GZI Transport Press Release - Interim Results

(Unaudited)
Six months ended 30th June
		2002			2001
		HK$’000			HK$’000
Turnover		173,883			214,169
Other revenues		2,267			16,310
Amortisation of interests in toll highways and bridges		(37,874)			(29,561)
Toll highways and bridges maintenance expenses		(36,787)			(39,204)
Administrative expenses		(13,934)			(17,131)
Other operating income/(expenses)		3,864			(3,375)
Operating profit		91,419			141,208
Finance costs		(20,437)			(24,547)
Share of profits of associated companies		70,723			70,179
Share of loss of a jointly controlled entity		(24,843)			--
Profit before taxation		116,862			186,840
Taxation		(17,169)			(15,131)
Profit after taxation		99,693			171,709
Minority interests		(21,965)			(39,247)
Profit attributable to shareholders		77,728			132,462
Interim dividend		31,388			31,337
Basic earnings per share		7.44 cents			12.75 cents
Fully diluted earnings per share		7.23 cents			12.14 cents
Interim dividend per share		3.00 cents			3.00 cents

ANALYSIS OF RESULTS

Turnover for the six months ended 30th June 2002 amounted to HK$173.9 million which was 18.8 per cent lower than the same period in 2001 due to disposal of Xinfeng Highways and negative traffic growth in certain toll road projects. However, taking the disposal factor aside, turnover decline was only 6.8 per cent.

Other revenues declined by 86.1 per cent to HK$2.3 million for the six months ended 30th June 2002 primarily due to loss of revenue from disposal of an other investment (Dongyang Highways) in December 2001.

Owing to adoption of new amortisation rates, amortisation of toll highways and bridges in the first half of 2002 was HK$37.9 million and was 43.1 per cent higher than same period last year (after ignoring the amount attributable to Xinfeng Highways). However, if the new amortisation rates were applied retrospectively to the first half of 2001, the average increment would only be 2.4 per cent which was in line with the Group’s new amortisation rates.

Administrative expenses incurred during the first six months of 2002 amounted to HK$13.9 million which was 18.7 per cent lower than same period last year. The decrease was mainly due to disposal of Dongyang Highways resulting in lower amortisation of other investment and lower bank charges of loans obtained from banks in China during the current period as compared to loans raised in Hong Kong during same period in 2001.

In April 2002, the transfer of 5.0 per cent of the Group’s interest in the jointly controlled entity, Guangzhou Northern Second Ring Expressway ("GNSR Expressway"), to a minority shareholder with a gain of HK$6.2 million was recorded as reduction to other operating expenses.

Finance costs declined by 16.7 per cent to HK$20.4 million for the first six months in 2002 mainly due to redemption of convertible bonds in December 2001 and repayment of US dollars bank loan in January 2002.

Share of profits of associated companies for the current period amounted to HK$70.7 million and slightly increased by 0.8 per cent as compared to HK$70.2 million for last period. Traffic volume of Humen Bridge increased substantially in the period. However, the lower traffic volume growth of Qinglian Highways and adoption of new amortisation rates by associated companies had reduced the overall attributable contribution from associated companies.

The Group’s jointly controlled entity, GNSR Expressway with total investment of Rmb2.7 billion, commenced toll collection in January 2002. For the period up to 30th June 2002, GNSR Expressway was operating at an attributable loss of HK$24.8 million. Such performance, which had reduced the Group’s attributable profit to shareholders, was typical for expressway at its initial stage of operation when traffic flow was far from its normal level yet.

Inspite of lower pre-tax profit caused by adoption of new amortisation rates and disposal of investments, taxation during the current period rose by 13.5 per cent to HK$17.2 million mainly due to expiration of the "tax" concession period of certain subsidiaries.

Minority interest for the first half of 2002 amounted to HK$22.0 million which was 44.0 per cent lower than same period last year mainly due to reduced operating profit. In addition, disposal of Xinfeng Highways and acquisition of the remaining 34.0 per cent shareholdings in a subsidiary holding Qinglian Highways had also reduced total minority interest by HK$9.9 million.

For the six months ended 30th June 2002, the Group achieved attributable profit to shareholders of HK$77.7 million as compared to HK$132.5 million for same period last year. Basic earnings per share for the two periods amounted to 7.44 cents and 12.75 cents respectively.

INTERIM DIVIDEND

The Board of Directors has resolved to declare an interim dividend for 2002 of 3.00 cents (2001: 3.00 cents) per share payable on 28th November 2002 to shareholders whose names appear on the register of members on 15th November 2002. Interim dividend pay out ratio will be 40.38 per cent (2001: 23.66 per cent).

Future Strategies and Prospects

In 2001, the Group disposed its 55 per cent stake of Xinfeng Highways and 82 per cent of Dongyang Highways. The amortisation rate was also re-adjusted while vehicles are yet to adjust to GNSR Expressway which is in its initial stage of operation. These factors affecting toll revenue and profit in the first half of 2002 were regarded by the Group as temporary. Income from GNSR Expressway will increase gradually and overall highway transportation is being underpinned by the fast economic growth of China. With rising traffic volume, the Group’s revenue and profit will continue to improve. The Group’s strategy is to continue acquiring new investments selectively with promising return to raise its profit.

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