Net Profit Amounted to RMB 880million
Guidance
- Overall Toll revenue increased, but in a slower growth rate
- Costs and expenses rose year-on-year
- Entrusted construction projects contributed revenue, explored construction management business
(Hong Kong, 28 March 2012) The Board of Directors ("the Board") of Shenzhen Expressway Company Limited (“Shenzhen Expressway ", or the “Company”; Stock Code: 548.HK) is pleased to announce the results of the Company and its subsidiaries (collectively the “Group”) for the year ended 31 December 2011 ("the Year" or “FY2011”).
Shenzhen Expressway recorded a revenue of about RMB 2950million in 2011, of which toll revenue was about RMB 2720million, representing an increase of 3.8% as compared to the corresponding period of the previous year. Net profit was RMB 880million and earnings per share was RMB 0.401, an increase of 17.3% year-on-year. The Board of Directors proposed a final dividend of RMB 0.16 per share.
In 2011, total revenue of toll highway projects operated and invested by the Group maintained increase, due to the slowed economic growth and changes in the traffic distribution in the road network, most of the projects are in a slower growth rate or in decline. Of which, average daily toll revenue of Jihe West, Yanpai Expressway, Yanba Expressway and Nanguang Expressway in Shenzhen region recorded a growth of 5.2%, 8.2%, 10.1% and 12.5% respectively. Average daily toll revenue of Meiguan Expressway and Jihe East were more or less the same, while Shuiguan Expressway and Shuiguan Extension recorded a YOY decline of 8.8% and 21.5% respectively. It was mainly due to the combining effect of the diverted traffic flow to municipal roads and traffic control measures implemented by the Government. The projects of other regions in Guangdong Province performed well. Benefited from the expressway operation of Liannan Section and the operation commencement of Yifeng Expressway, which connects Qinglian Expressway, the operational performance of Qinglian Expressway improved obviously, average daily toll revenue rose by 23.5% over the previous year. Affected by the combining effect of the change on surrounding road network and traffic control measures implemented in Wuhan, the average daily toll revenue of Wuhuang Expressway in Hubei province recorded a YOY drop of 9.6%.
FY 2011, cost of services for the Group (Excluding the impact of provisions for maintenance / resurfacing obligations) recorded a rapid YOY increasedue to the implementation of business plans and inflationary effect. It mainly came from an increase of road maintenance expenses and employee expenses. In the year, repair works were carried out on such roads as the South Section of Meiguan Expressway in Shenzhen, resulting in an increase on the cost of services of approximately RMB132 million, plus Qinglian Class 2 Road is performing an overall repair and the daily maintenance expenses was increased upon the expiry of the liability period of defects of Qinglian Expressway,resulting in the Group’s road maintenance expenses recorded a significant YOY increase. In addition, as the Company had made provision for the housing allowances for employees as required by Shenzhen municipal government, and there were an increase in the number of employees and an increase in remuneration of toll collection staff, the employee expenses recorded a YOY increase. During the reporting period, due to the increase in borrowings, also increase in the capital cost of the Group and Qinglian Company recorded an increase in its expensed interests upon the completion and commencement of operation of Liannan Section, resulted a YOY increase of 11.9% in overall financial expenses of the Group.However, based on the previous continuous research and investigation on the road maintenance plan, the Company adjusted and improved the road maintenance plan and its implementation scheme during the Reporting Period, thereby leading to corresponding adjustments of the accounting estimates on provisions for road maintenance/resurfacing obligations. This has resulted in an increase in net profit of RMB325 million during the Reporting Period, resulting a relatively faster YOY growth in net profit for the reporting period.
During the reporting period, reconstruction and extension works and road surface maintenance of the Group are progressing well. Reconstruction of Liannan Section of Qinglian Project into an expressway, road surface maintenance of South Section of Meiguan Expressway andreconstruction and extension works of Shuiguan Expressway have been completed according toschedule. In entrusted management, the construction works of Coastal Project has been completed more than half. Profit from the entrusted construction and management services of RMB 69million was recognized based on the method of percentage of completion, providing a useful supplement for the Group's results. In addition, the company explored and practiced actively in construction management business. The company entered into an agreement to carry out Guilong Project in August 2011 to participate in the construction of PhaseⅠof Guilong Road in Guizhou Province by “build and transfer” mode, and participated in primary land development in designated areas surrounding the road.
During the reporting period, the Group attempted to secure sufficient cash flow for payment and working capital by various ways of financing such as completed the issue of long-term corporate bonds of RMB 1.5billion, increased entrusted loans, factoring and payables, and effectively controlled the increase in financial costs. During the reporting period, the Group’s composite borrowing costs amounted to 4.96%,actually payment of the borrowing costs amounted to 4.34%, which were lower than the market borrowing rate.
Currently, domestic and international macro economy situation is still complex, also uncertainties in toll highway industry policy, which will create pressure and challenge for the operations and management of the company. In 2012, management team of the Company asserts that the Group will continue to adhere to the philosophy of sound operation, by way of increasing income and containing expenditures, make good use of project financing, entrusted construction, recovery of receivable from entrusted construction, maintenance and reconstruction of highways etc. The Group exerts itself to the utmost to meet the targets for the year and provide support and guarantee for the smooth implementation of strategy and the realization of the Group’s stable and healthy development.
