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Mountain China Resorts Reports 2019 First Quarter Financial and Operational Results

BEIJING, -- Mountain China Resorts (Holding) Limited reported its financial results for the quarter ended March 31, 2019. MCR reports its results in Canadian Dollars.

Financial Results

Total revenue and the net results were from resort operations sales revenue during the Reporting Period. For the quarter ended March 31, 2019, the Company generated revenues from resort operations of $4.04 million and a net loss of $0.12 million or $0.00 per share compared to $5.46 million and a net loss of $0.28 million or $0.00 per share in 2018 from continuing operations. Resort Operations EBITDA from continuing operations for the first quarter of 2019 were $0.68 million compared to $1.22 million last year. Major reason for the decrease in revenue was that since the second half of 2018, the Ski industry has been adversely affected by the overall economic downturn of China as a result of the macro-environment of trade war between China and the U.S., as well as a series of economic policies adopted by Chinese government to drop leverage rate. 2018-2019 winter operations were under negative influence of those macroeconomic environment.

Resort operations expenses totaled $3.15 million for the quarter ended March 31, 2019 compared to $4.06 million in 2018. Operation expense within the resorts are mainly attributable to grooming, staffing, fuel and utilities, which also include the G&A expenses relating to these resort’s senior management, marketing and sales, information technology, insurance and accounting. Gross margin decreased from 26% in 2018 to 22% in 2019. The drop in gross margin was due to unsatisfied amount of revenue generated in 2018-2019 winter operations.

Other income totaled $0.10 million (2018: 0.09 million) recognized from the deposit paid by Club Med.

Corporate general and administrative expenses (“G&A Expenses”) totaled $0.30 million for the quarter ended March 31, 2019 compared to $0.27 million in 2018. This amount mainly comprised executive employee costs, public company costs, and corporate information technology costs. 

Depreciation and amortization expense totaled $0.78 million for the quarter ended March 31, 2019 compared to $0.78 million in 2018. The decrease in depreciation and amortization from 2017 to 2018 was mainly caused by the debt settlement in 2017 in which properties and equipment with a book value of $5.24 million was disposed.

The Group incurred interest expenses of $0.32 million for the quarter ended March 31, 2019 compared to $0.23 million in 2018. Financing costs mainly related to the loan interests, accretion expenses of convertible bonds, and also included bank administrative fee, and service charge. The decrease in interest expense from 2017 to 2018 was mainly caused by the debt settlement in 2017 in which bank loans balance was reduced to $nil.

Cash totaled $1.69 million (December 31, 2018: 1.13 million) and working capital was negative $68.19 million as at December 31, 2018 (December 31, 2018: 69.13 million).

Operations Sun Mountain Yabuli

The 2017-2018 MCR’s Sun Mountain Yabuli Resort winter season operations commenced on October 27th, 2017 and closed on March 26th, 2018 (151 days in total). The 2017-2018 MCR’s Sun Mountain Yabuli Resort winter season operations commenced on November 1st, 2018 and closed on April 7th, 2019 (160 days in total). The revenue of Sun Mountain Yabuli Resort operation comprises mainly by mountain operation, beverage, skiing-related services and hotel lodging before the debt settlement carried out in May, 2017. After disposal of four subsidiaries, most of the Ski operations related assets and cash flow have been moved out from MCR, including ski equipment rent income, ski pass for using the lift, ski instructors services fee, slide income, and advertisement income. MCR only keeps two hotels and the cash flow from these hotels and MCR pays to Sun Village for using the lift and their ski instructors. The Sun Mountain Yabuli Resort attracted both regional and destination visitors from city ski clubs as well as independent travelers. Consistent with the response from conference and event attendees, visitors consistently ranked the Sun Mountain Yabuli Resort as the superior ski experience in China.

The Company reported a revenue decrease of 26% in first quarter of 2019 compared to 2018. Major reasons for the decrease in revenue was that since the second half of 2018, the Ski industry has been adversely affected by the overall economic downturn of China as a result of the macro environment of trade war between China and the U.S, as well as a series of economic policies adopted by Chinese government to drop leverage rate. 2018-2019 winter operations were under negative influence of those macroeconomic environment.

The Company has an accumulated deficit and a working capital deficiency which 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 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 or private placements. However, there is no assurance that the Company will be able to obtain additional financing.

2019 FIRST QUARTER MAJOR CORPORATE DEVELOPMENTS

MCR reported a 33% decrease in revenue for 2019 Q1

Club Med 2018-2019 winter season operations commenced on November 1st, 2018 and closed on April 7th, 2019. During the first quarter of 2019, total revenue was $4.04 million (2018 - $5.46 million), which represents a decline of 26% as compared with 2018. Major reasons for the decrease in revenue was that since the second half of 2018, the Ski industry has been adversely affected by the overall economic downturn of China as a result of the macro environment of trade war between China and the U.S, as well as a series of economic policies adopted by Chinese government to drop leverage rate.
The cooperation contract with Club Med will expire after 2019-2020 winter operations, management had started negotiation with Club Med on the renewal of the contract.

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. 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.

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