Boyuan Reports Third Quarter FY2015 Financial Results

-  Growth momentum continues; Net income up 133% year-over-year -

TORONTO, May 15, 2015 /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 and nine-month periods ended March 31, 2015. All figures are in U.S. dollars unless otherwise stated.

Selected Fiscal Year Financial Highlights

In thousands except share and % data	Q3 2015	Q3 2014	Change
Revenue	$89,493	$62,593	42.9%
Gross profit	$11,731	$9,097	29.0%
Gross profit margin	13.1%	14.5%	(9.8%)
EBITDA^1	$12,510	$7,754	61.3%
Net income	$8,041	$3,447	133.3%
Earnings per share - diluted	$0.26	$0.13	100%
	March 31, 2015	June 30, 2014
Total Assets	$264,717	$211,302	25.3%
Cash, cash equivalents and restricted cash	$15,461	$13,269	16.5%

"We are very proud of the progress and strides we have made to strengthen and expand our Company. As a result, we have achieved great success in our operational and financial results during the third quarter of 2015. Boyuan remains confident in our abilities to identify and capitalize on growth opportunities. With the support of our debenture holders, we have established a collaborative solution to continue with our growth trajectory while providing investors enhanced returns for their ongoing support." said Mr. Cailiang Shou, Chairman of Boyuan Construction Group.  

Q3 2015 Operational and Financial Highlights

• Revenue of $89.5 million, up 42.9% from $62.6 million for Q3 FY2014
• EBITDA of $12.5 million, up 61.3% from $7.8 million for Q3 FY2014
• Net income of $8.0 million, or $0.26 per diluted share for Q3 FY2015, up from $3.4 million, or $0.13 per diluted share, for Q3 FY2014
• Initiated two projects on Hainan Island. These projects include residential and commercial developments for a total value of $68.5 million.
• Received debenture holders approval for amendments to convertible debentures which are to come into effect July 1, 2015:
  • Annual interest rate has been increased to 11.5% from 10.0%;
  • Debenture holders have been provided a retraction right to require the Company to repurchase Debentures, at a price equal to 100% of the Debentures, on certain dates;
  • Conversion price has been reduced from $2.60 to $1.00 per share of the Company;
  • Maturity date of the Debentures has been extended from October 31, 2015 to October 31, 2018; and
  • The restricted redemption period has been extended to October 31, 2016.

Review of Financial Results
The Company's strategy of focusing on construction opportunities in Hainan province and tier two cities in the Yangtze River Delta continues to drive our revenue. Revenue for the three-month period ended March 31, 2015 was $89.5 million, up 43% from the corresponding period in FY2014.  Revenue for the first nine-months of FY2015 was $233.5 million, up 35% from $173.6 million for the same period of FY2014.  Boyuan recognizes revenue on the percentage-of-completion method. The significant increase in revenue in this quarter was mainly driven by the new projects the Company has taken up in the past twelve months and the additional revenue recorded as a result of the amount agreed in the final settlement report for one of the projects in Sanya was significantly greater than the contract value.

Cost of construction for Q3 FY2015 was $77.8 million, an increase of 45% from $53.5 million for Q3 FY2014. Expenses were higher as a result of increased project volume during the period which led to an increase in costs for Q3 FY2015 compared with Q3 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 Q3 FY2015 were $52.6 million and labour costs were $23.1 million, compared to direct material costs and labour costs of $40.2 million and $12.9 million for Q3 FY2014.

Gross profit for Q3 FY2015 was $11.7 million, which represented a margin of 13.1% on revenue, compared to gross profit for Q3 FY2014 of $9.1 million, which represented a margin of 14.5% 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 $1.3 million for Q3 FY2015 in-line with $1.2 million for Q3 FY2014. Interest expense for Q3 FY2015 was $1.5 million, a decrease of $0.4 million from the same period last year. The decrease was mainly due to a decrease in interest paid on receivables discounting and the decrease in general interest rates in PRC. The Company has discounted less receivable in the period as a result of improved cash position of the Company.

After-tax net income for Q3 FY2015 was $8.0 million, or $0.26 per fully diluted share, compared to net income of $3.4 million, or $0.13 per fully diluted share, in Q3 FY2014. Included in the net income this period was a gain of $2.1 million from the amendments of terms of the convertible debentures. For accounting purposes, the modification was considered an extinguishment of the existing convertible debenture and the recognition of a new convertible debenture, as the modified terms were substantially different from the original terms.

The Company had working capital of $113.4 million, including cash, cash equivalents, and restricted cash totaling $15.5 million as at March 31, 2015. This compares to $101.4 million and $13.3 million respectively at June 30, 2014. The increase in working capital is mainly due to the contribution of net earnings and improved working capital management.

Outlook
"China's real estate market has continued to show signs of improvement with growth in housing sales. We are dedicated and focused on capitalizing on accretive opportunities within our core markets of Yangtze River Delta, Shandong Province and Hainan Island. Boyuan's presence and expertise in construction services will continue to meet the demands of the growing middle class of China. In the longer term, we look to further expand and strengthen our capabilities to secure higher margin specialty construction projects," added Mr. Shou.

Boyuan's consolidated statements for the three-month and nine-month periods ended March 31, 2015 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 third quarter 2015 financial results on Tuesday, May 19, 2015 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 line.

The conference call will be archived for replay until Tuesday, May 26, 2015 at midnight. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 41876441#.

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.

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]; TMX Equicom: Ms. Renée Lam, [phone] ext. 258, [email protected]