PARIS — Satellite component manufacturer Com Dev International on Jan. 12 reported lower revenue but higher profitability for the year ending Oct. 31 and said its new maritime surveillance subsidiary should double its revenue in 2012.
Cambridge, Ontario-based Com Dev, which for two years has been struggling with five government space programs on which the company is losing money or making almost no profit, said four of the five have now been completed. The fifth will be finished in mid-2012.
In a Jan. 12 conference call with investors, Com Dev Chief Executive Mike Pley said that in 2012 as in 2011, Com Dev will focus on returning to its previous levels of profitability — 25 percent gross margin or better — rather than seek to grow revenue.
Com Dev reduced its work force in 2011, mainly in its division dealing with Canadian government contracts, because the Canadian Space Agency’s budget outlook does not permit large new contract orders.
Pley said the Canadian Space Agency is likely to continue to “drip-feed” contracts in 2012 as it did in 2011.
Com Dev builds electronics and other payload components on most commercial telecommunications satellites ordered around the world. As such, the company offers an insight into the health of the commercial satellite market.
In a submission to the Toronto Stock Exchange, Com Dev said that of 26 satellites ordered in the year ending Oct. 31, Com Dev has secured work on 18 and is competing for work on four others. These satellites include 18 commercial spacecraft, six civilian government satellites and five military satellites.
The 26-satellite total in 2011 compares with 32 in 2010, but the more relevant number for Com Dev is the number of transponders on the satellites that are ordered. In 2011, the 26 satellites placed under contract worldwide are expected to carry a total of 1,298 transponders, down 11 percent from 2010.
Pley said that despite this decline, Com Dev is seeing no broad market contraction with respect to telecommunications satellites.
What is changing, he said, is the type of customer. The larger satellite fleet operators are now past the peak of their replacement-and-expansion cycle. But regional satellite operators, whose disappearance has long been predicted, continue to proliferate, and these operators’ orders have mitigated the effect of the decline in orders from the bigger players, Pley said. To capture this new market, Com Dev is making overtures to several small-satellite manufacturers whose products could be better tailored to the demands of regional operators that often have only one or two satellites.
The commercial satellite market accounts for the vast majority of the annual transponder order count — 1,050 of the 1,298 ordered in the 12 months ending Oct. 31 — and in fiscal year 2011 represented more than 60 percent of the company’s revenue.
Com Dev booked new orders totaling 187.8 million Canadian dollars ($187.8 million) in 2011, 56 percent of it from commercial customers. Company backlog at Oct. 31 totaled 126.1 million Canadian dollars, down 15 percent from a year earlier.
Total revenue for the year ending Oct. 31 was 203.2 million Canadian dollars, down 8 percent from 2010.
Com Dev in 2010 and 2011 shut down a couple of its less profitable product lines as it focused on better margins. In 2011 its gross profit margin was 22.9 percent, up from 20.5 percent in 2010.
What Pley called Com Dev’s five “problem programs” reduced gross profit by some 8 million Canadian dollars in 2010.
Com Dev’s 73 percent-owned exactEarth Ltd. subsidiary, which began operations in mid-2010, is expected to be the company’s star performer in 2012. Revenue for exactEarth was 1.9 million Canadian dollars in 2010, 4.6 million in 2011 and is expected to double in 2012, exactEarth President Peter Mabson said during the conference call.
Pley said exactEarth, which reported a net loss of 7.6 million Canadian dollars in 2011, should be cash-flow positive by the end of the current fiscal year, and fully profitable a year later.
The exactEarth business is to provide Automatic Identification System data on ships to global coastal authorities through a small constellation of satellites that receives ship data from the vessels’ transmitters, sorts out the information and delivers it to government agencies.
With contracts from government agencies in Australia, Singapore, South Africa, Japan and Denmark in addition to the Canadian Space Agency, exactEarth booked 9.5 million Canadian dollars in orders in the 12 months ending Oct. 31. Mabson said the company has more than 35 trial programs under way with prospective customers.
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