HLS Systems Reports Financial Results for Its Fiscal 2008 Third Quarter and Nine Months Ended March 31, 2008

Business Wire,  July 16, 2008  

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Highlights

* Comprehensive income, excluding one-time merger and stock compensation related expenses, for the nine months ended March 31, 2008 was $19.2 million, up $4.6 million, or 31.5% from $14.6 million in the same period of the prior year;

* Revenue for the nine months ended March 31, 2008 increased by 31.1% to $89.6 million from $68.3 million in the same period of the prior year;

* Management reiterates the $32 million incentive share earnings target for the calendar year ending December 31, 2008 (based on comprehensive income and excluding stock compensation expenses);

* Backlog as of March 31, 2008 increased to $153.7 million, up from $112.4 million at March 31, 2007; Average contract size of new contracts increased 29.3%;

* Cash as of March 31, 2008 was $68.7 million, or $1.64 per share, up from $11.7 million on June 30, 2007;

* Conference call scheduled for 9:00 AM ET tomorrow to discuss results

BEIJING -- HLS Systems International Ltd. (OTCBB: HLSYF), ("HLS" or "the Company"), one of the leading automation systems providers in the People's Republic of China (PRC), today announced financial results for its fiscal 2008 third quarter and nine months ended March 31, 2008 (see attached tables).

Dr. Wang Changli, HLS' Chief Executive Officer commented, "We are pleased to announce our financial and operating results for the period ended March 31, 2008. Excluding one-time merger and stock compensation expenses, both our revenue and income increased by over 30% for the nine months ended March 31,2008 when compared with the nine months ended March 31, 2007. Our growth would have been even greater had the major snow storms that occurred in January and February 2008 and virtually paralyzed the transportation network in central China not affected our operations. This resulted in unanticipated delivery delays from our Hangzhou production facility to various key customers located in this region."

Dr. Wang continued, "We are more excited than ever about opportunities in each of each of our business segments and feel that we are well positioned to take advantage of China's massive infrastructure build-out.

Industrial Automation

Our core industrial automation business continues to benefit from a growing focus by Chinese manufacturers on productivity, quality and safety, and wage increases for Chinese workers are forcing factories to automate to stay competitive. We continue to focus our efforts on high growth opportunities in this business segment, and are pursuing a strategic alliance with a major PRC energy group to offer exclusive automation control products and services for their power plants. In addition, we are also focused on providing control systems to the rapidly expanding alternative energy market, including wind and biomass, and are pursuing alliance with a leading wind energy company in China to provide automation controls for their wind turbines exclusively.

Nuclear Power

We also remain very excited about our near term prospects in the nuclear automation and control systems segment of our business. The nuclear power market opportunity in China is huge and growing, as the PRC government recently announced plans to increase the nuclear build-out from 40 1GW reactors to 70 1GW reactors by 2020. As a result of our joint venture with Guangdong Nuclear Power Group ("GNPG"), the leading nuclear power plant operator in PRC, we believe we are uniquely positioned to be the dominant instrumentation and control system provider within the Chinese nuclear power industry.

In July 2007, we announced that our joint venture with GNPG signed contracts totaling $97 million to develop control systems for 6 1GW reactors and we expect to enter additional contracts in the future.

Rail/Subway

Another exciting segment of our business involves control systems for rail and subway networks. This continues to represent a large and growing market driven by the continued build-out of transportation infrastructure and the mandated replacement of old technology upgrades for safety purposes. Within this market segment, we remain particularly excited about the opportunities with high speed rail networks and are positioning HLS to be the premier provider of the control systems for these networks. In January 2008, we announced the signing of a 200 kilometer per hour high speed rail control system contract worth $19.9 million. Based on our performance on the previous contracts and the successful testing and implementation of control systems for trains at this speed and faster, we are well-positioned to win additional contracts for high speed rail systems ranging from 200 to 300 kilometers per hour.

Automation & Drive

In addition to the continued growth of our automation control system business, we also look forward to entering the surging automation and drive market and feel it will be a great complement to our core automation control business. The automation and drive business combines motor and drive technologies with our control systems to offer customers a totally integrated solution."