MDA returns to pre-recession profit levels, plans to roll out new initiatives

VANCOUVER, B.C. - MacDonald, Dettwiler and Associates Ltd. (TSX:MDA) says it's returning to pre-recession profit levels and plans to roll out a number of initiatives, striking a better balance between its real estate and space sides.

The Vancouver-area company, known as MDA, said it will rely more heavily on its space-based information systems business, nearly two years after Ottawa blocked a proposed sale of the division to a U.S. defence firm.

"We have spent the past five years dressing up for this party," MDA president and CEO Daniel Friedmann told investors during a conference call Wednesday.

Friedmann said the global real estate division, which is focused in the United Kingdom and United States, has been dominating the company's books in recent years.

But since the real estate downturn, and as its contracts on the space side increase, Friedmann said both divisions will be relied on to produce higher revenues.

"Everybody has to carry their weight on the corporate targets," he said.

Friedmann said the company is working to return to its annual growth target of 15 to 20 per cent by 2011.

To get there, the company has reworked its plans and increased investment across its divisions.

MDA has two divisions: information products, which makes software for the real estate and financial services sectors; and information systems, which includes its satellite and robotics services business.

Friedmann said the company is also developing "a third leg" out of its space division using its technology from such systems as Radarsat 2 satellite, for example.

He wouldn't provide specific details, but said more news on the venture could be announced later this year.

Friedmann's comments came after MDA reported profit was up in the third quarter thanks to an increase in cash flow from operations, but revenues were down after accounting changes.

MDA reported third-quarter earnings of $29 million, or 70 cents per share, compared with a profit of $242,000 or a penny per share for the same quarter last year.

The latest results beat expectations of seven analysts surveyed by Thomson Reuters, who were looking on average for earnings per share of 62 cents.

MDA said cash flows from operating activities "increased significantly" to $33 million in the quarter ended Sept. 30. That compared to $15 million for the same period of last year.

Consolidated revenues were $246 million compared to $278 million for the third quarter of 2008.

Analysts surveyed by Thomson Reuters were looking on average for revenues of $253 million.

MDA said revenues in the most recent quarter reflect accounting changes to revenue recognition for its property information business in British Columbia, along with a shift in sales mix "towards higher margin, value-added information solutions."

In January 2008, MDA struck a deal to sell its satellite and robotics division for $1.3 billion to Alliant Techsystems Inc. (NYSE:ATK), but Ottawa rejected the sale because it gave control of Radarsat-2, a key imaging satellite, to a foreign company.

MDA said at the time it wanted to sell the division to give its space operations and employees access to lucrative U.S. defence contracts and planned to use the proceeds to build its information products business.

Analysts said the company had no choice but to sell the division after government funding for Canadian space programs had been diminished over the years.

The company has signed a number of contracts with Ottawa and other international organizations, including the U.S. government, ever since.

On Wednesday, MDA shares closed down $1.67 or 4.5 per cent at $35.11 on the Toronto Stock Exchange, prior to the earnings release.

The stock has a 52-week high of $39.21 reached earlier this month and low of $16 in November.