GZI Transport Press Release - Interim Results

(Unaudited)
Six months ended 30th June
		2003			2002
		HK$’000			HK$’000
Turnover		191,580			173,883
Other revenues		4,102			2,267
Amortisation of interests in toll highways and bridges		(38,959)			(37,874)
Toll highways and bridges maintenance expenses		(41,782)			(36,787)
Administrative expenses		(16,181)			(13,934)
Other operating income/(expenses)		(6,039)			3,864
Operating profit		92,721			91,419
Finance costs		(12,614)			(20,437)
Share of profits of associated companies		87,441			70,723
Share of loss of a jointly controlled entity		(10,215)			(24,843)
Profit before taxation		157,333			116,862
Taxation		(22,414)			(17,169)
Profit after taxation		135,495			99,693
Minority interests		(21,965)			(21,965)
Profit attributable to shareholders		113,081			77,728
Interim dividend		44,159			31,388
Basic earnings per share		10.70 cents			7.44 cents
Fully diluted earnings per share		10.49 cents			7.23 cents
Interim dividend per share		4.00 cents			3.00 cents

 

Analysis of Results

 

Despite the outbreak of SARS in the first half of 2003, the Group’s overall traffic flow performance was satisfactory. Turnover for the six months ended 30th June 2003 rose by 10.2 per cent to HK$191.6 million as compared to the same period of 2002. Specifically, traffic volume of Guangshen and Guangshan Highways rebounded substantially due to easing of diversion effect from new roads. The other major toll roads such as Guangcong Highway Section I also performed steadily and had offset negative growth of Guangcong Highway Section II & Provincial Highway 1909.

Share of profits from associated companies for the first half of 2003 increased substantially by 23.6 per cent to HK$87.4 million as compared to same period in 2002. The full six months contribution from Shantou Bay Bridge acquired in July 2002 was recorded in the first half of 2003. Although traffic volume of Qinglian Highways was affected by a recently completed section of Jing Zhu Expressway, all associated companies achieved positive growth of profit contributions to the Group in the first half of 2003. The share of loss of the Group’s jointly controlled entity, GNSR Expressway was also reduced substantially due to doubling of traffic volume in the first half of 2003.

For the six months ended 30th June 2003, the Group achieved attributable profit to shareholders of HK$113.1 million as compared to HK$77.7 million for same period in 2002 representing a remarkable increase of 45.5 per cent. Basic earnings per share for the two periods were 10.7 cents and 7.44 cents respectively.

Interim Dividend

The Board of Directors has resolved to declare an interim dividend for 2003 of 4.0 cents (2002: 3.0 cents) per share payable on 5th November 2003 to shareholders whose names appear on the register of members on 27th October 2003. Interim dividend pay out ratio will be 39.05 per cent (2002: 40.38 per cent).

Future Investment

As a progressive toll road investor and operator, the Group continues to invest selectively in quality toll road projects. The Group is considering the investment of three major expressway projects located in the center of the Pearl River Delta in the coming four years.

These expressways, namely the Eastern Second Ring Road which connects the GNSR Expressway, crossing the Pearl River to Panyu District, the Western Second Ring Road which connects the western part of the GNSR Expressway and Nanhai, Guangzhao Expressway and the new Guangzhou Airport, and the Eastern Second Ring Road Extension Line which connects the Eastern Second Ring Road, leading to Panyu District and Shunde District in Foshan City. These three projects will cost approximately Rmb8.1 billion with total length of 77 kms.

The Group considers investing approximately 30 per cent stake in each expressway, which will be 30 per cent financed by equity and 70 per cent by non-recourse project loan. Estimated annual capital expenditure for the projects will be around HK$200 million each year from 2004 to 2007. This shall be comfortably covered by the Group’s operating cash flow and partly by external borrowings. Expected internal rate of return of these projects will be no less than 15 per cent.

The construction of the Eastern Second Ring Road will start in the end of 2003 to be followed by the Western Second Ring Road and the Eastern Second Ring Road Extension Line in 2004. These three projects are expected to complete in 2007. Through the investment in these three expressways, the Group could explore the immense economic growth potential in the Pearl River Delta region.

Prospects

The Group will continue strengthening the management of existing projects and enhance return to shareholders. Upon completion, proposed new investments including the Eastern Second Ring Road, Western Second Ring Road, and Eastern Second Ring Road Extension Line will underpin future growth potential of the Group’s toll road portfolio. After the signing of the Closer Economic Partnership Arrangement ("CEPA") between the Mainland of China and Hong Kong, economic activities will be speeded up substantially between Guangdong Province and Hong Kong. Accelerating growth and further economic integration of the Pearl River Delta is expected. As a major toll road operator in the Guangdong Province, the Group will become a major beneficiary of CEPA.

Contact: Sophia Yan, Executive Director of Guangzhou Investment Co. Ltd.
(Tel: 2116 8022 ; Fax: 2598 7688)