China HGS Reports First Quarter of Fiscal Year 2015 Results

2015-02-06 20:00 2747

HANZHONG, China, February 6, 2015 /PRNewswire/ -- 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 first quarter of fiscal 2015 ended December 31, 2014 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

Total revenues for the first quarter of fiscal 2015 were approximately $10.6 million, a decrease of 25.3% from approximately $14.1 million in the same quarter of fiscal 2014. Total revenues recognized from percentage of completion method were approximately $9.8 million, which accounted for 92.9% of total revenues in the first quarter of fiscal 2015.
Net income for the first quarter of fiscal 2015 totaled approximately $1.6 million, a decrease of approximately $1.4 million from the net income of approximately $3.1 million in the same period of last year. The decreased profit margin in this quarter compared to the same quarter of last year was primarily due to a slow down of contracted sales achieved in the current quarter.
Basic and diluted net earnings per share ("EPS") attributable to shareholders for the first quarter of fiscal 2015 were $0.04, compared to $0.07 for the same quarter last year.

"We had a slow down in sales during the quarter," said Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS. "Generally the first quarter is a slow season for the real estate developers. Since the construction of our real estate property under development is close to completion, we expect a recovery of sales when more residence move into our properties. In addition, we will consider increasing our marketing and promotional activities to attract more customers. 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)

December 31

September 30

2014

ASSETS

Current assets:

Cash

1,430,506

1,125,545

Restricted cash

1,605,282

1,589,887

Advances to vendors

269,681

Cost and earnings in excess of billings

12,114,016

12,332,396

Real estate property development completed

5,731,826

6,050,263

Real estate property under development

136,395,822

140,313,127

Other current assets

1,025,337

1,409,367

Total current assets

158,572,470

162,820,585

Property, plant and equipment, net

869,765

889,497

Real estate property development completed, net of current portion

2,467,850

2,572,215

Security deposits for land use right

3,254,149

3,249,549

Real estate property under development, net of current portion

131,880,441

128,516,074

Due from local government for real estate property development completed

2,356,588

3,165,644

Total Assets

299,401,263

301,213,564

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Bank loan - current portion

13,016,596

12,998,197

Short-term loans - other

20,193,622

15,290,753

Accounts payable

47,317,247

57,317,877

Other payables

13,929,531

13,777,853

Construction deposits

367,652

367,133

Billings in excess of cost and earnings

4,135,323

2,960,452

Customer deposits

28,478,857

31,100,334

Shareholder loan

7,537,302

5,465,743

Accrued expenses

4,132,310

3,801,567

Taxes payable

11,898,229

12,579,071

Total current liabilities

151,006,669

155,658,980

Long-term bank loan, less current portion

6,508,298

6,499,098

Deferred tax liabilities

3,220,239

2,992,459

Customer deposits, net of current portion

4,618,728

3,829,870

Construction deposits, net of current portion

1,005,785

1,004,364

Total liabilities

166,359,719

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

December 31, 2014 and September 30, 2014

45,050

Additional paid-in capital

17,759,349

Statutory surplus

12,845,197

Retained earnings

93,460,698

91,834,708

Accumulated other comprehensive income

8,931,250

8,744,489

Total stockholders' equity

133,041,544

131,228,793

Total Liabilities and Stockholders' Equity

299,401,263

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 December 31,
	2014		2013
Real estate sales	$	10,565,687	$	14,140,563
Less: Sales tax		(670,550)		(946,688)
Cost of real estate sales		(7,025,806)		(9,145,841)
Gross profit		2,869,331		4,048,034
Operating expenses
Selling and distribution expenses		375,166		114,350
General and administrative expenses		616,178		540,229
Total operating expenses		991,344		654,579
Operating income		1,877,987		3,393,455
Interest income		1,164		4,559
Interest expense		(18,100)		(18,100)
Income before income taxes		1,861,051		3,379,914
Provision for income taxes		235,061		322,797
Net income		1,625,990		3,057,117
Other comprehensive income
Foreign currency translation adjustment		186,761		407,365
Comprehensive income	$	1,812,751	$	3,464,482
Basic and diluted income per common share
Basic	$	0.04	$	0.07
Diluted	$	0.04	$	0.07
Weighted average common shares outstanding
Basic		45,050,000		45,050,000
Diluted		45,122,819		45,127,025

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)
	Three months ended December 31,
	2014			2013
Cash flows from operating activities
Net income	$	1,625,990	$		3,057,117
Adjustments to reconcile net income to net cash used in operating activities:
Deferred tax provision		223,803	304,878
Depreciation		21,015			19,283
Changes in assets and liabilities:
Restricted cash		(13,160)			35,394
Due from local government for real estate property development completed		814,478			-
Advances to vendors		(269,993)			(88,377)
Cost and earnings in excess of billings		236,110			949,475
Real estate property development completed		435,511			557,801
Real estate property under development		934,562			(26,805,615)
Other current assets		386,470			(89,649)
Accounts payables		(10,093,427)			4,237,763
Other payables		132,328			1,764,531
Billings in excess of cost and earnings		1,172,034			(3,197,042)
Customer deposits		(1,884,242)			4,875,305
Construction deposits		-			14,245
Accrued expenses		326,052			(103,277)
Taxes payable		(699,456)			(681,032)
Net cash used in operating activities		(6,651,925)			(15,149,200)


Cash flow from financing activities
Proceeds from shareholder loan		2,068,775			4,325,754
Proceeds from bank loan		4,886,869			8,161,800
Net cash provided by financing activities		6,955,644			12,487,554

Effect of changes of foreign exchange rate on cash		1,242			17,218
Net increase (decrease) in cash		304,961			(2,644,428)
Cash, beginning of period		1,125,545			5,878,101
Cash, end of period	$	1,430,506	$		3,233,673
Supplemental disclosures of cash flow information:
Interest paid	$	500,397	$		355,757
Income taxes paid	$	58,190	$		185,313

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.