Boyuan reports FY 2010 second quarter financial results
- Grows revenue, improves margins and expands into new markets -
TORONTO, March 1 /CNW/ - Boyuan Construction Group, Inc., (TSX-V: BOY & BOY.DB) a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, reported its financial results for the three-month and six-month periods ended December 31, 2009. All figures are in U.S. dollars unless otherwise stated.
Financial Highlights
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Q2 2010 Q2 2009 Change 6-Month 6-Month Change
2010 2009
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Revenue $37.6M $23.4M +60.8% $72.6M $44.7M +62.6%
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Gross profit $6.7M $3.2M +110.7% $12.4M $6.2M +99.4%
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Gross profit margin 17.8% 13.6% 17.1% 13.9%
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Net income $3.5M $2.4M +47.9% $3.3M $4.4M -25.2%
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Adjusted net income(1) $3.5M $2.4M +47.9% $6.5M $4.4M +48.2%
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Earnings per share -
diluted $0.14 $0.10 +40% $0.14 $0.18 -22.2%
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Adjusted Earnings per
share - diluted(2) $0.14 $0.10 +40% $0.26 $0.18 +44%
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"We are very pleased with our second quarter results," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group, Inc. "Since the start of the 2010 fiscal year, we have been able to capitalize on the strong demand for our construction and engineering services in each of our markets. This has resulted in significant year-over-year improvements to our revenue, gross profit margins and adjusted net income, providing further evidence of the strength of our business model and the high quality of our projects."
Business Highlights in Q2 and Subsequent to Quarter End
- Continued expansion of operations into Shandong, one of China's
fastest growing regions.
- Following overwhelming shareholder approval at its annual meeting in
Toronto, the Company changed the location of its registered office to
Ontario and ratified its stock option plan.
- Signed four new construction project contracts with an aggregate
value of $76.6 million. The agreements encompass residential,
commercial and hotel construction projects on Hainan Island and
Shandong Province, Boyuan's newest market.
Review of Financial Results
Revenue for the second quarter ended December 31, 2009 was $37.6 million, up 60.8% from $23.4 million for Q2 of FY2009. Revenue for the first six months of FY2010 was $72.6 million, compared to $44.7 million for the same period in FY2009.
Boyuan recognizes revenue on the percentage-of-completion method. The significant year-over-year growth in revenue was primarily attributable to an increase in the number of successful project bids by the Company as well as to an increase in demand for construction and engineering services in the Yangtze River Delta region and Hainan Island, Boyuan's core markets. Subsequent to quarter end, Boyuan has experienced strong demand for its services from Shandong province, a new market for the Company. Higher demand for construction and engineering services is due to ongoing urban migration and an expansion of China's middle class, which drive the need for new housing, commercial and public infrastructure projects.
Cost of construction for the second quarter of FY2010 was $30.9 million compared to $20.2 million for Q2 of FY2009. Cost of construction for the first six months of FY 2010 was $60.2 million, up from $38.4 million for the comparable period in FY2009. The increase was primarily as a result of higher expenses associated with greater project volume and an expanded work force. Cost of sales includes all direct material, labor, subcontract and other related costs, such as equipment repairs.
Gross profit for the second quarter of FY2010 was $6.7 million, or 17.8% of revenue, compared to $3.2 million, or 13.6% of revenue, for the same period of FY2009. Gross profit for the first six months of FY2010 was $12.4 million, or 17.1% of revenue, compared to $6.2 million, or 13.9% of revenue, for the same period of FY2009. The year-over-year improvement in gross profit margins in Q2 by 410 basis points was due to a higher percentage of revenue contributed from higher margin projects, particularly in Hainan Island, where the Company experiences strong demand for its services but faces limited competition, and a lower than average gross margin in Q2 FY2009. Historically, the norm for the Company's gross margins is 15%.
Net income for the second quarter of FY2010 was $3.5 million, or $0.14 per fully diluted share, compared to net income of $2.4 million, or $0.10 per fully diluted share, for Q2 of FY2009.
Net income for the six-month period was $3.3 million, down 25.2% from $4.4 million for the same period of FY2009. The decline is attributable to a non-cash stock-based compensation charge of $3.2 million that the Company incurred in the first quarter of FY2010. As previously reported, the charge related to the fair value transfer of shares under the make good provision of a financing agreement signed in July 2009. The charge is in full compliance with Canadian generally accepted accounting principles.
As specified by the Company's make-good provision of the July financing agreement, Boyuan forecasted an after-tax net income of $8.5 million for the fiscal year ended June 30, 2009. As a condition of the make-good provision, Boyuan's Chairman put 3.2 million shares in escrow and would have transferred 1.6 million shares to investors if the forecast target had not been met. As reported previously, the Company generated $9.6 million in adjusted after tax net income for FY 2009. As a result, 1.6 million shares previously held in escrow were returned to Chairman Shou during the quarter, resulting in a make good charge of $3.2 million.
Excluding the make-good provision charge, adjusted net income for the six month period ended December 31, 2009 was $6.5 million, or $0.26 per share diluted, which compares to $4.4 million, or $0.18 per share diluted, for the same period in FY2009. The Company believes that adjusted net income is more representative of its profitability and performance since the make good charge is a non-cash accounting charge and not related to its business activities.
The Company had cash, cash equivalents and restricted cash totaling $4.9 million and working capital of $35.3 million for the period ended December 31, 2009. This compares to a cash, cash equivalents and restricted cash balance of $5.5 million and working capital of $22.4 million at June 30, 2009.
Outlook
"Recent economic indicators in China remain relatively strong, suggesting continued optimism for the construction industry over the short term," said Mr. Shou. "Our opportunities for growth, in particular, are encouraging given that we operate in tier two level cities where the competitive landscape is fragmented and local economies are less affected by economic trends, such as rising property values, found in major cities, such as Shanghai or Beijing."
Boyuan's consolidated statements for the three and six month periods ended December 31, 2009 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities
within applicable timelines and will be available via SEDAR at www.sedar.com.
About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of residential and commercial building construction, municipal infrastructure and engineering projects. In its last four fiscal years ending June 30, 2009, Boyuan completed more than 125 projects for a number of private and public sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whose partners include DuPont, Mitsubishi and GE. Boyuan's current backlog includes residential, industrial and mixed-use developments, including a five-star hotel and a project at the Qingshan Nuclear Plant, China's first and largest nuclear facility. From its operating bases in Zhejiang Province and on Hainan Island, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, Hainan Island and Shandong Province. For more information please visit www.boyuangroup.com or follow us at http://boyuangroup.posterous.com
Caution Regarding Forward-Looking Information:
Certain information contained in this press release constitutes forward-looking information, which is information relating to future events or the Company's future performance and which is inherently uncertain. All information other than statements of historical fact may be forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook. Forward-looking information contained in this press release includes, but is not limited to, the Company's outlook on higher demand for construction and engineering services in China, China's ongoing urban migration and expansion of middle class, need for new housing, commercial and public projects in China, strong economic indicators in China, optimism on Chinese construction industry over the short term, and impact of economic trends (such as rising property value) on tier-two Chinese cities. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The Company believes the expectations reflected in the forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking information contained in this press release. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking information contained in this press release include, but are not limited to: risk of macro-economy cycle, risk from competition, risk from insufficient marketing to secure new projects, risk in obtaining additional financing, risk involving permits and licences, reliance on key management member, risk from supply of raw materials, risk of financial leverage, risk of bad debts in accounts receivables, risk involved in real estate development, foreign exchange fluctuations, political and economic conditions in China and other risks included in the Company's AIF for the fiscal year ended June 30, 2009 and in the Company's public disclosure documents filed with certain Canadian securities regulatory authorities and available at www.sedar.com. The forward-looking information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture ) accepts responsibility for the adequacy or accuracy of this release.
(1) Adjusted net income is not a recognized measure under Canadian GAAP.
It excludes a stock-based compensation charge of $3.2 million related
to the fair value transfer of shares under the "make-good provision"
of a financing agreement signed in July, 2009. The Company believes
that adjusted net income is more representative of its performance as
the make good charge is a non-cash accounting charge and not related
to its business activities.
(2) Adjusted earnings per share is not a recognized measure under
Canadian GAAP. It is calculated by dividing the Company's adjusted
net income by the number of outstanding shares (diluted).
Boyuan Construction Group, Inc.
(formerly "SND Energy Ltd.")
Consolidated Balance Sheets
(Expressed in US Dollars)
(Unaudited) (Audited)
December 31, June 30,
2009 2009
$ $
Current Assets
Cash and cash equivalents 2,337,013 2,365,738
Restricted cash 2,553,677 3,101,189
Accounts receivable 172,890 4,447,059
Unbilled revenue 45,881,930 35,528,915
Other receivables 7,063,564 2,216,873
Inventory 7,876 658,150
Advances to suppliers and prepaid expenses 11,169,059 2,971,020
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69,186,009 51,288,944
Deferred transaction costs 238,654 55,222
Due from related parties - 113,010
Property and equipment 7,019,893 5,946,748
Land use rights 111,203 112,243
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76,555,759 57,516,167
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Current Liabilities
Bank loans 13,622,535 12,926,776
Accounts payable and accrued liabilities 15,040,384 12,842,823
Income taxes payable 4,014,417 1,318,874
Deferred revenue 487,507 1,454,145
Automobile loans 112,990 118,292
Due to related parties 389,787 22,839
Future income tax 223,091 202,000
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33,890,711 28,885,749
Future income tax 571,281 573,000
Convertible debentures 5,871,599 1,880,200
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40,333,591 31,338,949
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Shareholders' Equity
Share capital 7,279,993 6,139,860
Contributed surplus 7,257,165 1,890,711
Reserve 2,760,648 1,928,732
Equity component of convertible debentures 372,783 137,295
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17,670,589 10,096,598
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Retained earnings 16,801,911 14,326,995
Accumulated other comprehensive income 1,749,668 1,753,625
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18,551,579 16,080,620
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36,222,168 26,177,218
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76,555,759 57,516,167
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Boyuan Construction Group, Inc.
(formerly "SND Energy Ltd.")
Consolidated Statements of Income and Comprehensive Income
(Expressed in US Dollars)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
$ $ $ $
Construction revenue 37,611,808 23,388,354 72,615,615 44,659,513
Cost of construction 30,901,132 20,203,218 60,225,015 38,445,560
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Gross profit 6,710,676 3,185,136 12,390,600 6,213,953
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Expenses
Amortization of
property and
equipment 147,189 141,193 289,230 203,598
General and
administrative
expenses 961,516 (83,663) 1,775,658 66,818
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1,108,705 57,530 2,064,888 270,416
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Income from operations 5,601,971 3,127,606 10,325,712 5,943,537
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Other Income (expense)
Interest and other
income 47,843 8,548 186,778 11,569
Foreign exchange loss (67,498) - (67,498) -
Interest expense (572,480) (7,871) (1,137,261) (78,398)
Make good provision - - (3,243,192) -
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(592,135) 677 (4,261,173) (66,829)
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Net income before
income taxes 5,009,836 3,128,283 6,064,539 5,876,708
Income taxes (1,497,097) (753,015) (2,757,707) (1,458,337)
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Net income for
the period 3,512,739 2,375,268 3,306,832 4,418,371
Other Comprehensive
Income (Loss)
Unrealized gain
(loss) on foreign
exchange translation 51,393 2,234 (3,957) 43,916
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Comprehensive income
for the period 3,564,132 2,377,502 3,302,875 4,462,287
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For further information: Boyuan Construction Group, Inc., Mr. Paul Law, CFO, (852) 9329-5088, [email protected]; The Equicom Group Inc., Joe Racanelli, (416) 815-0700 ext. 243, [email protected]
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