When Scott MacFabe joined BluMetric as CEO last March, he said his job was to accelerate the Ottawa cleantech firm’s ascent in the marketplace.
Nearly a year later, the veteran executive believes a leaner, more focused BluMetric (TSX-V:BLM) is indeed gaining altitude.
“We were tightening bolts on the plane and changing the engine while we were at 30,000 feet and still producing more net income,” MacFabe told OBJ on Wednesday, one day after the company announced it had finished its fourth consecutive fiscal year in the black.
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The Carp-based firm, which specializes in water and wastewater treatment technology, posted revenues of $32.2 million in fiscal 2018, a six per cent bump from the $30.5 million it recorded the previous year.
BluMetric’s year-over-year net earnings comparison is a little more complicated.
The company posted net earnings of $2.66 million for the 12-month period ending Sept. 30, 2018, a huge jump over the $334,000 it tallied the year before. But $2.1 million of that total resulted from the company’s decision to recognize a deferred income tax asset.
Under Canadian law, businesses are allowed to carry net losses forward during unprofitable years and apply these losses against taxable income during profitable years. They can recognize these losses as an asset once they begin to show a consistent profit.
MacFabe said the fact that BluMetric decided to recognize the deferred tax asset is a good sign because it shows the firm is now a consistent money-maker.
“The message that we’d like to send to the markets and to investors is we’re running a focused business, we are running a business that is profitable,” he said. “We have a very nice client-focused business model we are executing now that’s producing a better outcome.”
Without taking the deferred income tax asset into account, BluMetric’s net earnings were $544,000 – still a hefty increase of 63 per cent over 2017 and close to the $588,000 net income it posted in fiscal 2016.
Operating costs rose to $5.7 million from $5.3 million. BluMetric attributed the increase largely to a $250,000 severance payment to former chief executive Roger Woeller, who stepped down in 2017.
Most of BluMetric’s revenue gains occurred in the fourth quarter. The company brought in nearly $8.6 million in the last three months of fiscal 2018, an increase of $1 million over the same period in 2017.
Sharpening the services
BluMetric has about 165 employees at nine offices in Ontario, Quebec and the Northwest Territories, including about 60 at its Ottawa head office and 15 at a manufacturing plant in Gatineau. The company has jettisoned a number of unprofitable business lines over the past year while narrowing its focus on four key sectors: mining, military, government and the commercial and industrial space.
“These are the markets that we know well, we can service well, have a future for us to grow in and produce a positive outcome,” MacFabe said.
As part of the streamlining process, the company sold off its subsidiary in El Salvador last June. MacFabe said the 12-year-old Central American operation had become a “distraction” that was siphoning money and resources away from the company’s core customers and market verticals.
“It’s critical that we focused the business,” he said. “Anything that had cost us money, that wasn’t producing profit or a future to make profit, is gone.”
The CEO said that’s allowed the company to “sharpen the services” it delivers, a drive that’s paying off with major contract wins.
The firm opened a new office in Thunder Bay last spring after landing a contract to maintain a closed mine site west of the Northern Ontario city. BluMetric has also inked a deal to provide groundwater and surface water management systems to a “Tier 1” mining customer in that part of the province.
Last July, the company signed a three-year, $14.4-million deal with the Department of National Defence to provide water purification units to the Royal Canadian Navy, bolstering its military client base.
And last fall, Vancouver-based shipbuilder Seaspan Shipyards tapped BluMetric to provide water desalination systems for the country’s next generation of support ships currently being commissioned under the national shipbuilding strategy.
MacFabe said the $4.2-million Seaspan contract is one of BluMetric’s first major deals with a commercial client, signalling a new direction for the company.
“It’s producing some very nice exposure for us on a global level,” he said. “There’s certainly a need for clean water beyond the use of the Department of National Defence. It’s important for us to look at all these opportunities.”
While BluMetric already does some work with Fortune 50 companies, MacFabe said it’s still just scratching the surface of its potential. He said that although the firm is a relatively small player in its field, that can actually work in its favour when wooing big-name potential customers.
“We’re big enough to be able to deliver on those projects, and we’re agile enough to deliver it faster and better hopefully than most,” he explained, adding one of his main goals when he took over as CEO was to broaden BluMetric’s base of industrial clients.
“This firm has been good enough that it has produced enough gravity that we have a stable of clients right now that fit that (Fortune 50) description. But the reality is for us to grow, we need more.”