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Mountain China Resorts Reports 2016 Third Quarter Financial and Operational Results

/EINPresswire.com/ -- BEIJING, CHINA--(Marketwired - Dec 1, 2016) - Mountain China Resorts (Holding) Limited (TSX VENTURE:MCG) ("MCR" or the "Company"), today reported its financial results for the quarter ended September 30, 2016. 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. For the quarter ended September 30, 2016, the Company generated revenues from resort operations of $0.10 million and a net loss of $4.77 million or $0.02 per share compared to $0.18 million and a net loss of $6.03 million or $0.02 per share in 2015 from continuing operation. Resort Operations EBITDA from continuing operations for 2016 were negative $0.83 million compared to negative $0.63 million last year.

Resort operations expenses from continuing operations totaled $0.78 million for the quarter ended September 30, 2016 compared to $0.64 million in 2015. 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 $0.10 million (2015: 0.10 million), which mainly consists of income of $0.10 million (2015 - $0.10 million) recognized from the deposit paid by Club Med.

Corporate general and administrative expenses ("G&A expenses") totaled $0.25 million for the quarter ended September 30, 2016 compared to $0.27 million in 2015. This amount mainly comprised executive employee costs, public company costs, and corporate information technology costs.

Depreciation and amortization expense from continuing operations totaled $1.94 million for the quarter ended September 30, 2016 compared to $2.08 million in 2015. The slight decrease in depreciation and amortization was mainly caused by certain properties being fully depreciated in the last quarter of 2015. Those properties including furnishing constructions of hotels and some furniture bought in the last quarter of 2010 with an expected useful life of 5 years. No renewing work are required as those constructions and furniture are still in good condition and can be used in resort operations.

The Group incurred financing cost of $1.76 million for the quarter ended September 30, 2016 from continuing operations compared to $1.79 million in 2015. Financing costs mainly related to the loan interests, accretion expenses of a bank loan, and also included bank administrative fee, and service charge.

Cash totaled $0.33 million (December 31, 2015: 0.68 million) and working capital was negative $136.93 million as at September 30, 2016 (December 31, 2015: 140.20 million).

Operations Sun Mountain Yabuli

The 2014-2015 MCR's Sun Mountain Yabuli Resort winter season operations commenced on November 28, 2014 and closed on March 27, 2015 (120 days in total). The 2015-2016 MCR's Sun Mountain Yabuli Resort winter season operations commenced on December 1st, 2015 and closed on April 5, 2016 (127 days in total). 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. The Company reported a slight revenue decrease of 3.26% in the nine months ending September 30, 2016 compared with 2015 mainly due to the reduced operating days in 2016 resulted from unfavorable weather condition. With winter operations finished in the first quarter, second and third quarter has been the traditional slack season of the Company.

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 September 30, 2016 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 at least $4.50 million.

In 2013, political environment had affected tourism related real estate industry negatively. Many similar projects in ski resort areas started marketing and the outcome were quite frustrating. Those projects include Qingyun Town in the Yabuli region, and real estate projects of Changbai Mountain. As of December 31, 2013, management are of the opinion that with an additional cost to be invested to get the villas ready for sale, at this time it is unlikely that the benefit will exceed the cost. Therefore no further investment was made in 2013 and thereafter, and management do not expect any investment to be made in the recent future. Judging from the current economic environment, management's opinion is that there is very limited net realizable value associated with the villas at the moment, and a full impairment of was provided as of December 31, 2013 bringing the net book value of these villas to a nominal value of $1. As of the September 30, 2016, the net book value of property under construction was still $1.

Despite of the current difficulty, 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.

Financial Highlights

Summary Financial Results

(in thousands of Canadian dollars except for per share data) For the quarter ended September 30, 2016 For the quarter ended September 30, 2015
Revenue 102 175
Operating expenses (783 ) (639 )
Other income
General and administrative expenses 98 104
Depreciation and amortization (251 ) (266 )
Operating income (loss) from continuing operations (1,940 ) (2,077 )
Total non-operating income and expenses (2,773 ) (2,703 )
Deferred income tax recovery
Income (loss) from continuing operations (1,998 ) (3,332 )
Income (loss) from discontinued operations 6 6
Net Income (loss)
(4,765 ) (6,029 )
Net income (loss) per share from continuing operations (Basic and Diluted)
Net income (loss) share from discontinuing operations (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, 2016 December 31, 2015
Current Ratio 0.06 0.07
Free Cash 326 677
Working Capital (136,926 ) (140,201 )
Total Assets 115,780 134,073
Total non-current liabilities 18,106 22,817
Total Debt 164,093 174,126
Total Equity (48,312 ) (40,053 )
Total Debt to Total Equity Ratio (3.40 ) (4.35 )
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 future. The government of Heilongjiang Province had demonstrated strong incentive to support the skiing industry and the Company by increasing local infrastructure investment. In June, 2014, the Company received $1.50 million (RMB 7 million) government grant to reimburse the loan interest. Revenue from ClubMed in winter season has been growing steadily, and the Company successfully hosted the 2016 World Championships of Snowboarding. In 2013, management successfully extended the maturity period of Harbin Commercial Bank loan from 3 years to 10 years. Management is 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, 2016 December 31, 2015
(in thousands of Canadian dollars)
Accumulated deficit $380,707 $372,820
Working capital (deficiency) $136,926 $140,201

SUBSEQUENT EVENTS

There has been no substantial subsequent event up to the reporting date.

2016 QUARTERLY MAJOR CORPORATE DEVELOPMENTS

Updates on MCR 2016 summer results and 2016-2017 Winter Operations

The Company had stopped Club Med summer operations to cut loss since 2015 based on the historical data of unsatisfactory performance in summer and also as a result of unfavorable environment of competition among summer resort destinations. In the third quarter of 2016, resort revenue only amounted to 0.01 million, mostly from mountain slide operations. The 2016-2017 Club Med Winter Operations had started from November 25th, 2016 and will continue to late March in 2017.

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) Limited
Mr. Han Gang
Chief Financial Officer and Director
0086-10-66420868
investor_relations@mountainchinaresorts.com

Distribution channels: Travel & Tourism