Mountain China Resorts Reports 2013 Third Quarter Interim Financial
and Operational Results
BEIJING, CHINA--(Marketwired - Nov 29, 2013) - Mountain China
Resorts (Holding) Limited (TSX-VENTURE:MCG) ("MCR" or the
"Company"), today reported its financial results for the quarter
ended September 30, 2013. MCR reports its results in Canadian
Dollars.
Financial Results
Total revenue and the net results were from resort operations
with no real estate sales revenue during the Reporting Period. Club
Med carried out its second summer operations from July 5th to
August 18th, 2013 (44 days in total). In 2012, summer operations
started on July 14th and ended on September 2nd (50 days in total).
For the quarter ended September 30, 2013, the Company generated
revenues from resort operations of $0.73 million and a net loss of
$5.31 million or $0.02 per share compared to $1.18 million and a
net loss of $4.8 million or $0.02 per share in 2012 Q3. Resort
Operations EBITDA from continuing operations for the third quarter
of 2013 were negative $0.73 million compared to negative $0.5
million last year. The deterioration of EBITDA and net loss was
mainly due to reduced revenue made in Club Med's second summer
operations. Club Med opened its second resort in China (Club Med
Guilin Resort) in September. As marketing activity for Club Med
Guilin resort started to pick up, many guests were attracted to
Guilin instead of Yabuli for summer actitivities. Also, since the
new generation of national leaders in China took office in the 12nd
People's Congress in March 2013, Chinese government has issued a
series of policies aimed at tightening up spending on government
and business entertainment and reception activities. As a result,
consumptions in tourism and business receptions have decreased on a
large scale, and operations of Club Med were negatively affected by
this social environment.
Resort operations expenses from continuing operations totaled
$1.36 million for the quarter ended September 30, 2013 compared to
$1.61 million in 2012. Operations expenses within the resorts are
mainly attributable to snow making, grooming, staffing, fuel and
utilities, which also include the G&A expenses relating to the
resort's senior management, marketing and sales, information
technology, insurance and accounting.
Other income totaled $0.1 million (2012: 0.08 million), which
mainly consists of income recognized from the deposit by Club Med
of $0.08 million.
Corporate general and administrative expenses ("G&A
expenses") totaled $0.2 million for the quarter ended September 30,
2013 compared to $0.16 million in 2012. This amount mainly
comprised executive employee costs, public company costs, and
corporate information technology costs.
Depreciation and amortization expense from continuing operations
totaled $2.89 million for the quarter ended September 30, 2013
compared to $2.81 million in 2012.
The Group incurred financing cost of $1.6 million for the
quarter ended September 30, 2013 from continuing operations
compared to $2.02 million in 2012. Financing costs were mainly
related to the loan interest, and also included bank administrative
fees, and service charges.
Cash and cash equivalents totaled $7.68 million and working
capital was negative $65.52 million as at September 30, 2013.
Financial Highlights
Summary Financial Results
(in thousands of Canadian dollars except for per share
data) |
|
For the quarter ended September 30, 2013 |
|
|
For the quarter ended September 30, 2012 |
|
Revenue |
|
727 |
|
|
1,184 |
|
Operating expenses |
|
(1,355 |
) |
|
(1,606 |
) |
|
|
|
|
|
|
|
Other income |
|
98 |
|
|
83 |
|
General and administrative expenses |
|
(199 |
) |
|
(160 |
) |
Depreciation and amortization |
|
(2,889 |
) |
|
(2,813 |
) |
Operating loss |
|
(3,618 |
) |
|
(3,312 |
) |
|
|
|
|
|
|
|
Total non-operating income and expenses |
|
(1,714 |
) |
|
(1,518 |
) |
Deferred income tax recovery |
|
21 |
|
|
33 |
|
Results of discontinued operation |
|
- |
|
|
- |
|
Net loss |
|
(5,311 |
) |
|
(4,797 |
) |
|
|
|
|
|
|
|
Net loss per share (Basic and Diluted) |
|
(0.02 |
) |
|
(0.02 |
) |
|
|
|
|
|
|
|
Weighted average number of shares outstanding(Basic and
Diluted) |
|
308,859,103 |
|
|
308,859,103 |
|
Balance Sheet Key
Indicators
(in thousands of Canadian dollars except for ratios) |
September 30, 2013 |
|
December 31, 2012 |
|
Current Ratio1 |
0.35:1 |
|
0.40:1 |
|
Free
Cash |
7,678 |
|
9,080 |
|
Working Capital2 |
(65,523 |
) |
(60,661 |
) |
Total
Assets |
144,416 |
|
151,815 |
|
Total
non-current liabilities |
23,490 |
|
19,817 |
|
Total
Debt3 |
123,715 |
|
120,511 |
|
Total
Equity4 |
20,701 |
|
31,304 |
|
Total
Debt to Total Equity Ratio |
5.98:1 |
|
3.85:1 |
|
Notes:
- Current ratio is defined as total current assets divided by
total current liabilities
- Working capital is defined as total current assets less total
current liabilities
- Total debt is defined as total current liabilities plus total
non-current liabilities
- Total equity is equal to the total shareholders' equity
The Company has an accumulated deficit, a working capital
deficiency and has defaulted on a bank loan, which casts
substantial doubt on the Company's ability to continue as a going
concern. The Company's ability to meet its obligations as they fall
due and to continue to operate as a going concern is dependent on
further financing and ultimately, the attainment of profitable
operations. These consolidated financial statements do not include
any adjustments to the amounts and classifications of assets and
liabilities that might be necessary should the Company be unable to
continue as a going concern. Management of the Company plans to
fund its future operation by obtaining additional financing through
loans and private placements and through the sale of the properties
held for sale. However, there is no assurance that the Company will
be able to obtain additional financing or sell the properties held
for sale.
Despite of the financial difficulty posed by the overdue debts
and continued loss, management is confident in the development of
both the industry and the Company in the near future. The
government of Heilongjiang Province had demonstrated strong
incentive to support the skiing industry and the Company by
increasing local infrastructure investment and providing potential
bank loan interest subsidy scheme. Recently in August the Company
was notified by Harbin Commercial Bank that they had approved to
extend the repayment schedule of its bank loan with an outstanding
balance of $23.56 million (RMB 140 million) from 3 years to 10
years. Revenue from Club Med in winter season had been growing
steadily, and the Company will be the official partner and playing
field of 2016 World Championships of Snowboarding. Management are
also working on various means to attract new investment into the
company to complete the construction of villas and improve the
capital structure of the Company.
|
September 30, |
December 31, |
(in thousands of Canadian dollars) |
2013 |
2012 |
|
|
|
Accumulated deficit |
$ |
305,566 |
$ |
291,358 |
Working capital (deficiency) |
$ |
65,523 |
$ |
60,661 |
SUBSEQUENT EVENTS
Trading in the Company's securities was reinstated by the TSX
Venture Exchange (the "Exchange") on October 16, 2013 as the
Exchange is reviewing the Company's status with respect to its Tier
1 Continued Listing Requirements.
2013 THIRD QUARTER MAJOR CORPORATE DEVELOPMENTS
Maturity of Bank Loan from Harbin Commercial Bank Extended
to 10 Years
On February 14, 2012, the Company secured a bank loan for the
amount of $23,562 (RMB 140 million) from Harbin Commercial Bank
(the "Original HCB Loan"). The Original HCB Loan carries a three
year-term with a maturity date of February 15, 2015 and a fixed
annual interest rate of 7.315%, with interest to be paid on a
monthly basis commencing February 16, 2012. The principal of the
Original HCB Loan is repayable in four installments starting with
the first installment repayment due on August 15, 2013 and each
subsequent installment repayment due every six months thereafter.
The Company used the advance from the Original HCB Loan and $1,683
(RMB 10 million) of other available funds to repay the Bridge
Loan.
In order to improve the capital structure, management of the
Company had been negotiating with the bank to extend the repayment
schedule. In August, 2013, the Company was notified by Harbin
Commercial Bank that the bank had approved to extend the repayment
schedule from 3 years to 10 years (the "Adjusted HCB Loan").
According to the new arrangement the loan will mature in December,
2022. The first installment of $505 (RMB 3 million) is repayable in
August 2013, and thereafter the Company will need to repay $2,356
(RMB 14 million) each year for eight consecutive years (RMB 0.2
million in December and 13.8 million in February), and $4,208 (RMB
25 million) in the final year (RMB 0.4 million in December and 24.6
million in February). The Company had made the payment of the first
installment of $514 (RMB 3 million) in August, 2013.
Updates on China Construction Bank Loan Defaults
On March 31, 2013 the Company defaulted on its third principal
payment of $6.73 million (RMB 40 million) under its $42.08 million
(RMB 250 million) loan agreement with the China Construction Bank
("Construction Bank"). According to the Loan Agreement between
Yabuli and Construction Bank, Construction Bank has the right to
accelerate Yabuli's obligation to repay the entire unpaid principal
plus interest immediately and to take legal actions to enforce on
the security. In August 2013 the Company was made aware that a
formal prosecution has been brought by the bank to demand
repayment. As of on September 30, 2013, the principal and interest
owing was $44.26 million, and the collaterals associated with the
loan agreement are made up of the Company's land use rights and
property and equipment with a carrying value of approximately
$64.26 million. The outcome of this lawsuit cannot be accurately
estimated at the time. The company has been negotiating with the
bank to arrange for a debt restructuring plan, and as of the
reporting date, no consensus has been arrived yet. Although the
bank informally expressed their intention to maintain normal
operations of the Company, there is no assurance that they will not
take further actions in the future.
Updates on Debt Restructuring
On February 8, 2012, the Company entered into a Debt Settlement
Agreement with Melco Leisure and Entertainment Group Limited
("Melco" or "MLE") for the settlement of a loan in the principal of
US$12 million made by Melco to the Company (the "MCR Loan") and a
loan in the principal of US$11 million (the "MCRI Loan", and
together with the MCR Loan, the "Melco Loans" or "MLE Loan") made
by Melco to Mountain China Resorts Investment Limited ("MCRI"), the
Company's Cayman subsidiary, both in 2008. On May 29, 2012, the
Company and Melco entered into Amended and Restated Debt Settlement
Agreement ("the Agreement") to clarify details of the loan
settlement mechanism and procedures to implement the settlement of
the Melco Loans. On July 10, 2012, during the Company's Annual
General Meeting, the Company obtained Shareholder Approval on the
Agreement. The transactions contemplated under the Agreement have
been approved by the TSX Venture Exchange.
Detailed settlement arrangement can be found in Note 13 of 2013
Interim Consolidated Financial Statements. Settlement procedures
were started in the second quarter of 2013, and the Company paid
$3.01 million to MLE on May 31, 2013 as a partial fulfilment to its
cash repayment obligation specified in the Agreement. The Company
also issued 20,600,000 common shares (the "Issuance I") and
19,444,444 common shares (the "Issuance II") to its subsidiary MCRI
for the price of USD$0.18 on July 2, 2013 and July 23, 2013
respectively in preparation of fulfilling certain of its
obligations under the Agreement. The 20,600,000 common shares
issued in Issuance I will be transferred to MLE for full
satisfaction of the MCRI Loan with the new principal amount of USD
$14.9 million. According to the Company's initial discussion with
MLE, the US$3.5m portion of the Principal would be settled by
conversion into 19,444,444 common shares. Issuance II was made in
preparation of this potential settlement. However, after a series
of negotiations, it is probable that management of MLE will choose
to take up to the maximum of five Chosen Villas on the basis of USD
$0.7 million per villa for settlement of the US$3.5m portion of the
Principal. Therefore, it is probable that the 19,444,444 common
shares in the Issuance II may be canceled later accordingly. As of
the reporting date, the Company is still in negotiation with MLE on
the details of the settlement.
Update on Changchun Resort
On November 17, 2010, the Company announced that the government
of Erdao district of Changchun City in the Jilin Province of the
People's Republic of China (the "Erdao Government"), through
Changchun Lianhua Mountain Agricultural Project Development Company
Limited ("CCL Agricultural") excluded the Company from management
of the Changchun Resort. The Company has engaged in discussions
with the Erdao Government, Changchun Lianhua Mountain Sports &
Travel Development Company Changchun Sports and CCL Agricultural
with an aim of resolving this matter. If the current situation
cannot be resolved through negotiations, the Company may have to
resort to legal means to protect its rights in relation to
Changchun Resort.
As a result of the foregoing, the Company has lost control of
Changchun Resort and has therefore written off the full value of
the assets and liabilities of Changchun Resort and reported it as a
loss from discontinued operations as of December 31, 2010. In 2011,
the Company commenced legal actions against the Erdao Government in
an effort to regain control and ownership of the assets and
operations.
The Company's legal department has sent three letters of formal
complaint to the Ministry of Commerce of the People's Republic of
China in June 2012, the Erdao Government, and Jilin Lianhua Tourist
Committee. Recently, the Ministry of Commerce of the People's
Republic of China has assigned the case to the relevant authority
called the Economic and Technological Cooperation Department of
Jilin Province for handling. After a series of negotiations made
and no consensus arrived, management had decided to start formal
administrative prosecution process against the government. As at
September 30, 2013, management had sent several letters of notice,
but no formal prosecution has been started.
About MCR
MCR is the premier developer of four season destination ski
resorts in China. MCR is transforming existing China ski properties
into world-class, four seasons luxury mountain resorts with
excellent real estate investment opportunities for discerning
buyers. In February 2009, the Company's Sun Mountain Yabuli Resort
was awarded Best Resort Makeover in Asia by TIME Magazine. Yabuli
is also the permanent home of the China Entrepreneur's Forum the
leading and most influential community of China's most
distinguished and successful entrepreneurs and business leaders
with over 5,000 members from across a variety of key
industries.
The TSX Venture Exchange nor its Regulation Services
Provider has neither approved nor disapproved the contents of this
press release.
The TSX Venture Exchange nor its Regulation Services
Provider does not accept responsibility for the adequacy or
accuracy of this release.
FORWARD-LOOKING INFORMATION
Information in this press release that is not current or
historical factual information may constitute forward-looking
information within the meaning of securities laws, and actual
results may vary from the forward-looking information. Implicit in
this information are assumptions regarding future operations,
plans, expectations, anticipations, estimates and intentions, such
as the plans to develop the ski resorts in China. These
assumptions, although considered reasonable by MCR at the time of
preparation, may prove to be incorrect. Readers are cautioned that
actual future operating results and economic performance of MCR are
subject to a number of risks and uncertainties, including general
economic, market and business conditions, uncertainty relating to
land use rights in China, adverse industry events for the ski and
real estate industries, real estate prices in general in China,
MCR's ability to make and integrate acquisitions, the requirements
of recent Chinese regulations relating to cross-border mergers and
acquisitions, the inability to obtain required approvals or
approvals may be subject to conditions that are unacceptable to the
parties, changing industry and government regulation, as well as
MCR's ability to implement its business strategies, dispose of
assets or raise sufficient capital, MCR's ability to obtain
additional financial resources and sufficient working capital,
MCR's ability to complete the announced non-brokered private
placement, seasonality, weather conditions, competition, currency
fluctuations and other risks, and could differ materially from what
is currently expected as set out above.
Forward-looking information contained in this press release is
based on current estimates, expectations and projections, which MCR
believes are reasonable as of the date of this press release. MCR
uses forward-looking statements because it believes such statements
provide useful information with respect to the operation and
financial performance of MCR, and cautions readers that the
information may not be appropriate for other purposes. Readers
should not place undue importance on forward-looking information
and should not rely upon this information as of any other date.
While MCR may elect to, it does not undertake to update this
information at any particular time except as required by applicable
law.
NON-IFRS MEASURES
Throughout this news release we use certain non-IFRS measures
such as the term "EBIDTA" to analyze operating performance. We
define EBITDA as operating revenues less operating expenses from
continuing operations and therefore reflect earnings before
interest, income tax, depreciation and amortization,
non-controlling interest and any non-operating and non-recurring
items. These non-IFRS measures do not have a standardized meaning
prescribed by IFRS and may not be comparable to similarly titled
measures presented by other companies. These non-IFRS measures are
referred to in this news release because we believe they are
indicative measures of a company's performance and are generally
used by investors to evaluate companies in the resort operations
and resort development industries. Figures used in calculation of
EBITDA are in compliance with IFRS, therefore no reconciliation is
needed.
Mountain China Resorts (Holding) LimitedMr. Han GangChief
Executive Officer and DirectorTel:
0086-10-66420868investor_relations@mountainchinaresorts.comwww.mountainchinaresorts.com
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