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CAE reports year end, liquidity to weather the storm

“I am especially pleased with our 98 per cent conversion of net income to free cash flow.”


May 25, 2020
Wings Staff

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CAE on May 22 reported its fourth quarter and 2020 fiscal year end with revenue up 10 per cent year over year to $3.6 billion. This strong revenue performance comes as the Montreal company saw its fourth quarter revenue, relative to the corresponding 2019 quarter, decrease by four per cent to $977.3 million.

Its 2020 fourth quarter earnings, or net income, at $81.1 million decreased 35 per cent relative to the year ago quarter with $125.4 million. Fourth quarter operating income decreased by 14 per cent to $146.5 million relative to the year ago quarter which generated operating income of $170.4 million. Net income for CAE’s full 2020 year at $318.9 million decreased by six per cent relative to 2019 with $340.1 million of net income.

“While leading CAE toward what would have been another record year, the COVID-19 pandemic hit us in our fourth quarter,” said Marc Parent, president and CEO, CAE, noting the company prioritized the health and safety of its employees and customers. Parent also points to the innovation shown by CAE employees, including 12 of its engineers and scientists who developed the prototype of a critical care ventilator in just 11 days. Now called the CAE Air1 ventilator, more than 500 CAE employees are delivering on a contract with the Government of Canada to manufacture 10,000 of the ventilators, which are in the final stages of certification by health authorities.

CAE recalls temporarily laid-off Canadian employees, signs ventilator contract with government

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Turning to CAE’s financial results, Parent explained, “I am especially pleased with our 98 per cent conversion of net income to free cash flow, which underscores the cash-generative profile of CAE’s world-leading training solutions.”

Parent also points to positive full-year results in the company’s Civil aviation sector which exceeded its annual outlook with 37 per cent higher operating income, and annual orders totaling $2.5 billion. This includes additional airline training outsourcings and 49 full-flight simulator sales with the likes of LATAM, JetSmart Airlines and Sunwing Airlines. In business aviation, CAE won long-term training contracts with customers the likes of TAG Aviation Holdings, JetSuite, Solairus Aviation and Flightworks.

During the month of March 2020, however, approximately one-third of CAE’s Civil training locations worldwide suspended operations and the company was also forced to suspend the installation and delivery of simulator products to its customers worldwide. During the quarter, Civil signed training contracts valued at $468.6 million, including long-term training agreements and the sale of 12 full-flight simulators.

“In Defence, we anticipated a strong fourth quarter to reach our annual outlook for modest growth,” said Parent. “While we achieved this on revenue, we came up short on operating income which was down 13 per cent, mainly on lower than expected progress on program milestones and delays in securing new orders in the face of the COVID-19 pandemic.”

Parent notes CAE booked $1.2 billion of defence orders during the year, for a $4.1 billion Defence backlog, describing this position as “a good measure of diversification.” He also notes CAE was on track for double-digit annual revenue growth in healthcare until the impact of COVID-19 on its fourth quarter results.

“As we look to the fiscal year ahead, we believe it will be a tale of two halves, with the first-half of the year marked by sharply lower demand and major disruptions to our operations, and the second-half, slightly more positive as markets potentially begin to reopen and travel restrictions ease,” said Parent, noting the current uncertainty concerning the length and severity of the market downturn. “We realize that it may be some time before things get back to normal, and based on our scenario analysis, we have the liquidity to weather the storm with upwards of $2 billion in cash and available credit.”