boyuan reports fy 2010 second quarter financial

8/14/2019 Boyuan Reports Fy 2010 Second Quarter Financial

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BOYUAN REPORTS FY 2010 SECOND QUARTER FINANCIAL RESULTS

- Grows revenue, improves margins and expands into new markets-

Toronto, Ontario March 1, 2010 Boyuan Construction Group, Inc.(TSX-V: BOY & BOY.DB), afast-growing construction company in China of commercial, residential and municipal infrastructureprojects, reported its financial results for the three-month and six-month periods ended December 31,2009. All figures are in U.S. dollars unless otherwise stated.

Financial Highlights

Q2 2010 Q2 2009 Change 6-Month2010

6-Month2009

Change

Revenue $37.6M $23.4M +60.8% $72.6M $44.7M +62.6%Gross profit $6.7M $3.2M +110.7% $12.4M $6.2M +99.4%Gross profit margin 17.8% 13.6% 17.1% 13.9%

Net income $3.5M $2.4M +47.9% $3.3M $4.4M -25.2%Adjusted net income

1$3.5M $2.4M +47.9% $6.5M $4.4M +48.2%

Earnings per share -diluted

$0.14 $0.10 +40% $0.14 $0.18 -22.2%

Adjusted Earnings pershare - diluted

2

$0.14 $0.10 +40% $0.26 $0.18 +44%

We are very pleased with our second quarter results, said Mr. Cai Liang Shou, Chairman of BoyuanConstruction Group, Inc. Since the start of the 2010 fiscal year, we have been able to capitalize on thestrong demand for our construction and engineering services in each of our markets. This has resulted insignificant year-over-year improvements to our revenue, gross profit margins and adjusted net income,providing further evidence of the strength of our business model and the high quality of our projects.

Business Highlights in Q2 and Subsequent to Quarter End Continued expansion of operations into Shandong, one of Chinas fastest growing regions. Following overwhelming shareholder approval at its annual meeting in Toronto, the Company

changed the location of its registered office to Ontario and ratified its stock option plan. Signed four new construction project contracts with an aggregate value of $76.6 million. The

agreements encompass residential, commercial and hotel construction projects on Hainan Islandand Shandong Province, Boyuans newest market.

Review of Financial ResultsRevenue for the second quarter ended December 31, 2009 was $37.6 million, up 60.8% from $23.4million for Q2 of FY2009. Revenue for the first six months of FY2010 was $72.6 million, compared to$44.7 million for the same period in FY2009.

Boyuan recognizes revenue on the percentage-of-completion method. The significant year-over-yeargrowth in revenue was primarily attributable to an increase in the number of successful project bids by theCompany as well as to an increase in demand for construction and engineering services in the YangtzeRiver Delta region and Hainan Island, Boyuans core markets. Subsequent to quarter end, Boyuan has

1Adjusted 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-cashaccounting 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'sadjusted net income by the number of outstanding shares (diluted).


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experienced strong demand for its services from Shandong province, a new market for the Company.Higher demand for construction and engineering services is due to ongoing urban migration and anexpansion of Chinas middle class, which drive the need for new housing, commercial and publicinfrastructure projects.

Cost of construction for the second quarter of FY2010 was $30.9 million compared to $20.2 million for Q2of FY2009. Cost of construction for the first six months of FY 2010 was $60.2 million, up from $38.4million for the comparable period in FY2009. The increase was primarily as a result of higher expensesassociated with greater project volume and an expanded work force. Cost of sales includes all directmaterial, labor, subcontract and other related costs, such as equipment repairs.

Gross profit for the second quarter of FY2010 was $6.7 million, or 17.8% of revenue, compared to $3.2million, or 13.6% of revenue, for the same period of FY2009. Gross profit for the first six months ofFY2010 was $12.4 million, or 17.1% of revenue, compared to $6.2 million, or 13.9% of revenue, for thesame period of FY2009. The year-over-year improvement in gross profit margins in Q2 by 410 basispoints was due to a higher percentage of revenue contributed from higher margin projects, particularly inHainan Island, where the Company experiences strong demand for its services but faces limitedcompetition, and a lower than average gross margin in Q2 FY2009. Historically, the norm for theCompany's gross margins is 15%.

Net income for the second quarter of FY2010 was $3.5 million, or $0.14 per fully diluted share, comparedto net income of $2.4 million, or $0.10 per fully diluted share, for Q2 of FY2009.

Net income for the six-month period was $3.3 million, down 25.2% from $4.4 million for the same periodof FY2009. The decline is attributable to a non-cash stock-based compensation charge of $3.2 millionthat the Company incurred in the first quarter of FY2010. As previously reported, the charge related to thefair 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 forecastedan after-tax net income of $8.5 million for the fiscal year ended June 30, 2009. As a condition of themake-good provision, Boyuan's Chairman put 3.2 million shares in escrow and would have transferred1.6 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 millionshares previously held in escrow were returned to Chairman Shou during the quarter, resulting in a makegood charge of $3.2 million.

Excluding the make-good provision charge, adjusted net income for the six month period endedDecember 31, 2009 was $6.5 million, or $0.26 per share diluted, which compares to $4.4 million, or $0.18per share diluted, for the same period in FY2009. The Company believes that adjusted net income ismore representative of its profitability and performance since the make good charge is a non-cashaccounting charge and not related to its business activities.

The Company had cash, cash equivalents and restricted cash totaling $4.9 million and working capital of$35.3 million for the period ended December 31, 2009. This compares to a cash, cash equivalents andrestricted cash balance of $5.5 million and working capital of $22.4 million at June 30, 2009.

OutlookRecent economic indicators in China remain relatively strong, suggesting continued optimism for theconstruction industry over the short term, said Mr. Shou. Our opportunities for growth, in particular, areencouraging given that we operate in tier two level cities where the competitive landscape is fragmentedand local economies are less affected by economic trends, such as rising property values, found in majorcities, such as Shanghai or Beijing.

Boyuans consolidated statements for the three and six month periods ended December 31, 2009 andrelated managements discussion and analysis (MD&A) will be filed with securities regulatory authorities


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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 andcommercial building construction, municipal infrastructure and engineering projects. In its last four fiscalyears ending June 30, 2009, Boyuan completed more than 125 projects for a number of private andpublic sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whosepartners include DuPont, Mitsubishi and GE. Boyuans current backlog includes residential, industrial andmixed-use developments, including a five-star hotel and a project at the Qingshan Nuclear Plant, Chinasfirst and largest nuclear facility. From its operating bases in Zhejiang Province and on Hainan Island,Boyuan focuses on construction projects in Chinas fast-growing regions of the Yangtze River Delta,Hainan Island and Shandong Province. For more information please visit www.boyuangroup.com orfollow us at http://boyuangroup.posterous.com

Caution Regarding Forward-Looking Information:Certain information contained in this press release constitutes forward-looking information, which isinformation relating to future events or the Company's future performance and which is inherentlyuncertain. 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 Companys outlookon higher demand for construction and engineering services in China, China's ongoing urban migrationand expansion of middle class, need for new housing, commercial and public projects in China, strongeconomic indicators in China, optimism on Chinese construction industry over the short term, and impactof economic trends (such as rising property value) on tier-two Chinese cities. Forward-looking informationinvolves known and unknown risks, uncertainties and other factors that may cause actual results orevents to differ materially from those anticipated in such forward-looking information. The Companybelieves the expectations reflected in the forward-looking information are reasonable but no assurancecan be given that these expectations will prove to be correct and readers are cautioned not to placeundue reliance on forward-looking information contained in this press release. Some of the risks andother 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 additionalfinancing, risk involving permits and licences, reliance on key management member, risk from supply ofraw materials, risk of financial leverage, risk of bad debts in accounts receivables, risk involved in realestate development, foreign exchange fluctuations, political and economic conditions in China and otherrisks included in the Company's AIF for the fiscal year ended June 30, 2009 and in the Companys publicdisclosure documents filed with certain Canadian securities regulatory authorities and available atwww.sedar.com. The forward-looking information contained in this press release are made as of the datehereof and the Company undertakes no obligation to update publicly or revise any forward-lookinginformation, whether as a result of new information, future events or otherwise, except as otherwiserequired by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the

policies of the TSX Venture ) accepts responsibility for the adequacy or accuracy of this release.

ContactsBoyuan Construction Group, Inc. The Equicom Group Inc.Mr. Paul Law, CFO Joe Racanelli+(852) 9329 5088 (416) 815 0700 ext. [email protected] [email protected]


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Boyuan Construction Group, Inc.(formerly "SND Energy Ltd.")Consolidated Statements of Income and Comprehensive Income(Expressed in US Dollars)(Unaudited)

Three Months Ended Six Months EndedDecember 31, December 31, December 31, December 31,

2009 2008 2009 2008

$ $ $ $Construction revenue 37,611,808 23,388,354 72,615,615 44,659,513Cost of construction 30,901,132 20,203,218 60,225,015 38,445,560

Gross profit 6,710,676 3,185,136 12,390,600 6,213,953

Expenses Amortization of property and equipment 147,189 141,193 289,230 203,598General and administrative expenses 961,516 (83,663) 1,775,658 66,818

1,108,705 57,530 2,064,888 270,416

Income from operations 5,601,971 3,127,606 10,325,712 5,943,537

Other Income (expense)

Interest and other income 47,843 8,548 186,778 11,569Foreign exchange loss (67,498) - (67,498) -Interest expense (572,480) (7,871) (1,137,261) (78,398)Make good provision - - ( 3,243,192) -

(592,135) 677 (4,261,173) (66,829)

Net income before income taxes 5,009,836 3,128,283 6,064,539 5,876,708Income taxes (1,497,097) (753,015) (2,757,707) (1,458,337)

Net income for the period 3,512,739 2,375,268 3,306,832 4,418,371Other Comprehensive Income (Loss)

Unrealized gain (loss) on foreign exchange translation 51,393 2,234 (3,957) 43,916

Comprehensive income for the period 3,564,132 2,377,502 3,302,875 4,462,287

boyuan reports fy 2010 second quarter financial

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