BEIJING, CHINA--(Marketwire - Aug. 31, 2012) - Mountain China Resorts (Holding) Limited (TSX VENTURE:MCG) ("MCR" or the "Company"), today reported its financial results for the three months ended June 30, 2012 (the "Reporting Period"). MCR reports its results in Canadian Dollars.
Financial Highlights
| (in thousands of Canadian dollars except for per share data) | For the three months ended June 30, 2012 |
For the three months ended June 30, 2011 |
||
| Revenue | 25 | 16 | ||
| Operating expenses | (675 | ) | (494 | ) |
| Other income | 2324 | 8 | ||
| General and administrative expenses | (306 | ) | (914 | ) |
| Depreciation and amortization | (2,958 | ) | (2,346 | ) |
| Impairment of PPE | - | - | ||
| Operating loss | (1,590 | ) | (3,730 | ) |
| Total non-operating income and expenses | (2,146 |
) | (1,183 |
) |
| Deferred income tax recovery | 33 |
15 |
||
| Net loss | (3,703 | ) | (4,898 | ) |
| Net loss per share (Basic and Diluted) | (0.01 | ) | (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 resort operations only, with no real estate sales revenue during the Reporting Period. For the three months ended June 30, 2012, the Company generated revenues from resort operations of $0.025 million and incurred a net loss of $3.70 million or $0.01 per share, compared to revenues from resort operations of $0.016 million and a net loss of $4.90 million or $0.02 per share in the same period in 2011. The low revenue and the loss in the second quarter were primarily due to the fact that the Company's Yabuli Resort's ski operations closed in late March, 2012.
Resort operating expenses from continuing operations totaled $0.68 million for the three months ended June 30, 2012 compared to $0.49 million for the same period in 2011. Operating expenses within the Yabuli Resort were mainly attributable to staffing, fuel and utilities.
Corporate general and administrative expenses totaled $0.31 million for the three months ended June 30, 2012 compared to $0.91 million for the same period 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 $2.96 million for the three months ended June 30, 2012 compared to $2.35 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 $1.85 million for the three months ended June 30, 2012 from continuing operations compared to $0.90 million for the same period in 2011.
The Company's cash and cash equivalents totaled $13.49 million and the Company's working capital was negative $49.13 million as at June 30, 2012 compared to $15.77 million and negative $62.79 million as at December 31, 2011.
Operations Sun Mountain Yabuli
The 2011-2012 MCR's Sun Mountain Yabuli Resort winter season operations commenced on November 26, 2011 and ended on March 25, 2012. The summer operation began on July 14, 2012 and will continue until September 2, 2012 for a total of 50 days at the Sun Mountain Yabuli Resort. For the summer operation, the resort has provided outdoor activities including: archery, cross country mountain bike/hiking, mountain top afternoon tea party and so on. For the three months ended June 30, 2012, the total number of slide guests reached 268, the total number of hotel guests was 17, and the hotel occupancy rate reached 14%.
Revenues at the Yabuli Resort for the second quarter and the six-month period ended June 30, 2012 were $0.025 million and $5.26 million respectively. Operating EBITDA was negative $0.65 million in the second quarter and $1.34 million in the first half of 2012.
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 number of temporary policies have been introduced by the Chinese government attempting to cool down the rapidly rising housing price in mainland China from 2011 to present and the related government policies still have not changed in the quarter ended June 30, 2012. Therefore, the Company temporary suspended its efforts to sell the villas. Depending on the condition of the Chinese real estate market in the later part of 2012, the Company may recommence its efforts to sell the villas in the winter of 2012.
| Balance Sheet Key Indicators |
| (in thousands of Canadian dollars except for ratios) |
| June 30, 2012 | December 31, 2011 | |||
| Current Ratio1 | 0.46:1 | 0.41:1 | ||
| Free Cash | 13,491 | 15,772 | ||
| Working Capital2 | (49,131 | ) | (62,787 | ) |
| Total Assets | 178,457 | 187,728 | ||
| Total Debt3 | 116,803 | 118,152 | ||
| Total Equity4 | 61,654 | 69,576 | ||
| Total Debt to Total Equity Ratio | 1.90:1 | 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 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. The Company's 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.
| June 30, 2012 | December 31, 2011 | |||||
| (in thousands of Canadian dollars) | ||||||
| Accumulated deficit | $ | 261,337 | $ | 253,985 | ||
| Working capital (deficiency) | (49,131 | ) | (62,787 | ) | ||
Fiscal 2012 Major Corporate Developments
Debt Settlement Agreement with Melco
On July 10, 2012, during the Company's Annual and Special General Meeting, the Company obtained approval of disinterested shareholders on the Debt Settlement Agreement with Melco. As of the date of this news release, the Company is still waiting for the final approval of the Exchange to complete the transactions contemplated under the Debt Settlement Agreement.
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 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 RMB 10 million of its own funds to repay bridge loan from 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 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.
Loan Defaults
On March 2, 2012, 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 and the Bank, the 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 Company is still continuing its negotiation with the Bank for postponement of the second installment, but negotiation has not reached conclusion.
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.
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.
The TSX Venture Exchange nor its Regulation Services Provider has neither approved nor disapproved the contents of this press release.
Contact Information:
Mr. Han Gang
Chief Financial Officer and Director
0086-10-66420868
investor_relations@mountainchinaresorts.com
www.mountainchinaresorts.com