10.0 Outlook

The past five years at DCC have been marked by constant growth in service offerings to the Department of National Defence, and this trend is expected to continue. Although DND spending for its capital construction program has remained consistent at $450 to $500 million, it is turning to DCC increasingly more often to handle projects that could be considered to be on the periphery of construction contract management. These types of projects include project and program management support, facilities management, and diverse and specialized environmental projects. DCC’s ready and flexible capability has managed these client requirements over the past few years quite adroitly, and will continue to do so. The increase in DCC’s non-construction services to 39% of service revenue is a clear sign that the Corporation is not exclusively a construction contract management firm anymore. In the future, diversity in the evolution of the business is a certainty.

To meet the challenges that this diversity brings, DCC has undertaken several strategic initiatives that focus on managing change. The Corporation understands that in this time of business evolution, elements of human resources such as learning and development, internal communications, succession planning, and recruitment and retention are critical to business success. In both the short and medium term, senior management will apply special attention to these areas in order to ensure the viability and the success of the Corporation. This could mean a slight decrease in the utilization rate for the short term, but must be seen to be a long-term investment for the benefit of the client.

In 2007–08 the Corporation’s Board experienced several transitions. Four new members were added: Kris Matthews, Robert Presser, Lloyd Callahan and Shirley McClellan. These individuals bring new perspectives and experience that will benefit the Corporation. In the coming year, DCC will have a new Chair at the helm, who will also contribute to the future of the Corporation. DCC is also preparing for the pending retirement of the President and CEO, another transition that will have an impact on the Corporation. DCC has a strong senior management team in place that will support and allow for a seamless transition of these senior roles.

The Corporation’s employee population reached 606 full time staffers at the end of 2007–08. This is a 74% increase from 348 employees in 2003–04. Clearly, DCC is in the midst of a transition in many ways. Looking forward five years, there are many variables that could affect the Corporation’s scope and range of services. The major factor will be the demands of the Canadian government for defence services, and the subsequent priorities of DND and the CF. DCC has a well established track record of success in construction contract management and infrastructure support services. This collective core expertise, held together by over 55 years of culture, good governance and steady management will enable the Corporation to meet these needs in the future.

10.1 Financial Outlook

The Corporation has traditionally taken a conservative approach to forecasting future growth. The Corporation’s latest Corporate Plan shows an increase in revenues of approximately 13% for 2008–09 driven by a combination of anticipated higher business volumes and a planned increase in billing rates of approximately 3%. For the remaining Plan years, revenue growth has been forecasted to increase by approximately 3% a year, which is in line with expected increases in salaries and benefits. Business volumes are assumed to remain constant over this period.

Salaries and benefits expenses for 2008–09 are forecasted to increase by approximately 11% from 2007–08. This increase is due to a combination of an expected increase in total staff as well as to inflationary and merit increases to salaries. For future years, the Corporation’s financial forecasts assume an increase in salaries and benefits of approximately 3% a year, with staff strength remaining constant.

Operating and administrative expenses for 2008–09 are projected to increase by 14% over 2007–08. This increase is due to a combination of inflationary increases, increased business volume, and higher projected spending on rent and certain discretionary expenses, such as employee training and development and professional fees. For the remaining Plan years, operating and administrative expenses are forecasted to increase by 3% a year, primarily to cover projected inflation increases.

Amortization of property, plant and equipment is expected to increase by 36% in 2008–09 over 2007–08, due mainly to the projected increase in capital expenditures. Projections for capital expenditures, as discussed below, will affect the year-to-year fluctuation in the amortization of capital assets over the remaining years of the Plan.

Essentially, a break-even position (slight loss of $53,000) is forecasted for 2008–09 in order to maintain adequate financial resources for operating purposes, following the loss of $706,000 that was incurred in 2007–08. This is in keeping with the Corporation’s financial management policy. For the remaining Plan years, the forecast assumes a more or less break-even position.

Capital expenditures are projected to increase by 69% in 2008–09 over the previous year. The anticipated expenditures for the year ending March 31, 2009 will primarily relate to ongoing requirements to provide computers and software to new employees, as well as to upgrade older computer systems and software as well as leasehold improvements and office furniture and equipment for new facilities to accommodate the growing workforce. Increased spending is projected in the last three years of the Plan in anticipation of major expected upgrades to the Corporation’s main computer systems and software applications.

Financial Outlook (in thousands of dollars)

	2007-08	2008–09	2009–10	2010–11	2011–12	2012–13
	Actual	Plan	Plan	Plan	Plan	Plan
Revenue
Services	$ 55,458	$ 62,672	$ 64,740	$ 66,876	$ 69,016	$ 71,155
Interest	258	277	321	360	396	425
	55,716	62,949	65,061	67,236	69,412	71,580
Expenses
Salaries and employee benefits	49,343	54,776	56,419	58,112	59,855	61,651
Operating and administrative	6,228	7,072	7,284	7,503	7,728	7,960
Amortization of property, plant and equipment	851	1,154	1,316	1,585	1,760	1,934
	56,422	63,002	65,019	67,200	69,343	71,545
Net (Loss) Income	$ (706)	$     (53)	$        42	$        36	$        69	$        35
Capital expenditures	$    785	$   1,325	$   1,400	$   1,900	$   1,950	$   2,050