Interim Results
Zhejiang Expressway Co
16 August 2005
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock code: 0576)
2005 Interim Results Announcement
• Turnover up 13.5% to Rmb1,673.9 million
• Net profit up 18.1% to Rmb711.5 million
• Earnings per share up18.1% to Rmb16.38 cents
• Interim dividend of Rmb7.0 cents per share is recommended
The directors (the 'Directors') of Zhejiang Expressway Co., Ltd. (the 'Company')
are pleased to announce the unaudited consolidated operating results of the
Company and its subsidiaries (collectively the 'Group') for the six months ended
June 30, 2005 (the 'Period'), prepared in conformity with accounting principles
generally accepted in Hong Kong, with basis of preparations as stated in Note 1
to the consolidated financial statements set out below.
RESULTS AND DIVIDENDS
During the Period, turnover for the Group grew 13.5% over the same period in
2004 to reach Rmb1,673.9 million, while net profit from ordinary activities
attributable to shareholders of the Company grew 18.1% to reach Rmb711.5
million. Earnings per share for the Period amounted to Rmb16.38 cents,
representing an increase of 18.1% over the same period in 2004.
The Directors have recommended to pay an interim dividend of Rmb7.0 cents per
share, subject to the approval of the shareholders at the Company's proposed
extraordinary general meeting to be held on October 31, 2005.
The audit committee of the Company has reviewed the interim results. Set out
below are the unaudited consolidated income statement and balance sheet for the
Period, together with comparative figures for 2004 and relevant notes:
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the six months
ended June 30,
2005 2004
Rmb'000 Rmb'000
Notes (Re-stated)
Turnover 4 1,673,912 1,474,367
Operating costs (507,586) (438,226)
Gross profit 1,166,326 1,036,141
Other revenue 5 62,221 (6,361)
Administrative expenses (34,972) (46,759)
Other operating expenses (10,015) (15,255)
Profit from operating activities 6 1,183,560 967,766
Finance costs (46,480) (56,009)
Share of profit of associates 3,497 6,851
Share of profit of a jointly controlled entity 10,677 10,205
Profit before tax 1,151,254 928,813
Income tax expense 7 (373,003) (263,922)
Profit for the Period 778,251 664,891
Attributable to:
Equity holders of the Company 711,457 602,410
Minority interests 66,794 62,481
Dividends
Proposed interim 8 304,018 173,725
Earnings per share 9 16.38 cents 13.87 cents
CONSOLIDATED BALANCE SHEET
As at As at December 31,
June 30,
2005 2004
Rmb'000 Rmb'000
Notes Unaudited Audited (Re-stated)
ASSETS
Non-current assets
Fixed assets 12,975,037 12,564,936
Interest in a jointly controlled entity 82,219 79,812
Interests in associates 219,127 176,744
Expressway operating rights 192,895 197,245
Prepaid lease payment 396,884 405,830
Available-for-sale financial assets 1,000 1,000
Goodwill 85,472 85,472
Deferred tax assets 38,319 38,319
13,990,953 13,549,358
Current assets
Prepaid lease payment 17,893 17,893
Investments in securities 629,720 676,447
Inventories 7,235 6,416
Trade receivables 10 29,605 26,569
Other receivables 435,367 381,017
Cash and cash equivalents 763,326 803,739
1,883,146 1,912,081
Total assets 15,874,099 15,461,439
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Company
Share capital 4,343,115 4,343,115
Share premium and reserves 6,133,068 5,725,629
Proposed dividends 304,018 651,467
10,780,201 10,720,211
Minority interests 1,100,581 1,092,295
Total equity 11,880,782 11,812,506
Non-current liabilities
Interest-bearing bank and other borrowings 623,620 655,570
Long-term bonds 1,000,000 1,000,000
Deferred tax liabilities 428,775 384,577
2,052,395 2,040,147
Current liabilities
Trade payables 11 375,472 297,213
Profits tax payable 237,163 185,482
Other taxes payable 23,699 24,343
Other payables and accruals 289,316 294,786
Interest-bearing bank and other borrowings 1,015,272 787,892
Dividend payable - 19,070
1,940,922 1,608,786
Total liabilities 3,993,317 3,648,933
Total equity and liabilities 15,874,099 15,461,439
Notes:
1 Basis of Preparation
The condensed financial statements have been prepared in accordance with the
applicable disclosure requirements of Appendix 16 to the Rules Governing the
Listing of Securities (the 'Listing Rules') on The Stock Exchange of Hong Kong
Limited (the 'Stock Exchange') and with Hong Kong Accounting Standard 34
'Interim financial reporting' issued by the Hong Kong Institute of Certified
Public Accountants ('HKICPA').
2 Principal Accounting Policies
The condensed financial statements have been prepared on the historical cost
basis except for certain financial instruments, which are measured at fair
values.
The accounting policies used in the condensed financial statements are
consistent with those followed in the preparation of the Group's annual
financial statements for the year ended December 31, 2004 except as described
below.
During the Period, the Group has applied, for the first time, a number of new
Hong Kong Financial Reporting Standards (HKFRSs), Hong Kong Accounting Standards
(HKASs) and Interpretations (hereinafter collectively referred to as 'new
HKFRSs') issued by the HKICPA that became effective for accounting periods
beginning on or after January 1, 2005. The application of the new HKFRSs has
resulted in a change in the presentation of the income statement, balance sheet
and the statement of changes in equity. In particular, the presentation of
minority interests and share of tax of associates and jointly controlled
entities has been changed. The changes in presentation have been applied
retrospectively. The adoption of the new HKFRSs has resulted in changes to the
Group's accounting polices in the following areas that have an effect on how the
results for the Period or prior accounting periods are prepared and presented:
(a) Business Combinations
During the Period, the Group has applied HKFRS 3 'Business Combinations' which
is effective for business combinations for which the agreement date is on or
after January 1, 2005. The principle effects of the application of HKFRS 3 to
the Group are summarized below:
Goodwill
Prior to January 1, 2005, goodwill arising on acquisitions was capitalized and
amortised over its estimated useful life. With respect to goodwill previously
capitalized on the balance sheet, the Group has discontinued amortising such
goodwill from January 1, 2005 onwards and goodwill will be tested for impairment
at least annually. Goodwill arising on acquisition after January 1, 2005 is
measured at cost less accumulated impairment losses (if any) after initial
recognition. As a result of this change in accounting policy, no amortisation of
goodwill has been charged during the Period. Comparative figures for 2004 have
not been re-stated.
(b) Interests in Jointly Controlled Entities
Prior to January 1, 2005, interests in jointly controlled entities were
accounted for using the equity method. HKAS 31 'Interests in jointly controlled
entities' allows entities to use either proportionate consolidation or the
equity method to account for its interests in jointly controlled entities. Upon
the application of HKAS 31, the Group has elected to continue using the equity
method to account for its interest in jointly controlled entities.
(c) Leasehold land
Prior to January 1, 2005, leasehold land was included in fixed assets and its
amortization was provided on a straight-line basis to write off the cost of the
leasehold land over the lease term. During the Period, the Group has applied
HKAS 17 'Lease'. Under HKAS 17, the land and buildings elements of a lease of
land and buildings are considered separately for the purposes of lease
classification, unless the lease payments cannot be allocated reliably between
the land and buildings elements, in which case, the entire lease is generally
treated as a finance lease. To the extent that the allocation of the lease
payments between the land and buildings elements can be made reliably, the Group
has reclassified leasehold land from fixed assets to prepaid lease payments
under operation leases, which are carried at cost and amortized over the lease
term. Comparative figures have been re-stated. Alternatively, where the
allocation between the land and buildings elements cannot be made reliably, the
leasehold land continues to be accounted for as fixed assets.
(d) Financial instruments
During the Period, the Group has applied HKAS 32 'Financial instruments:
disclosure and presentation' and HKAS 39 'Financial instruments: recognition and
measurement'. HKAS 32 requires retrospective application. HKAS 39, which is
effective for annual periods beginning on or after January 1, 2005, generally
does not permit to recognize, derecognize or measure financial assets and
liabilities on a retrospective basis. The principal effects resulting from the
implementation of HKAS 32 and HKAS 39 are summarized below:
Classification and measurement of financial assets and financial liabilities:
Prior to January 1, 2005, the Group classified and measured its debt and equity
securities in accordance with the alternative treatment of Statement of Standard
Accounting Practice 24 (SSAP 24). Under SSAP 24, investments in debt or equity
securities are classified as 'trading securities', 'non-trading securities' or
'held-to-maturity investments' as appropriate. Both 'trading securities' and
'non-trading securities' are measured at fair value. Unrealised gains or losses
of 'trading securities' are reported in the profit or loss for the period in
which gains or losses arise. Unrealised gains or losses of 'non-trading
securities' are reported in equity until the securities are sold or determined
to be impaired, at which time the cumulative gains or losses previously
recognised in equity is included in the net profit or loss for that period. From
January 1, 2005 onwards, the Group classifies and measures its debt and equity
securities in accordance with HKAS 39. Under HKAS 39, financial assets are
classified as 'financial assets at fair value through profit or loss',
'available-for-sale financial assets', 'loans and receivables', or
'held-to-maturity financial assets'. 'Financial assets at fair value through
profit or loss' and 'available-for-sale financial assets' are carried at fair
value, with changes in fair values recognised in profit or loss and equity
respectively. 'Loans and receivables' and 'held-to-maturity financial assets'
are measured at amortised cost using the effective interest method.
On January 1, 2005, the Group reclassified its 'long term investments' and
'short term investments' as 'available-for-sale financial assets' and
'investment in securities', respectively, to conform to the requirements of HKAS
39. No adjustment to the previous carrying amounts of assets and liabilities at
January 1, 2005 has been made to the Group's retained earnings.
3 Summary of the Effects of the Changes in Accounting Policies
The effects of the changes in the accounting policies described above on the
results for the Period and the same period in 2004 are as follows:
For the six months ended June 30,
2005 2004
Rmb'000 Rmb'000
Decrease in amortisation of goodwill 6,123 -
Increase in profit 6,123 -
The cumulative effects of the application of the new HKFRSs as at December 31,
2004 and January 1, 2005 are summarized below:
As at December Adjustment As at December Adjustment As at January
31, 2004 31, 2004 1, 2005
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Originally (Re-stated) (Re-stated)
stated)
Balance sheet items
Fixed assets 12,988,659 (423,723) 12,564,936 - 12,564,936
Prepaid lease payments - 423,723 423,723 - 423,723
Total effects on assets and liabilities 12,988,659 - 12,988,659 - 12,988,659
Minority interests - 1,092,295 1,092,295 - 1,092,295
Total effects on equity - 1,092,295 1,092,295 - 1,092,295
Minority interests 1,092,295 (1,092,295) - - -
1,092,295 (1,092,295) - - -
The financial effects of the application of the new HKFRSs to the Group's equity
as at January 1, 2004 are summarized below:
As originally Adjustment As re-stated
stated
Rmb'000 Rmb'000 Rmb'000
Minority interests - 1,012,417 1,012,417
Total effects on equity - 1,012,417 1,012,417
4 Turnover and Segment Information
During the Period, the principal activities of the Group did not change. The
operating results by principal activities are summarized as follows:
For the six months ended June 30,
2005 2004
Turnover Profit Turnover Profit
Contribution Contribution
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Unaudited Unaudited Unaudited Unaudited
(Re-stated)
Segment by business activities
- Toll 1,537,003 1,142,282 1,376,019 1,005,821
- Service areas 114,449 10,418 79,921 20,099
- Advertising 22,460 13,626 18,427 10,221
1,673,912 1,166,326 1,474,367 1,036,141
Other revenue 62,221 (6,361)
Administrative expenses (34,972) (46,759)
Other operating expenses (10,015) (15,255)
Profit from operating activities 1,183,560 967,766
No further analysis of the turnover and profit from operating activities by
geographical segment was prepared as the turnover and profit from operating
activities of the Group were all generated from Zhejiang Province, the PRC,
during the Period.
5 Other Revenue
For the six months ended June 30,
2005 2004
Rmb'000 Rmb'000
Unaudited Unaudited
Profit/(loss) from short term securities investment 20,275 (36,648)
Interest income 12,901 5,295
Rental income 13,348 10,629
Trailer income 9,578 8,719
Exchange (loss)/gain (778) 137
Other miscellaneous income 6,897 5,507
Total 62,221 (6,361)
6. Profit from Operating Activities
The Group's profit from operating activities is arrived at after charging the
following:
For the six months ended June 30,
2005 2004
Rmb'000 Rmb'000
Unaudited Unaudited
(Re-stated)
Depreciation 129,331 130,921
Amortization of expressway operating rights 4,350 4,350
Amortization of goodwill - 6,126
Amortization of prepaid lease payment 8,946 8,800
Staff costs 43,762 44,035
7 Income Tax Expenses
As the Group had no taxable profits in Hong Kong during the Period, no Hong Kong
profits tax had been provided.
The Group was subject to Corporate Income Tax ('CIT') in the PRC 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 PRC.
According to the requirements of new HKFRSs, the presentation of share of tax of
associates and jointly controlled entities has been changed. The changes in
presentation have been applied retrospectively.
For the six months ended June 30,
2005 2004
Rmb'000 Rmb'000
Unaudited Unaudited
(Re-stated)
Group
Tax charged 328,805 270,078
Tax refunded - (34,360)
Deferred 44,198 28,204
Tax charge for the Period 373,003 263,922
A reconciliation of the tax expense applicable to profit before tax using the
statutory rates for the PRC to the tax expense at the effective tax rates is as
follows:
For the six months ended June 30,
2005 2004
Rmb'000 Rmb'000
Unaudited Unaudited
(Re-stated)
Group
Profit before tax 1,137,080 911,757
Tax at the statutory tax rate of 33% 375,236 300,880
Tax refunded - (34,360)
Tax effect of net (income)/expense that is not (taxable)/deductible in determining (2,233) (2,598)
taxable profit
Tax charge at the Group's effective tax rate 373,003 263,922
8 Dividends
The Directors have recommended the payment of an interim dividend of Rmb7.0
cents (approximately HK6.6 cents) per share (2004 Interim: Rmb4.0 cents),
subject to the approval of the shareholders at the Company's proposed
extraordinary general meeting to be held on October 31, 2005. The recommendation
has been set out in the financial statements.
9 Earnings per Share
The calculation of basic earnings per share is based on the net profit from
ordinary activities attributable to shareholders of the Company for the Period
of Rmb711,457,000 (2004: Rmb602,410,000) and the 4,343,114,500 shares (2004:
4,343,114,500 shares) in issue during the Period.
Diluted earnings per share for the Period have not been calculated, as no
diluting event occurred during these years.
10 Trade Receivables
The aging analysis of trade receivables as at June 30, 2005 and the comparative
figures as at December 31, 2004 are as follows:
As at As at December
June 30, 31, 2004
2005
Rmb'000 Rmb'000
Unaudited Audited
Within 1 year 25,582 25,636
1 to 2 years 3,090 933
Over 2 years 933 -
Total 29,605 26,569
The Group allows an average credit period of approximately 180 days to its trade
customers.
11 Trade Payables
The aging analysis of trade payables as at June 30, 2005 and the comparative
figures as at December 31, 2004 are as follows:
As at As at December
June 30, 31, 2004
2005
Rmb'000 Rmb'000
Unaudited Audited
Within 1 year 347,950 262,085
1 to 2 years 26,692 10,037
2 to 3 years 731 20,930
Over 3 years 99 4,161
Total 375,472 297,213
BUSINESS REVIEW
The ongoing macro-economic control measures at the national level, accompanied
by growing structural conflicts as well as a slowdown in the investment growth
rate at the provincial level, have slowed down the pace of economic growth in
Zhejiang Province, causing the GDP growth rate to come down from 15.5% in the
first half of 2004 to 12.0% during the Period.
The slower economic growth rate in Zhejiang Province during the Period was a
major factor that contributed to significantly lower traffic volume growth rates
on the expressways operated by the Group.
During the Period, income from toll road operations grew 11.4% compared to the
same period in 2004 to Rmb1,617.9 million, while income from toll road-related
business operations grew 34.9% to Rmb170.3 million.
A breakdown of the Group's turnover during the Period is set out below:
Six months ended June 30,
2005 2004
Rmb'000 Rmb'000 % Change
Toll income
Shanghai-Hangzhou-Ningbo Expressway 1,215,355 1,106,114 9.9%
Shangsan Expressway 402,549 345,916 16.4%
Other income
Service areas 116,696 81,852 42.6%
Advertising 23,786 19,510 21.9%
Subtotal 1,758,386 1,553,392 13.2%
Less: Revenue taxes (84,474) (79,025) 6.9%
Turnover 1,673,912 1,474,367 13.5%
Toll Road Operations
Traffic volume growth on the expressways operated by the Group remained solid in
the first half of 2005, though at significantly lower rates than those of the
past few years.
Average daily traffic volume on the Shanghai-Hangzhou-Ningbo Expressway in
full-trip equivalents was 35,295 during the Period, representing a growth of
approximately 7.2% compared to the same period in 2004, while toll income
generated was Rmb1,215.4 million, representing an increase of 9.9% compared to
the same period in 2004.
The Shangsan Expressway, on the other hand, recorded average daily traffic
volume in full-trip equivalents of 20,794 during the Period, and generated toll
income of Rmb402.5 million, representing increases of 9.5% and 16.4%,
respectively, over the same period in 2004.
In addition to the impact of a slower economic growth in Zhejiang Province, the
ongoing expressway widening project(s) along the Shanghai-Hangzhou-Ningbo
Expressway as well as on neighboring expressway(s) during the Period has also
contributed to a certain degree of traffic diversions away from the
Shanghai-Hangzhou-Ningbo Expressway, especially on the Jiaxing section.
The lowering of toll rates for heavy trucks of 10 tons or above since the start
of the year, together with corresponding adjustments to the classification of
heavy trucks, has resulted in a continued increase of heavy trucks amongst the
traffic flow, in absolute terms and in proportion to total traffic flow, hence
the significantly higher growth rates in toll income relative to traffic volume
during the Period.
Toll Road-Related Business Operations
The Group continued to engage in a number of toll road-related business
operations such as service area operations, billboard advertising and vehicle
servicing along the expressways operated by the Group.
During the Period, businesses such as restaurants and shops in service areas as
well as roadside billboard advertising and vehicle servicing operations
continued to grow at rates higher than that of the toll road business. Turnover
generated from these toll road-related business operations grew approximately
35.3% compared to the same period in 2004 to Rmb166.7 million.
Long-term Investments
Traffic volume on the 9.45km Shida Road, owned and operated by Hangzhou Shida
Highway Co., Ltd. (a 50% owned jointly controlled entity of the Company), grew
23.3% during the Period, while toll income grew 15.8% to reach Rmb40.4 million.
Profit before taxation realized by the jointly controlled entity was Rmb31.9
million, representing an increase of 43.7% over the same period in 2004.
Growing demand for gasoline consumption during the Period has helped to push
revenue up by 27.1% at Zhejiang Expressway Petroleum Development Co., Ltd. (a
50% owned associate of the Company), while surging oil prices in the world
market have narrowed profit margins at the same time. Net profit realized by the
associated company was Rmb8.1 million, representing a decrease of 43.3% compared
to the same period in 2004.
JoinHands Technology Co., Ltd. (a 27.58% owned associate of the Company)
experienced fierce competition in its field of computer networking and digital
printing businesses. While turnover increased by 68.9% compared to the same
period in 2004, the associate company incurred a loss of Rmb2.0 million during
the Period. However, the loss had limited impact on the Group.
Expressway Widening Project
Of the ongoing project to widen the Shanghai-Hangzhou-Ningbo Expressway from
four lanes to eight lanes (the 'Widening Project'), Phase II (the section
between Hangzhou and Shanghai) remained on track for full completion by the end
of 2005, while Phase III (the section between Shangyu and Ningbo) has been
progressing on schedule, and is targeted for completion by the end of 2007.
According to the current status of the Widening Project, we expect to complete
the entire Widening Project within the budget of Rmb5.24 billion.
FINANCIAL ANALYSIS
The Group adopted prudent financial policies and was in a sound financial
position while maintaining a double-digit growth in its operating results during
the Period.
Liquidity
As at June 30, 2005, the Group held Rmb1,883.1 million in current assets,
amongst which account receivables, other receivables and inventories accounted
for 25.1% (December 31, 2004: 21.9%).
As at June 30, 2005, the Group had adequate net cash inflow generated from
operating activities that amounted to Rmb1,062.3 million.
The current ratio (current assets divided by current liabilities) was 1.0 at
June 30, 2005 (December 31, 2004: 1.1). Considering the nature of the principal
businesses of the Group and the large percentage of cash and cash equivalents
amongst its current assets, the present current ratio represents a satisfactory
level of liquidity for the Group.
Borrowings and Capital Structure
Borrowings
During the Period, total interest-bearing borrowings of the Group increased from
Rmb2,443.5 million at the beginning of the Period to Rmb2,638.9 million as at
June 30, 2005. The long-term interest-bearing borrowings that the Group held as
of June 30, 2005 amounted to Rmb1,623.6 million, representing a decrease of 1.9%
from that at the beginning of the Period, while the short-term interest-bearing
borrowings that the Group held amounted to Rmb1,015.3 million, representing an
increase of 28.9% from that at the beginning of the Period.
During the Period, the interest rates of the Group's semi-annual and annual
domestic commercial bank borrowings, which amounted to Rmb790.0 million, ranged
between 4.67% and 5.58%. The effective interest rate of the Group's Rmb776.3
million World Bank loans, denominated in US dollar, was 4.11% during the Period.
The coupon rate of the Rmb1 billion corporate bonds issued by the Company was
4.29% per annum, with interest payable once a year. The interest rate of
government loans in Renminbi remained the same as that applicable as at December
31, 2004.
Except for the US dollar loans extended by the World Bank that bore interest at
a floating rate, the interest rates of the Group's other interest-bearing
borrowings during the Period were fixed.
With profit before interest and tax at approximately Rmb1,197.7 million, the
Group's interest cover ratio (profit before interest and tax over interest
expense) for the Period was 25.0 (June 30, 2004: 17.6).
Capital Structure
As at June 30, 2005, the Group had Rmb11,880.8 million total equity, Rmb1,862.6
million fixed-rate liabilities, Rmb776.3 million floating-rate liabilities and
Rmb1,354.4 million interest-free liabilities, representing approximately 74.8%,
11.7%, 4.9% and 8.6%, respectively, of the Group's total capital.
The gearing ratio, which represents the sum of fixed-rate liabilities,
floating-rate liabilities and interest-free liabilities over total equity, was
33.6% as at June 30, 2005 (December 31, 2004: 30.9%). The Directors believe that
the solvency of the Group remained strong during the Period.
Financial Resources
As at June 30, 2005, the Group had cash and cash equivalents of Rmb671.1 million
in aggregate, time deposits of Rmb92.2 million and short-term investments of
Rmb629.7 million, totaling Rmb1,393.0 million (December 31, 2004: Rmb1,480.1
million).
During the Period, short-term investments were reduced by 6.9% to Rmb629.7
million, amongst which 93.4% were held in treasury bonds, with the remaining
being close-ended securities investment funds. The reduction in the overall size
of the Group's short-term investment is expected to continue in the second half
of the year 2005.
The Directors believe that its capital expenditure needs and its working capital
funding, as well as its other known or expected commitments or liabilities, can
be met from its existing resources and facilities in the foreseeable future.
Capital Expenditure Commitments and Utilization
The total capital expenditure incurred by the Group and the Company amounted to
approximately Rmb578.9 million and Rmb335.1 million during the Period,
respectively. Approximately 89.0% of the Group's total capital expenditure was
applied toward the Widening Project.
As at June 30, 2005, the capital expenditure committed by the Group amounted to
Rmb4,804.8 million, of which approximately Rmb3,108.4 million will be applied
toward the Widening Project.
Contingent Liabilities and Pledge of Assets
As at June 30, 2005, the Group did not have any contingent liabilities nor any
pledge of assets.
Foreign Exchange Exposure
Except for a World Bank loan of approximately Rmb776.3 million denominated in US
dollar, and dividends for H shares payable by the Company that are settled in HK
dollar, the Group's principal operations are transacted and booked in Renminbi.
The recent change in the Renminbi's exchange rate regime against the US dollar
would be beneficial to the Group in relation to its repayment of the World Bank
loan, though the impact is not significant. Although the Directors do not
foresee any material foreign exchange risks for the Group, there is no assurance
that any further changes in the foreign exchange environment will not adversely
affect the operating results of the Group in the future.
HUMAN RESOURCES
There were no significant changes to the Company's overall number of employees,
remuneration policies, bonus schemes and training schemes from what has been
disclosed in the Company's latest annual report.
OUTLOOK
After more than ten years of rapid development, the Zhejiang provincial economy
is currently undergoing structural adjustments as well as experiencing a
slowdown in the investment growth rate. The GDP growth rate in Zhejiang Province
is anticipated to slow down further in the second half of the year from the
12.0% reported in the first half, though not expected to slide into a
single-digit growth.
While traffic volume growth rates on the two expressways operated by the Group
averaged between 7.2% to 9.5% in the first half of the year, the growth rates
were in a decreasing trend and are expected to be lower in the second half of
the year.
Since the measures to tackle the practice of overloading trucks were initiated
in mid-June 2004, changes in traffic mix has been taking place, leading to
higher growth rates for heavy trucks. The resulted higher growth rates in toll
income compared with traffic volume ranged roughly between 3 to 7 percentage
points in the first half of 2005. However, such additional growth is expected to
diminish as we enter the second half of the year, bringing toll income growth
rates more in line with traffic volume growth rates.
Nevertheless, growth in both traffic volume and toll income on the expressways
operated by the Group is anticipated to continue during the second half of the
year, albeit at more moderate rates compared to the past few years.
Travel conditions on the Shanghai-Hangzhou-Ningbo Expressway are expected to
improve significantly upon full completion of the Phase II (the section between
Hangzhou and Shanghai) of the Widening Project by the end of the year, thereby
providing further impetus for continued growth in traffic volume as we enter
2006.
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 Period.
COMPLIANCE WITH APPENDIX 14
The Company was in compliance with the code provisions in the Code on Corporate
Governance Practices set out in Appendix 14 to the Rules Governing the Listing
of Securities on The Stock Exchange of Hong Kong Limited during the Period.
APPRECIATION
As we are close to the completion of Phase II of the Widening Project (the
section between Hangzhou and Shanghai), I would like to take this opportunity to
thank our staff who have been working tirelessly on the Widening Project.
By order of the Board
GENG Xiaoping
Chairman
Hangzhou, the PRC, August 15, 2005
As at the date of this announcement, the executive directors of the Company are:
Messrs. GENG Xiaoping, FANG Yunti, ZHANG Jingzhong and XUAN Daoguang; the
non-executive directors are: Messrs. ZHANG Luyun and ZHANG Yang; and the
independent non-executive directors are: Messrs. TUNG Chee Chen, ZHANG Junsheng
and ZHANG Liping.
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