Boyuan Reports Record Second Quarter FY2012 Financial Results
Tuesday, February 14, 2012
- 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 Q2 FY2012 Q2 FY2011 Change
Revenue $54,295 $45,465 +19.4%
Gross profit $8,736 $7,592 +15.1%
Gross profit margins 16.1% 16.7%
EBITDA1 $7,580 $6,662 +13.8%
Net income $3,050 $3,325 -8.2%
Earnings per share - diluted $0.11 $0.14 -21.4%
Dec. 31, 2011 June 30, 2011
Total Assets $166,451 $139,573 +19.3%
Cash and cash equivalents $3,985 $6,314 -36.9%
"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 near future."
Q2 FY2012 Operational and Financial Highlights
Record Q2 revenue of $54.3 million, up 19% from $45.5 million in Q2 FY2011
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 year
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 projects.
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 last year.
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 line.
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 48775302#.
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.
For further information:
Boyuan Construction Group, Inc.
Mr. Paul Law, CFO
+(852) 9329 5088
(416) 815 0700 ext. 253