Boyuan Files FY2015 Financial Statements and Provides Disclosure Update

TORONTO, Dec. 18, 2015 /CNW/ - Boyuan Construction Group, Inc. (TSX: BOY, BOY.DB.A) ("Boyuan" or the "Company"), a growing construction company in China of commercial, residential and municipal infrastructure projects. In accordance to the issuance of a management cease trade order ("MCTO") by the Ontario Securities Commission ("OSC") on October 14, 2015, with the assistance of its auditors, the Company has filed statements and MD&A for year ended June 30, 2015 which can be found on SEDAR (www.sedar.com) under the Company's profile.

Selected Fiscal Year Financial Highlights

In thousands except share and % data	FY2015	FY2014	Change
Revenue	$320,896	$275,388	16.5%
Gross profit	$32,204	$32,790	(1.8%)
Gross profit margin	10.0%	11.9%
EBITDA^1	$31,044	$20,935	48.3%
Net income	$12,429	$6,128	102.8%
Earnings per share - diluted	$0.45	$0.24	87.5%
	June 30, 2015	June 30, 2014
Total Assets	$257,469	$194,925	32.1%
Cash, cash equivalents and restricted cash	$20.2	$13.3	51.9%

FY2015 Operational and Financial Highlights

• Revenue of $320.9 million, up 16.5% from $275.4 million for FY2014
• FY2015 EBITDA of $31.0 million, up 48.3% from $20.9 million in FY2014
• Net income of $12.4 million, or $0.45 per diluted share for FY2015, up from $6.1 million, or $0.24 per diluted share, for FY2014
• $204 million worth of projects initiated during the fiscal year

Review of Financial Results

Revenue for FY2015 was $320.9 million, up 16.5% from $275.4 million for FY2014. Revenue is recognized on the percentage-of-completion method. The measures introduced by the Chinese central government three years ago to cool down the real estate market have had a negative impact on our business activities resulting in slower growth in revenue and a smaller gross margin in the past two years. The Company was also more selective in taking up new construction projects under the uncertain economic environment. However, with the real estate market seemingly more stabilized and with the full repayment of the secured debentures last year, the Company has been more aggressive in taking on new projects in the past two years. New projects taken up in FY2015 and FY2014 amounted to $204 million and $367 million respectively. Most of the Company's projects have duration between 1 to 3 years.

Cost of construction for FY2015 was $288.7 million, up 19.0% from $242.6 million for FY2013. The increase was primarily as a result of higher expenses associated with greater project volume. Cost of construction includes all direct material, labour, subcontract and other related costs, such as equipment repairs. The two major components of the cost of construction are direct material and labour costs. Direct material costs were $203.8 million and labour cost was $76.2 million in FY2015. In comparison, direct material costs and labour costs were $174.7 million and $58.6 million in FY2014.

Gross profit for FY2015 was $32.2 million, representing a margin of 10.0% on revenue. Gross profit for FY2014 was also $32.8 million, representing a margin of 11.9% on revenue. Historically, Boyuan's gross profit margins have been in the range of 14% to 17%.

G&A expenses were $6.0 million in FY2015 compared to $6.1 million in FY2014. G&A expenses have remained fairly stable year on year.

Interest and other income was $3.6 million in FY2015, compared to $4.4 million in FY2014. Imputed interest on accounts receivable and unbilled revenue of $3.5 million and $4.3 million was recorded to interest and other income for the years ended June 30, 2015 and 2014 respectively.

Interest expense was $7.1 million in FY2015, a decrease of $0.4 million over FY2014. The decrease was mainly due to a decrease in interest paid on notes receivables discounting paid on early redemption. The Company has redeemed fewer notes receivables prior to their maturity date in the period as a result of improved cash flow position of the Company.

The other expense of $3.1 million for FY2015 (nil for FY2014) was related to the carrying amount of the financial guarantee contracts, representing the amount of obligation under these contracts as at June 30, 2015. The fair value of the financial guarantee contracts at initial recognition was assessed by a third-party independent valuation consultant. The fair value of financial guarantee contracts upon recognition is determined using option pricing models where the main assumptions are the probability of default by the specified counterparty extrapolated from market-based credit information and the amount of expected loss, as a result of the default.

After-tax net income for FY2015 was 12.4 million or $0.45 per fully diluted share while it was $6.1 million or $0.24 for FY2014.  The increase was principally due to an impairment loss recognized on unbilled revenue and a provision for allowance for doubtful debts recorded in FY2014.

As previously announced, The MCTO was issued as a result of Boyuan's delay in filing its audited annual financial statements for the fiscal year ended June 30, 2015 and related Management's Discussion & Analysis, Annual Information Form and CEO and CFO certification of filings (collectively, the "2015 Filings"), by the required date.  The MCTO restricts all trading in and all acquisitions of the securities of the Company, whether direct or indirect, by the Chief Executive Officer and the Chief Financial Officer of the Company until two full business days following the receipt by the OSC of all Annual Filings.  The MCTO will not affect the ability of persons who are not insiders of Boyuan to trade its securities.

Further to its press release issued on December 11, November 27 and 16, 2015, the Company intends to file restated interim financial statements and MD&A for the first quarter FY2016 by December 23, 2015.

Boyuan intends to satisfy the provisions of the Alternative Information Guidelines as set out in National Policy 12 - 203 for as long as Boyuan remains in default, including the issuance of further by-weekly default status reports, each of which will be issued in the form of a press release. A general cease trade order may be issued if Boyuan fails to file such default status reports on a timely basis.

A copy of the MCTO can be found at the Company's website at www.boyuangroup.com.

About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of commercial building and residential construction, municipal infrastructure and engineering projects. In its last three fiscal years ending June 30, 2015, Boyuan completed 45 projects for a number of private and public sector clients. Boyuan's current project backlog includes residential, commercial, industrial and mixed-use developments. From its operating bases in Zhejiang Province and in Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, Hainan Province and Shandong Province. For more information visit www.boyuangroup.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, management's expectation to restate and revise the 2015 interim filings and expected timing for the completion of the restatement and refiling, management's expectations on the areas and contents of the restatements; management's expectations to make the 2015 filings and expected timing for the filing; and 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, 2014 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.

Contacts: Boyuan Construction Group, Inc., Mr. Paul Law, CFO, +(852) 9329 5088, [email protected]; National Equicom, Ms. Renée Lam, [phone], [email protected]