SOURCE: Carmanah Technologies Corporation

March 16, 2006 17:51 ET

Carmanah Announces Financial Results for 2005

VICTORIA, BC -- (MARKET WIRE) -- March 16, 2006 -- Carmanah Technologies Corporation (TSX: CMH) is pleased to announce its results for the years ended December 31, 2005 and 2004.

Highlights for the Year

--  Annual revenues of $38,729,885, representing a 144% increase over 2004
--  Record outstanding orders of $4,744,279 at year end
--  2005 EBITA of $1,981,573, representing a 92% increase over 2004 EBITA
    of $1,034,439
--  2005 earnings before tax of $1,256,608, representing a 112% increase
    over 2004
--  2005 net earnings of $680,962, representing a 15% increase over 2004
--  Net working capital of $26,332,325 at year end, up from $11,759,089 at
    the end of 2004
    
Summary of Results

2005 was a year of substantial growth for Carmanah. Organically, the Company continued the historical trend of rapid global expansion in its targeted solar LED lighting and LED-illuminated signage markets, achieving 2005 revenues of $23,149,422, an increase of 46% over 2004. In July of 2005, Carmanah also entered the much larger solar power systems market through the acquisition of Soltek Powersource Ltd. ("Soltek"), the largest Canadian supplier of proprietary solar power systems and solar power equipment. Combined, Carmanah achieved overall 2005 revenues of $38,729,885, a record increase of 144% over 2004.

"Even with the challenges, distractions and additional work of a large integration, 2005 proved to be a great year for Carmanah," states Art Aylesworth, Carmanah's CEO. "The Company continued to show organic growth and fiscal discipline while dramatically expanding its size and scope. Carmanah remains a standout in the solar power industry as it grows rapidly, yet profitably."

"We are pleased with the results to-date and excited about the prospects for our future," states Aylesworth. "Carmanah has laid the foundation to become one of the primary global brands in the burgeoning solar energy sector. We are positioned to capitalize on the immense opportunities in the expanding international markets for our remote power systems and alternative energy technologies."

Overview of Operations

The growth in Carmanah's operations, both organically and through acquisition, has resulted in a broadening of the Company's business activities to include the design, manufacture and/or distribution of three technology groups: solar-powered LED lighting, solar power systems and LED-illuminated signage.

Carmanah's Solar LED Lighting Group provides a variety of energy-efficient LED lighting products for marine, aviation, transit, roadway and industrial worksite applications. The Company's Solar Power Systems Group offers a wide range of renewable energy system solutions for industrial, residential and recreational power applications. The LED Sign Group designs and manufactures energy-efficient LED edge-lit signs for corporate identity, point-of-purchase and architectural applications.

Carmanah's headquarters and primary manufacturing and distribution facilities continue to be located in Victoria, British Columbia, Canada. The Company also operates additional manufacturing and distribution facilities in Calgary, Alberta, Canada, as well as regional distribution and sub-assembly facilities in Barrie, ON; Santa Cruz, CA; and London, England.

Carmanah currently has more than 250,000 installations in 110 countries. Carmanah's customer list includes a wide range of government, commercial and private users worldwide, who are serviced directly by the Company or one of its regional authorized distributors and/or sales agents.

Results of Operations

Sales

Carmanah's sales for the year ended December 31, 2005 increased to $38,729,885, representing an increase of 144% from the same period in 2004 at $15,895,041. Contributions from each technology group were as follows:

----------------------------------------------------------------------
Segmented Sales Summary

                    Three Months Ended            Year Ended
                       December 31,               December 31,
                    2005          2004         2005          2004
----------------------------------------------------------------------
Solar LED
 Lighting Group   $5,645,037    $2,730,016   $18,413,057   $13,305,702
Solar Power
 Systems Group    $8,687,091    $        -   $15,580,463   $         -
LED Sign Group    $  809,800    $  949,898   $ 4,736,365   $ 2,589,339
======================================================================
                  $15,141,928   $3,679,914   $38,729,885   $15,895,041
Carmanah's increase in revenues is attributed to ongoing organic growth as well as the contribution in Q3 and Q4 from its newly acquired Solar Power Systems Group.

Organic sales achieved for 2005 from Carmanah's Solar LED Lighting and LED Sign Groups amounted to $23,149,422, representing a 46% increase over the same period in 2004 at $15,895,041. Sales booked in 2005 for these two groups was in excess of $25 million, and they ended the year with a record sales order backlog of $3.6 million.

Sales contributions from the Company's Solar Power Systems Group amounted to $15,580,463 for the six-month period ending December 31, 2005. This group also ended the year with a sales order backlog of $1.1 million.

Cost of Sales and Gross Profit Margin

Carmanah's cost of sales for the year ended December 31, 2005 was $24,311,146 (63% of sales), resulting in a gross profit margin of 37%. In comparison, for the year ended December 31, 2004, the cost of sales was $7,655,700 (48% of revenue), resulting in a gross profit margin of 52%. The shift in Carmanah's cost of sales and gross margin is primarily due to the sales contribution by its Solar Power Systems Group during the last half of the fiscal year ($15,580,463 at 27% gross margin).

Carmanah offers a wide array of product solutions to a variety of market sectors at various gross profit margins. The gross profit margin is significantly affected by the ratio of sales contributed by the various technological groups, by the product mix sold, as well as the related market sector. Management is focused on the continual improvement of gross margins in all sectors.

Wages and Benefits

For the year ended December 31, 2005, wages and benefits was $6,843,164 compared with $3,509,101 for the same period in 2005. This increase is the result of:

--  $1,835,232 in additional wage expense resulting from the acquisition
    of the Solar Power Systems Group;
--  $326,944 in additional commissions due to increase in sales;
--  $322,018 increased wages costs resulting from the expansion into the
    UK in late 2005;
--  an increase in marketing, finance and administrative staff in support
    of overall sales growth; and
--  an increase in senior staffing to provide more strength and support
    across the Company's executive and middle management teams.
    

As a percentage of sales, total wages and benefits for the year ended December 31, 2005 were 18%, down from 22% for the same period in 2004.

Office and Administration

Office and administration expenses for the year ended December 31, 2005, were $2,786,675, representing a 96% increase over same period in 2004 of $1,423,744. The acquisition of the Solar Power Systems Group contributed to 51% of this increase, with the addition of $690,037 in office and administration expenses. Other contributors to the increase in 2005 were primarily overall growth in facilities and related resources:

--  in late 2004, Carmanah opened an office in London, England, to support
    the Company's UK and European operations;
--  in early 2005, Carmanah expanded its existing Victoria facility to
    include an additional 6,000 square feet for LED-illuminated roadway sign
    manufacturing;
--  in September, 2005, Carmanah entered a lease to commence build out for
    a new 25,000 square foot manufacturing and warehouse facility; and
--  in late 2005, Carmanah expanded its Santa Cruz, CA, warehouse facility
    to support its US operations.
    
Carmanah's facility expansions have increased rent, general office, administration and information technology expenses. However, as a percentage of sales, office and administration expenses for the year ended December 31, 2005 were 7%, down from 9% for the same period in 2004.

Sales and Marketing

Sales and marketing expenses for the year ended December 31, 2005, were $1,775,099, representing a 32% increase over same period in 2004 of $1,341,112. Carmanah continued to increase sales and marketing activities for new and existing product lines throughout its worldwide marketplace, and is expanding its sales and marketing efforts to include the Power Systems Group's customers and verticals.

Sales and marketing expenses for the year ended December 31, 2005 were 5% of total sales, down from 8% for the same period 2004.

Research and Development

For the year ended December 31, 2005, research and development expenses were $903,723 (net of $620,935 SR&ED investment tax credits), compared with $959,842 (net of $316,000 SR&ED investment tax credits and $71,223 government grant) in the previous year. The SR&ED investment tax credits were the result of credits generated from scientific research and experimental development expenses, and recoverable as an offset to income taxes payable on taxable income. Carmanah's growth in research and development was the result of increased investment in new product offerings and existing product enhancements.

As a percentage of sales, gross research and development expenses (before investment tax credits and grants) were 4% in 2005, compared with 8% in 2004.

Income Tax

Income tax expense for the year ended December 31, 2005 totals $575,646. This amount is comprised of current tax expense of $1,021,372 and future income tax recovery of $445,726. The current tax expense relates to taxable income generated by Carmanah in the normal course of operations. Current tax expense as a percentage of pre-tax earnings is high, as Carmanah chose to postpone certain tax deductions to use investment tax credits that offset taxes otherwise payable. The future income tax recovery of $445,726 recognizes the availability of future tax deductions and was increased by $333,000 as a result of a reduction of the valuation allowance against future tax assets. The reduction of the valuation allowance recognizes the benefit of future income tax assets on past tax losses, based on the expectation of future taxable income.

Earnings

Earnings before interest, taxes and amortization ("EBITA") were $1,981,573 for the year ended December 31, 2005, representing an increase of 92% over the same period in 2004 at $1,034,434. Earnings before income tax were $1,256,608, compared with $592,937 in 2004, representing an increase of 112%. Net earnings were $680,962 in 2005, compared to $592,823 in 2004, representing an increase of 15%.

Balance Sheet Highlights

Carmanah's cash, cash equivalents, and short-term investments at December 31, 2005 were $11,662,214, compared to $7,751,411 at December 31, 2004. Net cash usage from operations was $3,751,295 for the year ended December 31, 2005.

Carmanah invested $5,559,897 in the purchase of Soltek, $1,432,936 in the purchase of equipment, leasehold improvements and intangibles, and increased investments by $2,930,000. Including the Soltek acquisition, financing for operational and investing activities for the year was raised by (1) the exercise of warrants and stock options in the amount of $4,180,446, (2) the issuance of shares to former shareholders of Soltek and (3) a private placement financing of common shares for net proceeds of $14,179,349.

Net working capital as at December 31, 2005 was $26,332,325 with a current ratio of 5.6:1 and $14,991 of non-current lease obligations.

About Carmanah Technologies Corporation

Carmanah is an award-winning manufacturer specializing in renewable and energy-efficient technology solutions. 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 Toronto Stock 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"

Praveen Varshney, Director

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.

CARMANAH TECHNOLOGIES CORPORATION
Consolidated Balance Sheets
(Expressed in Canadian dollars)

December 31, 2005 and 2004
--------------------------------------------------------------------------
                                                   2005              2004
--------------------------------------------------------------------------

Assets

Current assets:
  Cash and cash equivalents                $  1,882,214     $      901,411
  Short-term investments                      9,780,000          6,850,000
  Accounts receivable, net                    8,675,270          2,385,728
  Inventories                                11,012,640          2,758,250
  Receivable from forward foreign
  exchange contracts                                  -          1,834,350
  Prepaid expenses and deposits                 705,073            271,337
--------------------------------------------------------------------------
                                             32,055,197         15,001,076

Equipment and leasehold improvements, net     2,096,254          1,072,434
Intangible assets, net                        1,325,055            170,484
Goodwill                                     12,330,543          3,072,173
Future income taxes                             985,500            550,000
--------------------------------------------------------------------------
                                           $ 48,792,549     $   19,866,167
--------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable and accrued liabilities $  5,268,246     $    1,327,693
  Payable under forward foreign
  exchange contracts                                  -          1,803,300
  Deferred revenue                                    -             45,421
  Income taxes payable                          434,636                  -
  Future income taxes                                 -             44,000
  Current portion of obligations under
  capital leases                                 19,990             21,573
--------------------------------------------------------------------------
                                              5,722,872          3,241,987

Obligations under capital leases                 14,991             13,755
Obligation to former shareholders of SPS
to be settled in shares                       2,631,580                  -
--------------------------------------------------------------------------
                                              8,369,443          3,255,742
Shareholders' equity:
  Share capital                              38,772,138         16,322,119
  Contributed surplus                         1,292,390            610,690
  Retained earnings                             358,578           (322,384)
--------------------------------------------------------------------------
                                             40,423,106         16,610,425
--------------------------------------------------------------------------
                                           $ 48,792,549     $   19,866,167
--------------------------------------------------------------------------

CARMANAH TECHNOLOGIES CORPORATION
Consolidated Statements of Operations and Retained Earnings (Deficit)
(Expressed in Canadian dollars)

For the years ended December 31, 2005 and 2004
--------------------------------------------------------------------------
                                                  2005               2004
--------------------------------------------------------------------------

Sales                                      $ 38,729,885     $   15,895,041
Cost of sales                                24,311,146          7,655,700
--------------------------------------------------------------------------
                                             14,418,739          8,239,341
Operating expenses:
  Wages and benefits                          6,843,164          3,509,101
  Office and administration                   2,786,675          1,423,744
  Sales and marketing                         1,775,099          1,341,112
  Research and development                      903,723            959,842
  Bank charges                                  286,273             97,531
  Amortization of:
    Equipment and leasehold improvements        575,355            400,439
    Intangible assets                           149,610             41,063
--------------------------------------------------------------------------
                                             13,319,899          7,772,832
--------------------------------------------------------------------------
Operating income                              1,098,840            466,509
Other income:
  Interest and other income                     157,768            126,428
--------------------------------------------------------------------------
Earnings before income taxes                  1,256,608            592,937
Income tax expense (recovery):
  Current                                     1,021,372            316,000
  Future                                       (445,726)          (315,886)
--------------------------------------------------------------------------
                                                575,646                114
--------------------------------------------------------------------------
Net earnings for the year                       680,962            592,823
Deficit, beginning of year                     (322,384)          (915,207)
--------------------------------------------------------------------------
Retained earnings (deficit), end of year   $    358,578     $     (322,384)
--------------------------------------------------------------------------

Earnings per share:
  Basic                                    $      0.020              0.020
  Diluted                                         0.019              0.018
--------------------------------------------------------------------------

Weighted average number of shares outstanding:
  Basic                                      34,187,205         30,116,949
  Diluted                                    35,598,555         32,055,307
--------------------------------------------------------------------------
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Building 4, 203 Harbour Road, Victoria, BC, Canada   V9A 3S2
Phone (250) 380-0052
Toll Free 1-800-665-3749
Fax (250) 380-0062
E-mail: investors@carmanah.com

Contact Information

  • For further information, please contact:

    Investor Relations:
    Mr. Mark Komonoski, Director
    Investor Relations
    Tel: (403) 861-8384
    Toll-Free: 1-877-255-8483
    Email Contact

    Media:
    Mr. David Davies
    Tel: (250) 382-4332
    Email Contact