2011 First Quarterly Results Announcement
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as to its accuracy or completeness and expressly disclaim any liability whatsoever for any
loss howsoever arising from or in reliance upon the whole or any part of the contents of this
announcement.
ZHEJIANG EXPRESSWAY CO., LTD.
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock code: 0576)
2011 FIRST QUARTERLY RESULTS ANNOUNCEMENT
This quarterly results announcement of Zhejiang Expressway Co., Ltd. (the
"Company") for the three months ended March 31, 2011 (the "Period) is made
pursuant to the Rules Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited and has been prepared in compliance with section 4.3 of
the Disclosure and Transparency Rules of the United Kingdom Listing Authority.
The audit committee of the Company has reviewed the quarterly results of the
Company and its subsidiaries (collectively the "Group") for the Period. Set out
below are the Group's unaudited condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial position
and condensed consolidated statement of cash flow for the Period together with
the comparative figures for the corresponding period of 2010:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the three months
ended March 31,
2011 2010
Notes Rmb'000 Rmb'000
---------- ---------
Revenue 1 1,627,592 1,500,679
Operating costs (960,559) (835,362)
---------- ---------
Gross profit 667,033 665,317
Securities investment (losses)
gains (3,949) 37,352
Other income 2 51,271 33,071
Administrative expenses (19,680) (14,354)
Other expenses (10,159) 3,029
Share of profit (loss) of
associates 1,020 (4,903)
Finance costs (19,489) (15,007)
---------- ---------
Profit before tax 666,047 704,505
Income tax expense (167,366) (177,814)
---------- ---------
Profit for the Period 498,681 526,691
---------- ---------
Other comprehensive
expense
Available-for-sale
financial assets：
- Fair value (loss) (4,130) 3,821
gain during the Period
- Reclassification (4,200) (17,365)
adjustments for
cumulative gain
included in profit or
loss upon disposal
Income tax relating to 2,083 3,386
---------- ---------
components of other
comprehensive income
Other comprehensive (6,247) (10,158)
---------- ---------
expense for the Period
(net of tax)
Total comprehensive
income for the Period 492,434 516,533
========= =========
Profit for the Period 425,004 418,495
attributable to:
Owners of the Company
Non-controlling interests 73,677 108,196
--------- ---------
498,681 526,691
========= =========
Total comprehensive
income for the
Period attributable
to:
Owners of the Company 421,746 413,225
Non-controlling
interests 70,688 103,308
--------- ---------
492,434 516,533
========= =========
Earnings per share – basic 3 9.79 cents 9.64 cents
========= =========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
March December
31, 2011 31, 2010
Rmb'000 Rmb'000
Unaudited Audited
------------ ------------
Non-current assets 13,804,195 13,978,955
Current assets 18,061,616 19,673,100
Current liabilities 12,086,932 14,694,293
------------ ------------
Net current assets 5,974,684 4,978,807
------------ ------------
Total assets less current liabilities 19,778,879 18,957,762
------------ ------------
Non-current liabilities 1,252,976 1,262,647
------------ ------------
18,525,903 17,695,115
============ ============
Capital and Reserves
Capital 4,343,115 4,343,115
Reserves 10,803,938 10,380,137
------------ ------------
Equity attributable to owners of the Company 15,147,053 14,723,252
Non-controlling interests 3,378,850 2,971,863
------------ ------------
18,525,903 17,695,115
============ ============
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
For the three months ended March 31,
2011 2010
Rmb'000 Rmb'000
---------- ----------
Net cash from operating activities 378,600 363,449
Net cash used in investing activities (812,459) (173,921)
Net cash used in financing activities (180,000) -
---------- ----------
Net (decrease) /increase in cash and cash
equivalents (613,859) 189,528
Cash and cash equivalents at beginning of
the Period 5,682,053 5,049,003
---------- ----------
Cash and cash equivalents at end of the
Period 5,068,194 5,238,531
========== ==========
Notes:
1. Revenue
An analysis of the Group's revenue, net of discounts and taxes, for the Period
is as follows
For the three months
ended March 31,
2011 2010
Rmb'000 Rmb'000
--------- --------
Unaudited Unaudited
Toll operation revenue 831,723 787,123
Service area business revenue 438,989 356,023
Advertising business revenue 19,364 18,298
Commission income from securities
operation 262,680 293,188
Interest income from securities operation 74,836 46,047
--------- --------
Total revenue 1,627,592 1,500,679
========= =========
2. Other Income
For the three months
ended March 31,
2011 2010
Rmb'000 Rmb'000
--------- ----------
Unaudited Unaudited
Interest income on bank balances
and entrusted loan receivables 27,655 9,930
Rental income 15,165 13,779
Net exchange gain 2 115
Handling fee income 3,126 2,093
Towing income 2,154 2,583
Others 3,169 4,571
--------- ----------
Total 51,271 33,071
========= ==========
3. Earnings per Share
The calculation of the basic earnings per share is based on profit for the year
attributable to owners of the Company of Rmb425,004,000 (2010: Rmb418,495,000)
and the 4,343,114,500 (2010: 4,343,114,500) ordinary shares in issue during the
year.
No diluted earnings per share has been presented as there were no potential
ordinary shares outstanding in both periods.
BUSINESS REVIEW
During the first quarter of 2011, China's overall economy maintained a sound
operation momentum, heading toward the desired development direction as
anticipated under the prevailing macro-economic control policies. There was,
however, a decline in the growth rates of automobile and housing consumption
related commodities, with the national GDP growth for the first quarter slowing
to 9.7% year-on-year. While also showing a sign of slowdown, Zhejiang Province's
economic growth maintained a stable trend during the Period and up to the date
of publication of this announcement, achieving a GDP growth of 10.4%
year-on-year. Due to the complexity of the province's economic performance
during the first quarter, the Group's two expressways also exhibited varied
performances on their respective traffic volumes and toll revenues during the
Period and up to the date of publication of this announcement.
During the Period, the Group realized a total income of Rmb1,674.76 million,
representing an increase of 8.2% year-on-year; of which Rmb860.09 million was
attributable to the two major expressways operated by the Group, representing
51.4% of the total income; Rmb462.06 million was attributable to the Group's
toll road-related businesses such as service area operations, gas stations,
advertising business and so forth, representing 27.6% of the total income; and
Rmb352.61 million was attributable to the securities business, representing
21.0% of the total income.
TOLL ROAD OPERATIONS
As the weather in Zhejiang Province in January was characterized by more rain
and snow than usual and the operation of the high-speed railway was
strengthened during the Chinese New Year period in February, this resulted in a
reduction of the vehicles using the Group's expressways during the Period.
Meanwhile, the slowing macro-economic growth has also caused a slowdown in
organic growth of traffic volumes on the Group's expressways.
In addition, due to successive openings of new expressways in the vicinity of
the Hangzhou-Wuzhou direction, the Shanghai-Hangzhou Expressway suffered a
minor degree of traffic diversions.
The Shangsan Expressway, another expressway under the Group, continued to
suffer the diversion impact from the Zhuyong Expressway, and consequently
continued to face negative growth in traffic volume during the first quarter.
However, benefiting from the implementation of the toll-by-weight policy, the
expressway experienced a much lower magnitude of revenue decrease than traffic
volume decrease during the Period and up to the date of publication of this
announcement.
The average daily traffic volume in full-trip equivalents along the
Shanghai-Hangzhou-Ningbo Expressway was 38,551 during the Period, representing
an increase of 4.6% year-on-year. In particular, the average daily traffic
volume in full-trip equivalents along the Shanghai-Hangzhou section of the
Shanghai- Hangzhou-Ningbo Expressway was 38,493, an increase of 2.5%
year-on-year, and that along the Hangzhou-Ningbo section was 38,593, an
increase of 6.2% year-on-year. The average daily traffic volume in full-trip
equivalents along the Shangsan Expressway was 17,768 during the Period,
representing a decrease of 7.7% year-on-year.
During the Period, toll income from the Shanghai-Hangzhou-Ningbo Expressway
amounted to Rmb683.49 million, an increase of 7.5% year-on-year, while toll
income from the Shangsan Expressway amounted to Rmb176.60 million, a decrease
of 0.2% year-on-year.
TOLL ROAD-RELATED BUSINESS OPERATIONS
The Company also operates certain toll road-related businesses along its
expressways through its subsidiaries and associated companies, including gas
stations, restaurants and shops in service areas, as well as roadside
advertising and vehicle service businesses.
Income generated at the service areas dropped slightly during the Period and up
to the date of publication of this announcement, primarily due to a slowdown in
traffic volume growth on the Group's two expressways as well as a reduction in
the number of large coach vehicles and small vehicles traveling on the road due
to more frequent operations of Shanghai-Hangzhou high-speed trains and
Hangzhou-Wenzhou CRH trains. However, owing to an increase in the sale prices
of petroleum products which in turn led to a substantial increase in the sales
revenue of petroleum products, total income of the service areas operation
performed well. As a result, during the Period, the toll road-related business
recorded an income of Rmb464.21 million, a year-on-year increase of 22.0%.
SECURITIES BUSINESS
During the first quarter of 2011, although the stock markets in Shanghai and
Shenzhen operated steadily, given the severe competition in the industry,
commission rates continued to decrease. In addition, the growth of the
operation network and staff also led to an increase in business costs at
Zheshang Securities, affecting the earning performance of Zheshang Securities
during the Period and up to the date of publication of this announcement.
During the Period, Zheshang Securities realized an operating income of
Rmb352.61 million, a decrease of 1.1% year-on-year. Of such income, brokerage
commission income amounted to Rmb277.77 million, a year-on-year decrease of
10.6%; and bank interest income amounted to Rmb74.84 million, a year-on-year
increase of 62.5%. Meanwhile, the proprietary securities business of Zheshang
Securities suffered a loss on the shares held due to the market decline. As
such, the loss accounted for in the consolidated statement of comprehensive
income amounted to Rmb4.46 million.
LONG-TERM INVESTMENTS
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) was blessed by a further rise in the retail prices of
petroleum and a significant growth in petroleum sales during the Period, and
consequently realized an income of Rmb1,123.50 million during the Period,
representing an increase of 49.5% year-on-year. During the Period, net profit
amounted to Rmb9.08 million (corresponding period of 2010: net profit amounted
to Rmb 1.07 million).
The 69.7km Jinhua Section of the Ningbo-Jinhua Expressway, operated by Zhejiang
Jinhua Yongjin Expressway Co., Ltd. (a 23.45% owned associate company of the
Company), benefited from the introduction of the toll-by-weight system and the
networking effect of nearby highways during the Period. It recorded an average
daily traffic volume of 10,850 in full-trip equivalents, while toll income
amounted to Rmb52.24 million, representing an increase of 27.9% year-on-year.
Due to its heavy financial burden, the associate company still incurred a loss
of Rmb15.20 million during the Period but the loss is gradually decreasing
(corresponding period of 2010: net loss amounted to Rmb19.66 million).
JoinHands Technology Co., Ltd. (a 27.582% owned associate company of the
Company) generated its income primarily from its property leasing during the
Period and up to the date of publication of this announcement. It did not show
any improvement to its operations and realized a net loss of Rmb1.04 million
during the Period (corresponding period of 2010: net loss amounted to Rmb0.77
million).
FINANCIAL ANALYSIS
Liquidity and Financial Resources
As at March 31, 2011, current assets of the Group amounted to Rmb18,061.62
million in aggregate (December 31, 2010: Rmb19,673.10 million), of which bank
balances and cash accounted for 32.0% (December 31, 2010: 30.5%), bank balances
held on behalf of customers accounted for 54.6% (December 31, 2010: 59.4%), and
held-for-trading investments accounted for 4.9% (December 31, 2010: 4.1%). The
current ratio (current assets over current liabilities) as at March 31, 2011
was 1.5 (December 31, 2010: 1.3). Excluding the effect of customer deposits
arising from the securities business, the resultant current ratio of the Group
(current assets less bank balances held on behalf of customers over current
liabilities less balance of accounts payable to customers arising from
securities dealing business) was 3.6 (December 31,2010: 2.6).
During the Period, net cash inflow generated from the Group's operating
activities amounted to Rmb378.60 million.
Borrowings and Solvency
As at March 31, 2011, total liabilities of the Group amounted to Rmb13,339.91
million(December 31, 2010: Rmb15,956.94 million), of which 12.3% was borrowings
and 73.6% was accounts payable to customers arising from the securities dealing
business.
Total interest expenses for the Period amounted to Rmb19.49 million, while
profit before interest and tax amounted to Rmb685.54 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
35.2 (corresponding period of 2010: 47.9).
The asset-liability ratio (total liabilities over total assets) was 41.9% as at
March 31, 2011 (December 31, 2010: 47.4%). 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 dealing business over total assets less bank balances held on behalf
of customers) of the Group was 16.0% (December 31, 2010: 19.7%).
Capital Structure
As at March 31, 2011, the Group had Rmb18,525.90 million total equity,
Rmb11,109.99 million fixed-rate liabilities, Rmb350.00 million floating-rate
liabilities and Rmb1,879.92 million interest-free liabilities, representing
58.1%, 34.9%, 1.1% and 5.9% of the Group's total capital, respectively. The gearing
ratio, which was computed by dividing the total liabilities less accounts
payable to customers arising from securities dealing business by total equity,
was 19.0% (December 31, 2010: 24.4%).
PROSPECTS
Although China's overall economy maintained a sound operation momentum during
the first quarter, there are signs that the country's economic growth is facing
an initial slowdown as a result of the effective implementation of the State's
macro-economic control policies. Likewise, Zhejiang Province has witnessed
declining growths of its major economic indices during the first quarter, and
the province's overall economy for the year is expected to be taken as
"prudently optimistic".
The expected slowdown of the province's economic growth means that the organic
growth of traffic volumes generated on the Group's two expressways is also
expected to slow. However, as the diversions from the Zhuyong Expressway which
was opened in July 2010 became more stabilized, the affected Shangsan
Expressway is expected to end its negative growth in traffic volume in the
second half of this year. This will mean that the Company will register anew
traffic volume growth for the Shangsan Expressway.
Meanwhile, the electronic tolling system, of which Stage One was already
implemented, has received favorable feedback from drivers. We expect to
complete the installation of the system for an additional 7 toll stations and
18 non-stop toll collection lanes within the first half of this year, ahead of the original
schedule. Accordingly, we aim to commence the operation of Stage Two of the
electronic tolling system in the second half of the year. This will further
upgrade the convenience and efficiency of our service provided to traveling
vehicles, and will further raise the traffic capacity of the Group's
expressways.
As to China's securities market, it is true that it has demonstrated an upward
trend during the first quarter of this year. However, as the government is
gradually undertaking currency adjustment measures to curb inflation, the
securities market is expected to be faced with many more uncertain factors. In
view of an operating environment with intense competition, Zheshang Securities
will continue to grow its securities sales operations and to optimize the
deployment of its sales network, effectively enhancing its market share so as
to offset the impact of declining commission rates upon the profitability of
its brokerage business. Meanwhile, the Company will strive to seek further
developments of Zheshang Securities through enhancing the core competitiveness
of the investment banking business and pursuing a brand building of the
professional asset management business.
Year 2011 is the first year of the commencement of the Twelfth Five-year Plan.
The economic environments that we are faced with, both domestic and
international, are complex and characterized by a number of unstable and
uncertain factors. All the same, the management of the Company is confident
that with the parent company's support, Zhejiang Expressway will be able to
fully leverage its investing and financing capabilities, continuously
strengthening its core expressway business whilst steadily expanding its
securities business, with a view to creating better operating results for the
Company.
By order of the Board
Zhejiang Expressway Co.,Ltd.
Jisong Chen
Chairman
Hangzhou, PRC, May 9, 2011
As at the date of this announcement, the executive directors of the Company are:
Messrs. Jisong Chen, Xiaozhang Zhan, Wenyao Jiang, Jingzhong Zhang and Huikang Ding;
the non-executive director of the Company is: Mrs. Luyun Zhang; and the independent
non-executive directors of the Company are: Messrs. Chee Chen Tung, Junsheng Zhang
and Liping Zhang.
An electronic version of the Company's 2011 First Quarterly Results Announcement
is available at www.zjec.com.cn.
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