Boyuan Construction Reports Strong Revenue and Earnings Growth in First Quarter

TORONTO, Nov. 14, 2019 /CNW/ - Boyuan Construction Group, Inc. ("Boyuan" or the "Company") (TSX: BOY), an established China-based construction and engineering company, today reported strong first quarter financial results for the three-month period ended September 30, 2019. All figures are in U.S. dollars unless otherwise stated.

First Quarter 2020 Highlights

• Revenue grew 19.7% to $112.9 million;
• Continued margin compression with gross profit decreasing 6.1% to $6.8 million; 
• Net income increased 56.4% to $6.0 million;
• Commenced construction on six material projects with an aggregate contract value of $186.1 million.

"Our solid financial results for the quarter are testament to our continued ability to win new material contracts and our focus on smaller centres such as Jiaxing" said Mr. Cai Liang Shou. "Our backlog remains strong, supported by the six material projects we announced during the quarter. These included one commercial and five development projects worth a combined $186.1 million and that are expected to be completed between now and the middle of 2021. Two of these residential development projects are in our home base of Jiaxing."

Selected First Quarter Financial Results

In thousands except share and % data	Q1 2020	Q1 2019	Change
Revenue	$112,895	$94,280	19.7%
Gross profit	$6,845	$7,254	(6.1%)
Gross profit margin	6.1%	7.7%	(20.8%)
EBITDA^1	$8,955	$7,659	16.9%
Net income	$6,030	$3,855	56.4%
Earnings per share – diluted	$0.24	$0.13	84.6%

In thousands except % data	Sept. 30, 2019	June 30, 2019	Change
Total Assets	$293,527	$310,168	(5.4%)
Cash, cash equivalents & restricted cash	$19,757	$25,686	(23.1%)

Review of First Quarter 2020 Financial Results

Revenue for the quarter increased 19.7% to $112.9 million compared to $94.3 million for the same period last year. Revenue continued to benefit from the relatively robust real estate market in Jiaxing and its surrounding area in Zhejiang province. The Company commenced construction on six material new projects with an aggregate contract value of $186.1 million during the quarter.

Cost of construction was $106.0 million for the quarter, up 21.8% from $87.0 million in the first quarter of last year. The increase was primarily a result of higher expenses associated with larger project volume. Direct material costs were $71.8 million and labour costs were $29.3 million in the quarter, compared with direct material costs and labour costs of $59.5 million and $24.7 million respectively in the same quarter last year.

Gross profit for the quarter was $6.8 million, or 6.1% of revenue. Gross profit for the same period last year was $7.3 million, or 7.7% of revenue. The Company is continuing to experience some downward pressure on its margins.

G&A expenses were $1.57 million in the first quarter of this year, which remains practically unchanged from $1.52 million in the first quarter of last year.

Other income was $1.36 million for the quarter, compared to $1.20 million in the same period last year. Accretion income from the discount on non-current accounts receivable and unbilled revenue of $1.20 million and $1.10 million was recorded in other income for the periods ended September 30, 2019 and 2018 respectively.

In the first quarter, the Company has reversed an impairment loss on contract assets and accounts receivable of $1.8 million on previously impaired accounts.

Interest expense for the quarter was $1.1 million, a decrease of $0.9 million from $2.0 million in the first quarter of last year. The decrease was mainly due to the lower amounts of interest paid on bank notes payable in the period, including the redemption of the convertible debentures.

Net income of $6.0 million, or $0.24 per diluted share, for the quarter compares to $3.9 million, or $0.13 per diluted share for the same period the prior year. The increase was principally due to the increase in revenue as a result of the larger number of new projects taken up in the past year.

Boyuan had working capital of $55.1 million, including cash, cash equivalents, and restricted cash totaling $19.8 million as at September 30, 2019. This compares to $55.5 million and $25.7 million, respectively at June 30, 2019.

Boyuan's consolidated statements for the three-month period ended September 30, 2019 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.

Backed by a longstanding track record, Boyuan Construction Group, Inc. ("Boyuan" or the "Company") has the knowledge and expertise to design and build a wide range of commercial and residential developments, as well as municipal infrastructure and engineering projects. Based in Jiaxing City and with a growing presence in both Zhejiang Province and Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta and the Hainan Province. The Company's current project backlog includes residential, commercial, industrial and mixed-use developments. For more information visit www.boyuangroup.cn.  

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, management's expectation to comply with the Alternative Information Guidelines. 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 a general cease trade order bing issued, risk of 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, 2019 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.

¹ EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a defined performance measure under IFRS.

SOURCE Boyuan Construction Group, Inc.

Boyuan Construction Group, Inc., Mr. Paul Law, CFO, +(852) 9329 5088, [email protected]; NATIONAL Capital Markets, Trevor Heisler, Investor Relations, [phone], [email protected]