BOYUAN REPORTS RECORD RESULTS FOR FISCAL 2010
- Generates revenue of U.S. $147 million; exceeds after-tax income target by 7% -
TORONTO, Sept. 23 /CNW/ - Boyuan Construction Group, Inc. (the "Company"), a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, reported its financial results for the three- and 12-month periods ended June 30, 2010. All figures are in U.S. dollars unless otherwise stated.
Selected Year-end Financial Highlights
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In thousands except for share and % data FY2010 FY2009 Change
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Revenue $147,344 $101,664 +44.9%
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Gross profit $25,569 $15,981 +60.0%
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Gross profit margins 17.4% 15.7%
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Net income $10,057 $7,893 +27.4%
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Adjusted net income(1) $13,300 $9.611 +38.3%
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Adjusted earnings per share - diluted(2) $0.55 $0.39 +41.0%
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Total Assets $93,869 $57,516 +63.2%
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Cash, equivalents, and restricted cash $8,726 $5,467 +59.6%
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"We are very pleased with our financial results and the significant progress we achieved in FY2010," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group, Inc. "The gains we made to each of our key financial metrics, including revenue growth of 45%, increasing our profit margins to more than 17% and exceeding our $12.4 million after tax net income target by more than 7%, clearly demonstrate that our strategy of focusing on construction projects in emerging markets and tier-two cities unaffected by volatile real estate prices is working."
FY 2010 Operational and Financial Highlights
- Generated $13.3 million of adjusted net income after taxes, exceeding
the target forecast of $12.4 million stated in the Company's make-
good provision by 7.3%.
- Since January 2010, signed multiple new agreements with an aggregate
value of $127.6 million to construct residential, commercial and
infrastructure projects in the Yangtze River Delta, Hainan Island and
Shandong province, the Company's newest core market.
- Completed a private placement in July 2009 that generated gross
proceeds of CDN $6.47 million (with an effective date of June 30,
2009).
- Graduated to the Toronto Stock Exchange in June 2010.
- Appointed Dr. Fang Lixin, professor at the Guanghua Law School of
Zhejiang University, to the Company's Board of Directors.
Highlights Subsequent to Year End
- Initiated a residential construction project on Hainan Island valued
at $44.3 million, which represents Boyuan's largest contract value
for a single development to date.
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(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). By
comparison, earnings per share (diluted) for FY2010 were $0.43 and
$0.32 for FY2010.
Review of FY2010 Financial Results
Revenue for the 12-month period ended June 30, 2010 was $147.3 million, up 44.9% from $101.7 million for FY2009. Revenue is recognized on the percentage-of-completion method. The significant year-over-year growth was primarily attributable to an increase in the number of successful project bids by the Company as well as an increase in demand for construction and engineering services in the Yangtze River Delta, Hainan Island, Boyuan's core markets. The growth was also due to the Company's decision to expand into Shandong Province.
Cost of construction for FY2010 was $121.8 million, up 42.1% from $85.7 million for FY2009. The increase was primarily the result of higher expenses associated with greater project volume and an expanded work force. Cost of construction includes all direct material, labor, subcontract and other related costs, such as equipment repairs.
Gross profit for FY2010 was $25.6 million, representing a margin of 17.4% on revenue. Gross profit for FY2009 was $16.0 million, representing a margin of 15.7% on revenue. The year-over-year improvement in gross margins by 170 basis points was primarily due to a higher volume of projects on Hainan Island, where the Company is experiencing strong demand for its construction and engineering services but is encountering limited competition. Historically, Boyuan's gross profit margins have been in the range of 15% to 16%.
Net income after taxes for FY2010 was $10.1 million or $0.43 per share fully diluted. This compares to $7.9 million, or $0.31 per fully diluted share, for FY2009.
Adjusted net income for FY2010 was $13.3 million, up 38.3% from $9.6 million for FY2009. Adjusted net income is not a recognized measure under GAAP and excludes a non-cash, stock-based compensation charge of $3.2 million related to the fair value transfer of shares under the make-good provisions of two separate financing agreements signed respectively in February and June of 2009, pursuant to which Chairman Shou Cailiang deposited a total of 3,351,722 million shares for transfer to the investors of the Convertible Debentures should the Company fail to achieve certain financial forecasts. As specified by the Company's make-good provisions, Boyuan forecasted an after-tax net income of $11.5 million in March 2009 and $12.4 million in July 2009, respectively, for the fiscal year ending June 30, 2010.
There were a total of 2.64 million shares held in escrow as at June 30, 2010. By generating $13.3 million in adjusted after tax net income for FY2010, all shares remaining held in make-good escrow under the make good escrow provisions will be returned to Chairman Shou.
The accounting treatment of make-good provisions has subsequently changed and are no longer applied if issuers reach their financial targets. Boyuan currently has no make-good provisions in effect.
Boyuan had working capital of $39.9 million, including cash, equivalents, and restricted cash totalling $8.7 million for the fiscal year ended June 30, 2010. This compares to $22.4 million and $5.5 million, respectively at June 30, 2009.
Selected Fourth Quarter Financial Highlights
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In thousands except for share and % data Q4 FY2010 Q4 FY2009 Change
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Revenue $43,681 $41,066 +6.4%
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Gross profit $8,020 $7,448 +7.7%
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Gross profit margins 18.3% 18.1%
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Net income $4,593 $2,315 +27.4%
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Earnings per share - diluted $0.17 $0.09 +88.8%
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Adjusted net income $4,593 $4,033 +14%
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Adjusted earnings per share - diluted $0.17 $0.16 +6.3%
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Revenue for the three-month period ended June 30, 2010 was $43.7 million, up 6.4% from $41.1 million for Q4 FY2009. Historically, the fourth quarter is the Company's strongest and busiest period due to a variety of seasonal factors. The growth on a comparative basis was primarily due to the Company's decision to expand into Shandong Province.
Cost of construction for Q4 FY2010 was $35.7 million, up 6.0% from $33.6 million for Q4 FY2009. The increase was primarily as a result of higher expenses associated with greater project volume and an expanded work force.
Gross profit for Q4 FY2010 was $8.0 million, representing a margin of 18.3% on revenue. Gross profit for Q4 FY2009 was $7.4 million, representing a margin of 18.1% on revenue.
Net income after taxes for Q4 FY2010 was $4.6 million or $0.17 per share fully diluted. This compares to $2.3 million, or $0.09 per fully diluted share, for Q4 FY2009. The growth was primarily due to the Company's decision to expand into Shandong Province.
Due to changes in the accounting treatment of make good provisions, Boyuan did not incur any make good stock-based compensation charges in Q4 FY2010. Boyuan incurred a stock-based based compensation charge of $1.8 million in Q4 FY2009 due to accounting principles at the time. Adjusted net income for Q4 FY2010, as a result, was $4.6 million or $0.17 per diluted share. These compare to $4.1 million and $0.16, respectively, for Q4 FY2009.
Outlook
"The continued growth of China's middle class and the ongoing development of tier two cities as a result of urbanization suggest that higher demand for our construction services will remain strong in the coming periods," Mr Shou added. "Over the longer term, we believe that our growth will be driven by expanding our reach in tier-two cities and increasing focus on speciality construction projects, which we believe will deliver higher profit margins. As a part of this new strategic direction, we plan to upgrade our qualification and engineering standards to ensure that we can tap into this growing market potential."
China currently has 60 cities each with a population of one million or more. It is estimated that the number of cities with a population of one million or more will grow to 220 by 2025.
Boyuan's consolidated statements for the year and quarter ended June 30, 2010 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 visit www.boyuangroup.com or follow us on Twitter at www.twitter.com/boyuangroup
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 China's ongoing expansion of middle class and the growth of China's teir-2 cities, the continued growth of market for the Company's services, the Company's plan to increase focus on specialty construction projects, the Company's expectation of higher profit margins for the specialty construction projects, and the Company's plan to upgrade its construction licences and qualifications. 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.
Boyuan Construction Group, Inc.
Consolidated Balance Sheets
As at June 30, 2010 and 2009
(Expressed in US Dollars)
2010 2009
$ $
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Current Assets
Cash and cash equivalents 4,853,755 2,365,738
Restricted cash 3,872,488 3,101,189
Accounts receivable 676,187 1,314,900
Unbilled revenue 49,778,594 35,528,915
Other receivables 1,577,310 1,808,877
Inventory 390,130 658,150
Advances to suppliers and prepaid expenses 14,516,086 2,971,020
Deposits 9,385,787 3,540,155
Future income tax assets 479,000 -
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85,529,337 51,288,944
Deferred transaction costs - 55,222
Due from related parties - 113,010
Property and equipment 8,213,535 5,946,748
Land use rights 126,392 112,243
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93,869,264 57,516,167
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Current Liabilities
Bank loans 19,480,040 8,692,730
Notes payable 6,151,475 4,234,046
Accounts payable and accrued liabilities 12,679,266 12,842,823
Income taxes payable 3,038,947 1,318,874
Deferred revenue 1,057,840 1,454,145
Automobile loans 382,425 118,292
Due to related parties 592,214 22,839
Current portion of convertible debentures 2,223,048 -
Future income tax liabilities - 202,000
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45,605,255 28,885,749
Future income tax liabilities 808,000 573,000
Convertible debentures 3,919,428 1,880,200
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50,332,683 31,338,949
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Shareholders' Equity
Share capital 7,374,344 6,139,860
Contributed surplus 7,332,471 1,890,711
Reserves 2,774,998 1,928,732
Equity component of convertible debentures 372,533 137,295
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17,854,346 10,096,598
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Retained earnings 23,537,584 14,326,995
Accumulated other comprehensive income 2,144,651 1,753,625
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25,682,235 16,080,620
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43,536,581 26,177,218
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93,869,264 57,516,167
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Boyuan Construction Group, Inc.
Consolidated Statements of Income and Comprehensive Income
For the Years Ended June 30, 2010 and 2009
(Expressed in US Dollars)
2010 2009
$ $
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Construction revenue 147,344,451 101,664,080
Cost of construction 121,775,099 85,682,653
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Gross profit 25,569,352 15,981,427
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Expenses
Amortization of property and equipment 782,500 733,559
General and administrative expenses 3,047,626 1,752,521
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3,830,126 2,486,080
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Income from operations 21,739,226 13,495,347
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Other Income (expense)
Interest and other income 219,900 20,573
Foreign exchange loss (157,557) (138,135)
Interest expense (2,692,989) (430,139)
Stock based compensation (114,762) -
Make good provision (3,243,192) (1,718,357)
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(5,988,600) (2,266,058)
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Net income before income taxes 15,750,626 11,229,289
Income taxes 5,693,771 3,336,779
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Net income for the year 10,056,855 7,892,510
Other Comprehensive Income
Unrealized gain on foreign exchange
translation 391,026 64,217
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Comprehensive income for the year 10,447,881 7,956,727
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Earnings per share, basic $ 0.80 $ 2.40
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Earnings pre share, diluted $ 0.43 $ 0.31
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Weighted average number of common shares
outstanding, basic 12,542,210 3,291,768
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Weighted average number of common shares
outstanding, diluted 26,097,269 26,099,527
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For further information: Contacts: 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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