Zhejiang Expressway Co., Ltd
Achieve Growth
Through Innovation and Prudence
In the first half of 2016, as Zhejiang Province's economy steadily improved,
traffic volume on the Group's expressways continued to register healthy organic
growth, the Group's toll revenue registered an increase of 6.6% year-on-year.
However, due to weak domestic market sentiment and lackluster trading on
domestic stock markets, though income from Zheshang Securities' investment
banking business experienced significant growth, other business segments of
Zheshang Securities recorded varied levels of income decrease year-on-year.
Despite that, Zheshang Securities still outperformed the market in general. In
conclusion, although the Company saw a year-on-year decrease in profit due to
various macro factors, all business segments within the Group remained
competitive.
In the second half of the year, in response to the dynamic change of internal
and external environment, the Company's management will closely monitor the
latest financial policy developments as well as evolving market trends to
better formulate future strategic development plans. The Group will look to
expand its core expressway business by investing in and acquiring quality toll
road assets to further enhance its core competencies while strengthening its
securities business and seeking suitable investments and development projects
in order to enlarge the asset scale of its core businesses and increase future
profitability.
Contents
2016 Interim Results
Business Review
Financial Analysis
Outlook
Disclosure of Interests and Other Matters
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Condensed Consolidated Statement of Financial Position
Condensed Consolidated Statement of Changes in Equity
Condensed Consolidated Statement of Cash Flows
Notes to Condensed Consolidated Financial Statements
Appendices
Corporate Information
Corporate Structure of the Group
Financial Highlights
Location Map of Expressways in Zhejiang Province
2016 Interim Results
The directors (the "Directors") of Zhejiang Expressway Co., Ltd. (the
"Company") announced the unaudited consolidated operating results of the
Company and its subsidiaries (collectively the "Group") for the six months
ended June 30, 2016 (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 Rmb5,337.12 million, representing
a decrease of 13.7% over the same period in 2015. Profit for the Period
attributable to owners of the Company was Rmb1,368.21 million, representing a
decrease of 8.5% year-on-year. Earnings per share for the Period was Rmb31.50
cents (corresponding period in 2015 (Restated): Rmb34.43 cents).
The Directors have recommended to pay an interim dividend of Rmb6 cents per
share (corresponding period in 2015: Rmb6 cents), subject to shareholders'
approval at the extraordinary general meeting of the Company to be held in due
course.
The interim report has not been audited or reviewed by the auditors but has
been reviewed by the audit committee of the Company.
Business Review
During the first half of 2016, in response to the complex domestic and overseas
environment and continuing downward economic pressure, China initiated a number
of measures to expand its overall demand while accelerating the supply-side
reform. The economy was stable for the most part and recorded a steady 6.7%
year-on-year GDP growth. Meanwhile, Zhejiang Province's economy demonstrated
decent growth momentum as it benefited from the continuous rapid growth of the
tertiary industry and notable upgrades in its economic structure. Zhejiang
Province's first-half GDP recorded a year-on-year increase of 7.7%, one
percentage point higher than the national rate.
As Zhejiang Province's economy steadily improved during the Period, traffic
volume on the Group's expressways continued to register healthy organic growth.
Revenue from the Group's overall operations decreased 13.7% year-on-year to
Rmb5,337.12 million, of which Rmb2,537.81 million was generated by the four
major expressways operated by the Group, representing an increase of 6.6%
year-on-year and 47.6% of the total revenue. Revenue from the Group's toll
road-related businesses was Rmb532.11 million, representing a decrease of 43.2%
year-on-year and 10.0% of the total revenue. The Group's securities business
contributed revenue of Rmb2,152.38 million, representing a decrease of 24.8%
year- on-year and 40.3% of the total revenue.
A breakdown of the Group's revenue for the Period is set out below:
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
Toll revenue
Shanghai-Hangzhou-Ningbo Expressway 1,620,279 1,500,205
Shangsan Expressway 537,800 496,312
Jinhua section, Ningbo-Jinhua Expressway 160,198 159,848
Hanghui Expressway 219,529 223,488
Toll road-related business revenue
Service areas 521,277 886,397
Advertising 10,829 22,052
External road maintenance - 28,436
Securities business revenue
Commission and fee 1,407,455 2,026,162
Interest 744,925 835,709
Other operation revenue
Hotel operation 43,431 7,266
Property sales 71,397 -
Total revenue 5,337,120 6,185,875
Toll Road Operations
During the Period, driven by Zhejiang Province's notable economic developments
in the tertiary services industry and decent growth in fixed asset investment,
Zhejiang Province's economy maintained its growth momentum and traffic volume
on the Group's expressways registered solid organic growth. The organic traffic
volume growth for the Group's four expressways, namely the
Shanghai-Hangzhou-Ningbo Expressway, the Shangsan Expressway, the Jinhua
Section of the Ningbo-Jinhua Expressway and the Hanghui Expressway, were 8.3%,
8.6%, 8.8% and 5.7%, respectively, with the varied rates of growth due to the
different regions where the four expressways are located.
During the Period, as Hangzhou's GDP in the first half of 2016 surged by 10.8%
year-on-year, the transportation volume of the city and its surrounding areas
saw substantial increase, which resulted in a significant increase in traffic
volume along the Shanghai-Hangzhou-Ningbo Expressway. However, the opening of
the Hangzhou Xiaoshan Airport Expressway and surrounding elevated highways in
early May 2016 caused certain traffic volume diversion for the Qiantang River
Second Bridge of the Hangzhou- Ningbo Expressway operated by the Group.
Due to an increase in truck traffic volume, the overall traffic volume of the
Shangsan Expressway was higher than expected during the Period.
The Hangzhou-Jinhua-Quzhou Expressway had been closed due to construction for
four months starting from June 2015, resulting in a temporary increase of
traffic volume on the neighboring Jinhua Section of the Ningbo-Jinhua
Expressway. The completion of construction in September 2015 caused the traffic
volume of the Jinhua Section of the Ningbo-Jinhua Expressway to fall back
significantly. In addition, the Dongyang-Yongkang Expressway was opened to
traffic in July 2015 and caused a continuous diversion impact on traffic volume
from the Jinhua Section of the Ningbo-Jinhua Expressway. As a result of these
factors, there was a decrease in the overall traffic volume on the Jinhua
Section of the Ningbo-Jinhua Expressway during the Period.
The Hanghui Expressway registered lower organic growth in traffic volume during
the Period, as a result of the sluggish regional economy in the surrounding
areas. Concurrently, a section of the Hangzhou- Jinhua-Quzhou Expressway, which
is not operated by the Group but runs parallel to the Hanghui Expressway, was
reopened for traffic following construction, and certain sections of
expressways running from Jiangxi to Hangzhou cancelled their truck height
limits. As a result, a majority of long- distance trucks have returned to their
original routes or chose alternative local roads, causing significant decreases
in the truck traffic volume on the Hanghui Expressway, adversely impacting
overall traffic volume on the section during the Period.
During the Period, the average daily traffic volume in full-trip equivalents
along the Group's Shanghai- Hangzhou-Ningbo Expressway was 49,807, representing
an increase of 6.8% 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 48,987, representing an increase of
10.7% year-on-year, and that along the Hangzhou-Ningbo Section was 50,392,
representing an increase of 4.9% year-on- year. Average daily traffic volume in
full-trip equivalents along the Shangsan Expressway was 27,131, representing an
increase of 8.2% year-on-year. Average daily traffic volume in full-trip
equivalents along the Jinhua Section of the Ningbo-Jinhua Expressway was
17,661, representing a decrease of 1.1% year- on-year. Average daily traffic
volume in full-trip equivalents along the Hanghui Expressway was 16,134,
representing an increase of 4.2% year-on-year.
During the Period, total toll revenue from the 248km Shanghai-Hangzhou-Ningbo
Expressway, the 142km Shangsan Expressway, the 70km Jinhua Section of the
Ningbo-Jinhua Expressway and the 122km Hanghui Expressway was Rmb2,537.81
million, representing an increase of 6.6% year-on- year. Among which, toll
revenue from the Shanghai-Hangzhou-Ningbo Expressway was Rmb1,620.28 million,
representing an increase of 8.0% year-on-year; toll revenue from the Shangsan
Expressway was Rmb537.80 million, representing an increase of 8.4%
year-on-year; toll revenue from the Jinhua Section of the Ningbo-Jinhua
Expressway was Rmb160.20 million, representing an increase of 0.2% year-on-
year; and toll revenue from the Hanghui Expressway was Rmb219.53 million,
representing a decrease of 0.2% year-on-year (on the same basis as last year).
Toll Road-Related Business Operations
The Company also operates certain toll road-related businesses along its
expressways through its subsidiaries, including gas stations, restaurants and
shops in service areas, as well as advertisements. Since May 2016, the Company
has agreed to contract out the operation of several gas stations in its service
areas to Zhejiang Expressway Petroleum Development Co., Ltd. For details,
please refer to the Company's announcement "Continuing Connected Transactions
in Relation to Contracting out Operation of Service Stations" dated May 27,
2016.
Zhejiang Province took action in 2014 to remove billboards from along sides of
its expressways, which gradually narrowed most of the advertising business of
the Group's subsidiary to expressway service areas. As a result, advertising
income was substantially reduced within the Period. Additionally, during the
Period, the overall income of the toll road-related business operations was
adversely affected due to several reductions in the retail prices of domestics
refined oil products. During the Period, revenue from toll road-related
operations was Rmb532.11 million, representing a decrease of 43.2%
year-on-year.
Securities Business
During the Period, due to weak domestic market sentiment, trading on domestic
stock markets was lackluster. Trading volume on the Shanghai and Shenzhen stock
markets decreased 52.9% year-on- year in total. Concurrently, there was a
continued decline in average brokerage commission rate. As a result of these
factors, during the Period, though income from Zheshang Securities' investment
banking business experienced significant growth, other business segments of
Zheshang Securities recorded varied levels of income decrease year-on-year.
During the Period, Zheshang Securities recorded total operating revenue of
Rmb2,152.38 million, a decrease of 24.8% year-on-year. Of which, commission and
fee revenue declined 30.5% year-on-year to Rmb1,407.45 million, and interest
revenue from the securities business was Rmb744.93 million, representing a
decrease of 10.9% year-on-year. Moreover, during the Period, securities
investment gains of Zheshang Securities included in the condensed consolidated
statement of profit or loss and other comprehensive income of the Group was
Rmb107.99 million (corresponding period of 2015: gains of Rmb324.65 million).
Despite income from most of Zheshang Securities' businesses declining during
the Period with the exception of its investment banking business, Zheshang
Securities still outperformed the market in general. Zheshang Securities
continued to develop all its businesses steadily, as its asset management
business further expanded in scale while its investment banking business
reported a new high in income amidst weak market sentiment. In addition,
Zheshang Securities' IPO application to the Shanghai Stock Exchange was
accepted by the China Securities Regulatory Commission in May, 2013, and it
remains on the wait list for an IPO.
Other Business Operations
Other business income was mainly derived from hotel operations and sales of
ancillary apartments, namely the Qiyu Apartments.
Grand New Century Hotel, owned by Zhejiang Yuhang Expressway Co., Ltd. (a 51%
owned subsidiary of the Company), realized revenue of Rmb43.43 million for the
Period.
Qiyu Apartments opened for sale on November 29, 2015. 151 flats were sold out
during the Period and realized a sales revenue of Rmb71.40 million.
Long-Term Investments
Zhejiang Shaoxing Shengxin Expressway Co., Ltd. ("Shengxin Co", a 50% owned
joint venture of the Company) operates the 73.4km Shaoxing Section of the
Ningbo-Jinhua Expressway. During the Period, the average daily traffic volume
in full-trip equivalents was 16,320, an increase of 13.7% year-on-year. Toll
revenue during the Period was Rmb169.38 million. During the Period, the joint
venture turned profitable for the first time and reported a net profit of
Rmb0.20 million (corresponding period of 2015: net loss of Rmb30.47 million).
During the Period, Zhejiang Communications Investment Group Finance Co., Ltd.
(a 35% owned associate company of the Company), derived income mainly from
interest, fees and commissions for providing financial services, including
arranging loans and receiving deposits, for the subsidiaries of Zhejiang
Communications Investment Group Co., Ltd., the controlling shareholder of the
Company. During the Period, this associate company realized a net profit of
Rmb49.92 million (corresponding period of 2015: net profit of Rmb78.49
million).
Human Resources
During the Period, the Company actively revamped its human resource management,
improved its remuneration and performance policy, and promoted the pegging of
overall remuneration increase with the productivity of employees, thereby
paving the way for increasing employees' remuneration. There was no significant
change in other staff matters and assignment compared with the details
disclosed in the Company's most recent annual report.
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 Rmb1,368.21 million, representing a decrease of 8.5% over the
corresponding period of 2015, return on owners' equity was 8.1%, representing a
decrease of 4.7% over the corresponding period of 2015, while earnings per
share for the Company was Rmb31.5 cents.
Liquidity and Financial Resources
As at June 30, 2016, current assets of the Group amounted to Rmb52,249.47
million in aggregate (December 31, 2015: Rmb54,359.48 million), of which bank
balances and cash accounted for 7.3% (December 31, 2015: 9.7%), bank balances
held on behalf of customers accounted for 42.9% (December 31, 2015: 49.8%),
held for trading investments accounted for 13.5% (December 31, 2015: 6.9%) and
loans to customers arising from margin financing business accounted for 14.7%
(December 31, 2015: 19.4%). Current ratio (current assets over current
liabilities) of the Group as at June 30, 2016 was 1.2 (December 31, 2015: 1.3).
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 1.4
(December 31, 2015: 1.8).
As at As at
June 30, December 31,
2016 2015
Rmb'000 (Unaudited) Rmb'000 (Audited)
Cash and Cash equivalents
Rmb 3,498,769 4,935,103
US$ in Rmb equivalent 46,034 33,386
HK$ in Rmb equivalent 9,003 14,562
Time deposit - Rmb 275,000 270,000
Held for trading investments - Rmb 7,040,990 3,761,224
Available-for-sale investments - Rmb 1,213,642 1,032,750
Total 12,083,438 10,047,025
Rmb 12,028,401 9,999,077
US$ in Rmb equivalent 46,034 33,386
HK$ in Rmb equivalent 9,003 14,562
The amount of held for trading investments of the Group as at June 30, 2016 was
Rmb7,040.99 million (December 31, 2015: Rmb3,761.22 million), of which 96.9%
was invested in bonds, 3.0% was invested in stocks, and the rest was invested
in open-end equity funds.
During the Period, net cash flow generated from the Group's operating
activities amounted to Rmb1,804.42 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, 2016, total liabilities of the Group amounted to Rmb49,042.35
million (December 31, 2015: Rmb51,893.11 million), of which 6.0% was bank and
other borrowings, 2.0% was short- term financing note, 18.4% was bonds payable,
19.4% was financial assets sold under repurchase agreements, and 45.7% was
accounts payable to customers arising from securities business.
As at June 30, 2016, total interest-bearing borrowings of the Group amounted to
Rmb12,924.69 million, representing a decrease of 11.4% compared to that as at
December 31, 2015. The borrowings comprised outstanding balances of domestic
commercial bank loans of Rmb1,904.69 million, borrowings from other domestic
financial institution of Rmb450.00 million, entrusted loans from Communications
Group of Rmb570.00 million, short-term financing note of Rmb1.00 billion,
beneficial certificates of Rmb1.30 billion, subordinated bonds of Rmb6.20
billion and corporate bonds of Rmb1.50 billion. Of the interest-bearing
borrowings, 33.8% was not payable within one year.
Maturity Profile
>1 year-
Gross total Within 5 year Beyond
1 year inclusive 5 year
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Floating rates
Domestic commercial bank loans 496,739 496,739 - -
Other domestic financial institution 450,000 450,000 - -
Fixed rates
Domestic commercial bank loans 1,407,951 1,407,951 - -
Entrusted loans from 570,000 - 570,000 -
Communications Group
Short-term financing note payable
- short-term financing note 1,000,000 1,000,000 - -
Bonds payable
- beneficial certificates 1,300,000 - 1,300,000 -
Bonds payable
- subordinated bonds 6,200,000 5,200,000 1,000,000 -
Bonds payable
- corporate bonds 1,500,000 - 1,500,000 -
Total as at June 30, 2016 12,924,690 8,554,690 4,370,000 -
Total as at December 31, 2015 14,584,051 5,394,051 8,860,000 330,000
As at June 30, 2016, the Group's loans from domestic commercial banks were
short and long-term loans, of which long-term loans due in one year amounted to
Rmb150.00 million, with floating interest rate ranging from 4.1325% to 4.9875%
per annum. The floating interest rates for borrowings from other domestic
financial institutions ranged from 4.275% to 4.5125% per annum. The annual
interest rates for entrusted loans from Communications Group were fixed at
4.55%. The annual coupon rate for short-term loan note was fixed at 2.97%. The
fixed annual interest rates of beneficial certificates ranged from 3.45% to
3.5% respectively. The fixed annual interest rates for subordinated bonds
ranged from 5.7% to 6.3% respectively. The annual coupon rate for corporate
bonds was fixed at 4.9%, 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 Rmb344.48 million, while
profit before interest and tax amounted to Rmb2,617.72 million. The interest
cover ratio (profit before interest and tax over interest expenses) stood at
7.6 (corresponding period of 2015 (Restated): 11.5) times.
As at June 30, 2016, the asset-liability ratio (total liabilities over total
assets) of the Group was 68.8% (December 31, 2015: 70.2%). 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 54.5% (December 31, 2015: 53.2%).
Capital Structure
As at June 30, 2016, the Group had Rmb22,284.22 million in total equity,
Rmb43,893.27 million in fixed-rate liabilities, Rmb946.74 million in
floating-rate liabilities, and Rmb4,202.34 million in interest- free
liabilities, representing 31.2%, 61.5%, 1.3% and 6.0% 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 119.5% as at June 30, 2016 (December
31, 2015: 113.1%).
Capital Expenditure Commitments and Utilization
During the Period, capital expenditure of the Group totaled Rmb90.73 million.
Amongst the total capital expenditure of the Group, Rmb15.27 million was
incurred for acquisition and construction of properties, Rmb72.96 million was
incurred for purchase and construction of equipments and facilities, and
Rmb2.50 million was incurred for service area renovation and expansion.
As at June 30, 2016, the remaining capital expenditure committed by the Group
totaled Rmb570.46 million. Amongst the remaining balance of total capital
expenditures committed by the Group, Rmb302.36 million will be used for
acquisition and construction of properties, Rmb239.26 million for acquisition
and construction of equipment and facilities, Rmb28.84 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 comprehensively consider
using debt financing and equity financing to meet any shortfalls.
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 a joint guarantee for its bank loans of Rmb2,200.00 million,
in accordance with their proportionate equity interest in Shengxin Co. During
the Period, Rmb60.00 million of the bank loans had been repaid and the
remaining outstanding balance of the loans as at June 30, 2016 was Rmb1,980.00
million.
Except for the above, as at June 30, 2016, the Group did not have any other
contingent liabilities, pledge of assets or guarantees.
Foreign Exchange Exposure
Save for (i) dividend payments to the holders of H shares in Hong Kong dollars,
(ii) borrowing of HK$432,527,000 on June 8, 2016, and (iii) Zheshang
International Financial Holding Co., Limited (a wholly owned subsidiary of
Zheshang Securities) operating in Hong Kong, the Group's principal operations
were transacted and denominated in Renminbi. During the Period, the Group
purchased one-year Hong Kong dollar forwards of equivalent amount to hedge the
foreign exchange risk derived from the Hong Kong dollar borrowing. Except for
the above, during the Period the Group has not used any other financial
instruments for hedging purpose. Therefore, the Group's exposure to exchange
fluctuation is limited.
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 economic uncertainty has increased globally, downward pressure on China's
economy is expected to continue. Under the "new normal", Zhejiang Province, a
region with an above average growth outlook across China, will also face
relatively more intense economic pressure. The Group expects that the Group's
toll road business will maintain steady growth in 2016 given the macro and
regional economic outlook, albeit with a slightly slower growth rate in organic
traffic volume compared with 2015.
Currently, the business environment for the toll road industry is becoming
increasingly complex. As more and more expressways within Zhejiang Province are
launched for traffic, there will be a positive network effect but will also
cause diversion impact. The Dongyang-Yongkang Expressway, which opened for
traffic in July 2015, is expected to continue to have a slight diversion impact
on traffic on the Jinhua Section of the Ningbo-Jinhua Expressway but the impact
has been stabilized. The Group will endeavor to strengthen the monitoring and
analysis of the transportation network as well as researching the traffic
trends of the Group's expressways and the factors involved. The Group will
adopt specific promotional and marketing measures to direct and attract more
vehicles to use the expressways operated by the Group to minimize the diversion
impact.
China's securities market is still in the process of deleveraging, but the
Chinese government has released a series of measures to promote the healthy
development of its capital market, a signal to show the government's confidence
in the securities sector's sustainable development in the long term, which may
bring new opportunities to the Group's securities business. At the same time,
the Group will explore all potential avenues to accelerate Zheshang Securities'
A-Share listing application on the Shanghai Stock Exchange. Moreover, Zheshang
Securities will expand into innovative businesses and seek new profit drivers
while strengthening its cost control and risk management.
Looking ahead into the second half of 2016, although China might still see
continued downward economic pressure, the Company's management believes that
the supply-side reform and various economic transformation measures initiated
by Zhejiang Province will create a favorable development environment for all of
the Group's businesses.
In July 2016, the Zhejiang Province government made a decision to merge
Zhejiang Communications Investment Group Co., Ltd. ("Communications Group", the
controlling shareholder of the Company) with Zhejiang Railway Investment Group
Limited Co., Ltd. into a provincial communications investment and financing
platform. This new business entity, which will continue to use the name of
Communications Group, will be responsible for more construction assignments of
transportation and infrastructure projects, thereby providing more
opportunities in a wider scope for the Company to invest in and acquire quality
transportation and infrastructure projects within the province.
In response to the dynamic change of internal and external environment, the
Company's management will closely monitor the latest financial policy
developments as well as evolving market trends to better formulate future
strategic development plans. The Group will look to expand its core expressway
business by investing in and acquiring quality toll road assets to further
enhance its core competencies while strengthening its securities business and
seeking suitable investments and development projects in order to enlarge the
asset scale of its core businesses and increase future profitability.
Disclosure of Interests and Other Matters
PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S SHARES
Neither the Company nor any of its subsidiaries has purchased, sold, redeemed
or cancelled any of the Company's shares during the Period.
DISCLOSURE OF DIRECTORS', SUPERVISORS' AND CHIEF EXECUTIVE'S INTERESTS AND
SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES
As at June 30, 2016, none of the Directors, supervisors and chief executives of
the Company had any interest or short position in the shares, underlying shares
or debentures of the Company or any of its associated corporations (within the
meaning of Part Xv of the Securities and Futures Ordinance (Cap 571 of the Laws
of Hong Kong) (the "SFO")) as recorded in the register required to be kept
pursuant to Section 352 of the SFO, or as otherwise notified to the Company and
The Stock Exchange of Hong Kong Limited (the "Stock Exchange") pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers (the
"Model Code") in Appendix 10 to the Rules Governing the Listing of Securities
on the Stock Exchange (the "Listing Rules").
OTHER INTERESTS DISCLOSEABLE UNDER THE SFO
As at June 30, 2016, the following shareholders held 5% or more of the issued
share capital of the Company according to the register of interests in shares
required to be kept by the Company pursuant to Section 336 of the SFO:
Substantial shareholders Capacity Total interests Percentage
in number of of
ordinary shares the issued
of the Company share
capital
of the
Company
(domestic
shares)
Zhejiang Communications Investment Group Co., Ltd. Beneficial 2,909,260,000 100%
owner
Substantial shareholders Capacity Total interests Percentage
in number of of
ordinary shares the issued
of the Company share
capital
of the
Company
(H Shares)
JP Morgan Chase & Co. Beneficial 169,442,626 (L) 11.81%
owner, 1,326,000 (S) 0.09%
investment 66,804,479 (P) 4.65%
manager and
custodian
corporation
/approved
lending
agent
BlackRock, Inc. Interest of 130,897,684 (L) 9.13%
controlled
corporation
The Bank of New York Mellon Corporation Interest of 71,908,156 (L) 5.02%
controlled 66,367,400 (P) 4.63%
corporation
The letter "L" denotes a long position. The letter "S" denotes a short
position. The letter "P" denotes interest in a lending pool.
Save as disclosed above, as at June 30, 2016, no person had registered an
interest or short position in the shares or underlying shares of the Company
that was required to be recorded pursuant to Section 336 of the SFO.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE AND THE MODEL CODE
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 Company has adopted a code of conduct regarding directors' securities
transactions on terms no less exacting than the required standard set out in
the Model Code. The Directors have confirmed their full compliance with the
required standard set out in the Model Code and its code of conduct regarding
directors' securities transactions during the Period.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE INTERIM REPORT AND
ACCOUNTS
Each of the Directors of the Company, whose name and function are listed in the
section headed "Corporate Information" of this report, confirms that, to the
best of his/her knowledge:
- the condensed consolidated financial statements prepared in accordance with
Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of
Certified Public Accountants give a true and fair view of the assets,
liabilities, financial position and performance of the Group and the
undertakings included in the consolidation taken as a whole;
- the management discussion and analysis included in the interim report
includes a fair review of the development and performance of the business and
the position of the Group and the undertakings included in the consolidation
taken as a whole during the Period, together with a description of the
principal risks and uncertainties that the Group faces for the remaining six
months of the financial year; and
- the interim report includes a fair review of the material related party
transactions that have taken place during the Period and any material changes
in the related party transactions described in the Company's annual report for
the year ended 31 December 2015.
By order of the Board
Zhejiang Expressway Co., Ltd.
ZHAN Xiaozhang
Chairman
Hangzhou, the PRC, August 18, 2016
The electronic version of this report is published on the HKExnews website of
the Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.com.hk) and
on the Company's website (www.zjec.com.cn).
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive
Income
For the six months ended June 30,
Notes 2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Revenue 4 5,337,120 6,185,875
Operating costs (2,947,503) (3,555,595)
Gross profit 2,389,617 2,630,280
Securities investment gains 112,238 332,925
Other income 5 182,214 122,649
Administrative expenses (43,101) (48,125)
Other expenses (22,355) (44,777)
Share of (loss) profit of associates (992) 21,141
Share of profit (loss) of a joint venture 98 (15,234)
Finance costs 6 (344,479) (257,388)
Profit before tax 7 2,273,240 2,741,471
Income tax expense 8 (575,114) (705,540)
Profit for the Period 1,698,126 2,035,931
Other comprehensive (loss) income
Items that may be reclassified subsequently to profit or loss:
Available-for-sale financial assets
- Fair values gain during the Period 2,666 21,747
- Reclassification adjustments for cumulative gain included in profit or loss (21,254) (410)
upon disposal
Exchange differences on translating foreign operations 90 (125)
Income tax relating to items that may be reclassified subsequently 4,647 (5,334)
Other comprehensive (loss) income for the Period, net of tax (13,851) 15,878
Total comprehensive income for the Period 1,684,275 2,051,809
Profit for the Period attributable to:
Owners of the Company 1,368,206 1,495,193
Non-controlling interests 329,920 540,738
1,698,126 2,035,931
Total comprehensive income for the Period attributable to:
Owners of the Company 1,360,985 1,503,315
Non-controlling interests 323,290 548,494
1,684,275 2,051,809
Earnings per share - Basic and diluted 10 Rmb31.50 cents Rmb34.43 cents
Condensed Consolidated Statement of Financial Position
Notes As at As at
June 30, December
2016 31,
Rmb'000 2015
(Unaudited) Rmb'000
(Audited)
Non-current assets
Property, plant and equipment 3,113,077 3,178,494
Prepaid lease payments 56,776 57,745
Expressway operating rights 12,733,572 13,229,442
Goodwill 86,867 86,867
Other intangible assets 144,285 155,219
Interests in associates 644,444 583,537
Interest in a joint venture 275,698 275,600
Available-for-sale investments 1,682,378 1,635,858
Deferred tax assets 340,002 329,526
19,077,099 19,532,288
Current assets
Inventories 334,732 316,528
Trade receivables 11 191,901 151,083
Loans to customers arising from margin financing business 12 7,658,277 10,550,590
Other receivables and prepayments 13 1,588,591 1,231,799
Prepaid lease payments 1,939 1,939
Dividend receivable - 20,494
Derivative financial assets - 2,288
Available-for-sale investments 1,213,642 1,032,750
Held for trading investments 7,040,990 3,761,224
Financial assets held under resale agreements 14 7,987,561 4,959,155
Bank balances held on behalf of customers 22,403,032 27,078,574
Bank balances and cash
- Time deposits with original maturity over three months 275,000 270,000
- Cash and cash equivalents 3,553,806 4,983,051
52,249,471 54,359,475
Current liabilities
Placements from other financial institutions - 200,000
Accounts payable to customers arising from 22,402,799 27,009,641
securities business
Trade payables 15 746,710 908,616
Tax liabilities 345,222 641,606
Other taxes payable 79,206 88,022
Other payables and accruals 16 2,642,901 2,809,079
Dividends payable 123,848 333
Derivative financial liabilities 7,762 4,258
Bank and other borrowings 2,354,690 1,777,951
Short-term financing note payable 1,000,000 616,100
Bonds payable 5,200,000 3,000,000
Financial assets sold under repurchase agreements 17 9,512,523 5,385,380
44,415,661 42,440,986
Net current assets 7,833,810 11,918,489
Total assets less current liabilities 26,910,909 31,450,777
Non-current liabilities
Bank and other borrowings 570,000 1,590,000
Bonds payable 3,800,000 7,600,000
Deferred tax liabilities 256,692 262,128
4,626,692 9,452,128
22,284,217 21,998,649
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 12,538,456 12,393,543
Equity attributable to owners of the Company 16,881,571 16,736,658
Non-controlling interests 5,402,646 5,261,991
22,284,217 21,998,649
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the Company Non- Total
controlling
interests
Share Share Statutory Capital Investment Foreign Special Dividend Retained Total
capital premium reserve reserve revaluation currency reserves reserve profits
reserve translation
reserve
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2015 (Audited and restated) 4,343,115 3,645,726 3,907,055 1,712 28,403 - 1,599,088 1,150,925 2,324,873 17,000,897 4,127,573 21,128,470
Profit for the Period - - - - - - - - 1,495,193 1,495,193 540,738 2,035,931
Other comprehensive income for the Period - - - - 8,187 (65) - - - 8,122 7,756 15,878
Total comprehensive income for the Period - - - - 8,187 (65) - - 1,495,193 1,503,315 548,494 2,051,809
Dividend paid to non-controlling interests - - - - - - - - - - (106,008) (106,008)
Final dividend - - - - - - - (1,150,925) - (1,150,925) - (1,150,925)
Proposed interim dividend - - - - - - - 260,587 260,587 - - -
At June 30, 2015 (Unaudited and restated) 4,343,115 3,645,726 3,907,055 1,712 36,590 (65) 1,599,088 260,587 3,559,479 17,353,287 4,570,059 21,923,346
Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000 Rmb'000
At January 1, 2016 (Audited) 4,343,115 3,355,621 4,505,773 1,712 56,332 191 18,666 1,216,072 3,239,176 16,736,658 5,261,991 21,998,649
Profit for the Period - - - - - - - - 1,368,206 1,368,206 329,920 1,698,126
Other comprehensive income for the Period - - - - (7,268) 47 - - - (7,221) (6,630) (13,851)
Total comprehensive income for the Period - - - - (7,268) 47 - - 1,368,206 1,360,985 323,290 1,684,275
Settlement of assets management product upon expiry - - - - - - - - - - (4,880) (4,880)
Dividend paid to non-controlling interests - - - - - - - - - - (150,111) (150,111)
Final dividend - - - - - - - (1,216,072) - (1,216,072) - (1,216,072)
Dividend for non-controlling interests - - - - - - - - - - (27,644) (27,644)
Proposed interim dividend - - - - - - - 260,587 (260,587) - - -
At June 30, 2016(Unaudited) 4,343,115 3,355,621 4,505,773 1,712 49,064 238 18,666 260,587 4,346,795 16,881,571 5,402,646 22,284,217
Condensed Consolidated Statement of Cash Flows
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Net cash from (used in) operating activities 1,804,419 (3,805,132)
Net cash used in investing activities (293,845) (228,296)
Net cash (used in) from financing activities (2,939,909) 8,630,214
Net (decrease) increase in cash and cash equivalents (1,429,335) 4,596,786
Cash and cash equivalents at beginning of the Period 4,983,051 3,356,563
Effect of exchange rate changes on the balance of cash and cash equivalents 90 (125)
held in foreign currencies
Cash and cash equivalents at end of the Period 3,553,806 7,953,224
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PREPARATION
The condensed consolidated financial statements have been prepared in
accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting
issued by the Hong Kong Institute of Certified Public Accountants (the
"HKICPA") as well as with the applicable disclosure requirements of Appendix 16
to the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the "Listing Rules").
2. MERGER ACCOUNTING RESTATEMENT
On August 5, 2015, the Company entered into a share transfer agreement with
Zhejiang Communications Investment Group Co., Ltd. ("Communications Group") to
acquire 80.614% equity interest in Zhejiang Hanghui Expressway Co., Ltd.
("Hanghui Co") from Communications Group for a cash consideration of
Rmb1,699,348,000. Hanghui Co is principally engaged in the operation and
management of the Hanghui Expressway, which is the Zhejiang section of
Hangzhou-Ruili Expressway (G56) within the national expressway network. Before
the above acquisition, Hanghui Co was 80.614% owned by Communications Group and
19.386% owned by non-controlling shareholders. The acquisition has been
approved by independent shareholders on October 15, 2015 and subsequently
completed on November 10, 2015. After the completion of the acquisition,
Hanghui Co then became an 80.614% owned subsidiary of the Group and in December
2015, the equity interest held by the Group was increased to 88.674% after the
Company made a capital contribution to Hanghui Co. Since Communications Group
is the parent company of the Company, the Group's acquisition of the 80.614%
equity interest from Communications Group was regarded as a 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" ("AG5") issued
by 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 six months ended June 30, 2015 have therefore been restated, in
order to include the profit, assets and liabilities of the combining entities
since the date on which they first come under common control.
The adoption of merger accounting method in respect of the Group's acquisition
of 80.614% equity interest in Hanghui Co has resulted in a decrease in total
comprehensive income attributable to owners of the Company, a decrease in
profit attributable to owners of the Company and a decrease in earnings per
share (basic and diluted) for the six months ended June 30, 2015 by
Rmb19,255,000, Rmb19,255,000 and Rmb0.44 cents, respectively.
3. PRINCIPAL ACCOUNTING POLICIES
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.
In the Period, the Group has applied, for the first time, certain amendments to
Hong Kong Financial Reporting Standards (the "HKFRSs") issued by HKICPA that
are mandatorily effective for the Period. The application of the amendments to
HKFRSs in the Period has had no material effect on the amounts reported in
these condensed consolidated financial statements and/or relevant disclosures
set out in these condensed consolidated financial statements.
Except for the above, the accounting policies and methods of computation
applied in the condensed consolidated financial statements for the Period are
consistent with those followed in the preparation of the Group's annual
financial statements for the year ended December 31, 2015.
4. REVENUE AND SEGMENT INFORMATION
Compared to the same period last year, there were no major 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, 2016 (Unaudited)
Toll Toll Securities Other Total Elimination Total
operation related operation operation segment Rmb'000 Rmb'000
Rmb'000 operation Rmb'000 Rmb'000 Rmb'000
Rmb'000
Revenue
External sales 2,537,806 532,106 2,152,380 114,828 5,337,120 - 5,337,120
Inter-segment Sales - 283 - - 283 (283) -
Total 2,537,806 532,389 2,152,380 114,828 5,337,403 (283) 5,337,120
Segment profit 1,183,392 35,119 526,063 (46,448) 1,698,126 1,698,126
Revenue
External sales 2,379,853 936,885 2,861,871 7,266 6,185,875 - 6,185,875
Inter-segment sales - 11,255 - - 11,255 (11,255) -
Total 2,379,853 948,140 2,861,871 7,266 6,197,130 (11,255) 6,185,875
Segment profit 1,002,451 46,729 990,906 (4,155) 2,035,931 2,035,931
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,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Toll operation revenue 2,537,806 2,379,853
Service area businesses revenue (mainly sales of goods) 521,277 886,397
Advertising business revenue 10,829 22,052
Toll road maintenance service revenue - 28,436
Commission and fee revenue from securities operation 1,407,455 2,026,162
Interest revenue from securities operation 744,925 835,709
Hotel and catering revenue 43,431 7,266
Property sales revenue 71,397 -
Total 5,337,120 6,185,875
5. OTHER INCOME
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Interest income on bank balances and entrusted loan receivables 17,480 28,449
Rental income 77,776 50,056
Gain on commodity trading, net 22,747 3,722
Handling fee income 1,298 1,674
Towing income 3,958 4,228
Exchange loss, net (4,519) (9)
Others 63,474 34,529
Total 182,214 122,649
6. FINANCE COSTS
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Interest expenses wholly repayable within 5 years:
Bank and other borrowings 70,660 96,509
Short-term financing note 8,723 42,609
Bonds payable 265,096 121,523
Total borrowing costs 344,479 260,641
Less: Amount capitalised in the cost of qualifying assets - (3,253)
344,479 257,388
7. PROFIT BEFORE TAX
The Group's profit before tax has been arrived at after charging:
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Depreciation of property, plant and equipment 130,860 104,744
Release of prepaid lease payments 969 1,076
Amortisation of expressway operating rights
(included in operating costs) 495,870 495,931
Amortisation of other intangible assets (included in operating costs) 12,424 11,477
Cost of inventories recognised as an expense 450,892 794,047
8. INCOME TAX EXPENSE
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Current tax:
PRC Enterprise Income Tax 586,379 713,166
Deferred tax (11,265) (7,626)
575,114 705,540
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%.
Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable
profit. No Hong Kong Profits Tax has been provided as the Group has no
estimated assessable profit during the Period.
9. DIVIDENDS
The Directors have recommended the payment of an interim dividend of Rmb6 cents
per share (corresponding period of 2015: Rmb6 cents per share), subject to
shareholders' approval at the extraordinary general meeting of the Company.
10. 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 Rmb1,368,206,000 (corresponding
period of 2015 (Restated): Rmb1,495,193,000) and the 4,343,114,500
(corresponding period of 2015: 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 were no potential ordinary shares outstanding during both periods.
11. TRADE RECEIVABLES
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Trade receivables comprise:
Fellow subsidiaries 4,330 10,331
Third parties 188,837 142,044
Total trade receivables 193,167 152,375
Less: Allowance for doubtful debts (1,266) (1,292)
191,901 151,083
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 operated by Zheshang
Securities Co., Ltd ("Zheshang 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
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
within 3 months 177,698 80,949
3 months to 1 year 11,577 64,493
1 to 2 years 1,881 4,679
Over 2 years 745 962
Total 191,901 151,083
12. LOANS TO CUSTOMERS ARISING FROM MARGIN FINANCING BUSINESS
The Group has provided customers with margin financing and securities lending
for securities transactions, the credit facility limits to margin clients are
determined by the discounted market value of the pledged securities accepted by
the Group.
All of the loans to margin clients which are secured by the underlying pledged
securities are interest bearing. The Group maintains a list of approved stocks
for margin lending at a specified loan to collateral ratio. Any excess in the
lending ratio will trigger a margin call which the customers have to make good
of the shortfall. The Group has the right to process forced liquidation if the
customer fails to make good of the shortfall within a short period of time.
As at June 30, 2016, loans to customers under the margin financing and
securities lending activities carried out in the PRC were secured by the
customers' stock securities and cash collaterals. The undiscounted market value
of the stock security collaterals was amounted to Rmb26,330,291,000 (December
31, 2015: Rmb31,224,317,000). Cash collateral of Rmb1,731,319,000 (December 31,
2015: Rmb1,061,658,000) received from clients was included in accounts payable
to customers arising from securities business.
No aged analysis is disclosed as in the opinion of the directors, the aged
analysis does not give additional value in view of the nature of business of
securities margining financing.
13. OTHER RECEIVABLES AND PREPAYMENTS
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Entrusted loans and interest receivables from a related party (Note 18(ii) (2)) 603,703 634,436
Interest receivables 232,747 269,080
Prepayments 98,463 41,977
Bond and listed equity subscription deposit 366,421 176,377
Consideration receivable in relation to the disposal to
Communications Group of an associate and a subsidiary 9,083 44,759
Others (note) 278,174 65,170
1,588,591 1,231,799
Note: Since several asset management products managed by Zhejiang Zheshang
Securities Asset Management CO., Ltd (Zheshang Asset Management, a subsidiary
of Zhejaing Securities) had undertaken liquidity risk of default, Zheshang
Asset Management provided liquidity support of Rmb228,700,000. The collateral
for the above issue is still under compulsory execution. As the value of the
collateral could cover the obligatory right, no provision was provided.
14. FINANCIAL ASSETS HELD UNDER RESALE AGREEMENT
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Analysed by collateral type:
Bonds 4,212,823 1,921,876
Stock securities 3,774,738 3,037,279
7,987,561 4,959,155
Analysed by market:
Inter-bank market 4,212,823 1,521,876
Shanghai/Shenzhen Stock Exchange 3,774,738 3,437,279
7,987,561 4,959,155
The collaterals include both equity and debt securities listed in the PRC. As
at June 30, 2016, the fair value of equity and debt securities as collaterals
was Rmb11,813,309,000 (December 31, 2015: Rmb6,394,246,000) and
Rmb4,235,110,000 (December 31, 2015: Rmb1,947,197,000), respectively.
15. TRADE PAYABLES
Trade payables mainly represent the construction payables for the maintenance
projects of toll expressways. The following is an aged analysis of the trade
payables presented based on the invoice date:
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
within 3 months 245,456 422,424
3 months to 1 year 182,938 230,650
1 to 2 years 202,097 117,341
2 to 3 years 34,489 35,425
Over 3 years 81,730 102,776
Total 746,710 908,616
16. OTHER PAYABLES AND ACCRUALS
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Other liabilities:
Accrued payroll and welfare 1,554,649 1,609,626
Advance from rental and advertising customers 72,214 62,151
Toll collected on behalf of other toll roads 8,717 2,758
Retention payable 185,976 123,917
Deposit received for disposal of an associate 165,600 165,600
Deposits of equity return swaps 17,000 77,000
Payable to limited partnership in subsidiaries 166,141 133,088
Others 324,694 287,673
2,494,991 2,461,813
Other accruals 147,910 347,266
Total 2,642,901 2,809,079
17. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Analysed as collateral type:
Bonds 9,312,523 3,485,380
Beneficial rights 200,000 1,900,000
9,512,523 5,385,380
Analysed by market:
Shanghai Stock Exchange 2,394,615 350,000
Inter-bank market 6,917,908 3,135,380
Other financial institutions 200,000 1,900,000
9,512,523 5,385,380
Sales and repurchase agreements are transactions in which the Group sells a
security and simultaneously agrees to repurchase it (or an asset that is
substantially the same) at a fixed price on a future date. Since the repurchase
prices are fixed, the Group is still exposed to substantially all the credit
risks and market risks and rewards of those securities sold. These securities
are not derecognised from the financial statements but regarded as "collateral"
for the liabilities because the Group retains substantially all the risks and
rewards of these securities. In addition, the cash received is recognised as
financial liability.
As at 30 June, 2016, the Group entered into repurchase agreements with certain
counterparties. The proceeds from selling such securities are presented as
financial assets sold under repurchase agreements. Because the Group sells the
contractual rights to the cash flows of the securities, it does not have the
ability to use the transferred securities during the term of the arrangement.
18. RELATED PARTY TRANSACTIONS AND BALANCES
The following is a summary of the related party during the Period:
(i) Transactions and balances with government related parties
The Group operates in an economic environment currently predominated by
entities directly or indirectly owned or controlled by the PRC government
("government-related entities"). In addition, the Group itself is part of a
larger group of companies under Communications Group which is controlled by the
PRC government. However, due to the business nature, in respect of the Group's
toll road business and securities business, the directors are of the opinion
that it is impracticable to ascertain the identity of counterparties and
accordingly whether the transactions are with other government-related entities
in the PRC. Details of other significant transactions with government related
parties are summarised below:
(a) Communications Group
(1) Entrusted loans
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Interest expenses incurred 13,112 15,057
Pursuant to the entrusted loan contracts entered into between Hanghui Co and
Communications Group on March 12, 2013, Communications Group agreed to provide
Hanghui Co with entrusted loans amounting to Rmb570,000,000 at a fixed interest
rate of 5.24% per annum, which have been renewed for another three years on
August 10, 2015, at a fixed interest rate of 4.55% per annum, with maturity
date of August 10, 2018. Such amount was early repaid before the publication of
this report.
(2) Management and Administrative services
On July 1, 2015, the Company entered into agreements with the Communications
Group, pursuant to which, the Company would provide management and
administrative services to two toll roads of the Communications
Group, including Shenjiahuhang Expressway and Shensuzhewan Expressway.
According to the agreements, the Company would charge the Communications Group
management fee based on actual cost basis. During the Period, a total
management fee of Rmb235,000 has been recognized.
18. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with government related parties (Continued)
(a) Communications Group (Continued)
(3) Maintenance services
On June 13, 2016, the Company entered into road maintenance agreements with
Zhejiang Expressway Maitenance Co., Ltd ("Maintenance Co", a 100% owned
subsidiary of Communications Group) pursuant to which, Maintenance Co would
provide maintenance services for the four expressways of the Group. Such
service began from May 1, 2016, and will be expired by November 30, 2016, with
a term of seven months.
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Maintenance service expense 88,702 N/A
(4) Other transactions
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Toll road service area leasing income earned(Note i) 4,523 4,550
Toll road service area management fee paid (Note i) 1,953 1,793
Property leasing income earned 794 807
Road maintenance service expense incurred(Note ii) 592 3,515
Note i: Pursuant to the leasing and operation agreement entered into
between Zhejiang Jinhua Yongjin Expressway Co., Ltd. ("Jinhua Co", a 100% owned
subsidiary of the Company) and Zhejiang Communications Investment Group
Industrial Development Co., Ltd. (Zhejiang Communications Investment, a fellow
subsidiary of Communications Group), Jinhua Co leased the toll road service
area to Zhejiang Communications Investment and Zhejiang Communications
Investment managed the operation of the service area and the advertising
business in respect of the toll road service area. Such business began from
January 1, 2011, and will be expired at the same time with the operating right
in 2030.
Pursuant to the leasing and operation agreements entered into between Hanghui
Co and Zhejiang Communications Investment, Hanghui Co leased the toll road
service area to Zhejiang Communications Investment and Zhejiang Communications
Investment managed the operation of the service. Such business began from
January 1, 2015 and will be expired at the same time with the operating right
for respective expressway sections in 2029 to 2031.
Note ii: Road maintenance service provided by other subsidiaries (except for
Maintenance Co) of Communications Group
18. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(i) Transactions and balances with government related parties
(Continued)
(b) Transactions with other government related parties
(1) Zhejiang Expressway Petroleum Development Co., Ltd ("Petroleum Co")
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited)
Rental income from Petrol stations 10,212 N/A
Purchase of petroleum products 396,063 735,770
Pursuant to the operation management agreement entered into between Zhejiang
Expressway Investment Development Co., Ltd. ("Development Company", a wholly
owned subsidiary of the Company), and Petroleum Co in respect of the petrol
stations in the service areas along Shanghai-Hangzhou-Ningbo and Shangsan
Expressways. Petroleum Company assists Development Company in running their
petrol stations along these roads. The agreement was renewed from May in 2016.
Pursuant to the lease agreements entered into between Development Company and
Petroleum Company, Development Company contracted out the operating rights of
petrol stations and the related buildings and equipment facilities at the
service areas along Shanghai-Hangzhou-Ningbo and Shangsan Expressways to
Petroleum Company, which run the petrol stations. The leasing term began upon
the completion of change of business license of each petrol stations, and will
be expired on December 31, 2018. Both parties could negotiate to continue the
agreements after expiry of the lease. During the Period, Rmb10,212,000 from
rental income of petrol stations was recognized.
Petroleum Company is a government related party of the Group.
(2) Others
The Group has entered into various significant transactions, including deposit
placements, borrowings and other general banking facilities, with certain banks
and financial institutions which are government-related entities in its
ordinary course of business. In view of the nature of those banking
transactions, the directors are of the opinion that separate disclosure would
not be meaningful.
18. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other
non-government related parties
(1) Loan advanced from Zhejiang Communications Investment Group Finance
Co., Ltd. ("Zhejiang Communications Finance")
Zhejiang Communications Finance has advanced several loans to Hanghui Co.
Amongst the loans, Rmb50,000,000 was a one-year term loan carried interest at a
fixed annual interest rate of 5.1% and was repaid in June 2016 upon expiry.
Rmb450,000,000 were long term loans with floating interest rate from 4.275% to
4.5125% respectively, among which Rmb330,000,000 was early repaid before the
publication of this report.
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Outstanding loan payable balances:
within one year 100,000 250,000
over one year 350,000 250,000
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Interest expenses incurred 11,137 11,188
18. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other
non-government related parties (Continued)
(2) Loans advanced to a subsidiary of Zhejiang Concord Property
Investment Co., Ltd. ("Zhejiang Concord Property")
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Outstanding loan receivable balances 570,000 600,000
Interest receivables 33,703 34,436
603,703 634,436
Analysed for reporting purpose as:
Current assets 603,703 634,436
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Interest income 11,380 21,794
earned
During the Period, the Group advanced additional entrusted loans totaling
Rmb120,000,000 (corresponding period of 2015: Rmb500,000,000) and received
settlement of loan principal and interests amounting to Rmb150,000,000
(corresponding period of 2015: Rmb400,000,000) and Rmb12,300,000 (corresponding
period of 2015: Rmb11,304,000), respectively.
The entrusted loans were unsecured and repayable in accordance with the terms
of entrusted loan agreements, carrying interests at an effective interest rate
of 3.915% (2015: 8%) per annum. Such entrusted loans were guaranteed by world
Trade Center Zhejiang Real Estate Development Co., Ltd., in full.
18. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(ii) Transactions and balances with associates and other
non-government related parties (Continued)
(3) Financial service provided by Zhejiang Communications Finance
The Group has entered into a financial services agreement with Zhejiang
Communications Finance. Pursuant to the agreement, Zhejiang Communications
Finance agreed to provide the Group with deposit services, the loan and
financial leasing services, the clearing services and other financial services.
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Bank balances and cash
- Time deposits with original maturity over three months 65,000 65,000
- Cash and cash equivalents 536,173 480,471
601,173 545,471
For the six months ended June 30,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Unaudited
and restated)
Interest income 4,179 1,939
earned
19. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
This note provides information about how the Group determines fair value of
various financial assets and financial liabilities.
Fair value measurements recognised in the condensed consolidated statement of
financial position that are measured at fair value on a recurring basis
Some of the Group's financial assets and financial liabilities are measured at
fair value at the end of each reporting period. The following table gives
information about how the fair value of these financial assets and financial
liabilities are determined (in particular, the valuation technique(s) and input
(s) used).
19. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)
Fair value as at Fair value Basis of fair value measurement/ Significant Relationship of
hierachy valuation technique(s) and key input(s) unobservable unobservable
input(s) inputs to fair value
Financial Classified as June 30, December
assets 2016 31,
Rmb'000 2015
(Unaudited) Rmb'000
(Audited)
1) Equity Held for trading Assets- 212,144 Assets- Level 1 Quoted bid prices in an active market N/A N/A
investments investments 221,699
listed in
exchange
2) Equity Available-for-sale Assets -303,366 Assets- Level 2 Derived from recent transaction price N/A N/A
securities investment 237,260
listed
on exchange
(inactive Available-for-sale Assets -272,043 Assets- Level 3 Discounted cash flow. The fair value is Discounted The higher the
due to low investment 202,441 determined with reference to the quoted for lack of discount, the
transaction market prices with an adjustment of marketability lower the fair value
volume) discount for lack of marketability.
3) Listed Held for trading Assets - 5,758 Assets- Level 1 Quoted bid prices in an active market N/A N/A
Open-ended investments 191,967
equity
funds
4) Funds Available-for-sale Assets - 71,305 Assets- Level 1 Quoted bid prices in an active market N/A N/A
listed in investment 55,982
exchange
5) Debt Held for trading Assets Assets- Level 1 Quoted bid prices in an active market N/A N/A
investments investments -2,062,318 1,170,952
listed in
exchange or Held for trading Assets Assets- Level 2 Discounted cash flow. Future cash flows N/A N/A
in investments -4,760,770 2,176,606 are estimated based on applying the
inter-bank interest yield curves of different
market types of bonds as the key parameter.
Available-for-sale Assets -50,000 Assets- Level 2 Discounted cash flow. Future cash flows N/A N/A
investment 50,000 are estimated based on applying the
interest yield curves of different
types of bonds as the key parameter.
6) Investment Available-for-sale Assets -595,761 Assets Level 2 Shares of the net assets of the N/A N/A
in investment -544,597 products,
structured determined with reference to the net
products asset value of the products, calculated
by observable (quoted) prices of
underlying investment portfolio and
adjustment of related expenses.
Available-for-sale Assets - 183,142 Assets- Level 3 Discounted cash flow. Future cash Actual yield The higher the
investment 141,418 flows are estimated based on applicable of actual yield,
yield of underlying investment the the higher
portfolio underlying the fair value
and adjustment of related expenses, investment
discounted at a rate that reflects portfolio and
the credit risk of various the discount
counterparties rate
7) Investment Available-for-sale Assets - 10,068 Assets- Level 3 Discounted cash flow. Future cash Actual yield The higher the
in investment 10,000 flows are estimated based on applicable of actual yield,
trust yield of underlying investment the the higher
products portfolio underlying the fair value
and adjustment of related expenses, investment
discounted at a rate that reflects portfolio and
the credit risk of various the discount
counterparties rate
8) Unlisted Available-for-sale Assets-1,365,738 Assets- Level 2 Calculated based on the fair value of N/A N/A
equity investment 1,382,313 the underlying investments which are
investment listed equity securities, after making
at fair adjustments of related expenses
value
As at June 30,2016 (Unaudited)
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities -
a. Manufacturing 138,298 - - 138,298
b. Finance service 43,944 - - 43,944
c. Information technology service 8,553 - - 8,553
d. Energy and water service 5,464 - - 5,464
e. Transportation, storage and postal 5,107 - - 5,107
service
f. Real Estate 7,442 - - 7,442
g. wholesale 2,853 - - 2,853
h. Others 483 - - 483
212,144 - - 212,144
- Funds 5,758 - - 5,758
- Bonds 2,062,318 4,760,770 6,823,088
Sub-total 2,280,220 4,760,770 - 7,040,990
Available-for-sale investments
- Equity securities
a. Manufacturing - 148,754 - 148,754
b. Finance service - 8,960 - 8,960
c. Information technology service - 76,155 272,043 348,198
d. Transportation, storage and postal - 4,528 - 4,528
service
e. Leasing and commercial service - 1,649 - 1,649
f. Culture, PE and entertainment - 21,935 - 21,935
g. wholesale - 19,917 - 19,917
h. Construction - 10,146 - 10,146
i. Others - 1,377,060 - 1,377,060
- 1,669,104 -272,043 1,941,147
- Funds 71,305 - - 71,305
- Bonds - 50,000 - 50,000
- Structured products - 595,761 183,142 778,903
- Trust products - - 10,068 10,068
Sub-total 71,305 2,314,865 465,253 2,851,423
As at December 31, 2015 (Audited)
Level 1 Level 2 Level 3 Total
Rmb'000 Rmb'000 Rmb'000 Rmb'000
Held for trading investments
- Equity securities
a. Manufacturing 99,732 - - 99,732
b. Finance service 45,814 - - 45,814
c. Information technology service 21,284 - - 21,284
d. Transportation, storage and postal service 54,869 - - 54,869
221,699 - - 221,699
- Open-ended funds 191,967 - - 191,967
- Bonds 1,170,952 2,176,606 - 3,347,558
Sub-total 1,584,618 2,176,606 - 3,761,224
Available-for-sale investments
- Equity securities
a. Manufacturing - 104,309 - 104,309
b. Information technology service - 58,688 202,441 261,129
c. Finance service - 3,919 - 3,919
d. Transportation, storage and postal service - 2,305 - 2,305
e. Construction - 18,837 - 18,837
f. Energy service - 3,108 - 3,108
g. wholesale - 9,210 - 9,210
h. Agriculture, forestry, fishery and animal husbandry - 6,706 - 6,706
i. Others - 1,412,491 - 1,412,491
- 1,619,573 202,441 1,822,014
- Funds 55,982 - - 55,982
- Corporate bonds - 50,000 - 50,000
- Structured products - 544,597 141,418 686,015
- Trust products - - 10,000 10,000
Sub-total 55,982 2,214,170 353,859 2,624,011
There were no transfers between instruments in Level 1 and Level 2 in the
current and prior period.
19. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)
The following table represents the changes in Level 3 available-for-sale
investments.
Structured Trust Restricted Total
products products Shares
Rmb'000 Rmb'000 Rmb'000 Rmb'000
As at January 1, 2015 251,191 89,515 - 340,706
Addition 20,080 20,000 200,000 240,080
Disposal (20,000) (93,000) - (113,000)
Total loss recognised in other comprehensive income (21,337) (6,515) 2,441 (25,411)
Transfer out of Level 3 (88,516) - - (88,516)
As at December 31, 2015 141,418 10,000 202,441 353,859
Addition 62,500 - - 62,500
Disposal (20,000) - - (20,000)
Total gain recognised in other comprehensive loss (776) 68 69,602 68,894
As at June 30, 2016 183,142 10,068 272,043 465,253
20. SUMMARY OF FINANCIAL INFORMATION OF THE COMPANY
As at As at
June 30, December 31,
2016 2015
Rmb'000 Rmb'000
(Unaudited) (Audited)
Investments in subsidiaries 9,809,369 9,809,369
Amounts due from subsidiaries 1,212,907 314,649
Other assets 5,789,821 6,085,030
16,812,097 16,209,048
Total liabilities 4,016,028 2,955,256
Capital and reserves
Share capital 4,343,115 4,343,115
Reserves 8,452,954 8,910,677
12,796,069 13,253,792
21. APPROVAL OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements were approved and authorised
for issue by the board of directors on August 18, 2016.
Corporate Information
EXECUTIVE DIRECTORS STATUTORY ADDRESS
ZHAN Xiaozhang (Chairman) 12/F, Block A, Dragon Century Plaza
CHENG Tao 1 Hangda Road
LUO Jianhu (General Manager) Hangzhou City, Zhejiang Province
PRC 310007
NON-EXECUTIVE DIRECTORS Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
WANG Dongjie
DAI Benmeng
ZHOU Jianping PRINCIPAL PLACE OF BUSINESS
INDEPENDENT 5/F., No. 2, Mingzhu Int'l Business Center
NON-EXECUTIVE DIRECTORS 199 wuxing Road
Hangzhou City
ZHOU Jun Zhejiang Province
PEI Ker-wei PRC 310020
LEE wai Tsang, Rosa Tel : 86-571-8798 5588
Fax: 86-571-8798 5599
SUPERVISORS LEGAL ADVISERS
WU Yongmin (Resigned, with effect from As to Hong Kong and US law:
August 18, 2016) Herbert Smith Freehills
YAO Huiliang 23rd Floor, Gloucester Tower
SHI Ximin 15 Queen's Road Central
LU Xinghai Hong Kong
COMPANY SECRETARY As to English law:
Herbert Smith Freehills LLP
Tony ZHENG Exchange House
Primrose Street London EC2A 2HS United Kingdom
As to PRC law:
T & C Law Firm
AUTHORIZED REPRESENTATIVES 11/F, Block A, Dragon Century Plaza
1 Hangda Road
ZHAN Xiaozhang Hangzhou City, Zhejiang Province
LUO Jianhu PRC 310007
AUDITORS H SHARES LISTING INFORMATION
Deloitte Touche Tohmatsu The Stock Exchange of Hong Kong Limited
35/F, One Pacific Place Code: 0576
88 Queensway
Hong Kong LONDON STOCK EXCHANGE PLC
INVESTOR RELATIONS CONSULTANT Code: ZHEH
PR Concepts Asia Limited ADRS INFORMATION
16/F., Methodist House
36 Hennessy Road, wanchai US Exchange: OTC
Hong Kong Symbol: ZHEXY
Tel : 852-2117 0861 CUSIP: 98951A100
Fax: 852-2117 0869 ADR: H Shares 1:10
PRINCIPAL BANKERS REPRESENTATIVE OFFICE IN HONG KONG
Industrial and Commercial Bank of China, Suite 2910
Hangzhou Jiefang Road Subbranch 29/F, Bank of America Tower
12 Harcourt Road
Shanghai Pudong Development Bank, Hong Kong
Hangzhou Branch Tel : 852-2537 4295
Fax: 852-2537 4293
H SHARE REGISTRAR AND TRANSFER OFFICE
WEBSITE
Hong Kong Registrars Limited
Room 1712-1716, 17/F, Hopewell Centre www.zjec.com.cn
183 Queen's Road East
Hong Kong
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Note : To view the full set of the Company's 2016 Interim Report. Please visit
http://www.zjec.com.cn/
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