COVID's wild effect on bottom lines
Some left struggling while others experience spectacular revenue jumps
Near the end of the second quarter earnings cycle we can say this much about the impact of the coronavirus: it has blown through the income and balance sheets of the region's public firms with unexpected speed and direction. In a few cases the results have been spectacularly good. In others, companies have struggled to keep an even keel.
Then there is Ottawa-based Calian, an emerging giant in the business of providing professionals under contract to other companies and government.
With four separate business units under its wing Calian has experienced the impact of the virus in multiple ways but diversification has been a boon. The company, which reported its financials this week, looks to have prevailed with significantly more heft.
During the earliest stages of the pandemic, Calian was rescued by its health services unit, which employs 2,400 nurses and other professionals. Provincial and federal governments hired Calian to do COVID-19 vaccinations at popup clinics across the country. The provinces also bought rapid testing services from the firm.
During that early response to COVID-19 the health unit's quarterly revenues surged to $43.9 million from $32.2 million pre-pandemic. This gain of nearly $12 million was matched by a collective decline in Calian's other three units — advanced satellite technology, training and information technology
The result is that Calian's quarterly revenues overall remained roughly flat at $105 million.
“Installing ground systems for satellites in the U.S. was an absolute challenge,” Calian CEO Kevin Ford said in an interview with this newspaper.
“Our engineers had to quarantine both ways across the border causing them to lose a month in productivity each time,” he added.
The training unit, which gives courses in management, safety and other subjects to military and health officials, had challenges of its own. “Moving to virtual learning took a while,” Ford acknowledged.
Calian didn't take long to figure out the logistics. It was also fortunate that all its divisions specialized in businesses considered by health authorities to be essential, and thus were permitted to continue operating. Indeed, Calian's health professionals to date have administered more than 300,000 vaccinations.
Earlier this week, Calian reported financial results for its latest fiscal quarter showing that all its units had grown rapidly. Revenues reached $136 million — up 29 per cent year-over-year — with enough momentum for Ford to declare that Calian this fiscal year would for the first time surpass $500 million in revenues.
The health unit accounted for 37 per cent of total revenues, down from 46 per cent at the peak of the pandemic but still well up from 31 per cent pre-COVID-19.
Ford, 57, recognizes there's a risk these revenues could dip in the quarters ahead as the population gets closer to full vaccination and the need for testing fades. But he's not fully convinced it will play out this way: “Are we done with COVID?” he asked rhetorically, pondering whether there will be future waves or a need for booster shots.
“It's still a day-to-day play book,” he said. In the meantime he has the considerable advantage of diversifying his risks across multiple businesses.
Unlike Calian, other Ottawa businesses have a single focus but happened to hit it out of the park, thanks to the virus.
Consider Shopify's experience. Before the pandemic hit, the e-commerce enabler posted US$505 million in quarterly revenues and predicted sales could hit US$2.16 billion in 2020. That forecast fell short by an astonishing US$831 million as panicked retailers raced to make their goods available online and Shopify raked in fees and subscriptions. Two weeks ago Shopify revealed revenues for the quarter ended June 30 topped US$1.1 billion — up 57 per cent year over year.
Another firm for which the pandemic was nearly all upside was WOW Tech Group — created several years ago through a merger involving Ottawa-based We-Vibe, which sells vibrators and other sex toys. We-Vibe, which employs about 50 locally, was launched in 2008 by the husband and wife team of Bruce and Melody Murison, former employees of Nortel Networks.
This week WOW Tech merged with U.K.-based Lovehoney — a move that creates a US$400 million-a-year giant specializing in sexual wellness products. A major catalyst was a tripling in the growth rate to 26 per cent per year in sales of such merchandise during the pandemic.
A third group of Ottawa firms worked hard to offset the negative effects of the virus but didn't quite get there.
Some of the knock-on effects of the virus were that borders closed, substantially slowing immigration, business travel stopped cold, and vacationers stayed home. These were some of the factors behind the slowdown at Minto Real Estate Investment Trust, which operates nearly 7,300 rental suites in five cities — including 3,095 in Ottawa. Minto on Thursday reported a nearly 5 per cent drop in second-quarter revenues yearover-year to $29.9 million; earnings slipped more than 27 per cent to $8.7 million.
These results reflected a drop in the occupancy rate to 91.5 per cent in the second quarter compared to 96.2 per cent in the same period a year earlier. There were other pressures. Minto noted that financial hardships weighed on certain tenants as the pandemic progressed, prompting them to move in with friends or families. This, in turn, increased demand for Minto's larger apartments and reduced it for single bedroom units.
And, not least, the investment trust observed that some of its tenants were leaving to take advantage of deals being offered by landlords elsewhere.
Nevertheless, Minto pointed to a few hopeful signs. One is that Canada admitted 35,000 landed immigrants in June — the first time since the start of the pandemic that monthly arrivals topped 25,000. Immigrants are considered key in the market for apartments.
The second quarter was also the first time in the past year that has seen more people moving into Minto apartments than leaving.
Recovery must be getting near.