Latest Results
Interim results for the six months ended 30 June 2009
Et-china, a leading travel services group in the fast growing region of South China, announces its unaudited interim results for the six months ended 30 June 2009.
Highlights:
| 6 months to 30 June 2009 |
% | 6 months to 30 June 2008 |
||
| RMB million | £* | RMB million | ||
| Revenue | 840.3 | 74.1 | 8.2 | 776.7 |
| Gross Profit | 97.2 | 8.6 | 14.1 | 85.2 |
| Operating Profit/(Loss) | (9.1) | (0.8) | 56 | (20.7) |
| Profit / (Loss) After tax and MI | (4.9) | (0.4) | 78.6 | (22.7) |
*figures in Sterling are for illustrative purposes only, all translated using the RMB exchange rate of 11.3 RMB = £1
- Net revenues up 8.2% to RMB 840 million (2008: RMB 776.7 million)
- Gross profit up 14.1% to RMB 97.2 million (2008: 85.2 million)
- Gross margin 11.6% (2008: 10.9%)
- Loss after tax reduced by 79% to RMB 4.9 million (2008 Loss: RMB 22.7)
Matthew Ng, President and Chief Executive Officer, commented:
"The Board is optimistic that the Group will see an improved performance in the second half and has great confidence that the outlook for the Chinese travel sector remains highly attractive. Looking to 2010 we expect to benefit from increased volumes of travel surrounding the Shanghai World Expo, which runs from May to October and the Guangzhou Asian Games in November 2010.
The relative stability of the domestic economy is helping to rebuild consumer confidence in China which will benefit the travel market significantly. The Group is committed to growing the business and driving improved revenue growth and profitability.
We are also very pleased to welcome Maria Ng to the Board. Maria has a wealth of experience in the Asia Pacific travel industry through her time with Kouni and we look forward to cultivating closer links with Kuoni in the coming period."
Chairman's Statement
Results
I am pleased to report that the Group has continued to make good progress in developing its business during the six months to 30 June 2009. We have consolidated our position as the travel services market leader in Southern China in terms of revenue and we have made great strides in increasing our national presence. Recent government figures from CNTA (China National Tourism Administration) confirm this with the Group's tour operator business, GZL, ranked as the 5th largest travel operator in the whole of China, 4th for outbound and 6th for domestic travel.
The first half of 2009 began strongly with a substantial increase in trading over the 'Chinese New Year' 7 day holiday period. Both GZL, the Group's package tour provider and ETC, the FIT (Frequent Independent Traveler) business, saw steady progress in sales. The second quarter of the period saw a considerable reduction in the number of outbound trips sold, mainly due concerns over H1N1 (swine flu) and uncertainty over the pace of the recovery of the Chinese economy.
The acquisition of Yoee.com during the period has transformed Et-china's FIT business into a national operator and propelled the Group into the top 3 online travel providers in China. Yoee.com has now become an integral part of Et-china and the combined business has increased FIT revenues while margins have improved due to the ongoing integration. Management aims to improve margins as it implements further reductions to the cost base in the second half.
Most significantly the Group achieved continuing revenue growth of around 8% and substantially reduced its reporting loss during the period. This reflected continued profits from both GZL and the e-JV with China Southern Airlines, as well as a 31% reduction in the losses attributable to the Group's Frequent Independent Traveler business.
Stated revenue for the six months to 30 June 2009 rose over 8% to RMB 840.3 million (£74.1 million) from RMB 776.7 million in the same period of 2008. Gross operating profit was RMB 97.2 million (£8.6 million) (2008: RMB 85.2 million), up by 14.1%. The Group reduced losses by 78.6%, recording a loss after tax and minority interest of RMB 4.8m (£0.4 million) (2008: Loss RMB 22.7 million).
Within GZL, the strongest growth in revenue came from e-commerce activities which achieved a 25% rise in revenue to RMB 51.6 million (2008: RMB 41.5 million). Domestic travel sales increased by 10% to RMB 271.2 million (2008: RMB 246.9 million) and Outbound travel saw growth of just over 8% to RMB 447.5 million (2008: 414.3 million). These figures reflect the continuing appetite for travel amongst Chinese nationals as the economy stabilizes. A further example of this is the enormous increase in the volume of travelers to Taiwan where numbers of mainland tourists for the first half of 2009 are nearly triple that of the whole of 2008.
Turning to our FIT division, Et-china saw a 31% reduction in revenues to RMB 15.1 million, which was mainly due to the discontinuation of group tours within ETC FIT. However, the division showed continued margin improvement to around 45% as management closely controlled costs over the period.
The Group's e-ticketing joint-venture grew revenues to RMB 21.3 million (2008: RMB 14.9 million) an increase of 43% as the division saw a 55% rise in B2B customers.
In June we announced that Kuoni Travel Holding Limited ('Kuoni'), one of the largest global leisure travel companies had acquired a 31.8% stake in the Group. Consequently we have appointed Yuk-Yin Maria Ng (Maria) as a Non-Executive Director. Maria is currently Managing Director of Kuoni Travel (China) Limited and brings with her a wealth of experience in the Asia Pacific travel industry which will help Et-china develop and grow. Management intends to cultivate closer links with Kuoni and has arranged for senior management to visit Kuoni's headquarters in Zurich to establish a collaborative marketing strategy for the region.
Outlook
We have seen an improved performance from our Domestic travel operations with revenues growing by 29% in July of 2009 and we look forward to 'Golden Week' (1 - 8 October) which is expected to continue to show an increase in the number of people travelling. We also expect to see a recovery in Outbound travel, following a perceived reduction in the threat from H1NI, in the fourth quarter and anticipate a resumption in growth from Et-china FIT as marketing spend is increased and the benefits of a significant system integration and upgrade bear fruit.
The Board is optimistic that the Group will see an improved performance in the second half and has great confidence that the outlook for the Chinese travel sector remains highly attractive. Looking to 2010 we expect to benefit from increased volumes of travel surrounding the Shanghai World Expo, which runs from May to October and the Guangzhou Asian Games in November 2010.
The relative stability of the domestic economy is helping to rebuild consumer confidence in China which will benefit the travel market significantly The Group is committed to growing the business and driving improved revenue growth and reducing losses.
Matthew Ng
Chairman
28 August 2009
Consolidated income statement
for the half year ended 30 June 2009
| Six months ended 30 June 2009 | Six months ended 30 June 2008 | |||
| RMB'000 | RMB'000 | |||
| Revenue | 840,253 | 776,703 | ||
| Direct operating costs | (743,076) | (691,509) | ||
| Gross profit | 97,177 | 85,194 | ||
| Other operating income | (948) | 2,681 | ||
| Selling, general and administrative expenses | (105,374) | (108,585) | ||
| Net change in fair value of redemption | ||||
| option of convertible loan notes | - | - | ||
| Result from operating activities | (9,144) | (20,710) | ||
| Finance income | 23,850 | 1,948 | ||
| Finance expense | (3,771) | (1,124) | ||
| Net finance income/ (expense) | 20,079 | 824 | ||
| Share of profit of associates, | ||||
| net of income tax expense | - | - | ||
| Profit/(loss) before income tax expense | 10,935 | (19,886) | ||
| Income tax expense | (6,005) | (369) | ||
| Profit/(loss) for the year | 4,929 | (20,255) | ||
| Minority interests | 9,788 | 2,436 | ||
| Net loss for the year | (4,859) | (22,691) | ||
| (Loss) per share (RMB) | (0.14) | (0.69) |
Consolidated balance sheet
As at 30 June 2009
| As at 30 June 2009 |
As at 30 June 2008 |
||||
| RMB'000 | RMB'000 | ||||
| Assets | |||||
| Property, plant and equipment | 50,513 | 58,768 | |||
| Intangible assets | 46,966 | 46,472 | |||
| Investment properties | 7,256 | 7,973 | |||
| Investment in associates | 4,046 | 12,280 | |||
| Other investment | 70,029 | 59,712 | |||
| Lease prepayments | 27,433 | 28,207 | |||
| Total non-current assets | 206,243 | 213,412 | |||
| Inventories | 19,488 | 20,152 | |||
| Trade receivables | 86,320 | 77,955 | |||
| Deposits, prepayments | |||||
| and other receivables | 89,295 | 90,266 | |||
| Fair value of foreign | |||||
| exchange forward contracts | - | - | |||
| Tax recoverable | 187 | 1,711 | |||
| Amounts due from a director | 294 | 840 | |||
| Pledged deposits | 21,882 | 57,010 | |||
| Cash and cash equivalents | 305,717 | 233,869 | |||
| Total current assets | 523,183 | 481,803 | |||
| Total assets | 729,426 | 695,215 | |||
| Equity | |||||
| Share capital | - | - | |||
| Share premium | 192,508 | 192,508 | |||
| Other reserves | 139,533 | 104,945 | |||
| Accumulated losses | (247,055) | (201,398) | |||
| Total equity attributable | |||||
| to equity holders of the Company | 84,985 | 96,056 | |||
| Minority interests | 74,831 | 75,421 | |||
| Total equity | 159,816 | 171,477 | |||
| Liabilities | |||||
| Deferred income | - | - | |||
| Deferred tax liabilities | 27,755 | 26,980 | |||
| Total non-current liabilities | 27,755 | 26,980 | |||
| Trade payables | 110,682 | 102,256 | |||
| Accrued expenses and other payables | 186,740 | 250,640 | |||
| Fair value of foreign | |||||
| exchange forward contracts | - | - | |||
| Amounts due to directors | - | 2,776 | |||
| Loans and borrowings | 244,433 | 141,086 | |||
| Total current liabilities | 541,855 | 496,758 | |||
| Total liabilities | 569,610 | 523,738 | |||
| Total equity and liabilities | 729,426 | 695,215 | |||
Consolidated cash flow statement
for the half year ended 30 June 2009
| Six months ended 30 June 2009 |
Six months ended 30 June 2008 |
||||
| RMB'000 | RMB'000 | ||||
| Cash flows from operating activities | |||||
| Net loss for the year | (4,859) | (22,691) | |||
| Depreciation | 3,518 | 4,753 | |||
| Amortisation of Intangible assets | 101 | (3,648) | |||
| Increase / (decrease) in net working capital | 75,072 | (11,697) | |||
| Net cash generated from/(used in) | |||||
| operating activities | 73,832 | (33,283) | |||
| Cash flows from investing activities | |||||
| Acqusition of fixed assets and intangible assets | 2,863 | (754) | |||
| Investment | (27,781) | 19,667 | |||
| Cash flows from investing activities | (24,918) | 18,913 | |||
| Cash flows from financing activities | |||||
| Short term loan | 12,692 | 7,201 | |||
| Long-term loan | 67,389 | 70,121 | |||
| Capital Contribution | (8,631) | (16,725) | |||
| Total current liabilities | 71,450 | 60,597 | |||
| Net Increase in cash | 120,364 | 46,227 | |||
| Cash at start of period | 185,353 | 187,642 | |||
| Cash at end of the period | 305,717 | 233,869 | |||