BEIJING, CHINA--(Marketwired - May 10, 2013) - Mountain China Resorts (Holding) Limited (TSX VENTURE:MCG) ("MCR" or the "Company") today reported its financial results for the fiscal year ended December 31, 2012. MCR reports its results in Canadian Dollars.
Total revenue and the net results were from resort operations with no real estate sales revenue during the Reporting Period. For the year ended December 31, 2012, the Company generated revenues from resort operations of $9.45 million and a net loss of $17.85 million or $0.06 per share compared to $6.66 million and a net loss of $42.66 million or $0.21 per share. Resort Operations EBITDA from continuing operations for the 2012 year were $2.54 million compared to negative $0.8 million in the 2011 year.
Resort operations expenses from continuing operations totaled $8.08 million for the year ended December 31, 2012 compared to $6.43 million in 2011. 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.
Corporate general and administrative expenses ("G&A expenses") totaled $1.51 million for the year ended December 31, 2012 compared to $1.46 million in 2011. This amount mainly comprised executive employee costs, public company costs, and corporate information technology costs.
Depreciation and amortization expense from continuing operations totaled $11.18 million for the year ended December 31, 2012 compared to $12.38 million in 2011.
The Group incurred financing cost of $8 million for the year ended December 31, 2012 from continuing operations compared to $7.41 million in 2011. Financing costs were mainly related to the loan interest, and also included bank administrative fees, and service charges.
Cash and cash equivalents totaled $14.08 million and working capital was negative $60.66 million as at December 31, 2012.
Operations Sun Mountain Yabuli
The 2012-2013 MCR's Sun Mountain Yabuli Resort winter season operations commenced on November 24, 2012 and closed on March 24, 2013. The 2011-2012 winter season operations commenced on November 26, 2011 and closed on March 25, 2012. The revenue of Sun Mountain Yabuli Resort operation comprises mainly by mountain operation, beverage, skiing-related services and hotel lodging. Skiing-related services includes rental of ski equipment, goggles, lockers, gloves, etc, sales of ski equipment and skiing training services offered in the ski school. It also includes the mountain operation which is using the facilities built in the mountain, such as sight-seeing trams, snow tubing and alpine. Revenue from the Yabuli Resort for the year ended December 31, 2012 was $9.45 million versus $6.66 million in 2011.
Sun Mountain Yabuli - Real Estate Development
At the end of Fiscal 2010, the Company had finished working on the exterior decoration of the 55 villas of which three were completed with interior finishing. At this time of the reporting date, certain construction is still needed on the exterior grounds to complete lighting, roads and utility connections. Management expected to be able to begin selling the villas and use the proceeds to complete the construction. As of December 31, 2012 the Company had not been successful in selling any of the villas. Management is of the opinion that in order to complete sales it is necessary to first complete the exterior construction. Management estimates these additional construction costs to be $4,486 and has plans to commence construction in the summer of 2013.
Since 2010, due to a combination of temporary Chinese government policies trying to cool down the rapid growing housing price in mainland China, the property investment demand have gone down significantly, which also impacted the Yabuli area. At the same time, with a tight expense budget and shortage of working capital, the Company had decided for the time being not to take the risk by inputting its limited working capital into the villa's remaining public infrastructure construction (for example: public lighting, roads, landscape engineering) and a full scale marketing and advertising regime. However, the Company does have confidence with its first of a kind skiing in and skiing out villas in China. And the Company will be reasonably flexible with its pricing when the market shows sign of a turn around. No other detail milestones for the above matter are available from the Company as the related government policies are set to be temporary but with durations undetermined.
Summary Financial Results
|(in thousands of Canadian dollars except for per share data)||For the year ended December 31, 2012||For the year ended December 31, 2011|
|General and administrative expenses||(1,508)||(1,459)|
|Depreciation and amortization||(11,176)||(12,383)|
|Total non-operating income and expenses||(9,350)||(31,190)|
|Deferred income tax recovery||133||1,712|
|Results of discontinued operation||-||-|
|Net loss per share (Basic and Diluted)||(0.06)||(0.21)|
|Weighted average number of shares outstanding (Basic and Diluted)||294,130,414||203,143,543|
Balance Sheet Key Indicators
|December 31,||December 31,|
|(in thousands of Canadian dollars except for ratios)||2012||2011|
|Total Debt to Total Equity Ratio||3.85:1||2.36:1|
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 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.
|December 31,||December 31,|
|(in thousands of Canadian dollars)|
|Working capital (deficiency)||$60,661||$62,787|
On February 17, 2013, the convertible debenture with CZL of $7,600 (Note 15 (b)(ii)) was due. The Company did not repay the loan and it is currently in default.
In April 2013 the Company was made aware by the bank with an outstanding balance of $39,315, that they are taking legal actions to demand repayment. As of the reporting date that Company has not received any formal claim.
Fiscal 2012 Major Corporate Developments
Club Med Resorts management has further improved the revenue of Sun Mountain Yabuli Resort
In 2012, Club Med started its first summer operation from July 14 till 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 party, etc. The first summer operation of ClubMed promoted the Yabuli summer brand, so that guests from all over the country could experience Yabuli beautiful summer scenery. The revenue created in the summer operations reached $1.2 million in 2012, and management is expecting the revenue to be further increased to $1.5 million in the 2013 summer operation.
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 $22.36 million (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%, with interest to be paid on a monthly basis commencing February 16, 2012. The principal of the New Bank Loan is repayable in four instalments of $5.59 million (RMB 35 million) each, starting with the first instalment repayment due on August 15, 2013 and each subsequent instalment repayment due every six month thereafter. The original 23.96 million (RMB 150 million) bank loan with the same bank was repaid with advances from a short term bridge loan made by a 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 $1.60 million (RMB 10 million) of its own funds to repay bridge loan from the third party trust company.
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 to clarify details of the loan settlement mechanism and procedures to implement the settlement of the Melco Loans. As of the reporting date, the Company has not implemented the transactions contemplated under the Amended and Restated Debt Settlement Agreement at this time. The Melco Loans have matured on 31 March 2013, so that the entire Melco Loans now become immediately due and payable.
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 will be used for general working capital and for the repayment of certain debentures. The Shares are subject to a TSX Venture Exchange hold period of four months and one day from closing of the Offering. On March 9, 2012, the Shares were issued to the corresponding shareholders.
On March 2, 2012, Yabuli Resort missed the second principal repayment in the amount of $4.79 million (RMB 30 million) under its $39.93 million (RMB 250 million) loan agreement with the China Construction Bank ("Construction Bank"). On March 31, 2013 the Company defaulted on its third principal payment of 6.34 million (RMB 40 million). 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. 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 $68.64 million as at December 31, 2012. During the Company's initial negotiation with the bank, the bank required the Company to repay the interest. However, the Company has stopped the interest payment starting from February 2012. As a result, negotiations have ceased and the bank has indicated their intention to take possession of the pledged assets if the loan principal and interest are not repaid in full. On December 31, 2012 the principal and interest owing was $39,315. As of the reporting date that Company has not received any formal claim.
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.
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.
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.