2013 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)
2013 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, 2013 (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 Rmb3,647.27 million, representing
an increase of 6.1% over the same period in 2012. Profit for the
Period attributable to owners of the Company was Rmb930.39 million,
representing an increase of 6.9% year- on-year. Earnings per share for the
Period was Rmb21.42 cents (same period in 2012 (restated): Rmb20.03 cents).
The Directors have recommended to pay an interim dividend of Rmb6 cents per
share, subject to shareholder approval at the extraordinary general meeting of
the Company expected to be held on October 17, 2013.
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, 2013, with comparative figures
for the same period in 2012 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,
2013 2012
Notes Rmb'000 Rmb'000
(Unaudited) (Unaudited
restated)
------------ -------------
Revenue 4 3,647,268 3,439,196
Operating costs (2,283,848) (2,176,784)
------------ -------------
Gross profit 1,363,420 1,262,412
Securities investment gains 79,786 61,211
Other income 5 103,890 123,420
Administrative expenses (36,126) (35,994)
Other expenses (21,401) (16,755)
Share of gain (loss) of associates 4,791 (8,201)
Share of loss of a joint venture (13,938) -
Finance costs (43,079) (75,664)
------------ -------------
Profit before tax 1,437,343 1,310,429
Income tax expense 6 (374,175) (322,128)
------------ -------------
Profit for the Period 1,063,168 988,301
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss when specific
conditions are met:
Available-for-sale financial assets
- Fair value (loss) gain during the
Period (3,681) 5,436
- Reclassification adjustments for
cumulative gain included in
profit or loss upon disposal (1,381) -
Income tax relating to components of
other comprehensive income 1,266 (1,359)
------------ -------------
Other comprehensive (loss) income
for the Period (net of tax) (3,796) 4,077
------------ -------------
Total comprehensive income for the
Period 1,059,372 992,378
============= ==============
For the six months
ended June 30,
2013 2012
Note Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
------------ -------------
Profit for the Period attributable to:
Owners of the Company 930,385 869,973
Non-controlling interests 132,783 118,328
------------ -------------
1,063,168 988,301
============= =============
Total comprehensive income for the
Period attributable to:
Owners of the Company 928,429 872,099
Non-controlling interests 130,943 120,279
------------ -------------
1,059,372 992,378
============= =============
Earnings per share - Basic and diluted 8 21.42 cents 20.03 cents
============= =============
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
June 30, December 31,
2013 2012
Note Rmb'000 Rmb'000
(Unaudited) (Unaudited and
restated)
------------ -------------
NON-CURRENT ASSETS
Property, plant and equipment 1,638,818 1,634,299
Prepaid lease payments 69,234 70,321
Expressway operating rights 12,318,555 12,722,158
Goodwill 86,867 86,867
Other intangible assets 149,602 155,633
Interests in associates 567,997 280,057
Interest in a joint venture 356,016 369,954
Available-for-sale investments 173,065 133,000
Other receivables - 325,035
------------ -------------
15,360,154 15,777,324
------------ -------------
CURRENT ASSETS
Inventories 27,927 27,418
Trade receivables 9 64,166 64,447
Loans to customers arising from
margin financing business 2,301,208 724,123
Other receivables and prepayments 579,078 621,023
Prepaid lease payments 2,154 2,154
Available-for-sale investments 200,567 134,899
Held for trading investments 929,104 1,486,772
Financial assets held under resale
agreements 864,777 280,066
Bank balances held on behalf of
customers 7,753,335 7,491,625
Bank balances and cash
- Time deposits with original
maturity over three months 869,433 1,483,408
- Cash and cash equivalents 2,772,837 3,392,053
------------ -------------
16,364,586 15,707,988
------------ -------------
As at As at
June 30, December 31,
2013 2012
Note Rmb'000 Rmb'000
(Unaudited) (Unaudited and
restated)
------------ -------------
CURRENT LIABILITIES
Accounts payable to customers
arising from securities business 7,682,376 7,481,819
Trade payables 10 420,485 408,612
Tax liabilities 211,982 223,592
Other taxes payable 32,250 54,226
Other payables and accruals 1,089,978 991,260
Dividends payable 1,232,271 94,998
Other loans 430,000 200,000
Financial assets sold under
repurchase agreements 316,000 -
Placements from non-bank financial
institutions 310,000 -
Long-term bonds due in one-year - 1,000,000
Long-term loans due in one-year 470,000 460,000
------------ -------------
12,195,342 10,914,507
------------ -------------
Net current assets 4,169,244 4,793,481
------------ -------------
Total assets less current liabilities 19,529,398 20,570,805
------------ -------------
Non-current liabilities
Bank loans 500,000 680,000
Deferred tax liabilities 253,568 269,124
------------ -------------
753,568 949,124
------------ -------------
18,775,830 19,621,681
============ =============
CAPITAL AND RESERVES
Share capital 4,343,115 4,343,115
Reserves 10,909,422 11,701,345
------------ -------------
Equity attributable to owners
of the Company 15,252,537 16,044,460
Non-controlling interests 3,523,293 3,577,221
------------ -------------
18,775,830 19,621,681
============ =============
Notes:
1. BASIS OF PREPARATION
The condensed consolidated financial statements have been prepared in
accordance with the applicable disclosure requirements set out in Appendix 16
to the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the "Listing Rules") and with Hong Kong Accounting Standard34
("HKAS 34") "Interim Financial Reporting".
2. MERGER ACCOUNTING RESTATEMENT
During the Period, the Group has acquired the remaining 76.55% equity interest
in Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co"), of which
66.283% equity interest was acquired from Zhejiang Communications
Investment Group Co., Ltd ("Communications Group"). Since Communications
Group is the parent company of the Company, this transaction was
regarded as business combination involving entities under common control and
was accounted for using merger accounting method, in accordance with the
guidance set out in Accounting Guideline 5 "Merger Accounting for Common
Control Combinations" issued by the Hong Kong Institute of Certified Public
Accountants (the "HKICPA"). As a result, the comparative condensed consolidated
statement of profit or loss and other comprehensive income and condensed
consolidated statement of cash flows for the period ended June 30,
2012 and the consolidated statement of financial position as at
December 31, 2012 have therefore been restated, in order to include
the losses, assets and liabilities of the combing entities since the date on
which they first come under common control.
The adopting of merger accounting method has resulted in a decrease
in total comprehensive income attributable to owners of the Company and a
decrease in profit attributable to owners of the Company for the period ended
June 30, 2012 by Rmb21,618,000 and Rmb21,618,000, respectively.
The effect of the merger accounting restatement described above on the
condensed consolidated statement of profit or loss and other comprehensive
income for the six months ended June 30, 2012 by line items is as follows:
For the Merger For the
six months accounting six months
ended June 30, restatement ended June 30,
2012 Rmb'000 2012
Rmb'000 Rmb'000
(Unaudited (Unaudited
and originally and restated)
stated)
-------------- --------- -------------
Revenue 3,329,181 110,015 3,439,196
Operating costs (2,076,791) (99,993) (2,176,784)
-------------- --------- -------------
Gross profit 1,252,390 10,022 1,262,412
Securities investment gains 61,211 - 61,211
Other income 124,881 (1,461) 123,420
Administrative expenses (33,410) (2,584) (35,994)
Other expenses (16,508) (247) (16,755)
Share of loss of associates (15,849) 7,648 (8,201)
Finance costs (31,223) (44,441) (75,664)
-------------- --------- -------------
Profit before tax 1,341,492 (31,063) 1,310,429
Income tax expense (328,225) 6,097 (322,128)
-------------- --------- -------------
Profit for the Period 1,013,267 (24,966) 988,301
-------------- --------- -------------
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss when specific conditions
are met:
Available-for-sale financial assets
- Fair value gain during the Period 5,436 - 5,436
Income tax relating to components of
other comprehensive income (1,359) - (1,359)
-------------- --------- -------------
Other comprehensive income for
the Period (net of tax) 4,077 - 4,077
-------------- --------- -------------
Total comprehensive income for
the Period 1,017,344 (24,966) 992,378
============== ========= =============
Profit for the Period
attributable to:
Owners of the Company 891,591 (21,618) 869,973
Non-controlling interests 121,676 (3,348) 118,328
-------------- --------- -------------
1,013,267 (24,966) 988,301
============== ========= =============
Total comprehensive income
attributable to:
Owners of the Company 893,717 (21,618) 872,099
Non-controlling interests 123,627 (3,348) 120,279
-------------- --------- -------------
1,017,344 (24,966) 922,378
============== ========= =============
Earnings per share - Basic and
diluted 20.53 cents (0.50)cents 20.03 cents
============== ========= =============
The effect of the merger accounting restatement described above on the
consolidated statement of financial position as at December 31, 2012 by line
items is as follows:
As at Merger As at
December 31, accounting December 31,
2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000
(Audited and (Unaudited and
originally restated)
stated)
------------ ---------- -------------
NON-CURRENT ASSETS
Property, plant and equipment 1,357,844 276,455 1,634,299
Prepaid lease payments 66,931 3,390 70,321
Expressway operating rights 10,732,058 1,990,100 12,722,158
Goodwill 86,867 - 86,867
Other intangible assets 155,633 - 155,633
Interests in associates 465,513 (185,456) 280,057
Interest in a joint venture 369,954 - 369,954
Available-for-sale investments 133,000 - 133,000
Other receivables 325,035 - 325,035
------------ ---------- -------------
13,692,835 2,084,489 15,777,324
------------ ---------- -------------
CURRENT ASSETS
Inventories 27,418 - 27,418
Trade receivables 57,847 6,600 64,447
Loans to customers arising from
margin financing business 724,123 - 724,123
Other receivables and prepayments 701,627 (80,604) 621,023
Prepaid lease payments 2,052 102 2,154
Available-for-sale investments 134,899 - 134,899
Held for trading investments 1,486,772 - 1,486,772
Financial assets held under
resale agreement 280,066 - 280,066
Bank balances held on behalf of
customers 7,491,625 - 7,491,625
Bank balances and cash
- Time deposits with originally
maturity over three months 1,483,408 - 1,483,408
- cash and cash equivalents 3,362,709 29,344 3,392,053
------------ ---------- -------------
15,752,546 (44,558) 15,707,988
------------ ---------- -------------
As at Merger As at
December 31, accounting December 31,
2012 restatement 2012
Rmb'000 Rmb'000 Rmb'000
(Audited and (Unaudited and
originally restated)
stated)
------------ ---------- -------------
CURRENT LIABILITIES
Accounts payable to customers
arising from securities business 7,481,819 - 7,481,819
Trade payables 378,364 30,248 408,612
Tax liabilities 223,592 - 223,592
Other taxes payable 53,082 1,144 54,226
Other payables and accruals 973,031 18,229 991,260
Dividends payable 94,998 - 94,998
Other loans - 200,000 200,000
Long-term bonds due in one-year 1,000,000 - 1,000,000
Long-term loans due in one-year - 460,000 460,000
------------ ---------- -------------
10,204,886 709,621 10,914,507
------------ ---------- -------------
NET CURRENT ASSETS 5,547,660 (754,179) 4,793,481
------------ ---------- -------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 19,240,495 1,330,310 20,570,805
------------ ---------- -------------
NON-CURRENT LIABILITIES
Bank loans - 680,000 680,000
Deferred tax liabilities 224,220 44,904 269,124
------------ ---------- -------------
224,220 724,904 949,124
------------ ---------- -------------
19,016,275 605,406 19,621,681
============ ========== =============
CAPITAL AND RESERVES
Share capital 4,343,115 - 4,343,115
Reserves 11,177,137 524,208 11,701,345
------------ ---------- -------------
Equity attributable to owners of
the Company 15,520,252 524,208 16,044,460
Non-controlling interests 3,496,023 81,198 3,577,221
------------ ---------- -------------
19,016,275 605,406 19,621,681
============ ========== =============
The effect of merger accounting restatement described above on the Group's
equity as at January 1, 2013 and January 1, 2012 is as follows:
As at Merger As at As at Merger As at
January 1, accounting January 1, January 1, accounting January 1,
2012 restatement 2012 2013 restatement 2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Audited and (Unaudited (Audited and (Unaudited
originally and restated) originally and restated)
stated) stated)
------------ ---------- ------------- ----------- ---------- -------------
Share capital 4,343,115 - 4,343,115 4,343,115 - 4,343,115
Share premium 3,645,726 - 3,645,726 3,645,726 - 3,645,726
Statutory reserves 2,968,634 - 2,968,634 3,227,511 - 3,227,511
Capital reserve 1,712 - 1,712 1,712 - 1,712
Investment
revaluation
reserve (1,555) - (1,555) 254 - 254
Special reserve 18,666 797,471 816,137 18,666 797,471 816,137
Dividend reserve 1,085,779 - 1,085,779 1,042,347 - 1,042,347
Retained profits 3,116,462 (236,477) 2,879,985 3,240,921 (273,263) 2,967,658
------------ ---------- ------------- ----------- ---------- -------------
Equity
attributable to
owners of the
Company 15,178,539 560,994 15,739,533 15,520,252 524,208 16,044,460
Non-controlling
interests 3,420,561 86,874 3,507,435 3,496,023 81,198 3,577,221
------------ ---------- ------------- ----------- ---------- -------------
Total 18,599,100 647,868 19,246,968 19,016,275 605,406 19,621,681
============ ========== ============= =========== ========== =============
3. PRINCIPAL ACCOUNTING POLICY
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 described below, the accounting policies 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, 2012.
Merger accounting for business combination involving entities under common
control
The condensed consolidated financial statements incorporate the financial
statements items of the combining entities or businesses in which the common
control combination occurs as if they had been combined from the date when the
combining entities or businesses first came under the control of the controlling
party.
The net assets of the combining entities or businesses are consolidated using
the existing book values from the controlling party's perspective. No amount is
recognised in respect of goodwill or excess of acquirer's interest in the net
fair value of acquiree's identifiable assets, liabilities and contingent
liabilities over cost at the time of common control combination, to the extent
of the continuation of the controlling party's interest.
The condensed consolidated statement of profit or loss and other comprehensive
income includes the results of each of the combining entities or businesses from
the earliest date presented or since the date when the combining entities or
businesses first came under the common control, where this is a shorter period,
regardless of the date of the common control combination.
The comparative amounts in the condensed consolidated financial statements are
presented as if the entities or businesses had been combined at the end of the
previous reporting period or when they first came under common
control, whichever is shorter.
During the Period, the Group has applied, for the first time, the following new
and revised Hong Kong Financial Reporting Standards ("HKFRSs") issued by
HKICPA, which are effective for the Period. Except for the following, the
application of the other new and revised HKFRSs in the current interim period
had no material impact on the condensed consolidated financial statements and
(or) relevant disclosures set out in these condensed consolidated financial
statements.
Impact of the application of HKFRS 11
HKFRS 11 replaces HKAS 31 Interests in Joint Ventures, and the guidance
contained in a related interpretation, HK(SIC) - Int 13 Jointly Controlled
Entities - Non-Monetary Contributions by Venturers, has been incorporated in
HKAS 28 (as revised in 2011). HKFRS 11 deals with how a joint arrangement
of which two or more parties have joint control should be
classified and accounted for. Under HKFRS 11, there are only two types of
joint arrangements - joint operations and joint ventures. The classification of
joint arrangements under HKFRS 11 is determined based on the rights and
obligations of parties to the joint arrangements by considering the structure,
the legal form of the arrangements, the contractual terms agreed by the parties
to the arrangement, and, when relevant, other facts and circumstances. A joint
operation is a joint arrangement whereby the parties that have joint control of
the arrangement (i.e. joint operators) have rights to the assets, and
obligations for the liabilities, relating to the arrangement. A joint venture
is a joint arrangement whereby the parties that have joint control of the
arrangement (i.e. joint venturers) have rights to the net assets of the
arrangement. Previously, HKAS 31 had three types of joint arrangements -
jointly controlled entities, jointly controlled operations and jointly
controlled assets. The classification of joint arrangements under HKAS 31 was
primarily determined based on the legal form of the arrangement (i.e. a joint
arrangement that was established through a separate entity was classified as a
jointly controlled entity).
The initial and subsequent accounting of joint ventures and joint operations
are different. Investments in joint ventures are accounted for using the equity
method (proportionate consolidation is no longer allowed). Investments
in joint operations are accounted for such that each joint operator
recognises its assets (including its share of any assets jointly held), its
liabilities (including its share of any liabilities incurred jointly), its
revenue (including its share of revenue from the sale of the output by the
joint operation)and its expenses (including its share of any expenses incurred
jointly). Each joint operator accounts for the assets and liabilities, as well
as revenues and expenses, relating to its interest in the joint operation in
accordance with the applicable standards. The directors of the Company reviewed
and assessed the classification of the Group's investment in joint arrangement
in accordance with the requirements of HKFRS 11. The directors concluded that
the Group's interest in a jointly controlled entity under HKAS 31 should be
classified as a joint venture under HKFRS 11. The application of HKFRS 11 has
not had any material impact on the amount recognised in the Group's condensed
consolidated financial statements.
Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income
The amendments to HKAS 1 introduce new terminology for statement of
comprehensive income and income statement. Under the amendments to HKAS 1, a
statement of comprehensive income is renamed as a statement of profit or loss
and other comprehensive income and an income statement is renamed as a
statement of profit or loss. The amendments to HKAS 1 retain the option to
present profit or loss and other comprehensive income in either a single
statement or in two separate but consecutive statements. However, the
amendments to HKAS 1 require additional disclosures to be made in other
comprehensive section such that items of other comprehensive income are grouped
into two categories: (a) items that will not be reclassified subsequently to
profit or loss; and (b) items that may be reclassified subsequently to profit
or loss when specific conditions are met. Income tax on items of other
comprehensive income is required to be allocated on the same basis - the
amendments do not change the existing option to present items of other
comprehensive income either before tax or net of tax. The amendments have been
applied retrospectively, and hence the presentation of items of other
comprehensive income has been modified to reflect the changes.
HKFRS13 Fair value measurement
The Group has applied HKFRS 13 for the first time in the current interim
period. HKFRS 13 establishes a single source of guidance for and disclosures
about, fair value measurement, and replaces those requirements previously
included in various HKFRSs. Consequential amendments have been made to HKAS 34
to require certain disclosures to be made in the interim condensed consolidated
financial statements.
The scope of the HKFRS 13 is broad, and applies to both financial instrument
items and non- financial instrument items for which other HKFRSs require or
permit fair value measurements and disclosures about fair value measurements,
subject to a few exceptions. HKFRS 13 contains a new definition of "fair value"
and defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction in principal (or most
advantageous) market at the measurement date under current market conditions.
Fair value under HKFRS 13 is an exit price regardless of whether that price is
directly observable or estimated using another valuation technique. Also, HKFRS
13 includes extensive disclosure requirements.
In accordance with the transitional provisions of HKFRS 13, the Group has
applied the fair value measurement and disclosure requirements prospectively.
The Group has provided these disclosures in accordance with the
consequential amendments of HKAS 34 in the interim financial report.
Other than the additional disclosures, the application of HKFRS 13 has not had
any material impact on the amount recognised in the Group's
condensed consolidated financial statements.
4. REVENUE AND SEGMENT INFORMATION
Comparing to the same period last year, there were no 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, 2013
Service area
and
Toll advertising Securities
operation businesses operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ---------- ---------- ------------
Segment revenue from
external customers 1,921,545 1,010,644 715,079 3,647,268
========== ========== ========== ============
Segment profit 868,464 27,839 166,865 1,063,168
========== ========== ========== ============
For the six months ended June 30, 2012
Service area
and
Toll advertising Securities
operation businesses operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
(Unaudited (Unaudited (Unaudited) (Unaudited
and restated) and restated) and restated)
---------- ---------- ---------- ------------
Segment revenue from
external customers 1,844,153 1,028,811 566,232 3,439,196
========== ========== ========== ============
Segment profit 824,047 23,565 140,689 988,301
========== ========== ========== ============
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,
2013 2012
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
---------- -----------
Toll operation revenue 1,921,545 1,844,153
Service area businesses revenue (mainly sales of goods) 958,740 983,282
Advertising business rental revenue 51,904 45,529
Commission income from securities operation 538,279 422,931
Interest income from securities operation 176,800 143,301
---------- -----------
Total revenue 3,647,268 3,439,196
========== ===========
5. OTHER INCOME
For the six months
ended June 30,
2013 2012
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
---------- -------------
Interest income on bank balances, entrusted loan
receivables and financial products investment 45,746 72,158
Rental income 32,652 34,020
Handling fee income 2,193 3,396
Towing income 4,883 5,557
Exchange gain (loss), net 14 (3,552)
Others 18,402 11,841
---------- -----------
Total 103,890 123,420
========== ===========
6. INCOME TAX EXPENSE
For the six months
ended June 30,
2013 2012
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
---------- -------------
Current tax:
PRC enterprise income tax 388,811 326,801
Deferred tax (14,636) (4,673)
---------- -------------
374,175 322,128
========== =============
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and
Implementation Regulation of the EIT Law, the tax rate of the Group is
25%.
No Hong Kong Profits Tax has been provided as the Group's income
neither arises in, nor is derived from Hong Kong during the Period.
7. DIVIDENDS
The Directors have recommended the payment of an interim dividend of Rmb6 cents
per share (corresponding period of 2012: Rmb6 cents per share), subject to
shareholders' approval at the extraordinary general meeting of the Company
expected to be held on October 17, 2013.
8. 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 Rmb930,385,000
(corresponding period of 2012 (restated): Rmb869,973,000) and the 4,343,114,500
(2012: 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 was no potential ordinary shares outstanding during the both
periods.
9. TRADE RECEIVABLES
The Group has no credit period granted to its trade customers of toll operation
and service area businesses. The following is an aged analysis of trade
receivables presented based on the invoice date, which approximated the
respective revenue recognition dates, at the end of the reporting
period:
As at As at
June 30, December 31,
2013 2012
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
---------- -------------
Within 3 months 62,497 64,138
3 months to 1 year 1,500 -
1 to 2 years - 146
Over 2 years 169 163
---------- -------------
Total 64,166 64,447
========== =============
Included in the Group's trade receivable balance aged within 3 months were toll
receivables from the Expressway Fee Settlement Center of the Highway
Administration Bureau of Zhejiang Province amounting to Rmb59,829,000 (December
31, 2012: Rmb58,173,000) which has been settled subsequent to the end of the
reporting period. The directors consider the credit risk of the balance to be
minimal.
10. TRADE PAYABLES
Trade payables mainly represent the construction payables for the improvement
projects of toll expressways. The following is an aged analysis of the trade
payables presented based on the invoice date at the end of the reporting
period:
As at As at
June 30, December 31,
2013 2012
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
---------- -------------
Within 3 months 163,062 236,246
3 months to 1 year 128,131 37,328
1 to 2 years 26,051 29,117
2 to 3 years 8,694 49,122
Over 3 years 94,547 56,799
---------- -------------
Total 420,485 408,612
========== =============
BUSINESS REVIEW
The rate of growth in the Chinese economy has slowed down in 2013 as a result of
the slow recovery of the global economy and the domestic policy to maintain
steady growth and undergo structural adjustment. In the first half of the year,
China's GDP grew 7.6% year-on-year, while economic growth was down 0.1
percentage point from the first quarter of 2013. Zhejiang Province, which
saw its economy begin to stabilize and pick up in the second half of 2012,
continued to grow steadily in the first half of the year. The province's GDP
grew 8.3% year-on-year during the Period, an increase the same as that of the
first quarter of the year.
Benefiting from steady growth in the economy of Zhejiang Province as well as
the recovery in foreign trade in the province, the Group's income increased by
6.3% comparing with the same period last year, amounting to a total of
Rmb3,759.66 million. Of this income, Rmb1,987.14 million was generated from the
three major expressways owned and operated by the Group, representing an
increase of 4.2% comparing with the same period in 2012 and accounting for
52.9% of total income.Rmb1,016.65 million was generated from the Group's
toll road-related businesses, representing a slight decline of 2.0%
comparing with the same period in 2012 and accounting for 27.0% of total income.
The securities business contributed a income of Rmb755.88 million to the Group,
representing an increase of 27.4% comparing with the same period in 2012 and
accounting for 20.1% of total income.
A breakdown of the Group's income for the Period is set out below:
For the six months
ended June 30,
2013 2012
Rmb'000 Rmb'000 % Change
(Unaudited) (Unaudited
and restated)
---------- ------------ --------
Toll income
Shanghai-Hangzhou-Ningbo
Expressway 1,502,446 1,456,618 3.1%
Shangsan Expressway 359,199 338,830 6.0%
Jinhua section, Ningbo-Jinhua
Expressway 125,490 112,198 11.8%
Other income
Service areas (mainly sales of goods) 962,830 987,188 -2.5%
Advertising 53,815 49,796 8.1%
Securities business income
Commission 579,077 450,200 28.6%
Bank interest 176,800 143,301 23.4%
---------- ------------ --------
Subtotal 3,759,657 3,538,131 6.3%
Less: Revenue taxes (112,389) (98,935) 13.6%
---------- ------------ --------
Revenue 3,647,268 3,439,196 6.1%
========== ============ ========
Toll Road Operations
A higher level of organic growth was maintained in the traffic volume of the
Group's Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway during the
Period as a result of apparent signs of stable growth in Zhejiang's economy in
the first half of the year. Although the organic growth in the traffic volume
in the second quarter was lower compared to the first quarter, it remained
higher than in the fourth quarter last year.
The impact of the toll free policy on small passenger vehicles for the long
holidays of Chinese New Year, Qingming Festival and Labour Day during the
Period led to a loss of approximately Rmb73 million in the Group's toll
income. Coupled with the impact of a number of negative factors such as the
phasing out of the "Unified Toll Card" policy early last year, the adjustment to
the rounding off of the last figures for passenger vehicle tolls in mid-May and
the launch of the policy to adjust the classification of passenger vehicles in
early August in the same year, the Group's toll income suffered a loss of
approximately Rmb169 million during the Period.
Meanwhile, following the implementation of the tolling policy based on actual
travel routes in Zhejiang Province on May 15, 2012, the Company has managed to
increase its toll income by approximately Rmb69 million through the
implementation of a number of initiatives such as the marketing campaign
on the tolling policy based on actual travel routes, the fine-tuning of
the toll-by-weight mechanism and the modification of weighing equipment. In
particular, the tolling policy based on actual travel routes had a larger
positive impact on Shangsan Expressway, and accordingly, the increase in toll
income from Shangsan Expressway was higher than that from Shanghai-Hangzhou-
Ningbo Expressway during the Period.
Near the end of the Period, the Group completed the acquisition of a 76.55%
equity interest in Jinhua Co (which owns and operates the 69.7km
Jinhua Section of the Ningbo-Jinhua Expressway). During the Period,
construction work on some bridges on S211 Provincial Road, which runs parallel
to the Ningbo-Jinhua Expressway, led to an increase in the number of vehicles
rerouted to some parts of the Jinhua Section of the Ningbo-Jinhua Expressway,
while the continued traffic congestion on the roads in some areas of Yiwu
prompted a large number of local short-distance vehicles to switch to the
nearby Jinhua Section of the Ningbo-Jinhua Expressway. Moreover, benefiting
from the rapid growth in import and export trade in Jinhua, the traffic volume
of large trucks and container trucks increased significantly on a year-on-year
basis during the Period.
Average daily traffic volume in full-trip equivalents along the Group's
Shanghai- Hangzhou-Ningbo Expressway was 43,273 during the Period, representing
an increase of 3.4% 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 43,636, representing an increase of
2.4% year-on-year, and that along the Hangzhou-Ningbo Section was 43,005,
representing an increase of 4.2% year-on-year. Average daily traffic volume in
full-trip equivalents along the Shangsan Expressway was 17,397 during the
Period, representing an increase of 2.3% year-on-year. Average daily traffic
Volume in full-trip equivalents along the Jinhua Section of the Ningbo-Jinhua
Expressway was 12,993 during the Period, representing an increase of 10.4%
year-on-year.
Total toll income from the 248km Shanghai-Hangzhou-Ningbo Expressway, the 142km
Shangsan Expressway and the 70km Jinhua Section of the Ningbo-Jinhua Expressway
amounted to Rmb1,987.14 million during the Period, representing an increase of
4.2% year-on-year. Toll income from the Shanghai-Hangzhou-Ningbo Expressway
amounted to Rmb1,502.45 million, representing an increase of 3.1%
year-on-year; toll income from the Shangsan Expressway amounted to Rmb359.20
million, representing an increase of 6.0% year-on-year; while toll income from
the Jinhua Section of the Ningbo-Jinhua Expressway amounted to Rmb125.49
million, representing an increase of 11.8% year-on-year.
Toll Road-Related Business Operations
The Company operates certain toll road-related businesses along its expressways
through its subsidiaries and associated companies, including gas stations,
restaurants and shops in service areas, as well as a roadside advertising
business.
During the Period, there was a decline in operating income due to the closure of
the Yuyao Service Area from June last year for an expansion project, which
commenced service only in March this year, and for which the gas station
resumed full operations only from May 30 this year. This also had an impact on
sales of refined oil products in the service area, resulting in a year-on-year
decline in overall income. During the Period, income from toll road-related
operations amounted to Rmb1,016.65 million, representing a decrease of 2.0 %
year-on-year.
Securities Business
During the Period, the aggregate trading volume of the Shanghai and Shenzhen
stock exchanges rose by 22.8% year-on-year as a result of the recovery in the
Chinese stock market. Despite the year-on-year decline in the market share of
Zheshang Securities Co., Ltd. ("Zheshang Securities", a 70.83% owned subsidiary
of Zhejiang Shangsan Expressway Co., Ltd., a subsidiary of the Company),a
sizable year-on-year increase was registered in commission income during the
Period. Benefitting from an increase in trading volume in the stock market and
a slight rebound in the commission rate, there were year-on-year increases in
income to varying degrees across Zheshang Securities' securities brokerage
business, investment banking and asset management businesses during the Period.
To cope with uncertainties during the current recovery in the stock market,
Zheshang Securities is taking measures to gradually adjust its current business
pattern dominated by the brokerage business, and vigorously improving its
income and profit structures to boost the comprehensive development of its
various businesses by stepping up the innovation of its businesses. Meanwhile,
in order to speed up the process of its listing on the Shanghai Stock Exchange,
Zhejiang Securities has submitted an IPO application which was accepted by the
China Securities Regulatory Commission on May 2, 2013 and is officially admitted
into the waiting list for IPOs.
During the Period, Zheshang Securities realized income of Rmb755.88
million, an increase of 27.4% year-on-year. Of this income, brokerage
commission income amounted to Rmb579.08 million, a year-on-year increase of
28.6%, and interest income from the securities business amounted to Rmb176.80
million, a year-on-year increase of 23.4%. Moreover, securities investment
gains from Zheshang Securities accounted for in the condensed consolidated
statement of profit or loss and other comprehensive income amounted to
Rmb73.49 million during the Period.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) benefited from a growth in the sales of refined oil
products during the Period, the associate company realized an income of
Rmb3,085.49 million, representing an increase of 6.1% year-on-year. During the
Period, net profit amounted to Rmb11.34 million (same period in 2012: net
profit of Rmb10.18 million).
JoinHands Technology Co., Ltd. (a 27.582%-owned associate company of the
Company) generated its income primarily from its property leasing activities,
and the associate company did not make any significant improvements to
its operations during the Period. The Company has instituted legal
proceedings with regard to the transfer of the equity interest in the
associated company and separately lodged an appeal against the subsequent
judgement thereon. On April 28, 2013, the Hangzhou Intermediate People's Court
ruled in favour of the Company in its final judgement which is to be executed
after the court conducts an evaluation of the assets of the associated company.
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 improving provincial economy led the traffic
Volume on that section to pick up. The average daily traffic volume in
full-trip equivalents along that section was 12,318 vehicles, representing an
increase of 2.26% year-on-year and generating a toll income of Rmb141.22
million. Due to its heavy financial burden, a loss of Rmb27.88 million was
recorded in the current Period.
On March 30, 2013, the Company entered into a capital increase agreement with
Zhejiang Communications Investment Group Finance Co., Ltd. ("Zhejiang
Communications Finance") and its existing shareholders, pursuant to which the
Company has conditionally agreed to make a capital contribution of Rmb280
million in cash to the equity capital of Zhejiang Communications Finance,
thereby enabling the Company to own a 35% equity interest in Zhejiang
Communications Finance. Earnings from the associated company were accounted
for as share of gain of associates of the Company from May 1, 2013, and
Zhejiang Communications Finance realised profit of Rmb26.05 million from May
1, 2013 to the end of the Period.
FINANCIAL ANALYSIS
The Group adopts a prudent financial policy with an aim to provide shareholders
of the Company with sound returns over the long term.
During the Period, profit attributable to owners of the Company was
approximately Rmb930.39 million, representing an increase of 6.9% year-on-year,
return on owners' equity was 6.1%, representing an increase of 8.9%
year-on-year, while earnings per share for the Company was Rmb21.42 cents.
Liquidity and financial resources
As at June 30, 2013, current assets of the Group amounted to Rmb16,364.59
million in aggregate (December 31, 2012 (restated): Rmb15,707.99 million), of
which bank balances and cash accounted for 22.3% (December 31, 2012
(restated): 31.0%), bank balances held on behalf of customers accounted for
47.4% (December 31, 2012 (restated): 47.7%), and held for trading investments
accounted for 5.7% (December 31, 2012 (restated): 9.5%). Current ratio
(current assets over current liabilities) of the Group as at June 30, 2013
was 1.3 (December 31, 2012 (restated): 1.4). Excluding the effect of the
customer deposits arising from the securities business, the resultant
current ratio of the Group (current assets less bank balances held on behalf
of customers over current liabilities less balance of accounts payable to
customers arising from securities business) was 1.9 (December31, 2012
(restated): 2.4).
The amount of held for trading investments of the Group as at June 30, 2013 was
Rmb929.10 million (December 31, 2012: Rmb1,486.77 million), of which 97.1% was
invested in bonds, 2.4% 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 Rmb1,050.33 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, 2013, total liabilities of the Group amounted to Rmb12,948.91
million(December 31, 2012 (restated): Rmb11,863.63 million), of which 10.8%was
loans and59.3%was accounts payable to customers arising from securities business.
Total interest-bearing borrowings of the Group as at June 30, 2013
amounted toRmb1,400.00 million, representing a decrease of 40.2% compared to
that as at December 31, 2012. The borrowings comprised outstanding balances of
domestic commercial bank loans of Rmb970.00 million, loans from a domestic
non-bank financial institution of Rmb90.00 million and entrusted loans from an
enterprise of Rmb340.00 million. Of the interest-bearing borrowings, 35.7% was
not payable within one year.
As at June 30, 2013, the Group's loans from domestic commercial banks include
short-term loans and medium-term loans, with floating interest rate ranging from
5.895% to6.12% per annum; loans from an enterprise were short-term loans, with
floating interest rate of 5.24% per annum; loans from a domestic non-bank
financial institution were short-term loans, with the interest rate
fixed at 5.40% per annum; 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 Rmb43.08 million,
while profit before interest and tax amounted to Rmb1,480.42 million. The
interest cover ratio (profit before interest and tax over interest expenses)
stood at 34.4 times (corresponding period of 2012 (restated): 18.3).
As at June 30, 2013, the asset-liability ratio (total liabilities over total
assets) was 40.8% (December 31, 2012 (restated): 37.7%). Excluding the
effect of customer deposits arising from the securities business, the
resultant asset-liability ratio (total liabilities less balance of
accounts payable to customers arising from securities business over
total assets less bank balances held on behalf of customers) of the Group was
22.0% (December 31, 2012 (restated): 18.3%).
Capital structure
As at June 30, 2013, the Group had Rmb18,775.83 million in total equity,
Rmb8,398.38 million in fixed-rate liabilities, Rmb1,310.00 million in
floating-rate liabilities, Rmb3,240.53 million in interest-free liabilities,
representing 59.2%, 26.5%,4.1% and 10.2% 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 securities business
by total equity, was 28.0% as at June 30, 2013 (December 31, 2012 (restated):
22.3%).
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb1,140.03 million,
while capital expenditure of the Company totaled Rmb1,059.01 million. Amongst
the total expenditure of the Group, Rmb756.86 million was incurred for
acquiring 76.55% equity interest in Jinhua Co, Rmb280.00 million was incurred
for 35% equity investment in Zhejiang Communications Finance, Rmb61.12 million
was incurred for acquisition and construction of properties, Rmb19.98million
was incurred for purchase of equipments and Rmb22.07 million was incurred for
service area renovation and expansion.
As at June 30, 2013, the remaining capital expenditure committed by the Group
and the Company totaled Rmb1,703.24 million and Rmb1,155.72 million,
respectively. Amongst the remaining balance of capital expenditure committed by
the Group, Rmb1,000.00 million will be used for capital injection to
Jinhua Co, Rmb435.93 million will be used for acquisition and construction
of properties, Rmb218.53million for acquisition and construction of equipments
and facilities and Rmb48.78 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
As at June 30, 2013,Zhejiang Yuhang Expressway Co., Ltd. (a 51% owned subsidiary
of the Company) provided a property under construction as a mortgaged asset for
its domestic commercial bank loan of Rmb100.00 million. The carrying amount of
the mortgaged asset was Rmb306.51 million. Besides, Jinhua Co provided
the operating right of its expressway as pledged asset for its domestic
commercial bank loans of Rmb870.00 million. The carrying amount of the
pledged asset was Rmb1,933.30 million.
Except for the above, as at June 30, 2013, the Group did not have any other
contingent liabilities, pledge of assets or guarantees.
Foreign exchange exposure
Save for dividend payments to the holders of H shares in Hong Kong
dollars, the Group's principal operations were transacted and booked in
Renminbi. Therefore, the Group's exposure to exchange fluctuation is limited.
During the Period, the Group has not used any financial instruments for hedging
purpose.
Although the Directors do not foresee any material foreign exchange risks for
the Group, there is no assurance that foreign exchange risks will not affect the
operating results of the Group in the future.
OUTLOOK
The overall performance of the Group's toll road operations is influenced by
the macroeconomic and regional economic development. Existing statistical
figures suggest that although the economy of Zhejiang Province is
maintaining steady growth, it is subject to downward pressure and the
growth rate is likely to decline in the second half of the year. As a result,
organic growth in the traffic volume of the Group's expressways is expected to
slow down in the second half.
Meanwhile, the Jiaxing-Shaoxing Expressway, which opened to traffic on July 19,
2013, is expected to have a slight diversion impact on the Group's
Shanghai-Hangzhou-Ningbo Expressway. Since the Jiaxing-Shaoxing Expressway is
currently not yet open to trucks, the positive, favourable effect has not yet
been fully reflected on the Group's Shangsan Expressway. The opening of the
Jiaxing-Shaoxing Expressway will cause a slight fall in the Group's overall
toll income for the whole year.
The Company's management is undertaking various measures to further increase
income from its principal business. By increasing income and plugging
loopholes, the Company aims to step up marketing initiatives for newly opened
expressways such as Jiaxing- Shaoxing Expressway to attract more vehicles to
use sections of expressways operated by the Group. Meanwhile, the Group will cut
the loss of toll income by taking special measures against a small number of
toll-evading trucks.
Moreover, both the uncertainty over the recovery of the Chinese stock market and
the need for China to make appropriate modifications to its monetary policy
have presented new challenges and opportunities for Zheshang Securities,
prompting Zheshang Securities to accelerate the development of innovative
businesses and to further push forward the A-share listing process whilst
strengthening cost control and risk control for facilitating the sustainable
development of its businesses.
In addition to continuing to strengthen its principal toll road
operations, the Group is also actively engaging in the development of toll
road-related businesses with the acquisition of the franchise to operate
two pairs of service areas of expressways in Ningbo area in early August
this year. In addition to the improvement of the Group's securities and
financial business, the Group's management will also seek to generate strategic
synergies with its parent company by seeking suitable investment projects,
nurturing management capabilities in its diversified businesses and utilizing
its financial resources advantage to expand the space for future development
and improving profitability.
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 had 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 had adopted the recommended best
practices in the Code as and when applicable.
The electronic version of this announcement is published on the website of The
Stock Exchange of Hong Kong Limited (www.hkex.com.hk) and on the Company's
website (www.zjec.com.cn). The interim report of the Company for the six months
ended June 30, 2013 will be dispatched to shareholders of the Company and
published on The Stock Exchange of Hong Kong Limited's website and the Company's
website in due course.
By order of the Board
Zhejiang Expressway Co., Ltd.
ZHAN Xiaozhang
Chairman
Hangzhou, PRC, August 28, 2013
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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