TORONTO, Nov. 30 /CNW/ -- Boyuan Construction Group, Inc., a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, reported its financial results for the three-month period ended September 30, 2009. All figures are in U.S. dollars unless otherwise stated.
Financial Highlights
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Q1 2010 Q1 2009 Change
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Revenue $35.0M $21.3M +64.5%
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Gross profit $5.7M $3.1M +83.8%
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Gross profit margins 16.2% 14.5% +2%
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After-tax net income (loss) ($0.2M) $2.0M N/A
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Adjusted net income(1) $3.0M $2.0M +48.7%
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Adjusted earnings per share - diluted(2) $0.12 $0.08 +50.0%
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(1) Adjusted net income is not a recognized measure under Canadian GAAP.
It excludes a stock-based compensation charge of $3.2 million related
to the fair value transfer of shares under the "make-good provision"
of a financing agreement signed in July, 2009. The Company believes
that adjusted net income is more representative of its performance as
the make good charge is a non-cash accounting charge and not related
to its business activities.
(2) Adjusted earnings per share is not a recognized measure under
Canadian GAAP. It is calculated by dividing the Company's adjusted
net income by the number of outstanding shares (diluted). Under
Canadian GAAP, the Company recorded a loss per share, basic and
diluted, of $0.04 for the three-month ended September 30, 2009.
"Consistent with our expectations, we grew our revenue, improved our margins and generated adjusted after-tax net income of more than $3.0 million," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group, Inc. "Our success is due to our focused execution of strategy, namely on-time and on-budget project completion, our cost-plus sales model and a growing reputation for the quality of our projects."
Operating Highlights
- Signed four new construction project agreements with an aggregate
value of $48.1 million.
- Completed a private placement generating gross proceeds of CDN $6.47
million.
- Expanded operations into Shandong and Jiangxi, two of China's fastest
growing regions.
- Appointed Dr. Fang Lixin, professor at the Guanghua Law School of
Zhejiang University, to the Company's Board of Directors.
Review of Financial Results
Revenue for the first quarter ended September 30, 2009 was $35.0 million, up 64.5% from $21.2 million for Q1 of FY2009. Revenue is recognized on the percentage-of-completion method. The significant year-over-year growth was primarily attributable to an increase in the number of successful project bids by the Company as well as an increase in demand for construction and engineering services in the Yangtze River Delta and Sanya regions, Boyuan's core markets. Higher demand for construction and engineering services is due to ongoing urban migration and an expansion of China's middle class, which drive the need for new housing, commercial and public infrastructure projects.
Cost of construction for the first quarter of FY2010 was $29.3 million compared to $18.2 million for Q1 of FY2009. The increase was primarily as a result of higher expenses associated with greater project volume and an expanded work force. Cost of sales includes all direct material, labor, subcontract and other related costs, such as equipment repairs.
Gross profit for the first quarter of FY2010 was $5.7 million, or 16.2% of revenue, compared to $3.1 million, or 14.5% of revenue, for the same period of FY2009. The growth was due to increased project volume and higher value of projects, particularly in the Sanya region.
Operating expenses for the first quarter of FY2010 were $1 million compared to $0.3 million for the first quarter of FY2009. The increase was primarily attributable to higher general and administrative expenses, which consisted of increased salaries given an expanded management team as well as to higher legal, audit, investor relations and other fees as a result of the Company becoming publicly listed.
Income tax expense for the first quarter of FY2010 was $1.3 million compared to $0.7 million for Q1 of FY2009. The increase was due to higher income earned.
Net loss for the first quarter of FY2010 was $0.2 million, or $0.04 per share diluted, compared to net income of $2.0 million for Q1 of FY2009, or $0.08 per share. The net loss was as a result of a non-cash stock-based compensation charge of $3.2 million related to the fair value transfer of shares under the make good provision of a financing agreement signed in July 2009. The charge is in full compliance with Canadian generally accepted accounting principles.
As specified by the Company's make-good provision of the July financing agreement, Boyuan forecasted an after-tax net income of $8.5 million for the fiscal year ended June 30, 2009. As a condition of the make-good provision, Boyuan's Chairman put 3.2 million shares in escrow and would have transferred 1.6 million shares to investors if the forecast target had not been met. As reported previously, the Company generated $9.6 million in adjusted after tax net income for FY 2009. As a result, 1.6 million shares previously held in escrow were returned to Chairman Shou during the quarter, resulting in a make good charge of $3.2 million.
Excluding the make-good provision charge, adjusted net income for the first quarter of FY2010 was $3.0 million or $0.12 per share diluted. The Company believes that adjusted net income is more representative of its profitability and performance since the make good charge is a non-cash accounting charge and not related to its business activities.
Cash, cash equivalents and restricted cast at September 30, 2009 were $1.9 million compared to $2.4 million at June 30, 2009.
Outlook
"While we expect our momentum to be impacted by seasonal factors, such as Chinese New Year celebrations, in the short term, we are very optimistic of our prospects over the longer term," Mr Shou said. "Our strong project backlog coupled with growing demand for our high margin technical and engineering services position us very well for 2010. Given our recent progress, we expect to generate adjusted after-tax net income of $12.4 million for FY2010 as specified in our make-good provision."
Boyuan's consolidated statements for quarter ended September 30, 2009 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.
About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of residential and commercial building construction, municipal infrastructure and engineering projects. In its last four fiscal years ending June 30, 2009, Boyuan completed more than 125 projects for a number of private and public sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whose partners include DuPont, Mitsubishi and GE. Boyuan's current backlog includes residential, industrial and mixed-use developments, including a five-star hotel and a project at the Qingshan Nuclear Plant, China's first and largest nuclear facility. From its operating bases in Zhejiang Province and on Hainan Island, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, the city of Sanya and Shandong Province.
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. All information other than statements of historical fact may be forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook. Forward-looking information contained in this press release includes, but is not limited to, the Company's expectations regarding the impact on its momentum by seasonal factors in the short term, the Company's expectations on its prospects over long term, the company's expectation of growing demand for our high margin technical and engineering services (and our projection of our FY2010 adjusted after-tax net income.) 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 include, but are not limited to: risk of macro-economy cycle, risk from competition, risk from insufficient marketing to secure new projects, risk in obtaining additional financing, risk involving permits and licences, reliance on key management member, risk from supply of raw materials, risk of financial leverage, risk of bad debts in accounts receivables, risk involved in real estate development, foreign exchange fluctuations, political and economic conditions in China and other risks included in the Company's MD&A for the fiscal year ended June 30, 2009 and in the Company's 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 are 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.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Boyuan Construction Group, Inc.
(formerly "SND Energy Ltd.")
Consolidated Balance Sheets
(Expressed in US Dollars)
(Unaudited) (Audited)
September 30, June 30,
2009 2009
$ $
Current Assets
Cash and cash equivalents 1,896,645 2,365,738
Restricted cash 5,127,810 3,101,189
Accounts receivable 4,182,715 4,447,059
Unbilled revenue 39,556,598 35,528,915
Other receivables 8,578,455 2,216,873
Inventory 28,035 658,150
Advances to suppliers and prepaid expenses 5,157,411 2,971,020
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64,527,669 51,288,944
Deferred transaction costs - 55,222
Due from related parties - 113,010
Property and equipment 7,152,943 5,946,748
Land use rights 116,557 112,243
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71,797,169 57,516,167
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Current Liabilities
Bank loans 14,250,504 12,926,776
Accounts payable and accrued liabilities 14,504,159 12,842,823
Income taxes payable 2,566,514 1,318,874
Deferred revenue 2,932,946 1,454,145
Automobile loans 128,844 118,292
Due to related parties - 22,839
Future income tax 202,000 202,000
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34,584,967 28,885,749
Future income tax 585,970 573,000
Convertible debentures 5,518,910 1,880,200
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40,989,847 31,338,949
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Shareholders' Equity
Share capital 7,279,993 6,139,860
Contributed surplus 5,406,451 1,890,711
Reserve 1,928,732 1,928,732
Equity component of convertible debentures 372,783 137,295
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14,987,959 10,096,598
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Retained earnings 14,121,088 14,326,995
Accumulated other comprehensive income 1,698,275 1,753,625
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15,819,363 16,080,620
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30,807,322 26,177,218
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71,797,169 57,516,167
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Boyuan Construction Group, Inc.
(formerly "SND Energy Ltd.")
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Expressed in US Dollars)
(Unaudited)
Three Months Ended
September 30, September 30,
2009 2008
$ $
Construction revenue 35,003,807 21,271,159
Cost of construction 29,323,883 18,183,848
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Gross profit 5,679,924 3,087,311
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Expenses
Amortization of property and equipment 142,041 58,494
General and administrative expenses 814,142 212,886
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956,183 271,380
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Income from operations 4,723,741 2,815,931
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Other Income (expense)
Interest and other income 138,935 3,021
Interest expense (564,781) (70,527)
Make good provision (3,243,192) -
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(3,669,038) (67,506)
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Net income before income taxes 1,054,703 2,748,425
Income taxes 1,260,610 705,322
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Net income for the period (205,907) 2,043,103
Other Comprehensive Income (loss)
Unrealized gain (loss) on foreign exchange
translation (55,350) 41,688
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Comprehensive income (loss) for the period (261,257) 2,084,791
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