- reports 31% increase in net income -
CALGARY, May 5 /CNW/ - CriticalControl Solutions Corp., (TSX:CCZ) today reported its financial results for the three month period ended March 31, 2009.
<< Highlights for the quarter included (Q1 2009 compared to Q1 2008): - 8% increase in total revenue to $6.5 million from $6.0 million; - gross margin as a percentage of revenue of 51% compared to 52%; - 31% increase in net income to $0.66 million from $0.50 million; - corporation consolidated its common shares on a one new for three old share basis; - listed its shares on the Toronto Stock Exchange on a post consolidated basis and simultaneously delisted its shares from the TSX Venture Exchange; - completed the repayment of the Corporation's bank debt of $850 in the quarter. >>
"Reduced transactional revenue in our registration business due to the current economic climate was offset with organic growth in the remainder of its business divisions during the quarter," said Alykhan Mamdani, President and CEO of CriticalControl. "Despite expectations of continued lower levels of economic activity in the Corporation's client base, management expects to maintain the profitability it achieved in 2008, with further growth expected as the economics of the Corporation's client base improves."
Reference is made to the Corporation's 2009 First Quarter Financial Statements and Management Discussion and Analysis, full copies of which are available on www.sedar.com and the Corporation's website, www.criticalcontrol.com.
First Quarter 2009 Financial Summary
Total revenue was $6.5 million for the quarter ended March 31, 2009 compared with $6.0 million for the same period in 2008, an increase of $0.5 million or 8%. Revenue increases were attributable to organic growth and from the acquisitions of ScadaNet in July, 2008 and the assets of Western Corrosion Technologies in October, 2008.
Net income was $0.66 million for the quarter ended March 31, 2009 compared with $0.50 million for the same period in 2008, an increase of $0.16 million. Profitability increased primarily due to the growth experienced in the Corporation's energy business.
Cash flow from operating activities was $1.02 million for the quarter ended March 31, 2009 compared with $0.836 million for the same period in 2008, an increase of $0.2 million or 24%. The increase was attributable to improvements in income generated from both the government and energy sectors.
The Corporation's working capital improved to $3.03 million for the three months ended March 31, 2009, compared with $1.8 million for the same period in 2008, an increase of 69%.
Outlook:
This Outlook and Guidance contains forward-looking statements which the Corporation does not intend, and does not assume any obligation, to update, except as required by law. The forward looking information and statements include:
<< - The current economic and financial crisis and its effect on the Corporation's client base's business; - The price of natural gas and its effect on capital spending and operating budgets of the Corporation's client base; - The economic environment and its effect on the Corporation's government clients' expenditure plans; - The demand for value added services that provide additional cost reduction or production optimization for the Corporation's energy client base; and - Management's assumptions regarding the sustainability of recurring revenue streams and the Corporation's expected continuing profitability in 2009. >>
The current economic environment has affected the Corporation's client base in both its government and energy divisions. Management believes that the full effect of the global financial crisis and economic slowdown on its client base is not yet fully apparent. Although spending has been curtailed and likely will remain so by both sets of client bases for at least the next 3 quarters, the magnitude of the cuts in spending and the effect on longer term spending initiatives remain uncertain.
Although the Corporation recorded strong revenue increases from the Corporation's energy division in the first quarter of 2009 compared to the same period last year, management expects exploration in the Western Canadian Sedimentary Basin to be curtailed in 2009 and into 2010 due to weak commodity prices. Although the Corporation's recurring revenue is tied to gas production rather than exploration, a reduction in the number of gas wells drilled and completed in 2009 and 2010 will result in lower growth in the Corporation's business.
The severity of decrease in the economics of gas production has seen some low production wells shut in, especially where capital expenditure is required to continue production. Although management has been able to absorb this impact to the business through organic growth, the long term continuation of this economically induced trend may impact the Corporation's recurring revenue stream. In order to attain management's 2009 and 2010 growth objectives, management will need to succeed in creating or acquiring value added services to provide additional cost reduction or production optimization results for its energy client base.
The reduction in transactions in real estate and motor vehicles has resulted in a significant drop in the Corporation's registration services for provincial government ministries in the fourth quarter of 2008, and the first quarter of 2009 and is expected to continue until the economy improves. Although this decrease has been offset by the Corporation's other services to its government and healthcare clients, the continuity of this additional work is dependent upon continued spending on capital projects by the Corporation's government clients. In the event the global economic downturn continues, additional spending by the Corporation's government clients may be further curtailed and will jeopardize management's growth objectives.
Management's current opinion regarding the sustainability of its recurring revenue streams would suggest that the Corporation will be able to sustain continuous profitability for the remainder of 2009, consistent with 2008. The current economic climate, combined with possible continued uncertainty associated with its impact on Canada, may have further repercussions on the Corporation's client base which would result in lower revenue in both the Corporation's government and energy divisions. A deterioration of the economic climate or the prevalence of uncertainty for a lengthy period of time may materially affect management's outlook, in which case management's profitability targets will become dependent upon the Corporation's ability to expand its core offering and market reach - both organically and through acquisition, which may require a longer timeframe to achieve.
About CriticalControl:
CriticalControl enables its clients to increase operational performance through the better control of critical business information. Through the balance of practicality, innovation and technology, we empower our clients with everything from strategies and tools, to outsourced solutions to manage information, wherever and in whatever form that information exists. For more information please visit www.criticalcontrol.com.
For further information: Alykhan Mamdani, President & CEO, Tel (403) 705-7500; or David Feick, The Equicom Group, Tel (403) 538-4787