Revenues Increase 87% to $6.5 Million, Profit of $387,000
Victoria, British Columbia, Canada - July 11, 2005 - Carmanah Technologies Corporation (TSX Venture: CMH) is pleased to announce its results for the three and six months ended June 30, 2005 and 2004.
Highlights for the Quarter:
- Record Q2 2005 revenues of $6,542,507, representing an 87% increase over Q2 2004;
- 2005 year-to-date revenues at record $11,392,049, representing a 50% increase over the same six-month period in 2004;
- Sales order backlog of $1.64 million at close of quarter;
- Net income for the quarter of $387,217 (6% of sales) as compared to a net loss of $156,189 in 2004;
- Year-to-date net earnings of $650,639 (6% of sales) as compared to $213,303 (3% of sales) in 2004.
"We are very pleased with Carmanah's performance for the first six months of 2005", states Carmanah's CEO, Art Aylesworth. "We are on target with management's expectations, and all vertical markets are now contributing significantly to the Company's revenues. In particular, we are seeing a breakout year in the sales of our transit shelter and bus stop lighting products with more than $1.8 million in sales in Q2 2005 alone."
It should be noted that Carmanah's results for the first six months of 2005 do not include revenues from the Company's acquisition of Soltek Powersource Ltd. which closed effective July 1, 2005. Combined revenues will be reflected in the Company's third quarter results.
Click here for full release including financials.
Summary of Results
Carmanah's revenues for the three months ended June 30, 2005 were $6,542,507 as compared to $3,504,092 for the same period in 2004, representing an 87% increase. Revenues for the six months ended June 30, 2005 were $11,392,049, as compared to $7,617,793 for the same period in 2004, representing a 50% increase.
Revenues were derived from the sale of solar-powered LED lighting illumination products to the marine, aviation, transit and roadway markets, as well as from the sale of LED edge-lit signs for point-of-purchase, branding, wayfinding and architectural applications. Sales were realized through both a worldwide distribution network and direct sales efforts.
Carmanah's Transit Division achieved record sales for Q2 2005 in the amount of $1,864,003, representing 28% of Carmanah's total sales for the period. This amount is equivalent to the total transit sales achieved during all of 2004. Carmanah is pleased to see another one of its emerging vertical markets increase its contribution to revenues, providing a more balanced source of revenues to the Company.
Gross Profit Margin
Carmanah's gross profit margin in Q2 was 46%, compared to 57% for the same period in 2004 and compared to a 52% annual average for 2004. For the six months ended June 30, 2005 gross profit margin was 49%, compared with 55% for the same period in 2004. The decrease in gross profit margin is primarily attributed to the increased contribution from the Company's Transit Division. Although the Transit Division contributed the highest percentage to overall sales, it did so at a lower gross profit margin than all of the Company's other divisions. In particular, the Company delivered orders to some key transit customers at significantly lower margins for strategic purposes. As this market vertical matures, Carmanah anticipates that it can strengthen its gross margin through improved manufacturing processes and more efficient materials purchasing.
Wages and Benefits
Wages and benefit expenses for the three months ended June 30, 2005, increased 16% to $1,202,770, compared with $1,039,298 for the same period in 2004. For the six months ended June 30, 2005, wages and benefits expense increased 21% to $2,233,269, compared with $1,844,239 for the same period in 2004. In support of planned growth and expansion, the Company has broadened and strengthened its executive and middle management teams, resulting in increased senior staffing levels in 2005 over 2004. Furthermore, the Company has invested in staffing its UK office and continues to hire administrative staff in support of increased volumes and sales growth. As a percentage of sales, total wages and benefits for the six months ended June 30, 2005 were 20%, down from 24% for the same period in 2004.
Office and Administration
Office and administration expenses in first quarter 2005 were $453,658, representing a 77% increase over same period in 2004 of $256,083. For the first six months of 2005, office and administration expenses were $904,548, an 80% increase over $502,885 for the same period on 2004. The increase through first and second quarters is due primarily to overall growth and expansion in facilities and resources. The Company expanded its Victoria facility to include an additional 6,000 square feet for LED illuminated roadway sign manufacturing and opened an office in London, England (in late 2004). These expansions resulted in increased rent and facility costs as well as general office, administration and information technology in support of new hires for these facilities.
Research and Development
During Q2 2005, research and development expenses of $486,787 represented a 35% increase over $360,078 in the comparative quarter for 2004. For the six months ended June 30, 2005, research and development expenses of $850,012 represented a 22% increase over the same period in 2004.
The Company continues to invest in research and development in support of all verticals. In the marine sector, the Company is completing development of a re-modeled 700 series lantern that provides lighting to up to four nautical miles. In the roadways sector, the development team continues to work towards improvements to the design and manufacturing specifications of its roadway signs. In the transit sector, the engineering team is developing new, lower-cost design solutions for the Company's i-SHELTER™ solar illuminated bus shelter product.
As a percentage of sales for the six months ended June 30, 2005, research and development expenses decreased to 7% of sales, compared with 9% of sales for the same period in 2004.
Sales and Marketing
Sales and marketing expenses in Q2 2005 were $418,478 representing a 13% increase over same period in 2004 of $369,772, and for the six months ended June 30, 2005 was $776,103 representing a 17% increase over $663,545 in the same period for 2004. The Company continued to increase sales and marketing activities for new and existing product lines throughout its worldwide marketplace. Sales and marketing expense for the six months ended June 30, 2005 is 7% of total sales, down from 9% for the same period 2004.
The Company utilized a portion of its carry forward investment tax credits, tax losses and SRED pools in order to minimize any current tax expense. The future income tax effect arising from the use of these items has been offset against available tax losses not previously recognized.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $476,243 for the three months ended June 30, 2005 as compared to $(31,123) for the same period in 2004, and for the six months ended June 30, 2005, EBITDA was $801,433 as compared to $452,012 for the same period in 2004.
Net earnings for the three months ended June 30, 2005 were $387,217 (6% of sales), compared to a net loss of $156,189 in 2004. Net earnings for the six months ended 2005 were $650,639 (6% of sales) compared with $213,303 (3% of sales) in 2004.
Carmanah is starting to see some of its general operating expenses grow at a slower rate than its sales, resulting in total operating expenses declining as a percentage of sales. Total operating costs in Q2 2005 represented 41% of total sales, down from 48% in Q1 2005. In addition, for the six months ended June 30, 2005, operating costs represented 44% of total sales compared to 52% for the same period in 2004.
Balance Sheet Highlights
Carmanah's cash, cash equivalents, and short-term investments at June 30, 2005 were $8,592,174, compared to $7,751,411 at December 31, 2004. Net cash usage from operations and investing activities was $809,061, which included over $300,000 in leasehold improvements and equipment for the new roadways sign manufacturing facility. During the six months ended June 30, 2005, the Company raised $1,193,693 from the exercise of warrants and stock options. Net working capital for the six months ended June 30, 2005 was $13,241,671, with a current ratio of 5:1 and $7,798 of non-current debt obligations.
Subsequent to June 30, 2005, effective July 1, 2005, the Company acquired all of the issued and outstanding shares of Soltek Powersource Ltd. ("SPS"), a leading manufacturer/supplier of solar power systems for industrial, government, residential and retail applications. Carmanah paid $6 million in cash from existing funds and 1,503,756 in common shares at $2.66 per share. An additional contingent payment of up to $2 million worth of common shares at $2.66 may also be payable if SPS reaches specified revenue targets (pro-rated between $9 million and $12 million) and an EBITDA in excess of 5.5% of revenue for the six month period ending December 31, 2005. Principal vendors have been issued 300,000 performance warrants with an exercise price of $2.79 (being the weighted average trading price on the closing date of June 30, 2005, conditional upon SPS reaching increased revenue targets (prorated between $12 million and $14 million) and an EBITDA in excess of 5.5% of revenue for the six months ending December 31, 2005. The shares issued to the principal vendors will be held in a pooling agreement providing for the pro rata release of the shares over a two year period after closing.
About Carmanah Technologies Corporation
Carmanah is an award-winning manufacturer specializing in energy efficient technologies that fundamentally change the way its customers operate. The Company is currently focused on three technology groups: solar power systems & equipment, solar-powered LED lighting and LED illuminated signage.
Carmanah is headquartered in Victoria, British Columbia, Canada and has branch offices and/or sales representation in 11 cities across Canada, the United States and the United Kingdom. With more than 250,000 installations worldwide, Carmanah is one of the world's premier suppliers of energy-efficient products.
The shares of Carmanah Technologies Corporation are publicly traded on the TSX Venture Exchange under the symbol "CMH" and on the Berlin and Frankfurt Stock Exchanges under the symbol "QCX". For more information, please visit www.carmanah.com.
On Behalf of the Board of Directors
Carmanah Technologies Corporation
Praveen Varshney, Director
For further information, please contact:
Mr. Mark Komonoski, Director
Carmanah Technologies Corporation
Tel: (403) 861-8384
Mr. David Davies
Tel: (250) 382-4332
This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are described under the caption "Note Regarding Forward-looking Statements" and "Key Information - Risk Factors" and elsewhere in Carmanah's Annual Report for the fiscal year ended December 31, 2004, as filed with the U.S. Securities and Exchange Commission and which are incorporated herein by reference. Carmanah does not assume any obligation to update the forward-looking information contained in this press release.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.