2

CAE reports first quarter fiscal 2017 results

Estimated reading time 6 minutes, 39 seconds.

CAE has reported revenue of $651.6 million for the first quarter of fiscal year 2017, representing 17 percent growth over the first quarter last year.

First quarter net income attributable to equity holders from continuing operations was $68.7 million ($0.25 per share) compared to $44.9 million ($0.17 per share) last year. First quarter net income before specific items was $70.9 million, or $0.26 per share, which on the same basis, compares to $50.6 million ($0.19 per share) last year.

Specific items this quarter of $2.2 million (net after-tax) mainly involve restructuring, integration and acquisition costs related to the purchase of Lockheed Martin Commercial Flight Training (LMCFT). All financial information is in Canadian dollars.

“We had a good performance in the first quarter, with double-digit revenue and operating income growth in both Civil and Defence segments, and strong order intake contributing to a new record $6.5 billion backlog,” said Marc Parent, CAE’s president and chief executive officer.

“Underscoring our confidence in CAE’s outlook for long term sustainable growth and our commitment to enhancing shareholder returns, I am pleased to announce that CAE’s board of directors has approved a half cent increase to CAE’s quarterly dividend, which becomes eight cents per share, effective September 30, 2016.”

Civil Aviation Training Solutions (Civil)

First quarter Civil revenue was $371.6 million, up 11 percent compared to the same quarter last year, and segment operating income was $63.8 million (17.2 percent of revenue), up 12 percent compared to the first quarter last year. First quarter Civil training centre utilization was 79 percent.

During the quarter Civil signed a series of training solutions contracts valued at $397.2 million, including the sale of nine full-flight simulators. Also during the quarter, CAE concluded the acquisition of LMCFT, including the integration of training assets and manufacturing operations.

CAE also reached a strategic milestone with the launch of the validation phase of its next generation training system, which is expected to improve training quality and efficiency through the integration of untapped data-driven insights into training.

The Civil book-to-sales ratio was 1.07x for the quarter and 1.22x for the last 12 months. The Civil backlog at the end of the quarter was $3.2 billion.

Defence and Security (Defence)

First quarter Defence revenue was $257.3 million, up 31 percent compared to the same quarter last year, and segment operating income was $28.4 million (11 percent of revenue), up 20 percent compared to the first quarter last year.

During the quarter, Defence won training solutions contracts including a training systems integration (TSI) program to provide a comprehensive naval training centre for the United Arab Emirates (UAE) Navy and another to provide the UAE Joint Aviation Command with a suite of helicopter simulators and training devices.

These programs underscore CAE’s ability to lead comprehensive TSI programs in both the naval and air domains. In total, Defence received $283.1 million in orders this quarter, representing a book-to-sales ratio of 1.10x. The ratio for the last 12 months was 1.03x. The Defence backlog at the end of the quarter was $3.3 billion.

Additional financial highlights

Free cash flow from continuing operations was positive $15.5 million for the quarter compared to negative $61.2 million in the first quarter last year. The $76.7 million improvement compared to last year is mainly due to greater working capital efficiency and lower investment in non-cash working capital and an increase in cash provided by continuing operating activities.

Income tax recovery this quarter was $0.1 million, representing an effective tax rate of nil, compared to 18 percent for the first quarter last year. The lower tax rate this quarter was mainly due to the recognition of deferred tax assets in Brazil as well as a change in the mix of income from various jurisdictions. If not for these deferred tax assets, the income tax rate would have been 14 percent this quarter.

Growth and maintenance capital expenditures totaled $54.7 million this quarter.

Net debt ended the first quarter at $880.3 million for a net debt-to-total capital ratio of 31.6 percent. This compares to net debt of $787.3 million and a net debt-to-total capital ratio of 28.9 percent at the end of the last quarter.

Return on capital employed (ROCE) was 11.5 percent in the first quarter compared to 10.2 percent last year.

CAE will pay a dividend of eight cents per share effective Sept. 30, 2016 to shareholders of record at the close of business on Sept. 15, 2016.

During the three months ended June 30, 2016, CAE repurchased and cancelled a total of 1,195,300 common shares under the Normal Course Issuer Bid (NCIB), at a weighted average price of $15.50 per common share, for a total consideration of $18.5 million.

Management outlook for fiscal 2017 unchanged

CAE continues to expect revenue and operating income growth in all segments in fiscal year 2017, led primarily by Civil, which is expected to have higher annual utilization of its training network and low double-digit percentage operating income growth.

The company continues to expect modest growth in Defence and double-digit percentage growth in Healthcare. CAE expects the level of total capital expenditures in fiscal 2017 to remain relatively stable with the prior year ($117.8 million), with the exception of the addition of approximately $100 million capital investment for a specific, long-term training systems integration contract with the U.S. Army.

This program is expected to become operational for training by the end of the fiscal year. Management’s expectations are based on the prevailing positive market conditions and customer receptivity to CAE’s training solutions as well as material assumptions contained in this press release, quarterly MD&A and in CAE’s fiscal year 2016 MD&A.

Impact of the standardization of certain types of simulators on revenue recognition

The process improvement program that commenced in fiscal 2016 and remains underway at CAE results in the standardization of certain types of commercial aircraft simulators.

For standardized simulators, percentage-of-completion (POC) accounting is no longer appropriate and thus the company is recognizing revenue upon completion for such simulators commencing in fiscal 2017.

To the extent this impacts reported performance and to facilitate performance comparability, management will provide investors with a reference on a quarterly basis to illustrate how much profit would have otherwise been recognized if not for this change. The impact during the first quarter of fiscal year 2017 was minimal.

Leave a comment

Your email address will not be published. Required fields are marked *

HAI Heli-Expo 2024 Recap

Notice a spelling mistake or typo?

Click on the button below to send an email to our team and we will get to it as soon as possible.

Report an error or typo

Have a story idea you would like to suggest?

Click on the button below to send an email to our team and we will get to it as soon as possible.

Suggest a story