TORONTO, Feb. 14, 2020 /CNW/ - Boyuan Construction Group,
Inc. ("Boyuan" or the "Company") (TSX: BOY), an established
China-based construction and
engineering company, today reported its second quarter financial
results for the three-month period ended December 31, 2019.
All figures are in U.S. dollars unless otherwise stated. The
Company also provided an update on the impact that the novel
coronavirus officially named COVID-19 is having on their
business.
Second Quarter 2020 Highlights
- Revenue grew 15.9% to $112.6
million;
- Gross profit decreased 49.4% to $4.2
million on higher labour costs;
- Net income was $3.4 million, or
$0.13 per diluted share, compared to
$4.4 million, or $0.17 per diluted share, for the same quarter
last year.
"We continued to achieve solid revenue growth in the second
quarter as a result of the numerous material contracts secured over
the past three years," said Mr. Cai Liang
Shou, Chairman and CEO of Boyuan Construction Group.
"However, our margins remained under pressure, largely as a result
of increasing labour costs, as wages in China overall continue their upward trend.
Overall, we expect to continue to benefit from our strategy to
focus on real estate markets in smaller centres in the fast-growing
regions of the Yangtze River Delta and Hainan Province."
Selected Second Quarter Financial Results
In thousands
except share and %
data
|
Q2
2020
|
Q2
2019
|
Change
|
Revenue
|
$112,619
|
$97,199
|
15.9%
|
Gross
profit
|
$4,162
|
$8,227
|
(49.4%)
|
Gross profit
margin
|
3.7%
|
8.5%
|
(56.5%)
|
EBITDA1
|
$7,599
|
$7,028
|
8.1%
|
Net income
|
$3,376
|
$4,392
|
(23.1%)
|
Earnings per share –
diluted
|
$0.13
|
$0.17
|
(23.5%)
|
In thousands
except % data
|
Dec. 31,
2019
|
June 30,
2019
|
Change
|
Total
Assets
|
$327,725
|
$310,168
|
5.7%
|
Cash,
cash equivalents & restricted cash
|
$15,656
|
$25,686
|
(39.0%)
|
____________________________________
|
1 EBITDA is defined as earnings
before interest, income taxes, depreciation and amortization.
EBITDA is not a defined performance measure under IFRS.
|
Review of Second Quarter 2020 Financial Results
Revenue for the second quarter increased 15.9% to $112.6 million from $97.2
million in the same quarter from last year. Revenue was
derived from projects the Company commenced in 2019, 2018 and 2017,
which have amounted to $136 million,
$315 million and $260 million respectively. These projects are
estimated to have a project duration period between one to three
years.
Cost of construction for the quarter was $108.5 million, an increase of 21.9% from
$89 million in Q2 2019. The two major
components of the cost of construction are direct material and
labour costs. Direct material costs were $70
million and labour costs were $32
million in this quarter, compared to $62.2 million and $22.2
million respectively in the same quarter from last year. The
increase in labour costs over time has contributed to the Company
experiencing a downward trend in gross margins over the past few
years. Gross profit for the quarter was $4.2
million, 3.7% of revenue. Gross profit for the corresponding
period of last year was $8.2 million,
or 8.5% of revenue.
Other gain for the quarter increased to $3.6 million compared to $0.07 million in the same period last year. The
increase was due to the disposal of an office building in
Jiaxing.
G&A expenses were $1.7 million
in this quarter compared to $1.4
million in the same quarter last year. The increase in
expenses is primarily due to consulting fees and depreciation
charge.
Net impairment loss for this quarter was $0.3 million versus $1.2
million in the same quarter last year. The Impairment losses
were determined by doing an impairment assessment under ECL model
upon application of IFRS 9 on trade balances based on provision
matrix. On YTD basis, the net impairment reversed was $1.5 million this period and a net impairment
loss of $0.8 million for
the same period last year.
Interest expense for the quarter was $1.3
million, compared to $1.0
million for the same quarter a year ago. The higher interest
expense was due to the increase of borrowings in the period.
After-tax net income for the quarter was $3.4 million, or $0.13 per diluted share, compared to $4.4 million, or $0.17 per diluted share, for the same period last
year.
Boyuan had working capital of $81.7
million, including, cash, cash equivalents, and restricted
cash totaling $15.6 million for the
second quarter. This compares to the $55.5
million and $19 million at
June 30, 2019.
As previously announced, on December 5,
2019 and December 31, 2019,
non-brokered private placements of 5,255,765 and 1,100,000 ordinary
shares, respectively, were completed at a price of CAD0.31 each. Pursuant to a subscription
agreement of the same dates, the proceeds were used for operating
new construction projects and to provide additional working capital
for the Company.
Boyuan's consolidated statements for the three-month period and
six-month period ended December 31,
2019 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.
Update on Business Impact of COVID-19
In response to the threat of COVID-19 in China, the Chinese government had previously
issued a directive prohibiting most workers to go back to work
before February 10,2020, with
companies having to obtain approval from the government before
resuming their normal business activities. Boyuan sought approval
from the government to resume business activities on February 10,2020. The Company received approval
for its office workers to return to work on February 13, 2020. Boyuan is still waiting
for approval for its construction workers to return to work. It is
difficult for the Company at present to estimate when such approval
will be granted.
The virus epidemic will certainly have a negative impact on our
business this financial year, as the Company will experience some
delay in resuming normal construction activities and in the
initiation of new projects. It is however difficult for the Company
to accurately assess the extent of the impact at this stage. The
Company will provide further update on this situation in due
course.
About Boyuan Construction Group, Inc.
Backed by a longstanding track record, Boyuan Construction
Group, Inc. ("Boyuan" or the "Company") has the knowledge and
expertise to design and build a wide range of commercial and
residential developments, as well as municipal infrastructure and
engineering projects. Based in Jiaxing City and with a growing
presence in both Zhejiang Province
and Hainan Province, Boyuan
focuses on construction projects in China's fast-growing regions of the Yangtze
River Delta and the Hainan
Province. The Company's current project backlog includes
residential, commercial, industrial and mixed-use developments. For
more information visit www.boyuangroup.cn.
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, management's
expectation to comply with the Alternative Information Guidelines.
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 a general cease trade order bing issued, risk of 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 AIF for the fiscal year ended June
30, 2019 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.
SOURCE Boyuan Construction Group, Inc.