- Revenue increases 19%, EBITDA increases 14% -
TORONTO, Feb. 14, 2012 /CNW/ - Boyuan Construction Group, Inc., TSX: BOY, BOY.DB, BOY.DB.A) a fast-growing construction company in China of commercial,
residential and municipal infrastructure projects, reported today its
financial results for the three- and six-month periods ended December
31, 2011. All figures are in U.S. dollars unless otherwise stated.
Selected Fiscal Year Financial Highlights
In thousands except share and % data
Gross profit margins
Earnings per share - diluted
Dec. 31, 2011
June 30, 2011
Cash and cash equivalents
"The second quarter of fiscal 2012 was the best second quarter, in terms
of revenue and EBITDA, in our Company's history," said Mr. Cai Liang
Shou, Chairman of Boyuan Construction Group. "We grew revenue by 19%
and EBITDA by 14% during the quarter showing that despite a slight
slowing of real estate markets in tier two cities demand for our
construction services in our core markets, which now include Shandong
province and new markets within Hainan Island, remains strong and is
fuelling our growth. Our net income was slightly lower than last year
as financing charges for funds to be used for new projects was higher.
The revenue and income from those new projects will be realized in the
Q2 FY2012 Operational and Financial Highlights
Record Q2 revenue of $54.3 million, up 19% from $45.5 million in Q2
Record Q2 EBITDA of $7.6 million, up 14% from $6.7 million in Q2 FY2011
Q2 net earnings of $3.1 million, down 8% from $3.3 million in Q2 FY2011
Current backlog of projects worth over $287 million
$44.2 million worth of projects initiated to date for the current fiscal
Initiated a residential construction project located in Haikou, Hainan
Island valued at $23.6 million
Initiated a residential construction project located in Weifang,
Shandong Province valued at $12.6 million
Commenced a Normal Course Issuer Bid
Review of Financial Results
Revenue for the three-month period ended December 31, 2011 was $54.3
million, up 19.4% from $45.5 million for the same period in FY2011.
Revenue for the first six months of FY2012 was $107.6 million, an
increase of 21.6% from $88.5 million for the same period of FY2011.
Boyuan recognizes revenue on the percentage-of-completion method.
The year-over-year growth in revenue was primarily attributable to an
increase in the number of successful project bids with higher contract
value by the Company as well as to an increase in demand for
construction and engineering services in the Company's core markets of
the Yangtze River Delta region and Hainan Island.
Higher demand for construction and engineering services is due to
ongoing urban migration and an expansion of China's middle class, which
drives the need for new housing, commercial and public infrastructure
Cost of construction for Q2 FY2012 was $45.6 million, up 20.3% from
$37.9 million for Q2 FY2011. Cost of construction for the first six
months of FY2012 was $90.9 million, an increase of 23.1% from $73.9
million for the corresponding period of FY2011. The increase was
primarily as a 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. The two major
components of the cost of construction are direct material and labour
costs. Direct material costs were $33.6 million and labour costs were
$9.9 million in this quarter. In comparison, direct material costs and
labour costs were $25.0 million and $10.5 million in the same quarter
Gross profit for Q2 FY2012 was $8.7 million, which represented a margin
of 16.1% on revenue. Gross profit for the corresponding period of last
year was $7.6 million, which represented a margin of 16.7% on revenue.
The year-over-year decline in gross margins by 60 basis points was
attributable to a higher than average gross profit margin in Q2 FY2011
as there were several projects which yielded a higher than normal gross
margin. Historically, Boyuan's gross profit margins have been in the
range of 15% to 16%. On a six month basis, gross profit for FY2012 was
$16.7 million, which represented a margin of 15.5% on revenue. In the
same period of FY2011, gross profit and gross margins were $14.6
million and 16.5%, respectively.
G&A expenses were $1.16 million in Q2 FY2012 compared to $0.93 million
in Q2 FY2011. The small increase was due to an increase in staffing
cost as a result of the growth of the Company and the hiring of
additional professional staff for the management team. G&A expenses
for the six months period ended December 31, 2011 were $2.05 million
representing an increase of $0.11 million in the same period last year.
The increase in G&A expenses in this quarter came from the increase in
office administrative costs such as insurance and audit fees.
Interest expense for Q2 FY2012 was $1.5 million, an increase of $0.3
million over last year. The increase was primarily due to an increase
in bank loans and bank notes payable needed to fund start-up costs for
new projects as well as an increase in convertible debentures which
related to the Company's financing activities. Revenue for the
projects will be recognized as the projects are completed, typically a
duration of up to two years.
The Company also incurred a minimum total return (MTR) charge of $0.4
million for Q2 FY2012 compared to the $0.08 million incurred in Q2
FY2011. MTR charges were determined based on the provisions of
previous financing activities. Investors of the Company's convertible
debentures issued on February 2009 were entitled to a MTR right of 25%
per annum on their units. The calculation is based upon the 20 day
volume weighted average price of the Company's common shares, less
interest paid or payable on the convertible debentures, calculated on
the first, second and third anniversary of February 27, 2009 and
payable, if triggered, on February 27, 2012. The MTR expense recorded
in Q2 FY2012 was non-cash accrued expense based on calculations on
December 31, 2011.
After-tax net income for Q2 FY2012 was $3.1 million, or $0.11 per fully
diluted share, compared to net income of $3.3 million, or $0.14 per
fully diluted share, for Q2 FY2011. The slight decrease in net income
was a result of higher revenues from increased sales being primarily
offset by higher interest expense and a higher MTR charge. Both basic
and fully diluted EPS were negatively affected by an increase in the
number of shares outstanding. On a six-month basis, net income for
FY2012 was $5.9 million or $0.23 per share fully diluted. This compares
to a net income of $6.1 million, or $0.28 per share fully diluted, for
the same period of FY2011.
The Company had working capital of $72.2 million, including cash and
cash equivalents of $4.0 million for the period ended December 31,
2011. This compares to $63.3 million and $6.3 million, respectively, at
June 30, 2011. The increase in working capital is due to the
contribution of net earnings and improved working capital management.
"We continue to expect to grow within our current core markets as the
ongoing development of tier two cities due to urbanization remains
strong, suggesting continued growth in demand for our construction and
engineering services," added Mr. Shou. "This is despite some economic
evidence of a slowdown in the real estate markets of tier two cities.
As a result of government economic policies, liquidity is generally
tighter in the short term and we are therefore more selective in the
projects we choose to ensure our financial flexibility."
Boyuan's consolidated statements for the three-and six- month periods
ended December 31, 2011 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.
Conference Call Notice
The Company will hold a conference call to discuss its fiscal Q2 FY2012
financial results on February 15, 2012 at 10:00 a.m. ET. Mr. Paul Law,
Boyuan's Chief Financial Officer, will host the call.
All interested parties can join the call by dialing 647-427-7450 or
1-888-231-8191. Please dial in 15 minutes prior to the call to secure a
The conference call will be archived for replay until February 22, 2012
at midnight. To access the archived conference call, please dial
1-855-859-2056 or 416-849-0833 and enter the reservation number
A live audio webcast of the conference call will be available from the
investor relations section of the Company's website, www.boyuangroup.com, or from www.newswire.ca. Please connect at least 15 minutes prior to the conference call to
ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at the above web site
for 30 days.
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, 2011, Boyuan completed more than 80 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 or follow us on Twitter @ 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. 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 have been identified in the Company's
AIF for the fiscal year ended June 30, 2011 and in the Company's other
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 is
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.
For further information:
Boyuan Construction Group, Inc.
Mr. Paul Law, CFO
+(852) 9329 5088
(416) 815 0700 ext. 253