note with
three-month maturity of Rmb1 billion. Of the interest-bearing borrowings, 11.8%
was not payable within one year.
As at June 30, 2014, all of the Group's loans from domestic commercial banks
were long-term loans, of which long-term loans due in one year amounted to
Rmb100.00 million, with floating interest rate ranging from 5.895% to 6.765%
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 the latest short-term loan note was fixed at 4.87%, 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 Period amounted to Rmb43.27 million, while
profit before interest and tax amounted to Rmb1,717.91 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
39.7 (corresponding period of 2013: 34.4) times.
As at June 30, 2014, the asset-liability ratio (total liabilities over total
assets) of the Group was 42.9% (December 31, 2013: 38.7%). 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 20.7% (December 31, 2013: 17.8%).
Capital structure
As at June 30, 2014, the Group had Rmb19,741.37 million in total equity,
Rmb12,276.94 million in fixed-rate liabilities, Rmb300.00 million in
floating-rate liabilities, and Rmb2,246.54 million in interest-free
liabilities, representing 57.1%, 35.5%, 0.9% and 6.5% of the Group's total
capital, respectively. The gearing ratio, which is computed by dividing the
total liabilities less accounts payable to customers arising from the
securities business by total equity, was 26.0% as at June 30, 2014 (December
31, 2013: 21.6%).
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb193.55 million,
while capital expenditure of the Company totaled Rmb41.87 million. Amongst the
total capital expenditure of the Group, Rmb57.50 million was incurred for
setting up a wholly-owned subsidiary of the Company and external equity
acquisition by Zheshang Securities, Rmb114.29 million was incurred for
acquisition and construction of properties, Rmb20.15 million was incurred for
purchase and construction of equipments and facilities, and Rmb1.61 million was
incurred for service area renovation and expansion.
As at June 30, 2014, the remaining capital expenditure committed by the Group
and the Company totaled Rmb1,550.97 million and Rmb270.00 million,
respectively. Amongst the remaining balance of total capital expenditures
committed by the Group, Rmb1,209.80 million will be used for acquisition and
construction of properties, Rmb324.78 million for acquisition and construction
of equipments and facilities, Rmb16.39 million for service area renovation and
expansion.
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.
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. During the
Period, Rmb25.00 million of the bank loans had been repaid.
Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of
Zhejiang Yuhang Expressway Co., Ltd. ("Yuhang Co", a 51% 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 June
30, 2014, the carrying amount of the mortgaged asset was Rmb525.40 million.
Pursuant to the board resolution dated June 24, 2008 of Zhejiang Jinhua Yongjin
Expressway Co., Ltd. ("Jinhua Co", a 100% owned subsidiary of the Company),
Jinhua Co provided the operating right of the expressway operated by it as
pledged asset for its domestic commercial bank loans, the remaining outstanding
balance of which was Rmb200.00 million. As at June 30, 2014, the carrying
amount of the pledged asset was Rmb1,829.78 million.
Except for the above, as at June 30, 2014, 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
Though the economy is still facing downward pressure, a series of "stabilizing
growth" policies implemented by the state are gradually yielding results. While
external demands are expected to improve somewhat, internal growth of economic
development is expected to strengthen. Therefore, we expect that the organic
growth in traffic volume of the Group's expressways will maintain a steady rate
in the second half of this year.
Qianjiang Road, which opened for traffic in the first half of this year, and
the construction works on the airport road near the Second Qianjiang Bridge,
are still expected to have an adverse impact on the Group's
Shanghai-Hangzhou-Ningbo Expressway. Therefore, the Group will closely monitor
the construction work on the airport road, analyze impact from the newly opened
road network of the Qianjiang Road and the Jiaxing-Shaoxing Bridge, and
undertake effective promotional efforts to attract more vehicles to the
expressways operated by the Group so as to reduce the negative impact of
traffic diversion.
Meanwhile, Zhejiang Provincial Government recently launched a specific
rectification action on billboard advertising along expressways in the
province. The billboards on the two sides of the main lines of the expressways
must be removed by the end of October this year, which will restrict the
advertising business carried out by Zhejiang Expressway Investment Development
Co., Ltd. (a 100% owned subsidiary of the Company) to service areas, toll
plazas and expressway interchanges.
Additionally, Zheshang Securities transferred its entire 25% equity interest in
Zheshang Fund Management Co., Ltd. to Tonglian Capital Management Co., Ltd.
through electronic online bidding on the Zhejiang Property and Stock Exchange
on August 14, 2014. The total consideration received for such transfer was
Rmb207.00 million, and is expected to have a positive effect on the Group's
results for the second half of 2014.
A series of policies carried out by the Chinese government to reform China's
stock markets, which include the establishment of the Shanghai-Hong Kong Stock
Connect, the anticipated recovery of the Chinese stock market and increased
liquidity in China are expected to present new challenges and opportunities for
Zheshang Securities. Zheshang Securities will accelerate the development of
innovative businesses and further push forward the A-share listing process
while strengthening cost and risk control to facilitate the sustainable
development of its businesses.
The Group's management is making efforts to further strengthen its core
businesses through various measures, including reducing costs, increasing
operational efficiency, improving operating management facilities, and further
enhance service quality. In addition to continuing to strengthen its securities
businesses, the Group will look for suitable investment projects while
nurturing management capabilities in diversified operations. By leveraging its
financial resources, the Group will develop strategic synergies with its parent
company in order to broaden its scope of future development, improve
profitability, and achieve sustainable development over the long term.
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 complied with all code provisions in the
Corporate Governance Code and Corporate Governance Report (the "Code") set out
in Appendix 14 to the Listing Rules, and adopted the recommended best practices
in the Code as and when applicable.
The electronic version of this announcement is published on the HKExnews
website of the Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and
on the Company's website (www.zjec.com.cn). The interim report of the Company
for the six months ended June 30, 2014 will be dispatched to shareholders of
the Company and published on the HKExnews website of the Hong Kong Exchanges
and Clearing Limited and the Company's website in due course.
By order of the Board
Zhejiang Expressway Co., Ltd.
ZHAN Xiaozhang
Chairman
Hangzhou, PRC, August 27, 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; the non-executive
directors of the Company are: Mr. LI Zongsheng, Mr. WANG Weili and
Mr. WANG Dongjie; and the independent non-executive directors of the Company are:
Mr. ZHANG Junsheng, Mr. ZHOU Jun and Mr. PEI Ker-Wei.
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