Ottawa’s Calian hits 70 consecutive quarterly profits but shares sag on lowered guidance

Kevin ford
Calian CEO Kevin Ford. File photo.

Calian Group set another new record for revenues in the second quarter of fiscal 2019 while stretching its consecutive streak of quarterly profits to 70, the Kanata-based company announced Tuesday afternoon.

Calian (TSX: CGY) posted revenues of $83.4 million for the three-month period ending March 31, up from $77.4 million a year earlier and its third consecutive quarter of record revenues.

The firm turned a net profit of $3.9 million, or 50 cents per share, slightly less than its net earnings in the same period in 2018. Calian attributed the drop in profit to increased operating expenses related to a number of recent acquisitions.

Calian’s Kanata-based Business and Technology Services division ​– which focuses on health-care services and emergency response training and technology ​– grew its revenues almost 14 per cent year-over-year from $57.3 million to $65.2 million.

Meanwhile, the firm’s Saskatoon-based Systems Engineering division ​– which specializes in satellite components and has expanded into the aerospace and agri-tech sectors ​– saw its revenues fall from $20 million a year ago to $18.2 million in the second quarter.

But in a conference call with analysts on Tuesday afternoon, Calian CEO Kevin Ford said he believes the engineering division is poised to expand its presence around the world, thanks to the recent acquisitions of Regina-based agritech firm IntraGrain Technologies and German satellite component manufacturer SatService.

Ford also noted the group recently began building next-generation satellite dishes made with advanced composite carbon fibre rather than steel or aluminum in a bid to tap into the growing market for higher-frequency satellites.

Calian SED developed the cutting-edge equipment with help from the National Research Council, the Canadian Space Agency, the European Space Agency and Dominion Radio Astrophysical Observatory and recently installed a test antenna in the Caribbean nation of Guadeloupe.

As satellite networks continue to seek more bandwidth, they are moving toward higher-frequency ranges. Calian says its new lightweight equipment performs better in rainy and windy conditions than traditional metal dishes when targeting higher frequencies.

Telling analysts he “just didn’t believe that the markets in many ways viewed us as innovative,” Ford touted the four-year, multimillion-dollar satellite project as an example of the company’s commitment to R&D.

“I don’t see that slowing down, frankly,” he said. “There are a lot of new ideas out there in this company that we will continue to foster and fund.”

Ford also said demand for Calian’s emergency management training and evaluation services continues to rise as the frequency of weather-related events such as the recent flooding in the Ottawa Valley increases.

He said the company worked with the City of Ottawa to review its response to flooding two years ago and is seeing a “consistent trend” of municipalities taking a more proactive approach to disaster management.

“With increased occurrences now, between flooding and fires, terrorist attacks, we are still growing this segment not only nationally but also potentially globally,” he said. “The reality of flooding and terrorist attacks and fires and natural events is not a Canadian-only occurrence.”

Calian continues to project revenues of $330 million to $360 million for fiscal 2019 and is now calling for a profit in the range of $2.05 to $2.35 a share, down slightly from the estimate of $2.10 to $2.40 in the previous quarter.

Shares in the company were down 38 cents to $33.76 in late afternoon trading on the Toronto Stock Exchange.