Net income up 88.4% for the year

TORONTO, Sept. 28, 2018 /CNW/ - Boyuan Construction Group, Inc. ("Boyuan" or the "Company") (TSX: BOY) (TSX: BOY.DB.A), an established China-based construction and engineering company, today reported its financial results for the three-month and twelve-month periods ended June 30, 2018. All figures are in U.S. dollars unless otherwise stated.

Fiscal Year 2018 Highlights

• Revenue grew 63.4% to $325.9 million;
• Gross profit increased 43.3% to $24.4 million;
• Net income increased 88.4% to $8.7 million;
• Commenced construction on 13 material projects with an aggregate contract value of $315 million.

Highlights Subsequent to Year End

• As announced on August 27, 2018, commenced construction on four new projects with combined contract values of US$81.1 million.    

"Our strong revenue for the year is a testament to our strategic focus on the bourgeoning real estate market in Jiaxing City and the surrounding area," said Mr. Cai Liang Shou. "In fiscal 2018, we identified a number of high quality projects and commenced construction on thirteen material projects worth a total of $315 million. Twelve of these projects are in Jiaxing and its surrounding area. Since then, in August we announced that we had broken ground on four new material projects worth a combined $81.1 million. The new projects started subsequent to year end included a commercial and two residential development projects in Jiaxing, as well as a residential development in the city of Qionghai in Hainan Province."

Selected Fiscal Year Financial Results

Review of Fiscal Year 2018 Financial Results

Revenue for fiscal 2018 increased 63.4% to $325.9 million, compared to $199.5 million the year before. The Company's revenue is recognized on the percentage-of-completion method. Revenue for the year benefited from the Company's strategic focus on the fast-growing city of Jiaxing, which remains one of the hottest land markets in China despite measures introduced by the Chinese central government in recent years to cool down real estate markets across the country. As a result of the relatively robust real estate market in Jiaxing, Zhejiang Province, in fiscal 2018 the Company was able to identify a number of high quality projects and commenced construction on thirteen material projects, including twelve in Jiaxing and its surrounding area. These thirteen material contracts have an aggregate contract value of $315 million.

In fiscal 2018, costs of construction increased to $301.5 million, from $182.5 million the year before. Costs of construction include all direct material, labour, subcontract and other related costs, such as equipment repairs. The two major components of the costs of construction are direct material and labour costs. In fiscal 2018, direct material costs were $213.5 million and labour cost was $75.9 million, compared to $130.1 million and $47.9 million respectively in fiscal 2017.

Gross profit for fiscal 2018 increased 43.3% to $24.4 million, compared to $17.0 million the prior year. As a percentage of revenue, gross margin for fiscal 2018 was 7.5%, compared to 8.5% the year before.

There was an impairment loss recovered on deposits of $0.7 million in the year, compared to a loss of $0.6 million last year. These amounts were included in the G&A expenses last year. G&A expenses were $6.1 million in FY2018 compared to $6.5 million in FY2017. The decrease was mainly due to the reclassification of the impairment loss/recovered on deposits during the years.

The net impairment loss on accounts receivable and unbilled revenue was $6.8 million for FY2018 ($1.9 million for FY2017). The impairment loss was a result of two projects in Hainan and a project in Haining that the Company has experienced a long delay in collection. On the other hand, the Company has recovered certain amount from accounts previously impaired thus resulting in a net impairment loss of $6.8 million this year.

Interest expense was $6.8 million in FY2018, an increase of $0.7 million over FY2017. The higher interest expense for the year was primarily due to the increase in bank notes payable in the year.

Net income for fiscal 2018 was $8.7 million, or $0.34 per share (or $0.30 diluted earnings per share), compared to $4.6 million, or $0.18 per share ($0.17 diluted earnings per share) for fiscal 2017.

Boyuan had working capital of $53.3 million, including cash, cash equivalents, and restricted cash totalling $15.8 million as at June 30, 2018. This compares to $49.5 million and $10.8 million, respectively, at June 30, 2017.

Boyuan's consolidated statements for the three-month and twelve-month periods ended June 30, 2018 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 fourth quarter and year-end financial results on Tuesday, October 2, 2018 at 9:30 A.M. (ET). Mr. Paul Law, Boyuan's Chief Financial Officer, will host the call.

All interested parties can join the conference call by dialing 1-888-231-8191 or 647-427-7450. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Tuesday, October 9, 2018 at midnight. To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 4772589#.

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.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. 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, 2018 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.