China HGS Reports Third Quarter of Fiscal Year 2013 Results
China HGS Reports Third Quarter of Fiscal Year 2013 Results Revenue and Net Income Up by Over 47% and 77% respectively PR Newswire HANZHONG, China, Aug. 14, 2013 HANZHONG, China, Aug. 14, 2013 /PRNewswire-FirstCall/ -- 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 third quarter of fiscal 2013 ended June 30, 2013. Highlights for the Third Quarter of Fiscal 2013 o Total revenues for the third quarter of fiscal 2013 were approximately $7.2 million, an increase of 47% from approximately $4.9 million in the same period of fiscal 2012. o Total gross floor area ("GFA") sold during the three months ended June 30, 2013 was 13,287 square meters, more than 11% from 11,947 square meters sold in the same period of fiscal 2012. o Net income for the third quarter of fiscal 2013 totaled approximately $2.3 million, representing a 77% increase from the net income of approximately $1.3 million in the same period of fiscal 2012. o Basic and diluted net earnings per share ("EPS") attributable to shareholders for the third quarter of fiscal 2013 was $0.05, compared to $0.03 for the same period of fiscal 2012. "We continued to show improved performance over the last year, reflecting a healthy housing demand in the markets we are serving. We have also experienced solid sales activities during this quarter in our pre-sales of the new residential high-rise buildings that are still under constructions. However, due to the full accrual accounting method we are using to recognize revenues, those pre-sale activities are not reflected in our reported revenues. This, combined with reduced sellable inventory levels, has caused our sequential comparison unfavorable," Mr. Xiaojun Zhu, China HGS's Chairman and Chief Executive Officer commented. "Going forward, we will continue to focus on and speed up the construction of our three on-going development projects: Mingzhu Beiyuan, Oriental Pearl Garden, and Yangzhou Pearl Garden. Upon completion of these high-rise residential buildings, our sellable inventory will be replenished, which, we expect, will accelerate the growth of our revenues long term," concluded Mr. Xiaojun Zhu. Financial Results for the third Quarter of Fiscal 2013 Revenues increased by 47% to approximately $7.2 million for the third quarter of fiscal 2013 from approximately $4.9 million for the same period of last year. The total GFA sold during the third quarter of fiscal 2013 was 13,287 square meters, representing an increase of 11% from 11,947 square meters sold for the third quarter of fiscal 2012. During the third quarter of fiscal 2013, the Company completed and delivered one high-rise building in Yangzhou Pearl Garden project and recognized approximately $2.7 million in revenue from the sold units in this building. Gross profit was approximately $3.1 million for the third quarter of fiscal 2013 as compared to approximately $1.9 million for the same period of last year. The overall gross profit as a percentage of real estate sales before sales tax was 43.7%, increased from 38.2% for the same quarter of last year due to higher sales of higher margin commercial units in both Mingzhu Garden and Yangzhou Pear Garden projects during this quarter. Total operating expenses increased by 58.7% to approximately $0.7 million for the third quarter of fiscal 2013 from approximately $0.5 million for the same period of last year. The increase in operating expenses consisted of an increase in selling expense and general and administration expenses, mainly attributable to more promotions, sales commission, consulting, marketing and real estate development activities as well as higher executive compensation, taxes and office expense. As a percentage of total sales, the operating expenses slightly increased to 10.1% for this quarter from 9.4% for the same quarter of last year. The Company reported net income of approximately $2.3 million for the third quarter of fiscal 2013, as compared to net income of approximately $1.3 million for the same period of last year. The increase of approximately $0.9 million in our net income was primarily due to the increases in revenue and gross profit. As of June 30, 2013, the Company had total cash and restricted cash balance of approximately $4.1 million, increased by approximately $1.9 million compared to approximately $2.2 million cash and restricted cash balance as of September 30, 2012. Since most of our customers are first-time home buyers and our affordable housing units are in the pre-sales stage, we expect our cash flow will continue improving during the balance of fiscal 2013. 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, 2012, 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: firstname.lastname@example.org CHINA HGS REAL ESTATE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30 September 30 2013 2012 Current assets: Cash $ 2,888,796 $ 1,104,686 Restricted cash 1,244,516 1,080,985 Accounts receivable 2,507,409 - Advances to vendors 1,088,969 2,566,422 Loans to outside parties, net 977,196 20,957 Real estate property development completed 12,781,082 19,534,088 Real estate property under development 3,866,508 8,590,275 Other current assets 297,674 171,863 Total current assets 25,652,150 33,069,276 Property, plant and equipment, net 993,523 1,037,080 Real estate property development completed, 5,437,809 6,691,813 net of current portion Security deposits for land use right 11,082,178 22,894,698 Real estate property under development, net of 108,911,490 56,021,787 current portion Total Assets $ 152,077,150 119,714,654 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 13,007,469 $ 3,828,880 Other payables 1,872,648 1,213,394 Construction deposits 301,677 301,318 Customer deposits 5,220,783 11,597,422 Shareholder loan 1,810,000 1,810,000 Accrued expenses 2,642,683 2,305,086 Taxes payable 4,890,993 4,336,458 Total current liabilities 29,746,253 25,392,558 Construction deposits, net of current portion 1,045,952 864,259 Customer deposits, net of current portion 30,009,838 17,743,993 Total liabilities 60,802,043 44,000,810 Commitments and Contingencies Stockholders' equity Common stock, $0.001 par value, 100,000,000 shares authorized, 45,050,000 shares issued and outstanding June 30, 2013 and September 30, 2012 $ 45,050 $ 45,050 Additional paid-in capital 17,757,949 17,750,337 Statutory surplus 6,549,354 6,549,354 Retained earnings 58,432,571 44,894,229 Accumulated other comprehensive income 8,490,183 6,474,874 Total stockholders' equity 91,275,107 75,713,844 Total Liabilities and Stockholders' Equity $ 152,077,150 $ 119,714,654 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 June 30, Nine months ended June 30, 2013 2012 2013 2012 Real estate $ 7,174,974 $ 4,882,304 $ 37,561,349 $ 10,262,731 sales Sales tax (489,971) (297,536) (2,349,413) (667,020) Cost of real (3,549,401) (2,718,411) (18,057,656) (4,739,640) estate sales Gross profit 3,135,602 1,866,357 17,154,280 4,856,071 Operating expenses Selling and distribution 184,518 88,326 643.526 170,199 expenses General and administrative 542,836 369,969 2,221,352 1,183,614 expenses Total operating 727,354 458,295 2,864,878 1,353,813 expenses Operating 2,408,248 1,408,062 14,289,402 3,502,258 income Interest - 2,013 - 16,013 income Interest (18,100) (18,100) (54,300) (54,300) (expense) Other income (expenses) - (319) 12,613 7,640 12,613 net Income before 2,389,829 1,404,588 14,242,742 3,476,584 income taxes Provision for 127,284 71,259 704,400 167,542 income taxes Net income $ 2,262,545 $ 1,333,329 $ 13,538,342 $ 3,309,042 Other comprehensive income Foreign currency $ 1,337,601 $ 61,848 $ 2,015,309 $ 866,297 translation adjustment Comprehensive $ 3,600,146 $ 1,395,177 $ 11,553,651 $ 4,175,339 income Basic and diluted income per common share Basic $ 0.05 $ 0.03 $ 0.30 $ 0.07 Diluted $ 0.05 $ 0.03 $ 0.30 $ 0.07 Weighted average common shares outstanding Basic 45,050,000 45,050,000 45,050,000 45,050,000 Diluted 45,115,382 45,050,000 45,115,382 45,050,000 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) Nine months ended June 30, 2013 2012 Cash flows from operating activities Net income $ 13,538,342 $ 3,309,042 Adjustments to reconcile net income to net cash provided by (used in ) operating activities: Depreciation 67,151 63,572 Stock Based Compensation 7,612 21,093 Changes in assets and liabilities: Restricted cash (136,176) (246,873) Accounts receivable (2,474,262) - Advances to vendors 1,517,734 4,084,292 Loans to outside parties (943,110) 1,083,510 Real estate property development 8,512,382 (8,068,104) completed Real estate property under development (33,833,410) 691,386 Other current assets (120,144) (132,172) Security deposits for land use rights - (11,693,808) Accounts payables 8,968,016 (4,639,102) Construction Deposits 152,481 43,755 Other payables 622,260 679,934 Customer deposits 5,127,523 7,965,987 Accrued expenses 282,239 (4,130) Taxes payable 446,139 (277,728) Net cash provided by (used in) operating 1,734,777 (7,119,346) activities Cash flow from financing activities Proceeds from shareholder loan - 3,142,332 Repayment of shareholder loan - (3,142,332) Net cash provided by financing - - activities Effect of changes of foreign exchange 49,333 79,548 rate on cash Net increase (decrease) in cash 1,784,110 (7,039,798) Cash, beginning of period 1,104,686 8,837,795 Cash, end of period $ 2,888,796 $ 1,797,997 Supplemental disclosures of cash flow information: Interest paid $ - $ - Income taxes paid $ 243,474 $ 24,137 Non Cash transaction:: Transfer of security deposit for land use rights to real estate under development $ 12,589,971 $ - The accompanying notes are an integral part of these unaudited condensed consolidated financial statements SOURCE China HGS Real Estate Inc.