- Revenue, gross profit and EBITDA improvements driven by growing
demand in core markets -
TORONTO, Feb. 14 /CNW/ - Boyuan Construction Group, Inc., (TSX: BOY &
BOY.DB) a fast-growing construction company in China of commercial,
residential and municipal infrastructure projects, today reported its
financial results for the three- and six-month periods ended December
31, 2010. All figures are in U.S. dollars unless otherwise stated.
Selected Second Quarter Financial Highlights
In thousands except for share and % data
Gross profit margins
Earnings per share - diluted
Dec. 31, 2010
June 30, 2010
Cash, equivalents, and restricted cash
1 EBITDA is defined as earnings before interest, income taxes,
depreciation and amortization. EBITDA is not a defined performance
measure under generally accepted accounting principles (GAAP).
"Our strategy of focusing on construction opportunities in Hainan
province and tier two cities in the Yangtze River Delta continues to
drive our strong revenue and EBITDA growth," said Mr. Cai Liang Shou,
Chairman of Boyuan Construction Group. "Although our net income for
the second quarter was impacted by interest payments due to higher bank
facilities and the convertible debentures issued in November 2010,
these expenses are directly linked to start-up costs for new projects.
Valued at approximately $80 million, these new projects have been
initiated since the start of the fiscal year. As they are completed,
the positive impact will be reflected in our financial and operational
performance in the periods ahead."
Q2 Operational and Financial Highlights
Initiated three construction projects with an aggregate value of $34.5
million. Included are two residential projects in Hainan province
valued at $27 million and a commercial project, also in Hainan
Province, that is focused on the building of a clubhouse facility
valued at $7.5 million for the Volvo Ocean Race.
Total new project value for the six-month period was $78.8 million.
Issued CDN$15 million convertible unsecured subordinated debentures to
support the Company's project backlog.
Highlights Subsequent to Quarter End
Initiated a $10.9 million residential project in a planned tourist
district in Hainan province.
Selected 6-Month Financial Highlights
In thousands except share and % data
6-Month FY 2011
Gross profit margin
Adjusted net income2
Earnings per share - diluted
Adjusted Earnings per share - diluted3
2 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
3 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).
Review of Second Quarter Financial Results
Revenue for the second quarter ended December 31, 2010 was $45.5
million, up 20.9% from $37.6 million for the corresponding period of
FY2010. Revenue for the first six months of FY2011 was $88.5 million,
an increase of 21.9% from $72.6 million for the same period of FY2010.
Boyuan recognizes revenue 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 to an increase in demand for construction and engineering
services in the Yangtze River Delta and Hainan Province, Boyuan's core
markets. The growth was also due to the Company's decision to expand
into Shandong Province, an emerging market with growing demand for
construction and engineering services. Higher demand in Boyuan's
principal markets is due to ongoing urban migration and the expansion
of China's middle class, both of which drive the need for new housing,
commercial and public infrastructure projects.
Cost of construction for Q2 FY2011 was $37.9 million, up 22.6% from
$30.9 million for Q2 FY2010. Cost of construction for the first six
months of FY2011 was $73.9 million, an increase of 22.6% from $60.2
million for the corresponding period of FY2010. The growth was
primarily the result of higher expenses associated with greater project
volume and an expanded work force, including the start of the Company's
largest construction project, a residential development in Hainan
province valued at $44.3 million. Cost of construction includes all
direct material, labor, subcontract and other related costs, such as
Gross profit for Q2 FY2011 was $7.6 million, which represented a margin
of 16.7% on revenue. Gross profit for the corresponding period of last
year was $6.7 million, which represented a margin of 17.8% on revenue.
The year-over-year decline in gross margins by 110 basis points was
attributable to a higher than average gross profit margin in Q2 FY2010.
Historically, Boyuan's gross profit margins have been in the range of
15% to 16%. On a six month basis, gross profit for FY2011 was $14.6
million, which represented a margin of 16.5% on revenue. In the same
period of FY2010, gross profit and gross margins were $12.3 million and
Interest expense for Q2 FY2011 was $1.2 million, up 103% or $0.6 million
over the same period last year. On a year-to-date basis, interest
expense for FY2011 was $1.9 million, up from $1.1 million for FY2010.
The growth was primarily due to an increase in bank loans and bank
notes payable needed to fund start-up costs for new projects. The
increase in interest expense was also attributable to the issuance of
CDN $15 convertible debentures. On a year-to-date basis, Boyuan has
signed new agreements for construction development projects valued at
$78.8 million. 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 $82,374
and $0.7 million, respectively, for the three- and six-month periods
ended December 31, 2010. The Company did not incur any MTR charges in
FY2010. 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 twenty 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, 2013. The MTR expense recorded
in Q2 FY2011 was a non-cash accrued expense based on calculations on
December 31, 2010.
Net income after taxes for Q2 FY2011 was $3.3 million or $0.14 per share
fully diluted. This compares to a net income after taxes of $3.5
million, or $0.15 per fully diluted share, for the same period of
FY2010. The decline was principally due to higher interest expenses as
well as to a stock-based compensation charge of $0.4 million in Q2
On a six-month basis, net income for FY2011 was $6.2 million or $0.28
per share fully diluted. This compares to a net income of $3.3 million,
or $0.14 per share fully diluted, for the same period of FY2010 when
the Company incurred 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 March and July of 2009. 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. Excluding the
stock-base compensation charge, Boyuan had adjusted net income for the
six-month period of FY2010 of $6.5 million or $0.26 per fully diluted
share. Adjusted net income is not a recognized measure under GAAP, but
is more representative of the Company's operational and financial
performance for FY2010.
Boyuan had working capital of $62.3 million, including cash,
equivalents, and restricted cash totalling $17.0 million as at December
31, 2010. This compares to $39.9 million and $8.7 million, respectively
at June 30, 2010, the Company's fiscal year end.
"Demand for our construction and engineering services continues to be
very strong in each of our core markets, principally because of the
continued growth of China's middle class and the development of tier
two cities as a result of urbanization. In Hainan province, in
particular, we are very well positioned to leverage our experience and
reputation in the region to capitalize on growth opportunities and add
to our momentum in the years ahead given the levels of commitment by
central and provincial governments to develop Hainan as a major
international tourist destination by 2020," said Mr. Shou.
"Over the longer term, our growth will be driven by expanding our reach
in tier two cities and increasing our focus on specialty construction
projects, which will potentially deliver higher profit margins. As
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," Mr. Shou added.
Boyuan's consolidated statements for the quarter ended December 31, 2010
and related management's discussion and analysis (MD&A) are available
via SEDAR at www.sedar.com and the Company's website, www.boyuangroup.com
Conference call notice
Boyuan will hold a conference call to discuss its FY2011 second quarter
financial results on Tuesday, February 15, 2011 at 10:00 am (ET). Mr.
Paul Law, Boyuan's Chief Financial Officer, will host the call. All
interested parties can join the conference call by dialing 647-427-7450
or 1-888-231-8191. Please connect approximately 15 minutes prior to
the beginning of the call to ensure participation.
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, 2010, Boyuan completed more than 80 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 General Electric. Boyuan's current
project backlog includes residential, commercial, industrial and
mixed-use developments. 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, the city of
Sanya 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. 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, 2010 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.
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