Cantronic Systems Inc.
TSX VENTURE : CTS
PINK SHEETS : CRIXF

Cantronic Systems Inc.

May 24, 2011 07:00 ET

Cantronic Reports Results for FY Ended January 31, 2011: Revenue from Continuing Operations Increased 98% With Net Income $1.9 Million or $0.022 Per Share

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 24, 2011) - Cantronic Systems Inc., ("Cantronic" or the "Company")(TSX VENTURE:CTS)(PINK SHEETS:CRIXF) today announced its financial results for the fourth quarter and twelve-month period ended January 31, 2011 ("FY 2011"). All amounts are reported in Canadian dollars unless otherwise stated. Cantronic is reporting results from continuing and discontinued operations to allow investors to review Cantronic's China-based video surveillance technology and solutions business separately from the North American thermal imaging business (which was recently sold subsequent to the financial year-end).

Selected highlights of the year and subsequent events:

Financial:

  • Revenue of $18.1 million from continuing operations, an increase of 98% compared to $9.15 million for the previous fiscal year. Revenue from discontinued operations (the North American Business) was $1.86 million, resulting in total revenue of $19.95 million.
  • Adjusted EBITDA (a non-GAAP term) from continuing operations was $3.8 million compared to $1.0 million for the previous fiscal year. The Company uses adjusted EBITDA (a non-GAAP financial measure) internally to make strategic decisions, forecast future results and evaluate its performance, defined as net income before interest, income taxes, depreciation, amortization, stock option compensation expenses, foreign currency loss, and minority interest.
  • Gross margin from continuing operations of $6.8 million (38% of revenue) compared to $4.2 million (46% of revenue) for the previous financial year.
  • Net Income from continuing operations (after minority interest) was $1.9 million or $0.022 per share vs. a net loss of $395K from continuing operations or $0.005 per share in FY 2010.
Operating results
($000's except per share amounts)
FYE January 31Fiscal 2011Fiscal 2010
Fourth
Quarter
Fiscal
Year
Fourth
Quarter
Fiscal
Year
Revenue from continuing
operations6,53518,0913,9579,151
Adjusted EBITDA1,5323,7828571,000
Net income to shareholders6531,906-17-395
Net earnings (loss) per share, basic
and diluted$0.008$0.022$0.000-$0.005

Business:

  • Cantronic completed the acquisition of Actiontop Electronic (Shenzhen) Co., Ltd and Actiontop Electronics (HK) Co., Ltd., a technology leader in the dome camera market, for cash of $1.2 million and shares valued at $2.2 million.
  • Cantronic acquired an additional 9.08% interest in AVINFO, a provider of video management platform software, bringing its total ownership in AVINFO to 67.6%
  • Cantronic entered into a co-operation agreement with International Far Eastern Leasing Co., Ltd. to provide a leasing credit facility of up to RMB5 billion (approximately C$765 million) to customers pursuing Safe City and other video surveillance.
  • Actiontop introduced its full line of IP dome cameras, incorporating IP high-definition modules from Yellow River, another subsidiary of Cantronic.
  • Cantronic was awarded a $3.9 million project as prime contractor under China's Safe City Program for supply and installation of networked video surveillance systems in Haicheng City in
    China's Liaoning province.
  • Subsequent to FY 2011 year-end Cantronic sold its North American business, comprising the thermal imaging business located in Coquitlam, British Columbia as well as QWIP Technologies, Inc. of Brea, California. The transaction was completed on April 29, 2011.

"Revenue from continuing operations almost doubled in FY 2011, with adjusted EBITDA increased significantly and the Company reporting positive net earnings from continuing operations. FY 2011 marks the transformation of Cantronic Systems Inc. into a vertically integrated company operating in the Chinese video security and surveillance market, with key technologies in video management software, IP video cameras and dome cameras," remarked James Zahn, President and CEO of Cantronic Systems.

"The decision was taken to sell the North American thermal imaging business which had been generating losses and had reduced prospects due to cutbacks in military spending. We are executing on a plan that was developed when we entered the Chinese marketplace in 2008. With two years operating history in China, Cantronic is now able to seek bank financing for larger installation contracts which have higher margin than hardware sales. We continue to see major opportunities in China for increased sales of both video surveillance cameras and software as well as networked video surveillance solutions and turn-key projects. We are now well-positioned for tremendous growth opportunities in China with estimated market potential with only our existing customers to be $13 billion over the next 9 years", Mr. Zahn concluded.

Regulatory Filings

The material will be available through SEDAR at www.sedar.com and on the Company's website, www.cantronicsecurity.com.

About Cantronic Systems Inc.

Cantronic Systems Inc. manufactures, distributes, and provides training and services in the fields of IP- based networked video security surveillance technologies, specializing in networked video management software and video analytics, IP cameras, speed dome cameras, high definition video surveillance cameras and night vision surveillance systems for demanding security and surveillance applications.

Cantronic, through its China subsidiaries Cantronic Security Systems (China) Co. Ltd., Beijing Advanced Videoinfo Technology Co. Ltd. ("AVINFO"), Shenzhen Huanghe Digital Technology Co. Ltd. ("Yellow River") and Actiontop Electronics (Shenzhen) Co. Ltd. ("Actiontop") provides high-speed and digital networked video surveillance solutions to government and corporate customers in China.

Cantronic is a Tier 1 issuer on the TSX-V exchange, trading under the symbol CTS. For further information about Cantronic and Cantronic China, please visit our websites at www.cantronicsecurity.com and www.cantronics.com.cn.

Forward-looking statements

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Cantronic Systems Inc. and the markets in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements of Cantronic to be materially different from any future results, performance or achievements expressed or implied by said forward-looking statements.

Forward-looking statements include, but are not limited to: the completion of the Proposed Transaction, anticipated share capital following completion of the Proposed Transaction, expectations, opinions, forecasts, projections and other similar statements concerning anticipated future events, conditions or results that are not historical facts. In certain cases, forward-looking statements can be identified by the use of words such as "plans," "expects" or "does not expect," "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates" or "does not anticipate," or "believes," or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken," "occur" or "be achieved."

Readers are cautioned not to place undue reliance on such forward-looking statements. Forward- looking information is provided as of the date of this news release, and Cantronic Systems Inc. assumes no obligation to update or revise them to reflect new events or circumstances, except as may be required under applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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