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| 8-K - FORM 8-K - CHINA HGS REAL ESTATE INC. | v409476_8k.htm |
Exhibit 99.1
China HGS Reports Second Quarter of Fiscal Year 2015 Results
HANZHONG, CHINA – May 11, 2015 – China HGS Real Estate Inc. (NASDAQ: HGSH) (“China HGS” or the “Company”), a leading regional real estate developer headquartered in Hanzhong City, Shaanxi Province, China, today reported its financial results for the second quarter of fiscal 2015 ended March 31, 2015 with the U.S. Securities and Exchange Commission. An electronic copy of the quarterly report on Form 10-Q can be accessed on the SEC's website at www.sec.gov.
Highlights for the Quarter
| l | Total revenues for the second quarter of fiscal 2015 were approximately $23.6 million, a decrease of 53% from approximately $49.9 million in the same quarter of fiscal 2014. Total revenues recognized from percentage of completion method were approximately $20.9 million, which accounted for 88.6% of total revenues in the second quarter of fiscal 2015. The year-over-year decrease of revenue was primarily due to limited inventory on completed projects. |
| l | Net income for the second quarter of fiscal 2015 totaled approximately $9.3 million, a decrease of approximately $4.1 million from the net income of approximately $13.4 million in the same period of last year. The decreased net income in this quarter compared to the same quarter of last year was primarily due to less contracted sales achieved in the current quarter. |
| l | For the six months ended March 31, 2015, the Company achieved a positive operating cash flow of approximately $4.5 million, comparing to negative operating cash flow of approximately $18.8 million in the same period of last year. |
| l | Basic and diluted net earnings per share (“EPS”) attributable to shareholders for the second quarter of fiscal 2015 were $0.21, decreased by 30% from $0.30 for the same quarter of last year. |
“The Company had a positive operating cash flow during the six months ended March 31, 2015” said Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS. “Additionally, the Company achieved higher gross margin comparing to the same period of last year. In the second half of fiscal 2015, we expect that the completion of several real estate projects currently under development will increase our contracted sales. Meanwhile, we will focus on increasing our marketing efforts to sell our completed real estate properties. Given recently more relaxed central government policy on real estate industry to bolster the economic growth in China to targeted rate, we are positive about the outlook for the local real estate market in a long term,” concluded Mr. Xiaojun Zhu.
Safe Harbor Statement
This press release contains forward-looking statements, which are subject to change. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All “forward-looking statements” relating to the business of China HGS Real Estate Inc., which can be identified by the use of forward-looking terminology such as “believes”, “expects” or similar expressions, involve known and unknown risks and uncertainties which could cause actual results to differ. These factors include but are not limited to: the uncertain market for the Company’s business, macroeconomic, technological, regulatory, or other factors affecting the profitability of real estate business; and other risks related to the Company's business and risks related to operating in China. Please refer to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2014, as well as the Company's Quarterly Reports on Form 10-Q that have been filed since the date of such annual report, for specific details on risk factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update its forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.
About China HGS Real Estate, Inc.
China HGS Real Estate, Inc. (NASDAQ: HGSH), founded in 1995 and headquartered in Hanzhong City, Shaanxi Province, is a leading real estate developer in the region and holds the national grade I real estate qualification. The Company focuses on the development of high-rise, sub-high-rise residential buildings and multi-building apartment complexes in China's Tier 3 and Tier 4 cities and counties with rapidly growing populations driven by increased urbanization. The Company provides affordable housing with popular and modern designs to meet the needs of multiple buyer groups. The Company’s development activity spans a range of services, including land acquisition, project planning, design management, construction management, sales and marketing, and property management. For further information about China HGS, please go to www.chinahgs.com.
Company contact:
Randy Xiong,
President of Capital Market
China Phone: (86) 091-62622612
Email: randy.xiong@chinahgs.com
CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
| March 31 | September 30 | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,018,455 | $ | 1,125,545 | ||||
| Restricted cash | 1,629,017 | 1,589,887 | ||||||
| Advances to vendors | 65,353 | - | ||||||
| Cost and earnings in excess of billings | 11,097,577 | 12,332,396 | ||||||
| Real estate property development completed | 4,576,372 | 6,050,263 | ||||||
| Real estate property under development | 130,182,807 | 140,313,127 | ||||||
| Other current assets | 237,031 | 1,409,367 | ||||||
| Total current assets | 148,806,612 | 162,820,585 | ||||||
| Property, plant and equipment, net | 852,297 | 889,497 | ||||||
| Real estate property development completed, net of current portion | 2,413,376 | 2,572,215 | ||||||
| Security deposits for land use right | 3,267,653 | 3,249,549 | ||||||
| Real estate property under development, net of current portion | 139,339,801 | 128,516,074 | ||||||
| Due from local government for real estate property development completed | 2,366,367 | 3,165,644 | ||||||
| Total Assets | $ | 297,046,106 | $ | 301,213,564 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Bank loan – current portion | $ | 11,436,787 | $ | 12,998,197 | ||||
| Short-term loans - other | 11,373,068 | 15,290,753 | ||||||
| Accounts payable | 40,362,754 | 57,317,877 | ||||||
| Other payables | 14,404,395 | 13,777,853 | ||||||
| Construction deposits | 359,312 | 367,133 | ||||||
| Billings in excess of cost and earnings | 5,972,193 | 2,960,452 | ||||||
| Customer deposits | 28,188,991 | 31,100,334 | ||||||
| Shareholder loan | 11,362,985 | 5,465,743 | ||||||
| Accrued expenses | 4,591,043 | 3,801,567 | ||||||
| Taxes payable | 13,657,327 | 12,579,071 | ||||||
| Total current liabilities | 141,708,855 | 155,658,980 | ||||||
| Long-term bank loan, less current portion | 1,633,827 | 6,499,098 | ||||||
| Deferred tax liabilities | 3,746,058 | 2,992,459 | ||||||
| Customer deposits, net of current portion | 6,042,496 | 3,829,870 | ||||||
| Construction deposits, net of current portion | 1,009,959 | 1,004,364 | ||||||
| Total liabilities | 154,141,195 | 169,984,771 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' equity | ||||||||
| Common stock, $0.001 par value, 100,000,000 shares | ||||||||
| authorized, 45,050,000 shares issued and outstanding | ||||||||
| March 31, 2015 and September 30, 2014 | 45,050 | 45,050 | ||||||
| Additional paid-in capital | 17,759,349 | 17,759,349 | ||||||
| Statutory surplus | 12,845,197 | 12,845,197 | ||||||
| Retained earnings | 102,730,799 | 91,834,708 | ||||||
| Accumulated other comprehensive income | 9,524,516 | 8,744,489 | ||||||
| Total stockholders' equity | 142,904,911 | 131,228,793 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 297,046,106 | $ | 301,213,564 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
| Three months ended March 31, | Six months ended 31, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Real estate sales | $ | 23,558,742 | $ | 49,907,770 | $ | 34,124,429 | $ | 64,048,333 | ||||||||
| Less: Sales tax | 1,566,839 | 3,007,183 | 2,237,389 | 3,953,871 | ||||||||||||
| Cost of real estate sales | 11,330,140 | 31,503,090 | 18,355,946 | 40,648,931 | ||||||||||||
| Gross profit | 10,661,763 | 15,397,497 | 13,531,094 | 19,445,531 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and distribution expenses | 217,976 | 253,916 | 593,142 | 368,266 | ||||||||||||
| General and administrative expenses | 593,348 | 586,245 | 1,209,526 | 1,126,474 | ||||||||||||
| Total operating expenses | 811,324 | 840,161 | 1,802,668 | 1,494,740 | ||||||||||||
| Operating income | 9,850,439 | 14,557,336 | 11,728,426 | 17,950,791 | ||||||||||||
| Interest income | 3,276 | 4,446 | 4,440 | 9,005 | ||||||||||||
| Interest expense | (18,100 | ) | (18,100 | ) | (36,200 | ) | (36,200 | ) | ||||||||
| Income before income taxes | 9,835,615 | 14,543,682 | 11,696,666 | 17,923,596 | ||||||||||||
| Provision for income taxes | 565,514 | 1,095,103 | 800,575 | 1,417,900 | ||||||||||||
| Net income | 9,270,101 | 13,448,579 | 10,896,091 | 16,505,696 | ||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustment | 593,266 | (939,669 | ) | 780,027 | (532,304 | ) | ||||||||||
| Comprehensive income | $ | 9,863,367 | $ | 12,508,910 | $ | 11,676,118 | $ | 15,973,392 | ||||||||
| Basic and diluted income per common share | ||||||||||||||||
| Basic | $0. 21 | $ | 0.30 | $ | 0.24 | $ | 0.37 | |||||||||
| Diluted | $0. 21 | $ | 0.30 | $ | 0.24 | $ | 0.37 | |||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 45,050,000 | 45,050,000 | 45,050,000 | 45,050,000 | ||||||||||||
| Diluted | 45,120,699 | 45,126,214 | 45,120,699 | 45,126,214 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CHINA HGS REAL ESTATE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six months ended March 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 10,896,091 | $ | 16,505,696 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Deferred tax provision | 734,407 | 1,103,204 | ||||||
| Depreciation | 42,012 | 43,661 | ||||||
| Changes in assets and liabilities: | ||||||||
| Restricted cash | (30,168 | ) | (157,070 | ) | ||||
| Due from local government for real estate property development completed | 814,120 | (3,183,853 | ) | |||||
| Advances to vendors | (65,130 | ) | 109,435 | |||||
| Cost and earnings in excess of billings | 1,299,070 | 3,681,777 | ||||||
| Real estate property development completed | 1,675,022 | 7,542,703 | ||||||
| Real estate property under development | 801,585 | (56,191,546 | ) | |||||
| Other current assets | 1,176,152 | (217,975 | ) | |||||
| Accounts payables | (17,215,394 | ) | 3,010,516 | |||||
| Other payables | 547,901 | 3,814,113 | ||||||
| Billings in excess of cost and earnings | 2,985,006 | (3,600,479 | ) | |||||
| Customer deposits | (890,271 | ) | 6,269,755 | |||||
| Construction deposits | (9,832 | ) | 14,260 | |||||
| Accrued expenses | 767,099 | (154,580 | ) | |||||
| Taxes payable | 1,004,726 | 2,610,444 | ||||||
| Net cash provided by (used in) operating activities | 4,532,396 | (18,799,939 | ) | |||||
| Cash flow from financing activities | ||||||||
| Proceeds from shareholder loan | 5,856,780 | 7,598,660 | ||||||
| Proceeds from bank loan | - | 8,170,602 | ||||||
| Repayment of bank loan | (6,512,961 | ) | - | |||||
| Proceeds from short-term loan -others | 4,884,721 | - | ||||||
| Repayment of short-term loan -others | (8,873,910 | ) | - | |||||
| Net cash (used in ) provided by financing activities | (4,645,370 | ) | 15,769,262 | |||||
| Effect of changes of foreign exchange rate on cash | 5,884 | (3,471 | ) | |||||
| Net decrease in cash | (107,090 | ) | (3,034,148 | ) | ||||
| Cash, beginning of period | 1,125,545 | 5,878,101 | ||||||
| Cash, end of period | $ | 1,018,455 | $ | 2,843,953 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | 1,056,229 | $ | 751,854 | ||||
| Income taxes paid | $ | 72,089 | $ | 244,997 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.