NORTHWEST TERRITORIES

Buoyed by its first profitable year since 2008, Discovery Air president and CEO David Jennings said the Yellowknife-headquartered air services company is once again looking to expand.

David Jennings, president of Discovery Air, addresses attendees of a ceremony to mark the grand opening of the company's new corporate headquarters in Yellowknife in March 2010. Jennings hopes to further expand into domestic and international marketplaces. - NNSL file photo

"We have fairly aggressive growth aspirations," Jennings said during a conference call in late April to discuss Discovery Air's latest financial results with investment analysts, the company’s first such session since the recession sent it into a tailspin.

Jennings said Discovery’s range of skill sets present opportunities to organically grow into domestic and international marketplaces, but "we’re always open, for the right price, to consider an acquisition to get into a marketplace. We're not against doing it organically, it depends which is best".

The conference call was also a prelude to Discovery’s annual general meeting, scheduled for June 7 in Montreal – the first time the event has been held outside Yellowknife since the first quarter of 2010, when the company moved its headquarters north from London, Ont., to honour a $34 million loan agreement with the territorial government.

"We’ve always said at Discovery we view acquisitions differently from the previous strategy," Jennings said – a reference to company founder David Taylor, the London, Ont., banker who pulled Discovery together from a disparate group of companies.

"It’s the means to an end, not the end itself," said Jennings, who was among the partners who forced Taylor out in a disagreement over plans to add more companies to Discovery.

The task of identifying and pursuing opportunities and making recommendations on whether to grow from within or through acquisition goes to Discovery Innovations, a company freshly minted this year to handle the job.

"It gives us the best chance of success for some of the large opportunities we're pursuing," said Jennings, who expects to make a "further announcements shortly."

In the past year, Discovery deployed helicopters to do seismic work in Peru, and new contracts will keep them there for this year, Jennings said. Discovery also picked up the operations and employees of a bankrupt air services company in Quebec City, creating Discovery Air Technical Services.

For the fiscal year ended January 31, 2011, revenues were $152.4 million – a record for the corporation, and an increase of 24 per cent over $123.2 million the previous year. 

Revenues for the last quarter were $23.7 million compared to $17.7 million for the same period in 2009. Net earnings were $5.5 million or $0.04 per share compared to a loss of $300,000 the year previous.

"We’re viewing it as a success," Jennings said. "We set out a five- year plan 18 months ago. Fiscal 2011 was step one. We needed to improve results to work on other initiatives for the future."

Hard hit by the recession, the Northern Division – Great Slave Helicopters, Air Tindi and Discovery Mining Services – returned to profitability last year, and this year "activity seems to be improving," Jennings said. "We won’t return to '06 or '07 levels, but it looks like the trend is continuing. We're hoping this is just the tip of the iceberg.

"Improved operating and financial results have been accompanied by a strong recovery in capital market conditions in the two years since we completed our last major financing," Jennings said.

"As a result, we believe that we have an opportunity to recapitalize Discovery Air in a way that better supports its operations and planned growth, and we have undertaken several initiatives to accomplish this," he said. 

The market has responded to Discovery’s improved fortunes. The recession and internal turmoil knocked its share prices from a high of $2.40 to the penny stock range of 15 cents. Last week, its shares were trading in the 45 cent range.

In the first week of May, Discovery announced it had settled $13.2 million in debt to company officers Adam Bembridge and Ian Campbell with $2.9 million in cash and 10.3 million shares valued at 43 cents each.

The company also announced the successful issue of $30 million in $1,000 debentures. Proceeds will be used to repay December 2006 debentures, which were scheduled to mature December 31, 2011. The new debentures can be converted to shares valued at 73 cents each.

A $34 million loan from the NWT Opportunity Fund is due in to be repaid by February 2013.

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