MARKHAM – Cable and telecom equipment and services provider Cygnal Technologies reported lower revenues in the third quarter, ended September 30th, but lower losses.
Revenues were $33.5 million, down from $39.8 million in Q3 2004 but gross margin was 24.5%, up from 21.8% the previous year.
EBITDA was a loss of $700,000, compared to an EBITDA loss of $1.8 million in Q3 2004. Net loss came in at $1.1 million, or $0.04 per share, compared to a loss of $1.9 million or $0.07 per share the prior year. Selling, general and administrative expenses were $8.9 million, compared to $8.7 million last year
"Our communications services business, White Radio, had a strong quarter and has demonstrated that it has successfully adjusted its business model to focus on the growth of its higher margin core business," said Cygnal chairman Gerald Hurlow in the release. "In network operations, we are completing the job of establishing a strong growth platform. The performance of the western and eastern regions for this business segment is solid, so our work has been focused on dramatically improving performance in the central region.
“In the third quarter we initiated a significant project to re-develop our operational processes in this region. This project is scheduled to span the period of August of this year to February of 2006. Implementation of a portion of the changes has been initiated and we are on track to achieve our goal of $5 to $7 million of savings. As of November 14, headcount for the network operations business has declined to 456 from 492 on June 30, 2005 – a reduction of 36, or over 10% of our Central Region work force. Our goal is for headcount to be further reduced to below 435 in early 2006. In addition to savings from work force reduction we expect to generate reduced costs from other areas such as truck fleet, overtime and communications,” added Hurlow.
However, the fourth quarter is looking softer than previously predicted, it said.
“Cygnal is expecting fourth quarter 2005 revenue to range from $32 to $34 million which, if achieved, would result in revenues of $127 to $129 million in 2005, compared to $140 million in 2004. This represents an adjustment from the previously disclosed estimated range of $130 to $132 million,” reads the release.
“The company expects network operations revenue for the year to range from $77 to $79 million, compared to total segment revenue of $74 million in 2004. This expectation is slightly below the $80 to $81 million range provided last quarter, primarily due to a delay in the completion of a significant project. The company expects Communications Services (its contractor side) revenue to be approximately $50 million in 2005, consistent with previous estimates. Total segment revenue for Communications Services was $66 million in 2004.
“Excluding one-time costs related to the execution of a productivity improvement program in the network operations business, the company expects that EBITDA will be approximately zero in the fourth quarter of 2005. The company anticipates recording a net loss in fiscal 2005,” continues the release.
“Based on the company’s preliminary forecasts for 2006, revenue is expected to experience growth after a number of years of decline. The company expects percentage revenue growth to be at a mid-single digit rate for network operations in 2006, primarily due to growth in the CygnalConnex business and in the Western Canada region, offset by a revenue decline due to the completion of the Niagara Regional Broadband Network which is anticipated to occur in early 2006. The company expects communications services revenue to grow by approximately 10% in 2006 due to increased sales of wireless and telecom products.”
For the full release, go to www.cygnal.ca.
