Final Results
Zhejiang Expressway Co
6 March 2001
Zhejiang Expressway Co., Ltd.
(a joint stock limited company incorporated in the People's
Republic of China with limited liability)
2000 Annual Results Announcement
The directors (the 'Directors') of Zhejiang Expressway Co., Ltd.
(the 'Company') are pleased to announce the audited results of
the Company and its subsidiaries (collectively the 'Group') for
the year ended December 31, 2000 (the 'Period'), prepared in
conformity with the accounting principles generally accepted in
Hong Kong and the basis of preparation as stated in note 1
below, together with the 1999 comparative figures as follows:
FINANCIAL HIGHLIGHTS
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
December 31, December 31,
2000 1999
Notes Rmb'000 Rmb'000
TURNOVER 2 1,188,604 1,050,498
Operating costs (248,429) (298,417)
Gross profit 940,175 752,081
Other revenue 2 242,888 167,528
Administrative expenses (64,978) (60,320)
Other operating expenses (75,317) (2,374)
PROFIT FROM OPERATING ACTIVITIES 1,042,768 856,915
Finance costs (197,083) (172,922)
Share of profit of associates 40,584 22,559
Share of loss of a jointly-
controlled entity (6,517) --
PROFIT BEFORE TAX 879,752 706,552
Tax 3 (186,391) (71,810)
PROFIT BEFORE MINORITY INTERESTS 693,361 634,742
Minority interests (57,360) (86,431)
NET PROFIT FROM ORDINARY
ACTIVITIES ATTRIBUTABLE TO
SHAREHOLDERS 636,001 548,311
Transferred to reserves 4 (147,187) (144,937)
Dividends 5 (390,880) (238,872)
RETAINED PROFIT FOR THE YEAR 97,934 164,502
EARNINGS PER SHARE 6 14.64 cents 12.62 cents
Notes:
1. Basis of preparation
These financial statements have been prepared in accordance with
Hong Kong Statements of Standard Accounting Practice ('HKSSAP'),
accounting principles generally accepted in Hong Kong and the
disclosure requirements of the Companies Ordinance (Chapter 32
of the Laws of Hong Kong). They have been prepared under the
historical cost convention, modified with respect to the
measurement of investments in securities.
2. Turnover and revenue
Turnover mainly represents toll income from the operation of
expressways, the value of advertising services rendered, and the
value of road maintenance services rendered, net of relevant
revenue taxes.
An analysis of turnover and revenue is as follows:
2000 1999
Rmb'000 Rmb'000
Toll income 1,219,672 1,087,672
Advertising income 15,878 5,859
Road maintenance income 5,130 6,971
Others 15,582 9,918
1,256,262 1,110,420
Less: Revenue taxes (67,658) (59,922)
Turnover 1,188,604 1,050,498
Dividend income from unlisted equity
investments -- 107
Income on short term investments in 153,566 77,577
securities
Interest income 73,195 79,579
Rental income 7,098 4,893
Trailer income 6,821 4,309
Others 2,208 1,063
Other revenue 242,888 167,528
Revenue 1,431,492 1,218,026
The Group is subject to the following types of revenue taxes:
-- Business Tax ('BT'), levied at 5% on toll income and 3%-5%
on other services income;
-- City Development Tax, levied at 1% to 7% of BT;
-- Education Supplementary Tax, levied at 3.5% to 4% of BT; and
-- Culture & Education Fees, levied at 3% on advertising
income.
3. Tax
No Hong Kong profits tax has been provided as the Group had no
taxable profits in Hong Kong during the year.
The Group was subject to the Corporate Income Tax (the 'CIT')
levied at a rate of 33% of taxable income based on income for
financial reporting purposes prepared in accordance with the
laws and regulations in the People's Republic of China ('PRC').
According to approvals from Zhejiang Provincial Local Tax Bureau
dated February 12, 2001 and December 11, 2000 respectively,
Zhejiang Shangsan Expressway Co., Ltd. ('Shangsan Co') and
Zhejiang Expressway Advertising Co., Ltd. ('Advertising Co')
were qualified for the exceptions under the category of 'New
enterprise providing employment opportunities to redundant
workers' as defined in the relevant national tax rules, and
therefore, were entitled to the exemption from CIT for three
years starting from January 1, 1998 and January 1, 1999
respectively.
Pursuant to a directive issued by Zhejiang Provincial People's
Government in 1997, the Company was entitled to a refund from
the Zhejiang Finance Bureau, of an amount equal to 18% of its
taxable income in respect of the CIT paid to the taxation
bureau.
On January 11, 2000, the State Council issued a directive
numbered 2000(2), in respect of correcting the finance refund
policies adopted by local governments with effect from January
1, 2000.
However, a further directive numbered 2000(99) was subsequently
released by the Ministry of Finance dated October 13, 2000,
according to which listed companies can continue to enjoy the
'33% pay first, 18% refund later' policy until December 31,
2001. Nevertheless, such beneficial treatment was not granted to
subsidiaries, associates or jointly-controlled entities of
listed companies.
In this regard, the tax refunded and refundable represents the
financial subsidies received and receivable by the Company in
respect of the year.
2000 1999
Rmb'000 Rmb'000
Group:
Tax charged 185,307 166,839
Overprovision in prior year (1,474) (10,930)
Tax refunded/refundable (50,840) (82,966)
132,993 72,943
Deferred 39,775 (2,312)
Share of tax attributable to associates 6,074 7,443
Share of deferred tax attributable to an
associate 6,302 --
Share of deferred tax attributable to a
jointly-controlled entity 1,267 --
Overprovision in an associate in prior year -- (6,264)
Tax charge for the year 186,391 71,810
There was no material unprovided deferred tax in respect of the
year (1999: Nil).
4. Transferred to reserves
In accordance with the Company Law of the PRC and the respective
articles of association of the Company, its subsidiaries,
associates and jointly-controlled entity (the 'Entities'), the
Entities are required to allocate 10% of their profit after
taxation, as determined in accordance with the PRC accounting
standards and regulations applicable to the Entities, to the
statutory surplus reserve (the 'SSR') until such reserve reaches
50% of the registered capital of the Entities. Subject to
certain restrictions set out in the Company Law of the PRC and
the Entities' articles of association, part of the SSR may be
converted to increase the Entities' share capital.
In addition, Shangsan Co and Advertising Co were required by the
relevant tax authorities to transfer the CIT waived for 1999 to
their respective SSR account in 2000. The transfer has been
incorporated in these financial statements.
In accordance with the Company Law of the PRC, the Entities are
required to transfer 5% to 10% of their profit after taxation,
as determined in accordance with PRC accounting standards and
regulations applicable to the Entities, to the statutory public
welfare fund (the 'PWF'), which is a non-distributable reserve
other than in the event of the liquidation of the Entities. The
PWF must be used for capital expenditure on staff welfare
facilities and these facilities remain as properties of the
Entities.
The Directors have proposed to transfer Rmb57,063,000 and
Rmb28,531,000 to the SSR and the PWF, respectively. This
represents 15% of the Company's profit after taxation of
Rmb570,629,000 determined in accordance with the PRC accounting
standards. The transfer to the PWF is subject to shareholders'
approval at the forthcoming annual general meeting.
According to the relevant regulations in the PRC, the amount of
profit available for distribution is the lower of the amount
determined under the PRC accounting standards and the amount
determined under GAAP.
As at December 31, 2000, the Company had reserves of
approximately Rmb339,302,000 available for distribution by way
of cash or in kind.
As at December 31, 2000, in accordance with the Company Law of
the PRC, the amount of approximately Rmb3,633,159,000 standing
to the credit of the Company's share premium account was
available for distribution by way of capitalisation issues.
5. Dividends
2000 1999
Rmb'000 Rmb'000
Interim - Rmb0.02 (approximately HK$0.0187)
per share (1999: Rmb0.015 (approximately HK$0.014)
per share) 86,862 65,147
Proposed final - Rmb0.07 (approximately HK$0.065)
0.065) per share (1999: Rmb0.04 (approximately
HK$0.037) per share) 304,018 173,725
390,880 238,872
6. Earnings Per Share
The calculation of basic earnings per share is based on the net
profit from ordinary activities attributable to shareholders for
the year of Rmb636,001,000 (1999: Rmb548,311,000) and the
4,343,114,500 shares (1999: 4,343,114,500 shares) in issue
during the year.
Diluted earnings per share for the years ended December 31, 2000
and 1999 have not been calculated as no diluting event existed
during these years.
BUSINESS REVIEW
During the Period, the Group achieved solid growth in both
turnover and net profit, which increased by 13.13% and 15.99%
over those of 1999 to RMB1,188.604 million and RMB636.001
million, respectively. Income generated from the core business
of toll roads operations continued to constitute the dominant
share of overall revenue, whilst contributions from certain
ancillary businesses such as road-side advertising demonstrated
outstanding growth potential.
Toll Road Operations
During the Period, toll income for the Group reached
approximately RMB1,219.7 million, representing an increase of
approximately12.1% over that of 1999. Contributions from the
Shanghai-Hangzhou-Ningbo Expressway (comprising Jiaxing Section,
Yuhang Section and Hangzhou Section of the Shanghai-Hangzhou
Expressway, and the Hangzhou-Ningbo Expressway) and Shangsan
Expressway, respectively, were as follows:
Sections Toll % of total % of growth
income toll over 1999
(RMB'000) income
Shanghai-Hangzhou Expressway
Jiaxing Section 389,570 31.9 +25.2
Yuhang Section 101,323 8.3 +24.1
Hangzhou Section 31,090 2.5 +20.2
Hangzhou-Ningbo Expressway 659,489 54.2 +18.6
Shangsan Expressway 38,200 3.1 N/A*
Total 1,219,672 100.00 --
* For details please see the section headed 'Shangsan
Expressway' below.
Shanghai-Hangzhou-Ningbo Expressway
The Shanghai-Hangzhou-Ningbo Expressway (Zhejiang section),
totaling 248km in length, became fully operational in December
1998. With 20 toll stations and three service areas, it is the
only expressway directly linking the three major cities of
Shanghai, Hangzhou and Ningbo along the East Coast of China,
forming part of the twelve 'National Trunk Roads' planned by the
central government.
While the overall traffic volume along the expressway grew by
approximately 20% on average over that of 1999, the growth was
not evenly distributed throughout the Period, with a higher-than-
average growth rate during the first half of the year mainly due
to the temporary closure of certain sections of parallel
national roads for maintenance and renovations during the period
which diverted additional traffic to the expressway.
Of the RMB1,181,472,000 toll income collected on the Shanghai-
Hangzhou-Ningbo Expressway in 2000, 14.5% was attributable to
entrance fees.
Shangsan Expressway
The Shangsan Expressway (formerly known as the Shangyu-Sanmen
Road) is a 142km four-lane expressway connecting the Hangzhou-
Ningbo Expressway and the Ningbo-Taizhou-Wenzhou Expressway,
with a total of 11 toll stations and three service areas
situated in between.
The construction of the Shangsan Expressway was divided into two
phases. Phase 1, consisting of four short sections in Shangyu,
Shenzhou, Xinchang and Tiantai with a total length of 37.5km,
has been operational since February 1997 whilst the construction
of Phase 2 commenced in February 1998.
Due to the construction of Phase 2, Phase 1 had been only
partially operational since January 2000, until the entire Phase
1 ceased toll collection in August 2000. Average daily traffic
volume in full trips during the period of partial operation was
6,699 vehicles, representing a decrease of 7.9% over the average
in 1999. The entire Shangsan Expressway was completed and
formally opened to traffic and started toll collection on
December 26, 2000.
The operation of, and the toll collection on, the Shangsan
Expressway is carried out by Shangsan Co. which will also be
responsible for routine maintenance. Major overhauls will be put
out to tender.
The audited net asset value of Shangsan Co, as prepared in
accordance with the generally accepted accounting practice in
the PRC as of December 31, 2000 is approximately RMB2.58
billion.
Shida Road
Shida Road is a 9.45km connecting road operated by Hangzhou
Shida Highway Co., Ltd. ('Shida Co'). Its main function is to
provide an additional route for traffic flow between the
Shanghai-Hangzhou-Ningbo Expressway and the city of Hangzhou.
Average daily traffic volume in 2000 grew by 60% over that of
1999 to reach approximately 4,104 vehicles, and toll income in
2000 grew by 82% over that of 1999 to reach approximately
RMB11,033,000.
Although interest payments on commercial loans continued to
outweigh operating profit, and Shida Co recorded a loss of
approximately RMB15,568,000 during the year, the operation of
Shida Road nevertheless enhanced the overall accessibility of
the Shanghai-Hangzhou-Ningbo Expressway. The Directors
anticipate that the profitability of Shida Co will improve as
more vehicles are expected to use Shida Road for access to the
Shanghai-Hangzhou-Ningbo Expressway.
Other Businesses
Petroleum Co
The global rise in crude oil and product prices during the
Period did not have a significant impact on the business
performance of Petroleum Co. However, due to changes in the PRC
distribution system of petroleum products, which took place in
late 1999, Petroleum Co's wholesale business in petroleum
products was reduced by approximately 50% compared with that of
1999. In response to this latest development, Petroleum Co
reduced its registered capital by RMB200 million, and refocused
its business operations on retail sales of petroleum products.
Petroleum Co's net profit contribution to the Group in 2000 was
approximately RMB28,130,000, representing a return on capital of
approximately 26%.
Advertising Co
Advertising Co, which operates billboard advertising along
expressways operated by the Group, was successful in reaching
out to a wider market through extensive use of intermediate
advertising agents. Turnover for the year was approximately
RMB14,155,000, and net profit was approximately RMB12,735,000,
representing increases of 175% and 326% over that of 1999,
respectively.
JoinHands Technology
JoinHands Technology Co., Ltd. ('JoinHands Technology') is a
start-up company principally engaged in the application of
computer technologies in the areas of anti-counterfeiting and
modern logistics management networks. Since the Company's
investment in April 2000, JoinHands Technology made a
breakthrough in opening up markets with the introduction of its
technology to the local merchandising market. Various degrees of
headway in marketing were also made in areas such as
agricultural products, finance, pharmaceuticals, publishing,
taxation receipts and legal certificates. Turnover in 2000 was
approximately RMB6,250,000, and a net profit of approximately
RMB250,000 was realized for the first time.
Project Development
During the Period, the Company actively pursued a number of
potential investment projects, two of which came to fruition
with acquisition costs amounting to RMB191.3 million.
In April 2000, the Company invested an aggregate of RMB18.5
million to acquire a 30% equity interest in JoinHands
Technology. Details of this acquisition were disclosed in the
Company's announcement dated April 7, 2000.
In September 2000, the Company further acquired a 6% equity
interest in Shangsan Co through two separate acquisitions for a
total consideration of RMB172.8 million, details of which were
disclosed in the Company's announcement dated September 25,
2000.
OUTLOOK FOR 2001
Economic outlook in 2001 for Zhejiang Province and its
neighboring cities and provinces continues to be optimistic. The
provincial government recently announced a 9% annual gross
domestic product growth target for the next five years from 2001
to 2005, as well as plans to accelerate the urbanization process
already underway in many parts of Zhejiang Province. With the
pending accession of the PRC to the World Trade Organization,
Zhejiang Province is well positioned both geographically and
economically to enter a new stage of rapid economic growth.
Steady growth in personal wealth and decrease in passenger car
prices over the past few years have created a sizeable demand in
private vehicle ownership, especially in the economically
dynamic East Coast region of the PRC. The Directors believe that
this potential demand would likely lead to a surge in road
traffic, benefiting toll road operators such as the Company.
The Shangsan Expressway was successfully opened to traffic
before the end of 2000, bringing the Group's toll road mileage
from approximately 285km to approximately 390km. Toll income
from the newly opened Shangsan Expressway will become a major
revenue contributor to the Group in 2001, in addition to the
network effect created by its direct linkage with the Shanghai-
Hangzhou-Ningbo Expressway. The Company is confident about the
continued growth in traffic volume on these expressways in 2001.
The Company intends to apply to the China Securities Regulatory
Commission and the Shanghai Stock Exchange of the PRC for the
issue by way of public offer and placement of not more than 300
million A shares in 2001. Details of the proposed application
and proposed use of proceeds were disclosed in the Company's
announcements dated January 10, 2001 and February 2, 2001,
respectively.
The Company will strive to seize the moment to further expand
its business operations in the toll road sector, while
continuing to seek investment opportunities in other
infrastructure sectors with maximizing shareholders' value as
the ultimate objective.
DISCLOSURE OF INTERESTS AND OTHER MATTERS
Change of Shareholding
On December 28, 2000, Zhejiang Provincial High Class Highway
Investment Co,. Ltd. ('Provincial Investment Co') and Huajian
Transportation Economic Development Centre ('Huajian') entered
into a State-owned share transfer agreement whereby 476,760,000
shares of RMB1.00 each in the share capital of the Company,
representing approximately 11% of the total issued share capital
of the Company, will be transferred to Huajian.
Upon completion of the share transfer, the shareholding of
Provincial Investment Co in the Company will be reduced from
approximately 67% to approximately 56% of the total issued share
capital of the Company, and Huajian will hold approximately 11%
of the total issued share capital of the Company.
Impact of Housing Reform Policies
On September 6, 2000, the Ministry of Finance of the PRC issued
a directive (the 'Directive') numbered Caiqi (2000) 295 in
respect of accounting policies in relation to the national
enterprise housing reform. The Company has examined the relevant
issues, and has concluded that the Directive does not have any
significant impact on the results and financial standing of the
Group for the Period.
Purchase, Sale and Redemption of the Company's Shares
Neither the Company nor its subsidiaries has purchased, sold,
redeemed or cancelled any of the Company's shares during the
year under review.
By order of the Board
Geng Xiaoping
Chairman and General Manager
Hong Kong, March 5, 2001
A detailed results announcement containing all the information
required by paragraphs 45(1) to 45(3) of Appendix 16 to the
Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited (the 'Stock Exchange') will be subsequently
published on the Stock Exchange's website at
http://www.hkex.com.hk in due course.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the annual general meeting for the
year ended December 31, 2000 ('AGM') of Zhejiang Expressway Co.,
Ltd. (the 'Company') will be held at 10:00a.m. on April 26, 2001
at 18th Floor, Zhejiang World Trade Center, 15 Shuguang Road,
Hangzhou 310007, the People's Republic of China (the 'PRC') for
the conduct of the following business:
1. To consider and approve the report of the directors of the
Company for the year ended December 31, 2000;
2. To consider and approve the report of the supervisory
committee of the Company for the year ended December 31,
2000;
3. To consider and approve the audited financial statements of
the Company for the year ended December 31, 2000;
4. To consider and approve the proposed distribution of
profits and the final dividend of the Company for the year
ended December 31, 2000;
5. To consider and approve the budget plan of the Company for
the year ending December 31, 2001; and
6. To consider and approve the re-appointment of Ernst &Young
as the international auditors of the Company and Zhejiang
Pan-China Certified Public Accountants as the PRC auditors
of the Company and to authorize the board of directors of
the Company to fix their respective remuneration.
By Order of the Board
Zhang Jingzhong
Company Secretary
Hong Kong, March 5, 2001
Notes:
1. Eligibility for attending the AGM
Holders of H shares of the Company ('H Shares') who intend
to attend the AGM must deliver all transfer instruments and
he relevant shares certificates to the share registrar for
H Shares, Hong Kong Registrars Limited (which address is
set out in paragraph 5 below), at or before 4:00p.m. on
March 26, 2001.
2. Registration procedures for attending the AGM
(1) Holders of H Shares and domestic shares of the Company
('Domestic Shares') intending to attend the AGM should
return the reply slip for attending the AGM to the
Company by post or by facsimile (address and facsimile
numbers are shown in paragraph 5 below) such that the
same shall be received by the Company on or before
April 6, 2001.
(2) A shareholder or his/her/its proxy should produce proof
of identity when attending the meeting. If a corporate
shareholder appoints a legal representative to attend
the meeting, such legal representative shall produce
proof of identity and a copy of the resolution of the
board of directors or other governing body of such
shareholder appointing such legal representative at the
meeting.
3. Proxy
(1) A shareholder eligible to attend and vote at the AGM is
entitled to appoint, in written form, one or more
proxies to attend and vote on his/her/its behalf. A
proxy need not to be a member.
(2) A proxy should be appointed by a written instrument
signed by the appointor or his/her/its attorney. If the
appointor is a corporation, the same shall be affixed
with its common seal or signed by its director(s) or
duly authorized representative(s). If the form of proxy
is signed by the attorney of the appointor, the power
of attorney or other authorization document(s) of such
attorney should be notarised.
(3) To be valid, the power of attorney or any other
authorization document(s) (which have been notarised)
together with the completed form of proxy must be
delivered, in the case of holders of Domestic Shares,
to the Company at the address shown in paragraph 5
below and, in the case of holders of H Shares, to Hong
Kong Registrars Limited at the address shown in
paragraph 5 below, not less than 24 hours before the
time designated for the holding of the AGM.
(4) A proxy may exercise the right to vote by a show of
hands or by poll. However, if more than one proxy is
appointed by a shareholder, such proxies shall only
exercise the right to vote on a poll.
4. Closure of Register of Members
The register of members of H Shares will be closed from
March 27, 2001 to April 25, 2001 (both days inclusive),
during which no transfer of shares will be registered.
5. Miscellaneous
(1) The AGM will not last for more than one day.
Shareholders who attend shall bear their own travelling
and accommodation expenses.
(2) The address of the share registrar for H Shares, Hong
Kong Registrars Limited is at:
2/F,Vicwood Plaza
199 Des Voeux Road Central
Hong Kong
(3) The address of the Company is at:
19th Floor, Zhejiang World Trade Center
15 Shuguang Road
Hangzhou 310007
People's Republic of China
Telephone No.: (+86)-571-7987700
Facsimile No. : (+86)-571-7950329