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Boyuan Reports Second Quarter FY2014 Financial Results
Release: 2014-02-14 08:04
Boyuan Construction Group Inc (TSX:BOY) 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 December 31, 2013. All figures are in U.S. dollars unless otherwise stated.
Selected Fiscal Year Financial Highlights
|In thousands except share and % data||Q2 FY2014||Q2 FY2013||Change|
|Gross profit margins||14.6%||14.8%|
|Earnings per share - diluted||$0.13||$0.06||+116.6%|
|Dec. 31, 2013||June. 30, 2013|
|Cash, cash equivalents and restricted cash||$13,929||$13,320||+4.6%|
"Our strong results for the second quarter of fiscal 2014 further validate our strategic decision to remain selective in choosing which new construction projects we accept in order to minimize risk, preserve capital and ensure profitability in China's current restrictive real estate market," said Mr. Cailiang Shou, Chairman of Boyuan Construction Group. "Although the restrictive measures imposed by the central government on the residential market and the tightening of financial facilities to property developers have resulted in a slower pace of growth for the Company, we believe the market fundamentals that generated two consecutive years of record revenue growth in 2012 and 2013—the continued growth of China's middle class and the ongoing development of tier-two cities as a result of urbanization—remain unchanged. As the numerous projects undertaken during the quarter and subsequent to quarter end demonstrate, we remain committed to actively pursuing high value opportunities in spite of market conditions."
Q2 FY2014 Operational and Financial Highlights
- Revenue of $62 million, up 14.3% from $54.2 millionin Q2 FY2013
- EBITDA of $7.8 million, up 17.7% from $6.6 millionin Q2 FY2013
- Net income of $3.6 million, or $0.13 per diluted share, up from $1.6 million, or $0.06per diluted share, in Q2 FY2013
- Initiated construction on a multi-family residential complex valued at US$25.7 million in Wenchang City on the northeast coast of Hainan Island
- Initiated two projects in Zhejiang province: a commercial complex in Haining City valued at US$27.2 million; a commercial complex in Jiaxing City valued at US$42.6 million
Highlights Subsequent to Quarter End
- Initiated construction on a multi-family residential complex valued at US$8.3 million in Lingao County on the northern shore of Hainan Island
- Initiated construction on a multi-family residential complex valued at US$43.3 million in Sanya on the southern shore of Hainan Island
- Initiated construction on a multi-family residential complex valued at US$21.5 million in Ledong County in the southwest of Hainan Island
- Initiated construction on a commercial development valued at US$40.7 million in Jiaxing City in the eastern coastal province of Zhejiang on mainland China
Review of Financial Results
Revenue for the three-month period ended December 31, 2013 was $62 million, an increase of $7.7 million or 14.3% from $54 million for the same period in FY2013. Boyuan recognizes revenue on the percentage-of-completion method. Construction has already been commenced on a number of material projects in the last few months, which contributed to the increase in revenue for the period. In addition, the Company has been becoming gradually more proactive in securing construction projects since paying off its 11.75% secured debentures in May 2013.
Cost of construction for Q2 FY2014 was $52.9 million, an increase of 14.5% from $46.2 million in Q2 FY2013. The increase was primarily due to higher expenses associated with increased project volume during the period. 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 were $37.8 million and labour costs were $13.2 million in Q2 FY2014, compared to direct material costs and labour costs of $32.4 million and $11.4 million respectively in the same quarter last year.
Gross profit for Q2 FY2014 was $9 million, which represented a margin of 14.6% on revenue. Gross profit for the same period last year was $8 million, which represented a margin of 14.8% on revenue. The Company has experienced a slight downward pressure on margins under current real estate market conditions in China. Developers are becoming more price-sensitive and have longer development cycles, thus eroding some of the Company's normal margins. Historically, Boyuan's gross profit margins have been in the range of 15% to 17%.
G&A expenses were $1.39 million in Q2 FY2014 compared to $1.44 million in Q2 FY2013. G&A expenses were fairly stable during the most recent quarter and for the current six-month period when compared to the same periods last year.
Interest expense for Q2 FY2014 was $1.8 million, a significant decrease of $1.3 million from the same period last year. The decrease was mainly due to a decrease in interest paid on receivables discounting. The Company discounted fewer receivables in the period as a result of its improved cash flow position.
After-tax net income for Q2 FY2014 was $3.6 million, or $0.13 per fully diluted share, compared to net income of $1.6 million, or $0.06 per fully diluted share in the same period in FY2013. The increase in net income was attributable to increased revenue and a decrease in interest expense in the period.
The Company had working capital of $91.9 million, including cash, cash equivalents, and restricted cash totaling $13.9 million as at December 31, 2013. This compares to $79.8 million and $13.3 million respectively at June 30, 2013. The increase in working capital is due to the contribution of net earnings and improved working capital management.
"The strong underlying market forces of urbanization and the growth of the middle class that are driving growth in China suggest that demand for Boyuan's construction services will remain strong for the long term," added Mr. Shou. "To capitalize on these market forces, we plan to expand our reach in tier-two cities and focus on specialty construction projects, which we believe will deliver higher profit margins. As part of this new strategic direction, we plan to upgrade our qualification levels and engineering standards in order to put the Company in a better position to tap into this growing market potential."
Boyuan's consolidated statements for the three-month period ended December 31, 2013 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 second-quarter, fiscal 2014 financial results on Friday, February 14, 2014 at 9:00 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 Friday, February 21, 2014 at midnight. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 86412635#.
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, 2013, Boyuan completed 46 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, 2013 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
(416) 815-0700 ext. 233
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