In a changing business landscape, innovation and digitalisation are the key to growth – and no organisation knows this better than Zhejiang Expressway.
Established in 1997, the Hong Kong-listed company’s core business involves the development and operation of high-grade roads in Zhejiang province and neighbouring cities. It enjoys an ‘A+’ rating from Fitch – the highest ever received by a company in the Chinese mainland – and an ‘A’ from S&P Global Ratings, the highest in the sector in the country. It was the first publicly owned enterprise in Zhejiang province to list on the Hong Kong Stock Exchange, and among the first to list real estate investment trusts (REITs).
‘We stick to an overall principle of integrity, innovation, openness and agility’
Proactive and prudent
The key to Zhejiang Expressway’s success is, according to CFO Ruan Liya, a combined strategy of proactiveness and prudence. ‘We are a front-runner among our industry peers by revenue and gross profit, and it has everything to do with our philosophy of prudent operation. We stick to an overall principle of integrity, innovation, openness and agility,’ she says, pointing out that the company has doubled the total length of expressway that it operates from 872km to over 1,500km over the past five years.
In 2021, Zhejiang Expressway issued a zero coupon convertible bond due in 2026 and worth €230m to improve its debt structure. The move was followed by the issuance of five-year bonds, worth US$470m at an interest rate of 1.638% per annum, to provide financial backing to the company’s continuous expansion.
‘The infrastructural business is asset heavy and tends to have a long payback period but generate steady returns’
Ruan credits the moves to the business’s open mindset. ‘The market window enabled us to secure low financing costs that are now otherwise unimaginable,’ she says.
REIT move
Last year, Zhejiang Expressway listed a public REIT – the first of its kind in Zhejiang province – to improve its asset liquidity. In 2019, the company was the first in the country to list a private REIT that was backed by expressway assets rather than real estate properties.
Zhejiang Expressway has also been nationally recognised as an industry model; in 2021, it was named ‘Most Valuable Listed Company for Investment during China’s 14th Five-Year Plan’ at the 11th China Securities Golden Bauhinia Awards, and has also been recognised as a role model in corporate management and projects organisation among key state-owned enterprises by the State-owned Assets Supervision and Administration Commission. In addition, it has provided valuable input to regulators, which has been incorporated into industry-wide regulation.
In order to diversify income and cultivate synergy, the company has recently branched out into financial and securities businesses; in 2017, subsidiary Zheshang Securities listed on the Shanghai Stock Exchange.
‘Digitalisation means freeing accounting and finance professionals from repetitive work so that they can tap on data to explore hidden values’
There’s natural synergy between the two, according to Ruan. ‘In terms of asset category and allocation, the infrastructural business is asset heavy and tends to have a long payback period but generate steady returns, while the financial industry offers high leverage and high return in exchange for requiring the controlling shareholder to have a solid credit history and abundant liquidity position.’
This diversification proved fortuitous when the Covid-19 pandemic hit. While expressway tolls were suspended, leading to a decrease in income, the securities segment enjoyed healthy growth. Subsidiary Zheshang Security recorded a 54.1% year-on-year increase in total revenue in 2020, with 25.9% growth in 2021. Its key businesses, including brokerage, investment banking and securities margin trading, showed favourable momentum, as the Chinese mainland’s capital markets quickly recovered.
Looking ahead, Zhejiang Expressway aims to extend its international footprint with a primary focus on transportation infrastructure.
Data drive
Understanding and unlocking the value of data is also crucial, according to Le Zhengying FCCA, general manager of the company’s financial management department.
‘Digitalisation does not only mean the development of a shared accounting system; it means freeing accounting and financial professionals from repetitive work so that they can tap on data to explore hidden values,’ says Le.
Alongside the three traditional components of corporate reporting – balance sheet, income statement and cashflow statement – Zhejiang Expressway’s finance team is developing a fourth element: the data-driven value statement.
‘We want our finance team to be an international one with a vision not limited to our own business or industry, but set on the world’s best practices’
‘In a digitalised era, digitisation of financial records to present a company’s past or current performance is far from enough,’ Le says. ‘Instead, it requires finance professionals to make good use of data and seek added value in the crossovers of businesses, and from the relations of revenue, cost and profit.’
Data analysis also provides insights to help adjust road maintenance strategies – for example, choosing whether to implement preventive works or to instead plan repairs for the off-peak season. ‘The finance team needs not only to present figures, but also to understand the logic behind them,’ Le says.
ACCA approval
Another key factor in Zhejiang Expressway’s success is, of course, its people – and its association with ACCA plays an important role. In 2022, the company became an ACCA Approved Employer. ‘We are really honoured, as it represents recognition not only for the company but also for the finance team,’ Le says.
‘As Zhejiang Expressway envisions growing into an international investment holdings company, we want our finance team to be an international one, too, with a vision not limited to our own business or industry, but set on the world’s best practices.’
