Boyuan Reports Third Quarter FY2012 Financial Results
Tuesday, May 15, 2012
- Revenue decrease result of strategic decision to slow growth and conserve cash -
TORONTO, May 15, 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 nine- month periods ended March 31, 2012. All figures are in U.S. dollars unless otherwise stated.
Selected Q3 2012 Financial Highlights
In thousands except share and % data Q3 FY2012 Q3 FY2011 Change
Revenue $38,737 $41,042 -5.6%
Gross profit $6,302 $6,935 -9.1%
Gross profit margins 16.3% 16.9%
EBITDA1 $5,089 $5,891 -13.6%
Net income $2,186 $3,145 -30.5%
Earnings per share - diluted $0.08 $0.10 -20.0%
Mar. 31, 2012 June 30, 2011
Total Assets $175,017 $139,573 +25.4%
Cash and cash equivalents $3,236 $6,314 -48.7%
"This quarter's financial results reflect our strategic decision to be more selective of the projects we accept in an effort to be more conservative with our cash flow management," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group. "The number of opportunities to take on new projects has not decreased and the demand for our services remains consistently strong. Given the current uncertainty surrounding property developers in China, the tight liquidity they are experiencing and the near-term cash flow obligations we face, management has taken a more conservative approach when deciding both the number of and type of new projects to take on, thus, lessening the demands of capital required when initiating new projects."
Q3 FY2012 Operational and Financial Highlights
•Revenue of $38.7 million, down 5.6% from $41.0 million in Q3 FY2011
•EBITDA of $5.1 million, down 13.6% from $5.9 million in Q3 FY2011
•Net earnings of $2.2 million, down 30.5% from $3.1 million in Q3 FY2011
•Repaid $1.3 million of the 11.75% debentures as a result of some holders exercising their early redemption rights.
•$44.2 million worth of projects initiated to date for the current fiscal year
•Over $240 million in project backlog
Review of Financial Results
Revenue for the three-month period ended March 31, 2012 was $38.7 million, down 5.6% from $41.0 million for the same period in FY2011. Revenue for the first nine months of FY2012 was $146.4 million, an increase of 13.0% from $129.6 million for the same period of FY2011. Boyuan recognizes revenue on the percentage-of-completion method.
Given the uncertainty in the property market in China and the relatively tight liquidity situations the developers are facing at the moment, the Company has taken a more conservative approach in taking on new projects thus resulting to smaller revenue in this quarter.
The year-over-year growth in revenue for the nine-month period was primarily attributable to an increase in the number of successful project bids with higher contract value by the Company, principally from projects initiated from previous year.
Cost of construction for Q3 FY2012 was $32.4 million, down 5.0% from $34.1 million for Q3 FY2011. Cost of construction for the first nine months of FY2012 was $123.4 million, an increase of 14.3% from $108.0 million for the corresponding period of FY2011.
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 $23.5 million and labour costs were $8.1 million in this quarter. In comparison, direct material costs and labour costs were $22.9 million and $9.5 million in the same quarter last year.
Gross profit for Q3 FY2012 was $6.3 million, which represented a margin of 16.3% on revenue. Gross profit for the corresponding period of last year was $6.9 million, which represented a margin of 16.9% on revenue. The slight year-over-year decline in gross margins was attributable to a higher than average gross profit margin in Q3 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 nine-month basis, gross profit for FY2012 was $23.0 million, which represented a margin of 15.7% on revenue. In the same period of FY2011, gross profit and gross margins were $21.6 million and 16.7%, respectively.
G&A expenses were $1.2 million in Q3 FY2012 compared to $1.0 million in Q3 FY2011. G&A expenses for the nine-month period ended March 31, 2012 were $3.3 million representing an increase of $0.3 million in the same period last year. The small increase in G&A expenses in this quarter were a result of increases in office administrative costs such as insurance and audit fees.
Interest expense for Q3 FY2012 was $1.6 million, an increase of $1.1 million over last year. The increase was primarily due to two items, an increase in bank loans and bank notes payable needed to compensate for the slightly slower payment cycles from our customers and to the Company's convertible debenture issued in October 2010.
The Company also incurred a minimum total return (MTR) recovery of $0.12 million in this quarter. The Company incurred a MTR charge of $0.31 million in the same quarter last year. The MTR charges recorded in the past were non-cash accrued expenses based on calculations on respective quarter ends and year ends. 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, 2012. The actual MTR payable determined on February 27, 2012 was $2.3 million. The recovery of $0.1 million recorded in Q3 2012 was the difference between the actual payable amount and the accrued charge recorded in the past.
After-tax net income for Q3 FY2012 was $2.2 million, or $0.08 per fully diluted share, compared to net income of $3.2 million, or $0.10 per fully diluted share, for Q3 FY2011. The decrease was principally due to lower revenues, higher interest expense and a smaller valuation gain on the 11.75% debenture, partially offset by smaller share based compensation expense and MTR expenses. On a nine-month basis, net income for FY2012 was $8.1 million or $0.31 per share fully diluted. This compares to a net income of $9.3 million, or $0.37 per share fully diluted, for the same period of FY2011.
The Company had working capital of $71.0 million, including cash and cash equivalents of $3.3 million for the period ended March 31, 2012. 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.
"Our core markets remain relatively strong," added Mr. Shou. "However, in the short-term we expect to continue our conservative approach in taking on new projects in order to build up our cash position. This will increase our financial flexibility and allow us to meet our short-term cash obligations while the uncertainty continues in the property developer market."
Boyuan's consolidated statements for the three-and nine- month periods ended March 31, 2012 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 Q3 FY2012 financial results on May 16, 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 May 23, 2012 at midnight. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 78091504#.
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.
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