Boyuan Reports First Quarter FY2015 Financial Results

-  Initiated five new projects for a total value of $102.2 million -

TORONTO, Nov. 12, 2014 /CNW/ - Boyuan Construction Group, Inc., (TSX: BOY, BOY.DB.A) a growing construction company in China of commercial, residential and municipal infrastructure projects, today reported its financial results for the three-month period ended September 30, 2014. All figures are in U.S. dollars unless otherwise stated.

Selected Fiscal Year Financial Highlights

In thousands except share and % data	Q1 2015	Q1 2014	Change
Revenue	$67,732	$49,039	38.1%
Gross profit	$9,462	$7,218	31.1%
Gross profit margin	14.0%	14.7%
EBITDA^1	$8,194	$6,045	35.5%
Net income	$3,896	$2,338	66.6%
Earnings per share - diluted	$0.14	$0.09	55.6%
	September 30, 2014	June 30, 2014
Total Assets	$223,378	$211,302	5.7%
Cash, cash equivalents and restricted cash	$12,793	$13,269	(3.6%)

"We achieved a positive start to the year with the first quarter of fiscal 2015 as we experienced strong growth in both revenue and gross profit. We remain a leader in our core markets and continue to secure opportunities to drive results despite the tight real-estate market in China" said Mr. Cailiang Shou, Chairman of Boyuan Construction Group.

Q1 2015 Operational and Financial Highlights

• Revenue of $67.7 million, up 38.1% from $49.0 million for Q1 FY2014
• EBITDA of $8.2 million, up 35.5% from $6.0 million for Q1 FY2014
• Net income of $3.9 million, or $0.14 per diluted share for Q1 FY2015, up from $2.3 million, or $0.09 per diluted share, for Q1 FY2014
• Initiated four projects on Hainan Island. These projects include three residential developments for a total value of $62.5 million and a hotel development valued at $9.8 million.
• Initiated a $29.9 million residential project in Haining City located in the Zhejian province of mainland China.

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

Review of Financial Results
Boyuan generated revenue of $67.7 million in the three-month period ended September 30, 2014, an increase of 38.1% from $49.0 million in the same period ended September 30, 2013. Boyuan recognizes revenue on the percentage-of-completion method. The increase in revenue for the first quarter was mainly the result of the Company becoming more assertive in securing new construction projects as the real estate market in China continues to stabilize following a cool down in previous years. Additionally Boyuan has increased resources available following the repayment of its 11.75% secured debentures in May 2013.

Cost of construction for Q1 FY2015 was $58.3 million, an increase of 39.3% from $41.8 million for Q1 FY2014. Expenses were higher as a result of increased project volume during the period which led to an increase in costs for Q1 FY2015 compared with Q1 FY2014. 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 for Q1 FY2015 were $42.9 million and labour costs were $14.5 million, compared to direct material costs and labour costs of $29.9 million and $10.3 million for Q1 FY2014.

Gross profit for Q1 FY2015 was $9.5 million, which represented a margin of 14.0% on revenue, compared to gross profit for Q1 FY2014 of $7.2 million, which represented a margin of 14.7% on revenue. Boyuan has experienced a slight downward pressure on margins resulting from the market conditions in China. Developers are more price sensitive with longer development cycles, which results in some erosion of the Company's historical margins.

G&A expenses were $1.2 million for Q1 FY2015 in line with $1.24 million for Q1 FY2014.

Interest expense was $1.87 million for the first quarter of FY2015, a slight increase of $0.1 million compared with the same period last year. The increase was primarily attributable to the increase in bank loans for the period.

After-tax net income for Q1 FY2015 was 3.9 million, or $0.14 per fully diluted share, compared to net income of $2.3 million, or $0.09 per fully diluted share, in Q1 FY2014.

The Company had working capital of $106.0 million, including cash, cash equivalents, and restricted cash totaling $12.8 million as at September 30, 2014. This compares to $101.4 million and $13.3 million respectively at June 30, 2014. The increase in working capital is due to the increase in unbilled revenue as well as advances and prepaid expenses.

Outlook

"As we begin to see signs of the real estate market stabilizing in China we will continue our focus on our three core markets: Yangtze River Delta, Shadong Province and Hainan Island. In the long-term we will look to expanding our capabilities by upgrading our qualification levels and engineering standards in order to secure higher margin specialty construction projects. As the growth of the middle class continues in China it suggests the continued demand for Boyuan's construction services," added Mr. Shou.

Boyuan's consolidated statements for the three-month periods ended September 30, 2014 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 first quarter 2015 financial results on Thursday, November 13, 2014 at 11:30 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 line.

The conference call will be archived for replay until Thursday, November 20, 2014 at midnight. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 32837949#.

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, 2014, 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.  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, 2014 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.

SOURCE: Boyuan Construction Group, Inc.

Boyuan Construction Group, Inc., Mr. Paul Law, CFO, +(852) 9329 5088, [email protected]; TMX Equicom, Katelynn Thissen, [phone] ext. 276; [email protected]