Boyuan Reports Record First Quarter FY2012 Financial Results
Tuesday, December 06, 2011
- Revenue increases 24%, diluted EPS increases 20% -
TORONTO, Dec. 6, 2011 /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-month period ended September 30, 2011. All figures are in U.S. dollars unless otherwise stated.
Beginning with the first fiscal quarter of FY2012, Boyuan reported its financial results in accordance with International Financial Reporting Standards (IFRS), as required for public companies in Canada. Previously, the Company reported its financial results under Canadian Generally Accepted Accounting Standards (GAAP). Financial results for the corresponding period in 2011 have been restated to reflect the adoption of IFRS. The transition to IFRS reporting has no material impact on the Company's income statement.
Selected Fiscal Year Financial Highlights
In thousands except share and % data Q1 FY2012 Q1 FY2011 Change
Revenue $53,335 $43,044 +23.9%
Gross profit $7,974 $7,053 +13.1%
Gross profit margins 15.0% 16.4%
EBITDA1 $7,079 $6,044 +17.1%
Net income $2,828 $2,783 +1.6%
Earnings per share - diluted $0.12 $0.10 +20.0%
Sept. 30, 2011 June 30, 2011
Total Assets $156,809 $139,573 +12.3%
Cash and cash equivalents $9,309 $6,314 +47.5%
"The first quarter of 2012 was another record quarter for Boyuan in all significant financial and operational metrics," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group. "We grew revenue by 24% and EBITDA by 17% during the quarter providing continuing evidence that demand for construction services remains very robust in our core markets, which now include Shandong province and new markets within Hainan Island."
Q1 FY2012 Operational and Financial Highlights
Record Q1 revenue of $53.3 million, up 24% from $43.0 million in Q1 FY2011
Record Q1 EBITDA of $7.1 million, up 17% from $6.0 million in Q1 FY2011
Record Q1 net earnings of $2.83 million, up 1.6% from $2.78 million in Q1 FY2011
$44.2 million worth of projects initiated to date for the current fiscal year
Successfully completed transition from previous Canadian GAAP to IFRS
Highlights Subsequent to Quarter-End
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
Announced a Normal Course Issuer Bid
Review of Financial Results
Revenue for the three-month period ended September 30, 2011 was $53.3 million, up 23.9% from $43.0 million for the same period in 2010. Boyuan recognizes revenue on the percentage-of-completion method. The significant 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, which are the Yangtze River Delta region, Hainan Island and Shandong province.
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 projects.
Cost of construction for Q1 FY2012 was $45.4 million, up 26.0% from $36.0 million for Q1 FY2011. The increase was primarily as a result of higher expenses associated with greater project volume and an expanded work force including the continued work on the Company's largest two construction projects to date, residential developments in Hainan province valued at $44.3 million and $43.1 million. 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 $10.9 million in this quarter. In comparison, direct material costs and labour costs were $26.5 million and $7.5 million in the same quarter last year.
Gross profit for Q1 FY2012 was $8.0 million, or 15.0% of revenue. Gross profit for Q1 FY2011 was $7.1 million, or 16.4% of revenue. The gross profit margin, while still within the historical range, decreased compared to the same period last year primarily due to the relatively faster progress of lower margin projects in relation to higher margin projects in this quarter. Historically, Boyuan's gross profit margins have been in the range of 15% to 17%.
G&A expenses were $0.9 million in Q1 FY2012 compared to $1.0 million in Q1 FY2011. The small decrease is reflective of the Company's ability to operate efficiently and find cost savings wherever possible.
Interest expense for Q1 FY2012 was $1.5 million, an increase of $0.78 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 $0.56 million for Q1 FY2012, similar to the $0.57 million incurred in Q1 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, 2013. The MTR expense recorded in Q1 FY2012 was non-cash accrued expense based on calculations on September 30, 2011.
After-tax net income for Q1 FY2012 was $2.83 million, or $0.12 per fully diluted share, compared to net income of $2.78 million, or $0.10 per fully diluted share, for Q1 FY2011. The slight increase in net income was a result of higher revenues from increased sales being primarily offset by higher interest expense. The increase in fully diluted earnings per share for the period was due to the effect of adding back the interest expense on the convertible debentures in the calculations of the diluted earnings per share.
The Company had working capital of $68.5 million, including cash and restricted cash of $9.3 million for the period ended September 30, 2011. This compares to $63.3 million and $6.3 million, respectively, at June 30, 20110. The increase in both working capital and cash balances is due to the contribution of net earnings and continued improved operations.
"The ongoing development of tier two cities due to urbanization remains strong and suggests continued growth in demand for our construction and engineering services, despite any slowdown in the Chinese economy or restrictive measures imposed by the Chinese central government on the residential market," added Mr. Shou. "We believe our core markets still present many opportunities for us to capitalize on during the remaining fiscal 2012 year. Over the longer term, we plan to expand beyond those core markets to other tier two cities across China as the rate of urban migration taking place is dramatic and will drive further demand for our construction and engineering services."
Boyuan's consolidated statements for the three-month period ended September 30, 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 Q1 FY2012 financial results on December 7 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 December 14, 2011 at midnight. To access the archived conference call, please dial1-855-859-2056 or 416-849-0833 and enter the reservation number 26372832#.
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.
Annual General Meeting
Boyuan's annual general meeting of shareholders will be held on Thursday, December 15, 2011 at 11:00 a.m. at the Design Exchange, 3rd Floor South, Patty Watt Room, 234 Bay Street, Toronto, Ontario. All shareholders and other interested parties are invited to attend.
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.
For further information:
Boyuan Construction Group, Inc.
Mr. Paul Law, CFO
+(852) 9329 5088
(416) 815 0700 ext. 253