2014 Annual Results Announcement
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this announcement, make no
representation as to its accuracy or completeness and expressly disclaim any
liability whatsoever for any loss howsoever arising from or in reliance upon
the whole or any part of the contents of this announcement.
ZHEJIANG EXPRESSWAY CO., LTD.
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock code: 0576)
2014 Annual Results Announcement
-- Revenue was Rmb9,051.12 million, representing an increase of 15.3% year-on-year
-- Profit attributable to owners of the Company amounted to Rmb2,349.05 million,
representing an increase of 23.2% year-on-year
-- Earnings per share was Rmb54.09 cents
-- A final dividend of Rmb26.5 cents per share is recommended
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the
"Company") announced the audited consolidated results of the Company and its
subsidiaries (collectively the "Group") for the year ended December 31, 2014
(the "Period"), with the basis of preparation as stated in note 1 set out
below.
RESULTS AND DIVIDENDS
During the Period, revenue for the Group was Rmb9,051.12 million, representing
an increase of 15.3% over 2013. Profit attributable to owners of the Company
was Rmb2,349.05 million, representing an increase of 23.2% year-on-year.
Earnings per share for the Period was Rmb54.09 cents (2013: Rmb43.92 cents).
The Directors have recommended to pay a final dividend of Rmb26.5 cents per
share (2013: Rmb25 cents). The final dividend is subject to shareholders'
approval at the 2014 annual general meeting of the Company. Together with the
interim dividend of Rmb6 cents per share that has already been paid, the annual
dividend payout during the Period is Rmb32.5 cents per share (2013: Rmb31
cents).
The audit committee of the Company has reviewed the Group's annual results of
the Period. Set out below are the audited consolidated statement of profit or
loss and other comprehensive income for the Period and consolidated statement
of financial position as at December 31, 2014, together with the comparative
figures for 2013:
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year
ended December 31,
2014 2013
Notes Rmb'000 Rmb'000
------------ ----------------
Revenue 3 9,051,123 7,851,115
Operating costs (5,576,211) (4,955,609)
------------ ----------------
Gross profit 3,474,912 2,895,506
Securities investment gains 278,252 99,663
Other income 4 250,492 241,056
Administrative expenses (85,533) (84,792)
Other expenses (103,443) (70,061)
Share of profit of associates 65,020 21,537
Share of loss of a joint (33,277) (36,010)
venture
Finance costs (78,231) (95,161)
------------ ----------------
Profit before tax 3,768,192 2,971,738
Income tax expense 5 (917,948) (756,761)
------------ ----------------
Profit for the year 2,850,244 2,214,977
------------ ----------------
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Available-for-sale financial assets
- Fair value gain during the 68,301 4,865
year
- Reclassification adjustments - (1,381)
for cumulative gain included in
profit or loss upon disposal
Income tax relating to (17,075) (871)
components of other ------------ ----------------
comprehensive income
Other comprehensive income for 51,226 2,613
the year (net of tax) ------------ ----------------
Total comprehensive income for 2,901,470 2,217,590
the year ------------ ----------------
For the year
ended December 31,
Note 2014 2013
Rmb'000 Rmb'000
------------ ----------------
Profit for the year
attributable to:
Owners of the Company 2,349,052 1,907,470
Non-controlling interests 501,192 307,507
------------ ----------------
2,850,244 2,214,977
------------ ----------------
Total comprehensive income
attributable to:
Owners of the Company 2,375,654 1,909,017
Non-controlling interests 525,816 308,573
------------ ----------------
2,901,470 2,217,590
------------ ----------------
Earnings per share - Basic and 7 Rmb54.09 cents Rmb43.92 cents
diluted ------------ ----------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31, As at December 31,
2014 2013
Notes Rmb'000 Rmb'000
------------ ----------------
Non-current assets
Property, plant and equipment 2,987,465 1,762,042
Prepaid lease payments 66,001 68,156
Expressway operating rights 11,112,507 11,911,133
Goodwill 86,867 86,867
Other intangible assets 155,590 154,564
Interests in associates 627,866 574,733
Interest in a joint venture 300,667 333,944
Available-for-sale investments 221,232 143,514
Other receivables 50,828 401,400
------------ ----------------
15,609,023 15,436,353
------------ ----------------
Current assets
Inventories 170,654 73,576
Trade receivables 8 135,609 101,428
Loans to customers arising from 8,545,913 2,946,911
margin financing business
Other receivables and 832,238 451,968
prepayments
Prepaid lease payments 2,155 2,155
Available-for-sale investments 570,021 281,924
Held for trading investments 2,124,740 1,181,025
Financial assets held under 2,724,598 874,254
resale agreements
Bank balances held on behalf of 16,576,751 8,228,160
customers
Bank balances and cash
- Time deposits with original 761,320 704,459
maturity over three months
- Cash and cash equivalents 3,301,722 1,806,981
------------ ----------------
35,745,721 16,652,841
------------ ----------------
As at December 31, As at December 31,
2014 2013
Notes Rmb'000 Rmb'000
------------ ----------------
Current liabilities
Placements from other financial 1,940,000 310,000
institutions
Accounts payable to customers 16,545,146 8,167,103
arising from securities
business
Trade payables 9 693,604 421,994
Tax liabilities 463,648 331,611
Other taxes payable 67,642 53,417
Other payables and accruals 1,561,274 995,496
Dividends payable 76,139 94,976
Bank and other borrowings 150,000 540,000
Short-term financing note 883,570 1,000,000
payable
Financial assets sold under 6,299,057 -
repurchase agreements ------------ ----------------
28,680,080 11,914,597
------------ ----------------
Net current assets 7,065,641 4,738,244
------------ ----------------
Total assets less current 22,674,664 20,174,597
liabilities ------------ ----------------
Non-current liabilities
Bank and other borrowings 200,000 300,000
Bonds payable 1,200,000 -
Deferred tax liabilities 145,042 205,638
------------ ----------------
1,545,042 505,638
------------ ----------------
21,129,622 19,668,959
------------ ----------------
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 12,658,711 11,629,423
------------ ----------------
Equity attributable to owners 17,001,826 15,972,538
of the Company
Non-controlling interests 4,127,796 3,696,421
------------ ----------------
21,129,622 19,668,959
------------ ----------------
Notes:
1. BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with
Hong Kong Financial Reporting Standards issued by Hong Kong Institute of
Certified Public Accountants (the "HKICPA"). In addition, the consolidated
financial statements include applicable disclosures required by the Rules
Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange
of Hong Kong Limited and by the Hong Kong Companies Ordinance, which for the
year continue to be those of the predecessor Companies Ordinance (Cap. 32), in
accordance with transitional and saving arrangement under Part 9 of the Hong
Kong Companies Ordinance (Cap. 622), "Accounts and Audit", which are set out in
sections 76 to 87 of Schedule 11 to that Ordinance.
2. PRINCIPAL ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the historical cost
basis except for certain financial instruments that are measured at fair values
at the end of each reporting period, as explained in the accounting policies
below.
Except as disclosed below, the accounting policies and methods of computation
applied in the consolidated financial statements for the Period are consistent
with those in the preparation of the Group's annual financial statements for
the year ended December 31, 2013.
New and revised HKFRSs applied in the current year
The Group has applied the following new and revised HKFRSs issued by the HKICPA
for the first time in the current year.
Amendments to HKFRS 10, Investment Entities
HKFRS 12 and HKAS 27
Amendments to HKAS 32 Offsetting Financial Assets and
Financial Liabilities
Amendments to HKAS 36 Recoverable Amount Disclosures for
Non-Financial Assets
Amendments to HKAS 39 Novation of Derivatives and
Continuation of Hedge Accounting
HK(IFRIC) - Int 21 Levies
Except as disclosed below, the application of the new and revised HKFRSs in the
current year has had no material impact on the Group's financial performance
and positions for the current and prior years and/or on the disclosures set out
in these consolidated financial statements.
Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities
---------------------------------------------------------------------------
The Group has applied the amendments to HKAS 32 Offsetting Financial Assets and
Financial Liabilities for the first time in the current year. The amendments to
HKAS 32 clarify the requirements relating to the offset of financial assets and
financial liabilities. Specifically, the amendments clarify the meaning of
'currently has a legally enforceable right of set-off' and 'simultaneous
realisation and settlement'.
The amendments have been applied retrospectively. The Group has assessed
whether certain of its financial assets and financial liabilities qualify for
offset based on the criteria set out in the amendments and concluded that the
application of the amendments has had no material impact on the amounts
recognised in the Group's consolidated financial statements.
Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets
-----------------------------------------------------------------------------
The Group has applied the amendments to HKAS 36 Recoverable Amount Disclosures
for Non- Financial Assets for the first time in the current year. The
amendments to HKAS 36 remove the requirement to disclose the recoverable amount
of a cash-generating unit ("CGU") to which goodwill or other intangible assets
with indefinite useful lives had been allocated when there has been no
impairment or reversal of impairment of the related CGU. Furthermore, the
amendments introduce additional disclosure requirements applicable to when the
recoverable amount of an asset or a CGU is measured at fair value less costs of
disposal. These new disclosures include the fair value hierarchy, key
assumptions and valuation techniques used which are in line with the disclosure
required by HKFRS 13 Fair Value Measurements.
The application of these amendments has had no material impact on the
disclosures in the Group's consolidated financial statements.
New and revised HKFRSs issued but not yet effective
HKFRS 9 Financial Instruments[1]
HKFRS 14 Regulatory Deferral Accounts[2]
HKFRS 15 Revenue from Contracts with Customers[3]
Amendments to HKFRS 11 Accounting for Acquisitions of
Interests in Joint Operations[5]
Amendments to HKAS 1 Disclosure Initiative[5]
Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of
Depreciation and Amortisation[5]
Amendments to HKAS 19 Defined Benefit Plans: Employee
Contributions[4]
Amendments to HKFRSs Annual Improvements to HKFRSs 2010-2012
Cycle[6]
Amendments to HKFRSs Annual Improvements to HKFRSs 2011-2013
Cycle[4]
Amendments to HKFRSs Annual Improvements to HKFRSs 2012-2014
Cycle[5]
Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer Plants[5]
Amendments to HKAS 27 Equity Method in Separate Financial
Statements[5]
Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between
an Investor and its Associate or Joint
Venture[5]
Amendments to HKFRS 10, HKFRS 12 and Investment Entities: Applying the
HKAS 28 Consolidation Exception[5]
[1] Effective for annual periods beginning on or after January 1, 2018
[2] Effective for first annual HKFRS financial statements beginning on or after
January 1, 2016
[3] Effective for annual periods beginning on or after January 1, 2017
[4] Effective for annual periods beginning on or after July 1, 2014
[5] Effective for annual periods beginning on or after January 1, 2016
[6] Effective for annual periods beginning on or after July 1, 2014, with
limited exceptions
HKFRS 9 Financial Instruments
HKFRS 9 issued in 2009 introduced new requirements for the classification and
measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to
include requirements for the classification and measurement of financial
liabilities and for derecognition, and further amended in 2013 to include the
new requirements for general hedge accounting. Another revised version of HKFRS
9 was issued in 2014 mainly to include a) impairment requirements for financial
assets and b) limited amendments to the classification and measurement
requirements by introducing a 'fair value through other comprehensive income'
("FVTOCI") measurement category for certain simple debt instruments.
Key requirements of HKFRS 9 are described below:
All recognised financial assets that are within the scope of HKAS 39 Financial
Instruments: Recognition and Measurement are subsequently measured at amortised
cost or fair value. Specifically, debt investments that are held within a
business model whose objective is to collect the contractual cash flows, and
that have contractual cash flows that are solely payments of principal and
interest on the principal outstanding are generally measured at amortised cost
at the end of subsequent accounting periods. Debt instruments that are held
within a business model whose objective is achieved both by collecting
contractual cash flows and selling financial assets, and that have contractual
terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount
outstanding, are measured at FVTOCI. All other debt investments and equity
investments are measured at their fair value at the end of subsequent
accounting periods. In addition, under HKFRS 9, entities may make an
irrevocable election to present subsequent changes in the fair value of an
equity investment (that is not held for trading) in other comprehensive income,
with only dividend income generally recognised in profit or loss.
With regard to the measurement of financial liabilities designated as at fair
value through profit or loss, HKFRS 9 requires that the amount of change in the
fair value of the financial liability that is attributable to changes in the
credit risk of that liability is presented in other comprehensive income,
unless the recognition of the effects of changes in the liability's credit risk
in other comprehensive income would create or enlarge an accounting mismatch in
profit or loss. Changes in fair value of financial liabilities attributable to
changes in the financial liabilities' credit risk are not subsequently
reclassified to profit or loss. Under HKAS 39, the entire amount of the change
in the fair value of the financial liability designated as fair value through
profit or loss was presented in profit or loss.
In relation to the impairment of financial assets, HKFRS 9 requires an expected
credit loss model, as opposed to an incurred credit loss model under HKAS 39.
The expected credit loss model requires an entity to account for expected
credit losses and changes in those expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition. In other
words, it is no longer necessary for a credit event to have occurred before
credit losses are recognised.
The Directors of the Company anticipate that the application of HKFRS 9 in the
future may have a material impact on amounts reported in respect of the Group's
financial assets and financial liabilities (e.g. the Group's investments in
unlisted equity securities currently classified as available-for-sale
investments may have to be measured at fair value at the end of subsequent
reporting periods, with changes in the fair value being recognised in profit or
loss). Regarding the Group's financial assets, it is not practicable to provide
a reasonable estimate of that effect until a detailed review has been
completed.
HKFRS 15 Revenue from Contracts with Customers
In July 2014, HKFRS 15 was issued which establishes a single comprehensive
model for entities to use in accounting for revenue arising from contracts with
customers. HKFRS 15 will supersede the current revenue recognition guidance
including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related
Interpretations when it becomes effective.
The core principle of HKFRS 15 is that an entity should recognise revenue to
depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. Specifically, the Standard introduces a
5-step approach to revenue recognition:
-- Step 1: Identify the contract(s) with a customer
-- Step 2: Identify the performance obligations in the contract
-- Step 3: Determine the transaction price
-- Step 4: Allocate the transaction price to the performance obligations in the
contract
-- Step 5: Recognise revenue when (or as) the entity satisfies a performance
obligation
Under HKFRS 15, an entity recognises revenue when (or as) a performance
obligation is satisfied, i.e. when 'control' of the goods or services
underlying the particular performance obligation is transferred to the
customer. Far more prescriptive guidance has been added in HKFRS 15 to deal
with specific scenarios. Furthermore, extensive disclosures are required by
HKFRS 15. The Directors of the Company anticipate that the application of HKFRS
15 in the future may have a material impact on the amounts reported and
disclosures made in the Group's consolidated financial statements. However, it
is not practicable to provide a reasonable estimate of the effect of HKFRS 15
until the Group performs a detailed review.
Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of
------------------------------------------------------------------------
Depreciation and Amortisation
-----------------------------
The amendments to HKAS 16 prohibit entities from using a revenue-based
depreciation method for items of property, plant and equipment. The amendments
to HKAS 38 introduce a rebuttable presumption that revenue is not an
appropriate basis for amortisation of an intangible asset. This presumption can
only be rebutted in the following two limited circumstances:
a) when the intangible asset is expressed as a measure of revenue; or
b) when it can be demonstrated that revenue and consumption of the economic
benefits of the intangible asset are highly correlated.
The amendments apply prospectively for annual periods beginning on or after
January 1, 2016. Currently, the Group uses the straight-line method for
depreciation and amortisation for its property, plant and equipment, expressway
operating rights and other intangible assets respectively. The Directors of the
Company believe that the straight-line method is the most appropriate method to
reflect the consumption of economic benefits inherent in the respective assets
and accordingly, The Directors of the Company do not anticipate that the
application of these amendments to HKAS 16 and HKAS 38 will have a material
impact on the Group's consolidated financial statements.
Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions
-------------------------------------------------------------------
The amendments to HKAS 19 clarify how an entity should account for
contributions made by employees or third parties to defined benefit plans,
based on whether those contributions are dependent on the number of years of
service provided by the employee.
For contributions that are independent of the number of years of service, the
entity may either recognise the contributions as a reduction in the service
cost in the period in which the related service is rendered, or to attribute
them to the employees' periods of service using the projected unit credit
method; whereas for contributions that are dependent on the number of years of
service, the entity is required to attribute them to the employees' periods of
service.
The Directors of the Company do not anticipate that the application of these
amendments to HKAS 19 will have an impact on the Group's consolidated financial
statements as the Group does not have any defined benefit plans.
Amendments to HKAS 27 Equity Method in Separate Financial Statements
--------------------------------------------------------------------
The amendments allow an entity to account for investments in subsidiaries,
joint ventures and associates in its separate financial statements
-- At cost
-- In accordance with HKFRS 9 Financial Instruments (or HKAS 39 Financial
Instruments: Recognition and Measurement for entities that have not yet
adopted HKFRS 9), or
-- Using the equity method as described in HKAS 28 Investments in Associates
and Joint Ventures.
The accounting option must be applied by category of investments.
The amendments also clarify that when a parent ceases to be an investment
entity, or becomes an investment entity, it shall account for the change from
the date when the change in status occurred.
In addition to the amendments to HKAS 27, there are consequential amendments to
HKAS 28 to avoid a potential conflict with HKFRS 10 Consolidated Financial
Statements and to HKFRS 1 First time Adoption of Hong Kong Financial Reporting
Standards.
The Directors of the Company do not anticipate that the application of these
amendments to HKAS 27 will have a material impact on the Group's consolidated
financial statements.
Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an
----------------------------------------------------------------------------
Investor and its Associate or Joint Venture
-------------------------------------------
Amendments to HKAS 28:
-- The requirements on gains and losses resulting from transactions between an
entity and its associate or joint venture have been amended to relate only
to assets that do not constitute a business.
-- A new requirement has been introduced that gains or losses from downstream
transactions involving assets that constitute a business between an entity
and its associate or joint venture must be recognised in full in the
investor's financial statements.
-- A requirement has been added that an entity needs to consider whether assets
that are sold or contributed in separate transactions constitute a business
and should be accounted for as a single transaction.
Amendments to HKFRS 10:
-- An exception from the general requirement of full gain or loss recognition
has been introduced into HKFRS 10 for the loss control of a subsidiary that
does not contain a business in a transaction with an associate or a joint
venture that is accounted for using the equity method.
-- New guidance has been introduced requiring that gains or losses resulting
from those transactions are recognised in the parent's profit or loss only
to the extent of the unrelated investors' interests in that associate or
joint venture. Similarly, gains and losses resulting from the remeasurement
at fair value of investments retained in any former subsidiary that has
become an associate or a joint venture that is accounted for using the
equity method are recognised in the former parent's profit or loss only to
the extent of the unrelated investors' interests in the new associate or
joint venture.
The Directors of the Company do not anticipate that the application of these
amendments to HKFRS 10 and HKAS 28 will have a material impact on the Group's
consolidated financial statements.
Annual Improvements to HKFRSs 2010-2012 Cycle
---------------------------------------------
The Annual Improvements to HKFRSs 2010-2012 Cycle include a number of
amendments to various HKFRSs, which are summarised below.
The amendments to HKFRS 8 (i) require an entity to disclose the judgements made
by management in applying the aggregation criteria to operating segments,
including a description of the operating segments aggregated and the economic
indicators assessed in determining whether the operating segments have 'similar
economic characteristics'; and (ii) clarify that a reconciliation of the total
of the reportable segments' assets to the entity's assets should only be
provided if the segment assets are regularly provided to the chief operating
decision-maker.
The amendments to the basis for conclusions of HKFRS 13 clarify that the issue
of HKFRS 13 and consequential amendments to HKAS 39 and HKFRS 9 did not remove
the ability to measure short-term receivables and payables with no stated
interest rate at their invoice amounts without discounting, if the effect of
discounting is immaterial. As the amendments do not contain any effective date,
they are considered to be immediately effective.
The amendments to HKAS 16 and HKAS 38 remove perceived inconsistencies in the
accounting for accumulated depreciation/amortisation when an item of property,
plant and equipment or an intangible asset is revalued. The amended standards
clarify that the gross carrying amount is adjusted in a manner consistent with
the revaluation of the carrying amount of the asset and that accumulated
depreciation/amortisation is the difference between the gross carrying amount
and the carrying amount after taking into account accumulated impairment
losses.
The amendments to HKAS 24 clarify that a management entity providing key
management personnel services to a reporting entity is a related party of the
reporting entity. Consequently, the reporting entity should disclose as related
party transactions the amounts incurred for the service paid or payable to the
management entity for the provision of key management personnel services.
However, disclosure of the components of such compensation is not required.
The Directors of the Company do not anticipate that the application of these
amendments will have a material effect on the Group's consolidated financial
statements.
Annual Improvements to HKFRSs 2011-2013 Cycle
---------------------------------------------
The Annual Improvements to HKFRSs 2011-2013 Cycle include a number of
amendments to various HKFRSs, which are summarised below.
The amendments to HKFRS 3 clarify that the standard does not apply to the
accounting for the formation of all types of joint arrangement in the financial
statements of the joint arrangement itself.
The amendments to HKFRS 13 clarify that the scope of the portfolio exception
for measuring the fair value of a group of financial assets and financial
liabilities on a net basis includes all contracts that are within the scope of,
and accounted for in accordance with, HKAS 39 or HKFRS 9, even if those
contracts do not meet the definitions of financial assets or financial
liabilities within HKAS 32.
The amendments to HKAS 40 clarify that HKAS 40 and HKFRS 3 are not mutually
exclusive and application of both standards may be required. Consequently, an
entity acquiring investment property must determine whether:
a) the property meets the definition of investment property in terms of HKAS
40; and
b) the transaction meets the definition of a business combination under HKFRS
3.
The Directors of the Company do not anticipate that the application of these
amendments will have a material effect on the Group's consolidated financial
statements.
Annual Improvements to HKFRSs 2012-2014 Cycle
---------------------------------------------
The Annual Improvements to HKFRSs 2012-2014 Cycle include a number of
amendments to various HKFRSs, which are summarised below.
The amendments to HKFRS 5 introduce specific guidance in HKFRS 5 for when an
entity reclassifies an asset (or disposal group) from held for sale to held for
distribution to owners (or vice versa), or when held-for-distribution
accounting is discontinued. The amendments apply prospectively.
The amendments to HKFRS 7 provide additional guidance to clarify whether a
servicing contract is continuing involvement in a transferred asset for the
purpose of the disclosures required in relation to transferred assets and
clarify that the offsetting disclosures (introduced in the amendments to HKFRS
7 Disclosure - Offsetting Financial Assets and Financial Liabilities issued in
December 2011 and effective for periods beginning on or after 1 January 2013)
are not explicitly required for all interim periods. However, the disclosures
may need to be included in condensed interim financial statements to comply
with HKAS 34 Interim Financial Reporting.
The amendments to HKAS 34 clarify the requirements relating to information
required by HKAS 34 that is presented elsewhere within the interim financial
report but outside the interim financial statements. The amendments require
that such information be incorporated by way of a cross- reference from the
interim financial statements to the other part of the interim financial report
that is available to users on the same terms and at the same time as the
interim financial statements.
The Directors of the Company do not anticipate that the application of these
will have a material effect on the Group's consolidated financial statements
3. SEGMENT INFORMATION
Information reported to the General Manager of the Company, being the chief
operating decision maker, for the purposes of resource allocation and
assessment of segment performance focuses on types of goods or services
delivered or provided.
Specifically, the Group's principle reportable and operating segments under
HKFRS 8 are as follows:
(i) Toll operation - the operation and management of high grade roads and
the collection of the expressway tolls.
(ii) Service area and advertising businesses - the sales of food,
restaurant operation, automobile service, operation of petrol stations
and design and rental of advertising billboards along the expressways.
(iii) Other toll road-related service - the toll road maintenance service and
others.
(iv) Securities operation - the securities broking, margin financing and
securities lending services and proprietary trading.
Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable
and operating segment:
For the year ended December 31, 2014
Toll related
operation
Service Other
area toll
and road-
Toll advertising related Securities Total
operation businesses service operation segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
--------- --------- ------ --------- --------- -------- ---------
Revenue
External 4,259,247 2,291,532 81,984 2,418,360 9,051,123 - 9,051,123
Sales
Inter-segment - 4,631 - - 4,631 (4,631) -
sales --------- --------- ------ --------- --------- -------- ---------
Total 4,259,247 2,296,163 81,984 2,418,360 9,055,754 (4,631) 9,051,123
--------- --------- ------ --------- --------- -------- ---------
Segment 1,937,232 93,447 66,537 753,028 2,850,244 2,850,244
profit --------- --------- ------ --------- --------- ---------
For the year ended December 31, 2013
Toll related
operation
Service Other
area toll
and road-
Toll advertising related Securities Total
operation businesses service operation segment Elimination Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
--------- --------- ------ --------- --------- -------- ---------
Revenue
External 4,019,867 2,158,469 21,447 1,651,332 7,851,115 - 7,851,115
sales
Inter-segment - 4,755 - - 4,755 (4,755) -
sales --------- --------- ------ --------- --------- -------- ---------
Total 4,019,867 2,163,224 21,447 1,651,332 7,855,870 (4,755) 7,851,115
--------- --------- ------ --------- --------- -------- ---------
Segment 1,721,848 59,789 30,787 402,553 2,214,977 2,214,977
profit --------- --------- ------ --------- --------- -------- ---------
Segment profit represents the profit after tax of each operating segment. This
is the measure reported to the chief operating decision maker for the purpose
of resource allocation and performance assessment.
Inter-segment sales are charged at prevailing market rates.
Segment assets and liabilities
The following is an analysis of the Group's assets and liabilities by
reportable and operating segment:
Segment assets Segment liabilities
As at As at As at As at
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
Rmb'000 Rmb'000 Rmb'000 Rmb'000
---------- ---------- ------------ -----------
Toll operation 14,733,018 14,784,868 (1,783,759) (2,082,988)
Toll related
operation
Service area 915,371 926,171 (197,059) (234,708)
and advertising
businesses
Other toll 455,725 310,818 (56,933) -
road-related
service
Securities 35,163,763 15,980,470 (28,187,371) (10,102,539)
Operation ---------- ---------- ------------ -----------
Total segment 51,267,877 32,002,327 (30,225,122) (12,420,235)
assets
(liabilities)
Goodwill 86,867 86,867 - -
---------- ---------- ------------ -----------
Consolidated 51,354,744 32,089,194 (30,225,122) (12,420,235)
assets ---------- ---------- ------------ -----------
(liabilities)
Segment assets and segment liabilities represent the assets and liabilities of
the subsidiaries operating in the respective reportable and operating segment.
Other segment information
Amounts included in the measure of segment profit or segment assets:
For the year ended December 31, 2014
Toll related
operation
Service Other
area and toll road-
Toll advertising related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
------- ------- ------- ------- -------
Income tax 636,111 19,223 4,306 258,308 917,948
expense
Interest 48,558 7,759 243 2,547 59,107
income
Interest 18,037 - - 60,194 78,231
expense
Interests in - 231,609 364,439 31,818 627,866
associates
Interest in a 300,667 - - - 300,667
joint venture
Share of - 19,462 53,621 (8,063) 65,020
profit (loss)
of associates
Share of loss (33,277) - - - (33,277)
of a joint
venture
Gain on fair 15,864 - - 262,388 278,252
value changes
on held for
trading
investments
Additions to 707,664 12,592 12,749 746,439 1,479,444
non-current
assets (Note)
Depreciation 895,733 45,752 - 77,404 1,018,889
and
amortisation
Loss on 3,522 9,459 - 458 13,439
disposal of ------- ------- ------- ------- -------
property,
plant and
equipment
For the year ended December 31, 2013
Toll related
operation
Service Other
area and toll road-
Toll advertising related Securities
operation businesses service operation Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
------- ------- ------- ------- -------
Income tax 585,570 18,252 (10) 152,949 756,761
expense
(credit)
Interest 82,114 7,457 - 6,351 95,922
income
Interest 84,764 - - 10,397 95,161
expense
Interests in - 224,035 310,818 39,880 574,733
associates
Interest in a 333,944 - - - 333,944
joint venture
Share of - 40 27,669 (6,172) 21,537
profit (loss)
of associates
Share of loss (36,010) - - - (36,010)
of a joint
venture
Gain on fair 14,242 - - 84,040 98,282
value changes
on held for
trading
investments
Additions to 236,487 62,072 280,000 43,697 622,256
non-current
assets (Note)
Depreciation 900,966 31,500 - 90,057 1,022,523
and
amortisation
Loss (gain) 2,798 (783) - 134 2,149
on disposal ------- ------- ------- ------- -------
of property,
plant and
equipment
Note: non-current assets excluded financial instruments.
Revenue from major services
An analysis of the Group's revenue, net of discounts and taxes, for the year is
as followed:
For the year ended December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Toll operation 4,259,247 4,019,867
revenue
Service area 2,208,235 2,054,543
businesses revenue
(mainly sales of
goods)
Advertising 83,297 103,926
business revenue
Commission income 1,679,244 1,197,315
from securities
operation
Interest income 739,116 454,017
from securities
operation
Others 81,984 21,447
---------- ----------
Total 9,051,123 7,851,115
---------- ----------
Geographical information
The Group's operations are located in the PRC (country of domicile). All
non-current assets of the Group are located in the PRC.
All of the Group's revenue from external customers is attributable to the group
entities' country of domicile (i.e. the PRC).
Information about major customers
During the years ended December 31, 2014 and 2013, there were no individual
customers with sales over 10% of the total sales of the Group.
4. OTHER INCOME
For the year ended December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Interest income on 59,107 95,922
bank balances,
entrusted loan
receivables and
financial products
investment
Rental income 120,265 88,739
Handling fee income 2,142 2,781
Towing income 9,372 10,155
Gain on disposal of 29,890 -
an associate
Gain on - 16
deregistration of
an associate
Exchange gain 1,173 (957)
(loss), net
Loss on commodity (20,785) (1,351)
trading, net
Others 49,328 45,751
---------- ----------
Total 250,492 241,056
---------- ----------
5. INCOME TAX EXPENSE
For the year ended December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Current tax:
PRC Enterprise 995,619 821,118
Income Tax
Deferred tax (77,671) (64,357)
---------- ----------
917,948 756,761
---------- ----------
Under the Law of the PRC on Enterprise Income Tax (the "EIT Law") and
Implementation Regulation of the EIT Law, the applicable tax rate of the Group
is 25%.
No Hong Kong Profits Tax has been provided as the Group's income neither arises
in, nor is derived from Hong Kong during the year.
The tax charge for the year can be reconciled to the profit before tax per the
consolidated statement of profit or loss and other comprehensive income as
follows:
For the year ended December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Profit before tax 3,768,192 2,971,738
---------- ----------
Tax at the PRC enterprise
income tax rate of 25%
(2013: 25%) 942,048 742,935
Tax effect of share of (16,255) (5,384)
(profit) loss of
associates
Tax effect of share of 8,319 9,003
loss of a joint venture
Utilisation of unused tax (22,201) (9,441)
loss previously not
recognised
Tax effect of expenses not 6,037 19,648
deductible for tax ---------- ----------
purposes
Tax charge for the year 917,948 756,761
---------- ----------
6. DIVIDENDS
2014 2013
Rmb'000 Rmb'000
---------- ----------
Dividends recognised as
distribution during the
year 2014 Interim - Rmb6
cents (2013:
2013 Interim - Rmb6 cents) 260,587 260,587
per share
2013 Final - Rmb25 cents
(2013:
2012 Final - Rmb24 cents) 1,085,779 1,042,347
per share ---------- ----------
1,346,366 1,302,934
---------- ----------
The Directors have recommended the payment of a final dividend of Rmb26.5 cents
(2013: Rmb25 cents) per share totaling to Rmb1,150,925,000 (2013:
Rmb1,085,779,000) in respect of the year ended December 31, 2014, which is
subject to approval by the shareholders in the annual general meeting.
7. 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 Rmb2,349,052,000 (2013:
Rmb1,907,470,000) and the 4,343,114,500 (2013: 4,343,114,500) ordinary shares
in issue during the year.
Diluted earnings per share presented is the same as basic earnings per share
since there were no potential ordinary shares outstanding for the year ended
December 31, 2014 and 2013.
8. TRADE RECEIVABLES
As at As at
December 31, December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Trade receivables
comprise:
A fellow subsidiary 3,212 3,077
Third parties 133,349 99,023
---------- ----------
Total trade receivables 136,561 102,100
Less: Allowance for (952) (672)
doubtful debts ---------- ----------
135,609 101,428
---------- ----------
The Group has no credit period granted to its trade customers of toll operation
and service area businesses. The Group's trade receivable balance for toll
operation is toll receivables from the Expressway Fee Settlement Centre of the
Highway Administration Bureau of Zhejiang Province, which are normally settled
within 3 months. All of these trade receivables were neither past due nor
impaired in both periods.
In respect of the Group's asset management service, security commission and
financial advisory service operated by Zheshang Securities Co., Ltd. ("Zhejiang
Securities", a 70.83% owned subsidiary of Zhejiang Shangsan Expressway Co.,
Ltd., which is a subsidiary of the Company), trading limits are set for
customers. The Group seeks to maintain tight control over its outstanding
accounts receivable in order to minimise credit risk. Overdue balances are
regularly monitored by management.
The following is an aged analysis of trade receivables net of allowance for
doubtful debts presented based on the invoice date at the end of the reporting
period, which approximated the respective revenue recognition dates:
As at As at
December 31, December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Within 3 months 116,473 90,812
3 months to 1 year 18,111 10,453
1 to 2 year 971 -
Over 2 years 54 163
---------- ----------
Total 135,609 101,428
---------- ----------
Movement of allowance for doubtful debts
As at As at
December 31, December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
At the beginning of the 672 956
year
Impairment recognised for 280 7
the year
Amount reversed during the - (291)
year ---------- ----------
At the end of the year 952 672
---------- ----------
9. TRADE PAYABLES
Trade payables mainly represent the construction payables for the maintenance
projects of toll expressways. The following is an aged analysis of trade
payables presented based on the invoice date at the end of the reporting
period:
As at As at
December 31, December 31,
2014 2013
Rmb'000 Rmb'000
---------- ----------
Within 3 months 438,079 214,669
3 months to 1 year 119,156 82,048
1 to 2 years 67,732 29,518
2 to 3 years 10,897 8,496
Over 3 years 57,740 87,263
---------- ----------
Total 693,604 421,994
---------- ----------
BUSINESS REVIEW
In 2014, China's economy grew at a slower while steady pace with a 7.4%
increase in GDP compared with last year. Zhejiang Province's economy benefited
from smooth growth in fixed assets investment and consumption, as well as from
solid increase in exports. During the Period, Zhejiang Province's GDP increased
7.6% year-on-year and demonstrated an upward trend on quarterly basis.
As Zhejiang Province's economy steadily improved and foreign trade increased
during the Period, traffic volume on the Group's expressways continued to
witness decent organic growth. In addition, trading in the domestic stock
market was active. As a result, income from the Group's overall operations
increased 15.5% year-on-year. Total income reached Rmb9,343.77 million, of
which Rmb4,407.70 million was generated from the three major expressways
operated by the Group, representing an increase of 6.0% year- on-year and 47.2%
of the total income; Rmb2,388.00 million was from the Group's toll road-related
businesses, representing an increase of 8.9% year-on-year and 25.5% of the
total income; and Rmb2,548.07 million was from the securities business,
representing an increase of 46.3% year-on-year and 27.3% of the total income.
A breakdown of the Group's income for the Period is set out below:
2014 2013
Rmb'000 Rmb'000 % Change
---------- ----------
Toll income
Shanghai-Hangzhou-Ningbo 3,111,048 3,122,022 -0.4%
Expressway
Shangsan Expressway 987,429 769,723 28.3%
Jinhua Section, 309,222 266,594 16.0%
Ningbo-Jinhua Expressway
Other income
Service areas 2,216,382 2,062,558 7.5%
Advertising 85,362 107,692 -20.7%
Road maintenance 86,257 22,227 288.1%
Securities business
income
Commission 1,808,953 1,288,151 40.4%
Interest income 739,116 454,017 62.8%
---------- ----------
Subtotal 9,343,769 8,092,984 15.5%
Less: Revenue taxes (292,646) (241,869) 21.0%
Revenue 9,051,123 7,851,115 15.3%
---------- ----------
Toll Road Operations
Given the steadily improving economy in Zhejiang Province and the growth in
foreign trade, the Group's expressways maintained solid organic growth in
traffic volume. During the Period, the Group's three expressways, the
Shanghai-Hangzhou-Ningbo Expressway, the Shangsan Expressway and the Jinhua
Section of the Ningbo-Jinhua Expressway, recorded organic growth of 6.5%, 7.4%
and 11.8%, respectively, in traffic volume, with the varied rates of growth due
to the different regions where the three expressways are located.
The Jiaxing-Shaoxing Bridge (not operated by the Group), which first opened for
traffic in July, 2013, diverted some traffic away from the Group's
Shanghai-Hangzhou-Ningbo Expressway. However, the Company's proactive efforts
in adopting measures such as attracting more traffic with better road signage
resulted in an additional rise in traffic on the Group's Shangsan Expressway
and the Hangzhou-Ningbo Section of the Shanghai- Hangzhou-Ningbo Expressway,
and allowed the positive impact on the Shangsan Expressway brought by the
Jiaxing-Shaoxing Bridge to be fully realised. During the Period, the opening of
the Jiaxing-Shaoxing Bridge helped to drive an increase in toll income of
Rmb154.79 million from the Shangsan Expressway, while it resulted in a decrease
in toll income of Rmb112.90 million from the Shanghai-Hangzhou-Ningbo
Expressway.
Meanwhile, the Jinhua Section of the Ningbo-Jinhua Expressway continued to see
high organic growth in traffic volume as a result of strong growth in trade at
the nearby Yiwu small commodities market and the booming development of
e-commerce and foreign trade in the surrounding areas. Since local roads that
run parallel to the Jinhua Section of the Ningbo-Jinhua Expressway were under
construction, and measures to attract more traffic with better road signage
continued to be adopted, they led to positive growth in toll income. During the
Period, toll income of the Jinhua Section of the Ningbo-Jinhua Expressway
increased by Rmb11.74 million.
In addition, construction on the Hangzhou Airport Road, started on April 15,
2014, resulted in a decrease of Rmb57.91 million in toll income from the
Shanghai-Hangzhou- Ningbo Expressway, despite our effort to open a four-hour
window for trucks to pass through every day. The opening of Qianjiang Road (not
operated by the Group) on April 16, 2014 also led to a decrease of Rmb10.24
million in toll income from the Shanghai- Hangzhou-Ningbo Expressway.
In response to several diversions that affected traffic volume on the Group's
toll road operations, the management of the Company took more initiatives to
plug loopholes, introduced better road signage to attract more traffic,
conducted marketing campaigns to promote the Company's distance-based toll
pricing, and fine-tuned weighing equipment for accurate measurements to
increase toll income.
During the Period, the average daily traffic volume in full-trip equivalents
along the Group's Shanghai-Hangzhou-Ningbo Expressway was 45,198, representing
an increase of 2.7% 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 43,563, representing a decrease of
1.4% year-on-year, and that along the Hangzhou-Ningbo Section was 46,366,
representing an increase of 5.6% year-on-year. Average daily traffic volume in
full-trip equivalents along the Shangsan Expressway was 22,898, representing an
increase of 25.0% year-on-year. Average daily traffic volume in full-trip
equivalents along the Jinhua Section of the Ningbo-Jinhua Expressway was
15,911, representing an increase of 17.6% 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
was Rmb4,407.70 million during the Period, representing an increase of 6.0%
year-on- year. Toll income from the Shanghai-Hangzhou-Ningbo Expressway was
Rmb3,111.05 million, representing a decrease of 0.4% year-on-year; toll income
from the Shangsan Expressway was Rmb987.43 million, representing an increase of
28.3% year-on-year. Toll income from the Jinhua Section of the Ningbo-Jinhua
Expressway was Rmb309.22 million, representing an increase of 16.0%
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 advertising at service
areas, toll stations and expressway interchanges, and road maintenance.
During the Period, the opening of the Jiaxing-Shaoxing Bridge diverted a
certain amount of traffic volume from the Shanghai-Hangzhou-Ningbo Expressway.
As a result the sales in service areas along the Shanghai-Hangzhou-Ningbo
Expressway, which had been a bigger contributor to revenue in the past, were
adversely influenced. In addition, a large number of billboards along the
expressways were removed due to a clean up campaign of billboards along all
expressways in Zhejiang Province. This resulted in a substantial decline in
advertising revenue and a slight decline in overall revenue from services
areas. However, the Group's toll road-related businesses as a whole recorded
solid growth as a result of additional income from external road maintenance
projects and increased sales of refined oil products. Income from toll
road-related operations during the Period was Rmb2,388.00 million, representing
an increase of 8.9% year-on-year.
Securities Business
During the Period, Zheshang Securities' average brokerage commission rate
declined from 0.08% to 0.067% as a result of more intensified competition in
the securities industry and relaxed controls on commissions. The total trading
volume of the Shanghai and Shenzhen stock markets increased 63.8% from last
year due to a revival of activity in the domestic securities market. During the
Period, the brokerage business of Zheshang Securities saw a substantial
increase in trading volume and posted a year-on- year increase of 27.3% in
brokerage commission income.
In addition, while accelerating the all-round development of each business
segment, Zheshang Securities has been actively exploring innovative business
strategies, and constantly working to streamline its income and profit
structure and reduce the dominant role that its brokerage business has played
in the past. Income from investment banking, margin financing and securities
lending, and asset management recorded year-on-year increases of 52.1%, 97.1%
and 134.5%, respectively.
Zheshang Securities' IPO application to the Shanghai Stock Exchange was
accepted by the China Securities Regulatory Commission in May, 2013. Zheshang
Securities remains on the wait list for an IPO.
During the Period, Zheshang Securities' total operating income was Rmb2,548.07
million, an increase of 46.3% year-on-year. Of this, brokerage commission
income rose 40.4% year-on-year to Rmb1,808.95 million, and interest income from
the securities business was Rmb739.12 million, an increase of 62.8%. Moreover,
securities investment gains of Zheshang Securities included in the consolidated
statement of profit or loss and other comprehensive income of the Group was
Rmb262.39 million (2013: gains of Rmb85.42 million) during the Period.
Long-Term Investments
Zhejiang Expressway Petroleum Development Co., Ltd. (a 50% owned associate
company of the Company) recorded income of Rmb6,365.63 million, which was flat
compared with last year as a result of both the sales volume increase of
refined oil products in the first three quarters of the year and continuous
adjustments to domestic refined oil product pricing, especially the three
consecutive cuts in September 2014. During the Period, net profit of the
associate company was Rmb26.83 million (2013: net profit of Rmb21.63 million).
Shengxin Expressway Co., Ltd. ("Shengxin Co", a 50% owned joint venture of the
Company) operates the 73.4km long Shaoxing Section of the Ningbo-Jinhua
Expressway. During the Period, the average daily traffic volume in full-trip
equivalents was 13,994, an increase of 10.3% year-on-year. Toll income during
the Period was Rmb317.63 million. However, due to increased road maintenance
expenses and its relatively heavy financial burden, the joint venture reported
a loss of Rmb66.55 million (2013: loss of Rmb72.02 million).
During the Period, the income of Zhejiang Communications Investment Group
Finance Co., Ltd. (a 35% owned associate company of the Company) was mainly
derived from fees and commissions from providing financial services, including
arranging loans and receiving deposits, for the subsidiaries of Zhejiang
Communications Investment Group Co., Ltd., the Company's controlling
shareholder. During the Period, this associate company realized a net profit of
Rmb153.20 million (2013: net profit of Rmb79.05 million).
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 Rmb2,349.05 million, representing an increase of 23.2%
year-on-year, return on owners' equity was 13.8%, representing an increase of
15.7% year-on-year, while earnings per share for the Company was Rmb54.09
cents.
Liquidity and financial resources
As at December 31, 2014, current assets of the Group amounted to Rmb35,745.72
million in aggregate (December 31, 2013: Rmb16,652.84 million), of which bank
balances and cash accounted for 11.4% (December 31, 2013: 15.1%), bank balances
held on behalf of customers accounted for 46.4% (December 31, 2013: 49.4%) held
for trading investments accounted for 5.9%(December 31, 2013: 7.1%) and loans
to customers arising from margin financing business held for trading
investments accounted for 23.9% (December 31, 2013: 17.7%). The current ratio
(current assets over current liabilities) of the Group as at December 31, 2014
was 1.2 (December 31, 2013: 1.4). Excluding the effect of the customer deposits
arising from the securities business, the resultant current ratio of the Group
(current assets less bank balances held on behalf of customers over current
liabilities less balance of accounts payable to customers arising from
securities business) was 1.6 (December 31, 2013: 2.2).
The amount of held for trading investments of the Group as at December 31, 2014
was Rmb2,124.74 million (December 31, 2013: Rmb1,181.03 million), of which
91.2% was invested in bonds, 4.2% was invested in stocks, and the rest was
invested in open-end equity funds.
During the Period, net cash inflow generated from the Group's operating
activities amounted to Rmb3,669.55 million.
The Directors of the Company do not expect the Company to experience any
problems with liquidity and financial resources in the foreseeable future.
Borrowings and solvency
As at December 31, 2014, total liabilities of the Group amounted to
Rmb30,225.12 million (December 31, 2013: Rmb12,420.24 million), of which 1.2%
was bank and other borrowings, 4.0% was subordinated bonds, 20.8% was financial
assets sold under repurchase agreements, 6.4% was placements from other
financial institutions and 54.7% was accounts payable to customers arising from
securities business.
As at December 31, 2014, total interest-bearing borrowings of the Group
amounted to Rmb2,433.57 million, representing an increase of 32.3% compared to
that as at December 31, 2013. The borrowings comprised outstanding balances of
domestic commercial bank loans of Rmb350.00 million, subordinated bonds of
Rmb1,200.00 million, and beneficial certificates of Rmb883.57 million. Of the
interest-bearing borrowings, 57.5% was not payable within one year.
As at December 31, 2014, all of the Group's loans from domestic commercial
banks were long-term loans, of which long-term loans due in one year amounted
to Rmb150.00 million, with floating interest rate ranging from 5.895% to 6.765%
per annum. The annual interest rates for subordinated bonds were fixed at 6.3%
and 5.9%. The fixed interest rates of beneficial certificates ranged from 5.1%
to 7.0% 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 Rmb85.60 million, of which
capitalized interest amounted to Rmb7.37 million, while profit before interest
and tax amounted to Rmb3,846.42 million. The interest cover ratio (profit
before interest and tax over interest expenses) stood at 44.9 (2013: 32.2)
times.
As at December 31, 2014, the asset-liability ratio (total liabilities over
total assets) of the Group was 58.9% (December 31, 2013: 38.7%). Excluding the
effect of customer deposits arising from the securities business, the resultant
asset-liability ratio (total liabilities less balance of accounts payable to
customers arising from securities business over total assets less bank balances
held on behalf of customers) of the Group was 39.3% (December 31, 2013: 17.8%).
Capital structure
As at December 31, 2014, the Group had Rmb21,129.62 million in total equity,
Rmb26,867.77 million in fixed-rate liabilities, Rmb350.00 million in
floating-rate liabilities, and Rmb3,007.35 million in interest-free
liabilities, representing 41.1%, 52.3%, 0.7% and 5.9% of the Group's total
capital, respectively. The gearing ratio, which is computed by dividing the
total liabilities less accounts payable to customers arising from the
securities business by total equity, was 64.7% as at December 31, 2014
(December 31, 2013: 21.6%).
Capital expenditure commitments and utilization
During the Period, capital expenditure of the Group totaled Rmb1,509.44
million, while capital expenditure of the Company totaled Rmb300.93 million.
Amongst the total capital expenditure of the Group, Rmb30.00 million was
incurred for setting up a wholly-owned subsidiary of the Company, Rmb1,276.98
million was incurred for acquisition and construction of properties, Rmb195.28
million was incurred for purchase and construction of equipments and
facilities, and Rmb7.18 million was incurred for service area renovation and
expansion.
As at December 31, 2014, the capital expenditure committed by the Group and the
Company totaled Rmb1,020.15 million and Rmb510.81 million, respectively.
Amongst the total capital expenditures committed by the Group, Rmb308.05
million will be used for acquisition and construction of properties, Rmb431.40
million for acquisition and construction of equipments and facilities, Rmb67.70
million for service area renovation and expansion and Rmb213.00 million for
equity investment.
The Group will finance the above-mentioned capital expenditure commitments with
internally generated cash flow first and then will consider using debt
financing to meet any shortfalls in priority to using other methods.
Contingent liabilities and pledge of assets
Pursuant to the board resolution of the Company dated November 16, 2012, the
Company and Shaoxing Communications Investment Group Co., Ltd. (the other joint
venture partner that holds 50% equity interest in Shengxin Co) provided
Shengxin Co with joint guarantee for its bank loans of Rmb2,200.00 million, in
accordance with their proportionate equity interest in Shengxin Co. During the
Period, Rmb50.00 million of the bank loans had been repaid.
Pursuant to the resolution of shareholders' meeting dated June 26, 2012 of
Zhejiang Yuhang Expressway Co., Ltd. ("Yuhang Co", a 51% equity interest owned
subsidiary of the Company), Yuhang Co provided a property under construction as
a mortgaged asset for its domestic commercial bank loan of Rmb150.00 million.
As at December 31, 2014, the carrying amount of the mortgaged asset was
Rmb786.71 million.
Pursuant to the board resolution dated June 24, 2008 of Zhejiang Jinhua Yongjin
Expressway Co., Ltd. ("Jinhua Co"), Jinhua Co provided the operating right of
the expressway operated by it as pledged asset for its domestic commercial bank
loans of Rmb200.00 million. As at December 31, 2014, the carrying amount of the
pledged asset was Rmb1,777.27 million.
Except for the above, as at December 31, 2014, the Group did not have any other
contingent liabilities, pledge of assets or guarantees.
Foreign exchange exposure
Save for dividend payments to the holders of H shares in Hong Kong dollars, the
Group's principal operations were transacted and booked in Renminbi. Therefore,
the Group's exposure to exchange fluctuation is limited. During the Period, the
Group has not used any financial instruments for hedging purpose.
Although the Directors do not foresee any material foreign exchange risks for
the Group, there is no assurance that foreign exchange risks will not affect
the operating results of the Group in the future.
OUTLOOK
As the world economy continues to struggle for recovery, China's economy is
moving into a "new normal" as it downshifts from rapid growth to more moderate
levels of growth. It is anticipated that the Group's toll road business, which
is closely tied to macro-economic development, will see steady growth in
traffic volume in 2015, while the rate of growth is expected to be lower than
2014.
Qianjiang Road, which opened in the first half of last year, and the Hangzhou
Airport Road, which is currently under construction, will continue to have a
slight diversion impact on traffic from the Shanghai-Hangzhou-Ningbo
Expressway. In addition, the Dongyang-Yongkang Expressway, which will open to
traffic soon, is expected to have a slight diversion impact on traffic from the
Jinhua Section of the Ningbo-Jinhua Expressway. In view of the negative impact
brought by the diversions on surrounding new road networks, the Company will
closely monitor and conduct timely research and analysis as well as to improve
road signage to attract more traffic to the Group's expressways, thereby
minimizing the loss caused by traffic diversions. Meanwhile, the Company will
also work to further control operating costs.
After the launch of Shanghai-Hong Kong Stock Connect program, it is expected
that a series of favorable policies will be launched to promote the development
of the capital markets in China, including an expansion of the Shanghai-Hong
Kong Stock Connect program and the launch of the Shenzhen-Hong Kong Connect
program, which will present new opportunities to the Group's securities
business. Meanwhile, Zheshang Securities will pay close attention to market
policy updates, push to continue innovation in its business, and seek new
profit drivers. In addition, while Zheshang Securities focuses on reinforcing
cost and risk controls, it will look to push forward its listing process on the
Shanghai Stock Exchange, promoting a sustainable and healthy development of its
various lines of businesses.
Looking ahead to 2015, with China's economy moving into a "new normal" mode of
development, the Group's management believes that the new round of economic
reforms will bring new opportunities and challenges to the Group's
transformational development. The Group will strengthen its core expressway
business and improve its securities businesses as well as look for appropriate
investment projects through diversified channels to further exploit its growth
potential and boost profitability in the future.
PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S SHARES
Neither the Company nor any of its subsidiaries purchased, sold, redeemed or
cancelled any of the Company's shares during the Period.
COMPLIANCE WITH LISTING RULES APPENDIX 14
During the Period, the Company complied with all code provisions in the
Corporate Governance Code and Corporate Governance Report (the "Code") set out
in Appendix 14 to the Listing Rules, and adopted the recommended best practices
in the Code as and when applicable.
By Order of the Board
ZHAN Xiaozhang
Chairman
Hangzhou, the PRC, March 18, 2015
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. WANG Dongjie, Mr. DAI Benmeng and
Mr. ZHOU Jianping; and the independent non-executive directors of the Company
are: Mr. ZHOU Jun, Mr. PEI Ker-Wei and Ms. LEE Wai Tsang, Rosa.
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