BEIJING, CHINA--(Marketwire - Nov. 30, 2012) -Mountain China Resorts (Holding) Limited (TSX VENTURE:MCG) ("MCR" or the "Company"), reported its financial results for the three months ended September 30, 2012. MCR reports its results in Canadian Dollars.
|(in thousands of Canadian dollars except for per share data)|| ||For the three months|
September 30, 2012
| ||For the three months|
September 30, 2011
|Revenue|| ||1,184|| ||39|
|Operating expenses|| ||(1,606)|| ||(464)|
| || || || || |
|Other income|| ||83|| ||3|
|General and administrative expenses|| ||(160)|| ||(429)|
|Depreciation and amortization|| ||(2,813)|| ||(2,418)|
|Impairment of PPE|| ||-|| ||-|
|Operating loss|| ||(3,312)|| ||(3,269)|
| || || || || |
|Total non-operating income and expenses|| |
|Deferred income tax recovery|| |
|Net loss|| ||(4,797)|| ||(5,327)|
| || || || || |
|Net loss per share (Basic and Diluted)|| ||(0.02)|| ||(0.02)|
| || || || || |
|Weighted average number of shares outstanding(Basic and Diluted)|| ||308,859,103|| ||203,092,285|
Total revenue and the net results were from the Company's resort operations with no real estate sales revenue generated during the Reporting Period. For the three months ended September 30, 2012, the Company generated revenues from resort operations of $1.18 million and a net loss of $4.80 million or $0.02 per share compared to $0.039 million and a net loss of $5.32 million or $0.02 per share. The increase in the revenue is a sharp contrast to the revenue from the same period of last year because the Company started its first summer season operation on a trial basis in the three months ended September 30, 2012.
Also because of the trial summer season operation, the Company's resort operation expenses from continuing operations increased to $1.60 million for the three months ended September 30, 2012, compared to $0.46 million for the same period in 2011, because of the Company's resort summer season operations. Operations expenses for the resort were mainly attributable to staffing, fuel and utilities.
Corporate general and administrative expenses totaled $0.16million for the three months ended September 30, 2012, compared to $0.43 million for the same period in 2011. This amount mainly comprised executive employee costs, public company maintenance costs, and corporate information technology costs.
Depreciation and amortization expense from continuing operations totaled $2.81 million for the three months ended September 30, 2012, compared to $2.41 million for the same period in 2011. The increase was mainly due to the additional amortization expenses related to the building renovation completed in later 2011.
The Company incurred interest expenses of $1.48 million for the three months ended September 30, 2012 from continuing operations compared to $1.03 million for the same period in 2011.
Cash and cash equivalents totaled $14.46 million and working capital deficiency is $56.11 million as at September 30, 2012, compared to $15.77 million in cash and cash equivalent and working capital deficiency of $62.79 million as at December 31, 2011.
Operations Sun Mountain Yabuli
The Company's 2011-2012 Sun Mountain Yabuli Resort winter season operations commenced on November 26, 2011 and closed on March 25, 2012. The Company's first trial summer operation began on July 14, 2012 and closed on September 2, 2012 for a total of 50 days at the Sun Mountain Yabuli Resort. The resort provided outdoor activities including: archery, cross country mountain bike/hiking, mountain top afternoon tea parties and so on. For the three months ended September 30, 2012, the total number of slide guests reached 3,299, the total number of hotel nights reached 12,895, and the hotel occupancy rate reached 37% for the period of time when the summer operation was open. Even though Sun Mountain Yabuli Resort was successful in generating revenues from the first trial summer operation, after taking into consideration of the corresponding operating expenses for the summer operation, the summer operation at the Yabuli Resort is not profitable enough for the Company to continue. Accordingly, the Company and Club Med decided that there will be no summer operation in 2013 at Club Med Yabuli Resort.
Revenue at the Yabuli Resort for the third quarter and the nine-month period ended September 30, 2012 was $1.18 million and $6.45 million respectively. Operating EBITDA was negative $0.42 million in the third quarter and $0.91 million in the nine-month period ended September 2012.
The Company's 2012-2013 Sun Mountain Yabuli Resort winter season commenced on November 24, 2012 and is anticipated to continue until sometime in March of 2012. The Club Med portion of the Yabuli Resort will commence on November 30, 2012 and is anticipated to continue until sometime in March 2012. Advance hotel bookings received by the Company this year suggest that the winter operating income is expected to grow by 30%.
Sun Mountain Yabuli - Real Estate Development
As at the end of Fiscal 2010, the Company had completely finished working on the exterior decoration of 55 villas, including roofs, windows, painting and tiles. Three of the 55 villas were completed with interior finishing, including wall paint, carpets, wood floors, kitchen cabinets, countertops and other necessary furniture. 20 villas were left in its foundation stage (a total of 75 villas have been built) until the sales of the decorated villas begin. Flattened dirt roads were also constructed to connect each of the villas and the main street. As of the date of this MD&A, 55 villas are ready for sale and subject to internal decoration pursuant to the specifications of buyers. Generally, buyers in China are accustomed to have their interior decoration plan personalized, therefore, majority of homes sold in China are not decorated interiorly at the time when they are sold, but rather completely remained in cement.
A combination of temporary Chinese government policies aimed at cooling down the rapidly rising housing prices in mainland China from 2011 to now have depressed the market for resort properties like the Company's villas. Therefore, the Company temporary suspended sales efforts for its villas. When the policies of Chinese government changes and the market for resort properties warms up, the Company plans to resume its sales efforts for the villas.
|Balance Sheet Key Indicators |
|(in thousands of Canadian dollars except for ratios) |
| ||September 30, 2012|| ||December 31, 2011|
|Current Ratio1||0.41:1|| ||0.41:1|
|Free Cash||9,460|| ||772|
|Working Capital2||(56,111)|| ||(62,787)|
|Total Assets||170,840|| ||187,728|
|Total Debt3||115,764|| ||118,152|
|Total Equity4||55,076|| ||69,576|
|Total Debt to Total Equity Ratio||2.10:1|| ||1.70:1|
|1 Current ratio is defined as total current assets divided by total current liabilities|
|2 Working capital is defined as total current assets less total current liabilities|
|3 Total debt is defined as total current liabilities plus total non-current liabilities|
|4 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 all cast a substantial doubt on the Company's ability to continue as a going concern. The Company's ability to meet its obligations as they become 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 of its securities 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.
| ||September 30,||December 31,|
|(in thousands of Canadian dollars)|| || |
| || || |
|Accumulated deficit||$ 266,134||$ 253,985|
|Working capital (deficiency)||(56,111)||(62,787)|
Fiscal 2012 Major Corporate Developments
Debt Settlement Agreement with Melco
On July 10, 2012, during the Company's Annual General Meeting, the Company obtained the necessary shareholder approval for the Debt Settlement Agreement with Melco. However, the Company is still waiting for the final approval from the Exchange, which has asked the Company to provide an independent real estate appraisal for each of the villas at Club Med Sun Mountain Yabuli Resort proposed to be transferred for partial repayment of the debts. The Company is in the process of obtaining such appraisals.
New bank loan for the amount of RMB 140 million
On February 14, 2012, the Company secured a new bank loan for the amount of RMB 140 million with the Harbin Bank (the "New Bank Loan"). The New Bank Loan carries a three year term with a maturity date of February 15, 2015 and a fixed annual interest rate of 7.315%, which interest to be paid on a monthly basis commencing February 16, 2012. The principal of the New Bank Loan is repayable in four installments of RMB 35 million each, starting with the first installment repayment due on August 15, 2013 and each subsequent installment repayment due every six month thereafter. The original RMB 150 million bank loan with the same bank was repaid with advance from a short term bridge loan guaranteed by an independent third party trust company when it was due in on February 9, 2012. The Company then used the advance from the New Bank Loan and RMB 10 million of its own funds to repay bridge loan guaranteed by the third party trust company.
Non-Brokered Private Placement
On February 22, 2012, the Company announced that it has closed the non-brokered private placement of 105,700,000 common shares (the "Shares") initiated in September 16, 2011, priced at $0.18 per Share for gross proceeds of $19 million (the "Offering"). The proceeds from the Offering are being used for the Company's general working capital and for the repayment of certain debentures. On March 9, 2012, the Shares were issued to the corresponding shareholders.
On March 2, 2012, one of the Company's subsidiaries, Heilongjiang Yabuli On Snow Asian Game Village Hotel Co. Ltd. ("Yabuli Resort"), missed the second installment principal repayment in the amount of RMB 30 million under its RMB 250 million loan agreement with the China Construction Bank (the "Bank"). According to the Loan Agreement between Yabuli Resort and the Bank, the Bank has the right to accelerate Yabuli Resort's obligation to repay the entire unpaid principal plus interest immediately and to take legal actions to enforce on the security. During the Company's initial negotiation with the Bank, representatives of the Bank have advised the Company that the Bank will not take immediate actions against Yabuli Resort or the Company. However, the likelihood that the Bank will take legal actions and execute on its security over the collaterals increases significantly if Yabuli Resort still cannot repay the loan in the coming year. The Company is still trying to seek an extension of the repayment period from the Bank.
In order to better allocated and manage the Company's primary operations and assets, the Company completed the process of separating its real estate operation and its resort and ski related operations into different entities in the three months ended September 30, 2012.
The Company incorporated a subsidiary called Asia Snow Investment Limited ("Asia Snow"), in Hong Kong on March 21, 2012. Asia Snow is 100% owned by the Company's direct wholly-owned Cayman Island subsidiary, Mountain China Resorts Investment Limited. Asia Snow in turn holds 100% of the issued share capital Mountain China Resort Travel Consultancy (Beijing) Co. Ltd. ("MCR Beijing"), which was transferred from Mountain China Resorts Limited ("MCR HK") to Asia Snow. Also all of the issued share capital of Heilongjiang Yabuluoni Zhiye Co. Ltd. ("Zhiye") was transferred to MCR Beijing from MCR HK. By completing the corporate restructuring transaction, the resort business and real estate business of the Company will be operated and held by two separate operating subsidiaries. The Company believes that it will be more efficient for classifications and management purposes.
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.
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.