After Trimming Jobs, Product Lines in Tough 2010, Com Dev Expecting Rebound Year

by

PARIS — Satellite component builder Com Dev International of Canada on Jan. 13 reported sharply lower revenue and profit for the fiscal year ending Oct. 31, as expected, but said continued strength in the commercial satellite sector had swelled the company’s order book, making a turnaround likely in 2011.

The Cambridge, Ontario-based company, which has substantial operations in Europe and the United States, said the commercial, civil-government and military satellite programs that had torpedoed its 2010 results were nearing completion and would no longer pose problems.

These programs, all of which are costing Com Dev more than expected to complete, were key to last September’s decision by the Com Dev board of directors to fire the company’s chief executive and order a 5 percent reduction in its work force. The company also agreed to abandon several low-profit product lines.

Mike Pley, who was named chief executive in December, said Com Dev has completed the head-count reduction and is scouring its operations for further cost savings as a way of returning its gross-profit margin to 25 percent or better.

For the year ending Oct. 31, Com Dev reported revenue of 220.9 million Canadian dollars ($221 million), down 8 percent from 2009, and a gross profit margin of 20 percent, compared with 27 percent the previous year.

New orders during the company’s 2010 fiscal year totaled 210 million Canadian dollars, down nearly 16 percent from a year earlier. Total backlog as of Oct. 31 stood at 149 million Canadian dollars, down nearly 9 percent from where it stood 12 months earlier.

But in a conference call with investors, Pley said Com Dev brought in 80 million Canadian dollars in new orders, mainly from commercial telecommunications satellite customers, in the last three months of the fiscal year. He said this is a sign of the continued dynamism of the commercial satellite sector, which he said shows no sign of weakening despite several strong years.

New applications, such as satellite broadband, and a new crop of satellite operators, some supported by financing from the export-credit agencies of France, the United States and Canada, are responsible for the strength of the commercial satellite industry, Pley said. Com Dev measures the satellite sector not in numbers of satellites, but in the total number of transponders each year. By that measure, Pley said, 2011 shows signs of being nearly as strong as 2010.

By Com Dev’s count, 1,459 transponders were ordered for satellites in the 12 months ending Oct. 31, up from 1,406 the previous year. In each year, more than 1,000 of these transponders were for commercial satellites, with the rest ordered for military or civil-government spacecraft.

Com Dev’s search for cost savings apparently left untouched its exactEarth subsidiary, which is commercializing a satellite-based Automatic Identification System (AIS) for maritime traffic. The exactEarth project has two small satellites in orbit, with two more expected to be launched in the first half of 2011.

Peter Mabson, chief executive of exactEarth, said during the conference call that prospective customers want four satellites in orbit to increase the system’s ability to collate data from thousands of ships, and to reduce the time it takes for the data to be delivered to customers. Once the two new satellites are in orbit, Mabson said, some of these customers will be signing commercial contracts with exactEarth.

Pley said Com Dev’s decision in late 2010 to sell 20 percent of exactEarth to Hisdesat of Spain for 15 million Canadian dollars is an example of the company’s new way of operating. In the past, he said, Com Dev would have resisted sharing what it viewed as a promising new business. Now it is willing to take the cash even if it means sharing profit later on.

Com Dev’s exactEarth will be directly competing with Fort Lee, N.J.-based Orbcomm, which plans to launch two AIS-capable satellites in 2011 and has 18 other satellites, all equipped with AIS terminals, under construction.