Atlanta-based EMS saw full-year revenues increase to $360 million from $335 million, largely on the strength of its communications business, which posted a 41.3-per-cent jump to $159 million.
However, the gain wasn’t enough to offset the effect of an $18.5-million goodwill impairment charge on its LXE mobile computing and logistics business, which saw sales decline 25 per cent to $109.4 million during the year.
As a result, the company had an overall net loss of $12.4 million or 81 cents per share, compared to a profit of $20.5 million or $1.31 per share a year earlier.
The results were even bleaker for the fourth quarter alone, with sales declining by six per cent to $85 million, despite a 26.9-per-cent rise in revenues for the communications and tracking business. EMS also had a net loss of $17.9 million or $1.18 per share, compared to net income of $6.8 million or 44 cents per share a year earlier.
Still, noted EMS chief executive Neil Mackay in a statement: "EMS's main business focus is enabling mobile connectivity in places where connectivity is really tough to achieve. And the ever-growing demand for mobile connectivity helps our key markets to have resilience, even in the current challenging economic climate.”
Mr. Mackay – a long-time Ottawa veteran and the former head of SATCOM who moved to EMS’s corporate headquarters in 2007, and then into the CEO seat in November 2009 – told OBJ in an earlier interview that analysts are expecting “flattish” numbers across the board in fiscal 2010, a consensus that he said he “can’t argue with.”
“However, there are opportunities to improve profitability … with acquisitions and a consolidation play during 2010 to improve to the break-even point and open up some new markets,” Mr. Mackay said. “We need to prove to the Street that we can get good results in 2010 so we feel comfortable 2011 will be better.”
Part of EMS’s strategy is to combine its various aviation-sector business units – previously under its communications and tracking division – into a new segment called EMS Aviation, allowing the company to more efficiently target large players such as Honeywell and Collins, and to better co-ordinate product development.
“We need to prove to the Street that we can get good results in 2010 so we feel comfortable 2011 will be better.” - Neil Mackay, CEO, EMS Technologies Inc.
That will likely mean somewhat of a new order of business for EMS’s staff in Ottawa, who provide the company’s main expertise in aviation, Mr. Mackay said.
“Ottawa will continue to play a big role, as of all the groups we have they’re the ones who have the most sophisticated view of the aviation business … (except now) they’ll be working on providing data to the aircraft as well for Iridium, not just to the ‘data pipes’ for Inmarsat,” he explained.
Meanwhile, Mr. Mackay said the LXE sector will likely see more of its manufacturing operations sent offshore to firm up costs following a disappointing performance in fiscal 2009. Still, he noted that the division is entering fiscal 2010 with a “stronger-than-usual” backlog, and pointed out that it recently began shipping to Itron, one of the top makers of automated meter intelligence.
“We are encouraged but cautious in the near term. Economic uncertainties persist, especially in Europe,” he said in a statement. “Quarterly revenues have an additional element of uncertainty from delays in our supply chain, as suppliers that had cut back their operations must now rebuild their capacity to meet rising product demand.”
He took a cautious stance on the outlook for the company’s overall earnings for the year as well, predicting “single-digit-percentage-growth” for both sales and adjusted earnings.
Earnings from continuing operations are anticipated to be between 75 cents and 90 cents per share, excluding acquisition-related charges and assuming an effective income tax rate of 15 per cent.
Mr. Mackay said the company’s fortunes will likely improve in the second half of the year. However, the big play will be for the company to work towards strength in 2011.
“Meanwhile, we’ll continue to get our products more sophisticated, with more performance. The connectivity business in particular, where Ottawa fits, will probably be a very good growth engine in the future,” he said.
